HomeMy WebLinkAbout2021-04-27; City Council; ; COVID-19: Economic Recovery and Revitalization Initiative OptionsMeeting Date: Apr. 27, 2021
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: David Graham, Chief Innovation Officer
david.graham@carlsbadca.gov, 760-434-2992
Subject: COVID-19: Economic Recovery and Revitalization Initiative Options
District: All
Recommended Action
Adopt a resolution modifying the COVID-19 Small Business Loan Program to extend the terms
of both of its loan products and create a process for an additional deferment of the first loan
payment beyond the existing automatic deferral period.
Receive a report and discuss additional options to address the economic impact of the COVID-
19 pandemic and provide any desired direction based on the discussion.
Executive Summary
The City Council approved a $5 million Economic Recovery and Revitalization Initiative as part
of its comprehensive approach to providing ongoing economic relief that both allows and
incentivizes businesses that are impacted by the pandemic to comply with the public health
orders. The initiative includes a COVID-19 small business loan program that provides no-cost
and low-cost loans to qualifying businesses.
The Ad Hoc City Council Economic Revitalization Committee is recommending the council
approve modifications to the loan program, which are detailed below, to allow more businesses
to access financial assistance when they need it most and to further support loan recipients
who have ongoing impacts from state and county health orders.
This report also includes options for additional programs to aid in the COVID-19 economic
response and recovery. This includes options in response to direction from the City Council to
engage with business organizations on direct aid programs and return with options for
consideration including microgrants and rental assistance programs.
Discussion
Background
On March 4, 2020, Governor Gavin Newsom declared a state of emergency following the first
COVID-19 death in the state of California. On March 15, 2020, he directed all “non-essential”
businesses to close in the state. That same day the city manager, in his role as the city’s director
of emergency services, declared a local state of emergency in Carlsbad. The City Council
April 27, 2021 Item #2 Page 1 of 18
ratified the proclamation the following day. The impact to businesses and the economy was
severe, with unemployment spiking to 13.8% in the city in April 2020.
Six months after the shutdown, the state unveiled its Blueprint for a Safer Economy, which the
governor said outlined a stringent and slow plan for living with COVID-19 for the long haul. This
tiered plan used health metrics to slot counties into tiers based upon the severity of community
spread, allowing for more business activities where there was less spread and imposing greater
restrictions where community transmission was more widespread. The County of San Diego
was initially in the red or “substantial” tier, which had fewer restrictions than the purple or
“widespread” tier. On December 5, 2020, the Governor announced the Regional Stay at Home
Order, which put more stringent restrictions on business operations. This order was lifted on
January 25, 2021. At that time, the County of San Diego was in the purple or “widespread” tier,
before advancing to the red, and eventually orange tier.
Through all the mandates by the state and county to open, close, or modify public and private
operations, the City of Carlsbad worked to encourage and enforce adherence to the public
health orders. The city has collaborated with the county, other municipal agencies, its business
organizations, businesses and residents to address the pandemic. Carlsbad has consistently had
one of the lowest if not the lowest rates of infection for local cities with populations of 50,000
or more.
Economic Recovery and Revitalization Initiative
To support small businesses affected by the COVID-19 public health pandemic, the City Council
approved a $5 million Economic Recovery and Revitalization Initiative on April 21, 2020. The
initiative has included, among other things, city lessee relief, a business promotion and tourism
marketing campaign, a referral relationship with the National Conflict Resolution Center to
provide free mediation services to landlords and tenants through the county community
mediation program, an e-gift card program with bonuses funded by private fundraising with
matching city funding, a microloan and small business loan program and temporary outdoor
permitting for business operations.
Business outreach has included one-on-one support to businesses, webinars and a dedicated
webpage that includes federal, state, county and city resources.
The City Council approved a resolution on Sept. 1, 2020, appropriating $50,000 in funding to
the Carlsbad Chamber of Commerce to sponsor the “Gift Carlsbad” Shop Local program, an e-
gift card program with a bonus amount added to the purchase of an e-gift card from a
participating Carlsbad business. The bonus amount was paid for by the Ready Carlsbad Business
Alliance with a one-to-one match provided from the city. Eighty-three businesses signed up to
participate in the e-gift card marketplace and more than 2,100 virtual gift cards have been
purchased, which between the card purchase and bonus totals more than $85,000.
The City Council approved a resolution on Aug. 18, 2020, approving further implementation of
the Economic Recovery and Revitalization Initiative and modifications to the COVID-19 Small
Business Loan Program. The program provides microloans of between $5,000 to $10,000 and
small business loans of between $10,000 to $25,000 to Carlsbad businesses that meet certain
criteria.
April 27, 2021 Item #2 Page 2 of 18
On January 19, the City Council approved program modifications to allow for business loans of
up to $50,000 and increased the revenue cap of businesses to $5 million and allowed for
businesses to apply for multiple loan products, with a total loan cap of $60,000.
Based on an analysis of business license data approximately 150 to 175 businesses became
eligible to apply for a loan with the updated criteria. Since implementing the changes on
February 1, 22 new businesses have applied for a business loan and 15 have applied for loans
above the original limits.
A total of 82 businesses have received $1,660,000 in loans. Four applications are in process.
Sixty-two loans are currently in repayment – meaning their automatic six-month deferment
period is over – and two loans have been fully repaid. There have been no defaults.
The city has continuously assessed its economic response to the pandemic and made
modifications as necessary based on changing conditions, feedback from businesses and
business organizations and policy direction from the City Council. The Ad Hoc City Council
Economic Revitalization Subcommittee has generally met every two weeks to stay updated on
current economic and operating conditions and provide guidance regarding the city’s response.
