With just over $900,000 available to the city for pandemic-related costs in federal CARES Act funding, leaders are eyeing business relief.
After the the Economic Development Authority voted Oct. 22 to recommend that COVID emergency loans, distributed this spring, should be converted to grants, the City Council unanimously voted in agreement Nov. 9. With the council’s approval, the change will go into effect, and business owners now won’t need to pay the loans (now grants) back.
The city’s COVID emergency loan program started in April. The city expended over $480,000 in 0% interest loans to 56 small businesses through the program. Staff encouraged any and all small businesses to take part, noting that the payback period didn’t begin until 2021, and even if a business wasn’t sure if they would use the money, it could keep the funds and simply give it back later.
When the city received its $900,000 in CARES Act funds from the federal government, though, staff quickly compiled pandemic-related costs, including payroll, leave and extra time, PPE, legal, IT, business support and more. All of that only accounted for about $75,000, so the city used a small portion of the CARES funds to pay that back. Another $50,000 was then used for a utility assistance program in partnership with Minnesota Valley Action Council.
After the utility assistance program and the expenses are paid back, there is still about $777,000 in CARES Act funds left. So now the City Council will use a large chunk of those remaining CARES dollars to forgive the business loans.
The EDA members in October were all in favor of the move, with just a few questions. Brad DeVos, who is also on the City Council, asked if there was any concern that other businesses missed out, since the original offerings were loans, not grants. Community Development Director Russ Wille noted that the city made it clear that all eligible businesses should take the opportunity back in April, because even if the loans remained as such, they’re 0% interest and deferred a year, so the businesses could just keep the $10,000 as a deposit and pay it back if they didn’t use it.
“Subsequent to closing the loan on Aug. 31, I had two businesses that had made inquiries,” Wille said. “Both of them, I had exhaustively suggested that they take the $10,000 loans with 0% interest and just deposit it, if it gave them some comfort. Neither one did, but now of course there’s been chatter that these could be converted to grants. The city administrator (Todd Prafke) would not suggest reopening, because we did make a pretty valiant effort to get people to take the loans.”
“We did say at the beginning that businesses can take the loan and hold onto it,” City Administrator Todd Prafke said earlier in October. “We encouraged people to apply, even if they didn’t know if they’d use the dollars. Also, we did not know at that time if the CARES funding would even exist (meaning the city didn’t know the loans would become grants).”
Another question EDA members had was whether businesses that have closed since originally taking the loans should be seeing theirs converted to grants. Wille said staff agreed that it was best to treat all applicants the same, regardless of the current status of their businesses.
With the council approving the loan-to-grant conversion, more than half the CARES dollars will go toward that project. But the city should still have approximately $289,000 left to spend, though that will likely come down slightly, as the city continues to incur expenses related to the pandemic.
Leaders have questioned what exactly the city could do with those remaining dollars, as the CARES Act funds are intended to be spent for pandemic-related purposes. Staff had suggested dollars could go toward the city’s emergency services, but it was believed that documentation would need to be provided to indicate that those services were used for pandemic-related purposes. However, in more recent guidance from the United States Department of the Treasury, that documentation is not needed and instead there is a presumption that any money going toward emergency services would be pandemic-related.
Essentially, that means that whatever leftover CARES Act dollars the city has could go toward its emergency services budget and potentially save local taxpayers some money, although the CARES Act dollars are coming from federal taxes at the end of the day. Some of the councilors, including Keri Johnson, expressed great surprise that the restrictions on spending could be so lax.
“It’s amazing to me that we were so concerned about the auditing process and being extremely careful in doing this right, and now this just blows my mind,” she said at the Oct. 5 meeting.
Beyond putting the leftover CARES dollars toward emergency services, the city could pursue other opportunities, like assisting nonprofits, expanding the utility assistance program, doing more business grants, etc. It has until Nov. 15 to allocate the funds or they go back to Nicollet County. The county has until Dec. 15 to allocate all of its funds, or they go back to the federal government.