The COVID-19 pandemic prompted public health officials from the State, as implemented by the County, to require many service businesses to close. The closure of small businesses represents a substantial impact to the local Fairfield economy, as many small business owners struggle to make their payroll, lease payments, and other business operations expenses. At the City Council meeting on July 21, 2020, small business owners requested assistance from the City Council, who responded by requesting this item be brought before the Council.  

In staff’s research and conversations with multiple jurisdictions, the most common approach to providing small business support during COVID-19 has been loans with little or no interest. However, we have also heard first-hand from small business owners, and it has been widely reported, that loans present a problem to small businesses under this pandemic. As the pandemic continues requiring limited operations for most businesses, incurring additional debt, even without interest, prolongs the timeframe in which businesses may return to profitability. Loans may even carry the impact past the eventual return to normalcy as any profits will go towards loan repayment.  

As an alternative approach, some jurisdictions have created grant programs that do not require repayment of funds received by businesses. Under these programs, however, the eligibility requirements tend to be more stringent as they are grants of public funds. Based on staff’s research and understanding of the current need, a grant program is recommended as the preferred approach to supporting businesses. 

Rather than present an item for Council discussion and direction, the City wants to be responsive to small business needs. To speed up the process, the attached resolution authorizes the City Manager to complete the creation of a grant program with the following general parameters:

Eligibility Requirements

Business Size – businesses with 20 full-time equivalent (FTE) positions or fewer. One FTE totals 40 hours per week. This can be one employee or any combination of part-time employees whose weekly hours total 40 hours. 

Business Type – only for-profit businesses are eligible to receive funds. 

Location – the business must have a physical store front or office located within the jurisdictional boundaries of the City of Fairfield. The business must have been closed, or have operations severely limited, due to County Public Health orders. Home-based businesses and businesses that were not required to close during COVID-19 are not eligible for grant funding.  

Age – the business must have been in operation since January 1, 2019 to be eligible for grant funds. 

Revenues – businesses with gross revenues less than $2 million per year are eligible. The business must demonstrate profitability prior to COVID-19 and demonstrate revenue losses of at least 20% due to COVID-19. 

Ownership – only independently owned and operated businesses are eligible. Franchise businesses may be eligible if they 1) own two or fewer businesses; 2) their only location(s) are within Fairfield; and 3) they are not receiving any corporate support. 

Other Requirements – all applicants must be in good business standing (current business license, no liens or judgements, have not filed for bankruptcy, etc.). The applicant is only eligible for one grant under the program (i.e. owner of multiple businesses cannot apply multiple times for their different business entities). 

Funding Limits – grant funds will be distributed in three categories: micro businesses with 5 or fewer FTEs are eligible for up to $5,000; businesses with 6-10 FTEs are eligible for up to $7,500; and businesses with 11-20 employees are eligible for up to $10,000. 

Eligible Expenditures – grant funds may be used to pay for lease payments, payroll, utilities, business supplies (including PPE), equipment purchases that expand operations, and investments in software or technology that allows for a shift to online operations. Other expenses may be eligible as reviewed on a case by case basis. 

Application Process

All grants will be distributed under a lottery system. This ensures funding is distributed in a fair and equitable manner and does not only go to those most savvy with application processes. 

The application process will be administered during a set two-week period. The two weeks are intended to provide time for the City to advertise the program and answer any questions applicants may have. Once the application process is complete, the lottery will be held. Effectively, the application process is a two-step process: 

1. A simple online application is submitted for consideration. This will identify general business information, responsible person(s), FTEs, and amount of funds requested. Applicants will certify that they read and understand all eligibility requirements and will comply with all requests for information if selected under the lottery. 
   
   
2. The lottery will randomize all applicants into a rank order position (i.e. position 1, 2, 3, 4, and so on). All applicants whose position falls within the funding amount available will move to a pre-award phase. Upon pre-award, an underwriting process will screen applicants to ensure compliance with all program requirements. Applicants are required to supply all information needed as requested. This includes financial information, identification of uses for funds, verification of good standing, and any other information that may be needed to verify compliance with requirements. Businesses certified as complying with all requirements will be given a grant agreement and funds will be distributed by the City. 
   
   Any applicants selected under the lottery that do not comply with program requirements will be removed from the process. The City will continue down the lottery ordered list until all funds are expended.  

Grant Award Agreement

All businesses selected and found to meet program requirements will be required to enter into a simple grant award agreement. The agreement will require that funds be used for eligible expenses and that the business must stay in operation for at least six (6) months after receiving funds. The City recognizes that, unfortunately, not all businesses will make it through the COVID pandemic. This requirement is intended to protect the use of funds from going to any business that may immediately close and not use funding for the stated purpose. Any business found in violation of the grant award agreement will be required to repay the funds. 

Timeframe and Processing

Given the speed at which the City is seeking to move in creating this program, other changes may be needed during the process. The attached Resolution authorizes the City Manager to make any and all changes to the program to comply with funding regulations, process applications, and execute grant agreements provided that the program budget of $450,000 is not exceeded. The goal is to move quickly to support businesses while simultaneously protecting the public financial interest. 

The City is in negotiation with the Small Business Development Center (SBDC) and Workforce Development Board (WBD) to provide the necessary underwriting and application screening services. SBDC/WBD have experience with small business support and operational reviews and has the capacity to assist. Therefore, they are great partners to assist in reviewing the necessary documents to ensure compliance with the program requirements. 

Tentatively, the partnership and process with SBDC/WBD is as follows: 

• SBDC/WBD administers a two-week online application process.
   
• SBDC/WBD provides the City with a list of applicants at the end of the application period. 
  
  
• The City administers the lottery to identify businesses that move to pre-award, and to develop the waiting list order for those businesses not selected. 
  
  
• SBDC/WBD then works with the pre-awardees to conduct the application review process and recommend businesses for an agreement.
  
  
• Depending on what works most efficiently, the City may administer the grant agreements or have SBDC/WBD do that on our behalf. 
  
  
• Upon grant agreement execution, the City will distribute funds. 

Staff and SBDC/WBD believe we can begin to market the program and have the online application open within two weeks. Concurrent to the application period, we will complete development of the full program parameters, draft the sub-grant agreement, setup the lottery system, and market the program. This puts the lottery around the first week of September. SBDC/WBD estimates the pre-award review to take a few days to a couple weeks depending on the applicants’ ability to provide the required information. 

Altogether, the best-case scenario has the City distributing funds by the middle of September.