Options
The City Council directed staff to explore options for additional direct financial assistance to
businesses in response to the COVID-19 pandemic. Staff have researched such efforts in other
cities, engaged with business organizations, received input from businesses, developed options
and presented them to the ad hoc subcommittee.
There have been some significant changes to the pandemic impact on businesses and economic
relief including since the City Council’s direction to engage with business organizations on
additional direct aid programs, including:
• The $1.9 trillion American Rescue Plan was approved. It provides $7.25 billion for
another round of additional forgivable loans for small businesses, $29 billion in grants to
restaurants, $15 billion in grants for arts, cultural and entertainment operations, $15
billion in economic disaster loans as well as other resources for economic relief.
• California’s Regional at Stay Home Order ended Jan. 25, 2021. That lifted some of the
greatest restrictions that had been imposed on business operations to combat the
pandemic.
• San Diego County moved into the “moderate” or orange tier under the state’s Blueprint
for a Safer Economy. This has allowed for indoor operations with capacity limits for
nearly all business types.
• San Diego County has now vaccinated more than 1.3 million people, 64% of the
population, with at least one dose and at least 821,000 people, 41% of the population,
have been fully vaccinated.
• The governor announced that the tiered reopening system is scheduled to be eliminated
on June 15, 2021, if community spread, hospitalization and measure of intensive care
unit capacity continue to remain stable and improve.
The introduction of additional economic assistance resources and the gradual relaxation of
restrictions on business operations is likely to improve the health of Carlsbad businesses.
However, for many businesses and business sectors, the impact remains severe.
April 27, 2021 Item #2 Page 3 of 18
Local businesses have told the city, through the city’s direct outreach and an April survey of
Carlsbad businesses, that they still have a significant need to access capital to fully recover. Of
the 168 businesses that responded to the survey, 45% said they needed more than $25,000 in
additional capital over the next six months. While many operations are on track to normalize,
many business owners report they are significantly behind where they should be financially. As
we move from pandemic response to economic recovery and longer-term revitalization, a
thoughtful approach to continued support for businesses is required.
City staff have worked with other cities and engaged with experts in inclusive economic growth
to assess the city’s economic response to the pandemic. Based on that assessment and the
change in pandemic and economic conditions, staff are developing a strategic approach to
economic recovery. The assessment and strategic analysis are scheduled to be presented to the
City Council on May 11, 2020.
In the meantime, this report presents possible additional modifications to the city’s business
loan program and options for direct financial assistance for the City Council’s consideration and,
if desired, direction to staff. Each of the following options includes the results of the ad hoc
subcommittee discussion.
Should the City Council wish for any of these options, it could provide direction regarding the
size, scope and programmatic details and staff would then work with the City Attorney’s Office
on legal analysis and return with a detailed program and funding proposal for the council’s
consideration.
COVID-19 Small Business Loan Program modifications
City staff and the ad hoc subcommittee, in its role of making recommendations to guide the
city’s economic response to COVID-19, have consistently assessed the COVID-19 Small Business
Loan Program and recommended modifications as appropriate to achieve its goals.
1. Extending the loan term
CDC Small Business Financing, the organization contracted to manage and service the loan
program, suggested two areas of opportunity based upon their experience administering
the loan program.
The first area of opportunity is that the city’s loan program has a shorter loan term than
most similar small business loan products, such as federal Small Business Administration
loans. This means that loan recipients have a higher monthly loan repayment amount than
they may with another product from another institution. Some businesses that are
participating in the program have suggested that, because of the extended nature of the
pandemic and impacts to businesses and corresponding health orders, if the city were to
revise its loan term to have a longer payback period, it would aid in small business recovery.
CDC Small Business Financing also noted there have been a number of instances in which an
eligible business has applied for the loan, but then, once approved, decided not to execute
the loan agreement after reviewing all of the terms. Of the 142 loan applicants that have
applied, 48 have cancelled or withdrawn their application. Though there are many factors
that affect this rate of cancellation or withdrawal, including the changing nature of the
public health order business restrictions, the short term of the loan compared to other
similar products and the longer timeframe for recovery are factors. If the city were to revise
April 27, 2021 Item #2 Page 4 of 18
its loan term length to be more in line with other small business loan products the city
would likely see more participation in the program, which would aid in economic recovery.
Ad Hoc City Council Economic Revitalization Subcommittee
Recommends:
• Changing the maximum micro-loan terms from 18 months to 30 months
• Changing the maximum small business loan term from 30 months to 60 months
The Carlsbad Chamber of Commerce, Carlsbad Village Association and Visit Carlsbad also
recommend approval of this modification to the business loan program.
Pros
• Reduces the potential for default by providing a lower monthly payment and a
longer repayment period
• Applicants that received approval but withdrew their application prior to
entering into the loan due to the short repayment window and high-monthly
payment could reconsider and are more likely to reapply for loans
• Modified terms would increase the number of businesses that receive financial
assistance from the city using financial resources committed to that purpose by
the City Council
Cons
• Modified loan terms will extend the period of time that the borrower has to
repay the loan, which means it will take longer for the city to recoup funds that
are loaned to small businesses
2. Allowing more time to defer the first loan repayment
The second area of opportunity relates to when a borrower must begin paying back a city
loan. This is an issue that the City Council took up at the beginning of the program
development and the council decided to include an automatic six-month deferral from the
time the loan was issued until the time the first payment must be made. As the six-month
deferral period has ended for some of the earlier borrowers, CDC Small Business Financing
has received deferral requests from at least two business loan recipients. The program does
not allow for deferrals beyond the automatic six-month deferral from the time the loan is
granted. The businesses that have requested deferrals are still heavily impacted by the
public health orders that restricted their operations. If the loan program is modified to
allow for an additional deferral period in specific circumstances as recommended by CDC
Small Business Financing, the likelihood of a missed payment and default will be reduced.
