At CPA Eats we’re strongly advocating for relief from local legislatures for hospitality businesses of all kinds. We’re trying hard to help all our businesses and clients through this. We appreciate your support in advocating for the following suggestions with any government officials you are incontact with. Click here to see our suggestions for the steps restaurateurs can take to protect their own businesses.
1. Temporary Adjustment to Unemployment Insurance Program Parameters
Purpose: To provide employment flexibility and income assurance during the coronavirus pandemic period.
Measures:
Adjust the Unemployment Program for the remainder of 2020
Increase the weekly unemployment maximum payout to $1,000
Remove 2020 experience from future rate calculations for employers
Benefits
Increasing the weekly payout to $1,000 during 2020 ensures full income replacement for workers making up to $52,000 per year. This provides economic security for the vast majority of workers who will be directly affected by the virus and related closings, many of whom are working poor and particularly vulnerable to unexpected disruptions to earned income.
Temporarily unemployed workers with full income protection will continue to spend at a predictable velocity, thus providing a demand-side stimulus to maintaining the economy during this extraordinary period.
The funding pool for this stimulus already exists in the form of an unemployment insurance fund that was created specifically to protect workers from situations like this. The fund can be recharged from payroll taxes after the crisis is over.
Many small employers are deeply concerned about the physical and economic wellbeing of their employees. These employers are loathe to lay off employees, but simultaneously unable to meet payroll obligations if there are disruptions to business cash flow. This creates a self inflicted crisis whereby small employers need to reduce labor costs during a period of economic downturn, but are unwilling to make those reductions in a timely manner out of reluctance to harm employees. Ultimately, entire businesses and their whole employment pools are placed in jeopardy. Employers who know that their employees will be adequately compensated during a temporary unemployment period will be more inclined to make prudent choices to adjust staffing to sustainable levels. These same employers will be incentivized to rehire staff immediately upon lifting of coronavirus related bans in order to reclaim the human capital they invested in / trained.
Employers are currently penalized (rightly, during a ‘normal’ economic period) for unemployment payouts that are charged against their accounts. Removing the payments made in 2020 from the calculation of employer experience ratings ensures that employers will not be punished for adjustments made to address the challenges posed by the COVID-19 pandemic.
2. COVID-19 Economic Injury Rapid Relief Loans
Purpose: To invest in the immediate economic recovery of the state by providing small businesses with real-time access to working capital.
Update: We now recommend grants equal to 2% of a restaurant’s annual revenue, per month.
Measures:
Provide immediate loans to taxpayers with a <10 day application to funding process and guaranteed approval
Loan amount should be equal to the prior year sales taxes remitted by the business to the state
Taxpayer must be current on all sales tax filing and payment obligations to receive a loan
Loan structure will be a personally guaranteed loan with a 5 year amortization period and 0% interest
Benefits:
Retailers need readily available access to working capital during this period of crisis to ensure that they can continue operations through the crisis and/or restart them after the crisis
Traditional lending options, including the SBA, will not provide working capital expeditiously enough and present significant barriers to entry, including complicated underwriting processes and the need to provide adequate collateral for the borrowings
This loan program is simple in structure, approval, and execution
In essence, the state is lending the business the same amount that it expects the business to generate in sales tax receipts during the following twelve month period (assuming sales resume prior pace upon return to normalcy). This implies a 100% return on investment during Year One
A five year payback period is common for business loans and should be sustainable upon return to normalcy. The loan is an investment by the state in its small businesses, so no interest would be charged. Return to the state will be in the form of increased economic activity and the related tax revenues
The personal guarantee ensures the interests of the taxpayer and state are aligned
By restricting loans to taxpayers who are current on all sales tax filings and payment obligations, the state is objectively preferencing responsible businesses and prohibiting support of irresponsible businesses. This will naturally mitigate some of the potential for abuse of the program, plus we could naturally expect that the state will generate additional revenues from collections of past due sales taxes from taxpayers who are pursuing loan support