Loans – Businesses in Lackawanna, Luzerne counties reaped $742M in Paycheck Protection Program loans | Coronavirus
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Health care and related businesses received the biggest loans in a federal program that pumped more than $742.5 million toward protecting workers from layoffs in Lackawanna and Luzerne counties.
The Paycheck Protection Program infused cash across a wide array of industries ranging from small, single-employee businesses that received as little as $200, to larger corporations with multiple affiliates that secured more than $10 million.
The U.S. Small Business Administration approved nearly $525 billion in loans nationwide as of January to help businesses weather economic havoc brought on by the coronavirus pandemic.
Businesses with 500 or fewer employees were eligible to receive up to $10 million in loans, which will be converted to grants if the businesses use 60% of proceeds for salaries and meet certain other conditions.
Congress recently authorized a second, $284 billion round of funding as businesses continue to struggle to rebound. The new round lowers the employee threshold to 300 and the maximum loan amount to $2 million, and institutes additional restrictions.
As financial institutions begin taking applications for the second round, The Sunday Times analyzed the top loan recipients in Lackawanna and Luzerne counties and the effectiveness the program had on keeping people employed.
Key findings show:
In Lackawanna County, 3,361 businesses received a total of $356.1 million, while Luzerne County’s $386.4 million was spread across 3,901 businesses.
The health care and social assistance industries received the most funding in both counties, with Lackawanna County businesses securing $68.5 million, or 19.2% of the total, and Luzerne County businesses receiving $55.8 million, or 14.4%.
More than two dozen grocery stores in Lackawanna and Luzerne counties secured $3.7 million in loans even though the industry as a whole saw record sales. Changes in the new round of funding address that issue.
Funding for the hard-hit restaurant and hospitality industry lagged behind other industries in Lackawanna County, receiving $20.6 million, or 5.8% of the total. That sector fared better in Luzerne County, receiving $39.2 million, or 10.1% of the total. Most of that went to one company, Metz Culinary Management in Dallas, which received $10 million, the highest of any business in Luzerne County.
Business and economic analysts say it’s too early to fully analyze how successful the program was as employment data for the fourth quarter of 2020 has not yet been released. Initial, anecdotal evidence indicates it helped stave off an economic collapse.
“It certainly wasn’t a total failure,” said Andrew Chew, senior research and policy analyst with the Institute for Public Policy and Economic Development in Wilkes-Barre.
Top loan recipients
Wendy Wilson, spokeswoman for the Wright Center in Scranton, the top loan recipient in Lackawanna County at $6 million, said the funds were critical in helping the center keep its doors open. Physicians’ offices nationwide saw a dramatic decrease in revenues as patients, fearful of contracting the virus, put off care.
The Wright Center, with offices in Lackawanna and Luzerne counties, saw revenue decline 11% and expenses increase by 22% from the first and second quarters of 2020, Wilson said. The loans helped save 250 jobs at its graduate medical education center and 263 jobs at its community health centers, she said.
The Scranton Times LP, publisher of The Times-Tribune and its affiliated media companies, secured the second-highest amount of loans in Lackawanna County, just under $4.4 million.
Times-Shamrock Communications CEO and Publisher Jim Lewandowski said the funds were critical to help the company weather a roughly 25% reduction in advertising. That helped protect 403 jobs at The Times-Tribune in Scranton, its sister papers, The Citizens’ Voice in Wilkes-Barre, The Standard-Speaker in Hazleton and The Republican-Herald in Pottsville, as well as at all its radio stations, including ROCK-107, Q92.1, ESPN Radio and WZ(BA) in Baltimore, and two other companies that develop ads and distribute the newspapers.
Program changes helpful
Business and economic officials say they’re optimistic the new round of funding, with several changes to the restaurant industry, will help further stabilize businesses.
One of the most significant changes is the calculation used to determine how much money restaurants can seek.
In the first round, all businesses qualified for 2½ times their average monthly payroll. The new rules allow restaurants to seek 3½ times payroll, while other industries remain at 2½ times. The new rules also expand the types of expenses the funds can be used to cover, including costs for replacing spoiled products.
Tom Farrell, owner of Tiffany’s Tap & Grill in the Eynon section of Archbald, said the new rules allow him to seek a $100,000 loan in the second round, compared to the $80,500 loan he already received.
“The way the new PPP works is much more favorable to small businesses,” Farrell said. “It will basically cover almost all operating expenses.”
Chew said the change is among several that address key criticisms of the first round of funding, including lax lending rules where any business meeting the employee threshold could seek a loan, regardless of whether the pandemic negatively affected them.
“There is an argument that can be made that certain businesses got funding that probably could have withstood the pandemic without the funding,” he said.
The new rules require businesses to show a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. The rules also bar publicly traded corporations, such as national company-owned restaurant chains, from seeking a second PPP loan.
