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HomeMy WebLinkAbout03A Small Business Grant Relief WorkshopCity Council Action Request Meeting Date Department Agenda Category Title Staff Recommendation Budget Implication Attachments 12/2/2020 Administration Agenda Item Small Business Grant Relief Workshop N/A Cottage Grove Small Business Relief Grant Memov2.tif 7.15MB Grant Recipients.tif 259.94KB Business List EO 20-99.tif 453.36KB TO: Honorable Mayor and City Council Jennifer Levitt, City Administrator FROM: Christine Costello, Economic Development Director DATE: November 23, 2020 RE: Small Business Relief Grant Workshop Introduction In May 2020, the City Council and Economic Development Authority (EDA) approved a Small Business Emergency Assistance Grant Program. The grant program was in response to the COVID-19 pandemic and provided financing to assist local businesses in our community to sustain their operations, preserve employment, and prevent business closures. The intent of the grant program was to promote the long-term economic vitality in the community. The grant initially set aside up to $300,000 from the EDA Trust, to provide grants of up to $10,000 per business. Businesses needed to provide evidence of income loss due to COVID-19 and Governor Walz’s Executive Orders 20-04 and 20-08. Businesses also needed to prove profitability before the pandemic. The grants would help ensure the preservation of employment opportunities through the prevention of business closure. Through the grant process the City Council and EDA also revised the eligibility requirements in an attempt to assist more businesses. The revisions included:  Reduction in years of operation from two to one year,  Increase the number of full-time employees from 25 to 70, and  Allow businesses with annual gross income of $3.5 million or less to apply. As the pandemic continued the City received CARES Act funding from the Minnesota Department of Revenue. The Small Business Emergency Assistance Grant Program in Cottage Grove that awarded 19 grants totaling $181,800 will be reimbursed by CARES Act funding that the City received. As the pandemic has continued and there has been a rise in community spread Governor Walz implemented a four-week dial back on certain activities to slow the spread of COVID-19 as part of Executive Order 20-99. In summary Executive Order 20-99 includes:  In-person social gatherings with individuals outside your household are prohibited.  Bars and restaurants are dialed back to take-out and delivery service only.  Gyms, fitness studios, entertainment venues, event spaces, and similar establishments will need to close.  Adult and youth sports are paused. Honorable Mayor, City Council, and Jennifer Levitt Small Business Relief Grant Program November 23, 2020 Page 2 of 7 Staff is more than happy to develop a new small business grant program. There are a number of questions that need to be discussed/considered if a new program is to be offered. Below is a review the areas to be discussed for a new small business grant program. Discussion Overall Program Guidelines  Originally $300,000 from the EDA Trust was considered to fund grant program. Would this amount change?  Can a previous grant recipient from the City and/or County program apply again? (Attached)  Would a previous grant recipient receive a reduced grant amount? If so what amount? $300,000 Grant Pool $10,000 grants 30 grant recipients $15,000 grants 20 grant recipients $20,000 grants 15 grants Honorable Mayor, City Council, and Jennifer Levitt Small Business Relief Grant Program November 23, 2020 Page 3 of 7  If a previous grant recipient is allowed to apply can the grant be used for the same or different expenses. o An example if they used the County and City grant to pay for rent in April and May could this new grant be used to pay for rent in June, July, etc. Or must the grant recipient use the new grant for completely different expenses such as supplier payments.  Are home based businesses still excluded?  If Executive Order 20-99 extends past December 18th how will the grant timetable address this?  Also, if Executive Order 20-99 is extended and amended to include additional business sectors how will they be included? Will the timetable address the potential new business sectors? Eligible Expenses What should be included? Example includes:  Commercial rent/mortgage payments  Utilities and other non-payroll operating expenses  Supplier payments  Personal protective equipment  Costs to comply with public health guidance (https://staysafe.mn.gov)  Other COVID-19 related expenditures Eligible Businesses Items to consider include:  Have a fixed, permanent commercial (non-home-based) establishment in Cottage Grove.  Must be active in good standing with the Minnesota Secretary of State o Discussed in Application Process below.  Have employee and revenue maximums (Noted below with business sectors)  Have a COVID-19 Preparedness Plan in effect, and staff dedicated to its implementation. Is this necessary for the City to ensure? Public Safety Emergency Management?  