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HomeMy WebLinkAboutItem 8.1 - 3206 Dublin Small Business Emergency Microloan P Page 1 of 4 STAFF REPORT CITY COUNCIL DATE: May 5, 2020 TO: Honorable Mayor and City Councilmembers FROM: Linda Smith, City Manager SUBJECT: Dublin Small Business Emergency Microloan Program Prepared by: Hazel L. Wetherford, Economic Development Director EXECUTIVE SUMMARY: The City Council will consider approving the Dublin Small Business Emergency Microloan Program to help mitigate the severe impacts of COVID-19 (Coronavirus) on small businesses. Due to COVID-19 and shelter-in-place orders, many small businesses have had to close their doors or significantly alter their operations which has impacted their financial sustainability. STAFF RECOMMENDATION: Adopt the Resolution Approving the Dublin Small Business Emergency Microloan Program to mitigate the severe negative impacts of COVID-19 (Coronavirus) on small businesses. FINANCIAL IMPACT: The proposed Small Business Emergency Microloan Program would require using funds from the City’s Small Business Assistance Grant (SBAG) Program, which has a projected balance of $469,461 for Fiscal Year 2019-20. If the City Council approves an advance allocation for Fiscal Year 2020-21 (which is inclusive of the first two quarters revenue payments of $50,000), $519,461 will be available to fund the Microloan Program. DESCRIPTION: Background on COVID-19 Impacts On March 1, 2020, the Alameda County Health Officer declared a public health emergency. On March 4, 2020, California Governor Gavin Newsom issued a State of Emergency Proclamation for the State of California. Page 2 of 4 On March 16, 2020, the Alameda County Health Officer issued an Order directing all individuals living in the County to shelter at their place of residence, subject to certain exceptions. On March 16, 2020, the Dublin City Manager, acting as the Director of Emergency Services, proclaimed the existence of a local emergency within the City of Dublin pursuant to Dublin Municipal Code Chapter 2.44.060(A). On March 18, 2020, the City Council at a special City Council meeting, ratified and extended the proclamation of existence of a local emergency. On March 31, 2020, the Alameda County Health Officer issued an Order extending the shelter in place to May 3. During this time of sheltering in place, self-isolation, and other social distancing, many small business owners are experiencing substantial losses of income as a result of business closures or the loss of hours, hindering their ability to pay rent or to maintain employees on payroll. Small business owners in these circumstances may face possible evictions, layoffs, or be forced to permanently close as a result of the pandemic. Businesses are an integral part of the Dublin community from the jobs they provide for residents to the essential services supported by the revenues they generate. To assis t in retaining businesses that are experiencing severe negative impacts due to the COVID-19 pandemic, Staff is proposing the creation of an Emergency Microloan Program. The focus of this program is on small businesses, primarily restaurants and retailers , because they are key providers of sales tax revenues that allow the City to provide services and programs that broadly benefit the community. The City’s small business community is imperative to the City’s economic health and viability. The creation of a loan program would help with tenant stability, decrease store front vacancies, encourage the retention of existing businesses and help maintain the potential loss of sales tax revenue. The loan would provide a capital infusion to pay rent, payroll, and operating expenses during this time and help bridge the gap until allowed to re-open and fully operate. The Emergency Microloan Program would focus on businesses, primarily restaurants and retailers, with no more than 50 employees, and would provide unsecured, interest-free loans of up to $10,000 to those meeting the program’s requirements as outlined below and in Attachment 2. Funding Funding for the program would come from the City’s existing Small Business Assistance Grant (SBAG) Program, which has a projected balance of $469,461 for Fiscal Year 2019-20 with additional anticipated revenue of $50,000 for Fiscal Year 2020 -21 Quarters 1 and 2, bringing the total balance for the program to $519,461. Funding for the SBAG is made possible by an annual payment to the City from Amador Valley Industries (AVI) through an exclusive agreement for construction and debris hauling. In exchange for the agreement, AVI makes four quarterly payments of $25,000 to the City, totaling $100,000 annually. Page 3 of 4 Currently, the City uses the SBAG Program to help attract new businesses to Dublin or to help existing businesses expand and grow. Program funds have been used to assist with the cost of complying with federal, state, and local laws relating to disability access requirements, Title 24 upgrades, trash enclosures, and other obligations imposed on small businesses. If the City Council approves the use of the SBAG funds for the proposed Emergency Microloan Program, then the SBAG program would need to be suspended until future funding was available beginning in Quarter 3 of Fiscal Year 2020-21. The proposed funding of $519,461 for the program could be used to fund loans in the amount of $5,000, $7,000, or $10,000. Requirements and Restrictions Under the proposed Emergency Microloan