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FAIRBANKS NORTH STAR BOROUGH ECONOMIC DEVELOPMENT COMMISSIONMEETING AGENDA THIS MEETING WILL BE HELD BY TELECONFERENCE IN THE MONA LISA DREXLER ASSEMBLY CHAMBERS JUANITA HELMS ADMINISTRATION CENTER 907 TERMINAL STREET, FAIRBANKS, ALASKA

April 7, 2020 at 3:30 PM

A. ROLL CALL

B. MESSAGES

1. Citizen’s Comments – limited to three (3) minutes

a. Agenda items not scheduled for public hearing b. Items other than those appearing on the agenda

2. Disclosure & Statement of Conflict of Interest

C. APPROVAL OF AGENDA AND CONSENT AGENDA

Approval of consent agenda passes all routine items indicated by asterisk (*) on agenda. Consent agenda items are not considered separately unless any Commission member or citizen so requests. In the event of such request, the item is returned to the general agenda.

D. *MINUTES

1. *Minutes from April 2, 2020

E. NEW BUSINESS

1. Report on Federal actions in response to economic impacts as a result of COVID-19

a. Report on SBA Economic Injury Disaster Loan Program b. Communications from CODEL in regards to Federal actions in response to COVID-19 c. Updates on any additional federal actions

2. Report on State actions in response to economic impacts as a result of COVID- 19

a. Report on any new Health Mandates from Governor Dunleavy that impact the economy b. Report on the progress of the Alaska Economic Stabilization Team and the Alaska COVID-19 Economic Stabilization Plan c. Coordination of state-wide economic development agencies and partners

d. Updates on any additional state actions

3. Report on Local actions in response to economic impacts as a result of COVID- 19

4. Recommendations and policy direction to Borough administration in response to economic impacts of COVID-19

a. Report on assigned tasks for mitigation of economic impacts b. Report on funding opportunities from the Federal and State programs as relevant to the FNSB and the community c. Identify priority actions to mitigate economic impacts

5. Meeting schedule a. Next Meeting – TBD

F. EXCUSE FUTURE ABSENCES

G. COMMISSIONER’S COMMENTS/COMMUNICATIONS

H. ADJOURNMENT

FAIRBANKS NORTH STAR BOROUGH ECONOMIC DEVELOPMENT COMMISSION

MINUTES APRIL 2, 2020

A regular meeting of the Fairbanks North Star Borough Economic Development Commission was held by teleconference in the Mona Lisa Drexler Assembly Chambers, Juanita Helms Administration Center, 907 Terminal Street, Fairbanks, Alaska. The meeting was called to order at 2:06 p.m. by Mayor Bryce Ward, Chair.

A. ROLL CALL

MEMBERS PRESENT: Mike Meeks, Mindy O’Neall, Abigail Riggs, Paul Robinson, Russell Talvi, Frank Tomaszewski, Mayor Bryce Ward, Mayor Mike Welch

MEMBERS ABSENT: None

OTHERS PRESENT: Brittany Smart, Special Assistant to Mayor Ward; Krista Major, Executive Assistant; Kerynn Fisher, Grants Coordinator; Stephanie Pearson, Community Research Technician

B. MESSAGES

Citizen’s Comments – limited to three (3) minutes

Mr. Jomo Stewart identified himself as a Project Manager for the Fairbanks Economic Development Corporation but provided comments as a private citizen. Mr. Stewart suggested that the Commission consider using another community entity to take the lead of the task force. The commission needs to accept that certain rules may have to be set aside. Community won’t be upset, as we are all trying to help during this unprecedented time.

Disclosure & Statement of Conflict of Interest

None

C. APPROVAL OF AGENDA AND CONSENT AGENDA

Motion to approve the agenda and consent agenda made by Commissioner Meeks and seconded by Commissioner Robinson. Carried without objection or roll call vote.

D. *MINUTES

Minutes from January 28, 2020.

E. NEW BUSINESS

1. Request for the FNSB Economic Development Commission to serve as an Economic Impact and Recovery Task Force in response to COVID-19.

Ms. Smart summarized the memo recommending the Commission serve in such a capacity.

Motion to accept the Economic Impact and Recovery Task Force in response to COVID-19 as a project for the Commission made by Mr. Robinson and seconded by Ms. O’Neall.

Mayor Ward stated that the Commission was a good vehicle for this project as it was already established and serves as the ARDOR for Interior Alaska. Taking this project on is appropriate with the work the Commission is already doing.

Commissioner Meeks stated that anything we can do to help move this along will be helpful.

Ms. Smart requested feedback on the identified tasks presented in the memo.

Commissioner Meeks stated that data collection is important and asked if there were ideas on how to move it forward.

Ms. Smart stated she is working with Community Planning staff who develops the Community Research Quarterly as well as tracking other survey efforts in other communities and across the state.

Motion carried without objection or roll call vote.

2. Report on Federal actions in response to economic impacts as a result of COVID- 19

Ms. Smart provided a report on the Federal actions in response to COVID-19.

Mayor Ward requested a motion to postpone the remainder of the agenda until the next meeting on Tuesday April 7 at 3:30pm due to technical difficulties. Mayor Welch so moved and seconded by Commissioner Tomaszewski. Motion carried without objection or roll call vote.

The Small Business Owner’s Guide to the CARES Act The programs and initiatives in the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was just passed by Congress are intended to assist business owners with whatever needs they have right now. When implemented, there will be many new resources available for small businesses, as well as certain non- profits and other employers. This guide provides information about the major programs and initiatives that will soon be available from the Small Business Administration (SBA) to address these needs, as well as some additional tax provisions that are outside the scope of SBA. To keep up to date on when these programs become available, please stay in contact with your local Small Business Administration (SBA) District Office, which you can locate here. Struggling to get started? The following questions might help point you in the right direction. Do you need: • Capital to cover the cost of retaining employees? Then the Paycheck Protection Program might be right for you. • A quick infusion of a smaller amount of cash to cover you right now? You might want to look into an Emergency Economic Injury Grant. • To ease your fears about keeping up with payments on your current or potential SBA loan? The Small Business Debt Relief Program could help. • Just some quality, free counseling to help you navigate this uncertain economic time? The resource partners might be your best bet.

Already know what resources you’re Table of Contents Paycheck Protection Program Loans 2 looking for? The table of contents can direct you to more information about Small Business Debt Relief Program 6 the program or assistance product you Economic Injury Disaster Loans and 7 need. Emergency Economic Injury Grants Small Business Counseling 9

Small Business Contracting 10

Small Business Tax Provisions 11 Paycheck Protection Program (PPP) Loans The program would provide cash-flow assistance through 100 percent federally guaranteed loans to employers who maintain their payroll during this emergency. If employers maintain their payroll, the loans would be forgiven, which would help workers remain employed, as well as help affected small businesses and our economy snap-back quicker after the crisis. PPP has a host of attractive features, such as forgiveness of up to 8 weeks of payroll based on employee retention and salary levels, no SBA fees, and at least six months of deferral with maximum deferrals of up to a year. Small businesses and other eligible entities will be able to apply if they were harmed by COVID-19 between February 15, 2020 and June 30, 2020. This program would be retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls. Loans are available through June 30, 2020.

FREQUENTLY ASKED QUESTIONS QUESTION: What types of businesses and entities are eligible for a PPP loan? Answer: • Businesses and entities must have been in operation on February 15, 2020. • Small business concerns, as well as any business concern, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or Tribal business concern described in section 31(b)(2)(C) that has fewer than 500 employees, or the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by SBA, if higher. • Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals. • Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a NAICS code beginning with 72, for which the affiliation rules are waived. • Affiliation rules are also waived for any business concern operating as a franchise that is assigned a franchise identifier code by the Administration, and company that receives funding through a Small Business Investment Company.

QUESTION: What are affiliation rules? Answer: Affiliation rules become important when SBA is deciding whether a business’s affiliations preclude them from being considered “small.” Generally, affiliation exists when one business controls or has the power to control another or when a third party (or parties) controls or has the power to control both businesses. Please see this resource for more on these rules and how they can impact your business’s eligibility.

QUESTION: What types of non-profits are eligible? Answer: In general, 501(c)(3) and 501(c)(19) non-profits with 500 employees or fewer as most nonprofit SBA size standards are based on revenue, not employee number. You can check here.

