COVID-19 came into our lives in a significant way less than a month ago, and the impact of the virus has been wide-ranging. Perhaps the negative impact that will be felt the longest will be to the country’s financial system, notably to small businesses. The U.S. Small Business Administration said recently that there are 30 million small businesses in the country which combine to produce more than $10 trillion dollars annually. Another fact is small business revenue accounts for 50 percent of the country’s Gross Domestic Product.

With those facts in mind, there should be no surprise the recent $2.2 trillion federal economic stimulus plan entitled The Coronavirus Aid, Relief, and Economic Security (CARES) Act, included $349 billion for loans to small businesses to assist with payroll costs called the Paycheck Protection Program (PPP).

In Coronado, the economic news is sobering. Recent projections from the City of Coronado provided by City Manager Blair King, reflect a total revenue loss of $7,055,800 for Fiscal Year 2019-20 from previously projected levels. The breakdown includes $6 million in Transient Occupancy Tax, often referred to colloquially as the ‘Hotel Tax’; $730,000 in Sales Tax; and $325,800 in Interest earnings. The news gets worse when projected ahead, as the total estimated revenue loss budgeted from FY 2019-20, compared to budgeted FY 2020-21, is $12,325,000.

King added in an E-mail dated March 26, 2020, “City policy allows committed reserves to be used if General Fund revenues fall below estimates by eight percent or greater. I anticipate that we will look to balance the FY 20-21 General Fund budget with a draw from reserves.”

During an interview at City Hall Friday morning, King discussed a wide range of possible solutions to the challenges currently faced by the Coronado small business community. City Staff will present options to the Coronado City Council during their meeting of Tuesday, April 7, 2020. “There are a variety of symbolic things,” King said. “We’re going to announce that we aren’t going to be enforcing parking restrictions on Orange Avenue. Probably the biggest thing to take to the council is the City of San Marcos, the City of San Diego, and the South County Economic Development Council (SCEDC) have made different programs available. San Marcos is making about $3 million to $4 million available out of their reserves. The SCEDC is making micro loans with a total capitalization of between $5,000 and $10,000. The City of San Diego has a plan and we’ll probably show the City Council those various programs and see if they want to pursue the micro loans or something more along the line of San Marcos. We’ll have a wide range of options for the council to consider.”

King added, “We have a strong tax base, but how long will it take to come back will be the issue. No one is going out or traveling. There are a lot of frightened people who may be frightened into the future. I think for Coronado a concern going forward is the Hotel Del Coronado. From my perspective, the Del is incredibly important part of our tax base and they are owned by a strong financial company. Small businesses are the most vulnerable and will have the hardest time coming back. We’ll give the council a range of options to discuss, both in terms of capitalization and scope.”

As for the city’s immediate financial future, King said, “I think from Day 1 we were watching our burn rate on expenditures and forecasting the impact on our revenues. We’re fortunate we have reserves, but a lot of that will depend on what happens in FY 2020-21 in terms of the economy and when the all clear might be given and how it will be given.”

An example of the challenge facing Coronado’s 75 restaurants, small businesses all, came from a recent podcast by Internationally famous restaurateur Chef David Chang, who owns restaurants in New York City; Sydney; Toronto; Washington, D.C; Las Vegas; and Los Angeles. Chang is concerned about the future of the industry and noted that a restaurant being closed negatively impacts the eatery’s chefs, cooks, wait staff and other personnel, as well and entire supply chain of food and beverage suppliers, linen and laundry companies, trash collection, and the ability of the restaurant’s ownership to pay rent on their space. If any of the groups in the supply chain were to go out of business, it will prolong a restaurant’s recovery period.

A second interview Friday with Coronado Chamber of Commerce Executive Director Sue Gillingham talked about the Chamber’s recent focus and rapidly shifted to two Federal Government-related programs which can benefit local business. “Our first foray was to put on our website, the day-by-day changes,” Gillingham said. “We focused on the restaurants initially. We have a list that we update three times a week, and what they are doing if it’s takeout, delivery or you can purchase gift cards. It’s been really well-received, and then we’ve done the hotels and some retail. You can go to our main page (coronadochamber.com) and the Coronado restaurants are listed alphabetically, and it says if they are open for business. We’ve had very good feedback from a lot of different sources and it’s good to have the information in one place.”

There are two programs which can benefit Coronado businesses. The first is a Small Business Administration Economic Injury Disaster Loan (EIDL). Gillingham said, “This is not your father’s SBA Loan. They have waived some of the requirements and the processes. First and foremost, they are trying to address payroll. The loans can cover payroll, paying your lease or mortgage, accounts payable and extraordinary expenses caused by the disaster. There are no points or fees associated with the loans and the interest rate is 3.75 percent, with the first payment due in a year. Basically, normal business forms are all you need to complete the application.”

A PowerPoint presentation prepared by the SBA is also on the Chamber website and the details include funding being made available 25-35 days after you complete your application. Also, applications can be authorized based on a simple check of a borrower’s credit score, not the traditional detailed credit evaluation. And once you have filed for a particular amount, you can request additional funds later if they are required.

Gillingham added, “The other thing of particular interest is the first $10,000 is a grant. Companies including non-profits can apply for the loan. You can get turned down for the loan and still get the grant. If you already have laid people off, and you bring them back between now and June 1, you can still get the loan and the first $10,000 is forgiven.”

Gillingham went on to discuss a second new federal program, the $367 Billion Paycheck Protection Program. “It’s not an SBA loan and you go through a regular lender who is authorized to do these loans. These loans are only for payroll. The definition of a small business for the SBA is a business with under 500 employees. Conceivably you could apply for both loans. Your first move would be to go to the Chamber website. We have all the application forms online. On the surface, this looks like some fresh air for businesses. I would think all the businesses on Orange Avenue would qualify for these loans. There are other things on the website. If you have to file for unemployment, we have that form. Right now, an additional $600 is being added to each unemployment check from the state.”

The Chamber is also contacting their membership, according to Gillingham. “We’re calling all of our members to see what they are doing, to tell them about their benefits and what’s on the website. We’re finding out if they’re open and asking if they need help. The response has been very positive. Usually when the Chamber is calling its about an event or to give us some money, as opposed to ‘these resources are here for you.’ There is no ‘ask’ in this, tell us what you need.”

So, the bottom line is there is an identified path for assistance from the Federal Government and in Coronado possible aid for local small businesses will be presented at the April 7 City Council meeting.

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