PHED Committee in January
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PHED ITEM #3 January 25, 2021 Worksession M E M O R A N D U M January 20, 2021 TO: Planning, Housing, and Economic Development (PHED) Committee FROM: Gene Smith, Legislative Analyst SUBJECT: Review of Pandemic-related Business Assistance Programs PURPOSE: Discussion, no votes expected Those expected for this worksession: Jerome Fletcher, Office of the County Executive Laurie Boyer, Office of the County Executive Ben Wu, Montgomery County Economic Development Corporation (MCEDC) Bill Tompkins, MCEDC Sarah Miller, MCEDC The PHED committee requested a review of all the business assistance programs implemented by the County in response to the COVID-19 pandemic. Program implementation was divided between the County and the MCEDC. I. Background and Summary The COVID-19 pandemic has created an uneven recession with certain industry sectors more impacted than others. Hospitality, leisure, restaurants, and retail businesses have seen the largest decline in economic activity. Much of this decline is due to the State and County health orders that restrict gathering size to limit the spread of the virus. While there was some expectation that the health orders and restrictions would be short-term measures, the reality is the pandemic has required that these orders remain in place for many months. The Council created many new business assistance programs for the impacted industry sectors to respond to this uneven recession. These new programs were funded and administered by the County or its partners. This memo provides a summary for each program implemented and includes detailed program information in the attachments. Table 1 provides an overview of all the programs included in this report. Table 1: Overview of Programs Total Funding Total Funding Number of Average Program Available Awarded Awardees Award PHEG $25,000,000 $20,916,452 2,344 $8,923 Reopen Montgomery $14,000,000 $3,226,549 919 $3,511 Tourism Grant $5,000,000 $5,000,000 14 $357,143 Medical/Dental Grants $2,500,000 $2,500,000 66 $37,879 Arts Grants $3,250,00 $3,250,000 191 $17,016 Microenterprise Program $4,393,899 $1,104,254 176 $6,274 Local Production Fund $200,000 $200,000 25 $8,696 Telework Assistance Program $1,500,000 $1,041,000 547 $1,905 3R Initiative $1,030,00 $1,030,00 206 $5,000 Restaurant Relief Program $7,930,497 $7,930,497 793 $10,000 Total $60,524,396 $45,168,752 5,281 $8,553 II. County-Implemented Programs A. Public Health Emergency Grant (PHEG) Program Program Overview The PHEG Program was the first assistance program created in response to the pandemic. This program was created in the County Code as part of the Economic Development Fund (EDF) and included two elements. The first element was an award based on financial loss due to the pandemic, and the second element was a grant to assist businesses transitioning to telework. The bill was introduced on March 24, 2020 and signed into law on April 3, 2020 (Enacted Bill). The law defines the eligibility criteria and maximum award amount. The Executive adopted a temporary Executive Regulation to implement the program, which further defined the award process and criteria for the program. Table 2 summarizes the elements of the PHEG Program, and where applicable, denotes what was defined in the County Code and what was defined in the Executive Regulation. Table 2: PHEG Program Overview Included in the law • Could be either a for-profit or non-profit business 1 Eligibility Criteria • Must have its principal place of business in the County; • Must employ 100 or less full-time-equivalent employees; and • Must have suffered significant financial losses due to the pandemic. 1 A principal place of business is defined the same for all programs – either 1) the business only has physical locations in the County; or 2) 50% of its employees or 50% of its gross sales occur in the County. 2 Included in the Executive Regulation • Must have been incorporated prior to March 5, 2020; Eligibility Criteria • Must be in good standing with the State of Maryland; (continued) • Must demonstrate at least 50% loss in the monthly revenue when compared to the monthly average revenue from the previous year. Included in the law • Must reserve 25% of the appropriation for restaurant and retail Priority establishments. Consideration Included in the Executive Regulation • Limited the maximum award to $10,000 for eligible businesses Included in the law: Award amount • Maximum award for financial loss was $75,000. • Maximum award for telework assistance was $2,500. Program Implementation Executive staff provided details about the PHEG Program’s implementation on ©1, and a list of all PHEG Program awardees is available on ©2-51. Table 3 highlights implementation details for the PHEG Program. Table 3: PHEG Program Implementation Overview Application Overview Application open date April 15, 2020 Application closed date April 25, 2020 Days application was open 10 days Application process First come, first served Application