FAQ’s continue on the next page! QUESTION: How is the loan size determined? Answer: Depending on your business’s situation, the loan size will be calculated in different ways (see below). The maximum loan size is always $10 million.

• If you were in business February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs during that time period. If your business employs seasonal workers, you can opt to choose March 1, 2019 as your time period start date. • If you were not in business between February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs between January 1, 2020 and February 29, 2020. • If you took out an Economic Injury Disaster Loan (EIDL) between February 15, 2020 and June 30, 2020 and you want to refinance that loan into a PPP loan, you would add the outstanding loan amount to the payroll sum.

QUESTION: What costs are eligible for payroll? Answer: • Compensation (salary, wage, commission, or similar compensation, payment of cash tip or equivalent) • Payment for vacation, parental, family, medical, or sick leave • Allowance for dismissal or separation • Payment required for the provisions of group health care benefits, including insurance premiums • Payment of any retirement benefit • Payment of State or local tax assessed on the compensation of employees QUESTION: What costs are not eligible for payroll? Answer: • Employee/owner compensation over $100,000 • Taxes imposed or withheld under chapters 21, 22, and 24 of the IRS code • Compensation of employees whose principal place of residence is outside of the U.S. • Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act QUESTION: What are allowable uses of loan proceeds? Answer: • Payroll costs (as noted above) • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums • Employee salaries, commissions, or similar compensations (see exclusions above) • Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation) • Rent (including rent under a lease agreement) • Utilities • Interest on any other debt obligations that were incurred before the covered period

FAQ’s continue on the next page! QUESTION: What are the loan term, interest rate, and fees? Answer: For any amounts not forgiven, the maximum term is 10 years, the maximum interest rate is 4 percent, zero loan fees, zero prepayment fee (SBA will establish application fees caps for lenders that charge).

QUESTION: How is the forgiveness amount calculated? Answer: Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered 8 week period compared to the previous year or time period, proportionate to maintaining employees and wages (excluding compensation over $100,000):

• Payroll costs plus any payment of interest on any covered mortgage obligation (not including any prepayment or payment of principal on a covered mortgage obligation) plus any payment on any covered rent obligation plus and any covered utility payment.

QUESTION: How do I get forgiveness on my PPP loan? Answer: You must apply through your lender for forgiveness on your loan. In this application, you must include:

• Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings. • Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities. • Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use.

QUESTION: What happens after the forgiveness period? Answer: Any loan amounts not forgiven are carried forward as an ongoing loan with max terms of 10 years, at a maximum interest rate of 4%. Principal and interest will continue to be deferred, for a total of 6 months to a year after disbursement of the loan. The clock does not start again. QUESTION: Can I get more than one PPP loan? Answer: No, an entity is limited to one PPP loan. Each loan will be registered under a Taxpayer Identification Number at SBA to prevent multiple loans to the same entity.

QUESTION: Where should I go to get a PPP loan from? Answer: All current SBA 7(a) lenders (see more about 7(a) here) are eligible lenders for PPP. The Department of Treasury will also be in charge of authorizing new lenders, including non- bank lenders, to help meet the needs of small business owners.

FAQ’s continue on the next page! QUESTION: How does the PPP loan coordinate with SBA’s existing loans? Answer: Borrowers may apply for PPP loans and other SBA financial assistance, including Economic Injury Disaster Loans (EIDLs), 7(a) loans, 504 loans, and microloans, and also receive investment capital from Small Business Investment Corporations (SBICs). However, you cannot use your PPP loan for the same purpose as your other SBA loan(s). For example, if you use your PPP to cover payroll for the 8-week covered period, you cannot use a different SBA loan product for payroll for those same costs in that period, although you could use it for payroll not during that period or for different workers. QUESTION: How does the PPP loan work with the temporary Emergency Economic Injury Grants and the Small Business Debt Relief program? Answer: Emergency Economic Injury Grant and Economic Injury Disaster Loan (EIDL) recipients and those who receive loan payment relief through the Small Business Debt Relief Program may apply for and take out a PPP loan as long as there is no duplication in the uses of funds. Refer to those sections for more information.

Small Business Debt Relief Program This program will provide immediate relief to small businesses with non-disaster SBA loans, in particular 7(a), 504, and microloans. Under it, SBA will cover all loan payments on these SBA loans, including principal, interest, and fees, for six months. This relief will also be available to new borrowers who take out loans within six months of the President signing the bill into law.

FREQUENTLY ASKED QUESTIONS QUESTION: Which SBA loans are eligible for debt relief under this program? Answer: 7(a) loans not made under the Paycheck Protection Program (PPP), 504 loans, and microloans. Disaster loans are not eligible (see p. 7 for more information on these). QUESTION: How does debt relief under this program work with a PPP loan? Answer: Borrowers may separately apply for and take out a PPP loan, but debt relief under this program will not apply to a PPP loan. QUESTION: How do I know if I’m eligible for a 7(a), 504, or microloan? Answer: In general, businesses must meet size standards, be based in the U.S., be able to repay, and have a sound business purpose. To check whether your business is considered small, you will need your business’s 6-digit North American Industry Classification System (NAICS) code and 3-year average annual revenue. Each program has different requirements, see https://www.sba.gov/funding- programs/loans for more details. QUESTION: What is a 7(a) loan and how do I apply? Answer: 7(a) loans are an affordable loan product of up to $5 million for borrowers who lack credit elsewhere and need access to versatile financing, providing short-term or long-term working capital and to purchase an existing business, refinance current business debt, or purchase furniture, fixtures and supplies. In the program, banks share a portion of the risk of the loan with SBA. There are many different types of 7(a) loans, you can visit this site to find the one that’s best for you. You apply for a 7(a) loan with a bank or a mission-based lender. SBA has a free referral service tool called Lender Match to help find a lender near you. QUESTION: What is a 504 loan and how do I apply? Answer: The 504 Loan Program provides loans of up to $5.5 million to approved small businesses with long- term, fixed-rate financing used to acquire fixed assets for expansion or modernization. It is a good option if you need to purchase real estate, buildings, and machinery. You apply through a Certified Development Company, which is a nonprofit corporation that promotes economic development. SBA has a free referral service tool called Lender Match to help find a lender near you. QUESTION: What is a microloan and how do I apply? Answer: The Microloan Program provides loans up to $50,000 to help small businesses and certain not-for- profit childcare centers to start up and expand. The average microloan is about $13,000. These loans are delivered through mission-based lenders who are also able to provide business counseling. SBA has a free referral service tool called Lender Match to help find a microlender near you. QUESTION: I am unfamiliar with SBA loans, can anyone help me apply? Answer: Yes, SBA resource partners are available to help guide you through the loan application process. You can find your nearest Small Business Development Center (SBDC) or Women’s Business Center here.

Economic Injury Disaster Loans & Emergency Economic Injury Grants These grants provide an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan (EIDL). To access the advance, you first apply for an EIDL and then request the advance. The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments. FREQUENTLY ASKED QUESTIONS QUESTION: Are businesses and private non-profits in my state eligible for an EIDL related to COVID- 19? Answer: Yes, those suffering substantial economic injury in all 50 states, DC, and the territories may apply for an EIDL. QUESTION: What is an EIDL and what is it used for? Answer: EIDLs are lower interest loans of up to $2 million, with principal and interest deferment at the Administrator’s discretion, that are available to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses. QUESTION: Who is eligible for an EIDL? Answer: Those eligible are the following with 500 or fewer employees: • Sole proprietorships, with or without employees • Independent contractors • Cooperatives and employee owned businesses • Tribal small businesses Small business concerns and small agricultural cooperatives that meet the applicable size standard for SBA are also eligible, as well as most private non-profits of any size. See below for more info on size standards. QUESTION: My private non-profit is not a 501(c)(3). Is it still eligible for an EIDL and a grant? Answer: Yes, if you are a private non-profit with an effective ruling letter from the IRS, granting tax exemption under sections 501(c), (d), or (e) of the Internal Revenue Code of 1954, or if you can provide satisfactory evidence from the State that the non-revenue producing organization or entity is a non-profit one organized or doing business under State law. However, a recipient that is principally engaged in teaching, instructing, counseling, or indoctrinating religion or religious beliefs, whether in a religious or secular setting, or primarily engaged in political or lobbying activities is not eligible to receive an EIDL. If you are uncertain whether you qualify, please consult with legal counsel to determine whether your organization meets program criteria. QUESTION: Who is eligible for an Emergency Economic Injury Grant? Answer Those eligible for an EIDL and who have been in operation since January 31, 2020, when the public health crisis was announced.

