Small businesses in Westminster that have taken financial hits from the coronavirus crisis will be able to apply for up to $20,000 in city assistance loans in the coming months.
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But when City Council members unanimously approved that program at their Wednesday live streamed meeting, they also approved the program’s funding source, which took $1.1 million away from a city fund that was initially set up for improvements to poorly maintained properties and structures in the city’s west end.
That money originally comprised a grant and loan program for property and business owners in blemished areas along Westminster Blvd, in the west side between Bolsa Chica Rd. and Edwards St., staff said. Residents and watchdogs quickly pointed out that the fund is still needed for that area, but has remained untouched for years.
“Considerably more thought needs to go into that,” said resident Jodi Boyd during public comment Wednesday, calling the proposal to re-route the money “quite a surprise to many of us who live and do business on the west side to learn there was $1.1 million set aside for a couple years for economic improvement and nothing was ever done.”
Boyd said “this was one area where residents could have rolled up our sleeves to champion this program — instead I felt there was a complete lack of communication and transparency, and it’s not fair to completely take away these funds.”
Resident Terry Rains called on the council to delay a vote on the program proposal, adding the money needs to go where it was originally intended: “badly-needed improvements on the west side.”
Council members like Sergio Contreras and Kimberly Ho reasoned that the original purpose of the fund as a grant and loan program for those properties along Westminster Blvd didn’t have “any takers.”
But the city’s community development director, Alexa Smittle, said “some people knew about the loans” — that the original person overseeing that program, former assistant city manager Chet Simmons, “received a number of phone calls or inquiries” about the program.
Why the money never “went out the door,” Smittle said she wasn’t totally sure. The improvement efforts for the area involved a broad, “systemic approach” that involved different moving pieces like code enforcement and plans for the city planning department to educate property owners. She surmised things got “waylaid” and the different aspects of the improvement efforts were unable to “gel together.”
Yet there was no other funding program like this set aside for any other part of the city, she said, meaning this strip of the city was a specific target area for improvement.
Smittle lamented that the expertise on that program resided with Simmons, who along with former city manager Eddie Manfro abruptly exited City Hall earlier this year. “We have to experience the challenges of some staff turnover and the knowledge base that went with them.”
Under the loan program, the repayment term would be up to five years at a 2% interest rate. It would be eligible for businesses of 25 employees or fewer. The city expects the businesses to use the money for sustenance throughout the crisis, and put it toward things like rent payments, payroll for employees and utilities — not an expansion of their business.
At Ho’s request, businesses owners would also have to undergo business training and mentorship with SCORE, a partner of the U.S. Small Business Administration (SBA).
Ho and Ta before the vote publicly disclosed that they owned businesses in the city, but said they wouldn’t apply for the loans.
Boyd during public comment questioned the effectiveness of the loans assisting the city’s large number of small businesses. “The impact of COVID-19 is going to go on for years, so giving small businesses $20,000 now is really just a bandaid.”
“We’re taking way too big of a risk with city money we really don’t have to lend out,” she said, later adding “if I had $1.1 million to give away, I would buy gift cards from the small businesses in need and redistribute to residents in need – that would be a win win.”
She recommended the city hold off on such a program until it found an outside economic recovery consultant, which the City Council on Wednesday directed staff to look for.
Absent Top Staff, Officials Look Past City Hall for Economic Help
In the wake of Manfro’s and Simmons’ departures — with other city department heads temporarily forced to sponge into their roles — city staff will now look for an outside economic recovery consultant who could help smooth out a plan to nurture the local economy coming out of the crisis.
The idea was Ta’s, who said staff “are obviously professionals and experts, however they have been overwhelmed with many projects.”
When the city begins to reopen, “we need an expert to help us recover,” he added.
Without the recent blows dealt by the coronavirus emergency — where subsequent stay home orders and health guidelines to limit trips out in public have impacted local businesses — the city was already facing the prospect of $13 million in revenue losses with the looming expiration of its voter-approved, one-cent sales tax increase, which took effect in 2017.
Revenue from the sales tax increase comprises much of what keeps the city budget above water, and it comes from purchases at local businesses that now have either been forced to cut down on hours and operations during the pandemic, or close entirely.
Westminster’s sales tax is slated to phase out in 2022. Once it does, the extra revenue it’s been pulling in for essential city services “evaporates almost immediately,” Johnson, who was then the city’s top numbers cruncher in the finance department, said at a May 22 Council meeting last year.
That means that unless city officials bring an extension of the sales tax increase back before voters in a ballot measure before 2022, the city could see cuts of up to $13 million in annual needed revenue that Manfro in his retirement letter called an “essential lifeline.”
Johnson in previous statements to Voice of OC said the full breadth of the city’s fiscal situation will be understood when the latest projections “will be presented at the budget study session later this month.”
Councilman Tai Do expressed concern over hiring a consultant in a period where the city has yet to bring on a permanent city manager — a role temporarily filled by Sherry Johnson, who was previously serving as the city’s finance director.
He raised questions about who the consultant would answer to: “the City Council, or the City Manager?”
Ta and Ho defended the urgency of hiring a consultant as soon as possible, maintaining that the consultant wouldn’t be a “full time” staffer, or fulfilling any assistant city manager duties or powers.
Contreras said he understood the urgency of hiring someone soon, but warned against a non-transparent hiring process or lack of vetting of whoever the city planned to bring on.
“I only ask it to be an open and fair process, and we hire the most qualified person,” Contreras said — versus “some hack” with a bad reputation at other public agencies, lest the city “inherit more problems.”
Contreras said the consultant’s task will likely be “one of the biggest projects in our city for years to come.”
Brandon Pho is a Voice of OC staff writer and Report for America corps member. Contact him at firstname.lastname@example.org or on Twitter @photherecord.
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