Taking a page from Washington, cities craft their own stimulus
Unable to wait for federal help, they are finding ways to offer loans to local businesses.
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That concern percolates through Lakeport, which approved the loan scheme last month.Skip to next paragraph
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“There’s a fear there that this may be a bit more risky than any of us know,” says Mr. Knoll of the redevelopment agency. “What are we going to be looking at a year from now if the businesses need to close and can’t make repayments?”
But, he adds, “rural communities don’t seem to be getting the attention through the federal recovery program that a lot of the urban areas are getting. We’re not sure if we’re going to get much help.”
In truth, many urban areas are simply retasking federal money that they have received for other purposes.
Boston recently announced the creation of a $350,000 microloan program that uses federal grant money that the city has on hand to target struggling businesses in poorer parts of the city. The goal is to help businesses overcome a loss of cash flow and a tight credit market. The beneficiaries so far include an ethnic food market and a discount store, both of which received $25,000 to help keep their doors open, says Kerry O’Brien, spokeswoman for Boston’s Department of Neighborhood Development.
On a more expansive level, San Francisco is using $23.8 million of federal money to entice companies to set up shop in struggling parts of the city. The effort is part of a five-part stimulus plan that draws on federal and local funds to pay for construction projects, training programs, and recruitment of overseas industries – particularly from China. Similar microloan efforts are underway or in planning stages from Bayonne, N.J., to Boulder, Colo.
“There is some potential for success here, with just keeping people employed, even if at some point the companies don’t make it. Until we get some job growth that would be beneficial,” says Michael Wasylenko, professor of economics at Syracuse University in New York. “The downside is: Are we just delaying the inevitable? That’s a very hard thing to assess, especially with small businesses.”
Professor Wasylenko’s hesitation reflects a wider concern with emergency business stabilization. There is little way of knowing if the preserved businesses will be the types of businesses that will thrive in an altered, post-crisis economy.
In New York City, such concerns are paramount. The city is embarking on a $10 billion stimulus program. Some $3 million of that will be allotted to the earliest stages of business development – helping entrepreneurs to move from an idea to a viable business model. It also will provide office space and training programs.
“You have to invest for the future at time when you are hurting the most,” says Seth Pinsky, president of the city’s Economic Development Corporation.
In Lakeport, Roy Fields is still hopeful there will be a future for his swimwear and boat-rental shop, On The Waterfront. It’s far too early to close up shop, he says, but revenue is down to $30,000 a month – $50,000 below his usual break-even point. Mr. Fields’ business was what Knoll, the city’s redevelopment director, had in mind when he came up with the city loan-stabilization program.
“I’m trying not to put my hand out, I’m trying to make it on my own,” Fields says. But many businesses, and quite possibly his own shop, won’t survive without a cash infusion, he adds.
“We need each other to survive, especially in a small community,” Fields says. “What [Knoll]’s doing over there is worth watching.”