FAQ’s continue on the next page! QUESTION: How long are Emergency Economic Injury Grants available? Answer: January 31, 2020 – December 31, 2020. The grants are backdated to January 31, 2020 to allow those who have already applied for EIDLs to be eligible to also receive a grant. QUESTION: If I get an EIDL and/or an Emergency Economic Injury Grant, can I get a PPP loan? Answer: Whether you’ve already received an EIDL unrelated to COVID-19 or you receive a COVID- 19 related EIDL and/or Emergency Grant between January 31, 2020 and June 30, 2020, you may also apply for a PPP loan. If you ultimately receive a PPP loan or refinance an EIDL into a PPP loan, any advance amount received under the Emergency Economic Injury Grant Program would be subtracted from the amount forgiven in the PPP. However, you cannot use your EIDL for the same purpose as your PPP loan. For example, if you use your EIDL to cover payroll for certain workers in April, you cannot use PPP for payroll for those same workers in April, although you could use it for payroll in March or for different workers in April. QUESTION: How do I know if my business is a small business? Answer: Please visit https://www.sba.gov/size-standards/ to find out if your business meets SBA’s small business size standards. You will need the 6-digit North American Industry Classification Code for your business and your business’s 3-year average annual revenue. QUESTION: How do I apply for an economic injury disaster loan? Answer: To apply for an EIDL online, please visit https://disasterloan.sba.gov/ela/. Your SBA District Office is an important resource when applying for SBA assistance. QUESTION: I am unfamiliar with the EIDL process, can anyone help me apply? Answer: Yes, SBA resource partners are available to help guide you through the EIDL application process. You can find the nearest Small Business Development Center (SBDC), Women’s Business Center, or SCORE mentorship chapter at https://www.sba.gov/local- assistance/find/.

Counseling & Training If you, like many small business owners, need a business counselor to help guide you through this uncertain time, you can turn to your local Small Business Development Center (SBDC), Women’s Business Center (WBC), or SCORE mentorship chapter. These resource partners, and the associations that represent them, will receive additional funds to expand their reach and better support small business owners with counseling and up-to-date information regarding COVID-19. There will soon be a joint platform that consolidates information and resources related to COVID-19 in order to provide consistent, timely information to small businesses. To find a local resource partner, visit https://www.sba.gov/local-assistance/find/. In addition, the Minority Business Development Agency’s Business Centers (MBDCs), which cater to minority business enterprises of all sizes, will also receive funding to hire staff and provide programming to help their clients respond to COVID-19. Not every state has a MBDC. To find out if there is one that services your area, visit this site.

FREQUENTLY ASKED QUESTIONS QUESTION: Do I have to pay for counseling and training through SBDCs, WBCs, and MBDCs? Answer: Counseling is free and training is low-cost with these partners. The additional funds that Congress provided will help keep this possible. Mentorship through SCORE is always free.

QUESTION: What is a SBDC? Answer: SBDCs are a national network of nearly 1,000 centers that are located at leading universities, colleges, state economic development agencies and private partners. They provide counseling and training to new and existing businesses. Each state has a lead center that coordinates services specifically for that state, which you can find by clicking the link above. To find out more about SBDCs, visit https://americassbdc.org/about-us/.

QUESTION: What is a WBC; is it only for women? Answer: WBCs are a national network of more than 100 centers that offer one-on-one counseling, training, networking, workshops, technical assistance and mentoring to entrepreneurs on numerous business development topics. In addition to women, WBCs are mandated to serve the needs of underserved entrepreneurs, including low-income entrepreneurs. They often offer flexible hours to meet the needs of their diverse clientele. To find out more about WBCs, visit https://www.awbc.org/.

QUESTION: What is SCORE? Answer SCORE provides free, confidential business advice through our volunteer network of 10,000+ business experts. You can meet with a mentor online. Find out more here.

QUESTION: Who do MBDCs serve? Answer: MBDCs are a good option for minority-owned businesses (including those owned by Black, Hispanic, Asian American/Pacific Islander, and American Indian business owners), especially those seeking to penetrate new markets — domestic & global — and grow in size and scale.

Contracting If you are a government contractor, there are a number of ways that Congress has provided relief and protection for your business. Agencies will be able to modify terms and conditions of a contract and to reimburse contractors at a billing rate of up to 40 hours per week of any paid leave, including sick leave. The contractors eligible are those whose employees or subcontractors cannot perform work on site and cannot telework due to federal facilities closing because of COVID-19.

If you need additional assistance, please reach out to your local Small Business Development Center, Women’s Business Center, SCORE chapter, or SBA District Office. You should also work with your agency’s contracting officer, as well as the agency’s Office of Small and Disadvantaged Business Utilization (OSDBU).

Small Business Tax Provisions Employee Retention Credit for Employers Subject to Closure or Experiencing Economic Hardship

This provision would provide a refundable payroll tax credit for 50 percent of wages paid by eligible employers to certain employees during the COVID-19 crisis. The credit is available to employers, including non-profits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings. The credit is also provided to employers who have experienced a greater than 50 percent reduction in quarterly receipts, measured on a year-over-year basis.

Wages of employees who are furloughed or face reduced hours as a result of their employer’s closure or economic hardship are eligible for the credit. For employers with 100 or fewer full- time employees, all employee wages are eligible, regardless of whether an employee is furloughed. The credit is provided for wages and compensation, including health benefits, and is provided for the first $10,000 in wages and compensation paid by the employer to an eligible employee. Wages do not include those taken into account for purposes of the payroll credits for required paid sick leave or required paid family leave, nor for wages taken into account for the employer credit for paid family and medical leave (IRC sec. 45S).

• The credit is not available to employers receiving assistance through the Paycheck Protection Program. The credit is provided through December 31, 2020.

Delay of Payment of Employer Payroll Taxes

This provision would allow taxpayers to defer paying the employer portion of certain payroll taxes through the end of 2020, with all 2020 deferred amounts due in two equal installments, one at the end of 2021, the other at the end of 2022. Payroll taxes that can be deferred include the employer portion of FICA taxes, the employer and employee representative portion of Railroad Retirement taxes (that are attributable to the employer FICA rate), and half of SECA tax liability.

• Deferral is not provided to employers receiving assistance through the Paycheck Protection Program.

ALASKA DISTRICT OFFICE 420 L Street, Suite 300 Anchorage, Alaska 99501 (907)271-4022 or (800)755-7034

ACTIVE SBA PARTICIPATING LENDERS IN ALASKA

BANKS

Denali State Bank Aaron Pletnikoff, Chief Lending Officer, SVP 119 N Cushman Street Fairbanks AK 99701 Ph: (907) 458-4228/(907)378-6777 http://www.denalistatebank.com

First National Bank Alaska (SBAExpress, EWCP) Sheila Lomboy, Assistant Vice President 101 W 36th Avenue, Ste 333 Anchorage AK 99510-0720 Ph: 907-777-5650 http://www.fnbalaska.com

First Bank Giovanna Trentanelli, Assistant VP Loan Quality Control Officer 2030 Sea Level Dr., Ste. 100 Ketchikan AK 99901 Ph: (907) 907-228-4416 or (800) 478-6101 http://www.firstbankak.com

SBA Lender Status: PLP: Preferred Lender Program. Non-Bank Lender: Financial Institution that does not hold depository accounts. SBA Express: Streamlined review process, lenders approved under this program to provide SBA guaranteed loans of $350,000 or less. EWCP: Lenders approved to provide SBA Export Working Capital loans, which are SBA guaranteed loans of $5.0 million or less, focusing primarily on businesses that are able to generate export sales and need additional working capital to support these sales. CDC: Certified Development Corporation

Revised: 10/17/2019

www.sba.gov/ak U.S. Small Business Administration 2

BANKS CONT…

KeyBank, N.A. (PLP, SBAExpress) Carrie Callaway Cardy, VP Senior SBA Relationship Manager 1301 Fifth Ave, 24th Floor Seattle, WA 98101 Mobile: 425-208-1098 http://www.key.com

Live Oak Banking Co. (PLP, SBAExpress) Kelley Mears, Senior Loan Officer 1741 Tiburon Dr. Wilmington, NC 28403 Ph: (541) 3888453 / (541) 408-7851 http://www.liveoakbank.com

