SAN MARCOS — As businesses across the country continue to take major financial hits due to the COVID-19 pandemic, a federal emergency lending program, established for small businesses, has burned through funds in less than 14 days.
The Small Business Administration’s Paycheck Protection Program (PPP) was created to allocate $349 billion to small American businesses in the form of loans. However, the program has come under fire for providing loans to several larger chains, leaving countless small businesses without any sort of relief.
Around the same time, the City of San Marcos launched its COVID-19 Business Sustainability Program with a similar goal: The city would provide low-interest loans to small businesses, giving its residents a solution much closer to home.
“We always viewed our program as a sort of a bridge for businesses to get to larger programs offered by the federal government that will have longer payback period,” San Marcos City Manager Jack Griffin said. “However, we recognized that the federal government was not going to be as quick as we could be, that’s one of the reasons we did it.”
The program set aside $3 million of the city’s General Fund Reserves, which is projected to be more than $30 million for the current fiscal year.
“Our City Council has a policy to maintain 40 percent of our budget in reserves, so for the current fiscal year, our operating budget is around $80 million in the General Fund, meaning 40 percent of $80 million would go into our General Fund Reserves,” Griffin said.
The reserve is split up into three categories: Emergency, Budget and Pension Stability, and Economic Opportunity. The Business Sustainability Program would fall into the emergency category, a category worth roughly $10 million.
According to Griffin, the reserves have been built up through sales tax, property tax and rent that the city gets for a nonresidential property they own, and because of the city’s extensive real estate portfolio, it makes $10 to $12 million in rent revenue annually. That rent revenue alone would pay for the emergency portion of the General Fund Reserves.
Griffin told The Coast News that there will be no cost to the taxpayer down the line, and though he admitted that there are some risks, the reward, he said, is worth it.
“Assuming that everyone pays their loans back, and there is some interest on some of those loans, the $3 million will be replenished within 5 years,” Griffin said. “It was important for us because we rely on sales tax and rent as significant parts of our revenue, and because we do have the means, it’s an investment into our business community.”
There have been more than 100 loan applications from small businesses in San Marcos representing a total of 1,277 employees. 79 of those 100 businesses have been approved so far, which is equivalent to almost 80 percent of the $3 million budget.
“In this challenging time, we believe that the right thing to do for our businesses and citizens is to invest in our businesses so that as many of them as possible can exit this emergency in as close a fiscal condition as when it started,” said Economic Development Director Tess Sangster. “In supporting our businesses, we are supporting our entire community.”