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The PR trap of using recovery funds to boost tourism

The PR trap of using recovery funds to boost tourism

Liz Farmer's avatar
Liz Farmer
Mar 31, 2022
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Long Story Short
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The PR trap of using recovery funds to boost tourism
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people on beach during daytime
Photo by SARAH GRANGER on Unsplash

The Covid-19 pandemic was devastating to the tourism and hospitality industry and in particular to service workers who found themselves out of a job. So, the American Rescue Plan Act allows governments to use their fiscal recovery funds to help that sector. 

Makes sense, right?

Well, turns out it doesn’t look so good when governments choose to spend some of their federal grant money on tourism. A recent Associated Press story called into question some of these expenses, and prompted outrage from some federal lawmakers while putting local government representatives on the defensive.

This week, I’ll explain what’s going on and how show ARPA’s flexibility can be a double-edged sword. But first…

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Stadiums, museums and a hotel

Among the projects the Associated Press story highlighted were “a high-end hotel” that’s part of Broward County, Florida’s convention center upgrade, minor league baseball stadium renovations in Dutchess County, New York, and debt service for the Edward M. Kennedy Institute in Boston. It also flagged:

  • $15 million New Jersey allocated for upgrades to help the state’s bid to host the 2026 World Cup; 

  • $6.6 million to replace irrigation systems at two golf courses in Colorado Springs;

  • $5 million in Birmingham, Alabama, to support the 2022 World Games (which the article essentially mocks, but I’m a little fascinated to know what hard-core tug-of-war or beach handball would look like).

The AP story is well-researched and reported, featuring responses from federal lawmakers, a Treasury Department official and local officials. But for the most part, these are allowable expenses under the rules. It demonstrates the trap that the funding flexibility so coveted by state and local officials can create. Let’s take a deeper look at the reasoning and context of these choices.

What the rules say about tourism spending

The Treasury Department’s final rule on the fiscal recovery funds—directly citing the ARPA law—says the funds can be used “specifically” for “the public health emergency or its negative economic impacts, including…aid to impacted industries such as tourism, travel, and hospitality.”

Because Congress wrote that language into the law, Treasury can assume that any community’s tourism industry has suffered from the pandemic. In fact, the rule uses national employment losses in tourism and hospitality as one of the benchmarks for governments to determine which of their other local industries also suffered economically and therefore would be eligible for pandemic aid. 

But when it comes to spending on physical assets, it’s a little confusing.

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