To date the program has a 0% default rate.
Ad Hoc City Council Economic Revitalization Subcommittee
Recommends:
• Allowing for one extension of the repayment deferral for a period of time based
on the professional determination by CDC Small Business Finance that such
April 27, 2021 Item #2 Page 5 of 18
deferral is warranted to meet the goals of the program, which includes reducing
the risk of default
• CDC Small Business Financing’s determination would be validated by city staff
and, upon validation, would result in a re-amortization of the loan with a new
repayment schedule not to exceed the original term of the loan
The Carlsbad Chamber of Commerce, Carlsbad Village Association and Visit Carlsbad also
recommend approval of this modification to the business loan program.
Pros
• Reduces the likelihood of default in the rare case that a discretionary deferral is
necessary
Cons
• None identified
Staff agrees with the business program loan modifications recommended by the city’s business
organizations and the ad hoc subcommittee.
New COVID-19 program options
The City Council directed staff to engage with business organizations on direct aid programs
and return with options for the council’s consideration. In response, staff evaluated several
pandemic-related relief programs that the City of Carlsbad could administer. During the
evaluation process, staff researched relief programs offered in nearby cities and in peer-
metropolitan areas throughout the region and state. The evaluation included input gathered
from previous and current surveys of Carlsbad businesses, stakeholder engagement forums,
Carlsbad business organizations and third-party research from a contracted economic
development consultant with experience working with other cities around the state and
country. Based on that work, the following options were presented to the ad hoc
subcommittee:
• Microgrants
o Direct microgrant program
o Matching grant program
• Rental assistance
• Revolving loan fund
General outlines of the programs have been developed based on research, business input and
ad hoc subcommittee discussion. The council may wish to discuss and provide further direction
regarding one or more of these program options and, based on that discussion, direct city staff
to further develop program details and a funding plan to implement the program.
In addition to direct-aid programs, the Carlsbad Charitable Foundation has requested the
support from the city for their grant program. The ad hoc subcommittee has discussed the
importance of nonprofits on the economy and the fact that many of them have been
significantly impacted during the pandemic. Staff offer an additional option of supporting the
Carlsbad Charitable Foundation and its nonprofit relief efforts in this report.
April 27, 2021 Item #2 Page 6 of 18
Microgrants
One of the direct aid program ideas that council directed staff to research was a microgrant
program. There are several options for developing such a program. The parameters generally
revolve around eligibility, grant size and total program budget. These can be grants for a
specific purpose or for general business expenses. Two options were developed for discussion
by the ad hoc subcommittee, general microgrants and matching grants.
1. General microgrant program
An option for a general microgrant program could include the following provisions:
• Provide $2,000 grants to Carlsbad small businesses with revenues or gross receipts
of $2 million or less
• Applying businesses must show a revenue impact of 50% or greater due to the
pandemic
• Grant funds could be used for working capital
• Program would aid 50 businesses for every $100,000 of city money invested
To have a larger impact, the amount of the grant per business or the total amount of the
program could be scaled up. There are other criteria that could be used to target eligibility,
such as business sector, census tract characteristics or type of business ownership.
Depending on its design, this program would be duplicative of existing programs from the
county, state and federal governments, including the Paycheck Protection Program, the
California Rebuilding Fund, the California Small Business COVID-19 Relief Grant and the
County Small Business Stimulus Grant, all of which are able to offer larger grants or
forgivable loans for businesses and have far larger pools of funding than Carlsbad has
committed to pandemic economic relief at this time.
Ad Hoc City Council Economic Revitalization Subcommittee
The committee did not recommend this program. The committee found:
• The availability of existing programs from the county, state and federal government
would make this program redundant
• The amount of funding necessary to have a significant impact and the size of the
award would need to be significantly scaled up to have an impact and likely would
not exceed the impact of other resources available to Carlsbad businesses
• A grant program would be a short-term solution rather than a sustainable program
The Chamber of Commerce, Carlsbad Village Association and Visit Carlsbad saw the value in
such a program but did not rank it as a high priority.
Pros
• Provides direct financial aid to businesses impacted by the pandemic
• Use of the funds for working capital can have a positive impact on jobs and the
economy
April 27, 2021 Item #2 Page 7 of 18
• Program can be tailored to achieve specific goals including supporting small and very
small sized businesses
Cons
• The more rigorous the criteria the more staff time will be required for
administration
• Depending on program design, it would likely be redundant to county, state, and
federal programs
• Grant amount and total program funding would need to be significant to have a
demonstrable impact on the economy
• Grants are a one-time infusion of financial resources and do not create a sustainable
means for economic development
2. Matching grant program
This option is intended to support activities that would lead to longer-term economic
growth. A matching grant program could target investment in façade and storefront
improvements for consumer accessible businesses, capital and equipment improvements to
expand business operations and other physical improvements to spur business growth. An
option for a matching grant could include the following provisions:
• Require a one-to-one match from the business owner or landlord of up to $5,000
• Funds could be used for public facing business façade improvements, capital
equipment or other improvements that are capital and intended to promote
business growth
• Program would aid 20 businesses per $100,000 in city money invested with a total of
$200,000 impact per $100,000 because of the required business match
To have a larger impact, the amount of the grant per business or the total amount of the
program could be scaled up. If there were a sustainable funding source, this could be a part
of a long-term economic development strategy.
