Why Pay LEAP $10K to Administer East Lansing’s Small Business Grants?

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Gary Caldwell for ELi

Normally this time of year, downtown would be flooded with people spending money. This year, it's a ghost town.

On Monday, ELi reported that East Lansing’s Downtown Development Authority voted last week to channel $250,000 to grant one hundred downtown businesses $2,500 each for emergency relief, and that the DDA will pay the Lansing Economic Area Partnership (LEAP) $10,000 to help administer these grants.

Several readers wrote follow-up questions to “Ask ELi.” This article explains more about the small-grant plans in advance of tomorrow afternoon’s follow-up DDA meeting on this matter.

The grants and payment to LEAP will come out of the DDA’s Project Development Fund

When the matter of business relief came to the DDA on April 23, Director of Planning Tom Fehrenbach indicated the DDA had at its disposal about $324,000 in the DDA’s Project Development Fund that could be channeled to emergency relief without needing to consult with City Council.

These are funds the DDA would normally use on projects like storefront facade improvements, public-space amenities like benches and planters, and sidewalk repairs.

LEAP suggested dedicating $150,000 of the DDA’s funds to 30 grants of $5,000 each. LEAP had sought a 10 percent administrative fee to help manage the program, but in advance of the meeting agreed to a flat fee of $10,000.

At last Thursday’s meeting, DDA members decided to dedicate more money – a total of $250,000 –  to a grant program, to allot $2,500 to one hundred businesses. Dillon Rush of LEAP, attending in the electronic meeting, was asked if LEAP would still take $10,000 for this bigger program. He said LEAP would.

The $10,000 to pay LEAP would come out of the DDA’s own funds, and would be in addition to the $250,000 directed to local businesses.

What LEAP will and won’t do for the program

According to materials provided to the DDA last week, for the $10,000 fee, LEAP would take on developing a web-based application and scoring criteria based on the DDA’s priorities, provide an FAQ for prospective applicants, answer some questions, promote the program, sketch out a review process including a conflict-of-interest management plan, design agreements, organize required banking and tax forms, “design, distribute, and collect monthly reporting,” and provide outcome reports to the DDA.

LEAP would not review the applications or make decisions about who would get the funds, would not disperse funds, and would not collect financial information for deposits and tax reporting. So, a substantial amount of the work would still have to be managed by City staff.

Why not have City staff do all the administration and save the $10,000?

Hiring LEAP in relation to this program means not having to start from scratch. LEAP has already run a grant program similar to this for the Greater Lansing Area, funded by the Michigan Economic Development Corporation (MEDC).

As DDA Vice Chair Jim Croom put it at last week’s meeting, LEAP has already “kicked the tires on this.” Fehrenbach described the administration as a “turn-key” option where City staff would not have to create a process anew.

City Manager George Lahanas, a member of the DDA by virtue of his office, argued at last week’s DDA meeting that creating “new apparatus” for this program “would slow us down and be burdensome.” He felt it important to get funds to the businesses as soon as possible and not to ask City staff to take on a new grant program.

Lahanas also said the cost of staff managing the work that LEAP is being hired to do would amount to a “hidden cost” for which there would not be compensation to the City from the DDA.

DDA members were split on the question of whether to hire LEAP

At last week’s meeting, DDA member Jeff Smith had helped with the LEAP review of applications for the MEDC-funded grants and said he described the process organized by LEAP as thorough, quantitative, objective, rigorous, thoughtful, and transparent.

DDA member Luke Hackney, who owns a t-shirt shop in the DDA district, disagreed and said he preferred a simple divvying-up of the money evenly among all businesses in the district.

DDA member Lynsey Clayton said she believed that, with the cancellation of festivals, postponement of submission of permits and site plans, and the like, City staff ought to have time to manage this grant program. She said she “could not stomach” LEAP obtaining $10,000 for this work when local businesses need the money. She suggested “getting creative with staffing.”

But Smith said it was essential that the grants be distributed as fast as possible and that letting LEAP take on this work would make a big difference: “we need to take action immediately or we will lose companies” in the district, Smith said. “Every day that goes by, another company will close,” he warned. Croom strongly agreed.

The DDA ultimately voted in favor of designating $250,000 to one hundred grants of $2,500 each, to pay $10,000 to LEAP in addition, and to meet again “early” this week to decide on criteria for eligibility. Only Hackney voted against this proposal.

The hope has been to get this project in the works fast, to have funds out to businesses by about the middle of May.

The DDA is meeting Thursday

Yesterday, the City announced the DDA would have the follow-up meeting on this matter tomorrow, Thursday, April 30, starting at 4:30 p.m.

UPDATE: The agenda has now been posted and includes recommended criteria for the grants. See the agenda packet here.

The DDA meeting will be available for public viewing at the City’s special meeting portal. Written comments can be sent at any time to Heather Pope by email. Public comment will be accepted live during the meeting, but will likely be limited to two minutes per person. Public comment can be made by calling 1-312-626-6799, or Toll Free 1-888-788-0099 (meeting ID: 812 5922 2631) at 4:30 p.m. on Thursday.

Earlier in the day on Thursday, City Council will hold its first meeting in about six weeks, starting at 9 a.m.

UPDATE: The agenda for City Council has also now posted. See the agenda with attachments here.

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