To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Kristin Read, Assistant Town Manager
Title
Discussion/Direction: COVID-19 Small Business Support Grant Appeals
Body
________________________________________________________________________________
Executive Summary
At the October 20, 2020, Town Council meeting, Council directed staff to open an appeals period so applicants not awarded grants through the Town’s two-round COVID-19 Small Business Grant Support Program could request consideration. Council’s direction included collecting information on whether the State forced the applicant’s business to close and whether the business could provide teleservices. Further, Council directed staff not to remove any of the criteria in place for the program.
Staff opened the appeals period from October 26 through November 6 as directed. Twenty-three appeals - eight for the second round and 15 for the first round - were received. The grant review team met on November 10 to review the submitted appeals and arrived at the recommendations in Attachment A, which would award five additional grants as a result of the 23 appeals. The recommendations were published at CRgov.com/BusinessGrants starting November 12. Appealing businesses were also notified by email on that date of the recommendations and the opportunity to provide comments for tonight’s meeting.
Discussion
In its approval of the COVID-19 Small Business Grant Support Program, Council approved the following criteria:
Funding priority will be given to small businesses - defined as those with 25 employees or less - that have frequent and/or close customer contacts, and whose business has been negatively and significantly interrupted by the pandemic. Categories of priority businesses include storefront retail, restaurants/food shops, and personal care small businesses (barbers, hair and nail salons, etc.). Franchises located within Castle Rock and whose franchisees also reside within Town are eligible.
Other small businesses will be considered for grants as funds are available, with lesser priority, if they meet program criteria. Ineligible businesses include liquor stores; auto- and construction-related businesses; regional businesses with more than five locations in Colorado; professional service businesses; and nonprofit organizations.
To qualify, a business must have been operating in Castle Rock for a minimum of one year prior to making application. (Staff used the date of the Town’s most recent business license issuance to make recommendations relative to this requirement. The cut-off date used to determine if a license has been valid at least a year was November 6, the day the appeals period ended. Council could choose a different date as desired; staff simply recommends a consistent application.) Preference will be given to businesses that collected and remitted Town sales tax during 2019.
Additional program criteria:
l The business must have a physical and publicly accessible location in the Town of Castle Rock that is not based in a residence or coworking space.
l To be eligible, a business must be in good standing with the Town in regard to Town business licensure and sales tax and use tax returns. The business must further be operating in accordance with applicable laws and registered with the Colorado Secretary of State’s Office.
l The business must meet all established program criteria and agree to provide financial records to support its application upon the Town’s request.
l The business must have applied for a federal SBA loan and provide proof of application.”
Second-round recommendations
For the second-round grants, in addition to meeting the criteria above, eligible businesses must have provided evidence that the business had suffered interruptions to include a loss of revenue totaling at least $5,000 that could be attributed to the COVID-19 pandemic when comparing May-August 2020 to May-August 2019.
A total of 16 of the 54 second-round applicant businesses were determined ineligible by Council and the grant review team, and eight of those submitted appeals. The grant review team found that in none of those instances had circumstances changed surrounding the reason for denial. Therefore, the review team is not recommending any additional awards based on the second-round appeals submitted.
Still, Council could opt to award grants to some or all of these eight businesses that submitted appeals per their discretion. If awarding all businesses that appealed for the second round, total additional awards would be $40,000.
First-round recommendations
For the first-round grants, in addition to meeting the criteria discussed, eligible businesses must have provided a statement or other evidence that the business had suffered economic harm (e.g. loss of revenue or income, employee lay-off, etc.) between March 1, 2020, and the date of the application that could be attributed to the COVID-19 pandemic and/or the subsequent State of Colorado public health orders mandating restricted or closed business practices. Businesses were also required to provide information, via their online application, on how granted funds would be used.
A total of 143 of the 241 first-round applicant businesses were determined ineligible by Council and the grant review team, and 15 of those submitted appeals. The grant review team found that in five of those instances, circumstances had changed surrounding the reason for denial. The team is recommending a total of $9,500 in awards for those three businesses as detailed in Attachment A.
Council could opt to award grants to some or all of the businesses the committee has not recommended for an award per their discretion. If awarding all otherwise eligible businesses that submitted appeals for the first round, total additional awards would be $18,750. Staff should note that two of the businesses were found during the appeal review to have additional disqualifying factors to ones listed and reviewed. Therefore, the committee would not recommend these businesses for an award even if Council chooses to grant their appeals.
Additional Considerations
Knowing the window to utilize CARES Act funding is short - funds are available for use until December 30 - and seeing the need that still exists within the local business community, the grant review team recommends Council consider opening a third round of grants, potentially with fewer requirements this time.
For this round, the committee would recommend removing the professional service restriction, which has been the cause of many ineligible determinations. Other restrictions Council may wish to consider removing are those for regional businesses with more than five locations in Colorado, and potentially also the requirement that the business must have operated in Town for a year to be eligible - this could be simplified to eligibility via holding a current valid Town business license. The committee would recommend all other criteria continue to apply. All decisions regarding criteria are within Council’s discretion.
In terms of awards, the group recommends an approach more consistent with the first-round grants, with awards varied based on if the business is a priority business and dependent on the amount of 2019 sales tax remittance. The group could work out the specific award amounts - not to exceed an amount to be specified by Council - once it’s clear how the application volume compares with the program budget. Staff proposes a budget of approximately $500,000, which could be accommodated within the Town’s remaining available CARES Act distribution.
The timing for the program would need to be quite compressed, given the need to make awards by December 30 to be eligible for reimbursement. If Council wishes to proceed, staff recommends the following schedule:
l Thursday, November 19 - Grant applications open
l Friday, December 4 - Grant applications close at 5 p.m.
l Week of December 7 - Review committee meets to consider applications and form recommendations
l Friday, December 11 - Review team recommendations published at CRgov.com/BusinessGrants by 5 p.m.
l Tuesday, December 15- Town Council considers recommendations and awards grants
l By December 30 - Granted funds are mailed to receiving businesses
This schedule would not offer an opportunity for a dispute process nor a cure period unless Council would wish to provide grants using Town funds that could not be reimbursed, as the deadline for reimbursement coincides with the proposed end of this program.
Staff Recommendation
Staff encourages Council to review the appeals information provided and request any additional details needed to make determinations regarding the appeals. Any awards approved tonight are expected to be mailed to receiving businesses in late November.
Staff also encourages Council to discuss whether to offer a third round of grants and to provide specific direction regarding criteria if an additional round of grants is desired.
Proposed Motions
“I move to direct staff to award additional grants
as recommended.”
to ____________.”
“I move to direct staff to open a third round of grants
and to remove from the criteria
_______________.”
Attachments
Attachment A: Grant Appeals Recommendations Detail