Durham City Council members voted unanimously last Thursday to create a $1 million loan fund to help the city’s small businesses recover from the COVID-19 shutdown.
But some council members took issue with aspects of the program, while some business owners voiced frustration that it was a loan and not a grant program. Last month, Raleigh approved a $1 million grant program; so far, more than 300 businesses have applied.
Why, they asked, should struggling Durham businesses have to take on more debt to get relief?
The answer, according to Mayor Steve Schewel, is that state law forbids Durham from giving public dollars to private companies. Raleigh has a charter provision—approved in a 1975 local act—that enables it to use public funds for socioeconomic programs that serve “the public interest and the well-being of the community and its citizens,” according to a city memo.
Durham’s charter doesn’t have a similar provision, city attorney Kimberly Rehberg told the council last week.
Ryan Hurley, who co-owns the downtown boutique Vert & Vogue and has lobbied the city for small business assistance, says establishing a grant program, rather than forcing businesses to seek loans, is critical.
“Early in the crisis, I recognized it was going to be a significant cash consequence for small businesses,” he says. “We have slim margins and few cash reserves. I knew that a loan program and additional debt wasn’t going to be a solution.”
Even with online commerce, Hurley says Vert & Vogue’s sales are 50 percent off. He received a loan through the Paycheck Protection Program—albeit five weeks after he applied—and he’s managed to keep his full-time employees on reduced hours while they receive unemployment benefits; Vert & Vogue furloughed its part-timers.*
Hurley says he understands that the city is following the letter of the law. But Raleigh, he argues, recognized that its economy is in a state of emergency and found ways to help its small businesses.
“They took that position, which is the right one to take,” Hurley says. “Durham has not taken that position.”
While the city can’t give public money to private businesses, Schewel told the council last week, it can relax credit-score and collateral requirements for loans, which is likely to lead to a large number of defaults. If few businesses pay the city back, loans-versus-grants may end up being a distinction without a difference.
The recovery program, as described by Office of Economic and Workplace Development director Andre Pettigrew, would distribute 10-year, low-interest loans of up to $50,000 to businesses with fewer than 25 employees and revenues of less than $2 million per year. Payments would be deferred for 12 months, and funds would go out by the new fiscal year, which begins on July 1.
The program would prioritize disadvantaged businesses that have no existing relationships with banks and that operate in seven neighborhoods that struggle with high poverty rates.
Several council members noted that Pettigrew did not recommend a certified development financial institution to administer the funds, and council member DeDreana Freeman said she was worried about getting funds to unbanked businesses.
In addition, the council looked askance at waiting until July to distributing the funds.
“Many of the temporary closures have become permanent,” Mark-Anthony Middleton said. “There are folks going out of business right now, as we speak. How soon can we start cutting checks and getting this money in the people of Durham’s hands?”
Council member Jillian Johnson said the proposal did not focus enough on holding businesses accountable for ensuring that workers are paid well, provided with personal protective equipment, and have paid sick leave—“all the things that we know are even more important right now with the COVID-19 crisis,” she said.
Freeman argued that $1 million wouldn’t be enough. At least $500,000 should go to the “black and brown businesses who make up 5 percent of the city’s business community,” she said.
And the other 95 percent need help, too.
“This is our future tax base,” Freeman said. “If we are not going to be investing in our future tax base, then what are we going to have coming out of COVID?”
There is some more money coming down the pike, however.
Duke University has pledged $1 million to support Durham’s small businesses. Schewel told the INDY on Monday that university officials are now working out details about how this money would be doled out with the city’s staff.
Contact staff writer Thomasi McDonald at email@example.com. *Correction: This story was updated to more accurately reflect Vert & Vogue’s personnel decisions.
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