State needs to step up and support small business
Our State Legislature convened a Joint Special Committee on Coronavirus Response on March 18. (Here's a link to the agenda for their first meeting.)
This committee will inform the state's response to be considered in a soon-to-be-called special session of the legislature. The committee was charged with identifying actions to support low-income and vulnerable Oregonians and small businesses as they comply with public health guidance. And yet, at the only hearing when the committee invited testimony, only organizations representing large corporate interests were invited. The one exception to that was an invitation to Johnell Bell of Espousal Strategies who serves on the board of the National Small Business Association.
The following letter was submitted on March 23 on behalf of several organizations representing small business and culturally specific chambers of commerce.
The Honorable Arnie Roblan
The Honorable Paul Holvey
Co-Chairs Roblan and Holvey and Members of the Committee:
Small businesses employ 55% of Oregon's private workforce. We urge the Committee to act in proportion, recognizing that small businesses face an immediate need for decisive action to prevent their permanent closure. This means big, simple, and direct assistance, as outlined below.
In a poll completed early last week, Built Oregon spoke with nearly 1,000 small businesses across the state — 69% owned by women, 25% from underrepresented groups, representing 21 counties. The results of the survey, which are certainly an understatement at this point, revealed:
These are the businesses across Oregon who are most vulnerable to the lasting effect of this crisis. These are also the businesses that have the least ability to absorb this crisis and re-open their doors for business. These are the businesses that should be receiving the most State support to survive the crisis.
While larger companies have the means to absorb financial hits such as credit facilities and diverse revenue streams, there is no safety net for small businesses. The COVID-19 crisis is so precipitous and far-reaching for small businesses — again, these businesses employ over half of O regon's private workforce — that we have to treat our vital community enterprises as too many to fail.
We respectfully urge you to take action now for these small businesses. It needs to be:
Thank you for the work you have done thus far. Based on our observations of your committee meetings and priority documents, it appears you are aware of the need to protect commercial tenants. Property owners, lenders, and retail tenants, however, are linked in a set of nested relationships, and actions taken to protect one will affect the others. While a moratorium on evictions would protect small business, it may have negative ramifications for smaller property owners that will result in unintended consequences in the economy. An eviction moratorium should go hand in hand with a suspension of mortgage payments for property owners, and with protections or incentives for lenders to create flexible terms for property owners. We ask that the State work with federal agencies to streamline the support to local lenders in the implementation of these measures.
The following are our specific requests that seem to have been missing from your discussions, despite the fact that we and others did raise these priorities in our written testimony last week.
These are the supports that small business needs from the state government right now.
1. Stabilize our CDFIs and other community lenders. We commend to you the letter provided on March 17, 2020 from Community Lending Works and MESO. Their expertise is critical.
In addition, we would add that $10M needs to be deployed to buffer the immediate losses caused by the shut down. This money would be used to absorb losses from small business loans, and would allow the CDFIs and other non-bank lenders to modify terms with borrowers. If we lose our intermediaries, like MESO, Community Lending Works and Craft3, then we can not hope to deploy any federal relief funds that may come our way.
Further, a large number of minority owned and COBID businesses can be supported by simply having these lenders suspend interest and principal payments for 6 months. The State can support them in taking that step by providing grants to cover the costs to take such an action.
One potential source of funding for this is Business Oregon's existing Credit Enhancement Fund. We ask that the State declare Multnomah and all other counties not previously considered distressed for the purposes of the CEF program distressed, open it up to CDFIs and other non-bank lenders, and streamline the application process.
2. Create and capitalize an emergency small business relief fund that provides direct financial assistance to help businesses meet payroll obligations, fixed expenses, and
maintain their supply chains and inventory. Supplement the G overnor's Strategic Reserve F und with $50 million for one-time grants to provide closure benefits for businesses that have been forced to close or limit service in response to the pandemic — particularly for restaurants, hospitality and retail, and similarly positioned service providers. This relief must be available with a minimum of paperwork and red tape, to ensure that businesses with limited administrative capacity can access them quickly.
3. Expand Unemployment Insurance:
4. Provide direct financial assistance for working parents whose kids are out of school.
5. Expand eligibility to the Oregon Health Plan for people who lose their health insurance, and reopen enrollment period immediately if already closed for current year.
6. Provide state tax relief to business owners by:
7. Encourage banks and credit unions to offer 90 day deferments on all loan payments.
8. Establish a legislative guarantee that business insurance claims will be paid.
9. Trusted Technical Assistance. Small businesses need quality short term and long term planning help. Owning a small business for many is not something they "get" to do, but is their only choice for employment. It is not a privilege to operate a small business, and the difference between those who can and cannot survive this crisis will largely be determined by their ability to navigate the complex support systems that are currently being implemented. State funds should augment trusted technical assistance programs at statewide nonprofits.
10. Finally, local, regional, and state governments should avoid freezing contracts with small business vendors, and prioritize opportunities to support small businesses through procurement. Require all state agencies to promptly pay invoices from firms of 50-500 employees (but especially COBID firms with 50 or less employees) within 30 days. Currently, state agencies take up to 90 days to pay contractors for work performed. Now, more than ever, small businesses need to be paid promptly to maintain cash flow.
We have reviewed the requests you have received from other business organizations and want to clarify our organizations' positions on a few of them:
1. We do not support a delay in implementation of the CAT tax because it would blow a $250-500 million hole in state funding for schools. This would create secondary negative economic impacts by putting teachers and support staff out of work.
Furthermore, businesses that can anticipate the benefit of a tax cut are not facing an immediate threat of going out of business, so their demands should be considered only after the most immediate concerns we have described above.
2. Although not something that should be in the legislature's perview, we do not support the call to delay voter-supported collections for the Portland Clean Energy Fund. The purpose of these funds is to support our most economically marginalized communities that will be hit hardest by COVID-19.
3. We further oppose any blanket delay of local and regional tax measures currently under consideration.
Our lives and our livelihoods are threatened by this new disease. People throughout this state are taking extreme action to minimize its impact. We take these actions in the hope that we can return someday soon to our previous ways of life. But if you don't act today to provide swift and comprehensive economic relief, it will be the disease of inaction that leads to truly long term devastation. Targeted, swift money invested right now will help small businesses survive temporary closures. These actions will be less costly and far better for our state's economic health than recovering from years of boarded-up storefronts in our towns and cities.
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