Consider Guidelines for Business Grant Program - Phase 2 COVID-19 Business Assistance Program Using CARES Act Funding Allocation

Purpose: To discuss potential guidelines for a grant/loan program funded through the the City CARES Act allocation and to make a recommendation to the City Council.

Background:  The City of Ramsey has been providing assistance to its businesses throughout this COVID- 19 pandemic.  City staff has be communicating state, federal and other grant/loan opportunities to our businesses and assisting them with the application process when possible.  Federal programs such as the Paycheck Protection Plan (PPP) and Economic Injury Disaster Loan (EIDL) have been utilized by many businesses but funds have dried up in certain areas.  In an effort to get more relief for businesses and government, the federal government passed the CARES Act which allocated money directly to the State of Minnesota to assist with unexpected relating to COVID-19. 

A portion of this funds are being administered by the State of Minnesota and the state rolled out a $10,000 Small Business Relief Grant program with an application deadline of July 2, 2020.  The total amount allocated in this program was $60M. Criteria for that program is attached to this case as reference only (we do not need to use all of the same criteria).

Anoka County also received an allocation of CARES Act Funds and are also creating a grant program similar to other city and county partners. Anoka County is still putting together its application and criteria for the program.  It should be noted that businesses can only receive one allocation from CARES Act grant dollars.  For example, if a business receives a State grant you are not eligible to receive a City or County grant.  Based on information received from existing and contemplated grant programs from other cities, states and counties the criteria varies greatly.  The purpose of this case to to evaluate options and criteria that would best serve our Ramsey businesses.

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Staff has reviewed several peer community templates in preparation for this discussion. Most of the existing loan and grant programs staff reviewed were developed prior to allocation of CARES Act funding to Cities and Counties and were seeded from City Revolving Loan Fund (RLF) and other funding sources.   Based on this, new programs would need to call out the prohibition to receiving multiple CARES Act grant awards and to factor that into the application process.

In order to have a successful grant/loan program the city will need to put in place something that has meaningful impact to businesses,  is easy to apply for and has criteria that allows for quick processing of the application and administration of the grants.  To be eligible to receive Small Business Emergency Assistance funds, a business must demonstrate that its operations have been directly and adversely affected by the COVID-19 Health Pandemic and/or that it operates in a category named in Executive Orders 20-04 and 20-08. Below are some criteria/processes the EDA should consider for recommendation to the City Council that businesses will want to use and that is simple to apply.  A range of criteria is based on research done by staff in relation to other programs.

Available Funds (subject to City Council discussion on 7/14)

• $200,000 (approximately 10% of Ramsey's allocation)
  • Note - Staff recommends two rounds of Applications that will allow the City to adapt to the Applicant Pool; also, an additional allocation may be possible once the City's reimbursable expenses are better known.

Business size: Options - 3-70 Employees (Full Time Equivalent - FTEs), Case by case if under 3 FTE's

• Staff Recommendation - 50 FTE or less

Business Type: EO-04-08, Same as previous Ramsey Resident Ad Waiver program, Other?

• Staff Recommendation - Any Ramsey Business that can show impacts from COVID-19

Annual Business Revenue: Options - $3.5M or less (majority of peer community examples are capped at $1M)

• Staff Recommendation - $2M or less annual revenue

Time business has been in operation: Options - 6 months, 1 year prior to March 1, 2020

• Staff Recommendation - 1 year

How long business has been in Ramsey (Longevity) 

• Staff Recommendation - Business should have been operating in Ramsey on or before March 1, 2019. If scoring system is used additional points should be awarded for businesses operating longer in Ramsey.

Whether business is in compliance City Zoning Code and current with City utilities, property taxes or other city charges

• Staff Recommendation - Compliant with City Zoning Code, current with City Utilities and City Charges.  Property Taxes paid through 2019

Business Entity Type: Options - For profit only, Non-Profits. Must be registered with Minnesota Secretary of State and in good standing.

• Staff Recommendation: For-Profit businesses only and being registered in good standing (Non-Profit groups can be discussed - but recommending to wait until a second round of applications)

Grant/Loan Amount: Options $4-10K (Varies), Amount based on number of employees, Forgivable Loans, Grants, Loans

• Staff Recommendation: $10,000 Grant

Business Location: Ramsey businesses located in Ramsey only

• Staff Recommendation: Ramsey businesses only (Staff has received requests for businesses located in other communities but serving Ramsey as well as residents of Ramsey owning a business in other communities)

Application Period: Varies

• Staff Recommendation: 2 Week (14 days) Application Period (2 week period in August for businesses to apply)

How grants awards are determined: first come-first serve, lottery, scoring system

• Staff Recommendation: Random draw with Application Deadline (still some degree of minimum scoring threshold)

Duration of time to expend funds: (2-3 months)

• Staff Recommendation: Funds to be expended by October 31, 2020 and expenses documented to City by November 15, 2020

Proof of need: Comparisons from last year to this year showing reduction in revenue, explanation of need for expenses

• Staff Recommendation:  Flexibility, but do need to show and document need (program will go through extensive audit)

Uses of funds: Current payroll obligations (i.e. may not include employees who have been laid off), lease or mortgage payments, utilities, accounts payable, property taxes and other critical business expenses that can’t be paid as a direct result of the current health emergency. Awarded funds may not be used for business owner’s/manager’s personal uses or expenses

• Staff Recommendation:  Same as above with the caveat that the Expenses are directly associated at Ramsey business location

Grant application and administration: City, Anoka County, Central Minnesota Development Corporation (CMDC - Mike Mulrooney), other entity

• Staff Recommendation: At this time, Staff recommends administering the program internally, but will re-evaluate when program demands are better known. 

Businesses not eligible: (Options Below)

• Do not have a physical address within the City of Ramsey
• Derive income from passive investments without operational ties to operating businesses.
• Primarily generate income from gambling activities.
• Generate any part of its income from adult-oriented or tobacco/vaping-related activities.
• Have no current or historical financial statements.
• Previously received emergency funds from the city. (Discussion as to Phase 1 COVID-19 Plan)
• Non-profits 

   Staff Recommendation: Same as above, with discussion about Phase 1 COVID-19 Plan and non-profits

There is a possibility that there could be a second round of grants/loans if money is available and all initial funds are awarded.

$200,000 from City of Ramsey Cares Act allocation.

The EDA should discuss the above options and develop a recommendation for criteria that Staff could incorporate into a draft Grant/Loan Policy and Application

Motion to recommend establishment of a $200,000 grant or loan (select one) to the City Council with the agreed upon criteria.