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HomeMy WebLinkAbout11A Small Business Emergency Assistance Grants TO: Honorable Mayor and City Council Jennifer Levitt, City Administrator FROM: Christine Costello, Economic Development Director DATE: May 27, 2020 RE: Award Small Business Emergency Assistance Grants Background On May 6th, the City Council held a workshop to discuss a proposed Small Business Emergency Assistance Program. The City Council discussed that by providing financing to assist local businesses that it may help the business sustain their operations, preserve employment, and prevent business closures, all in effort to promote long term economic vitality in the community. The City Council recommended moving forward with establishing a program. Then on May 7th the Economic Development Authority (EDA) reviewed the proposed grant program and recommended approval of the program as well with a vote of 7 to 0. The grant program provides $300,0000 from the EDA Trust fund which is not City tax dollars to provide grants of up to $10,000 per businesses that can provide evidence of a loss of income during COVID-19 and proof of profitability before the pandemic. The grant is to ensure the preservation of employment opportunities through the prevention of business closure to promote long-term economic vitality in the community. While this effort focuses on business stability, it also assists those workers employed by a small business and allows them to continue to make rent and mortgage payments to stay in their home. The program provides qualified locally owned and operated small businesses (those with 3 to 25 employees and under $1 million dollars in annual revenue) with a one-time emergency grant of up to $10,000 to be used for working capital purposes defined as wages, employee health benefits, leave payments, mortgage/rent payments, utilities and/or property taxes and other critical business expenses that can’t be paid as a direct result of the current COVID-19 pandemic. The applications were reviewed by Ehlers and Associates (Ehlers), as the third-party consultant and to prevent bias in the review of the applications. Ehlers reviewed the applications to ensure the applicants met the program guidelines and were in good standing before the pandemic. After City Council and EDA approval of the program, Economic Development staff mailed 95 letters with program guidelines to businesses that were impacted by Executive Orders 20-04 and 20-08 the program guidelines and how to apply. The program was promoted on the City’s social media platforms, City’s website, and emails were sent to the Cottage Grove Area Chamber of Commerce and Open to Business, asking that they promote the program to their Cottage Grove contacts and post to their social media accounts as well. Honorable Mayor, City Council, and Jennifer Levitt Award Small Business Emergency Grants May 27, 2020 Page 2 of 4 Discussion As the application period ended on May 20th EDA staff learned that some of our community partners were not able to advertise the program as robustly as hoped. As of May 20th, the EDA had received ten (10) applications for the grant program. Due to the smaller application pool the deadline was extended to provide a second round of the grant program. The EDA re-advertised and sent another mailing to 95 businesses as well as advertising again on the City’s social media platforms and working with our community partners to get the “word out” to businesses. The second-round application period ends on May 29th and those applications will be brought before the EDA at the June 9th meeting. The grant program had six eligibility requirements and they included: • Eligible businesses per Executive Orders 20-04 and 20-08. • Located in Cottage Grove • 3 to 25 full-time employees • Make $1 million or less in annual gross income • Two years in operation • Applied for State and Federal funds The last eligibility requirement was strongly encouraged but not required in the grant program. At the end of the first round there were ten (10) grant applications. Based on the eligibility requirements Ehlers recommended grants to the following businesses: The recommendation from Ehlers for All About Nails was based on the fact they had not been in business for two years and they had not applied for Federal and State funding. It is felt that since these eligibility requirements are minor compared to being in good financial standing before the pandemic All About Nails should be awarded a grant of $10,000. The grant application for Rustic Floral Boutique is considered incomplete because they did not provide the required documentation for the grant application. They have been given the opportunity to apply for the second round of the grant funding if they submit the required documentation needed for the grant application. The Small Business Emergency Assistance Grant Program and the COVID-19 pandemic has impacted the business community greatly leaving many businesses future uncertain. In developing the Cottage Grove Small Business Emergency Assistance Program other small business programs for the impacts of COVID-19 pandemic were researched (Edina, St. Louis Park, and Minnetonka). It was found that all the of the eligibility requirements were nearly the Honorable Mayor, City Council, and Jennifer Levitt Award Small Business Emergency Grants May 27, 2020 Page 3 of 4 same for all of the communities so developing the Cottage Grove program was based on what other metro communities used as guidelines, these served as the basis for the Cottage Grove program since the community has not had previous loan and/or grant programs in the past. In addition to research of other community programs a list of businesses to market was used from ReferenceUSA.; they pull data from all public sources as well as making calls to businesses around the nation to collect data on businesses. ReferenceUSA is used as a main source for communities to develop their business retention and expansion lists. Though no data source is fail-safe, it served as a starting point in developing a list of businesses that qualified under the program guidelines and Governor Walz’s Executive Orders 20-04 and 20-08. This was the list of 95 businesses that received letters about the grant program. Through this process and in speaking with local businesses many could not apply or did not qualify based on the current legibility guidelines. Specifically, for the years of operation, the number of full-time employees, and the annual gross income. An example of this was the application received from Las Margaritas; they did not qualify for the grant because they were over the full- time employee count and the annual gross income. Since the EDA and City Council approved grant funding of $300,000 and with the low number of applications received another round of funding where some of the guidelines were adjusted to serve those business still impacted by COVID-19, such as Las Margaritas could provide further assistance to businesses. Changes to the eligibility requirements to allow more businesses to apply would include: • Business who have been in operation for one year, instead of two years, • Increase the number of full-time employees from 25 to 70, and • Allow application for businesses with annual gross income of $3.5 million or less These changes to the grant program would assist in encompassing more local businesses who have been impacted by the COVID-19 pandemic. With the consideration of revising the eligibility guidelines all eight of the applications (nine applications, if Las Margaritas was included) could be considered for grants of $10,000 (totaling $90,000) and there would be a remaining $210,000 (21 grants) for local businesses to apply for that may meet the revised guidelines. A lottery system would be used if greater than 21 applications are received. Additionally, all the business are required to provide a brief report in approximately two months (November 1, 2020 at the latest) to the EDA on how the grant funds were used for eligible expenses such as for working capital purposes defined as wages, employee health benefits, leave payments, mortgage/rent payments, utilities and/or property taxes and other critical business expenses The EDA is considering the grant program modifications and approval of the nine existing grant applications at their June 2, 2020 EDA meeting. Recommendation Consideration of: 1. Approval of nine (9) Small Business Emergency Assistance Grants each for $10,000 to All About Nails, Belissimo Salon and Spa, Mathnasium of Cottage Grove, Dance by Kris, Honorable Mayor, City Council, and Jennifer Levitt Award Small Business Emergency Grants May 27, 2020 Page 4 of 4 Historic John P. Furber Farm, The Healing Place of Cottage Grove, New Century Salon, Las Margaritas, and Turbo Nails. 2. Approval of revising three of the six eligibility guidelines to allow businesses to apply if they have been in business for one year instead of two, have between 3 and 70 full-time employees and make $3.5 million or less in annual gross revenue and provide a brief report to the EDA no later than November 1, 2020 on how the grant was used for eligible expenses. Attachments Program Guidelines Grant Agreement Ehlers Memo dated May 27, 2020