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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

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.”

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.

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.”

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.

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.

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