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Franchot calls on Gov. Hogan to tap Rainy Day fund to help small businesses survive pandemic

Maryland Comptroller Peter Franchot, left, looks for a pair of jeans with Beth Pocalyko, owner of John's Men's Clothing in Bel Air, during the state's back-to-school tax-free shopping days in August 2019.
Maryland Comptroller Peter Franchot, left, looks for a pair of jeans with Beth Pocalyko, owner of John's Men's Clothing in Bel Air, during the state's back-to-school tax-free shopping days in August 2019. (Erika Butler/The Aegis / Baltimore Sun)

Comptroller Peter Franchot urged the governor and lawmakers Wednesday to boost aid to small Maryland businesses struggling in the pandemic and renewed calls for businesses to be given grants of $10,000 each.

“It just kills me to see these ‘For Lease’ signs up on Main Street and realize that small businesses that have spent decades working hard to build your business, many of them unfortunately are going out of business in Maryland,” Franchot said during a virtual roundtable attended by about two dozen small and large retailers. “Every small business that goes out of business is a tragedy.”

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Franchot first proposed in March that Gov. Larry Hogan and the General Assembly dip into the state’s Rainy Day Fund to offer at least $500 million for small businesses hurt in the health crisis.

He wants $10,000 grants to go to struggling small businesses, he said Wednesday.

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“It’s there and it needs to be spent yesterday... to save small businesses that are hanging on by a thread,” Franchot said.

The state has offered both grants and loans to help businesses weather the crisis, but not at the funding level Franchot is proposing.

The state has earmarked $175 million worth of grants, loans and other relief to help small businesses weather the pandemic. By mid May, the state Department of Commerce had received so many applications that it stopped accepting new ones.

As of Monday, the department said it had nearly completed doling out the first $50 million round of grants announced in March. The state had issued 4,944 grants, with checks totaling $48.6 million.

“There are still a few outstanding grants we need to issue, most of which I think are just waiting on some outstanding paperwork,” said Karen Glenn Hood, a spokeswoman for the Commerce Department.

The state also continues to make loans from a pool of $75 million, also announced in March. As of Monday, 313 loans have been issued for a total of $60 million.

The state has begun awarding a second $45 million round of grants Hogan announced at the end of June and that became available July 20. The department has not accepted new applications for the new funds, which offer grants of up to $10,000 to businesses with 50 or fewer workers, but is continuing to vet the applicants already on file.

The second round of funding also included $5 million for the Maryland Small Business Development Financing Authority to offer financing to economically and socially disadvantaged entrepreneurs. That financing can help with working capital, supplies and materials, machinery and equipment acquisition, land acquisition, or real estate improvements.

But Franchot said he feels the state hasn’t followed through on its promise to help small businesses.

”I almost feel like we’re throwing in the towel, frankly, as far as getting relief to small businesses in Maryland,” Franchot said. “We need to do some dramatic things right now.”

Glenn Hood said the department is not aware of any additional funding being considered.

During Wednesday’s roundtable organized by the Maryland Retailers Association, merchants said they struggled with little or no sales during a state shutdown this spring and continue to face new challenges and rising expenses as they operate under new safety protocols, with fewer customers allowed in stores and with the potential for another resurgence of the coronavirus in the fall.

Beth Pocalyko, co-owner with her mother of John’s Men’s Clothing in Bel Air, said Harford County residents have come out in force to support local merchants. But, she added, “we’re scared if there is a shutdown again, that is in the future in the fall and winter months.

“That is scary,” Pocalyko said. “It makes us hesitant when buying products and how to prepare for that. You don’t want to overbuy right now.”

Retailers told the comptroller the state should offer additional tax relief, help negotiate with landlords, expand an upcoming tax-free shopping week and promote Maryland-based small businesses.

Staci Smith, owner of Stevie Lynn’s Bowtique in North East, a women’s clothing stores, said she had to scramble to create an online presence when stores were shut down. She suggested expanding the state’s tax-free week, planned this year to start Aug. 9, when consumers can get a break on the state’s 6% sales tax on any single item costing $100 or less.

“If it were a month, or two weeks, it would help bring people into the stores,” she said. “If we had it longer, it would bring in more revenue.”

She also suggested offering a COVID-19 tax credit on income tax to cover the period businesses were shut down.

“Your idea of expanding some aspects of tax free shopping combined with some form of tax credit incentives so you guys can stay in business makes all sorts of sense and doesn’t necessarily cost the taxpayers a lot of money if it’s done correctly,” Franchot said.

The state legislature would need to act to change or expand the tax free week.

Angela Tandy, owner of the Sassanova fashion boutiques in Harbor East in Baltimore, Baltimore County and Bethesda, said creating an online site during the shutdown helped but brought in just a fraction of what would be sold in stores.

Now, Tandy said, “my biggest struggles are landlord negotiations. I’m dealing with three different landlords in three different areas.”

While some rent has been deferred and two stores have bounced back, “one has not and I’m at risk in that location of potentially not being able to stick it out.”

Tandy said she received a federal Paycheck Protection Program loan to help with payroll and other costs, “but that’s not going to carry us through 2020.”

A tax credit could help, she said.

Franchot agreed that the state should help with negotiations with creditors, particularly larger landlords, who some said have become less responsive over the period of the crisis in working with with tenants.

Smaller landlords, he said, may need subsidies as well to help get through the crisis.

“I’m normally tight with a dollar and conservative on fiscal issues ... but we need you to survive and we need you to be healthy enough,” Franchot told her. “We do have better days ahead.”

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