Be current on property taxes. Ineligible Businesses Should there be any businesses that are excluded? Examples include:  Home-based businesses; food trucks; those without a permanent physical establishment; outdoor facilities and venues  Non-profit organizations, civic institutions, facilities owned by government entities o This would exclude Chamber of Commerce, sports (youth and adult) associations, and church organizations (i.e. day cares)  Corporate chains, multi-state chains (exclude franchisees)  Businesses in default conditions prior to February 29, 2020  Businesses that derive any income from adult entertainment Corporate Chains/Multi State Chains Previously the City’s grant program did not allow corporate chains and/or multi-state chains.  Would locally owned franchisees be allowed to apply now?  How would a locally owned franchise be defined? Cottage Grove?, County?, Twin Cities? Honorable Mayor, City Council, and Jennifer Levitt Small Business Relief Grant Program November 23, 2020 Page 4 of 7 o For example, in the County program allowed for a franchisee of Subway who owned two locations apply for a grant. Each Subway location received a grant since there was two different LLC’s and each location has their own employees, location, expenses, etc. o Another example is that the Hennepin County program continues to exclude corporate chains, multi-state chains. Restaurants and bars must be locally owned establishments with 100 employees or fewer and under $6 million in annual revenue. If locally owned franchisee would be allowed to apply for a grant there is no State, County, or City list to identify locally owned franchises. It would be up to the applicant as part of the application process to provide evidence that they are locally owned. Therefore, to ensure a business is not accidentally excluded from a new small business grant program, it would be marketed to all restaurants and the franchisee when applying would provide evidence that the franchise is locally owned. Social Gathering Spaces – Event Venues This would include wedding venues. Cottage Grove has three wedding venues, not including the City-owned River Oaks Event Center. They include Cedarhurst Mansion, John P. Furber Historic Barn and Event Center, Hope Glen Farm.  Guidelines could include allowing for locally owned for-profit event and entertainment venues with 50 employees or fewer and no revenue maximums.  Cedarhurst and Furber Farm received grants from the City and County. Would they be allowed to apply again? Or apply again at a reduced grant amount? Fitness Venues Guidelines to allow for locally owned for-profit gymnasiums and fitness facilities. This could include gymnasiums, fitness facilities, indoor recreation, sports, martial arts, dance, and exercise studios.  Dance by Kris received a grant from the City. Would they be allowed to apply again? Or apply at a reduced grant amount? For fitness venues that are locally owned franchisee, like restaurants and bars there is no list through either the State, County or with the City that would identify if a business is owned by a local franchisee. Therefore, to ensure a business is not accidentally excluded from a new small business grant program, it would be advertised to all fitness venues and it would be made clear in the advertising that local franchisee could apply for a grant and information indicating they are a franchise would be a part of the application. Indoor Youth Sports Paused Indoor youth sports organizations are sometimes non-profit organizations. Would these organizations be allowed to apply for a grant? If allowed this opens up consideration of other non- profits such as Chamber of Commerce and religious organizations. Application Process It is proposed to continue to use a third--party organization, such as Ehlers, the City’s financial consultant to provide review the program applications for completeness and disburse program funds through a lottery system. This would ensure that funds are not disbursed or perceived to be disbursed against any small business. A lottery system allows for an even “playing field” for all those that choose to apply to the program. Submittal to a third-party organization also allows Honorable Mayor, City Council, and Jennifer Levitt Small Business Relief Grant Program November 23, 2020 Page 5 of 7 the financial data of the business to remain private and not a part of public record. A third-party organization would need a week to review applications, if the applications were complete. Review could take longer than one week if not complete. For application submittal documentation it would be suggested that it remain the same as the previous program other than the credit check/score. This costs a business roughly $350 and I think may have caused some applicants to not apply without talking to staff about the application process. Application submittal could include but not limited to:  Active