The Birmingham City Council will vote next Tuesday on an ordinance that would provide emergency loans to certain small businesses affected by the COVID-19 pandemic — but the program will need additional votes next week to take effect.
The loan program would allocate nearly $1.2 million to revenue-generating small businesses affected by the novel coronavirus; individual businesses would be eligible for up to $25,000 in loans, with an anticipated average of $10,000 per business. The funding would come largely from the city’s general fund, which would contribute $1 million; the remaining $200,000 would be provided by the city’s Department of Innovation and Economic Opportunity.
“Part of what we have to do is bridge small businesses into a new economic environment in what is really a turbulent time,” Dr. Josh Carpenter, the city’s director of innovation and opportunity, told the council Tuesday morning. He added that if the city passed the $1.2 million loan package, “We think we can go get $1.2 million more from the private sector, so that we can put $2.4 million total into our small business economy.”
The fund would provide zero-interest, 180-day loans to businesses with fewer than 50 employees. Pending the ordinance’s passage, a loan advisory committee — including representatives from the Department of Innovation and Opportunity, the Birmingham Business Resource Center, the Community Foundation of Greater Birmingham and private sector partners who donate to the fund — will be assembled to approve or deny loan applications. The Birmingham Business Resource Center will administer the loans, taking an administrative fee of no more than 5% per loan, paid for by the city.
If details of the loan program are approved by the council on March 24, Woodfin’s administration speculated that businesses could begin receiving those loans by the week of April 6. The deadline for businesses to apply would be March 27.
The loans will be necessary, argued Director of Finance Lester Smith, to stymie the city’s projected revenue losses as a result of the virus. “We went into this year with budgeted revenues of about $452 million,” Smith told the council, adding that sales, use and occupational taxes represented 75% of that money. Using the 2008 financial crisis as a precedent, Smith said he estimated that the city could see a 20% decline in its revenue base over the next four months — a potential decline of $9 million.
When asked what would happen if the decline was greater than 20%, Smith sighed. “Lord help us,” he said with a short laugh.
Smith said it would be unlikely that the city could deal with that decline simply by cutting costs. “I think there’s some things we need to consider. We can look at travel, we can look at training, at trying to control overtime for the non-police, non-fire and non-public works (city employees). But at some point in time, what we’re going to have to do is look at the revenue, and I’ve got nowhere to go to increase the revenue … . We just have to be very mindful of continuing to project and forecast and also have an understanding of what resources are available to us.”
The city would also need to alter its budget, Smith said, to address changes in city operations as a result of the virus. “As we all know, when we prepared the 2020 budget, we did not (consider) the current situation we’re faced with,” he said. “As it relates to our first responders — the fire department and police officers — if we do not have those individuals properly equipped (and a group of them become infected), now all of a sudden you’re talking about our response time being decreased.”
The city would need to provide between $100,000 and $200,000 for those departments to have personal protective equipment such as masks, Smith said. Overtime costs, he said, would require an additional $4 million to $5 million.
Another significant cost, he said, would be to “mobilize our existing city employees so that they can work remotely,” providing them with laptops and other ways to work from home. Smith said his office had estimated that this would take “about $5 million for that … all inclusive, for everything.”
Both of those funding items will appear before the council on March 24.
Both of those funding items were approved by the council; the loan program, while approved in concept, will require additional votes next week to take effect.
Spending Last Year’s Surplus
The council, at Smith’s urging, also voted to spend surplus funds from last year’s budget on a long-pending drainage project on Sixth Avenue South ($1.2 million), construction on a new cell of the city’s eastern area landfill ($2.6 million) and renovations on the Carver Theatre in the city’s downtown area ($900,000). Those funds were necessary, he said, to complete projects already underway.
“In essence, what you are doing is keeping workers working,” Smith said. “If that money is not transferred, those projects cannot proceed.”
The city also voted to give a 1% cost-of-living adjustment to employees, which would total about $3.2 million. That money had also been budgeted from the FY 2020 budget surplus.