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April 15, 2021

Arts Venue Closures Likely After Months-Long Delay in Federal Grant
Program

Technical glitches at the Small Business Administration leaves
independent business owners on a knife's edge

 

Bimbo's 365 Club in San Francisco in March. (Eric Risberg/AP Photo)

The Chief

**** A critical $16.25 billion grant program to sustain thousands of
small creative venues that haven't been able to open since the
pandemic began has yet to deliver a cent of relief four months after
passage, due to delays and faulty technology at the Small Business
Administration (SBA). A website constructed to take grant applications
closed last week after only four hours online, because of constant
crashes and an inability to intake documents. It has not been restored
and there's no timetable for its return.

The program, based on the landmark Save Our Stages legislation put into
last December's COVID relief bill, was the largest investment in the
arts in U.S. history. But the byzantine application process (often
requiring over 100 pages of documents) and stubborn lack of payout has
music clubs, small museums and movie theaters, and other venues either
closing or looking to sell out to larger firms.

"Understandably, landlords can't last forever," said Audrey Fix
Schaefer, communications director with the National Independent Venues
Association , a lead driver of Save Our
Stages. "Eviction notices are coming. People are like, 'we can't
do this anymore.'"

The situation reinforces the importance of policy implementation, the
primary responsibility of the executive branch. SBA has been notorious
for decades
for failing in its mission to support small businesses, and the
changeover in administrations to President Biden has not ameliorated
this. A critical Inspector General report

released a week ago noted that the grants management office where the
program is being run from has only one designated official managing the
process; the rest of the staff is on "temporary detail."

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**** SBA Spokesperson Andrea Roebker, said that the program,
known as Shuttered Venues Operating Grants (SVOG), has been "built
from the ground up," and that the agency "is committed to delivering
this much-needed relief to these venues, many of which have been closed
for extended periods of time." But in the meantime, venue operators
must wait agonizingly, living on borrowed time, borrowed money, and the
fear of collapse.

The legislation establishing SVOG passed on December 27, 2020. This is
one of the few grant programs the SBA has had to manage in its history,
and several factors needed to be built out and decided. Specifically,
the agency needed to build a website that could upload financial
documents, and determine guidelines for eligibility and other program
management.

The Paycheck Protection Program (PPP), also overseen through the SBA,
was actually run out of private banks as a loan that would later get
forgiven. That sidestepped some of the more intrusive processes a
government grant project demands. "This is a different animal," said
Alissa McCain, an attorney with Texas Accountants and Lawyers for the
Arts, a nonprofit providing pro bono assistance with pandemic relief
programs to creative venue operators.

For months, applicants have been trying to figure out what information
would be needed to qualify for SVOG. The SBA has issued 10 different
Frequently Asked Questions documents

about the program, and according to McCain the FAQs contain 260
different questions. "I actually counted them because I got
frustrated," she said. "260 questions to understand the program,
it's a lot." McCain said the process resembles a grant program that
nonprofits must navigate, which isn't necessarily the skill set for
independent venue owners that operate hand-to-mouth businesses.

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For example, applicants must sign up for a "System for Award
Management" designation to accept federal money, the way a federal
contractor would. "This is required for all federal grants," the
SBA's Roebker said, and that's true; PPP got around this because of
the technicality of being a forgivable loan program where the money
technically came from private banks. SAM registration is extensive and
can take over a week to complete; it can subject the recipient to as
many as ten after-the-fact audits of the funds awarded. While Schaefer
and others support fraud controls on the program, others question the
level of documentation required in an emergency situation. "SBA is
treating the 930 Club and Rockwood Music Hall like Lockheed," said
Chris Castle, an entertainment attorney in Austin, Texas. Congress could
have set parameters that waived SAM designation for these particular
grantees, but did not.

While there was no formal application issued, venue operators knew
through the FAQs that they had to assemble monthly revenues for 2019 and
2020, along with quarterly revenues for the same period. They need to
compile employee lists, payroll lists, and even floor plans (whether a
non-music venue has fixed seating affects eligibility). All of this
determines whether a venue qualifies and how much they can receive.

After no word about the start of the first-come, first-served process
for months, applicants got word 12 hours before the launch

that the application portal
would go live at noon on April 8. When it opened, "not a single entity
was able to actually submit their application," said Schaefer, who
works at the 9:30 Club and other venues in Washington, D.C. First,
applicants had trouble entering the system, constantly hitting refresh
until they could get in. Once there, nobody could upload their
attachments. The SBA shuttered the site by 4:15 that afternoon, and if
you visit the portal today, it
states that it has been "temporarily suspended" due to "technical
difficulties."