Program, eligibility criteria include, but are not limited to: Physical location in the City of Dublin, possession of a valid City of Dublin Business License (as of March 1, 2020) and being in good standing with the City. Minimum of one employee with a maximum of 50 employees. Can demonstrate at least a 25% reduction in revenues due to COVID-19. Can demonstrate that they have applied for federal or state financial assistance (i.e. Paycheck Protection Program, Economic Injury Disaster Loan, Economic Injury Disaster Loan Advance, etc.). As previously noted, the goal of the program is to help small businesses such as restaurants and retailers since they have been the most severely impacted from the shelter-in-place orders. Under the terms of the proposed program, businesses not eligible to receive emergency microloans include, but are not limited to: Lending and investment institutions and insurance companies Non-profit entities Hotels Professional services Home-based businesses Chain stores and corporately owned franchises Repayment and Option for Forgiveness The Emergency Microloan Program would provide an unsecured, zero-interest loan with a repayment plan. Repayment of the loan would be deferred for up to 36 months after approval. Businesses who have been approved would be required to sign a promissory note with the City and agree to an automatic deduction of monthly , equal installment payments following the 36-month period. In addition, Staff recommends that the loan program include a forgiveness component. If the City Council concurs, then Staff would recommend that a business would need to meet one of the following conditions: Longevity – For each year the business is in operation, 1/3 of the loan will be forgiven. If at the end of three years, the business is still in operation, then the entire loan shall be forgiven; or Page 4 of 4 Sales Tax – If at the end of Year 3, the business has cumulatively produced sales tax dollars to the City in the amount of the loan, then the loan shall be forgiven. It should be noted that there is an element of risk involved with this program. Given the current pandemic and the uncertainty of the business climate, some small businesses may permanently close even after receiving financial support and be unable to repay the loan. Time Frame Applications will be accepted on a first-come, first-served basis and will be considered complete when all required documentation is submitted. Applications will be accepted through Tuesday, June 30, 2020 at 5:00 PM or when funding has been exhausted, whichever occurs first. On April 22, 2020, Staff presented this recommendation to the Economic Development Committee. The Committee supported the concepts included in this report and unanimously recommended that Staff bring the item before the City Council for consideration. This recommendation falls under the Committee’s purview to provide policy guidance and direction on economic development activities. STRATEGIC PLAN INITIATIVE: Strategy 4: Focus efforts on ways to strengthen the City’s economic vitality, including the downtown, through public investment and economic development. NOTICING REQUIREMENTS/PUBLIC OUTREACH: None. ATTACHMENTS: 1. Resolution Approving the Dublin Small Business Emergency Microloan Program 2. Exhibit A to Resolution - Dublin Small Business Emergency Microloan Program Summary RESOLUTION NO. XX- 20 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN ********* APPROVING THE DUBLIN SMALL BUSINESS EMERGENCY MICROLOAN PROGRAM WHEREAS, on March 1, 2020, the Alameda County Health Officer declared a public health emergency; and WHEREAS, on March 4, 2020, California Governor Gavin Newsom issued a State of Emergency Proclamation for the State of California; and WHEREAS, on March 16, 2020, the Alameda County Health Officer issued an Order directing all individuals living in the County to shelter at their place of residence, subject to certain exceptions; and WHEREAS, on March 16, 2020, the Dublin City Manager, acting as the Director of Emergency Services, proclaimed the existence of a local emergency within the City of Dublin pursuant to Dublin Municipal Code Chapter 2.44.060(A); and WHEREAS, on March 18, 2020, the City Council at a special City Council meeting, ratified and extended the proclamation of existence of a local emergency; and WHEREAS, on March 31, 2020, the Alameda County Health Officer issued an Order extending the shelter in place to May 3; and WHEREAS, during this time of shelter in place, self-isolation, and other social distancing, many small business owners are experiencing substantial losses of business income as a result of business closures or the loss of hours, hindering their ability to pay rent or to maintain employees on payroll; and WHEREAS, small business owners in these circumstances may face possible evictions, layoffs, or be forced to permanently close as a result of the pandemic; and WHEREAS, businesses are an integral part of the Dublin community from the jobs they provide for residents to the essential services and amen ities supported by the revenues they generate; and WHEREAS, to assist in retaining businesses that are experiencing severe negative impacts due to the COVID-19 pandemic, Staff is proposing the creation of an emergency microloan program; and WHEREAS, the focus of this program is on small businesses, primarily restaurants and retailers because they are more likely to have difficulty in securing capital financing and