March 23, 2020 IEDC Briefing: COVID-19 – Preparing for What Comes Next
Prepared by Kathleen McCabe, McCabe Enterprises

The International Economic Development Council organized a panel discussion “COVID-19 Preparing for What Comes Next” on March 23, 2020.  NEDA is an IEDC partner.  NEDA board member Kathy McCabe of McCabe Enterprises listened in and prepared the following summary to share with NEDA members.  A big thank you to IEDC!  The key take-away is start planning and preparing now for recovery. 

IEDC’s panel was moderated by Dr. Eloisa Klementich, CEO of Invest Atlanta and IEDC board member.  Panelists featured Bill Allen, CEO of Los Angeles County Economic Development Corporation (LAEDC); Mike Grella of Grella Partners; Jeff Sjorstrom, President of the Galveston Economic Development Partnership; and Mike Williams, General Manager of Economic Development, Culture & Tourism for the City of Toronto.

Key Questions for Preparing for What Comes Next

  • What can we do now?
  • What can we continue to do?
  • How are we as Economic Developers preparing for this pandemic?
  • How is your city being impacted – budget, taxes?

Data is going to be critical in planning recovery and responding to today’s needs.  Communities are going to need to track, analyze, and communicate.  Data on existing assets and infrastructure, particularly in response to the health care emergency is needed.  Critical supplies and needs must be identified.  Current and expected impacts should be evaluated.  Decisions regarding resource and policies need to be optimized for tomorrow, next week, next month, next quarter. 

Most jurisdictions stop their prevention efforts too soon.  This results in another wave, which further sets back business.  A vaccine will be needed, before a true ramp-up in the economy occurs.  There will be pent-up demand. 

Incentives will be important in the short-term to help businesses respond.  We will need to re-tool our incentive programs to better respond to today’s needs.  The re-thinking of economic development incentives today will frame the future use of incentives.   It is important to relieve the pressure on businesses.  This means reducing costs to businesses.  The policies of no utility shutoffs, no evictions, no foreclosures need to be extended and include small businesses. 

J.P. Morgan and Amazon have both established funds to assist small businesses with Covid-19 impacts.  Opportunity zones and New Market Tax Credit-eligible locales will be able to draw on these additional incentives and resources.

The concept of a Restaurant Bond or Cultural Activity Bond was mentioned.  This is being used in Toronto.  An individual person (investor) purchases a “bond” worth say $80 of food and drink at a restaurant or for a theater/performance/museum tickets and receives $100 worth of services post the coronavirus crisis.  This is a strategy to assist the local restaurant industry and arts community.

The Loan Versus Grant Conundrum was discussed.  Panelists thought that the federal government may develop forgivable loan products, with a key issue being the viability of small businesses and maintenance of work force.  Sole proprietorships often have poor recordkeeping and tend to be poor candidates for loan products. There are four tiers of loans and all will be needed to address the COVID-19 crisis.  They are: 

  • CDBG loans, which have threshold requirements, such as benefiting low/moderate income persons;
  • SBA loans, including economic injury loans that have now been made available in most states;
  • Bank loans which are mostly based on existing banking relationships; and
  • Micro-loans.

Solutions will need to be customized at the local level. The Economic Development Organization can serve as the local sherpa for resources and technical assistance.  Use technology tools to get through these tough times.  We will need to rely on data and information.  Businesses need to have a web presence and be on twitter so they can communicate. 

Following a crisis, the existing trends tend to accelerate.  For example, strong businesses before Katrina got stronger following Katrina.  Weaker businesses and programs often did not make it. 

The coronavirus crisis will increase the focus on buying local.  Local, state and federal governments are likely to increase their focus on buying America.  There will be a demand for local purchasing, and perhaps even an incentive (subsidy) for purchasing American-made goods. 

Advice for the future:

  • Stay calm.
  • Focus on resources – government, social savings, and economic development resiliency.
  • Find creative ways to develop and deliver services.
  • Don’t waste the crisis.
  • Play the long game.
  • Slow and steady will win the race.

The following are highlights from each of the panelist’s communities and their responses to Covid-19, lessons learned from other disasters, and tools they are employing.