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Roebker, of SBA, said that "technical issues arose despite multiple
successful tests of the application process." It's likely that
thousands of applicants were attempting to upload documents at once.
Roebker added that the agency "has identified and fixed the initial
issues," after re-testing the portal, which was created by outside
vendors, "our teams identified other potential performance issues,
which we are working to resolve."

Public communications from the agency
have not given a
date certain for resumption. Venue owners and advocates really need that
date certain to plan their survival. It's also not clear how long
after a venue operator uploads an application that it will get a review
and money will be released. (Some payments will be released in
installments, though it's unclear how that is determined.)

The office of Senate Majority Leader Chuck Schumer (D-NY), a champion of
the Save Our Stages legislation, said in a statement to the Prospect,
"We've been in touch with SBA to push for them to quickly fix the
issues and relaunch the program once all problems have been
addressed." Sen. Amy Klobuchar (D-MN), who co-authored the
legislation, and Sen. Ben Cardin (D-MD), chair of the Senate Small
Business Committee, did not respond to a request for comment.

The start and then stop of SVOG has crushed venue owners, who finally
saw a ray of hope after more than a year of lockdowns. "To call it
absolutely devastating is an understatement," said Schaefer. She told
me of one venue owner whose family member put off a surgery scheduled
for April 8 so she could be in front of the computer to upload the
application. "Then it went down, but she's still thinking, 'should
we do the surgery?'" Schaefer explained. She would be a couple hours
away from a computer and her personal documents, meaning she could miss
the moment to upload and get frozen out of the program. "There are a
lot of real-world implications for this," Schaefer said.

One of them is frustration leading to desperation. Venue operators have
been barely hanging on, cashing out 401(k) plans, taking out second
mortgages, doing anything to make rent, with no revenues coming in.
Stopping landlords from moving to eviction was easier when there was a
definitive date for SVOG opening. Now there's nothing to ward off
financial obligations. "Venues that are really on the cusp are trying
to make hard decisions," said pro bono attorney McCain. "Is my lease
up, do I renew, do I go into bankruptcy, do I put more personal money
into this? It's just a really dire situation." The fact that mass
vaccinations could lead to imminent reopening of live events makes it
even more tantalizing.

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The Arclight Theaters in Los Angeles, which as a local chain could have
qualified for SVOG, announced this week that it would permanently close
.
Other venue operators are giving up, either through closure or selling
out their venues to a conglomerate. As the Prospect has reported
,
Live Nation, the nation's largest music venue operator, has
accumulated $2 billion in funding for acquisitions. Venture capital
funds are also circling. The fear is that corporate-run music venues
will reduce choice, raise ticket prices, or cut artist payouts; some
buyers may want the real estate instead of the venue.

The disastrous situation is an example of how passing a bill is only the
beginning of the policy process. Too many pundits have skipped right
ahead

to measuring President Biden for Mount Rushmore based on one piece of
emergency legislation. But he will likely rise or fall on
implementation; if beloved music venues and theaters close across the
country because the SBA can't manage a functioning website, all the
legislation in the world won't matter. It also stresses the importance
of legislative design; everyone knew the SBA was a wreck, so giving them
control of this major arts funding without assistance was likely a
mistake. The American Rescue Plan added a paltry $840,000

in resource funding for SVOG.  

A progressive resurgence only succeeds if government works for people.
Decades of disinvestment in government makes that monumentally
difficult. But it's an imperative for Biden's executive branch.

What Day of Biden's Presidency Is It?

Day 86.

We Can't Do This Without You

Today I Learned

* The Johnson & Johnson vaccine will be paused in the United States

for at least another week. (Wall Street Journal)

* Meanwhile, the U.S. is likely to have 300 million extra doses

on hand by the end of July. (Washington Post)

* Offsetting infrastructure funding with taxes on the rich and
corporations makes the package more popular
.
(Quinnipiac poll)

* Biden's speech on Afghanistan withdrawal

was actually pitch-perfect. (New York Times)

* But the concern is that we'll trade a permanent troop presence for a
permanent private military contractor presence
.
(American Prospect)

* Mitt Romney and Kyrsten Sinema working on a bipartisan minimum wage
increase

expected to be in the $10-$11 range. (HuffPost)

* The foot-dragging on an OSHA temporary emergency workplace standard

is terrible. (New Republic)

* The foot-dragging on raising the refugee cap
is
worse, and deadly for thousands of refugees. Just shameful. (CNN)

* White House imposes sanctions on Russia

for the SolarWinds hack. (Axios)

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