Ad Hoc City Council Economic Revitalization Subcommittee
The committee did not recommend this program. The committee found:
• The availability of existing programs from the county, state and federal government
would also render this program redundant
• The amount of funding necessary to have a significant impact and the size of the
award would need to be significantly scaled up to have an impact and likely would
not exceed the impact of other resources available to Carlsbad businesses
• A grant program would be a short-term solution rather than a sustainable program
• Current economic conditions and the availability of other grant and loan programs
do not warrant a matching grant program to spur growth
The Chamber of Commerce, Carlsbad Village Association and Visit Carlsbad saw the value in
such a program but did not rank it as a high priority.
April 27, 2021 Item #2 Page 8 of 18
Pros
• Provides direct financial aid to businesses impacted by the pandemic
• Use of the funds for working capital can have a positive impact on jobs and the
economy
• Matching grant nature of the program would leverage city funds with business
investment causing a greater economic impact
• Program can be tailored to achieve specific goals including supporting small and very
small sized businesses
Cons
• The matching fund nature of the program may require more staff time for
administration and monitoring
• Depending on program design it would likely be redundant to county, state, and
federal programs
• Grant amount and total program funding would need to be significant to have a
demonstrable impact on the economy
• While a matching grant program leverages city funds to spur business investment
grants are a one-time infusion of financial resources rather than a sustainable means
for economic development
Should the City Council provide direction to pursue one or more of these options, staff would
work with the City Attorney’s Office on legal analysis and return with a final proposal that
would include program details and funding options.
Rental assistance grant program
The inability to pay rent during the pandemic has been a real concern for businesses. This
concern has generally been addressed by local commercial eviction moratoriums, including one
enacted in Carlsbad. Such moratoriums have been allowed by the state, most recently by
Governor Newsom’s Executive Order N-01-21, allows local jurisdictions to extend protections
for commercial tenants through June 30, 2021. Additionally, county, state and federal grant and
forgivable loan program resources can be used to pay rental expenses. It should be noted that
the California legislature is considering laws that could supersede a program of this nature.
Like other grant programs, a rental assistance program would provide direct aid from the city to
support core business expenses for companies that have experienced a significant economic
impact due to COVID-19. There would be some differences from this program to the other
direct-aid options to ensure that financial aid goes to rent and not to other operational costs.
An option for a small business rental assistance grant program could include the following
provisions:
• Provide up to $3,000 in rental assistance to qualifying businesses
April 27, 2021 Item #2 Page 9 of 18
• Eligible businesses must show a pandemic related economic impact that led to their
inability to pay rent
• Payments would be made directly to the landlord to ensure the funds were used to
address unpaid rent or rent on a go-forward basis
• As a condition of program participation, the landlord and tenant would agree to enter
into good-faith negotiations to address future rent for a specified period of time; staff
recommends six months
• Program would aid 33 businesses for every $100,000 in city money invested
Ad Hoc City Council Economic Revitalization Subcommittee
The committee made no recommendation about this program, leaving it for the council’s
consideration.
The Chamber of Commerce, Carlsbad Village Association and Visit Carlsbad saw the value in
such a program but did not rank it as a high priority.
Pros
• Provides direct financial aid to businesses impacted by the pandemic
• Financial benefit to both the tenant and landlord potentially reducing the need for
future evictions
• If significant resources are dedicated to this program it could affect commercial and
industrial vacancy rates
Cons
• The direct payment to the landlord may require more staff time for administration and
monitoring
• Depending on the program design it would likely be redundant to county, state, and
federal programs that offer grants and forgivable loans for working capital including rent
• One-time infusion of financial resources rather than a sustainable economic
development tool
Should the City Council provide direction to pursue one or more of these options, staff would
work with the City Attorney’s Office on legal analysis and return with a final proposal that
would include program details and funding options.
Revolving loan fund program
A revolving loan fund (RLF) is a gap financing measure primarily used for development and
expansion of small businesses. It is a self-replenishing pool of money, utilizing interest and
payments on formerly issued loans to fund the issuance of new loans. It is a common public,
non-profit and not-for profit economic development tool that is often used to bridge the final
amount borrowers need in addition to what they can secure from private markets for business
development and growth. An RLF can be issued at competitive market rates that enable it to
generate enough interest to replenish the pool for future loan allocations. Typical loan terms
vary from 3-5 years for smaller loans and up to 10 years for larger amounts.
April 27, 2021 Item #2 Page 10 of 18
RLFs are a powerful tool for the promotion of strategic and smart economic recovery and
growth in cities. They offer a complementary way for small businesses to secure funding to stay
afloat, especially during economic turmoil. For both businesses that are recovering from
disaster and businesses looking to grow, it can be a valuable resource that leads to increased
investment, increased employment and increased community revitalization.
There are at least 30 RLF programs operated by local governments and organizations in the
State of California, including the Cities of San Diego and Chula Vista. Prior to the pandemic, the
Economic Development Administration (EDA) provided funding and support for municipalities
to establish funds. In many areas, like Monterey, Long Beach, Berkeley and San Joaquin Valley,
RLFs were and are used as job generators by tying job creation to dollar amounts (e.g., one job
created for every $30,000 loaned). In San Diego, the RLF program has yielded one job added or
retained per every $10,000 loaned. They are commonly used to support disaster recovery,
incentivize targeted growth and support under-banked businesses that are on stable financial
footing. RLFs are quickly adaptable to changing economic conditions and economic
development priorities. As an example, cities that had existing RLF programs were also able to
repurpose them during the pandemic, injecting resources into the existing program to address
emergency relief needs quickly.