Details Total applications received 6,751 Total applications approved 2,344 Total applications awarded 2,344 Total applications denied 4,407 • Revenue loss did not meet the 50% threshold • Business was not in good standing with the State of Maryland Reasons for denial • Business was not a local business as defined by law • Business had more than 100 full-time-equivalent employees • Business was non-responsive to Executive staff’s request. Funding Information Total funding available $25 million total - $10 million for restaurants and retail - $15 million for other businesses Total awarded funding $20,916,452 Council approved repurpose $4,000,000 for Reopen Montgomery Average award for loss $8,648 Average award for telework $1,795 3 Executive staff provided an analysis of the PHEG Program awardees on ©52. This infographic provides summaries of the awardees by industry sector, zip code, and other criteria. Council staff summarizes certain details below. • 85% of the awardees had 10 or fewer employees, including 350 business that had no employees. • 31% of the awardees were in the Retail and Restaurant industry sector, followed by 27% of the awardees in an “Other category” that included more than 20 different industry sectors. The Office of Inspector General (OIG) also released OIG Report #21-008 and a Lessons Learned companion about the implementation of the PHEG Program. Below are the three findings of the OIG for the implementation of this program. The OIG did not review the other business assistance program, so it is unknown if the same types of errors were made with other programs. 1) Application processors applied a superseded formula to determine the percentage of revenue loss resulting in some underpaid awardees. 2) Application processors made processing errors that in some instances led to faulty eligibility decisions and improper payments. 3) Program processors did not maintain application support documents and written communications with applicants in a consistent and secure manner. B. Reopen Montgomery Program Program Overview The Reopen Montgomery Program was created through a special appropriation by the Council. The Council approved the appropriation resolution on July 7, 2020. The resolution defined the eligibility criteria and maximum award amount. Table 4 summarizes the elements of the Reopen Montgomery Program. Table 4: Reopen Montgomery Program Overview • Could be either a for-profit or non-profit business; • Must have its principal place of business in the County; • Must employ 100 or less full-time-equivalent employees; Eligibility Criteria • Must not have received County funding for reopen expenses; and • Must have incurred reopening expenses between March 16, 2020 and 30 days following the date of the County’s Phase 3 reopening. Award amount • Maximum award was $10,000. 4 Program Implementation Executive staff provided details about the implementation of Reopen Montgomery on ©1, and a list of the awardees for the program is on ©53-72. Table 5 highlights the implementation details for the Reopen Montgomery Program. Table 5: Reopen Montgomery Program Implementation Overview Application Overview Application open date July 29, 2020 Application closed date December 2, 2020 Days application was open 126 days Application process Rolling, random lottery Application Details Total applications received 5,497 Includes duplicates and applicants that did not provide complete documentation Total applications approved 2,415 as of Jan. 12, 2021 Total applications awarded 919 as of Jan. 12, 2021 Total applications denied 582 as of Jan. 12, 2021 • Ineligible expenses • Not in good standing with State of Maryland Reasons for denial • Not a local business • Already received financial assistance for the same expenses • Non-responsive Funding Information Total funding available $14 million Total awarded funding $3,226,549 as of Jan. 12, 2021 Council approved repurpose $5,050,000 for the Tourism Grant Average award $3,511 as of Jan. 12, 2021 Table 6 summarizes the different industry sectors and average amounts based on the list of awardees provided by Executive staff. Table 6: Reopen Montgomery Program by Industry Sector Industry Sector Awardees Total Awards ($) Average Award ($) Agriculture 6 22,697 3,783 Arts / Entertainment / Recreation 58 201,011 3,466 Automotive Services 12 28,106 2,342 Child Care 52 153,936 2,960 Construction 17 63,815 3,754 Consulting Services 15 48,465 3,231 Education Services 44 144,340 3,280 Finance / Insurance / Real Estate 40 137,179 3,429 Health Care / Medical Services 193 749,365 3,883 5 Table 6: Continued Industry Sector Awardees Total Awards ($) Average Award ($) Hospitality 23 95,998 4,174 Information Services / Technology 16 54,422 3,401 Manufacturing 16 62,954 3,935 Other 86 261,660 3,043 Personal Services 72 200,353 2,783 Professional / Scientific / Technical 29 80,938 2,791 Religious Organizations 26 111,835 4,301 Restaurant / Food Services 149 614,437 4,124 Retail 47 137,563 2,927 Transportation 13 45,779 3,521 Wholesale Trade 5 11,696 2,339 C.