History: Section 601(a) of the Social Security Act, as added by section 5001 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), established the Coronavirus Relief Fund (Fund) and appropriated $150 billion to the Fund. Under the CARES Act, the Fund is to be used to make payments for specified uses to States and certain local governments; the District of Columbia and U.S. Territories; and Tribal governments. Hennepin County received a direct payment out of the Fund from the U.S. Treasury.

The CARES Act provides that money from the Fund may only be used to cover costs that:

1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19);
2.  were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and
3.  were incurred during the period that begins on March 1, 2020 and ends on December 30, 2020.

Allowable expenditures include those incurred to respond to second-order effects of the emergency, such as economic impacts. Federal guidance for the Coronavirus Relief Fund specifically includes as allowable “expenditures related to the provision of grants to small businesses to reimburse the costs of business interruption caused by required closures.”

Current Economic Impacts of COVID-19

• According to data from the Department of Employment & Economic Development (DEED) 69% of Hennepin County businesses are small businesses with between 2-9 employees, and there are approximately 27,000 businesses in Hennepin County with fewer than 20 employees.
•  Based on national surveys, it is estimated that 54% of these businesses are on the verge of failure.
•  As of April 28, 2020, the MN Unemployment Office has received 127,690 applications for unemployment benefits in Hennepin County, representing 17.9% of the county’s labor force.
• While state and federal emergency funding programs for small businesses have been made available, the most vulnerable businesses, those with twenty or fewer employees, have the least capacity to access these first-come, first-served funds. Barriers faced by businesses owned by people of color, women, or in lower-income areas are only exacerbated by the current crisis.
• Support for small businesses on both an emergency relief basis and support for recovery are critical to ensure that workers in Hennepin County have jobs to return to and massive, continued unemployment can be prevented.
• Local financial support programs that prioritize racial equity and inclusion, when combined with additional strategies such as culturally specific outreach, can help mitigate the disproportionate impacts of the COVID-19 crisis for people of color and low-income communities.

Hennepin County Small Business Relief Fund

In response to the economic impacts of COVID-19 in Hennepin County, the Hennepin County Housing and Redevelopment Authority (HCHRA) established the Hennepin County Small Business Relief Program on April 21, 2020, as one critical step that will provide approximately 265 small local businesses with emergency funding. Rooted in policy positions of the HCHRA, the Small Business Relief Program is intended to fill gaps in federal and state coronavirus relief programs, align with similar programs established by 11 cities in Hennepin County, and more equitably distribute funds. Established guidelines defined eligible businesses as those that have documented losses due to COVID-19 impacts and:

• are locally owned and operated;
• have a physical establishment in Hennepin County;
• have at least one and no more than 20 employees; and
• under $1 million in annual revenue.

To expand the reach of this program and to prioritize support to businesses owned by people of color, women, or in lower-income areas, Hennepin County has partnered with The Alliance for Metropolitan Stability and 10 community-based organizations to conduct culturally specific outreach and technical assistance in navigating the various sources of funds available.

The current action would use federal Fund resources to increase the Hennepin County Small Business Relief Fund to $12,040,000. To align the established Small Business Relief Program guidelines with federal guidance and to further support racial equity and inclusion, the current action would amend the guidelines as follows:

• provide funds in the form of grants instead of forgivable loans;
•  increase the maximum grant amount to $10,000 instead of $7,500;
•  set aside up to $1,000,000 within the Small Business Relief Fund for businesses with 0 employees, up to a maximum grant amount of $3,000;
•  additional minor modifications to program guidelines and criteria based on federal Fund guidance, pending review from the County Attorney’s Office. 

Amendment 1 to Agreement PR00002172 (NTE $11,850,000) with the Metropolitan Consortium of Community Developers (MCCD) would revise program guidelines as described above and increase the fund administration fee to $290,000. To enable the increased volume of applications and small business financial information to be reviewed and eligibility determined as closely as possible to the established program timeframe, additional financial review capacity will be provided by NextStage, a local non-profit organization with small business expertise under an agreement not to exceed $190,000. These agreements provide for fund administration at a combined not to exceed cost of $480,000, or approximately 4% of the total fund amount.

Separately, staff will develop guidelines and an implementation plan for Board consideration that includes strategies to provide small business technical assistance and emergency funding assisting local businesses with costs associated with reopening under new public health guidance and protocols currently under development as part of recovery from the COVID-19 pandemic.

Current Request: This request is to allocate $15,000,000 of federal CARES Act Fund resources to small business relief/recovery; authorization to negotiate Amendment 1 to Agreement PR00002172 with the HCHRA and MCCD to revise program guidelines and increase the not to exceed amount to $11,850,000 (including $290,000 for MCCD administration); authorization to negotiate an agreement with NextStage to expand capacity for financial review and technical assistance in processing Hennepin County Small Business Relief program applications, during the period May 6, 2020 through December 30, 2020, with a not to exceed amount of $190,000.

Impact/Outcomes: Approval of this agreement will assist approximately 1,390 Hennepin County small businesses with the costs of business interruption due to the COVID-19 pandemic.