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Main Spotlight: What Does Treasury's ARPA Final Rule Mean for Main Streets?

February 2, 2022 | Main Spotlight: What Does Treasury's Final Rule Mean for Main Streets? | By: Kelly Humrichouser, Director of Government Relations at Main Street America |

Since the passage of the American Rescue Plan Act (ARPA) in March and the subsequent release of the Interim Final Rule, Main Street programs have been advocating for the use of State and Local Fiscal Recovery Funds (SLFRF) to support commercial district needs. Many have found success in working hand-in-hand with city government to prioritize corridor revitalization while others awaited further guidance on applicable uses.

On January 6, the Treasury Department released the Final Rule governing the use of these funds. With the roll-out of the Final Rule, communities are anticipated to begin committing ARPA funds at a more rapid pace. Main Street programs and other supporters of business district revitalization may need to refresh on what this funding can mean for small businesses and Main Street organizations, understand what the Final Rule included, and consider the best approach to accessing this funding for Main Street needs. In today's Main Street Spotlight, learn more about the current status of this important relief funding.

The American Rescue Plan Act (ARPA), the recovery legislation enacted in March 2021, included $350B in State and Local Fiscal Recovery Funds (SLFRF). The first tranche of funds was distributed via a formula to every state, county, and city in the country starting in May along with initial guidance through the Interim Final Rule. Recipient entities are responsible to determine how best to utilize the funds to support COVID recovery across four major buckets: 1) responding to negative public health and economic impacts; 2) premium pay to essential workers; 3) replacement of lost revenue and 4) infrastructure (specifically water, sewer, and broadband).

Shortly after the enactment of the ARPA, Main Street programs went to work advocating for funding and planning the many ways in which SLFRF could be utilized to support downtown recovery from the devastating effects of the pandemic. Main Street America created a series of resources to assist local programs and submitted comments to Treasury outlining ways to increase the utility of funds for business districts. Over the past six months, we have seen several innovative, collaborative programs produced through state and local Main Street programs to support entrepreneurs, enhance places with housing and small-scale development, and spur the return of foot traffic. Still, many communities were hesitant to move forward until the final guidance was released. Now, with Final Rule taking effect on April 1, 2022, local conversations about funding allocations may be reigniting and moving forward with increased speed.

The ARPA Final Rule provides substantial clarity on aspects of the earlier guidance and some key improvements that have the potential to benefit commercial corridors and small businesses. Main Street America was pleased to see that comments submitted to the Treasury on the utility of ARPA relief funds for small businesses were incorporated into the final guidance.

  • Increased Utility for Small Businesses in Qualified Census Tracts. The Final Rule offers a clear framework for whether small businesses are considered "impacted" and "disproportionately impacted." Significantly, all small businesses located within Qualified Census Tracts (QCT) are considered "disproportionately impacted" and are thus eligible for a broader list of place-based support, including storefront renovation and other physical improvements. This clarification creates opportunities for Main Street programs located in QCTs to offer place-based support to all small businesses. Approximately 50% of Main Street programs overlap with a QCT. If you are unsure, use the Department of Housing and Urban Development mapping tool to check if this applies to your community.
  • Capital Expenditures Allowed. Capital expenditures that respond to negative economic or health impacts are allowed under the Final Rule. This expansion of eligible uses creates new opportunities for communities to invest in physical improvements. These expenditures must be proportional to the negative impact identified, but expenditures under $1 million do not require written justification.
  • Identify the Issue; Create a Solution. Similar to the Interim Final Rule, the Final rule confirms that other uses beyond those enumerated are eligible but require adherence to a simple framework: identify the negative impact (economic or health related) and design a project that responds to the impact. Ultimately, this confirms that there is no one size-fits-all approach to ARPA; each community must determine priorities locally and can employ creativity to address those needs.
The Final Rule also confirms and extends other uses of these funds important to Main Street: to support non-profits negatively impacted by the pandemic; to create affordable housing; and to increase broadband connectivity.

Main Street programs should focus on the following in the coming months:

  • Create Partnerships. ARPA funds have been received by every city, county, and state. Recipient jurisdictions are empowered to subcontract or subgrant funds for administration of identified projects. Collaboration within and across jurisdictions and with other aligned groups will create a stronger approach. Main Street programs should consider how they can be effective partners in the distribution of funds and execution of projects.
  • Prioritize Equity. Guidance on the use of ARPA funds includes a focus on creating equitable local outcomes and seeking to support populations that were hardest hit by the pandemic, including low-income residents and communities of color. The reporting requirements for recipient jurisdictions include measurement for diverse populations reached and for community engagement conducted. Thus, if you are proposing a project for Main Street district needs or to support local small businesses, consider how underserved residents or entrepreneurs are served by the project.
  • Be Prepared. Along with the Final Rule, Treasury produced additional resources including an abbreviated Overview of the Final Rule document and webinars, along with updated materials on reporting requirements. Communities advocating locally for ARPA funding should be familiar with the area of the guidance applicable to your project.

Join Main Street America for a webinar in partnership with the Institute for Local Self-Reliance on Thursday, February 10th to hear more about how ARPA State and Local Relief Funds can support small businesses and Main Street districts. This webinar will walk through a new report, Small Businesses Big Moment, produced by ILSR Senior Researcher (and former Director of Main Street America) Kennedy Smith identifying twelve ways ARPA can support local businesses. You are encouraged to invite other local Main Street supporters and consider asking Civic Leaders to join.

About the Author

As the Director of Government Relations, Kelly leads Main Street America's (MSA) work to uplift the role of Main Street organizations to policy and decision makers. She works alongside MSA's 44 Main Street state, city, and country Coordinating Programs in defending and growing their programs and supports MSA's great network of Main Street programs in pushing for federal support for Main Streets. Originally from northeast Ohio, Kelly graduated with a B.A. in Art History from Kenyon College and a M.S. in Historic Preservation from SAIC. Most recently, she completed the National Development Council’s Historic Real Estate Finance certification offered through MSAI.