Can small cities use these new grant funds to pay for engineering and planning before construction begins?
Yes. Under Oregon Senate Bill 1585, incorporated cities with populations of 20,000 or less are explicitly permitted to use grant award moneys for all phases of a funded project. This includes engineering, planning, and support activities, rather than limiting the funds strictly to physical construction.
What the bill or law says
The enrolled text of SB 1585 amends several existing statutes to remove restrictions on how small cities can spend specific state grants. For each affected program, the bill adds language stating that notwithstanding any other provision of law restricting the use of grant award moneys, eligible cities may use the funds for all phases of a project Enrolled Bill Text, Sections 1-4, 7, 9.
The bill specifically lists "engineering, planning and support" as allowable uses alongside construction. This provision applies to five major grant categories:
- School Safety Improvement Projects
- Connect Oregon Transportation Projects
- Multimodal Active Transportation Program
- Levee Project Grants
- Water Resources Feasibility Studies and Water Supply Development Account grants
Previously, many of these programs restricted grant usage to capital construction or municipal infrastructure improvements, often excluding pre-construction costs like design and feasibility studies from the grant coverage.
How it works in practice
For a city with 15,000 residents applying for a school safety grant, this change means the city could potentially use the state award to pay for the initial traffic study and engineering designs. In the past, the city might have needed to find separate local funding to cover these early stages before qualifying for construction funds.
The permission to use funds for all phases is tied to the reduced match requirements. Cities with populations of 20,000 or less must provide a cash match between 3% and 12%, depending on their specific population bracket and project cost Enrolled Bill Text, Section 1. By allowing the grant money itself to cover planning, the bill reduces the upfront financial burden on small municipalities that may lack large reserves for professional services.
State agencies administering these grants, such as the Oregon Transportation Commission and the Water Resources Department, will need to update their application guidelines to reflect this broader eligibility for fund usage. The law takes effect on June 5, 2026 Official Bill Page.
What the source does not answer
The bill text does not specify whether there are caps on the percentage of a grant that can be spent on planning versus construction. It also does not detail how state agencies will verify that planning costs are reasonable or necessary for the subsequent construction phase. Additionally, the text does not clarify if this flexibility applies to retroactive payments for planning work already completed before the law’s effective date.