Scottsdale Industrial Development Authority sends lifeline to local small business community

IDA approves $200K in COVID-19 relief grant program

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The Scottsdale Industrial Development Authority is providing financial assistance to small businesses as ramifications of COVID-19 strip the wallets of local proprietors.

On April 28, the Scottsdale IDA voted unanimously to approve $200,000 of funding to give in $5,000 grants to businesses in-need. The meeting was held over the phone as all city entities practice social distancing amid statewide stay-at-home orders.

IDA officials says the small business grant funding program is in response to the federal Coronavirus Aid, Relief and Economic Security Act --- also known as the CARES Act --- not adequately supporting local destination businesses with 0-100 employees.

Specifically, only 9% of federal stimulus payments have been made to “accommodation and food services,” IDA documents states. And, Arizona ranks in the bottom 50% of states for federal Paycheck Protection Program funding disbursement.

FnB Chef, and James Beard Foundation award winner, Charleen Badman was on the IDA’s call, and was reportedly an inspiration behind the grant program.

“I think this will definitely be a help, a great help, to businesses in the City of Scottsdale,” Ms. Badman said. “Of course, I veer in the restaurant direction, and the problems restaurants --- as many as there are there and the fact we’re really not able to have a voice. And, anybody that we feel are listening to us, the fact we employ so many people in the country, and how many there are, and how many there won’t be after this. This is really an opportunity to see if we have a fighting chance to continue on when we are able to re-open and also just to have a much-better footing when that happens.”

Overall, the IDA believes Scottsdale businesses are in need of multiple short-term, mid-term and long-term solutions during this time.

The Scottsdale Small Business Assistance Center is receiving approximately 10-plus inquiries from small business owners daily, as people look to their local government for assistance.

Through collaboration officials aim to align programs and leverage resources for greater impacts now and into the future, as impacts to business are estimated to take up to 24 months for recovery. Entities said to be involved in this effort include the Scottsdale IDA, the City of Scottsdale, Experience Scottsdale, Scottsdale Chamber of Commerce, Scottsdale Leadership and Scottsdale Charros.

One financial official on the call stated unemployment rates could grow to 20%, and take up to five years to recover. The grant program was first proposed to be $100,000, before IDA Vice President Tim Stratton suggested doubling the program by rolling a future year’s funds over now.

“Because this is such an unprecedented development here, and we do we have plans for multi-year grant programs, would there be any appetite on the part of the board to consider maybe expanding this program here and now?” Mr. Stratton asked of investing $200,000.

“I know it sounds like a drastic increase, it is, we’re doubling our investment. But this really is an investment in the community, and if we can help out more businesses I would put our capital to work now to do that.”

Grant criteria will be prioritized for businesses that:

  • Employ 0-50 people;
  • Use funds to retain jobs and support operating costs;
  • Are legacy businesses (in business for at least three years, with a preference for 10-plus years);
  • Are in the food and beverage, tourism or healthcare industries; and
  • Have shown a strong commitment to their local and industry communities.

The Scottsdale IDA was granted incorporation by the Arizona Corporation Commission on June 15, 1984. The main function of the board is to issue tax­-exempt bonds for certain types of private developments for the purpose of attracting new economic activity to the community.

A distressing situation

Scottsdale IDA President Shannon Scutari explains a lot of discussion has emerged surrounding moving forward on a community grant program similar to what the organization had done in the past.

On March 25, the IDA approved a $100,000 allocation for such a program.

“We had a general idea of how the world might change, but we really didn’t understand the incredible impact for sheltering-in-place that we’re dealing with right now in our community,” Ms. Scutari said.

“When it came time to work with businesses immediately, we stepped up from the IDA side and connected Rob Millar and the City of Scottsdale with some expertise to get the Small Business Center up and running. At the same time, I’ve been having some conversations with Charleen and working to integrate, really, experiences she was having, but frankly dozens and hundreds of businesses were having.”

