For many businesses in Western North Carolina, the coming of COVID-19 represented what planners call an “unknown unknown,” a situation so outside of normal that it hadn’t been previously considered.
Now, more than two months into the statewide state of emergency declared by Gov. Roy Cooper, enterprises have largely shifted their thoughts to the “known unknown”: how revenues might be challenged by the recession unfolding from the coronavirus pandemic.
In Buncombe County, several efforts funded by public money have sprung up to help relieve some of this economic uncertainty. The One Buncombe Fund received $200,000 from the county and $100,000 from the city of Asheville, nearly a quarter of its roughly $1.3 million total. Two-thirds of that money is being used to offer low-interest loans of up to $10,000 to small businesses in need. (The remaining third is dedicated to support unemployed residents.)
Meanwhile, the Buncombe County Tourism Jobs Recovery Fund will repurpose $5 million from the Buncombe County Tourism Development Authority to provide grants of up to $50,000 for small businesses and nonprofits that “provide a direct visitor experience,” including restaurants, music venues and breweries. The money comes from the portion of occupancy tax revenues that had previously been reserved for community capital projects.
But those programs have introduced unknowns of their own for county taxpayers. Both the One Buncombe and TDA funds are being managed by Asheville-based Mountain BizWorks, which as a nonprofit community development financial institution is not subject to the same open records requirements that public agencies must follow.
Because of this arrangement, officials with local governments and the tourism authority say they will play no direct role in determining what area businesses receive public dollars — and what businesses are denied aid that could keep them from bankruptcy. And in the case of the One Buncombe Fund, taxpayers won’t know which businesses wound up with their money at all.
The county and city contributions to the One Buncombe Fund were both made as economic development incentives, a type of spending specifically defined in North Carolina law. In Buncombe County, those incentives have mostly been paid to individual businesses as a bonus for building the county’s workforce and tax base: Engine part manufacturer Linamar, for example, will receive $19 million in county incentives through 2024.
In those cases, however, incentive payments have been contingent on companies meeting economic goals, such as creating a certain number of jobs at a certain average wage. No such performance goals were established for the One Buncombe Fund; the only stipulation attached to the county and city money is that loans issued from the fund go to businesses with fewer than 50 employees.
Kit Cramer chairs the Buncombe County Service Foundation, a county-established nonprofit that serves as the fiduciary agent for the One Buncombe Fund. She says that BCSF board members have set no additional policies for business loans beyond the employee limit and that all decisions regarding specific loans are made by Mountain BizWorks. “We wanted to ensure that the process would be relatively simple,” she says.
However, it is unclear how the BCSF can know with certainty that BizWorks is adhering to the employee limit in its loanmaking. According to county spokesperson Kassi Day, the lender is not required to provide a list of loan recipients to the BCSF board or any local governmental entity. “De-identified, aggregated details,” she says, are provided “on a regular basis to ensure that the funds are being used appropriately to meet community needs.”
According to the latest report from Mountain BizWorks, 47 business loans had been made as of May 7 for a total of $445,000. Over half of those loans had been awarded to businesses of five employees or fewer, and 34 had gone to firms owned by minorities or women.
But demand clearly exceeds the supply of funding: 210 businesses had applied as of May 7, meaning that fewer than a quarter of applicants had received support. And as a nonprofit, BizWorks is not required to hold open meetings or share documentation outlining why specific loan decisions were made.
In response to an Xpress request for comment, Mountain BizWorks spokesperson Susan Osborne confirmed that the lender had not sent “identifiable client information” to either Buncombe County or Asheville. “Due to client confidentiality, we’re not able to share client information without their prior approval,” she said. “As we’re just the administrator of the fund, I would refer you back to the county and city government for additional information.”
Because those public bodies don’t have documents containing recipient information, they cannot be compelled to produce it through public record laws. “We have this sense that if it’s public money, we should be able to follow the yellow brick road,” says attorney Amanda Martin, general counsel for the N.C. Press Association. “But that is not always true.”
Something to see here
The situation bears some similarity to that of the Tourism Jobs Recovery Fund, which was established as part of the COVID-19 Recovery Act signed into law May 4 by Gov. Cooper. Although that fund’s $5 million in seed money comes from occupancy tax dollars managed by the TDA — a quasi-governmental agency that must comply with public records requests — it also will be administered by Mountain BizWorks.
Kathi Petersen, a spokesperson for the Explore Asheville Convention and Visitors Bureau, says that the tourism authority will play no role in evaluating grant applications from local small businesses and nonprofits. As with the One Buncombe Fund, Mountain BizWorks will make all decisions in a process not subject to public records law.
The legislation creating the fund, Petersen notes, “provides for the TDA to contract the administration of the fund to an agency experienced in emergency management funding for grants to assist small businesses that have closed or been otherwise significantly affected due to the economic hardship from the COVID-19 epidemic with the costs of recommencing business activities.”
But in this case, the names of grant recipients and grant amounts will be made public. Noah Wilson, director of sector development for Mountain BizWorks, says applicants will agree to share that information as part of the grant process, providing “a very clear element of consent right from the beginning of the program.”
Wilson says that while loan clients will occasionally agree to be profiled in a case study, there are “very different expectations and requirements of privacy” between loan and grant programs. “It is a common practice among grantors to announce their recipients, amounts and key metrics (i.e., jobs), and for grantees to have an expectation of public visibility as a result of being part of that program,” he explains. “It would be extraordinarily unusual (I’ve never heard of an example) for a lender to announce their loan recipients in the same way.”
Regardless of whether a business receives a loan or grant, Wilson continues, funding is critical for many to remain viable through COVID-19. “We know it’s going to take a lot of support in order for our small-business community to stay strong and weather the storm. We’re glad to do what we can and grateful for all the partners and collaborators and entrepreneurial thinkers who will make the larger success stories possible.”