West Virginia should take a “cautious” and “prudent” approach to using federal CARES Act funds for highways construction and repairs, given the risk the U.S. Treasury could rule the projects are non-permissible uses of the funds and require the state to repay the money.
That was the legal advice of Charleston lawyers Ben Bailey, Brian Glasser and Jonathan Deem in a memorandum dated July 9.
“[T]he risk that any certain project would be deemed a non-permissible use of CRF [Coronavirus Relief Fund] dollars should be proportionate to the degree to which the existing conditions are impeding access to care,” the lawyers stated in a memo to state Revenue Secretary Dave Hardy.
On June 26, two months after the state received $1.25 billion of CARES Act funds, Gov. Jim Justice announced his plan for allocating the funds, including spending $100 million for what he described as COVID-19 highways.
On July 1, responding to criticism from Sen. Joe Manchin, D-W.Va., among others, questioning whether COVID-19 relief funds should be used for roads, Justice commented, “What does Manchin want me to do? Just send that money back to the federal government?”
Justice also said, “We got every legal opinion we could get,” regarding the appropriateness of using the funds for road repair and construction.
A day later, Curtis Johnson, press secretary for Attorney General Patrick Morrisey, confirmed the Justice administration had not requested legal opinions from the Attorney General’s Office, as is the normal protocol on legal questions.
On Friday, Justice announced he is “pivoting” on the use of CARES Act funds for highways, shifting $50 million of the $100 million to broadband expansion and indicating use of COVID-19 relief funds for road building will be phased in.
The July 9 memorandum from Bailey, Glasser and Deem summarizes prior communications with the Justice administration, including emails sent on June 11 and June 23.
“First, we were asked to analyze conceptually whether CRF dollars could be used to fund road and highways repairs or whether such an expense would be deemed an impermissible use of CRF dollars that the State would have to repay. We concluded that using CRF dollars for road and highways repairs should be considered permissible under circumstances where the repairs are necessary to enhance access to medical care for COVID-19 patients and the costs of such repairs are not or cannot be paid for with other federal funds,” the memo states.
The memo states the Division of Highways identified $179 million of road building or repair projects that could be funded with CARES Act dollars, based on criteria including being within 5 miles of health care facilities or repairing road conditions that impede access by emergency vehicles.
“Following our review, we communicated to you that a cautious approach should be taken before deciding whether to allocate CRF funds to any particular project due to there being no specific mention of road or highways repairs in the list of eligible expenses set forth in Treasury’s guidance,” the memo states.
The memo adds, “As we explained previously, the risk that any certain project would be deemed a non-permissible use of CRF dollars should be proportionate to the degree to which the existing conditions are impeding access to care. For example, disbursing CRF funds to fix a road that has been identified by local authorities as being impassable to ambulances is more likely to be considered a permissible use of funds than securing an embankment that may slide and cause hazardous road conditions but that is not currently impeding emergency vehicle access.”
The memo concludes, “For these reasons, we advised a prudent approach would be to examine the circumstances of each repair project the State intends to fund, to make decisions based on the documented conditions relevant to each project and to document the precise facts on which the decision makers relied to determine the projects were reasonably necessary to enhance access to care for COVID-19 patients.”
In a statement Monday, Manchin said he is concerned Justice is moving forward with plans to use CARES Act funds for highways, despite issues raised by the attorneys.
“I remain concerned that the governor has not read the fine print, and West Virginians will be left holding the bill,” Manchin said. “That kind of financial burden is the last thing West Virginia needs as we attempt to get our financial house back in order amid the economic fallout of a global pandemic.”
Manchin said there are better uses for the funds, including supplying personal protective equipment, paying first responders, helping small businesses and increasing COVID-19 testing capabilities.
“It just shouldn’t be this hard to get this money out the door,” Manchin said.
During his July 8 COVID-19 briefing, Justice agreed to release the legal memorandum on using CARES Act funds for highways, as well as a companion opinion regarding legal authority for the governor to appropriate the $1.25 billion without legislative approval, to the Gazette-Mail, stating, “I want to be as transparent as I can be all of the time.”
The Governor’s Office to date has not provided the second memorandum regarding Justice’s authority to appropriate the CARES Act funds.