An RLF would allow the City of Carlsbad to support small businesses’ recovery and growth by
providing needed access to capital that would help stabilize small businesses as they recover
from the pandemic, while also gaining tangible long-term benefits. Coming out of the COVID-19
health emergency, this could help employers recover jobs faster and spur economic growth. If
structured correctly, it could also continue to generate jobs if the fund remains active.
An option for a small business RLF could include the following provisions:
• The program could provide loans between $25,000 and $100,000 to Carlsbad businesses
that may have barriers to accessing traditional debt-financing or that need additional
capital beyond a traditional business loan
• Loan funds could be used for working capital that could be used to restart operations,
provide stability during the pandemic recovery and pursue growth
• The city could consider program design elements that would support inclusive recovery
and growth including supporting stable businesses that are under-banked or need
leverage to secure additional resources to support their business
• The city could also set strategic economic development objectives for the program by
targeting certain business sectors, business types, business ownership models or
resourcing historically disadvantaged businesses
• Potential funding sources could include repayments to the COVID-19 Small Business
Loan Fund and the conversion of any excess funds that were committed to that program
as the city moves from the economic response phase of the pandemic to recovery
Ad Hoc City Council Economic Revitalization Subcommittee:
The committee made no recommendation about this program, leaving it for the council’s
consideration.
The Chamber of Commerce, Village Association and Visit Carlsbad saw the value in the program
and ranked it as a priority.
April 27, 2021 Item #2 Page 11 of 18
Pros
• Builds upon the city’s successful COVID-19 small business loan program that has
supported 82 businesses to-date
• Provides a tool that can be used during the economic recovery and revitalization phase
of the pandemic
• Creates an adaptable economic development tool to support small businesses during
emergencies or non-emergency times
• Develops a sustainable resource to support small businesses rather than one-time
financial assistance like a grant
Cons
• The program would require a financial investment by the city
• Participating business would be required to repay the principal and interest on the loan
rather than a grant, which would require no repayment
• Not all businesses that apply for the loan would qualify, similar to the city’s existing
small business loan program
• There would ongoing costs associated with the program which would need to be
addressed to ensure the sustainability of the fund
Should the City Council provide direction to pursue this option, staff would work with the City
Attorney’s Office on a legal analysis and return with a final proposal that would include
program details and funding options.
Resolution in support of the Carlsbad Charitable Foundation
The Carlsbad Charitable Foundation is the local affiliate of the San Diego Foundation that serves
as an effective funding source to support and strengthen nonprofits that serve Carlsbad. Its
mission is celebrating and investing in Carlsbad. The organization meets emerging needs by
encouraging responsible and effective philanthropy.
The foundation was formed nearly 15 years ago with a four-to-one matching grant from the
City of Carlsbad. Among the many nonprofits that have received funding from the foundation
are Showers of Blessings, Carlsbad Partners in Education, Carlsbad Education Foundation, New
Village Arts, Boys & Girls Club and the Museum of Making Music. The organization has granted
more than $840,000 to charitable causes and created a long-term Carlsbad Community
Endowment of nearly $750,000. During its 2020-2021 funding cycle, the foundation awarded
$124,389 to seven organizations.
The organization has asked the city for a resolution of support it in its mission of assisting non-
profit organizations. Just like businesses, non-profit organizations have felt the impact of the
COVID-19 pandemic. Non-profit organizations are also an important part of the economy and
the foundation has strived to support non-profits serving Carlsbad that have been impacted by
the pandemic. If the city wished to consider supporting the organization, options could include:
• Approving a resolution of support for the organization and its mission
• An official partnership with the organization that would include promotional efforts
April 27, 2021 Item #2 Page 12 of 18
• Providing a matching grant to achieve near-term economic recovery and long-term
economic revitalization goals
Ad Hoc City Council Economic Revitalization Subcommittee
The committee recommends the approval of a resolution of support for the Carlsbad
Charitable Foundation and providing an appropriate partnership that is not exclusive of
other organizations.
Should the City Council provide direction to pursue this option, staff would work with the City
Attorney’s Office on a legal analysis and return with a final proposal that would include
program details and funding options for any associated costs.
Fiscal Analysis
The City Council has allocated $5 million to the Economic Recovery and Revitalization Initiative
and there remains adequate capacity in the COVID-19 Small Business Loan Program to continue
providing loans consistent with the proposed modifications. Should the City Council provide
direction to pursue one or more of the options presented, program details and a funding
proposal will be developed.
Next Steps
Should the City Council approve modifications to the COVID-19 Small Business Loan Program,
staff will amend the contract with CDC Small Business Finance and will begin actively promoting
the revised loan program.
Should the City Council give direction to pursue any of the options listed above or other
options, staff will return to the council with any additional program details and funding
proposals that may be required.
Environmental Evaluation (CEQA)
This action is not a “project” as defined in California Public Resources Code Section 21065 and
CEQA Guidelines Section 15378(b)(5) because it involves administrative activities of
governments that will not result in direct or indirect physical changes in the environment.
The action being considered is a report that provides an overview of the various actions and
programs that the city has implemented in response to the COVID pandemic and provides a
description of possible future actions that could be considered, which on their own accord will
not cause a significant environmental impact, so this activity is not subject to CEQA pursuant to
CEQA Guidelines Section 15060(c)(3).
