CC SR 20200602 05 - Small Business Finance Assistance Update
CITY COUNCIL MEETING DATE: 06/02/2020
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA DESCRIPTION:
Consideration and possible action receive a status report on City’s Small Business
Financial Assistance Plan in response to COVID-19.
RECOMMENDED COUNCIL ACTION:
(1) Receive and file a status report on the City’s Small Business Financial
Assistance Plan;
(2) Approve modifying the Business License Tax Refund Program to include all 189
businesses categorized as “in-City businesses” and provide automatic refunds
without requiring an application; and
(3) Provide Staff with direction on the proposed requirements for the Community
Development Block Grant Small Business Stimulus Program.
FISCAL IMPACT: Reduction of business license tax revenue for amount not to
exceed $65,000.
Amount Budgeted: $0
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Vina Ramos, Interim Deputy Director of Finance
REVIEWED BY: Trang Nguyen, Director of Finance
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. Draft Program Requirements (page A-1)
BACKGROUND AND DISCUSSION:
On April 7, 2020, the City Council unanimously approved the Small Business Financial
Assistance Plan to provide financial assistance to City-defined small businesses that
are financially affected by the COVID-19 pandemic. Based on the City Council’s
direction, this report is to provide a status update of the approved assistance p lan which
encompasses a one-time refund of the 2020 business license tax and a Community
Development Block Grant (CDBG) Stimulus Program.
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2020 Business License Tax Refund
The first component of the plan is a one-time refund of the 2020 business license tax
paid by the City’s small businesses that provide retail, food and other similar services to
the community from a physical (“brick-and-mortar”) location in the City. The required
gross (sales) receipts must be less than $1.5 million in 2019. Since the City Council’s
approval of the plan, Staff posted the information on the City’s website, the daily
COVID-19 updates, the City Manager’s Weekly Administrative Report, and sent the
information through the City’s Breaking News listserv. As of May 21, 2020, the program
updates are as follows:
Received 16 requests.
Issued just over $2,000 in refunds for six eligible businesses – two gyms,
two restaurants, retail shop, and salons.
Denied three businesses that are not eligible because they are located in
Rolling Hills Estates and Palos Verdes Estates.
Denied seven businesses that are not eligible. The businesses did not
meet the brick-and-mortar requirement. The requests were from the
owners of a business office and independent contractors for a business
within the City.
As reported at the April 7 City Council meeting, there are approximately 189 businesses
in the City that may meet these criteria, with an overall potential fiscal impact of
approximately $65,000 in potential business license tax refunds. Staff believes that the
low turnout of the program is due to the current closures of the businesses and that
eligible businesses may not be informed of the program. Additionally, some of the
businesses categorized as “in-City business” may not be eligible due to the criteria of
providing retail, food and other similar services to the community from a “brick -and-
mortar” location in the City. For example, although the seven businesses denied refunds
are located within the City, they were deemed ineligible since they are not in the
category of retail, food, or similar services that are open to the public.
In an effort to support the City’s small businesses impacted by COVID-19, Staff
requests the City Council consider modifying the program to include all 189 businesses
categorized as “in-City businesses” to receive the one-time business license tax refund.
The modified approach would encompass a larger group of in-City small businesses.
Additionally, due to the challenges of reaching out to closed businesses, Staff would like
to propose issuing refunds automatically to all “in-City businesses” instead of waiting for
applications to be completed. With these two proposed modifications, the potential fiscal
impact remains the same at approximately $65,000
Community Development Block Grant (CDBG) Stimulus Program
The second component of the Council-approved plan is the Community Development
Block Grant (CDBG) Stimulus Program authorizing the use of $86,499 of CDBG-CV
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Coronavirus Aid, Relief, and Economic Security (CARES) Act funding and $30,000 of
unallocated CDBG funds. Based on City Council direction, the program would provide
assistance in the form of low-interest or interest-free loans, lower the minimum loan
amount to maximize the number of available loans, and have the City subsidize any
administrative costs related to the loans. Since the approval of the program, Staff has
been working with the City’s CDBG consultants to obtain program guidelines and
provisions set by the U.S. Department of Housing and Urban Development. In order to
formally use CDBG funding, the City must develop program and eligibility requirements
and submit the plan to CDBG for final review and approval. Once the plan is approved,
the City can move forward with implementing the program. Staff’s goal is to simplify the
process while meeting CDBG requirements.
Based on Staff research and incorporating City Council direction and guidance from the
City’s CDBG consultants, the main points of the preliminary program requirements
(Attachment A) are the following:
A small business is defined as a “brick-and-mortar” business located
within the geographic boundaries of the City of Rancho Palos Verdes that
generated less than $1.5 million in 2019 gross receipts.
Eligible small businesses are deemed non-essential under Governor
Newsom’s Executive Order N-33-20 dated March 19, 2020.
Loans are interest-free and/or forgivable.
Loans are for small businesses that are negatively impacted by COVID-
19.
Loans are for short-term working capital for operating expenses to retain
jobs and support service delivery.
For microenterprises business with five or fewer employees, loan amounts
are up to $15,000.
For small businesses with six or more employees, loan amounts are up to
$25,000.
Loan repayment is deferred for the first 12 months unless the Council
desires to make the loan forgivable.
