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File #: DIR 2020-045    Version: 1 Name:
Type: Discussion/Direction Item Status: Passed
File created: 12/3/2020 In control: Town Council
On agenda: 12/15/2020 Final action:
Title: Discussion/Direction: Third-Round COVID-19 Small Business Support Grant Program
Attachments: 1. Attachment A: Options 1 and 2, 2. Attachment C: Limited Health Care (Page 5), 3. Attachment B: Options 1A and 2A, 4. Public Comments received thru 12-15-2020, 5. Presentation

To:                     Honorable Mayor and Members of Town Council

 

Thru:                     David L. Corliss, Town Manager

 

From:                     Kristin Read, Assistant Town Manager

 

Title

Discussion/Direction: Third-Round COVID-19 Small Business Support Grant Program

Body

________________________________________________________________________________

 

Executive Summary

 

At the November 17, 2020, Town Council meeting, Council authorized a third-round COVID-19 Small Business Support Grant Program. The program application was online from November 19 to December 4. Businesses submitted 101 unique applications during that time.

 

A team of Councilmembers, staff members and community partners from the Castle Rock Chamber and Economic Development Council have reviewed the applications against the approved criteria and is recommending that Council award 86 of the businesses grants. Recommended and alternative options for award amounts are attached to this agenda item.

 

Council approved, and directed staff to exhaust, an initial program budget of approximately $500,000. As time has progressed toward the December 30 CARES Act reimbursement deadline, further analysis has revealed that roughly $1 million can actually be made available for this program if Council finds that appropriate. Staff recommends Council review the alternatives presented and provide direction on how to proceed with awards.

 

Discussion

 

Since the pandemic began impacting our area in March, the Town has pursued numerous initiatives to assist local businesses. Council provided financial resources so the EDC could offer crowdsourced and 0% interest loan programs. Council also provided direction that led the Town to engage with a marketing firm to promote Castle Rock as a shopping and dining destination to a Front Range audience. Staff and the Town’s community partners have augmented that effort with a “Supporting Our Castle Rock Community” social media campaign in support of local businesses. And, Castle Rock Water continues to offer financial and other support directly to small local businesses to ease their financial burdens during this difficult time.

 

Perhaps most significantly financially, Council has awarded two rounds of small business grants and has made available the third round of grants being discussed this evening. Through November, Council had awarded $466,000 in grants to roughly 150 local small businesses. The criteria for all three rounds of grants has remained fairly consistent, with a few less restrictive items enacted for the current third round as noted:

 

Funding priority will be given to independently owned restaurants and bars, which are being most impacted by current public health orders. Preference will also be given to businesses that collected and remitted Town sales tax during 2019.

 

To qualify, a business must:

Ÿ                     Have a physical and publicly accessible location in the Town of Castle Rock that is not based in a residence or coworking space

Ÿ                     Be a small business - defined as those with the equivalent of 25 or less full-time employees

Ÿ                     Have been negatively and significantly interrupted by the pandemic - details of these impacts were required on the grant application

Ÿ                     Have been operating in Castle Rock for a minimum of six months (updated from the one year required in prior grant rounds), as defined by the date of the most recent Town business license issuance, by Dec. 15, 2020

Ÿ                     Be in good standing with the Town in regard to Town business licensure and sales tax and use tax returns

o                     Applicants not current on sales tax remittance were contacted in attempt to correct this to become eligible for a grant

Ÿ                     Be registered with the Colorado Secretary of State

Ÿ                     Be operating in accordance with applicable laws, including public health orders

Ÿ                     Have applied for a federal SBA loan and provide proof of application

Ÿ                     Provide a completed W-9 form for the business to enable the Town to issue it a check

Ÿ                     New for the third round: Businesses that have received the full possible $10,000 in awards resulting from the first two rounds of grants are eligible to apply but will be given lower priority than other businesses

Ÿ                     Franchises located within Castle Rock are eligible if the franchisee also resides within the Town of Castle Rock; this is defined by addresses paying property tax to the Town

Ÿ                     Ineligible businesses include liquor stores; auto- and construction-related businesses; and nonprofit organizations

o                     Professional service businesses and regional businesses with more than five locations in Colorado are eligible in the third round, with lesser priority than other businesses

Ÿ                     Businesses must agree to provide financial records to support their application - in essence, to submit to a program audit - upon the Town’s request

Council’s approval of the third round of grants established that if a business timely submitted an application compliant with all criteria, it would be awarded a grant of up to $5,000, subject to increase based upon funding availability.

 

Using Council’s direction and approved criteria, staff developed an application-scoring model that resulted in a maximum grant of $5,000. Using this model, staff screened the applications and awarded businesses points as follows:

 

Ÿ                     10 points - any business that meets all qualifications

Ÿ                     Up to 10 points - one point for each $5,000 in declined revenue when comparing 2019 to 2020, maxing out at $50,000 in decline

Ÿ                     Up to 10 points - one point for each $5,000 in 2019 Town sales tax remitted, maxing out at $50,000 in remittance (for businesses established in 2020, staff used sales tax remitted to date to estimate an annual amount for which to award points)

Ÿ                     10 points - businesses most impacted by current Level Red orders: restaurants, gyms, retail, personal services and limited health care (see Attachment C for the State’s definition of limited health care, which was used in applying points for those businesses)

Ÿ                     10 points - independently owned restaurants and bars

Ÿ                     -2.5 points - de-prioritization of professional service and regional businesses with more than five locations, as directed by Council, and of food trucks and businesses within businesses, as recommended by the grant review team

 

The review team - consisting of Councilmembers, staff and Chamber and EDC representatives - met December 7 to review and make recommendations regarding the applications. The review resulted in 15 businesses being recommended ineligible, with the remaining 86 recommended for grants. Of the businesses recommended for grants, 38 would be first-time recipients of the Town’s grant program.