Mt. Mckinley Mutual Savings Bank (SBAExpress) Jeremy Pletnikoff, Senior Vice President Ph: 907-452-1751 David Durham, Executive VP Chief Credit Administrator Ph: 907-452-1751 530 Fourth Avenue Fairbanks AK 99707 http://www.mtmckinleybank.com

National Cooperative Bank (PLP, SBAExpress) Jesse Janssen, VP Corporate Banking AK 585 E. 36th Ave, Suite 222 Anchorage, AK 99503 Ph: (907) 561-5799 http://www.ncb.coop

Native American Bank Shannon Ward, Senior VP/CLO 999 18th St., Ste. 2460 Denver, CO 80202 Ph: (303) 988-2727 x: 128 Cell: (720) 402-6784 Veronica Lane, Business Development Officer Ph: 303-988-2727 x:115 http://nabna.com SBA Lender Status: PLP: Preferred Lender Program. Non-Bank Lender: Financial Institution that does not hold depository accounts. SBA Express: Streamlined review process, lenders approved under this program to provide SBA guaranteed loans of $350,000 or less. EWCP: Lenders approved to provide SBA Export Working Capital loans, which are SBA guaranteed loans of $5.0 million or less, focusing primarily on businesses that are able to generate export sales and need additional working capital to support these sales. CDC: Certified Development Corporation

Revised: 10/17/2019

www.sba.gov/ak U.S. Small Business Administration 3

BANKS CONT…

Northrim Bank (EWCP) In Anchorage: Phillip Read, VP Commercial Loan Officer 3111 C Street, Suite 410 Anchorage, AK 99503 Ph: 907-261-8771

In Fairbanks: Scotty Watkins, VP Commercial Lending Team Lead or Bill Staley, Loan Officer 360 Merhar Ave. Fairbanks, AK 99701 Ph: (907) 455-1101 / (907)455-1105

In Juneau: James Young, or Marc Guevara, Loan Officers. 2094 Jordan Avenue Juneau, AK 99801 Ph: (907) 790-5143 or (800)478-2265

In Ketchikan:Jason Gentry, VP Lending Branch Manager Ph: (907) 228-4655 2530 Tongass Ave. Ketchikan, AK 99901 http://www.northrim.biz

SeaCoast Commerce Bank (PLP) Joseph Cowles, Senior VP SBA Business Development Officer 2146 Kimberly Circle Eugene, OR 97405 Ph: (541) 521-7881 (Mobile) http://www.sccombank.com

Unibank (PLP, SBAExpress) Phillip Yun, SBA Manager 16929 Hwy. 99, Ste. 10 Lynnwood, WA 98037 Ph: (425) 275-9715 http://www.unibankusa.com

Revised: 10/17/2019

www.sba.gov/ak U.S. Small Business Administration 4

United Midwest Savings Bank (PLP, EWCP) Frederick Crispen, Senior Vice President 14101 Panama City Beach Pkwy., Ste. 300 Panama City Beach, FL 32413 Ph: (850) 249-6886 Mobile: (850) 527-5310 https://www.umwsb.com

Wells Fargo Bank, N.A. (PLP, SBAExpress) Jim Harty, VP SBA Lending 301 W Northern Lights Blvd. Anchorage, AK 99503 Ph: (907) 787-9016 Carol Vi-Thompson, SBA Business Development Officer 1300 SW Fifth Ave., 13th Floor Portland, OR 97201 Ph: (971) 930-7402 http://www.wellsfargo.com

CERTIFIED DEVELOPMENT COMPANIES (CDCs/504 LOANS)

Evergreen Business Capital Theo Ransum, Programs Loan Officer Ph: (907) 982-5045 2525 C St., Ste. 220 Anchorage, AK 99503 (800) 878-6613 Main Office http://www.evergreen504.com

NON-BANK LENDERS (Financial Institutions that do not hold depository accounts)

Alaska Growth Capital Bidco, Inc. (PLP, SBAExpress) Taka Tsukada, President and CEO Ph: (907) 339-6776 Julie Woodworth, SVP Lending Manager Ph: (907) 339-6778 3900 C Street, Suite 101 Anchorage, Alaska 99503 http://www.alaskagrowth.com

Revised: 10/17/2019

www.sba.gov/ak U.S. Small Business Administration 5

NON-BANK LENDERS CONT…

Evergreen Business Capital (Community Advantage Program) Theo Ransum, Programs Loan Officer 2525 C St., Ste. 220 Anchorage, AK 99503 Ph: (907) 795-6504 http://www.evergreen504.com

Hana Small Business Lending (PLP) James Kim, Senior VP/Manager 1000 Wilshire Blvd., 20th Fl. Los Angeles, CA 90017 Ph: (213) 977-5501 http://www.hanafinancial.com

NEWTEK Small Business Finance, Inc. Robert Rabuck, Senior VP 1981 Marcus Ave., Ste. 130 Lake Success, NY 11042 Ph: (212) 273-8213 http://www.newtekone.com

CREDIT UNIONS

ALPS Federal Credit Union Sandi Riggs, CEO Ph: (907) 747-6261 401 Halibut Point Rd. Sitka, AK 99835 http://www.alpsfcu.org

Alaska USA Federal Credit Union (SBAExpress) David Bennett, Regional VP Commercial Lending Ph: (907) 786-2324 500 W 36th Ave., Suite 400 Anchorage, AK 99503 http://www.alaskausa.org

Revised: 10/17/2019

www.sba.gov/ak U.S. Small Business Administration 6

CREDIT UNIONS CONT…

Denali Federal Credit Union (SBAExpress) Don Clary, Loan Officer 440 East 36th Avenue, Suite 220 Anchorage, AK 99503-4136 Ph: (907) 257-7240 http://www.denalifcu.org

Matanuska Valley Federal Credit Union (SBAExpress) Tiffany Janssen, Commercial Lending Manager 501 N Main St. Wasilla, AK 99654 Ph: (907) 761-4713 http://www.mvfcu.coop

Northwest Federal Credit Union Tony Price, SBA Manager Ph: (703) 709-8900 Ext. 4264 200 Spring St. Herndon, VA 20170-5292 http://www.nwfcu.org

Spirit of AK Federal Credit Union (SBAExpress) Dan Bunten, Business Lending Specialist Ph: (800) 478-1949 Rachel Cox, Commercial Loan Officer Ph: (907) 378-7614 1417 Gillam Way Fairbanks, AK 99701 http://www.spirtofak.com

Tongass Federal Credit Union (SBAExpress) Shellee Atwood, Loan Manager 2000 Tongass Ave. Ketchikan, Alaska 99901 Ph: (907) 225-9063 http://www.tongassfcu.com/

Revised: 10/17/2019

www.sba.gov/ak U.S. Small Business Administration

Paycheck Protection Program FAQs for Small Businesses

Where can I apply for the Paycheck Protection Program?

You can apply for the Paycheck Protection Program (PPP) at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program and additional lenders approved by the Department of Treasury. This could be the bank you already use, or a nearby bank. There are thousands of banks that already participate in the SBA’s lending programs, including numerous community banks. You do not have to visit any government institution to apply for the program. You can call your bank or find SBA-approved lenders in your area through SBA’s online Lender Match tool. You can call your local Small Business Development Center or Women’s Business Center and they will provide free assistance and guide you to lenders.

Who is eligible for the loan?

You are eligible for a loan if you are a small business that employs 500 employees or fewer, or if your business is in an industry that has an employee-based size standard through SBA that is higher than 500 employees. In addition, if you are a restaurant, hotel, or a business that falls within the North American Industry Classification System (NAICS) code 72, “Accommodation and Food Services,” and each of your locations has 500 employees or fewer, you are eligible. Tribal businesses, 501(c)(19) veteran organizations, and 501(c)(3) nonprofits, including religious organizations, will be eligible for the program. Nonprofit organizations are subject to SBA’s affiliation standards. Independently owned franchises with under 500 employees, who are approved by SBA, are also eligible. Eligible franchises can be found through SBA’s Franchise Directory.

I am an independent contractor or gig economy worker, am I eligible?

Yes. Sole proprietors, independent contractors, gig economy workers, and self-employed individuals are all eligible for the Paycheck Protection Program.

What is the maximum amount I can borrow?

The amount any small business is eligible to borrow is 250 percent of their average monthly payroll expenses, up to a total of $10 million. This amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. This 8 week period may be applied to any time frame between February 15, 2020 and June 30, 2020. Seasonal business expenses will be measured using a 12-week period beginning February 15, 2019, or March 1, 2019, whichever the seasonal employer chooses.

