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4396 Federal Register/Vol. 87, No. 18/Thursday, January 27, 2022/Rules and Regulations
<br /> development services and projects. businesses for general economic reasonably designed to respond to the
<br /> Commenters reasoned that many state development activities argued that harm,benefit the beneficiaries that
<br /> and local governments are familiar with subsidies to businesses increase job experienced it,and be related and
<br /> this program,and that aligning to its growth and that,in some cases, reasonably proportional to that harm or
<br /> eligible uses may help recipients easily assistance to companies that excelled impact.
<br /> understand and pursue eligible projects. during the public health emergency As noted above,recipients should
<br /> Commenters also noted that Treasury would help create more job analyze eligible uses based on the
<br /> had chosen to align with existing federal opportunities for workers or expand the beneficiary of the assistance,and
<br /> programs in other eligible use jurisdiction's tax base and produce recipients may not provide assistance to
<br /> categories,namely water infrastructure, funds to support government services. small businesses or impacted industries
<br /> in the interim final rule. In contrast, other commenters argued that did not experience a negative
<br /> Treasury Response:In the final rule, that academic research consistently economic impact.Provision of
<br /> Treasury is not including all categories finds that economic development assistance to a business that did not
<br /> of projects permissible under CDBG as subsidies have a negligible, or even experience a negative economic impact,
<br /> enumerated eligible uses to respond to negative, economic effect, citing under the theory that such assistance
<br /> the public health and negative economic research findings to this effect.257 would generally grow the economy and
<br /> impacts of the pandemic. Because CDBG Treasury Response:In the final rule, therefore enhance opportunities for
<br /> permits such a broad range of activities, Treasury maintains the interim final workers,would not be an eligible use,
<br /> including services to individual rule's approach that general economic because such assistance is not
<br /> households, communities, small development or workforce development, reasonably designed to impact
<br /> businesses,general economic meaning activities that do not respond individuals or classes that have been
<br /> development activities,and capital to negative economic impacts of the identified as having experienced a
<br /> expenditures,Treasury determined that pandemic and rather seek to more negative economic impact.In other
<br /> it was more appropriate to assess the generally enhance the jurisdiction's words,there is not a reasonable
<br /> underlying types of projects eligible business climate,would generally not connection between the assistance
<br /> within CDBG and whether each type of be eligible under this eligible use provided and an impact on the
<br /> project responds to the negative category.As noted above,to identify an beneficiaries. Such an activity would be
<br /> economic impacts of the pandemic.In eligible use of funds under this category, attenuated from and thus not reasonably
<br /> other words,Treasury considered a recipient must identify a beneficiary designed to benefit the households that
<br /> whether various types of community or class of beneficiaries that experienced experienced the negative economic
<br /> and economic development projects a harm or impact due to the pandemic, impact.Research cited by some
<br /> respond to the impacts of the pandemic and eligible uses of funds must be commenters finding that business
<br /> in different communities and subsidies have limited or negative
<br /> circumstances.In the final rule, 257 See,e.g.,Matthew D.Mitchell et al.,The economic impact also suggests that such
<br /> Treasury addresses the eligibility of Economics of a Targeted Economic Development
<br /> Subsidy(Arlington,VA:Mercatus Center at George a response may not be reasonably
<br /> these various types of projects in each Mason University,2019),5,available at https:// designed to benefit households and
<br /> relevant eligible use category within www.mercatus.org/publications/government- other entities impacted by the
<br /> public health and negative economic spending/economics-targeted-economic- pandemic. Similarly,planning activities
<br /> impacts under SLFRF,including development-subsidy,Timothy J.Bartik,Who for an economic development or
<br /> Benefits from Economic Development Incentives.
<br /> assistance for impacted households, How Incentive Effects on Local Incomes and the workforce strategy regarding general
<br /> disproportionately impacted Income Distribution Vary with Different future economic growth do not provide
<br /> households, disproportionately Assumptions about Incentive Policy and the Local
<br /> Economy(Upjohn Institute Technical Report No. a program, service, or capital
<br /> impacted small businesses,and capital 13-034,W.E.Upjohn Institute for Employment expenditure that responds to negative
<br /> expenditures. Research,March 1,2018),available at:https:// economic impacts of the pandemic.
<br /> Public Comment:General Economic research.upjohn.org/up_technicalreports/34/;Cailin However,Treasury notes that the final
<br /> Development.Treasury provided Slattery and Owen Zidar,Evaluating State and
<br /> guidance following the interim final Local Business Tax Incentives,journal of Economic rule includes as enumerated eligible
<br /> rule that general economic development
<br /> Perspectives 34,no.2(2020):90-118,available at: uses many types of assistance that
<br /> https://www.aeaweb.org/articles?id=10.1257/ respond to negative economic impacts
<br /> or workforce development would jep.34.2.90;Kenneth Thomas,The State of State and of the pandemic and may produce
<br /> generally not be eligible as it does not Local Subsidies to Business(Mercatus Policy Brief,
<br /> respond to a negative economic impact Mercatus Center at George Mason University, economic development benefits. For
<br /> of the COVID-19 public health Arlington,VA,October 2019),available at:https:// example, see sections Assistance to
<br /> www.mercatus.org/system/files/thomas_-_policy_ Unemployed Workers,Assistance to
<br /> emergency. brief--the—state—of state—and—local—subsidies—to— Small Businesses, and Capital
<br /> Some commenters recommended that business__vl.pdf,Dennis Coates,Growth Effects of
<br /> Treasury expand enumerated eligible Sports Franchises,Stadiums,and Arenas:15 Years Expenditures.
<br /> uses to include general economic
<br /> Later(Mercatus Working Paper,Mercatus Center at
<br /> George Mason University,Arlington,VA, B.Premium Pay
<br /> development activities,beyond those September 2015),available at:https:// Background and Summary of the
<br /> that respond to negative economic www.mercatus.org/System/f"iles/Coates-Sports-
<br /> impacts y
<br /> impacts of the pandemic,such as Franchises.pdf;Dennis Coates and Brad R. Interim Final Rule
<br /> creatingan economic development Humphreys,Do Economists Reach a Conclusion on Sections 602(c)(1)(B) and 603(c)(1)(B)
<br /> p Subsidies for Sports Franchises,Stadiums,and
<br /> strategy for the jurisdiction's overall Mega-Events?,Econ Journal Watch 5,no.3(zoos): of the Social Security Act,as added by
<br /> economic growth,creating a general 294-315,available at:https://econjwatch.orgl the ARPA,provide that SLFRF funds
<br /> workforce development strategy,or articles/do-economists-reach-a-con clusion-on- may be used"to respond to workers
<br /> providing funds to businesses that did
<br /> subsidies-for-sports-franchises-stadiums-and-mega- performing essential work during the
<br /> events;Matthew D.Mitchell,Daniel Sutter,and
<br /> not experience negative economic Scott Eastman,The Political Economy of Targeted COVID-19 public health emergency by
<br /> impacts to carry out economic Economic Development Incentives,Review of providing premium pay to eligible
<br /> development activities or to incentivize Regional Studies 48,no.1(2018):1-9,available at: workers of the . . .government that are
<br /> h ttps://www.mercatus.org/publications/corporate-
<br /> the addition or retention of jobs. welfare/political-economy-targeted-economic- performing such essential work, or by
<br /> Commenters supportive of assistance to development-incentives. providing grants to eligible employers
<br />
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