Business
Will US Government Grant Restaurants’ Request for $145 Billion Recovery Fund?
Predicting that COVID-19 — along with the social distancing measures put in place to contain the outbreak — would result in a loss of $225 billion in restaurant sales over the next three months and cost 5 million to 7 million people their jobs, the National Restaurant Association asked the Trump Administration to create a $145 billion Restaurant and Foodservice Industry Recovery Fund.
“The restaurant industry is one of low margins, tight cash flow, and a workforce that depends on us for their livelihood,” Sean Kennedy, EVP of Public Affairs, wrote Wednesday in a letter addressed to President Donald Trump, U.S. House Speaker Nancy Pelosi and U.S. Senate Majority Leader Mitch McConnell. “Without aggressive action from the federal government, many restaurants that are a staple of local communities will simply never resume service.”
He went on to say that the restaurant and foodservice industry needed immediate liquidity to compensate for reduced revenue attributed to coronavirus-related declines in order to pay employees, maintain service operations, meet transactional and financial obligations.
In order to maintain solvency, the NRA requested that the U.S. Treasury create the program within 15 days of enactment and provide grants with minimal delay.
According to an internal analysis by the organization's economists, a three-month shutdown of the restaurant industry would also be a $675 billion hit to the economy overall, since every dollar spent in restaurants generates an additional $2 elsewhere in the national economy, the NRA said.
Specifically, Kennedy's package calls for the government to:
- Offer $35 billion for Community Development Block Grants for Disaster Relief assistance. This program is used when regions and communities — and their local businesses — may not recover after a federally declared emergency or disaster.
“The unprecedented business disruption for restaurants and hospitality industry companies has led to significant concerns about whether businesses will be able to reopen this year. This targeted financial assistance will allow some businesses to maintain their commitment to their communities and hopefully prepare for a return to normal operations,” the letter stated.
- Assistance in allowing businesses to defer mortgage, lease and loan obligations as most small businesses do not have long-term cash reserves.
- $100 billion in federally backed Business Interruption Insurance. As of March 17, 28 states or territories have ordered closures for their restaurants and bars, according to the NRA, and an additional number of counties and municipalities have also mandated closures. While many businesses have invested in Business Interruption Insurance and Contingent Business Interruption Insurance, most policies can deny claims due to a “Virus” exclusion, the letter said.
Rather than engaging in a protracted dispute and arbitration process, Congress must approve a timely insurance program through the U.S. Treasury Department that allows businesses to receive their insured benefit under an expedited time frame, the letter said.
“As we enter a 12-to-18 month period of tremendous uncertainty in the hospitality industry, these insurance claims must be approved quickly and utilize a federal backstop similar to the program created for airlines after 9/11/2001,” Kennedy wrote.
- Federal loan program equal to lost revenue. Create a federal loan program for a business to get a loan equal to lost revenue during an emergency three-month period with the option for extension through 2020. The loan would receive forgiveness as long as the employer keeps its workers on the payroll without reducing their pay, including workers self-quarantining or on paid sick-leave.
“Before coronavirus, the recruitment and retention of employees was the top challenge for the restaurant industry,” the letter stated. “Amid this current massive economic disruption, the industry may lose its workforce for years to come. This critical legislation would permit employees to stay on payroll, maintain employer benefits, and avoid additional long-term harm to the restaurant industry. This legislation also keeps more Americans in the workforce rather than on public assistance — when the ongoing public health emergency subsides — Americans will be ready to get back to work.
- $45 billion in expanded access to effective, efficient and affordable federal and conventional loans.
- $130 Million in disaster unemployment assistance, which will help employees with financial benefits during interrupted employment due to closures and
other emergency-related hardships. DUA benefits are payable to individuals (whose unemployment continues to be a result of the major disaster) only for weeks of unemployment in the Disaster Assistance Period. - Fix the Qualified Improvement Property technical correction. Congress can help the economy immediately by fixing QIP so that businesses can (a) amend their returns and receive money back that they effectively overpaid in taxes, and (b) receive the benefit of bonus depreciation, as a stimulus measure. This fix has been scored at a zero-cost to the federal government, according to the NRA.
- Assistance in allowing businesses to delay, defer, or forgo tax obligations. Tax and financial forbearance from states and banking institutions on sales and income taxes, property taxes and other payments that directly impact a small business’s cash flow. States must expedite refunds for any over-payments of estimated taxes.
- Tax credits for businesses that are retaining employees. Congress can quickly pass the Employee Retention Tax Credit, which has been utilized to protect
employees and employers during similar emergency situations. - Reduced credit card interchange fees, expanding upon the Durbin Amendment under the Dodd-Frank legislation.
- A Temporary Payroll Tax Cut that increases economic activity. Reduce the employee shares of Social Security payroll taxes by two percentage points (from 6.2% to 4.2% for employees) and hold the Social Security Trust Fund harmless through a transfer of general revenue. Employees/consumers will receive more pay in each paycheck immediately through a reduction in payroll tax withholdings.
“Taken together, these proposals will ensure that restaurants have increased liquidity and access to necessary financing to help them survive the dramatic loss in profits caused by the coronavirus,” Kennedy wrote.
In the coming days, the association said it would submit additional recommendations as the situation unfolds.