Public Notification and Outreach
Public notice of this item was posted in accordance with the Ralph M. Brown Act and it was
available for public viewing and review at least 72 hours prior to scheduled meeting date.”
Exhibits
1. City Council resolution
April 27, 2021 Item #2 Page 13 of 18
RESOLUTION NO. 2021-094
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, APPROVING MODIFICATIONS TO THE COVID-19 SMALL
BUSINESS LOAN PROGRAM
WHEREAS, on February 14, 2020, the San Diego County Health Officer declared a Local Health
Emergency as a result of the spread of COVID-19; and
WHEREAS, on March 4, 2020 Governor Newsom proclaimed a statewide state of emergency as
a result of the spread of COVID-19; and
WHEREAS, on March 16, 2020, the Director of Emergency Services proclaimed a local state of
emergency as a result of the COVID-19 pandemic, which the City Council subsequently ratified and
extended; and
WHEREAS, on March 19, 2020, Governor Newsom issued Executive Order N-33-20 directing
individuals living in California to comply with a State Public Health Officer order to stay at home except
as needed to facilitate authorized, necessary activities or to maintain the continuity of operations at
critical infrastructure sectors; and
WHEREAS, on May 4, 2020 Governor Newsom issued Executive Order N-60-20 allowing non-
essential businesses to reopen in four stages in compliance with criteria set by the State Public Health
Officer and based on certain public health criteria being met on a county-by-county basis; and
WHEREAS, on June 19, 2020, dine-in restaurants, alcohol-serving businesses offering dine-in
meals, personal care services businesses and other businesses in the County of San Diego were
permitted to reopen subject to compliance with state issued guidance; and
WHEREAS, on July 13, 2020 a statewide public health officer order was issued closing bars, pubs,
brewpubs, and closing indoor operations of dine-in restaurants, wineries, tasting rooms, family
entertainment centers, movie theaters, zoos, museums, and cardrooms; and
WHEREAS, the State of California has issued industry guidance for businesses that are allowed
to reopen that require modification to business operations, which has a direct cost and may have an
impact on the space in which businesses may operate thus impacting revenue; and
WHEREAS on December 6, 2020, the State of California enacted a Regional Stay at Home Order
for Southern California mandating additional closures and modifications for businesses due to ICU
capacity dropping below 15 percent in a region; and
April 27, 2021 Item #2 Page 14 of 18
WHEREAS, the effects of the Regional Stay at Home Order have continued to have an impact on
Carlsbad businesses operations; and
WHEREAS, the City of Carlsbad unemployment rate spiked to 12.3 percent in April of 2020 and
has not yet recovered to the 2019 average of 2.9 percent; and
WHEREAS, the City of Carlsbad conducted surveys of businesses impacted by COVID-19 in
November 2020 and April 2021 and found that 46 percent of companies indicated the need for more
than $25,000 in additional financial relief to maintain operations over the next six months; and
WHEREAS, 66 percent of businesses surveyed indicated that they experienced a revenue
decrease of more than 25 percent due to COVID-19; and
WHEREAS, the City of Carlsbad approved a resolution creating an Ad Hoc City Council Economic
Revitalization Subcommittee on April 7, 2020; and
WHEREAS, the Ad Hoc City Council Economic Revitalization Subcommittee has met 33 times
since it was created and provides input on the city's COVID-19 related economic relief efforts and
recommendations to the City Council; and
WHEREAS, it is in the public interest to take steps to ensure local businesses remain
economically viable during the COVID-19 pandemic state of emergency; and
WHEREAS, there is a public benefit to providing economic relief to local businesses impacted
by the COVID-19 health emergency, so they may continue providing jobs and tax revenue to the City
of Carlsbad which funds public services; and
WHEREAS, there is a public benefit to providing access to operating capital in the form of low-
cost or no-cost loans to allow businesses to fund the cost of payroll, utilities, rent, mortgage interest,
insurance, and business operation modifications or adaptations necessary to comply with the public
health orders; and
WHEREAS, adopting this resolution is necessary and appropriate to mitigate the immediate
threats to the public health, safety, and welfare of residents and local businesses from the significant
economic impacts of the COVID-19 pandemic by providing economic relief and providing resources to
remain open in compliance with the public health orders.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1. That the above recitations are true and correct.
April 27, 2021 Item #2 Page 15 of 18
2.That conducting a small business loan program to mitigate the impacts of COVID-19
serves a public purpose and provides a public benefit.
3.That the parameters for the small business loan program are modified as shown in
Attachment A.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 27th day of April, 2021, by the following vote, to wit:
AYES: Hall, Blackburn, Acosta, Bhat-Patel, Schumacher.
NAYS: None.
ABSENT: None.
MATT HALL, Mayor
BARBARA ENGLESON, City Crerk
(SEAL)
April 27, 2021 Item #2 Page 16 of 18
ATTACHMENT A
CITY OF CARLSBAD
COVID-19 SMALL BUSINESS LOAN PROGRAM
A. LOAN PARAMETERS
The following are the parameters for all loans issued under the City of Carlsbad's COVID-19 small
business loan program. They are designed to ensure businesses that need resources during the
pandemic receive support. Based upon consultation with CDC Small Business Finance, a survey of
businesses, and specific information from business that have applied for loans, the following
program structure provides for significant participation and deployment of resources while
addressing the risk of significant defaults.
1.All applicants must have a valid City of Carlsbad business license or show proof that they have
applied for a business license or business license renewal at the time of application.