Staff seeks City Council direction regarding the preliminary program requirements
described above. Once approved, Staff will work with CDBG to obtain approval for the
plan and post a required public notice on how the funds will be utilized.
CONCLUSION:
Staff recommends that the City Council receive and file a status report on the City’s
Small Business Financial Assistance Plan; approve modifications to the Business
License Tax Refund Program; and provide direction on the proposed requirements for
the CDBG Small Business Stimulus Program.
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ALTERNATIVES:
In addition to the Staff recommendation, the following alternative actions are available
for the City Council’s consideration:
1. Direct Staff to suspend all or a specific component of the City’s Small
Business Financial Assistance Plan in response to COVID-19.
2. Take other action as deemed appropriate.
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Microenterprise and Small Business Loans
Community Development Block Grant (CDBG-CV) Cares Act
June 2, 2020
Program Use
Example
Qualifying Business
Expenses
Funding Amount
Loan/Forgivable
Loan
Basic Qualifications
Assistance to
Microenterprises -
5 employees or less
105(a)(22)(42 U.S.C.
5305 (a)(22)); 24
CFR 570.201(o)
Provide loans to
stabilize
microenterprises
with 5 or less
employees
negatively impacted
by COVID-19
Loan may be used
for payroll,
lease/mortgage
interest, utilities, or
necessary supplies
or equipment
Up to $15,000 Zero-interest Loan
(forgivable after 1
year if criteria is
met)
1) Applicant operates out of a
physical commercial storefront
(“brick and mortar”) within the
City limits of Rancho Palos
Verdes.
2) Applicant is able to
demonstrate financial loss in
business operations due to
COVID-19 in 2020 year-to-date
compared to 2019.
3) Forgivable Loan – After 1 Year
if the following criteria is met:
A) Applicant must provide
receipts showing loan was used
for qualifying business expense
B) Applicant must report
business status:
Open or Closed in the City of
Rancho Palos Verdes
If Closed, show closure was
due to COVID-19 Pandemic
Assistance to Small
Businesses - 6 or
more employees.
105(a)(17)(42 U.S.C.
5305(a)(17)); 24
CFR 570.203(b)
Provide loans to
stabilize businesses
with 6 or more
employees
negatively impacted
by COVID-19
Loan may be used
for payroll,
lease/mortgage
interest, utilities, or
necessary supplies
or equipment
Up to $25,000 Zero-interest Loan
(forgivable after 1
year if criteria is
met)
A-1
CITY OF RANCHO PALOS VERDES
SMALL BUSINESS FINANCIAL ASSISTANCE PROGRAM
GRANT APPLICATION
RPV 20200512 1
INTRODUCTION
To mitigate the impact of COVID-19 on Rancho Palos Verdes small businesses and their
employees, the City of Rancho Palos Verdes has approximately $116,000 in one-time
Community Development Block Grant (CDBG) Funds to create a Small Business
Financial Assistance Loan Program.
The objective of this program is to offer relief from economic distress and promote
general welfare by providing immediate financial assistance to the small business
community within the City of Rancho Palos Verdes.
OVERVIEW
Small business is defined as “brick and mortar” business located within the geographic
boundaries of the City of Rancho Palos Verdes that generated less than $1.5 million in 2019
gross receipts.
Loans of up to $25,000 for qualified small businesses of 6 employees or more that has been
deemed non-essential under the Governor of California’s Executive Order N-33-20 dated
March 19, 2020.
Loans of up to $15,000 for qualified microenterprises of 5 employees or less that has been
deemed non-essential under the Governor of California’s Executive Order N-33-20 dated
March 19, 2020.
Loan funds may be only used to cover the following items: payroll, lease/mortgage payment,
utilities, or necessary supplies and/or equipment.
Loans may be forgiven after 1 year if the applicant met the following criteria.
a. Applicant must submit a written request for loan forgiveness
b. Applicant must provide receipts showing loan was used for qualifying business
expense
i. Payroll
ii. Lease/mortgage payment
iii. Utilities
iv. Supplies and/or equipment
c. Applicant must report current business status:
i. Open or Closed in the City of Rancho Palos Verdes
ii. If Closed, show closure was due to COVID-19 Pandemic
Loans will be awarded on a first-come, first-serve basis for qualified applicants.
Loan repayment is deferred for 12 months, from the date the fund was received by the
applicant.
A-2
CITY OF RANCHO PALOS VERDES
SMALL BUSINESS FINANCIAL ASSISTANCE PROGRAM
GRANT APPLICATION
RPV 20200512 2
ELIGIBILITY
Please carefully review the eligibility requirements below.
1. To qualify for a Small Business Financial Assistance Loan up to $25,000 the applicant must
have 6 employees or more.
2. To qualify for a Microenterprise Financial Assistance Loan of up to $15,000 the applicant must
have 5 employees or less.
3. Applicants must operate out of a physical commercial storefront (“brick and mortar”) within the
geographic boundaries of the City of Rancho Palos Verdes.
4. Applicants must have been in operation in the City of Rancho Palos Verdes for at least one
year as of March 1, 2020.
5. Applicants must verify the business has experienced a loss of income due to COVID-19.
6. Applicants must submit a current copy of its W-9 form.
7. Applicants must have an active City of Rancho Palos Verdes Business License.
A-3