The changes reflect the government’s recognition that the pandemic did not affect all industries equally. While some, particularly the hospitality industry, were decimated, others prospered, yet still qualified for loans.
’Shocked and dismayed’
Supermarkets experienced explosive growth in sales during the initial phase of the pandemic as consumers, fearing prolonged stay-at-home orders, resorted to panic buying.
A recent study by Womply,, a Utah-based local commerce platform that provides market analysis services to businesses, showed grocery sales were up an average of 20% to 30% nearly every day in March — the start of the pandemic.
Despite that, more than two dozen grocery stores in Lackawanna and Luzerne counties received PPP loans; loan applications opened in April.
In Lackawanna County, 12 businesses classified as supermarkets and other grocery stores received $1.68 million. The largest loan — $1 million — went to Schiff’s Restaurant Service in Scranton. P&R Discount Foods II, with a Jermyn mailing address, received the second-highest loan, $444,817. In Luzerne County, 18 markets received a total of $2.1 million. Schiel’s Markets, with two stores in Wilkes-Barre, received the most, $920,909, through two loans — one under Schiel Inc., the other under CCFFG Inc. A related entity, Schiel’s Beverage, a beer distributor, received $13,295.
Schiff’s Vice President Adam Reese said his company differs from a typical supermarket because they also service the local restaurant industry.
“We saw a modest increase in the utilization of our grocery services; however, the restaurant supply sector of our business took a major hit,” he said.
Attempts to reach P&R Discount officials were unsuccessful. Schiel’s officials refused to comment.
Joe Fasula, co-owner of Gerrity’s supermarkets, said he understands grocers who supply the restaurant industry seeking money, but slammed other grocers for accepting the funding.
Gerrity’s did not qualify for the program because it employs about 1,100 people, Fasula said. Even if the company did, he said he would not have sought the funds because his business prospered.
“Shame on the government for allowing someone who stayed open and was doing more business than normal to collect that money,” Fasula said. “As a taxpayer … I’m shocked and dismayed anyone (in his industry) would apply for and accept that money. It’s just not right.”
Laura Strange, a spokeswoman for the National Grocers Association, a trade group for independent supermarkets, acknowledged the industry as a whole saw increased revenue. There was lot of uncertainty when the pandemic began, however, so there was no way to predict the sales boon, she said.
Strange noted the industry also saw a significant increase in costs, including purchasing personal protective equipment, installing plexiglass barriers and giving hazard pay to employees. A recent survey showed 85% of the group’s members offered hazard pay, Strange said.
“It’s important to remember there is a distinction between profits and overall dollar revenue,” Strange said. “The PPP loans gave them the comfort they needed to stay open and provide for the community.”
Big company bans
Consumer advocates also hailed the ban on publicly traded companies receiving a second round of loans.
“The point of the program was to be able to give emergency funding to businesses, particularly small businesses, that don’t have a credit line at their banks. … But, that’s not what happened,” said Beth Rotman, director of money in politics and ethics for Common Cause, a government watchdog group. “You don’t announce a program for small businesses then pass out all the money to the Ritz Carltons of the world.”
Independent franchise owners of national chains are still permitted to receive funding even if the parent company is publicly traded.
Several large franchise owners in Lackawanna and Luzerne counties received substantial loans under the first round of the PPP program.
In Lackawanna County, the owners of multiple locations of Denny’s Restaurant, a publicly traded company, obtained a total of $2.3 million under 19 different corporations in variations of the name Gills Inc., all of which have a mailing address of 116 S. State St., Clarks Summit.
Attempts to reach Hardev Gill, president of several of the corporations, were unsuccessful.
In Luzerne County, eight separate corporations affiliated with Metz Culinary Management received $2.6 million on top of the $10 million it received for the culinary management company, which provides onsite dining services for various industries.
One of those companies, Northeast Restaurant Group Inc., includes restaurants that are publicly traded — 11 T.G.I. Friday’s and one Ruth’s Chris Steakhouse. The restaurant group still will qualify for loans because they are franchise locations.
Maureen Metz, executive vice president, said the companies are separate, registered corporations and therefore eligible for separate loans. They plan to seek additional loans, she said.
Metz said Metz Culinary Management’s loan was crucial to keep people employed, as many of the businesses it serves were shut down during the early days of the pandemic. The company employs 4,500 people at 356 locations in 20 states. None of their companies have more than 300 employees at any one location, she said.
“It was of the utmost importance, and our No. 1 priority, to retain jobs and keep our employees safe,” she said.
It’s important the government continues to evaluate the program’s effectiveness to determine how best to meet needs, Rotman said.
“I’m cautiously optimistic everyday Americans will see more of these attempts to rescue them out of this really dark situation we’re in, while ensuring public money that’s going out is actually helping the people who need it most,” she said.