Businesses must have a valid business license before funding is approved.
2.All applicants must demonstrate they have been lawfully operating for at least six months.
3.All applicants shall comply with all laws, regulations, and orders applicable to it, including all
public health orders.
4.All applicants must be in good standing with the city.
5.Nationally owned chain businesses or franchises are ineligible; however, chains or franchises
that are located in Carlsbad and have a business owner that lives within San Diego County are
eligible.
6.Loan funds may be used for operational expenses, such as rent, payroll, mortgage interest,
utilities, insurance, the cost of complying with public health orders, and the cost of activating
business operation areas. Construction-related work paid for with loan funds must comply
with state prevailing wage laws.
7.The first loan repayment may be deferred up to 180 days from the date the loan is issued.
8.Applicants may apply for one extension of the repayment deferral period through CDC Small
Business Finance (CDCSBF), subject to approval of the loan. Approval of the additional deferral
will be based on the professional determination of CDCSBF that such deferral is warranted to
meet the program goals, including reducing the risk of default, with validation by city staff. If
an additional deferral is approved, the loan will be re-amortized with a new repayment
schedule not to exceed the original term of the loan
9.The city offers small business microloans of $5,000 to $10,000 for businesses with gross
receipts of $2,000,000 or less, or 15 employees or less, and terms of 0% interest if paid back
within six months, 1% if paid back within twelve months, and 2% if paid back within 30
months.
10.The city offers small business recovery loans of $10,000 to $50,000 for businesses with gross
receipts of $5,000,000 or less and fewer than 50 employees and terms of 2% interest if paid
pack within twelve months and 3% if paid back within 60 months.
11.Applicants may apply for and receive both the small business microloan and the small
business recovery loan if all relevant qualifications are met however, applicants may not apply
for and receive more than a combined total of $60,000 across all loan products.
April 27, 2021 Item #2 Page 17 of 18
ATTACHMENT A
B. LOAN APPLICATION EVALUATION AND DISPOSITION
CDCSBF will review loan applications based upon the goal of deploying resources to businesses
that are affected by COVID-19 while considering factors that present a high risk of default. These
factors include:
1.Minimum 640 FICO score but will engage with applicants that have a lower score to
understand mitigating factors that may affect the risk of default
2.Bankruptcy must be at least three years old but will engage with applicants with more recent
bankruptcy to understand mitigating factors that may affect the risk of default
3.No open liens, judgments, or lawsuits that may present a high risk of default
4.Business owner will be required to sign a personal guarantee, or if there are multiple business
owners, the majority business owner will be required to sign the personal guarantee.
CDCSBF will provide a list of reviewed applications to the city for validation. Upon validation
CDCSBF, will generate the loan documents and route them for signature by the borrower and
deputy city manager, administrative services. CDCSBF will service the loan portfolio and will
provide monthly reports and invoices to the city for their services.
April 27, 2021 Item #2 Page 18 of 18
COVID:19 Economic Recovery and
Revitalization Options
David Graham, Chief Innovation Officer
April 27, 2021
Recommendation
•Adopt a resolution modifying the COVID-19 Small Business
Loan Program to extend the terms of both of its loan products
and create a process for an additional deferment of the first
loan payment beyond the existing automatic deferral period
•Receive a report and discuss additional options to address the
economic impact of the COVID-19 pandemic and provide any
desired direction based on the discussion
2
Council Direction
•Jan. 19 direction
–Engage with business organizations on direct aid programs and return with options including:
•Microgrants
•Rental assistance
•Ad hoc subcommittee discussion and recommendation
3
Option Development
•Researched pandemic relief programs in other cities
•Assessed current ERRI options
•Engaged with businesses directly through stakeholder forums
•Evaluated federal, state, and county assistance programs
•Assessed current economic conditions that factor in blueprint for reopening status and vaccination rates
•Engaged with business organizations on option development
•Presented options to ad hoc subcommittee for recommendation
4
Options
•Modify the Small Business Loan Program
•Microgrants
–General microgrants
–Matching grant
•Revolving loan fund program
•Support Carlsbad Charitable Foundation
•Rental assistance
5
Action and Direction
•Approval of the modifications to the small business loan
program will result in a contract amendment and staff will
actively promote the revised loan program
•Direction regarding any other options will result in staff
returning with additional program details and funding
proposals
6
Economic Conditions
•Presented in economic scan
•New ARP programs
–$29 billion to restaurants
–$15 billion for arts, cultural and entertainment
–$15 billion in economic disaster loans
•PPP funded and extended until May 31
•Round 6 CA small business grants of $5,000-$25,000 opens Apr. 28-Tues. May 4
7
Small Business Loan Program Modifications
8
Small Business Loan Program
•Microloans -$5,000-$10,000
–$2m or less in gross revenue
–Scaled interest from 0% to 2% based on payback
•Small Business Loans -$10,000-$50,000
–$3m or less in gross revenue
–Scaled interest from 2% to 3% based on payback
•May receive a combined total of $60,000
•Automatic deferral of first repayment up to six months
•$1.66 million has been loaned to 82 businesses
9
Small Business Loan Program
•CDCSBF identified two opportunity areas based on administration of the program
–Extension of the loan term to reduce the monthly repayment
o Similar term to other small business loan products
o Increase the potential applicant pool and reduce the repayment burden during recovery
–One deferral based on professional recommendation
o Reduce the likelihood of default
10
Small Business Loan Program
