TO: HONORABLE MAYOR FROM: Nanci Klein
AND CITY COUNCIL
SUBJECT: SEE BELOW DATE: March 7, 2022
Approved Date
03/11/22
SUBJECT: AGREEMENT WITH ENTERPRISE FOUNDATION TO MANAGE AND
IMPLEMENT A CITY GRANT PROGRAM FOR ELIGIBLE SAN JOSE
SMALL BUSINESSES IMPACTED BY THE COVID-19 PANDEMIC
RECOMMENDATION
Adopt a resolution authorizing the City Manager to negotiate and execute an agreement with the Enterprise Foundation to manage and implement a grant program utilizing American Rescue Plan Act funding in an amount not to exceed $2,750,000 for a term from April 1, 2022 to December 31, 2022 to provide financial assistance to eligible San José small businesses that have been negatively impacted by the COVID-19 pandemic.
OUTCOME
City Council approval will allow staff to move forward on providing up to $2.75 million in federal American Rescue Plan Act funds through the Enterprise Foundation, a nonprofit organization, to eligible San José small businesses that have been financially impacted by the COVID-19 pandemic.
BACKGROUND
On March 16, 2021, the City Council adopted the Fiscal Year 2021-2022 City Roadmap identifying small business recovery as a key priority. The 2021-2022 budget approved by City Council totaled $14.635 million for small business recovery which included $2.75 million for a new small business grant program. The focus of the new grant program is to assist San José small businesses with outstanding rent and utility debt arising from the impact of the COVID-19 pandemic. Priority will be given to small businesses with 10 or fewer employees that have not received federal or State of California pandemic loans or grants to date. Based on the estimated level of disbursement grants, approximately 300 small businesses with a physical location in San COUNCIL AGENDA: 3/22/22
FILE: 22-350
ITEM: 2.7
HONORABLE MAYOR AND CITY COUNCIL
March 7, 2022
Subject: Agreement with the Enterprise Foundation for Management of COVID-19 Small Business Grant Program
José would benefit from the new grant program. The grants are designed to meet the deadlines imposed by the County of Santa Clara’s commercial rent eviction moratorium.
ANALYSIS
The County ordinance for the commercial rent eviction moratorium began on March 24, 2020 and expired August 19, 2021. The City Council endorsed the County ordinance in April 2020.
The County’s Assessor’s Office records show that there are 27,000 commercial tenants in San José, 99 percent of whom were covered by the ordinance. The ordinance was effective in preventing commercial evictions for rent indebtedness and in some cases indirectly encouraged landlords and tenants to reach negotiated solutions.
The County ordinance did not forgive any commercial rent debt and required tenants to repay a minimum of 50 percent of any outstanding rent debt incurred during the dates the ordinance was in force by February 19, 2022, with any outstanding balance to be repaid by August 19, 2022.
Though there is no reliable data on the number of San José small businesses carrying a rent debt from the period March 2020 to August 2021, individual feedback from businesses owners to the City’s Economic Development and Cultural Affairs staff reveal that commercial rent debt remains a significant issue, particularly where business premises were closed and income declined dramatically for many months in 2020 and again in early 2021. The intention of the new small business grant program is to assist San José small businesses that have rent debt owed from the period of the County’s commercial rent eviction moratorium.
Federal and State of California loan and grant programs to aid businesses during the COVID-19 pandemic ended December 31, 2021. The Office of Economic Development and Cultural Affairs submitted an Information Memorandum to the City Council on July 30, 2021 reporting that over $2.7 billion of pandemic-related loans and grants were secured by San José businesses. Despite the relative success of the total value of loans and grants secured by city businesses, staff’s analysis of the Small Business Administration Paycheck Protection Program loan program revealed that only 40 percent of San José businesses employing 10 or fewer individuals secured a Paycheck Protection Program loan compared to 75 percent of San José businesses that employ more than 10 individuals. The new business grant program will launch in April 2022 and will prioritize San José small businesses that did not receive federal or State of California pandemic- related loan or grant monies to date and currently have commercial rent debt.
In 2020, Economic Development and Cultural Affairs staff designed a small business grant program and contracted with the Enterprise Foundation, a local non-profit organization, to implement the grant program that aided San José small businesses. The Enterprise Foundation/Small Business Development Center was selected as the program administrator due to the constrained timeframe in which grant funds had to be expended and the specific capabilities of the organization. The 2020 program benefitted primarily small businesses in the most COVID-19-impacted zip codes of the city. Staff was able to collect data on grant recipients
HONORABLE MAYOR AND CITY COUNCIL
March 7, 2022
Subject: Agreement with the Enterprise Foundation for Management of COVID-19 Small Business Grant Program
to determine how vulnerable businesses and communities most at risk were reached. This included:
• 92 percent of grants awarded to business with Black, indigenous, and people of color (BIPOC) owners
• 100 percent distributed to low- or moderate-income applicants • 52 percent awarded to businesses located in zip codes most heavily impacted by the pandemic
• 100 percent distributed to businesses with 10 or fewer employees
The Enterprise Foundation successfully managed the application process, eligibility assessment, and awarded individual business grants in 2020. The added value enabled many business owners to seek free business advice and mentoring services that in turn supported more applications to be made for other pandemic federal loan and State of California grant programs. Since 2020 the Enterprise Foundation/Small Business Development Center has continued to build specialist knowledge and experience delivering business grant programs on behalf of the County and other local jurisdictions across the region.
San José businesses eligible for this $2.75 million business grant program will include those with 10 or fewer employees and annual receipts up to $3 million. Businesses must also be fully compliant with federal law to be eligible, as the program is funded by American Rescue Plan Act funds. Priority will be given to eligible businesses that have not received a federal or State of California COVID-19 related loan or grant and grantees will be selected by lottery. Due to eligibility and documentation requirements, as well as the timeline for expending the funds, grant proceeds will cover only business owners’ unpaid or pending rent and outstanding utility debt from March 1, 2020 through August 30, 2021. The maximum grant will be $15,000.
