East Lansing’s Downtown Development Authority has released a list of 57 small businesses that will each receive a $2,500 grant to help them weather the pandemic and hopefully stay in business.
But there’s money still left in the pot, and for that and other reasons, the process has not been without its critics.
The DDA had voted at its April 23 meeting to assist 100 businesses with the $2,500 grants. But only 76 businesses applied, and 19 were deemed ineligible. The DDA voted unanimously yesterday to approve $2,500 grants to the remaining 57.
The winning applicants include real estate agents, coffee shops, restaurants, bars, barbers and hair salons, a tattoo parlor, as well as the Michigan State University student newspaper, the State News.
Many long-time small local businesses are on the list, including Pinball Pete’s, Saper Galleries, Curious Book Shop, Conrad’s, Twitchell’s Cleaners, and The Peanut Barrel.
Most recipients are stand-alone locations, but local franchises of chains such as 7-Eleven and Cottage Inn Pizza were also approved. (See the whole list here.)
Sundance Jewelers owner Bill Yonkus called into the DDA meeting yesterday to thank them for the grant to his store, and said increasing the cash allotments to the businesses with the leftover funds would be beneficial to everyone awarded funds.
“We’re appreciative of any assistance,” he said. “I’ve got a pretty good idea what to do with the money.”
Business owners tell ELi they plan to use the funds to pay rent to keep their locations, and also to pay utilities and employees when they are able to reopen. The grant reporting form requires only a narrative of how money was spent; no evidence of how the money was spent will be required.
City staff said the grant opportunity was well advertised, but some members of the DDA questioned what they saw as the low number of applicants.
Of the 76 businesses that applied, 7 were rendered ineligible by being located outside the Downtown Development District. Another 12 businesses were categorized as ineligible because they were not current on taxes or fees owed to the City before the local State of Emergency was declared in mid-March.
Because the number of applicants meant there was no need for selection of winners among those eligible, the Lansing Economic Area Partnership (LEAP) discounted its fee for assisting from $10,000 down to $5,000.
The first round of grants only amounted to $142,500 of the $250,000 set aside for grants. Yesterday, a 6-2 majority of the DDA voted to use the remaining funds for a new round of grants that would give other businesses a chance to apply, and to pay LEAP $5,000 for assistance with that.
The 57 businesses that received money in the first round will not be able to receive any in the second round. Those that had been rendered ineligible by the first round’s requirement that they not owe the City any money as of March 15 could apply this time if they pay off all their debts to the City by June 1.
Applications for the new round of the business relief program are anticipated to open June 2 and close on June 5.
DDA members Luke Hackney and Lynsey Clayton maintained their opposition to the program. Hackney has stated that he thinks money should go out to all businesses in the district, and Clayton believes that there are more effective ways to help the downtown survive the pandemic. She also objected to giving another $5,000 to LEAP.
DDA Board member Jill Rhode indicated she wasn’t generally thrilled with the idea of making grants from tax dollars to people who been late paying their taxes.
One local business owner, Paul Vlahakis, complained about the whole process in a letter to the authority.
Vlahakis is a real estate developer, and his family business owns Dublin Square and El Azteco. The city assessor website shows that both of those businesses have a long history of failing to pay taxes on time. In 2018, Vlahakis told ELi that those debts were being resolved, but overdue taxes have continued to be reported.
“I am disappointed at the method the DDA chose to allocate these discretionary funds,” Vlahakis wrote in his letter about the grant program. “If there are 175 businesses in the DDA, does the DDA honestly think that selecting 100 businesses and awarding $2,500 dollars rather than issuing all of the businesses $1,428 dollars is going to make a difference?” he inquired.
“Every business is suffering financial hardship, and this [business relief program] will just prove to be another disappointment to the businesses that are not selected,” he wrote. “The DDA is in place to help drive and support all businesses in the Downtown not turn its assistance into a lottery or game show. I think it was a very bad decision and it continues to be increasingly evident to me that it may be time to select a new person to lead this body.”
The money in the DDA’s Project Development Fund, which is the source of these grants, ultimately comes from property tax millages levied on DDA district property owners and businesses.
Some observers have questioned the legality of the DDA’s small business relief fund, since it is not normal for the authority to redistribute tax dollars specifically to prop up private businesses while receiving nothing for the public in return in terms of specific goods or services.
In a legal opinion dated April 23 and attached to yesterday’s DDA agenda, City Attorney Tom Yeadon defended the program, citing state statutes governing downtown development authorities that Yeadon said could be “read broadly enough to permit direct support of our downtown businesses.”
The law allows the DDA to develop and implement plans “designed to halt the deterioration of property values in the downtown district and to promote the economic growth of the downtown district, and take such steps as may be necessary to persuade property owners to implement the plans to the fullest extent possible.”
“I felt there was legal room to proceed,” Yeadon told the DDA on Thursday.
If the DDA doesn’t get enough eligible applicants for the second round of grants, it will revisit the question of what to do with the remaining funds.