•Proposed modifications
–Extend microloan term from 18 months to 30 months
–Extend small business loan term from 30 months to 60 months
–Allow for one additional deferral based on CDCSBF professional determination that it is warranted to meet goals like reducing default risk
11
Small Business Loan Program
•Chamber, CVA & Visit Carlsbad recommend
approval
•Ad Hoc City Council Economic Revitalization
Subcommittee recommends approval
12
General Microgrant
13
General Microgrant
•Eligibility
–Carlsbad businesses with less than $2 million in revenues
–Demonstrated impact of 50% or more due to COVID-19 pandemic
–Other criteria as specified
•Grant and Use
–$2,000 for working capital
•Impact
–20 businesses per $100,000 in funding
14
General Microgrant
•Considerations
–Provides direct financial assistance
–Use of funds for working capital can have a positive impact on jobs and the economy
–More rigorous criteria will require more administration
–Program likely redundant to other assistance programs
–Grant amount would need to be significant to have a demonstrable impact
15
General Microgrant
•Chamber, CVA, and Visit Carlsbad saw value but did not recommend as a high priority
•Ad Hoc City Council Economic Revitalization Subcommittee did not recommend
–Availability of existing programs from county, state, and feds make it redundant
–Program funding necessary to have an impact would be significant
–Short-term solution rather than sustainable program
16
Matching Grant
17
Matching Grant
•Eligibility
–Could include business size restriction like gross revenue
–Could include COVID-19 revenue impact
•Grant
–$5,000 with 1:1 match from business
•Fund use
–Public facing business façade improvements
–Capital equipment or other capital improvements for growth
•Impact
–20 businesses per $100,000 in city money but a total investment of $200,000 into businesses due to the matching requirement
18
Matching Grant
•Considerations
–Provides direct financial aid
–Matching grant leverages city funds with business investment
–Program likely redundant to other assistance programs
–Grant amount would need to be significant to have a demonstrable impact
19
Matching Grant
•Chamber, CVA, and Visit Carlsbad saw value but did not recommend as a high
priority
•Ad Hoc City Council Economic Revitalization Subcommittee did not
recommend
–Availability of existing programs from county, state, and feds make it
redundant
–Program funding necessary to have an impact would be significant
–Short-term solution rather than sustainable program
–Current economic conditions and availability of other grant and loan
programs do not warrant a matching grant program to spur growth
20
Revolving Loan Fund
21
Revolving Loan Fund
•Program Design
–Loans between $25,000 to $100,000
–Working capital
–Designed to support inclusive recovery and growth
–Could be consistent with strategic economic development objectives
–Could have similar eligibility characteristics to existing business loan program
22
Revolving Loan Fund
•Considerations
–Builds upon the city’s successful COVID-19 business loan program
–Provides a tool that can be used during the economic recovery
–Creates an adaptable economic development tool
–Would require a financial investment by the city which could be repurposing any excess capacity in ERRI
–Not all business that apply for the loan would qualify
23
Revolving Loan Fund
•Chamber, CVA, and Visit Carlsbad saw value
and ranked it as a priority
•The Ad Hoc City Council Economic
Revitalization Subcommittee made no
recommendation –Council consideration
24
Carlsbad Charitable Foundation
25
Carlsbad Charitable Foundation
•Nearly 15-year track record
•Recipients have included Showers of Blessings,Carlsbad Education Foundation, New Village Arts, and Boys & Girls Club
•Granted more than $840,000 to charitable causes
•Nearly $750,000 endowment
•FY 20/21 grant cycled focused on COVID-19
•$124,389 given to seven organizations
•Request
–Resolution of support
–Official partnership including active promotion
–Matching grant to support COVID-19 impacted nonprofits
26
Carlsbad Charitable Foundation
•The Ad Hoc City Council Economic
Revitalization Subcommittee recommends
approval of a resolution of support for the
Carlsbad Charitable Foundation and
providing an appropriate partnership that is
not exclusive of other organizations
27
Rental Assistance
28
Rental Assistance
•Eligibility
–Pandemic related economic impact leading to an inability to pay rent
•Design
–$3,000 in rental assistance to qualifying businesses
–Funds can be used for unpaid rent or rent on a go-forward basis
–Payments made directly to landlord to ensure funds are used to pay rent
–Landlord and tenant would agree to enter into good-faith negotiations to address future rent for a specified period of time
•Impact
–33 businesses per $100,000 in funding
29
Rental Assistance
•Considerations
–Provides direct financial assistance
–Financial benefit to tenant and landlord reducing need for future evictions
–Program design, like direct payments to landlords may result in significant administration
–Program likely to be redundant to existing relief programs
–One-time financial assistance rather than a sustainable economic development tool
30
Rental Assistance
•Chamber, CVA, and Visit Carlsbad saw value
but did not recommend as a high priority
•The Ad Hoc City Council Economic
Revitalization Subcommittee made no
recommendation –Council consideration
31
Recommendation
•Adopt a resolution modifying the COVID-19 Small Business
Loan Program to extend the terms of both of its loan products
and create a process for an additional deferment of the first
loan payment beyond the existing automatic deferral period
•Receive a report and discuss additional options to address the
economic impact of the COVID-19 pandemic and provide any
desired direction based on the discussion
32
Next Steps
•Approval of the modifications to the small business loan
program will result in a contract amendment and staff will
actively promote the revised loan program
•Direction regarding any other options will result in staff
returning with additional program details and funding
proposals
33
Discussion
•Modifications to the Small Business Loan Program
–Extend loan term
–Allow one deferral upon professional recommendation
•General Microgrant
•Matching Grant
•Revolving Loan Fund
•Carlsbad Charitable Foundation
34