Paycheck Protection Program In Los Angeles: Intended As A Lifeline For Small Business Amidst The COVID- 19 Crisis, The Program Was Inequitably Distributed SUMMARY: On April 3, 2020, the Small Business Administration (SBA) announced the Paycheck Protection Program (PPP), claiming it would “bring immediate economic relief and eight weeks of financial certainty to millions of small businesses and their employees.” Los Angeles county businesses have subsequently received 184,027 loans. But, tracking with a national trend, relief across Los Angeles has not been equally distributed. Additionally, several companies of questionable need made off with program funds. An Accountable.us analysis of zip codes across Los Angeles showed an inequitable distribution of PPP aid. Overall, for every 1,000 residents of Los Angeles, 17 PPP loans were awarded, and the county’s demographic split was roughly even between white and nonwhite residents. For the top 10 zip codes with the largest nonwhite population, loans per 1,000 residents drops to 11; for the top 10 zip codes with the most white residents, it rises to 59.3. Black zip codes mirror the larger nonwhite trend, with the 10 ten proportioned zip codes also receiving 11 loans per capita. These results mirror nationwide racial disparities in the disbursement of PPP funds. Despite the PPP’s intention to serve small businesses, larger entities in the Los Angeles area received loan funding while smaller businesses suffered. COVID-19 produced record unemployment rates in Los Angeles, and some economists predicted it could take up to the three years for the area to return to pre-pandemic unemployment levels. While some areas were left out of funding to relieve economic pain, other entities, such as the entertainment industry raked in cash. Up to $5 million in PPP funds found their way to Kanye West’s $3-billion Yeezy apparel brand; Hollywood talent agencies such as LA’s Don Buchwald and Associates, agent to Howard Stern and major television stars, received up to $1 million; the LA Lakers received $4.6 million before returning the funds following outcry. And despite the intent to help small, struggling businesses, large national firms took funds from the program – such as LA health services company RadNet, Inc., a nationwide firm with over 6,000 employees that took home more than $4 million from the PPP after making nearly $14.8 million in profits in 2019. The Paycheck Protection Program Was Launched As A Lifeline For Small Businesses Amid COVID-19 April 3, 2020: Small Business Administration (SBA) Launched The Paycheck Protection Program (PPP), A Fund Designed For Small Businesses Struggling To Meet Expenses During The COVID-19 Pandemic. “The U.S. Small Business Administration Administrator Jovita Carranza today launched the Paycheck Protection Program, a $349 billion emergency loan program created last week with the President’s signing of the Coronavirus Aid, Relief, and Economic Security Act (CARES). The program provides forgivable loans up to $10 million to small businesses left financially distressed by the Coronavirus (COVID-19) pandemic. The loans, which will be administered at the local level by a national network of banks and credit unions, are designed to maintain the viability of millions of small businesses struggling to meet payroll and day-to-day operating expenses.” [Small Business Administration – Press Release, 4/3/20] Payroll Protection Program Was Intended For Small Businesses, Traditionally Defined As Under 500 Employees. “Restaurant chains, construction companies and mobile-home makers are among more than a million businesses approved for loans so far under the government's $349 billion Paycheck Protection Program. The program is primarily intended to benefit small businesses — defined as those with fewer than 500 employees — hurt by the coronavirus pandemic. However, some larger, publicly traded companies have also qualified for loans.” [National Public Radio, 4/21/20] 1 April 23, 2020: Treasury’s FAQ Document On The PPP Said Companies With “Substantial Market Value And Access To Capital Markets” Would Have Difficulty Justifying The Necessity Of A Loan. “Question: Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan? Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. […] For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.” [Treasury Department - Paycheck Protection Program Loans Frequently Asked Questions, 4/23/20] A Zip Code Analysis Of Los Angeles Showed Zip Code Areas With High Nonwhite Populations Received Less PPP Loans Key Points: • Zip codes in Los Angeles county received 184,027 PPP loans. • Per capita, residents in Los Angeles county received approximately 18 PPP loans for every 1,000 residents. Zip codes in Los Angeles county were approximately evenly split between white and nonwhite residents, 50.6-percent to 49.4-percent. • A significant relationship existed between the nonwhite population of a zip code, and that zip code’s per capita PPP loans. The 10 zip codes with the highest proportion of nonwhite residents received 11 loans per capita. This compared to the roughly 59.3 per capita received in the 10 zip codes with the highest percentage of white residents. • Black zip codes in Los Angeles fared similar to overall nonwhite zip codes in proportions, as the ten zip codes with the highest proportion of black residents received 11 loans per capita. 8.6-percent of Los Angeles residents were black. • Zip codes were based on the Los Angeles County listing of zip codes. o Zips 90079, 90506, 90747, 90831, and 91608 were removed for having zero population; o 90071, 90073, 90095, 90822, 91046, 91210, 91759, and 93563 were removed for having populations under 1,000. o 90704 constituted two Channel Islands within LA County and was included in the total dataset, but was removed from the above map to better highlight disparities. Zip Codes With Higher Nonwhite Populations In Los Angeles County Received Less PPP Loans On Average. 2 ZIP CODE POPULATION PPP LOANS WHITE- NONWHITE- LOANS PER 1,000 PERCENTAGE PERCENTAGE POPULATION 90001 57,110 295 35.91% 64.09% 5.2 90002 51,223 101 28.10% 71.90% 2 90003 66,266 238 30.00% 70.00% 3.6 90004 62,180 881 37.32% 62.68% 14.2 90005 37,681 518 29.07% 70.93% 13.7 90006 59,185 804 31.88% 68.12% 13.6 90007 40,920 551 38.73% 61.27% 13.5 90008 32,327 326 8.50% 91.50% 10.1 90010 3,800 1,368 23.26% 76.74% 360 90011 103,892 451 33.82% 66.18% 4.3 90012 31,103 832 27.11% 72.89% 26.7 90013 11,772 1,009 37.26% 62.74% 85.7 90014 7,005 1,427 40.16% 59.84% 203.7 90015 18,986 1,626 35.35% 64.65% 85.6 90016 47,596 543 24.48% 75.52% 11.4 90017 23,768 995 34.78% 65.22% 41.9 90018 49,310 295 26.01% 73.99% 6 90019 64,458 927 29.97% 70.03% 14.4 90020 38,967 668 24.34% 75.66% 17.1 90021 3,951 1,307 41.00% 59.00% 330.8 90022 67,179 437 52.36% 47.64% 6.5 90023 45,903 499 49.62% 50.38% 10.9 90024 47,452 1,323 61.60% 38.40% 27.9 90025 42,147 2,467 64.67% 35.33% 58.5 90026 67,869 995 46.73% 53.27% 14.7 90027 45,151 1,076 69.84% 30.16% 23.8 90028 28,714 1,093 63.15% 36.85% 38.1 90029 38,617 463 43.88% 56.12% 12 90031 39,316 338 35.64% 64.36% 8.6 90032 45,786 251 45.01% 54.99% 5.5 90033 48,852 296 45.97% 54.03% 6.1 90034 57,964 991 49.60% 50.40% 17.1 90035 28,418 974 76.06% 23.94% 34.3 90036 36,865 1,561 67.28% 32.72% 42.3 90037 62,276 285 26.33% 73.67% 4.6 90038 28,917 698 51.49% 48.51% 24.1 90039 28,514 790 56.53% 43.47% 27.7 90040 12,520 706 55.00% 45.00% 56.4 90041 27,425 551 49.14% 50.86% 20.1 90042 62,430 623 47.64% 52.36% 10 90043 44,789 400 10.99% 89.01% 8.9 3 90044 89,779 268 22.43% 77.57% 3 90045 39,480 1,213 61.13% 38.87% 30.7 90046 48,581 1,796 84.00% 16.00% 37 90047 48,606 364 11.80% 88.20% 7.5 90048 21,397 1,633 84.02% 15.98% 76.3 90049 35,482 1,230 84.17% 15.83% 34.7 90056 7,827 158 13.42% 86.58% 20.2 90057 44,998 404 28.72% 71.28% 9 90058 3,223 1,019 35.65% 64.35% 316.2 90059 40,952 134 21.73% 78.27% 3.3 90061 26,872 229 21.56% 78.44% 8.5 90062 32,821 137 21.19% 78.81% 4.2 90063 55,758 192 48.54% 51.46% 3.4 90064 25,403 1,396 69.69% 30.31% 55 90065 45,527 684 48.72% 51.28% 15 90066 55,277 1,242 62.45% 37.55% 22.5 90067 2,424 1,201 85.68% 14.32% 495.5 90068 22,286 727 80.97% 19.03% 32.6 90069 20,483 1,598 85.35% 14.65% 78 90077 9,377 276 84.56% 15.44% 29.4 90089 3,217 15 50.30% 49.70% 4.7 90094 5,464 239 57.17% 42.83% 43.7 90201 101,279 481 50.93% 49.07% 4.7 90210 21,741 1,493 86.68% 13.32% 68.7 90211 8,434 1,420 77.67% 22.33% 168.4 90212 11,555 1,451 80.95% 19.05% 125.6 90220 49,328 444 22.97% 77.03% 9 90221 53,704 362 29.22% 70.78% 6.7 90222 31,869 125 29.06% 70.94% 3.9 90230 31,766 963 54.07% 45.93% 30.3 90232 15,149 840 60.74% 39.26% 55.4 90240 25,876 360 59.17% 40.83% 13.9 90241 42,399 703 57.36% 42.64% 16.6 90242 43,497 251 54.31% 45.69% 5.8 90245 16,654 1,198 78.04% 21.96% 71.9 90247 47,487 516 25.33% 74.67% 10.9 90248 9,947 970 28.16% 71.84% 97.5 90249 26,669 547 29.49% 70.51% 20.5 90250 93,193 837 35.49% 64.51% 9 90254 19,506 764 86.78% 13.22% 39.2 90255 75,066 477 52.38% 47.62% 6.4 90260 34,924 384 44.94% 55.06% 11 4 90262 69,745