How can I use the money such that the loan will be forgiven?

The amount of principal that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, rent payments, leases, and utility service agreements. Payroll costs include employee salaries (up to an annual rate of pay of $100,000), hourly wages and cash tips, paid sick or medical leave, and group health insurance premiums. If you would like

to use the Paycheck Protection Program for other business-related expenses, like inventory, you can, but that portion of the loan will not be forgiven.

When is the loan forgiven?

The loan is forgiven at the end of the 8-week period after you take out the loan. Borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness.

What is the covered period of the loan?

The covered period during which expenses can be forgiven extends from February 15, 2020 to June 30, 2020. Borrowers can choose which 8 weeks they want to count towards the covered period, which can start as early as February 15, 2020.

How much of my loan will be forgiven?

The purpose of the Paycheck Protection Program is to help you retain your employees, at their current base pay. If you keep all of your employees, the entirety of the loan will be forgiven. If you still lay off employees, the forgiveness will be reduced by the percent decrease in the number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25 percent, loan forgiveness will be reduced by the same amount. If you have already laid off some employees, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020.

Am I responsible for interest on the forgiven loan amount?

No, if the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the 8-week covered period. The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by you and the lender.

What are the interest rate and terms for the loan amount that is not forgiven?

The terms of the loan not forgiven may differ on a case-by-case basis. However, the maximum terms of the loan feature a 10-year term with interest capped at 4 percent and a 100 percent loan guarantee by the SBA. You will not have to pay any fees on the loan, and collateral requirements and personal guarantees are waived. Loan payments will be deferred for at least six months and up to one year starting at the origination of the loan.

When is the application deadline for the Paycheck Protection Program?

Applicants are eligible to apply for the PPP loan until June 30th, 2020.

I took out a bridge loan through my state, am I eligible to apply for the Paycheck Protection Program?

Yes, you can take out a state bridge loan and are still be eligible for the PPP loan.

If I have applied for, or received an Economic Injury Disaster Loan (EIDL) related to COVID- 19 before the Paycheck Protection Program became available, will I be able to refinance into a PPP loan?

Yes. If you received an EIDL loan related to COVID-19 between January 31, 2020 and the date at which the PPP becomes available, you would be able to refinance the EIDL into the PPP for loan forgiveness purposes. However, you may not take out an EIDL and a PPP for the same purposes. Remaining portions of the EIDL, for purposes other than those laid out in loan forgiveness terms for a PPP loan, would remain a loan. If you took advantage of an emergency EIDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under PPP.

Alaska’s economy and the COVID-19 virus

Mouhcine Guettabi ∗

1 Institute of Social and Economic Research, University of Alaska Anchorage

March 27, 2020

Abstract

The Alaska economy, similar to the rest of the world, will contract over the next few weeks and months due to the COVID-19 virus that has forced businesses to close or significantly curtail operations. While it is near impossible to identify the true economic consequences of these measures, we make educated assumptions about the size of the layoffs in the most vulnerable sectors. To get the full scale of the potential losses, we estimate multiplier effects from these losses using an input output model. Layoffs in the directly affected sector could exceed 27,000 with a payroll of almost 80 million dollars in the month of April. The indirect and induced effects of this shock could result in another 21,000 jobs lost if the employment separations are not temporary. In the second quarter of 2020, direct GDP losses due to the decline in economic activity -not including declines in oil prices- could amount to almost 2 billion dollars. If the disruption in economic activity is not short-lived, we could expect another 2 billion dollars in losses due to the indirect and induced effects. The significant Federal aid package which will provide a boost to unemployment insurance, direct transfers to households, and aid to businesses will certainly dampen some of the consequences we estimate. While the short term costs of social distancing are high, Alaska’s long term economic health depends on first containing the virus.

∗Associate Professor of Economics. Email: [email protected]. All ISER publications are solely the work of the individual authors. This report and its ﬁndings should be attributed to the authors, not to ISER, the University of Alaska Anchorage, or the research sponsors. Contents

1 Summary 3 1.1 Main ﬁndings ...... 3

2 Introduction 5

3 Alaska Leisure and Hospitality Industry Breakdown for Jobs and establishments 6

4 Job losses 6 4.1 Multiplier eﬀects of the decline in economic activity ...... 7

5 Alaska GDP and expected losses 9

6 Firm size and vulnerability 14

7 Tourism season 16

8 conclusion 16 1 Summary

1.1 Main ﬁndings

Public health experts have advised governments around the world to mandate closures in order to mitigate the transmission of the virus. This document calculates the potential short-term economic losses associated with declines in spending, layoffs, and overall contraction. We do not attempt to calculate the trade-offs between full social distancing measures and ones that allow for a "re-opening" of economic activity as it is clear the state’s long term health depends on virus containment. Instead, we assume the closures will be maintained for the next few months. We highlight the size of the sectors most vulnerable to this recent shock and illustrate the scale of the layoffs under fairly simple scenarios. In addition to the immediate effects, we also estimate "multiplier" effects from expected layoffs and declines in output. These indirect and induced effects will only materialize if the closures last for an extended period of time. None of the analysis accounts for reductions in employment and GDP that may occur in the Oil and Gas industry as a result of the much lower prices. Below is a summary of the findings:

• Alaska’s economic structure:

– Leisure and Hospitality, the sector most sensitive to closures as well as decline in travel, represents almost 10% of all jobs in Alaska. – Accommodation and food services, a subset of Leisure and hospitality, had 1883 firms with 929 -almost 50%- having fewer than 5 employees. – GDP in the first quarter of 2019 was 54.9 billion dollars with 1.6 billion coming Accommodation and Food services, and another 2.3 billion from Retail Trade. Transportation and Warehousing, another vulnerable sector, was responsible for 7.4 billion dollars. – In 2019, total wages were 437 million dollars higher in July than they were in Jan- uary. Of that amount, 130 million is due to the Leisure and Hospitality sector. This large increase is due to the seasonal nature of tourism and the fishing industries, both of which are in jeopardy.

• Basic assumptions and employment eﬀects:

– At this stage, it is nearly impossible to know the exact economic response by businesses across the state. However, we use the best available information to make educated decisions for this illustrative exercise.

3 – Relying on national estimates, we assume that the first round of losses will be concentrated in the Leisure and Hospitality sector, the retail sector, and the Trans- portation sector. – Specifically, we assume the Leisure and Hospitality sector will employ 50% fewer people starting March 15th, and the retail and transportation sectors will each experience a 20% decline in employment starting on the same date. – Using these initial shocks, we calculate employment losses, and wage losses for March, April, and May 2020. We also measure the multiplier effects of these losses to capture economy-wide effects from the declines in spending and employment. – The direct effects of the assumptions above indicate that March, 2020 employment will be 26,319 less than March, 2019. Total wages will be 34 million less than March, 2019. – For the first full month post closures -April-, employment will be 27,072 less than the previous year, while total wages lost will equal 79.1 million dollars. – Once we account for the multiplier effects, we conclude that April employment in 2020 will be around 48,000 less than April, 2019. Again, the size of the multiplier effects will depend on the length of the closures as well as well as how quickly the Federal aid reaches people’s and businesses bank accounts.

• GDP eﬀects:

– Assuming that economic disruption in Alaska started mid-way through March and making similar assumptions to the employment case, we conclude that the direct effect of the contraction will result in a 490 million dollars or 0.89% decline in GDP for the first quarter of 2020. – In the second quarter -April through June-, we find that maintaining the closures for the first two months results in the GDP for 2020 being almost 2 billion dollars less than GDP for 2019. Accounting for the multiplier effects shows that GDP in the second quarter could be 4.1 billion dollars less than the second quarter of 2019 based on the scenarios we evaluate. Importantly, these declines in GDP do not take into account the effect of the declines in oil prices which could further depress the state’s Gross State Product. Similar to the employment case, the multiplier effects may be much smaller if the federal aid reaches businesses quickly.

