As the City of Miami Beach is a HUD entitlement recipient of Community Development Block Grant (CDBG) funds, the CARES Act has made available approximately $564,276 in supplemental CDBG Coronavirus funds (CDBG-CV).

On May 13, 2020, Resolution 2020-31257 authorized amendment of the City's 2018-2022 Consolidated Plan and FY 2019 Action Plan in order to administer these funds, with $200,000 devoted to small business assistance.

Per federal guidelines, the CDBG-CV grant funding is intended to:

“avoid job loss caused by business closures related to social distancing by providing short-term working capital assistance to small businesses to enable retention of jobs held by low- and moderate-income persons.”

The basis of the CDBG financial assistance program is business assistance and economic development, with core objectives of sustaining small businesses and preventing an increase in unemployment. While a business may incidentally use the funds for rent payments or mortgage interest, rental assistance is not the primary goal.

Federal law holds that CDBG grant assistance for businesses can be provided for two “Eligible Activity” categories:

• Microenterprise assistance:  the small business contains five (5) or fewer employees (including the business owner) and the business owner must be considered Low-Moderate Income (LMI), meaning that the owner’s household is at or below 80% Area Media Income (AMI).  (24 CFR 570.201(o)(1)(i))

• Special economic development activities: the small business being supported must create or retain one (1) job held by a Low-Moderate Income (LMI) person, meaning that the employee’s household is at or below 80% Area Media Income (AMI).  (24 CFR 570.203(b))

CDBG-CV Small Business Programs Nationwide

Review of COVID-19 business assistance programs recently developed using CDBG funding by local governments across the country (including Seattle, Boston, Washington, D.C.) found that a majority of programs offer grants up to $10,000, predominantly to microenterprises (5 employees or less, including the business owner), and generally exclude from eligibility: startup businesses under a year old, lending/financial institutions, nonprofits, home-based businesses, and adult-oriented uses (liquor stores, pawn shops, and adult entertainment).

• Miami-Dade County: zero interest forgivable loans up to $25,000 for businesses up to 25 employees (51% of which must be LMI), that have not received PPP loan, and becomes forgivable after 12 months, if business able to create/retain 51% LMI employees.

• City of Miami, FL:

o   Microenterprise grant: up to $10,000 grant for non-essential microenterprises, for use towards 3 months of allowable business expenses, as long as the business owner is 80% AMI and the business did not receive any CARES Act funding (e.g. PPP loan).

o   Small business loan: forgivable loans between $10,000 - $20,000, maximum 20 employees, must create one permanent full time 80% AMI employee. Funding can complement other CARES assistance (e.g. PPP loans), but not for duplicative expenses.

• City of Hialeah, FL: $5,000 grants to 400 qualified businesses, must be 25 employees or less, also excluding from eligibility: landlords; publicly traded companies; medical facilities; legal, real estate; or clerical offices; schools and day care facilities; and chain or franchise establishments.

• City of Deerfield Beach, FL: $5,000 grants to microenterprises (5 or fewer employees). Funds awarded on a first-come, first serve-basis. Also excluded from eligibility are real estate investors and marketing companies.

• St. Johns County, FL: $10,000 grant for businesses of 75 or less employees and with less than $5 million in 2019 annual gross income.

• City of La Crosse, WI: businesses with 75 employees or less may receive up to $5,000 per 10 employees, with a maximum of $25,000 per business, as long as they retain an employee for 6 months or if the business owner qualifies as LMI.

• City of Pleasanton, CA: $2,500 loans ($2,900 in business district) for microenterprises, and restaurants and retailers with no more than 20 employees, if they can prove 25% income loss as well as having taking action to secure federal/state financial assistance. Insurance companies and hotels also excluded from applying.

• City of Columbia, SC: forgivable loan up to $10,000, 100 employees or less, priority to businesses with 5 employees or less, must demonstrate revenue decreases of at least 30%, and preference for most vulnerable business owners, as indicated by City’s 2020 COVID-19 survey of small businesses. Also excludes hotels and residential businesses, national/regional chains, and private membership or fraternal organizations.

