Ongoing Aid Programs Necessary; Better Information Needed to More Effectively Target Businesses
“While communities across the nation felt the impacts of the pandemic on their restaurant, retail and recreation sectors, New York City was hit especially hard,” DiNapoli said. “As economic activity returns, foot traffic in key corridors should improve and reinvigorate market demand, but policy makers should recognize that many of these businesses, particularly those in disadvantaged communities, are likely to need continued support, especially in light of the recent severe surge in positive cases. The governor and mayor need to work together to help these businesses keep their doors open.”
Currently, New York City’s overall economic recovery continues to lag behind the rest of the country. The city lost a higher share of jobs between the second quarter of Calendar Year (CY) 2019 and the second quarter of CY 2021 than any of the other five most populous counties in the nation. Approximately 10% of the jobs lost in the nation over the period and 62% of the jobs lost in the state were based in New York City.
DiNapoli’s report found that while some of the jobs lost during the pandemic have returned, the restaurant subsector still employs 30% fewer workers than in 2019. The arts, entertainment and recreation sector was 24% smaller, and retail trade had 14% fewer jobs. Nationally, those sectors overall were just 3.4% smaller.
Between the second quarter of CY 2019 and the second quarter of CY 2021, the RRR sectors were hit hardest in Manhattan, where jobs declined by 40% compared to an average of 13% for the other boroughs. While slow growth can be attributed to lower rates of foot traffic and overall economic activity in the borough, resignations in the overall national workforce were also concentrated in these sectors.
The federal government provided a range of COVID-19 relief options to businesses through the U.S. Small Business Administration (SBA) totaling nearly $1.3 trillion. These include the Paycheck Protection Program (PPP), the Economic Injury Disaster Loan (EIDL) program, the Shuttered Venue Operators Grant (SVOG) program and the Restaurant Revitalization Fund (RRF) program.
Businesses in the city received at least $45 billion dollars in federal funding that, in turn, helped many small businesses manage payroll and operating expenses, pay rent, bolster protective equipment and cleaning materials, and construct outdoor dining structures. However, not all eligible businesses received funding. The SBA was so overwhelmed with applicants for RRF awards, for example, that the money ran out quickly, leaving many restaurants across the nation unfunded. In New York state, only 35% of the restaurants that applied for RRF funding received it before the program ran out of money.
DiNapoli’s report also assesses distribution of aid in low- and moderate-income (LMI) communities and historically underutilized business (HUB) zones, where past distributions for small businesses have lagged high-income areas and established business corridors. LMI status serves as a proxy for funding minority communities, since the average LMI census tract in the city is over three-quarters minority.
The Comptroller found that while data remains limited for a comprehensive analysis of the distribution of aid and its success in reaching LMI communities, the information available for RRF funding shows these restaurants received a proportionately smaller share of loans when compared to the percentage of all city restaurants. For example, in Manhattan’s Chinatown and the Lower East Side, only 30% of RRF dollars made it to the 59% of businesses located in LMI communities, whereas the remaining 70% of RRF dollars went to businesses in more affluent parts of the neighborhood.
While the state and city have expanded relief efforts targeted at businesses in the tourism industry and support businesses, the recent surge in COVID cases and the new Omicron variant pose a risk to the ongoing recovery. Better targeting of distribution of aid will be necessary going forward; a slump in market demand due to the decimation of the tourism industry led to a 5.5% rise in vacancies across premier shopping corridors over the first half of 2021 alone.
Even with the numerous programs and partnerships geared to help businesses survive, the city will face challenges in identifying neighborhoods and businesses in need due to a lack of information. The city and the state should make every effort to gather data on the results of the programs meant to close the gaps in the federal relief programs for small businesses. This data is especially important for program evaluation. As aid is disseminated to struggling communities, the city and the state must regularly assess their approach to identify any barriers to reaching those communities and improve results and ensure the efficient use of funds.