4 2 Introduction

The spread of COVID-19 has created adverse economic impacts for the nation and these impacts have been growing over the last few weeks. Given the severe decline in the oil markets and the stock markets, most economic observers anticipate a U-shaped recovery rather than V-shaped one. This shift in expectation is largely driven by concerns surrounding how long it will take for consumer and business confidence to recover. The speed and the scale of the recovery will depend on how quickly the virus is contained, how aggressive the aid packages are to small businesses, households, and local governments, and whether households revert back to spending money. Alaska will not escape the damage as the tourism season is in serious jeopardy, oil prices have significantly declined, and the recent establishment closures as of Mid-March are affecting a few sectors, mainly the Leisure and Hospitality industry. While it is clear that this contraction in spending has economic costs, we do not have access to high frequency data that would allow us to comment on the current economic effects of the pandemic. Instead, we make assumptions about the size of the employment/wage/output cuts based on the best available information, and then track the multiplier effects of these losses. The economic effects from social distancing measures as well as the decline in travel will have far reaching consequences for the Alaska economy in both the short and long run. This short summary addresses neither the health effects nor the long term economic effects but instead focuses on the immediate and near term costs of the pandemic on the Alaska economy. 1 Below, we provide some background on the Alaska economy, the sectors most sensitive to the announced closures and declines in spending, as well as estimates of payroll, wage, and GDP losses over the next few months. In Table 1, we show that almost 32,000 -10%- of all jobs in March, 2019 were in the Leisure and Hospitality sector. The sector is, arguably, the most vulnerable as it contains restaurants and drinking establishments which are no longer allowed to provide dine-in services and have as a result laid-off a considerable number of workers.2

1We do not account for cuts that may happen in the Oil and Gas Industry due to the drop in oil prices. 2Based on preliminary reports, initial unemployment claims jumped by almost 596%

5 3 Alaska Leisure and Hospitality Industry Breakdown for Jobs and establishments

Table 1: Leisure and hospitality industry

Jobs (Share) (Establishments) (Share) Total 318,890 – 22,065 – Leisure and Hospitality 31,638 9.92% 2,639 11.9% Arts, Entertainment, and recreation 4,347 1.36% 586 2.66% Accommodation 6,807 2.13% 588 2.66% Eating and drinking places 20,484 6.42% 1,465 6.64%

4 Job losses

The economic consequences of mitigating this public health crisis are far reaching. The most direct effect is that many businesses have closed (at least temporarily) and there are expec- tations of record layoffs in the coming months. According to the U.S. Department of Labor,3 the number of initial unemployment claims in Alaska for the week ending March, 21st were 7,806. This represents a 596% increase over the previous week and we will likely be seeing even higher initial claims for the upcoming weeks as more businesses lay off employees. According to a report by the Federal Reserve Bank of St. Louis,4 46% of all occupations, at the national level, are at "high risk" of layoffs. Unsurprisingly, the most vulnerable individuals include those employed in Food Preparation and Serving-Related Occupations, Sales and Related Oc- cupations, Production Occupations, and Installation, Maintenance and Repair Occupations. Moody’s analytics, in a recent report, has produced equally grim projections as they show that as many as 80 million Americans are in high or moderate risk of a layoff. They project that at least 10 million of those in relatively high risk occupations will actually be laid off. They consider workers in transportation and travel, leisure and hospitality, temporary help services and oil drilling and extraction amongst the most likely to be affected. While it is near impossible to obtain real time estimates of the layoffs, the recent mandated closures to maintain social distancing coupled with the preliminary initial unemployment claims indicate that the output and job losses in Alaska will be very large. In Table 2, we show the starting

3Initial claims 4High risk occupations

6 assumptions we use to estimate the economic impacts. We assume the direct losses will occur in Leisure and Hospitality, Transportation, and Retail. We model the losses as starting on March 15th and lasting through the end of May. Based on relative vulnerability and data from previous natural disasters, we expect the largest losses -50% decline to occur in Leisure and Hospitality. We anticipate Transportation and retail to each experience a 20% decline. While Merchandise stores are open and some are even hiring employees, many retail establishments such as furniture stores are closed. Table 3 and Table 4 show the employment and wage losses using the inputs we describe above. In the ﬁrst full month of the shut-down, April, employment losses would equal 27,072 employment with total wages lost of 79.1 million dollars. Table 2: Assumptions about employment and wage reductions by month

Month Leisure Transport Retail March 50% starting March 15th 20% starting March 15th 20% starting March 15th April 50% full month 20% full month 20% full month May 50% full month 20% full month 20% full month Note: Some ﬁrms may keep workers on the payroll as the federal aid starts being distributed.

Table 3: Sector size and expected employment declines in the most aﬀected sectors by month

Month Leisure losses Transport losses Retail Losses Drop relative to previous year March 31,031 15,819 18,090 3,618 34,410 6,882 26,319 April 32,574 16,287 18,987 3,797 34,941 6,988 27,072 May 38,572 19,286 22,025 4,405 36,109 7,222 30,913 Note: The losses in blue are a direct result of the assumptions in Table 2.

Table 4: Sector size and expected wage declines in the most aﬀected sectors by month

Month Wage Leisure losses Wage Transport losses Wage Retail Losses Drop relative to previous year March 14.8 M 10.06 M 9.29 M 34.15 M April 37.5 M 22.2 M 19.4 M 79.1 M May 37.5 M 22.2 M 19.4 M 79.1 M Note: Actual wage losses could be smaller/larger depending on the actual size of the layoﬀs/reduction in hours.

4.1 Multiplier eﬀects of the decline in economic activity

The declines in economic activity we describe above only account for the losses incurred in the sectors directly aﬀected by the social distancing measures, declines in spending, and declines in travel. These sectors are, of course, connected to the rest of the economy as

7 Table 5: Multiplier eﬀects of employment losses using April numbers

Sector Direct eﬀect Multiplier Total eﬀects

Retail trade 6,988 1.86 13,019 Transportation and warehousing 3,797 2.42 9,226 Leisure and Hospitality 16,287 1.6 26,059 Total 27,072 48,304 they purchase goods and services from other businesses. In Table 5, we present the direct effects, the multiplier5 for each sector, and the expected total losses for the month of April if no changes occur between now and then. It is important to note that both the direct and spin-off effects will be temporary if the virus is contained relatively quickly. If, on the other hand, the pandemic lasts longer, the job losses may become permanent as small businesses which typically operate on razor thin margins start to fail. The recent passage of the federal stimulus bill which boosts unemployment insurance, provides loans and grants to businesses, and provides states with health related dollars may affect businesses’ ability to keep workers on the payroll. In the next section, we turn our attention to potential GDP effects using a similar methodology. Given that GDP data is only available at the quarterly level, we present the potential consequences on GDP for 2020 Q1, 2020 Q2, and 2020 Q3.

5We use IMPLAN to obtain the employment and output multipliers. IMPLAN is an input output model often used to estimate economic impacts of private and public activities. There is a great deal of uncertainty over both the length of the closures as well as when the federal aid will reach businesses and households.

8 5 Alaska GDP and expected losses

In Figure 1, we show that Alaska’s GDP in the first quarter of 2019 was 54 billion dollars with 1.6 billion coming from Accommodation and Food services, and another 2.3 billion from Retail Trade. Transportation and Warehousing, another vulnerable sector, was responsible for 7.4 billion dollars. Before presenting the potential GDP losses, we show in Table 6 the assumed reductions in GDP by quarter and sector. In the first quarter, we assume the disruptions occurred half way through the month of March, for the second Quarter we assume that the effects last for April and May, and for the third quarter we assume that the results last the whole quarter due to tourism related disruptions. In Figure 2,6 we show the expected GDP changes before the onset of the virus and the expected losses due to the pandemic. Given that GDP for the first quarter was disrupted towards the middle of March, the expected decline in GDP using the assumptions described in Table 6- will be relatively moderate at 490 million dollars or 0.89%. Table 5 shows the direct economic impacts by quarter, while Table 6 shows both the direct and total effects using the second quarter as an example. In Figure 5, we show the percentage change in GDP by quarter due to the direct effects alone. The losses, when accounting for both direct and indirect effect as we show in Table 8, could amount to 4.1 billion dollars in the second quarter of 2020. That would represent a 7.4% decrease in GDP relative to the second quarter of 2019. As we explain in the employment section, these losses do not account for the potential effects of oil decline and also behavioral responses by households and businesses as a result of the federal aid package.