often have higher operating costs; and WHEREAS, small businesses are key providers of sales tax revenues that allow the City to provide services and programs that broadly benefit the community; and WHEREAS, the City of Dublin’s small business community is imperative to the City’s economic health and viability; and WHEREAS, City staff is proposing a small business emergency microloan program for small businesses with no more than 50 employees. The proposed loan program would provide unsecured, interest-free loans up to $10,000 for small businesses who meet the program ’s requirements; and NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby approve the Dublin Small Business Microloan Program attached hereto as Exhibit A to this Resolution. BE IT FURTHER RESOLVED that the City Council authorizes the City Manager to take administrative action, and make any minor amendments to the Program, to carry out the intent of this Resolution. PASSED, APPROVED AND ADOPTED this 5th day of May, 2020 by the following vote: AYES: NOES: ABSENT: ABSTAIN: ___________________________________ Mayor ATTEST: _______________________________________ City Clerk Dublin Small Business Emergency Microloan Program Summary PROGRAM OBJECTIVE The objective of this program is to mitigate the severe negative impacts of COVID-19 on small businesses having to close by offering immediate financial assistance. Small businesses are those businesses with no more than 50 employees. This program will provide small businesses with a capital infusion. The focus of this program is on small businesses, primarily restaurants and retailers because they are more likely to have difficulty in securing capital financing. Small businesses are key providers of sales tax revenues that allow the City to provide services and programs that broadly benefit the community. FUNDING Funds are limited for this program. Applications will be processed on a first-come, first-served basis. Once the grant funding has been exhausted, the program will end. Funding for the Dublin Small Business Emergency Microloan Program will be funded by the City of Dublin’s Small Business Assistance Grant Program (SBAG), which has a balance of $469,461 (includes FY 2019/20 Quarter 4 SBAG payment) and an additional $50,000 in anticipated revenue for Fiscal Year (FY) 2020/2021 Quarters 1 & 2. Funding for the SBAG is made possible by an annual payment to the City of Dublin from Amador Valley Industries through an exclusive agreement for construction & debris hauling in exchange for an annual $100,000 payment for economic development. $469,461 SBAG Program Funds (projected balance includes FY 2019/20 Qtr 4 payment) $ 50,000 SBAG FY 2020/21’s First Two Quarters Revenue $519,461 TOTAL FUNDING ELIGIBILITY REQUIREMENTS & RESTRICTIONS Businesses eligible to receive emergency loans include, but are not limited to: • Physical location in the City of Dublin and possess a valid City of Dublin Business License (as of March 1, 2020) and be in good standing with the City. • Minimum one employee with a maximum of 50 employees. • Can demonstrate at least a 25% reduction in revenues due to COVID-19. • Can demonstrate that they have applied for federal or state financial assistance (i.e. Paycheck Protection Program, Economic Injury Disaster Loan, Economic Injury Disaster Loan Advance, etc.). • Funds must be used to cover payroll, rent, operating expenses or working capital. Businesses not eligible to receive emergency loans include, but are not limited to: • Lending and investment institutions and insurance companies • Non-profit entities • Hotels • Professional services • Home-based businesses • Chain stores and corporately owned franchises REPAYMENT OF LOAN Business who receive financial assistance, will be placed on a repayment plan for the unsecured, zero-interest loan. Repayment of the loan will be deferred for up to 36 months after approval. Businesses who have been approved would be required to sign a promissory note with the City and agree to an automatic deduction of monthly equal installment payments. Option: If the City Council approves a loan forgiveness option, then City staff would recommend that a business would need to meet one of the following conditions: • Longevity – For each year the business is in operation, 1/3 of the loan will be forgiven. If at the end of three years, the business is still in operation, then the entire loan shall be forgiven; or • Sales Tax – If at the end of Year 3, the business has cumulatively produced sales tax dollars to the City in the amount equal to the loan, then the loan shall be forgiven. REQUIRED DOCUMENTATION Applicants must complete and submit all documentation as listed below: 1. Complete City of Dublin Loan Application (Economic Injury Disaster Loan Form) 2. City of Dublin Business License 3. State Driver’s License or Identification Card 4. Verification of applying for Federal or State funding 5. Itemized Budget for Funds Requested 6. W-9 Form (Request for Taxpayer Identification and Certification) 7. Electronic Funds Transfer Form (for direct deposit of loan funds) 8. Lease Agreement or Rental Agreement 9. Promissory Note 10. Automatic Deduction of Installment Payments Form DEADLINE Applications will be accepted on a first-come, first-served basis and will be considered complete when all required documentation is submitted. Applications will be accepted through Tuesday, June 30, 2020 at 5 PM or when funding has been exhausted, whichever occurs first.