Council Preview: City Finds $15 Million to Help Struggling Businesses

Three programs designed to assist economic sectors forced to close early in the pandemic


Members of the live music industry gathered at City Hall on Wed., Sept. 16, for the "Come & Save It" rally in support of the SAVES resolution (Photo by David Brendan Hall)

City Council is prepared to approve at its meeting today, Oct. 1, $15 million in funding to help music venues, legacy businesses, and child care centers. The three $5 million programs are designed to assist economic sectors forced to close early in the pandemic as they continue to struggle to bounce back, even as the state relaxes its regulations and allows them to serve increasing numbers of customers.

The plan being presented today follows the unanimous passage of the Save Austin's Vital Economic Sectors (SAVES) resolution on Sept. 17. Council gave city staff just under two weeks to find the money and create a framework to ensure the funding is distributed equitably – without depriving other programs or services of needed resources. The Austin Music Venue Pres­er­vation Fund will provide grants to help live music venues; the Austin Legacy Business Relief Grant program will also help venues, along with established local restaurants and arts organizations; while the Austin Child­care Provider Relief Grants will help child care providers offering both in-home and center-based programs.

The COVID-related hardships these businesses have experienced came on top of the challenges many were already facing in Austin's booming real estate market – especially Downtown, where rents were already becoming unsustainable for small businesses. It was just one year ago that Council established the Live Music Fund, allocating a portion of hotel occupancy taxes to help prop up struggling creatives and the venues where they exhibit and perform their work. By the end of the year, staff expects that fund to have accumulated $2.5 million.

To provide more immediate relief to these sectors without hampering other important projects, Deputy Chief Financial Officer Ed Van Eenoo explained at Council's Tuesday work session, staff will modify its spending plans in four areas of the fiscal year 2021 budget, which also goes into effect Oct. 1. First, instead of paying $6 million upfront to replace the city's Human Capital Manage­ment System, the city can pay for the new information platform incrementally in future years and divert the money now to SAVES priorities.

Similarly, the Budget Office recommends Council redirect $4.8 million it had prepaid to fund five years of the Pay for Success program, a collaboration between city and county government, nonprofits, and private businesses that aims to help people experiencing homelessness who frequently utilize emergency rooms or who interact with the criminal justice system. The program has struggled to get off the ground, but staff feels they can continue funding it in the future – though a memo outlining the funding plan cautions that property tax revenue caps imposed by the Texas Legislature make funding for the initiatives more difficult to find.

The Austin Transportation Department found $3.7 million of $6.6 million in revenues generated from right-of-way fees that could be transferred to the SAVES funds. That would leave a $2.9 million hole in its budget; ATD Assistant Director Jim Dale said the Transportation User Fee paid by Austinites through utility bills would have to increase by 55 cents to cover the department's revenue loss. Council Member Kathie Tovo expressed concerns about raising the fee, but Dale claimed the alternative would be to consider layoffs (on top of the citywide hiring freeze that's already in place). Finally, another $500,000 could be sent to the SAVES funds by delaying some less critical capital rehabilitation projects.

While the $15 million in SAVES funding will help, Council continues to warn advocates that it won't be enough. Without federal and state funding, the local relief will fall short of saving these prized institutions. "The scale of the challenge we have in our community is huge," Mayor Steve Adler said Tuesday. "The need is just so great. We have so many businesses that are suffering and face the prospect of closing, we really do need federal help to deal with the scale of this challenge." He urged commercial landlords to proactively work with the city and their tenants to leverage the scant funding offered by the city into solutions that can sustain vulnerable businesses. He also called on local arts advocates – who have waged a campaign for the city to provide funding to preserve music during the pandemic – to direct some of that energy toward state and national leaders. For instance, they could tap into the nearly $6 billion in federal CARES Act funding that Gov. Greg Abbott has not yet spent, which will expire on Dec. 30.

Staff is looking at other funding sources to grow the SAVES funds that need more time for development. One idea, currently under review by the city law department, would be a temporary modification to the Chapter 380 economic incentive program. These agreements were initially used to support big projects like Samsung Austin Semiconductor and the Domain, but in 2018, Council modified the program to target smaller businesses. After revenue caps were lowered in the last legislative session, Council members considered doing away with the program altogether; staff now proposes a modification to further extend fee waivers and property tax abatements to businesses targeted for relief through the SAVES resolution.

That resolution also tasked staff with creating a new way to distribute funds, responding to frustrations in the creative sector over how the Better Business Bureau administered money allocated for business relief through the CARES Act. "We had a big chunk of money and put a contract out to a company with no roots in our community," CM Leslie Pool said of the BBB, "and no surprise, we had problems."

On top of charging a 5% administrative fee – further reducing a bucket of money that was already too small – BBB distributed some of the funds in a way that has puzzled CMs. According to a staff report, for example, Kick Butt Coffee received $29.94, while other venues like Stay Gold and Cheer Up Charlies received $40,000 grants from one funding source.

Council is set to (finally, after literally decades of consideration) approve the creation of an Austin Economic Development Corporation to handle public-private partnerships and programs like SAVES, but Pool said that entity would not be stood up quickly enough to help businesses immediately. "The challenge is in the timing," she said. "We can't wait for the [AEDC] to be set up, we have to nimbly distribute resources; we need the help now." In another agenda item, Council is set to approve the BBB as administrator of the SAVES dollars.

Sylnovia Holt-Rabb, acting director of the Economic Development Department, said that of the seven applicants interviewed as possible administrators of CARES funds, BBB most clearly had the resources in place to handle the task. Holt-Rabb said that EDD staff outlined qualities required for an administrator, such as ability to conduct outreach, capacity to handle a massive volume of requests, case management experience, ability to quickly disperse funds, and delivery of data to the city that could be posted to the ATX Recovers dashboard. She also said the BBB's 5% admin fee was lower than that of any of the other applicants.

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