While 665 businesses have applied for the legislature’s $60.5 million COVID-19 grant program for struggling small businesses, only 66 of them represent the industries hit hardest by shutdowns aimed at slowing the spread of coronavirus.
The Job Retention Grant program, which had a Sept. 1 application deadline, requires grant recipients to have kept at least 90% of employees through the early months of the pandemic — a requirement that knocks out many shuttered restaurants, bars and entertainment venues that were forced to close and lay off employees.
Legislative leaders said the 90% requirement was based on similar rules for the federal Paycheck Protection Program, and removing it would result in legal challenges. In general, government is prohibited from handing out money to private businesses without some strings attached.
“If the General Assembly were to create a grant program with no requirement, there would almost certainly be constitutional questions,” said Lauren Horsch, a spokeswoman for Senate leader Phil Berger. Republicans argue that reopening more businesses is a better approach.
“The food and beverage industry in North Carolina employs 11% of the state’s workforce and contributes tens of billions of dollars to the state’s GDP,” Horsch said in an email. “There is no amount of taxpayer money that can support such a massive industry during a sustained shutdown like what Gov. Cooper ordered and continues to maintain.”
But lawmakers did opt to use $60.5 million in federal coronavirus funding to help businesses through the Job Retention Grants. The grants are based on each business’s average monthly payroll costs from 2019, up to $250,000.
In addition to the job retention requirement, applicants have to prove a revenue loss of at least 10%. The Department of Commerce, which is administering the program, is currently reviewing the applications and hasn’t awarded grants yet.
The agency released a breakdown of the applications by industry in response to a request from the NC Insider. Nonprofits (150 applicants, or 23% of total applications) and manufacturing companies (131 applicants, or 20%) formed nearly half the applicant pool. The “professional and technical services” category was a distant third place with 50 applicants, followed by retail (46 applicants), transportation and warehousing (43) and “other services” (43).
Only 35 businesses from the hard-hit food service and lodging industries applied, and only 21 businesses from the “arts, entertainment and recreation” category are seeking a grant.
Movie theaters, which remain closed under “Phase 2.5” of the state’s reopening plan, fall into the latter category.
But rent, utilities and maintenance bills continue to mount for the Kingsway 4 movie theater in Eden. And with most of the theater’s employees receiving unemployment benefits until North Carolina allows them to reopen, owner Tim Robertson said he wouldn’t meet the 90% requirement in the state’s grant program.
“If you want to give me assistance, give me the assistance without the stipulation,” he said. “Rent, power bills, utility bills — we’re paying everything just to keep the doors locked.”
He’d like to see the state offer help with that, as well as helping fund the cleaning supplies and personal protective equipment he’ll need to keep customers and employees safe when it’s time to reopen.
Otherwise, even reopening might not keep the bills paid if theater capacity is restricted to allow for social distancing. “We’re the ones on the front lines in business, we know what we need,” he said.
Gov. Roy Cooper and Senate Democrats sought about $50 million to fund grants for utilities and rent payments, instead of increasing funding for the Job Retention grants, but Senate Republicans shot down an amendment from Sen. Kirk deViere, D-Cumberland.
“Businesses need help and there is real concern that more is needed beyond the Job Retention Grants,” said Ford Porter, a spokesman for Cooper. “It’s deeply disappointing that legislative leaders ignored these businesses and adjourned despite the governor’s proposal.”
As for the “constitutional questions” that Republicans cited as a reason for the job retention requirement, Porter said the governor’s office “consulted the Department of Justice to ensure (federal CARES Act) funds could be used” for the utility and rent grant program. CARES Act guidelines from the U.S. Department of the Treasury say that states can use the money for “grants to small businesses to reimburse the costs of business interruption caused by required closures.”
DeViere said in an email that “it is unfortunate that instead of working together to help these small businesses left out in the budget — which was entirely authored by the majority with no say at all from the Democrats — Senate Republicans chose to find obstacles instead of pathways to help many of our locally owned businesses.”
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