 

Applying the scoring model to the applications resulted in total scores ranging from 7.5 to 50 points. Points initially were multiplied by 100 to arrive at a maximum grant amount of $5,000. However, based upon the number of applications, to exhaust the approved program budget of roughly $500,000, staff ultimately applied a multiplier of 2.1 to the initial amounts to reach the recommendations provided in Option 1. As noted earlier in this memo, it now appears the resources available for this program may be closer to $1 million. Therefore, staff has presented a second option, Option 2, in which the amounts are doubled yet again to reach $1 million. Recommended grants for each eligible business under these two options are outlined in Attachment A.

 

It should be noted that, per Council’s direction, any business that had already received $10,000 in grants was recommended for an adjusted award amount. Staff further extended this direction to apply to businesses already awarded $7,500, to provide for greater equity.

 

Option 1 reflects grants totaling $510,100, and the total for Option 2 would be $1,068,700. The maximum individual grant in Option 1 is $10,500 (2.1 times $5,000), and in Option 2 that is $21,000. Option 1 would provide for a maximum cumulative award (across the three rounds) for any one business of $15,500; Option 2 would see that increase to $26,000. Staff believes this is a supportable amount based on awards observed in other jurisdictions, which have ranged to at least $30,000.

 

During, and subsequent to, the review team meeting, Councilmember Cavey raised concern about the scoring model being based partly on sales tax remittance. Staff and Council’s thinking on this has been that consideration of sales tax generation provides for a symbiosis in this program - the program prioritizes help to sustaining sales tax-generating businesses which, in turn, help sustain the Town’s operations, which are funded primarily by sales tax. Accordingly, staff recommends making awards under Option 1 or Option 2.

 

Staff has included alternatives that reassign the 10 sales tax points in the scoring model to meeting all qualifications, making that item worth 20 points. (There are numerous ways to adjust the model; staff selected for presentation this simple one.) Applying this approach results in Option 1A grants totaling $647,230 and Option 2A grants totaling $1,347,160. These alternatives (Attachment B) would bring the program budget above what was initially approved and what is expected is remaining available in Town CARES Act reimbursements. If Council wishes to award grants using Option 2A, the likely result is that some Town expenses that would otherwise be eligible to be reimbursed would not be, due to Town CARES funds being exhausted by this program. If Council finds that an acceptable outcome, it can decide to award grants under that option. Staff did not believe it best to present an alternative model that keeps awards within the initial $500,000 and $1 million budgets, because the review team’s recommended awards to some businesses would likely need to be reduced, including to some of the businesses Council in November stated it wished to help the most: restaurants.

 

Staff’s recommended Option 1 would result in average grants of $5,931.40 and Option 2 of $12,426.74. By comparison, Option 1A would average to $7,525.93, and Option 2A to $15,664.65. The maximum individual and cumulative awards to any one business would be the same under 1 and 1A and under 2 and 2B.

 

Another point Councilmember Cavey raised was whether to recommend for a grant the one franchise that was recommended ineligible because the owner does not live in Town, since the owner lives within Douglas County. The awards to that business would be as follows under the four alternatives: 1, $3,675, 1A, $5,775, 2, $7,350 and 2A, $11,550. Given these amounts, staff’s assessment is that inclusion of this business would not present a significant financial hurdle if Council sees fit to award a grant. Staff should note there were eight businesses denied grants in prior rounds for being franchises whose owner does not live in Town. Since a change to this requirement was not advertised, it’s possible those prior applicants would have reapplied in this round if they had known Council wished to award franchisees who live within Douglas County but not specifically the Town.

 

For grants approved this evening, staff anticipates mailing checks to businesses by December 30. Like with prior rounds, staff wishes to let Council and the public know a few disclosures about this program: 1) It does not include any payback provisions, should the business close or become noncompliant with the grant criteria after approvals are made. (A small number of the businesses awarded grants in earlier rounds have closed and have not been required to repay funds granted.) 2) The review team did not audit the financial information provided on the applications. Rather, the team took at face value the businesses’ stated financial losses and verified that they had supplied supporting documentation, should an audit of any application be desired. 3) No formal dispute process nor cure period has been established relative to any applications the review team has deemed ineligible.

 

Staff Recommendation

 

Staff recommends Council review the alternatives presented and provide direction on how to proceed with awarding grants.

 

Proposed Motions

 

“I move to direct staff to award grants under Option 1 / 1A / 2 / 2A."

 

“I move to direct staff to include in the awards the eligible franchise whose owner resides in Douglas County.”


Attachments

 

Attachment A:                     Recommended Options 1 and 2

Attachment B:                     Alternative Options 1A and 2A

Attachment C:                     State Information on Limited Health Care Businesses