Gig Harbor businesses press city for aid as shutdown pushes them to the edge
Increasingly desperate, some small business owners in Gig Harbor are pressing the city for more help in surviving the coronavirus shutdown.
But Mayor Kit Kuhn says the city is already doing all it can, and businesses must look to the state and federal governments for relief.
In an open letter widely circulated online, architect Brett Marlo DeSantis argued that if businesses don’t survive, the whole structure of Gig Harbor’s tourist economy is at risk, and the city with it.
“I realize the City of Gig Harbor is a business and is suffering like the rest of us,” DeSantis wrote. “However, we need you to dig deep and offer us financial support and relief. I fear if you don’t, you will not have an attractive, welcoming or even existing downtown business core to attract the tourism that fills the city’s coffers...”
Another business owner, Bleu Braaten, whose family owns Gig Harbor’s Best Western Wesley Inn & Suites, suggested in an email to the mayor and council that the city return the lodging and tourism tax collected during the first quarter from hotels, motels and bed-and-breakfasts. He cited Seaside, OR. as a city that has done that.
“These funds will allow collectors to pay necessary operations bills and hopeful retain staff,” Braaten said, noting that his hotel employs 25 people.
Legal constraints
But Kuhn said the city can’t legally do that.
“The lodging tax is basically a pass-through, paid by the customer,” he told The Gateway in an interview last week. “There’s no legal mechanism for returning it to the hotel. If we returned it to anyone, it would have to go back to the client” — that is, the customer who paid for the room.
There are other restrictions, the mayor said. Since it’s a tax collected and distributed by the state, only the state has authority to change the way it’s collected. And once it’s distributed to states and counties, state law limits the way it can be used.
“We can’t just take it and give it to anyone who asks for it,” Kuhn said. “It’s illegal, as well as unethical, for the city to give money to private businesses.”
Seaside, OR is a special case, noted City Administrator Bob Larson, because their 12 percent tax is levied directly by the city, and the refund was authorized by a city ordinance.
The lodging tax, sometimes called the LTAC, after the city committee that administers it, is set by the state at 5 percent for hotels and motels that have 25 rooms or more, and 2 percent for smaller lodgings. Like sales tax, it is collected by the state Department of Revenue and later redistributed to cities and counties.
Gig Harbor has three hotels and a handful of bed and breakfasts.
By state law, there are only four kinds of things cities can fund with this money, said Laura Pettit, the city’s marketing and tourism director.
Those are general tourism marketing; promotion of special events and festivals; operations of tourism-related facilities, such as the Harbor History Museum and the Skansie Visitors Center; and capital outlay and operations of tourism-related facilities, such as parks and docks, owned by the city.
Income from the tax also covers half the Tourism and Marketing department salaries, benefits and office expenses, she noted.
Kuhn said the city has taken what steps it can to provide relief to struggling businesses.
The Gig Harbor City Council last week approved a 60-day moratorium on collecting the city’s water and sewage fees, which the mayor said would save the average utility ratepayer about $120 a month — and cost the city about $588,000 in lost revenue.
“We did that for both residential and business users,” Kuhn said, “because our primary concern is providing everyone with uninterrupted services.”
The utility waiver will add to the revenue loss the city is experiencing because of the coronavirus shutdown, which has already been estimated in excess of $1 million.
Beyond that, Kuhn said, there is little else the city can do, except join in lobbying the federal government to quickly re-fund the Small Business Administration’s emergency payroll protection program.
“We have been lobbying both on the state and federal level to get some of that relief down to businesses,” the mayor said. They city has a contract with the Tacoma law firm of Gordon Thomas Honeywell to conduct its lobbying.
Fed loans “hit and miss”
So far, though, success with the federal program has been “hit and miss” in the Gig Harbor area, Kuhn said. Many businesses have reported frustration trying to apply for the SBA loan.
Dave Krogle, who runs a web design business in Gig Harbor with two part-time employees, vented in a recent email about his experience:
“First, we tried going through our business bank Kitsap Credit Union, but they weren’t SBA approved, so they couldn’t help. Then pretty much every other bank said you needed to be a current banking customer but none of them accepting any new banking clients!
“ I finally found that US Bank was accepting an initial application for the PPP even if you didn’t bank with them, so I sent in that application about 1 or 2 weeks ago and haven’t heard anything back at all. And to put a bow on the whole ordeal, we got an email ... from our bank, Kitsap Credit Union, saying that they were just accepted by the SBA to provide PPP loans. I immediately filled out their form to get in line to be considered for the loan.”
Then, he said, the final blow fell: The SBA ran out of money and stopped accepting applications. (A bill to re-fund the program passed Congress last week.)
“We are trying to stay positive and hopeful that somehow we will be OK, but I have to admit that the constant moving of the goalposts and then on top of that, the ball being ripped out from underneath you (like Charlie Brown) has been disappointing and disheartening, to say the least,” Krogle wrote.
Non-profits hurt, too
Christopher Jones, president of the Gig Harbor Film Festival, had a similar experience, he told Debbie Cockrell of The News Tribune.
“We’re a small nonprofit and very much feeling left out,” Jones wrote The News Tribune on April 6.
His organization first faced a delay for the program to launch at its bank, Columbia Bank. The program launched nationally April 3.
Eventually, the film festival organization’s application was accepted. But the acceptance coincided with the first wave of funding running out by April 16.
“Columbia Bank accepted our application for underwriting for PPP last week and was completed in the last day or two for under-writing details.,” Jones told The News Tribune via email.
While Jones said his organization met every deadline, it was told “federally allocated funds have been dispersed per the federal authorization. Further, we have received zero dollars or feedback on a FEMA emergency grant.”
The 2020 Gig Harbor Film Festival has been canceled, but it hopes to resume in 2021.
One in five get loans
In a national survey released Monday, the National Federation of Independent Business (NFIB) reported that “about three-quarters of small-business owners have submitted an application for a PPP loan as of April 17.”
But, only about one in five (20 percent) of submitted applications had been fully processed with funds deposited in the borrower’s account, according to NFIB, with the rest still waiting.
It added that about 40 percent of small-business owners successfully submitted an application for an Economic Injury Disaster Loan through the SBA website, with about 77 percent requesting the emergency grant of up to $10,000.
“Of those who requested the EIDL emergency grant, about 10 percent have received the funds. Essentially, all of the EIDL applicants (99 percent) have yet to receive the loan,” NFIB reported.
In one hopeful sign for Gig Harbor businesses, the Pierce County Council last week voted to extend its emergency small business loan program to businesses in incorporated cities. The council allocated $3 million for zero-interest loans. Businesses can receive $1,000 per employee, up to a total of $20,000. (For details, see story A-)
(For opinion columns by Brett Marlo DeSantis and Mayor Kit Kuhn, see A2)
This story was originally published April 28, 2020 at 12:00 AM.