 

Atlanta

Atlanta’s focus today is on stopping the spread of Covid-19 and social distancing.  In response to the coronavirus shut down, Atlanta has established a zero (0%) loan program.  Loans in the amount of $5,000 to $30,000 are available for a six to twelve-month period aimed to help local employers maintain same level of employees (or at least 90% of their workforce) during the Covid-19 crisis.  

Los Angeles

Los Angeles began working on the Covid-19 issue in late December since China is LA’s leading trading partner.  There has been a 23% drop in traffic at Los Angeles and Long Beach ports.  One of the largest sources of visitors and tourists to Los Angeles is also from China and Asia. 

Los Angeles County Economic Development Office (LAEDC) is now fully remote.  LAEDC has launched online resources.  LAEDC has been overwhelmed with request for assistance.  LAEDC established a Coronavirus response page and has published 17 steps for businesses to more ably cope with new operational challenges in the era of the Coronavirus.  (Scroll down for the 17 steps.)

Key concerns are:

  • Maintaining the Supply Chain
  • Households having liquidity to stay afloat
  • Capital to employer to keep work force as long as possible.

There is a 3-prong approach in Los Angeles County – state resources, city resources, and philanthropic resources. The state of California established a $1 Billion health and economic development fund in response to COVID.  The City of Los Angeles is focusing on the needs of micro-enterprises with a $1 million allocation. Los Angeles city is using city resources to get capital to micro-business and assist immigrant communities in the COVID crisis.  Use of city resources allows Los Angeles to bypass federal restrictions banning assistance to undocumented immigrants.

The philanthropic community is working with community-based organizations and nonprofits to address the impacts of the pandemic on individual residents as the nonprofit sector. 

Toronto

Toronto was the epicenter of the largest outbreak of SARS outside of Asia in 2003.  Lessons from the SARS outbreak informing the Coronavirus response starts with at the front end – identify cases!  Toronto during SARS spent $25 million overall for economic recovery.  $5 million was expended initially.  $500,000 of seed funding to address economic and tourism impacts immediately.  There will need to be marketing to encourage people to come back.

In Toronto, the City is working with United Way to address social needs.  Toronto has a significant population in need of shelter.  The Mayor is insisting that Toronto start planning for recovery now.  Planning provides hope. 

Key issues to address with the coronavirus is reducing costs to businesses and helping employees.  Steps include extending grace periods; using contingency funds; employee protection measures; and helping with access to employee insurance.  Landlords are reluctant to give up rents.  Some property tax referrals are being done on municipal level.  The City of Toronto is working with the provincial government and special districts to forego or delay tax payments. 

Galveston County, Texas

Galveston and Galveston County is not under a shut-down or shelter-in-place order yet.  However, its 9,000 workers in accommodations and food services are being impacted as well as its $31 million cruise industry, which supports many small businesses.  Galveston has had experience developing its emergency response sector in response to numerous hurricanes.  As a consequence, the Galveston Economic Development Partnership has tools in place to respond to a disaster, such as Covid-19, including a Business Recovery Loan program.  This loan program provides gap funding to businesses before SBA loans and or insurance can kick-in.  It provides 180-day loans at 3.125% APR. 

Local response to the Coronavirus thus far includes:

  • Weekly regional conference calls hosted by the Houston Partnership to collect best practices and share updates
  • Business Continuity Resource Guide – A Disaster Toolkit is available on GEDP’s web site,
    • The Business Continuity Resource Guide, while developed to address the impacts of hurricanes has applicable information to today’s Covid-19 crisis.
  • Regional listing of primary contacts.

Galveston’s Economic Development Partnership’s experience with hurricane disasters has taught them to be prepared for the future by analyzing potential impacts and determining what role and services GEDP could best provide that would be most helpful post-disaster.  As result, GEDP focused on lending issues. Local lenders helped local businesses – existing relationships made a difference.  A need for gap financing was identified which prompted GEDP to create the Business Recovery Loan program.  The Small Business Administration (SBA) is a resource.  GEDP is waiting hear what EDA will be doing to address Coronavirus.  In the past, GEDP has worked with their regional planning agency to access and leverage resources.