ARPA Funds - The Best Way Municipalities Can Spend American Rescue Plan Act Funds

What is ARPA (American Rescue Plan Act)?

Also referred to as the COVID-19 Stimulus Package or American Rescue Plan, this $1.9 trillion government sponsored package was meant to buoy the economy in 2021 in the face of economic upheaval and tens of thousands of small business closures across the US. It was also used to curb the uncertainty that faced many more small businesses and households across the US as the Coronavirus continued to pose an unpredictable threat to public health and local economies across the country. 

What are ARPA funds being spent on? 

Much of the ARPA money went to funding a diverse set of initiatives to encourage rapid recovery such as household stimulus checks, emergency paid leave, expansion of food stamp benefits, rental assistance programs, funding for COVID testing and vaccine sites, agriculture support, grants for small businesses, and more. 

Also in the wash of the diversely sprayed funds, a significant purse (~ $350 billion) was trickled down and disbursed to counties, territories, and municipalities across the US. The purpose of the funds, from economic development sources we've spoken to, were earmarked mostly to maintain and improve infrastructure in an effort to set a healthy economic foundation. However, the restrictions on how exactly localities could spend the funds remained somewhat murky, but that is changing as more guidance and precedents are being set. 

One creative way municipalities are spending ARPA funds -- Community Gift Card programs

So far the top priorities for municipalities spending ARPA funds locally has been for "COVID-19 response, public health, economic recovery and revenue replacement" according to the ARP Data and Evidence Dashboard. That said, economic developers have personally told us they have received so much money they don't know how to spend it all, which has allowed for some creative thinking. 

The most creative idea we've seen thus far are cities looking to launch their own version of a local stimulus program by creating their own Community Gift Card program. A Community Gift Card is an all-in-one gift card that works at multiple local businesses in a town, but not anywhere else. For instance, a Bristol, CT card will only work at the 70 approved local businesses participating in the program, but not be able to be spent at online giants like Amazon or any other community. Cities can determine which businesses participate and exclude others who they might identify as not requiring the same level of help or attention (e.g. national chains). Ultimately, this locks in dollars exclusively for the small merchants in the community and strengthens the local community. 

Example.) A City in California

Our company has been in touch with one California city who has earmarked six figures to launch two versions of a Community Gift Card program for their area. The first is geared to support the local business environment where the City plans to use ARPA funds to provide a 50% match to any local citizens who purchase the Community Gift Card. In the retail industry they call this BOGO, or "Buy One Get One". So if you were to purchase this city's Community Gift Card it would cost you only $25 to receive a $50 card because the City is leveraging ARPA funds to subsidize the card's value. The second program is meant to support people with significant economic challenges. Upon special application, the City would provide these individuals, as a gift, a 100% subsidized gift card based on certain qualifications.  

Example.) A County in Washington

One county in Washington state was able to leverage recovery funds to provide "bonus" value to local citizens who purchased the area's Community Gift Card. A shop local campaign was put together to encourage shopping at small businesses who were, at that time, just coming out of pandemic closures. The program was promoted for two months in late 2020 and it turned out that the gift card sales from those two months were on pace to return an 8x investment on the federal funds that were used to incentivize the card purchases. A study conducted in concert with the program discovered that people were "significantly more likely" to purchase a $50 gift card if they were provided at least a $10 bonus. Turns out that roughly one-third of card purchasers spent more than the gift card amount, and at least the same spent more than the bonus amounts. Add to that more than 50% of card recipients visited a business for the first time, which goes to show the direct and long-tail economic impacts are significant. 

Example.) A Town in Texas

My favorite story is one town in Texas had invested in launching their own gift card program where they distributed 12,000 gift cards with $100 loaded on each to households across their town. The $1.2 million investment resulted in a total of 69,077 transactions for an average sale of $27.64. This meant more than $1.9 million in direct economic impacts, or an 37% improvement on the investment. That doesn't even count the consumer and business relationships built and the unmeasured local economic impacts still to come. Powerful stuff. 

Spend American Rescue Plan Act funds to launch a local stimulus of your own 

Much like the federal government sent $1200-$1400 stimulus checks to each household across America, municipalities with a windfall of ARPA funds have an opportunity to be bold and do the very same thing but at the local level. 

By working with a gift card program manager like Giverrang to launch your own Community Gift Card, imagine the impact of sending every household in your community a $20 local gift card that is guaranteed to be spent back in your community with the businesses that matter most. This not only can help alleviate your local citizens' personal financial hardships, but it pours money back into the local business environment which supports the local economy. Because the cards are card network branded (Visa or Mastercard), redemption is handled automatically daily so merchant participation is likely to be very high since it's already what they are used to. 

If you are an economic development official at a state, regional, or municipal level who is looking for how to creatively spend your ARPA funds, and continue to assist with the economic recovery in your area, we strongly encourage you to launch your own local stimulus using ARPA funds. There are many ways to run an effective program, and the above precedents are just a few examples. Giverrang is happy to provide its expertise to assist municipalities in launching a successful initiative that will refuel and stimulate your local economy and citizenship. 

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