ProgramCOVID-19 Federal Assistance e311
TopicsProgram Administration, Workforce & Economic Development
May cities expend ARP funds to support events aimed at economic recovery, including tourism or supporting small businesses?
1. ARP rules which are generally applicable:
The American Rescue Plan Act of 2021 (“ARP”) Coronavirus Local Fiscal Recovery Fund (“CLFRF”) Interim Final Rule (the “Rule”) provides guidance for municipal governments intending to use CLFRF to respond to the COVID-19 public health emergency and mitigate the economic crisis impacts of the pandemic, including to affected industries such as tourism and to small businesses. Specifically:
Sections 602(c)(1) and 603(c)(1) of the ARP provide that funds may be used for the following: a) To respond to the public health emergency or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality.
[S]ection 602 and section 603 also describe several types of uses that would be responsive to the impacts of the COVID-19 public health emergency, including assistance to households, small businesses, and nonprofits and aid to impacted industries; such as tourism, travel, and hospitality.
[A]ssessing whether a program or service “responds to” the COVID-19 public health emergency requires the recipient to, first, identify a need or negative impact of the COVID-19 public health emergency and, second, identify how the program, service, or other intervention addresses the identified need or impact.
Treasury does not make transfers directly to nonprofits or private organizations as part of CLFRF. However, municipalities receiving CLFRF allocations may transfer funds to a “private nonprofit organization…, a Tribal organization…, a public benefit corporation involved in the transportation of passengers or cargo, or a special-purpose unit of State or local government” as well as other constituent units of governments and other private entities. Any such transferee is to be considered a subrecipient and is expected to comply with all regulation regarding the uses of such funds, including only using funds in manners determined to be eligible under the Rule, as well as subrecipient reporting requirements. Additionally, the municipality is responsible for oversight of their subrecipients, as well as reporting upon the uses of the funds by the transferee as part of its regular CLFRF reporting process.
“A recipient may provide aid to support the safe reopening of businesses in the tourism, travel and hospitality industries and to districts that were closed during the COVID-19 public health emergency.” A recipient may also provide aid to support a “planned expansion or upgrade of tourism, travel and hospitality facilities delayed due to the pandemic.”
The Rule specifies that aid may be used to implement COVID-19 mitigation and infection prevention measures to enable safe resumption of tourism, travel, and hospitality services. Treasury has identified several examples of mitigation and infection prevention measures that would qualify:
- Improvements to ventilation;
- Physical barriers or partitions;
- Signage to facilitate social distancing;
- Provision of masks or personal protective equipment; and
- Consultation with infection prevention professionals to develop safe reopening plans.
3. Small Businesses:
The Rule states that eligible uses of CLFRF funds include “Assistance to small businesses, including loans, grants, in-kind assistance, technical assistance or other services, that responds to the negative economic impacts of the COVID-19 public health emergency.”
Small business assistance may include:
- Loans or grants to mitigate financial hardship such as declines in revenues or impacts of periods of business closure, for example by supporting payroll and benefits costs, costs to retain employees, mortgage, rent, or utility costs, and other operating costs;
- Loans, grants, or in-kind assistance to implement COVID-19 prevention or mitigation tactics, such as physical plant changes to enable social distancing, enhanced cleaning efforts, barriers or partitions, or COVID-19 vaccination, testing, or contact tracing programs; and
- Technical assistance, counseling, or other services to assist with business planning needs.
Additional criteria may be considered to “target assistance to businesses in need, including small businesses.” Such criteria may include the following:
- Businesses facing financial insecurity, substantial declines in gross receipts (e.g., comparable to measures used to assess eligibility for the Paycheck Protection Program), or
- Other economic harm due to the pandemic, as well as businesses with less capacity to weather financial hardship, such as the smallest businesses, those with less access to credit, or those serving disadvantaged communities.
“Recipients should consider local economic conditions and business data when establishing such criteria.”
4. Additional Considerations
Relative to Public Health and Economic Impact use, the Rule further requires State, local, and Tribal governments to:
[P]ublicly report assistance provided to private-sector businesses under this eligible use, including tourism, travel, hospitality, and other impacted industries, and its connection to negative economic impacts of the pandemic. Recipients also should maintain records to support their assessment of how businesses or business districts receiving assistance were affected by the negative economic impacts of the pandemic and the aid provided in response to these impacts.
Last Revised: July 29, 2021
 Treas. Reg. 31 CFR 35 at 7, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.
 Id., at 10.
 Id., at 105.
 U.S. Department of the Treasury Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021) – FAQ #1.8 at 3-4, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
 Department of Treasury, Coronavirus State and Local Fiscal Recovery Funds: “Guidance on Recipient Compliance and Reporting Responsibilities,” at 17-18, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.
 U.S. Department of the Treasury Coronavirus State and Local Fiscal Recovery Funds Frequently Asked Questions (as of July 19, 2021) – FAQ #2.9, at 6, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.
 Treas. Reg. 31 CFR 35 at 36, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.
 Id, at 141.
 Id., at 34-35.
 Id., at 35.
 Id., at 37-38.