registration with the Minnesota Secretary of State  A 2019 tax return  W9  Additional documentation or information may be deemed necessary either before or after grant distribution. Registration with the Minnesota Secretary of State is a means of independent verification of a business. "In good standing" means that your business is current and active with any required business registrations with the Office of the Secretary of State as of March 1, 2020 and that no Minnesota tax liens have been filed against your business with the Minnesota Secretary of State. Here is an example of a Cottage Grove business that is not active with the Secretary of State and without renewing they could not apply: Potential Schedules The current Executive Order 20-99 will expire on December 18th but the impacts of the pandemic on businesses will last long past the deadline of the existing Executive Order and any future orders. Below are two potential schedules in an attempt to implement a grant program as soon as possible. The difficulty with this time is having a business complete an application during the holiday period, this may cause a business to miss out on the opportunity to apply for a grant. In the City’s previous grant program 8 days (May 13-20, 2020) were provided to roll out the program and for a business to submit an application. A concern is that maybe this is where a Honorable Mayor, City Council, and Jennifer Levitt Small Business Relief Grant Program November 23, 2020 Page 6 of 7 future program can be improved and allow for a longer time period to advertise and market the grant program as well as provide a longer time period for a business to submit an application. Potential Schedule A – Does Not Consider Holidays/Weekends City Council Workshop – Discuss Grant Program December 2, 2020 EDA Meeting – Consider New Grant Program December 8, 2020 City Council Meeting – Approval of Grant Program December 16, 2020 Advertising/Marketing Grant Program (1 week) December 17 – 23, 2020 Application Submittal (1 week) December 24 - 30, 2020 Ehlers Review of Applications (1 week needed) December 31 – January 6, 2021 EDA Meeting Consider Grant Awardees January 12, 2021 City Council Meeting Approval of Grants January 20, 2021 Potential Schedule B – Considers Holidays/Weekends City Council Workshop – Discuss Grant Program December 2, 2020 EDA Meeting – Consider New Grant Program December 8, 2020 City Council Meeting – Approval of Grant Program December 16, 2020 Advertising/Marketing Grant Program (2 weeks) December 17 – January 8, 2021 Application Submittal (1 week) January 11 - 15, 2021 Ehlers Review of Applications (1 week needed) January 19 – 27, 2021 EDA Meeting Consider Grant Awardees February 9, 2021 City Council Meeting Approval of Grants February 17, 2021 Current State Proposal On November 24th Governor Walz held a press conference and House Republicans also unveiled their plan. Plans are currently in the proposal stage, but Governor Walz stated at his press conference that he hoped both sides would come together for the benefit of the State’s small business community. The suggested ideas from each party are: Republican Plan  Three-month sales tax holding  Relief from certain licensing fees  Reopening gyms and fitness centers  Expand liquor to go  $400 million cash grant program Democrat Plan Would also include:  Waive regulatory fees  Establish an eviction moratorium for businesses  Extend unemployment benefits for 13 weeks  $500 to low income families  Cash payments to 14,00 business. Democratic House Majority Leader mentioned in the press conference a potential figure of $25,000 per business, so for 14,000 businesses, that is roughly $350 million. Republicans and the Governor stated that as soon as there is a deal a special session will be called. Honorable Mayor, City Council, and Jennifer Levitt Small Business Relief Grant Program November 23, 2020 Page 7 of 7 Additionally, one restaurant with liquor has made a request to defer 2021 liquor license payment. This may be an additional way to assist those businesses in Cottage Grove with an intoxicating liquor license. Recommendation Given that we will most likely see the impacts of the pandemic now and into the future there are no wrong ways to support a small business. It comes down to deciding how much assistance the City of Cottage Grove would like to not only invest in the small business community but if there is a larger comprehensive vision for small businesses to be developed in addition to a grant program. Direction moving forward could include any combination of the following: Option 1: Continue discussion of a small business grant program as well as a comprehensive vision for small businesses at the Strategic Planning session on January 9, 2021. Option 2: Establish a small business grant program as soon as possible, with City Council providing objectives and criteria for establishing guidelines. Attachments Previous Cottage Grove Grant Award Recipients Businesses Impacted by Executive Order 20-99