City of Miami Beach Program

 CDBG-CV: Special economic development activities

Business Eligibility. To apply, businesses must have a valid Miami Beach BTR since February 1, 2019 (therefore, in existence for at least one year) and be in good standing with the Finance and Code Compliance departments.  In addition:

• Business size.  Although the Small Business Administration (SBA) considers small businesses as 500 employees or less, the City Commission expressed desire to limit eligibility to microbusiness, businesses with five employees or less, including the business owner.

• Nonessential businesses. To be eligible, businesses may not have been deemed “essential” by emergency order and thus were forced closed during the shutdown in order to enforce social distancing (e.g. fitness studios, hair salons, retail establishment)

Employee Retention Requirement.  Businesses will not be required to repay grant funds to the City, if the business, throughout a period of 12 months, retains or creates one (1) full-time employee that resides in a low-income City of Miami Beach household[1]. The employee must be a U.S. citizen or legal resident, and the employee must also reside in the City of Miami Beach. Upon 12 months after receiving the funding, the business must verify compliance by submitting payroll documentation. If unable to prove compliance, then any funds received from the City must be repaid.

Low Income Employee. HUD’s income limits are based on Median Family Income estimates and Fair Market Rent area definitions for each metropolitan area (i.e., Miami-Dade County). As stated earlier, low income is defined as earning 80% of the median family income for Miami-Dade. The 2020 income limits applicable for the household of the employee of the applicant business are:

Permitted use of funds. 'Qualified business expenses’ are considered any operational costs like payroll, utilities, rents, and/or COVID-related expenditures. Upon review and approval of applicants, qualified individuals must submit their receipts for eligible expenses, such as those incurred for reopening, to the City for reimbursement. Businesses that prove retention of an eligible employee for 12 months after the reimbursement, will not be required to reimburse the City; otherwise all funding must be paid back.

Additional Considerations

MB Standard program. The MB Standard program is designed to encourage better health and safety practices, and certification in the program is a relatively low bar with minimal financial cost to participating businesses. Staff recommends conditioning grant money on enrollment into the MB Standard program in one of two ways:

• Option 1 (incentivize participation) – 50% of CDBG grant program funding ($100,000) will be dedicated to businesses that are certified MB Standard participants.

• Option 2 (mandatory enrollment) – as prerequisite for approval into the grant reimbursement program, each grant recipient must agree to participate in the Standard program and be certified prior to issuance of grant reimbursement payments.

Program Funding Options. Program funding of $200,000 is a nominal amount, which with amount caps will serve only serve a very small number of our businesses. Staff proposes establishing award caps in one of two ways:

• Option 1 ($10,000 cap) - reaches only 20 businesses if structured to grant fixed $10,000 block awards to every chosen recipient.

• Option 2 ($5,000 cap) – reaches 40 businesses if structured to grant fixed $5,000 block awards to every chosen recipient.

Selection of grant recipients. Staff anticipates significant interest in the program. The key to encouraging a successful roll-out will be to provide for sufficient notice prior to opening the program for applicants.  AS the Commission requested evaluating the methods for awarding recipients, staff recommends the following options:

• Option 1 - a "first qualified, first served" policy may unfairly prejudice applicants who learn about the program later than others, or those who take longer to assemble necessary application documents.
• Option 2 - "Lottery system" in which business submit their applications online or via email before a predetermined deadline date, after which all applications that have been received are reviewed for eligibility by City staff and those deemed preliminarily qualified are placed into a lottery pool. On the date of the lottery, business names are drawn randomly from the pool, and businesses selected are again reviewed for eligibility. The City will award funding in the order of selection from the random lottery to qualified applicants until all program funding is exhausted.  

_____________________________________

[1] Pending clarification of the CDBG-CV eligibility requirements

The City Commission previously authorized the use of CDBG-CV funds for small business assistance and, although further City Commission action is not required, the Administration seeks the Commission’s input on the program direction. It is the recommendation of the Administration to move forward with the funding program as described, pursuant to any direction the Commission deems appropriate.

As limited funding and stiff eligibility requirements, set forth by the Federal government, will result in a limited number of grant recipients, the Administration welcomes direction on prioritization, whether based on existing need, business type, or conditions on the expenditure of funds.