The Enterprise Foundation is uniquely qualified to manage and implement this small business grant program as a result of its experience managing similar COVID-19 related grant programs over the past two years for a variety of municipalities, the County, and the City of San José in 2020. Additionally, the Enterprise Foundation is resourced to manage the significant amount of documentation that will be needed to meet the stringent reporting requirements of the federal funding dispersed through this program and are also able to provide access to an extensive resource and support network for the small business owner applicants. The Enterprise Foundation will be retained to execute the program under a unique services agreement pursuant to Municipal Code Section 4.12.235. Program administrative costs will total $206,250 equivalent to a maximum of 7.5 percent of the budget. This will enable 92.5 percent of all funds totaling $2,543,750 to be available for grant awards to San José small businesses.
The grant awards will follow the approach used by the State of California Small Business COVID-19 Relief Grant based on annual receipts to be determined on the following basis, assuming a sufficient number of eligible applications are received in each category:
HONORABLE MAYOR AND CITY COUNCIL
March 7, 2022
Subject: Agreement with the Enterprise Foundation for Management of COVID-19 Small Business Grant Program
Annual Receipts Budget Allocation Grant Number of Awards Up to $1 million $847,917 $5,000 169
Up to $2 million $847,917 $10,000 84
Up to $3 million $847,916 $15,000 56
Total $2,543,750 309
The grant program will allow a significant number of San José businesses to apply for a grant due to the Enterprise Foundation’s relationship with the small business community, ethnic chambers of commerce, and collaboration with other community agencies in impacted areas, as well as BusinessOwnerSpace.com partners. Outreach will be targeted to small businesses in San José neighborhoods highly impacted by COVID-19. The outreach will include Spanish, Chinese, and Vietnamese translation and the application will also be available in these languages. The Office of Economic Development and Cultural Affairs will promote and host a webinar in advance of the launch of the small business grant program with follow-up and referrals to BusinessOwnerSpace.com partners.
CONCLUSION
In many respects, the San José economy is performing well. San José’s December 2021 unemployment rate of 3.2 percent is significantly below California’s 6.5 percent unemployment rate. However, many small businesses, particularly in the non-technology sector and in specific locations such as downtown San José, remain significantly impacted by the two-year pandemic and are vulnerable to closure. No new federal pandemic business programs have been announced in 2022, and from mid-February 2022 onward, small businesses must begin to repay any rent debt incurred during the period that the County’s commercial rent eviction moratorium was in effect. The City achieved a high level of success in directing and funding earlier business grant programs in 2020 and the Office of Economic Development and Cultural Affairs recommends replication of this approach to the design and implementation of the new San José small business grant program.
EVALUATION AND FOLLOW-UP
Eligible small businesses will receive the grant funding provided through this program by summer 2022. Updates on the management and implementation of the program will be provided by the Office of Economic Development and Cultural Affairs through scheduled reports of the Small Business Recovery priority to the City Council and to the Council’s Community and Economic Development Committee.
HONORABLE MAYOR AND CITY COUNCIL
March 7, 2022
Subject: Agreement with the Enterprise Foundation for Management of COVID-19 Small Business Grant Program
CLIMATE SMART SAN JOSE
The recommendation in this memorandum aligns with Climate Smart San José Strategy 3.1:
Create Local Jobs in our City to Reduce Vehicle Miles Traveled.
PUBLIC OUTREACH
This memorandum will be posted on the City’s website for discussion at the March 22, 2022 City Council meeting. The Office of Economic Development and Cultural Affairs will engage with each council office as well as several community organizations including, but not limited to, the San José Downtown Association, the San José Chamber of Commerce, the Latino Business Foundation, Prosperity Lab, and neighborhood business organizations to promote the grant opportunity and encourage eligible small businesses to apply.
COORDINATION
This memorandum has been coordinated with the City Attorney's Office and the City Manager’s Budget Office.
COMMISSION RECOMMENDATION/INPUT
No commission recommendation or input is associated with this action.
FISCAL/POLICY ALIGNMENT
The project supports the City Council’s Community and Economic Recovery priority under Small Business Recovery.
COST SUMMARY/IMPLICATIONS
The recommended contract with the Enterprise Foundation is funded by an existing allocation of funds within the American Rescue Plan Fund for the Small Business Grants workstream, as outlined in Manager’s Budget Addendum #16, Community and Economic Recovery Budget and incorporated in the 2021-2022 Adopted Budget. Total funding for the grant program is capped at $2,750,000, of which 92.5 percent ($2,543,750) will directly support grant awards to small businesses, with the remaining 7.5 percent ($206,250) supporting the costs of program administration.
HONORABLE MAYOR AND CITY COUNCIL
March 7, 2022
Subject: Agreement with the Enterprise Foundation for Management of COVID-19 Small Business Grant Program
BUDGET REFERENCE
The table below identifies the fund and appropriation to fund the contract recommended as part of this memo.
Fund
#
Appn
#
Appn
Name
Total
Appn
Amt. for
Contract
2021-22
Adopted
Budget
Page
Last Budget
Action (Date,
Ord. No.)
402 219X Small Business
Recovery - Small
Business Grants
$2,750,000 $2,750,000 N/A 11/30/2021,
30693
CEQA
Not a Project, File No. PP17-006, Grant Application with no commitment or obligation to enter into an agreement at the time of application.
/s/
NANCI KLEIN
Director of Economic Development and
Cultural Affairs
For questions, please contact Victor Farlie, Senior Executive Analyst, at (408) 535-8230.