City’s Effort to Support Small Businesses Threatens Groups That Support Small Businesses
One of the city’s measures to aid small businesses amid the coronavirus pandemic could have the unintended consequence of taking down the nonprofit groups that are themselves dedicated to supporting small businesses.
Mayor Kevin Faulconer last week announced a series of economic relief measures meant to throw a lifeline to small businesses decimated by a near halt to the global economy.
But one of those measures could have the unintended consequence of taking down the nonprofit groups that are themselves dedicated to supporting small businesses.
It’s yet another reminder that in an unprecedented economic crisis, a city that suddenly needs to find $109 million in immediate budget cuts doesn’t have many easy avenues to relieve pressure on businesses hit by a global phenomenon. Facing those imperfect choices, the mayor’s office has been forced to weigh its priorities, and hope.
Faulconer’s relief package included a provision allowing businesses to delay paying their licensing fees for up to 120 days. Those fees include assessments charged to businesses in 18 neighborhoods that established so-called business improvement districts, where private groups called BIDs promote the commercial districts and offer additional public services like public trash cans, neighborhood clean-ups and beautification and graffiti removal.
Those fees vary, but typically cost businesses from $40 to about $500 per year, though some are as high as $1,200. Confronted with empty storefronts citywide, however, the mayor is looking for any break he can give businesses in hopes they can keep some workers employed and survive long enough for the economy to restart.
Leaders of the city’s BIDs, though, say the potential loss of months of assessments could force them to close their doors. Many have already seen the collapse of other revenue streams, and now see the assessment deferral as the fatal blow.
“It definitely feels like a sinking ship,” said Angela Landsberg, who runs North Park Main Street.
Based on an informal count, Landsberg said about 70 percent of North Park businesses are permanently or temporarily closed. As of April 2, her organization will be down to just her, now that it can’t pay her three employees. Likewise, Jason Wells, CEO of the San Ysidro Chamber of Commerce, said he’ll have to close his doors if he goes three months without business assessments.
“Politically, it sounds great. ‘Whatever you owe the city, we’ll float it for three months.’ It sounds great, but what’s the effect? In San Ysidro it means our clean-up program is out the window, and we won’t be here to help them find what resources are available to them,” Wells said.
But the choice between cutting costs to local businesses and severing the services those costs fund brings into focus the issues being forced by an unprecedented pandemic. There aren’t easy choices laying around, so the city has been forced to weigh its priorities.
“BIDs are an important piece of the city’s strategy to support small businesses specifically in our most historic, commercial corridors,” said Christina Bibler, director of the city’s Economic Development Department, in a written statement. “In responding to the unprecedented economic challenges faced by San Diego businesses however, the mayor’s priority is to directly help small businesses immediately.”
Given the choice, the city is looking to support local businesses, not protect the groups formed to support local businesses.
Wells and Landsberg both said they would make that same choice, too, if they thought that was really the choice on the table.
Instead, they think the deferred assessments will be too small to matter for the individual businesses that no longer have to pay them, while the accumulated loss of them will be the final blow for BIDs.
But if the BID leaders understand the city’s logic, it’s the implementation that has grinded them. BIDs and the city’s economic development department work closely together, and both sides see them as something of an extension of the city itself.
That’s why the BID leaders are especially upset they learned about the fee deferral through the mayor’s press conference, with scant details on how businesses would be informed that they don’t have to pay for a few months.
“People are making decisions on an emergency timeline,” said Scott Kessler, executive director of the Adams Avenue Business Association. “We don’t know if they didn’t consider what it would do to us, or if they thought they had no choice. We don’t know, because they didn’t talk to us.”
“It was disappointing we had to hear about it on a press conf and not get a heads up from the economic development department,” Landsberg said. “We’re the city’s partners. We’re out there doing their work.”
Bibler, though, argued the city is making a tough decision based on the best way to ensure as many small businesses as possible survive a crisis that has functionally ended transactions for most storefronts.
“If we do what we can to help small businesses survive until it is safe to reopen their doors, more of these businesses will be successful, assessment-paying BID members for years to come,” she said.
Kessler’s association only gets about 10 percent of his association’s budget through business assessments. But the biggest share of his budget – special event revenue and corporate sponsorships – is getting crushed by the crisis, too.
That’s a story for many of the BIDs, which were beginning to see how they could tape their budget together just as they learned of the city’s decision.
“Our members are suffering, so obviously we’re going to suffer,” Kessler said. “I’m definitely not saying the city should be charging BID fees. But there needs to be a plan. If 95 percent choose to pay, it’s hardly an impact at all. If only half pay, it’s different. So in an uncertain time, it’s another uncertainty.”
For now, BIDs are beginning to look into whether there’s some form of help available to backfill the help that went to small businesses at their expense.
Wells, for instance, said the BIDs are considering applying together, as the Business Improvement District Alliance, for a grant from the San Diego Foundation’s newly created Covid-19 Community Response Fund. But there’s been confusion within the BID community about whether that fund offers grants or loans, or if they’re even eligible. Landsberg, meanwhile, hopes the county could make grants available to keep them afloat. She also suggested the city could temporarily fund the BIDs from other sources with at least enough to keep a director on the payroll, so that if the crisis ends, they can ramp up their efforts faster than if they have to shutter completely.
“There’s plenty of pain and suffering going around here, and as the government tries to relieve that pain, they unintentionally create pain somewhere else,” Kessler said. “I don’t have the answer.”
In the meantime, the crisis is bringing on a host of new challenges for the businesses that have survived thus far, Landsberg said, and she’s trying to pivot to deal with those at the same time she confronts the lost revenue.
For one, she wants to help her businesses maneuver the city’s newly created small business relief fund, through which it’s made $10,000, no interest loans available. But the application procedure for that program, rolled out alongside the deferred fees, is not at all clear yet, she said.
“My businesses are concerned they’re going to be looted,” she said. “As is, we’ve already been asking for more frequent police patrol. And now we’ve got an empty business district, with no one on the street and businesses closing up.”
She’s also acting as a liaison between businesses and North Park’s landlords, trying to get them to give their tenants a break. Landsberg said she’s seen everything from landlords waiving rent entirely, saying they’ll do anything to keep businesses alive, to offering 50 percent discounts, to literally laughing in her face when she suggested some sort of break.
“I’ve never been busier in my life,” she said.
Correction: An earlier version of this story misattributed the written statement from the city’s economic development department.