SCGA Governmental Affairs Update (5/11/20)
The weekend just past was the 1st one in many weeks in which golf was played in all 58 of California’s counties. Unlike the “recreational” golf that was played in the days immediately following the Governor’s statewide “stay at home” order, the golf played this last weekend in Southern California’s counties was for the most part an orderly display of strict social distancing and common touch point control.
There is nothing like a 6-week hiatus to discipline the starved golfer! The trick is going to be maintaining that level of discipline in the coming weeks. Or as the Los Angeles Times opined in a Friday Editorial about the opening of trails and golf courses – “reader, don’t screw it up.”
Last to be eliminated; first to come back. That was the strategy; that was the result. And it was a “result” premised entirely on the game’s ability to convince public policy makers and an often skeptical public that the central component of golf is entirely recreational, amenable to a level of social distancing and common touch point control second to none among outdoor recreational activities. We forget that at our own peril. Overreach, and what was granted can be rescinded.
There are business components to golf to be sure, and they will return when their parallels in the marketplace are reintroduced during the next five phases of Governor Newsom’s reopening paradigm. Not one day sooner; not one day later.
In the meantime, there are a few rough edges to some of counties’ protocols to be cleaned up – restoration of private golf instruction in San Diego County and golf carts in the only county still prohibiting their use (Ventura). We are working on those and remain optimistic on both counts. No doubt there are other “rough edges,” and if past is prologue, many of you will bring those to our attention in short order.
The pattern in every county has thus far been to gradually loosen restrictions as Public Health Officers gain confidence in their golf communities’ capacities to hew to the letter and spirit of their social distancing admonitions. That happens sooner than later in direct proportion to golfers’ behavior. So, please “do your part, play safe” to cite a familiar phrase (www.scga.org).
The “recreational” game may be back. The “business” component will follow in due time. But the across-the-board economic devastation caused by the hard-economic stop will linger for a long time. How long is anybody’s guess. How deep is anybody’s guess. But as the federal government heaps many trillions upon current debt and deficit loads, California’s Legislative Analyst predicts $20 billion + deficits through 2024, unemployment hits 14.7% on its way to a much higher number next month, and certain businesses are not likely to be fully functional until sometime in 2021, golf, no matter how lucky it has been in being among the first activities reintroduced, will not escape unscathed.
But before we pivot to the challenges of the next five phases of the state’s return to normality, which is likely to be a very new normal, there are a few details of Phase 1 to wrap up.
Paycheck Protection Program (PPP)
The Small Business Association’s (SBA) Paycheck Protection Program (PPP) is more grant program than loan program. It is aimed at companies with 500 or fewer employees for the primary purpose of enabling those companies to retain payrolls during closures by literally turning loans into grants so long as the companies spend roughly 75% of the “loan” on keeping employees employed for the 8-week period of the envisaged closure. While 501(c)(3) and (c)(19) nonprofits are eligible, other (c) Chapter Corporations are not. Since (c)(6)’s are the classification of most of the nation’s amateur golf associations and PGA Sections, and (c)(7)’s are the classification of most of the nation’s private golf clubs, the industry’s national organizations have continued to lobby for their inclusion in amended versions of the Program; thus far without success, although momentum for accommodating certain kinds of (c)(6)’s has been growing.
The nation exhausted the first $349 billion Congress appropriated for PPP. When Congress added another $310 billion to it April 27, most expected the well to quickly run dry again. However, as of Friday, 40% of those monies remain in the PPP coffers. There are many reasons. Due to what some, including Treasury Secretary Steven Mnuchin, have called a “loophole” in the PPP legislation, many large corporations have been “shamed” into returning their “loan/grants.” In addition, many small firms, particularly restaurants, are burdened more by expenses other than payroll and thus cannot qualify for forgiveness. They have shied away from the program. Bottom line: There are grants to be had in PPP for those small golf businesses and sole proprietorships whose business models are amenable to the 75% payroll requirement that triggers loan forgiveness.
Economic Injury Disaster Loans (EIDL)
Small business owners, sole proprietorships, independent contractors, 501(c)(6) and (7) corporations, and self-employed individuals are eligible to apply for Economic Injury Disaster Loans (EIDL), a longstanding U.S. assistance program that was enhanced to the tune of $70 billion by the CARES Act. Like the PPP, monies remain in this pot of largesse as well.
The CARES Act allows for an EIDL cash advance of up to $10,000, without repayment. Interest rates are 2.75% for most categories, 3.75% for certain types of businesses; 1st payback installments are delayed 12 months. The funds are intended to support temporary loss of revenue businesses and self-employed individuals are experiencing due to COVID-19. The rest of the already-established EIDL loan program caps out at $2 million, and although it is not forgivable, it may provide more flexibility than PPP in the types of expenses it covers, including a range of operating costs. The EIDL loan amount that can be requested is based on the amount of “economic injury” the applicant has sustained as a result of COVID-19. One can determine that “injury” (or loss) by comparing this year’s economic results to those in 2019.
Akin to PPP, the applicant will need to submit necessary documentation to establish eligibility, such as payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses from a sole proprietorship. Bank records will suffice if the borrower does not have other forms of documentation.
Eligible entities and self-employed individuals may apply for both PPP and EIDL, to the extent the EIDL is used for purposes other than those permitted for PPP loans. But, if the entity took out an EIDL loan between Jan. 31, 2020, and April 3, 2020, and used that loan funding for payroll costs, the borrower is still eligible for the PPP, but the borrower must then use the PPP to refinance the EIDL loan.
NEXT ROUND OF CONGRESSIONAL RELIEF
As we teased last week, Congress turns next to relief for the nation’s states, counties and cities. A combination of factors – the inability to print money, the inability to declare bankruptcy, a requirement to balance budgets, plummeting tax receipts, and costly COVID-19 burdens – has rendered the nation’s municipal governments financial basket cases.
Those municipal governments own 20% of the nation’s golf facilities. Those facilities play host to more than one-third of the nation’s golf rounds. Those facilities are the game’s growth engines and the sites for most of the nation’s developmental golf programs. The relief envisaged by Congress is not direct relief to the nation’s publicly owned golf courses, but to the degree to which money is fungible and parks departments are always disproportionately cut during hard times, it is indirect relief likely to spell the difference between continued life and death for many of the nation’s publicly owned golf courses.
Washington watchers know that Congressional Democrats are proposing $1 trillion for the country’s state and local governments. Congressional Republicans are balking at bailing out what they call fiscally irresponsible states, while strongly advocating for blanket business immunity from COVID-19 related lawsuits. The “fiscally irresponsible” states are pointing out that their residents pay much more in federal taxes than they get back, while the “fiscally responsible” states generally get more back than they pay in. Cause for alarm for an industry whose fate is so heavily invested in the public sector? We don’t think so. Cooler heads are prevailing in the form of a bipartisan effort in both House and Senate that would cut the aid to $500 billion and attach conditions guaranteeing that the states cannot divert or otherwise restrict monies intended for smaller towns and counties. No doubt it will be accompanied by a set of narrow liability protections in exchange therefore. The posturing begins this week.
Because the relief envisaged in this package is indirect as opposed to the direct relief involved in the PPP and EIDL components of the CARES Act, the game’s national advocacy effort, We Are Golf, is going to have much more difficulty finding ways to advocate for the game’s interest in this legislation than it did in the CARES Act. But there’s a narrowly nuanced lane in their somewhere, and we have confidence they’ll find their way to it; the stakes are high.