6GDP by sector is assumed to grow between 2020 Q1 and 2019 Q1 at the same rate it did between 2019 Q1 and 2018 Q1

9 Table 6: Assumptions about GDP losses by quarter and sector

Description Quarter 1 Quarter 2 Quarter 3

Retail trade 20% for half a 20% for April No eﬀect month and May Transportation and warehousing 20% for half a 20% for April 10% for all month and May three months Arts, entertainment, and recreation 50% for half a 50% for April 70% for all month and May three months Accommodation and food services 50% for half a 50% for April 60% for all month and May three months

Table 7: GDP losses by quarter (in Millions)

Description Quarter 1 Quarter 2 Quarter 3

Retail trade 79.81 316.39 – Transportation and warehousing 249.91 990.66 754.26 Arts, entertainment, and recreation 27.83 110.35 237.72 Accommodation and food services 132.81 526.48 962.88

Table 8: Multiplier eﬀects of GDP losses using Q2 numbers (in Millions)

Sector Direct eﬀect Multiplier Total eﬀects

Retail trade 316.39 2.10 664.41 Transportation and warehousing 990.66 2.22 2,199.26 Arts, entertainment, and recreation 110.35 2.10 231.735 Accommodation and food services 526.48 2.04 1,074.01 Total 4,169

10 Figure 1: Alaska GDP

Figure 2: Q1 GDP changes with and without the virus

11 Figure 3: Q2 GDP changes with and without the virus

Figure 4: Q3 GDP changes with and without the virus

12 Figure 5: Potential GDP losses by quarter

13 6 Firm size and vulnerability

The short term effects we estimate in the previous sections ignore that fiscal stress on employers due to lack of revenues may lead to business exits and/or bankruptcies. In Figure 6, we show that almost 50% all firms in Accommodation and Food services have fewer than 5 employees and are therefore very sensitive to income disruptions. These firms will not only be affected by the closures but also by the much smaller anticipated summer season. The other sector whose

Figure 6: Accommodation and food services

ﬁrms are likely sensitive to the travel restrictions is the Arts, Entertainment, and Recreation industry where 70% of all ﬁrms have fewer than 5 employees.

14 Figure 7: Arts, Entertainment, and Recreation

15 7 Tourism season

The leisure and hospitality sector of the economy has been and will be very adversely impacted by the closures. Leisure and hospitality includes hotels, motels, restaurants and bars, and the arts, entertainment, and recreation sectors. Similarly, the travel industry is being impacted by increased social distancing, including airlines, cruise lines, buses, and trains. In Figure 8 and Figure 9, we show the extent to which each borough’s economy swells over the summer. Statewide, wages are 437 million dollars higher in July than in January with a 124 million of the increase due to the Leisure and Hospitality sector. Table 9 shows the potential declines in employment due the closures and declines in spending at the borough level.

Figure 8: Percentage change in wages between July and January by borough

8 conclusion

In this short summary, we provide an illustration of the potential economic losses due to the COVID-19. The results should be not be interpreted as a prediction for the potential consequences but instead as an attempt to capture the scale of the eﬀects. A return to full

16 Figure 9: Total changes in wages between July and January by borough

Figure 10: Total changes in wages in Leisure and Hospitality between July and January by borough

17 production and economic activity will ﬁrst require virus containment. In the meantime, it will be important to support households, businesses, and local governments as they deal with signiﬁcant disruptions that may have far reaching and long term consequences.

18 Table 9: Direct Employment losses in the Leisure and Hospitality sector by month assuming layoﬀs of 50% of workers starting March 15th

Area March April May

Alaska 15,819 16,287 19,286 Aleutians East Borough 13 14.5 17 Aleutians West Census Area 16.5 18 17 Anchorage Municipality 8694 8611.5 8852 Bethel Census Area 35.5 40 Bristol Bay Borough 26.5 36 56 Denali Borough 102 171.5 976.5 Dillingham Census Area 26.5 34.5 Fairbanks North Star Borough 2073 2125 2373.5 Haines Borough 63 81.5 166.5 Hoonah-Angoon Census Area 23 43 159 Juneau City and Borough 734 782.5 986 Kenai Peninsula Borough 1001.5 1094 1560.5 Ketchikan Gateway Borough 327 368 506.5 Kodiak Island Borough 204.5 220 230 Kusilvak Census Area (formerly Wade Hampton CA) 11 10 11.5 Lake and Peninsula Borough 21 20.5 46 Matanuska-Susitna Borough 1252.5 1326.5 1654 Nome Census Area 94 68.5 68.5 North Slope Borough 389.5 366.5 314 Northwest Arctic Borough 60.5 58 58.5 Petersburg Borough 41 44.5 58 Prince of Wales - Hyder Census Area 46 49.5 56 Sitka City and Borough 211.5 220 297.5 Skagway Municipality 33 71.5 259 Southeast Fairbanks Census Area 77.5 82 103 Unknown Location 8 8 17 Valdez-Cordova Census Area 198 218 275.5 Wrangell City and Borough 18.5 28 30 Yakutat City and Borough 12 32.5 34 Yukon-Koyukuk Census Area 14

Status of Interior Alaska Tourism Industry Due to COVID-19 (UPDATED as of 4/3/2020 4:00 p.m.)

Current Situational Analysis Fairbanks along with the global travel industry is experiencing dramatic rippling effects caused by the COVID-19 pandemic. Explore Fairbanks has been tracking the situation ever since the first reported outbreak three months ago and has been working closely with tourism partners to analyze impact to the industry. These updates inform us as we chart a course of action for marketing strategies and operations both now and looking ahead.

Because of the ever-changing nature of the situation, it is difficult to draw any definitive conclusions as to the overall impact that COVID-19 will have on the tourism industry. It will become more evident in the months to come as we receive and analyze data from a variety of sources, including Hotel/Motel Tax collections, Fairbanks International Airport arrivals and departures, Alcan border crossings and Alaska Railroad arrival and departures.

Fairbanks and Alaska tourism have witnessed record growth in the past few years. For the Fairbanks region, we had five-years of increases with 2019 heralding highest numbers to date in both summer and winter. Specifically regarding winter, the last quarter of 2019 was solid with regional tourism on point to break winter tourism records in the first quarter of 2020. To exemplify, January and February Hotel/Motel Tax collections increased by about 20% over 2019. However, the situation quickly unraveled with cancellations in March, the most popular winter month, when the Fairbanks tourism industry witnessed dramatic declines for on-season winter. By mid-month, many Explore Fairbanks tourism partners had ceased their winter operations.

Also beginning in March, local tourism businesses were inundated with cancellations for summer at an alarming rate with no end in sight. Looking ahead to summer, the delay to the start of the cruise season will have a significant impact, given the important role the cruise market plays in our summer visitor season. In 2016 the Alaska Visitor Statistics Program indicated that of Interior Alaska’s 320,000 summer visitors, 41%, or 131,200 were on a cruise land tour.

These downturns reflect consumers hunkering down to avoid the risk of COVID-19 as well as the longer, unknown period of “confidence shock” in travel.

The following report summarizes those cancellations and postponements to date to the best degree possible given that the situation is ever-changing.

Status of Transportation Modes

Cruise • Cruise lines that have altered their summer 2020 season to date include:

. CORRECTION: Princess Cruises and Holland America Line have not yet made an announcement on their summer 2020 season in Alaska. Carnival Cruise Line has announced the cancellation of all Alaska sailings through and including June 30.

. Both Celebrity Cruises and Royal Caribbean are delaying the start of their Alaska cruise season until July, which includes several one-way Cross Gulf of Alaska sailings.

• Regarding cruise ports, the Port of Seattle announced that they anticipate a delay in the start of the 2020 Alaska cruise season though no specific dates have been indicated at this time. The Canadian Government announced that cruise ships may not enter ports in Canada until July 1 subject to change. The Passenger Vessel Services Act (PVSA) of 1886 requires that foreign-hull cruise ships carrying more than 500 passengers and crew must include a stop in a foreign port, typically Vancouver BC for Alaska cruises. The Alaska Travel Industry Association and other industry leaders have requested that the Federal Government implement a temporary waiver for this summer of this PVSA provision in order to allow ships to cruise from port-to-port in the US.

Aviation To date, the following service to Fairbanks International Airport (FAI) has been reduced or cancelled:

• American Airlines has cancelled its new summer 2020 service direct to Fairbanks from both Dallas/Fort Worth and Chicago hubs.

• United Airlines cancelled its summer 2020 service from Denver but is still planning its daily Chicago to Fairbanks service.

