ESSER III: Financing the construction of schools | Bricker & Eckler LLP
The original version of this article was published in June 2021. It has been updated based on experiences over the past year.
By now, you’re likely aware that the federal government has awarded three rounds of relief funds to Ohio school districts in response to the coronavirus pandemic, which many school district leaders see as a unique opportunity to s take care of some of their facilities. needs while promoting the health and safety of students in the district. The most recent round — created by the American Rescue Plan and called ESSER III or ARP ESSER — is the largest to date and has made $4.5 billion available to school districts in Ohio. To the extent that school districts still have ESSER funds, many wonder how and to what extent these remaining funds can be used for building and improving facilities. The relevant authorizing legislation expressly authorizes the use of these funds for repairs and improvements to school facilities to “reduce the risk of virus transmission and exposure to environmental health risks” and for carrying out HVAC and other improvements to “improve indoor air quality” in school buildings. .
The Ohio Department of Education (ODE) has approved a wide variety of facility improvements in this language. Examples of approved facility upgrades include: (1) new construction or upgrades to existing outdoor facilities that will allow students to spend part of their day in the fresh air, as recommended by the CDC; and (2) projects creating additional square footage that facilitates social distancing, such as an addition to an existing building or even the construction of a new facility. However, even though these are approved uses of ESSER funds, ODE reviews requests for Global Continuous Improvement Plan (CCIP) funds with some level of scrutiny. Therefore, care must be taken when drafting CCIP requests to clearly specify that the project concerns the reduction of the risk of spreading the virus. An experienced construction attorney can help the school district review PICC applications that were submitted to ODE by the August 20, 2021 deadline.
Fortunately, ESSER III funds can be used to fund an upgrade in conjunction with other funding sources. For example, the school district may seek to use ESSER III funds in combination with a voted levy or bond issue to build a project. Alternatively, school districts can couple these funds with a lease-purchase agreement under RC 3313.375 and avoid having to go to their constituents completely, assuming sufficient existing cash flow. School districts should consult with an experienced public finance attorney to further explore these funding options. It is important to remember, however, that if ESSER III funds are used for even a portion of a project, all federal requirements described below apply.
School districts should be aware of additional procurement requirements applicable to the use of federal funding for construction projects. For example, school districts will need to ensure that the procurement of construction professionals complies with uniform federal law guidelines, as well as state law requirements that would normally apply to such projects. .
Additionally, there are a host of contractual provisions that must be included in the construction contract to fully ensure federal compliance. Typically, this is accomplished by incorporating a piece of federal law attached to a contract.
The Davis-Bacon Act applies to ESSER-funded or assisted contracts over $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or works public, including Ohio School District projects that are otherwise exempt from prevailing wage requirements. . Davis-Bacon triggers an obligation for contractors and subcontractors to pay the prevailing federal wage. School districts are also required to review current salary reports to ensure they are in compliance. Therefore, an experienced construction consultant can help the school district navigate the uncharted waters of federally funded construction with Davis-Bacon requirements. It is also important to note that one of the most common sticking points for auditors on ESSER-funded projects appears to be non-compliance with the Davis-Bacon Act.
In sum, ESSER III funds have provided school districts with a unique opportunity to address some of their existing facility needs while promoting the health and safety of students in the district. However, this opportunity has led to an apparent increase in audits. If school districts need to be audited, our experienced construction consultants can help.