Ms. Scutari says in the matter of a few weeks, city partners were able to come together to hit the ground running to kick-off the grant program.

Lisa Glenn Nobles led the IDA through a presentation on the community grant program. Ms. Nobles began working with Scottsdale’s Small Business Assistance Center in early April.

“In all honesty, truly, a month’s worth of work at the Small Business Assistance Center has been really eye-opening of the situation of our small business owners in Scottsdale,” Ms. Nobles said.

Data from the Small Business Assistance Center shows:

  • There have been nearly 150 calls and communications with Scottsdale businesses;
  • Of those calls, 46% have applied for one of the federal relief programs;
  • Only one of those businesses to date has received funding from the federal government;
  • About 11% of Scottsdale businesses have reached out requesting relief from the city.

“If we were to extrapolate those numbers as a representative sample of the larger small business community, it’s very distressing,” Ms. Noble said. “We have a huge number of people reaching out for support.”

With this context, Ms. Nobles said brainstorming began on how to create a helpful program.

“We know at this point with very little doubt the CARES Act is not adequately supporting local destination businesses with fewer than 100 employees,” she said. “Specifically, for vital Scottsdale industries --- food and beverage, tourism, healthcare --- they’re getting about 9% of the stimulus payout. So when we look at who needs the support the most and who is getting the support, we see some glaring challenges there.”

Furthermore, Ms. Nobles points out that when businesses do start to re-open, the owners will not have money to pay salaries initially.

“We seemed to have made the foregone conclusion that when businesses re-open they will have the money to pay their staff, and that’s obviously not the case,” she said. “It won’t take six weeks to six months for us to recover. It will take about 24 months total.”

What is the overall need?

Scottsdale IDA Treasurer Eloy Yndigoyen supported the call to double the funding amount, stating it makes sense.

“This is the time --- we have this money --- now is the time to open it up,” Mr. Yndigoyen said.

Glenn Pahnke with RBC Wealth Management, said he doesn’t see much of a downside from front-loading the grant program with funds that would normally be utilized later down the road.

“Realistically, I think a year from now we will be in a mode where we can look back and say to some degree we’re recovered, our economy is back open, things are much better --- that doesn’t mean I think we’re going to be back at the highs of the market, that could take a couple of years,” Mr. Pahnke said.

“The issue there, to me, is going to be debt and unemployment. At the low point, unemployment was at about 3.3%. I think it could easily approach 20% before this is done with. I think it will take a long time --- say three to five years --- to get back under 5%.”

Ms. Scutari says the funding provided by the IDA could help flatten that unemployment curve for Scottsdale in the future.

Overall, Mr. Pahnke said the wealth management firm is flexible for whatever the IDA wants to do, he just requested to know the cash flow needs.

IDA member Evelyn Racette supported the call for increased funds, but said she hesitates to think that $5,000 per approved company is enough.

“How far will that go for a small business? I think obviously it helps them, but is that going to be a stop-gap for a year? Are we going to see a return on investment with that business staying in our community long term or will there be some that can’t make it even after this?” Ms. Racette said.

“I don’t know how many small businesses need the help in Scottsdale --- I assume a lot --- would it be better to help 40? What exactly is the need overall? How many businesses are we talking that actually need the assistance?”

Ms. Scutari said this IDA program is one drop in the bucket for businesses to provide a bridge, pointing to the efforts with other Scottsdale organizations to leverage the funding through collaboration.

“One of the things that gets me really motivated, is I was at the governor’s office during the recession and worked on the stimulus --- particularly on the infrastructure side --- and I didn’t see the funds end up in the hands of the people who really needed them,” Ms. Scutari said.

“That wasn’t because there wasn’t a lot of effort to do that, there was a lot of effort to do that. But there was a lot of bureaucracy that got in the way. With something like this, we can be very agile, innovative and flexible.”

The IDA community grant implementation plan includes accepting grant applications and disbursing funds in May.

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