• Alaska Airlines announced a 70% reduction in capacity systemwide in their domestic operations with the impact on Fairbanks changing on a regular basis as the airline announces new cancellations. Through April 9, Alaska has cancelled all direct flights between Fairbanks and Seattle and are routing through Anchorage. Anchorage to Fairbanks flights during that time have been dramatically reduced from six to two daily flights. Anticipate that the rest of April will see a similar schedule, however, as of March 27, further flight schedule changes for April and May have not yet been published. Considerations are being given to possibly revising the FAI schedule to three daily flights with one to Seattle and two to Anchorage.

• Delta Airlines announced a 70% reduction in domestic operations and an 80% reduction internationally. Currently, the only change to Fairbanks is moving to a smaller aircraft for the daily flight from Seattle during the month of April. To date, Delta has not announced changes for its twice-a-day summer service to between Fairbanks and Seattle or its daily summer service to Minneapolis.

• To date, Condor is still planning its summer 2020 service from Frankfurt with weekly flights every Thursday beginning May 21. • According to an Anchorage Daily News report on April 2, Ravn Air Group is cutting its fleet from 30 planes to three and eliminating routes to smaller villages that relied on RavnAir Connect for travel as well as deliveries and medical services. The company was taking “further actions to drastically cut costs” and further reducing flying operations by 90%. The company will continue service to communities it’s federally required to serve and continue flights to other markets served with the planes: Kenai, Homer, Valdez, King Salmon, Dillingham, St. Paul, Bethel, Aniak, St. Mary’s, McGrath and Unalakleet.

• Airlines are constantly monitoring routes and schedules based on demand, therefore, expect continual changes. According to ASM North America, the consultant for Fairbanks International Airport, in an April 1st report, “North American carriers are operating at near-skeletal levels and will likely continue to do so through the coming weeks. As an example, American announced on March 27 domestic reductions of 60- 70% (April) and 70-80% (May) with international reductions of 80-90% across both months. Other airlines have announced similar reductions. It is important to note, however, that much of this operational reduction is taking place near departure time with only a portion showing in advanced published schedules.” The report also noted, “Per an April 1 update, U.S. carrier RPMs (Revenue Per Passenger Mile) were down 92% last week (versus last year) with a March 29 daily industry load factor of 13% despite ongoing capacity reductions.”

Alaska Railroad Effective April 1st, the Alaska Railroad is extending the following temporary operational changes for regularly scheduled passenger operations:

. Between Anchorage and Fairbanks: o Aurora Winter Train: initially suspended on March 19, is suspended through end of 2019-2020 winter season o Denali Star Train: daily scheduled service begins July 1, 2020 (northbound only); daily northbound and southbound July 2, 2020

. Other routes as follows: o Hurricane Turn Train: operates April 2, May 7, and June 4, 2020 while maintaining social distancing requirements in applicable State and Municipal orders related to COVID-19; standard Thursday-Monday service begins July 2, 2020 o Coastal Classic Train: daily scheduled service begins July 1, 2020 o Glacier Discovery Train: daily scheduled service begins July 3, 2020

Status of Meetings and Conventions

Below is a list of meetings scheduled in Fairbanks that have been postponed or cancelled to date. This incomplete report reflects a loss of $3.6 million in Estimated Direct Attendee Spending in the community during the March through June period.

# of Estimated Direct Attendees Cancelled / Attendee Meeting/Event Name Date of Event Expected Postponed Status Spending

One Health, One Future Conference 3/11-14/2020 400 Postponed Definite $1,056,000

Festival of Native Arts 3/19-21/2020 1500 Cancelled Definite $192,000

2020 Tanana Chiefs Conference Annual Convention 3/16-19/2020 400 Postponed Definite $216,000

2020 Spring Fisheries Meeting 3/23-26/2020 300 Cancelled Definite $192,000

Alaska Miners Association Biennial Conference 3/30-4/4/2020 600 Cancelled Definite $432,000

Fairbanks Native Association Annual Meeting 3/13/2020 Report Only Cancelled Definite Report Only

2020 Alaska School Nurses Association Spring Conference 4/24-26/2020 100 Cancelled Definite $36,000

Rotary District 5010 Conference 4/30-5/3/2020 300 Cancelled Definite $144,000

Red Flag 20-1 4/30-5/15/2020 700 Cancelled Definite $1,120,000

2020 Alpha Delta Kappa State Convention 4/4-5/2020 100 Cancelled Definite $57,600

Resiliency Conference 4/10-11/2020 150 Cancelled Lead $1,200 UAF Faculty & Staff Retreat 4/16-17/2020 40 Postponed Lead $12,960

UAF CTRP Meeting 4/21-23/2020 80 Cancelled Assist $36,000

NASA ABoVE, 6th Science Team Meeting 5/11-14/2020 100 Cancelled Assist $72,000

UAF College of Rural and Community Development Strategic Planning Meeting 6/16-24/20 66 Cancelled Lead $63,360 ATTENDEES EDA TOTAL EXPECTED 4836 SPENDING $3,631,120

Status of Explore Fairbanks

Operations • In accordance with the State of Alaska’s COVID-19 11th Social Distancing Health Mandate introduced on March 27, Explore Fairbanks employees are telecommuting for the time being.

• The Morris Thompson Cultural and Visitors Center is closed to the public until further notice, when it reopens, hours of operation will be from 8a.m.-5p.m. for the remainder of the year.

• Explore Fairbanks created a COVID-19 landing page at www.explorefairbanks.com which is being updated for current and future guests. One of the more recent updates included a list of food and beverage businesses that are offering To-Go services.

Advertising

As Explore Fairbanks revamps strategies on digital and print advertising, social media, media and consumer communications, some decisions have been made for us:

o Alaska Beyond Magazine (Alaska Airlines in-flight magazine) - Suspending printing of April and May issues, no decision for June issue as of March 31 o Travel 50 & Beyond Magazine - Ceasing publication immediately o Sunset Magazine - Delaying printing of May/June issue, developing a plan for a mid- to late- Summer issue o Alaska State Vacation Planner - Postponing start of ad sales which were to start the week of March 23 o In agreement with Condor, suspending Fly Away Fridays (outbound advertising with Condor and iHeartMedia) and will reevaluate in early April o Due to cancellations of direct flights, revised inbound flight-specific radio advertising in Denver, Dallas and Chicago to general Fairbanks message on March 17.

Explorefairbanks.com Website Destination Travel Network (DTN) is not charging for ads in April and May.

Publications Pushing timelines for Winter 2020/21 Guide and 2021 Visitors Guides back one month later.

Media Tours Had six media tours cancel in February and March.

Travel Trade Several trade shows and sales missions that the Explore Fairbanks Tourism Department were planning to participate in have either been postponed or cancelled. They include:

• Active America China, a trade show designed to match tour operators from mainland China with US-based destinations and tourism businesses which Explore Fairbanks and some local businesses attend annually, was scheduled to be held in San Diego in late March has been postponed to September 13-15, 2020. • Go West Summit, a domestic-based travel trade show attended by international tour operators and travel agents was scheduled to be held in Portland, Oregon March 24-27, 2020 and has been rescheduled to August 30-Sep. 2, 2020. • ITB Berlin in Germany, one of the largest international travel trade shows in the world with 10,000 exhibitors from 180 countries, has been cancelled for 2020. Explore Fairbanks European-based contractor Fairwell Travel was scheduled to attend the event which was to have been held March 4-8, 2020. However, the contractor Elke Brosin was able to conduct meetings by phone with the tour operators that she was to have on the marketplace floor. • The Alaska Trade Mission to Japan and South Korea led by Explore Fairbanks postponed from April to mostly likely September. • ITB China in Shanghai was scheduled for May 13-15 and has been postponed until a yet- to-be determined later date. Explore Fairbanks China-based contractor East West Marketing was scheduled to attend the show. Explore Fairbanks has been receiving weekly updates from the contractor. • NTA Contact, a domestic travel trade show scheduled to be held in Anchorage March 18-21 has been cancelled. Explore Fairbanks had two FAMs in conjunction with the show that still came to Fairbanks. • The Dallas Travel and Adventure Show, a consumer show that was scheduled for March 28-29 has been postponed to a later date yet to be announced. • SeaTrade Cruise Global in Miami, Florida, a major B2B event for the global cruise industry, has been postponed. The event was originally scheduled for April. Explore Fairbanks was not attending the event but was one of the sponsors for the ATIA booth. • Cruise360 in Vancouver, B.C., a trade show catering to the travel agent cruise market, was originally scheduled for May 18-21 but has been postponed until a yet to be determined date.