Friday, August 18, 2017

Expanding Metro’s Successful Business Interruption Fund

Since construction of the Red Line began in the 1980s, there has almost always been a rail line under construction somewhere in the county. When Measure R passed in 2009, providing money to a number of major capital projects, things really took off. Prior to the opening of the Gold and Expo Line extensions last year, Metro had five rail lines under construction simultaneously. With Measure M providing additional new funding for transit and highway projects, Metro’s construction efforts will continue to transform the landscape of the Los Angeles region for decades.

But, while seeing construction can be an exciting reminder of the progress being made to improve regional mobility, the impacts of construction can be disruptive to neighborhoods and the small businesses that anchor local communities. In order to mitigate the harmful effects of construction, Metro has been operating a grant fund to support small businesses next to some Measure R capital projects.

This pilot program, called the Business Interruption Fund, launched in 2015 and has been providing funding to local businesses to help them cover expenses like rent and payroll. Metro’s Board of Directors has approved annual spending of $10 million for the program. Qualifying businesses are allowed to apply for and receive funding multiple times, with an annual limit of $50,000.

To date, Metro has narrowly defined the cohort of businesses that are eligible to receive support from the BIF. Grant-receiving businesses must be located in a property directly adjacent to where Metro rail construction is taking place and have sufficient documentation to demonstrate revenue loss has occurred. They must also be a for-profit business or a non-religious nonprofit that has been in continuous operation at least two years and is still in business at the time the grant is approved.

Metro has designated the corridors that qualify for BIF eligibility on a project by project basis. The program originally covered the Crenshaw/LAX Line, the Little Tokyo segment of the Regional Connector in Downtown Los Angeles, and the first phase of the Purple Line Extension. Subsequently, Metro’s Board has approved expanding qualifying businesses to include those along the second phase of the Purple Line extension and near the 2nd/Broadway station of the Regional Connector. The Expo and Gold Line extensions completed in 2016 were not part of the BIF program, and neither is the Flower Street segment of the Regional Connector.

Metro’s goal is for 100% of grant recipients to be in business a year after they receive their money, but, currently, that number is about 90%. Over two and a half years, the average grantee has received about $40,000 from the BIF, suggesting that most businesses have been able to maintain financial stability without maxing out the available assistance from Metro.

The Business Interruption Fund has been successful and popular thus far. According to a Metro survey, 84% of grant-receiving businesses are satisfied with the program. Metro should make the program permanent and look at ways to improve it. Given that Metro requires businesses document their construction-related losses and that the average business receives far less than the maximum allowable grant, Metro’s Board should consider raising the maximum award amount above $50,000. This change would apply to a relatively small number of businesses, but it could make a major difference for them, and help meet Metro’s own goal of increasing the length of time businesses can remain viable with a BIF grant. Furthermore, it wouldn’t necessarily require Metro to allot more money to the program to make this change. While the Board authorized spending $10 million annually on the BIF, Metro has awarded about that amount total for the program since 2015.

Metro should also be willing to reconsider how it defines the geographic eligibility of businesses. Currently, only those businesses that are directly adjacent to the construction corridor can receive funding. Metro’s data show that applications are frequently received from non-eligible areas, and have to be declined as a result. It seems likely that the impacts of construction extend beyond the corridor itself, and Metro should study what it would cost to slightly loosen the definition of an eligible business.

Lastly, the Board should make a clear policy regarding how corridors are selected for inclusion in the BIF program, and explicitly tie it to Measure M capital projects. This program is a good policy for Metro, which, for a fraction of a percent of the cost of the projects being constructed, helps alleviate community concerns by keeping local businesses above water. In the coming years, construction will expand into underserved communities in the San Fernando Valley, Southeast Los Angeles and the San Gabriel Valley. Metro should commit to supporting these communities with the Business Interruption Fund and help secure a smooth transition to Los Angeles’ multimodal future.

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