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 COVID-19 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 business 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, the maximum loan amount to
$2 million and institutes additional restrictions.
As financial institutions begin taking applications for the second round, The Citizens’ Voice analyzed the top loan recipients in Lackawanna and Luzerne counties and the effectiveness the program had on keeping people employed.
Key findings show:
- In Luzerne County, 3,901 businesses received a total of $386.4 million, while Lackawanna County’s $356.1 million was spread across 3,661 businesses.
- The Health Care and Social Assistance industry received the most funding in both counties, with Luzerne County businesses securing $55.8 million or 14.4% of the total, and Lackawanna County businesses receiving $68.5 million, or 19.2%.
- More than two dozen grocery stores in Luzerne and Lackawanna 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 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% of the total. The vast majority of that went to one company, Metz Culinary Management in Dallas, which received $10 million, the largest loan to any business in the county.
Local business and economic analysts say it’s too early to fully analyze how successful the program was because employment data for the fourth quarter of 2020 has not yet been released. Initial, anecdotal evidence indicates it helped stave off an economic collapse.
How it helped
Linda Kanarr, CEO of Ecumenical Enterprise, which received a $1.7 million loan, said the funds enabled the company to maintain all 165 employees and hire new ones when turnover occurred and as the resident census declined at The Meadows in Dallas.
Kanarr said the loan was used “strictly to fund payroll at the nursing center and the personal care facility” and “gave us the opportunity to provide our skilled nursing home employees the hero’s pay they deserved.”
As a group, skilled nursing facilities received the most funding in the health care and social services industry in the county. The next-largest distribution went to child and youth service agencies.
Chris Boyle, senior vice president of human resources at Children’s Service Center of Wyoming Valley in Wilkes-Barre, said the agency’s $3.6 million loan enabled the behavioral health agency “to keep people home and employed,” keep crisis teams staffed and award “hazard pay” to help prevent turnover among frontline workers “at a time when hiring was difficult.”
“It helped us ride out that storm and figure out what we’re going to do moving forward,” said Boyle, who noted the agency would not qualify for the new round of loans because it has more than 300 employees.
The retail and construction industries received the second- and third-largest loan distributions, respectively, in the county. While it was obvious that many retail stores were closed, non-essential contractors were also put out of work.
Dave Balent, an Exeter-based contractor and board member of the Pennsylvania Builders Association, said the construction industry was devastated by the shutdown. He estimated at least 190 builders in the state went out of business because of it.
While Balent praised his lender, FNCB, for keeping him up to date on changes to the PPP, he said most contractors considered non-essential couldn’t get straight answers from state on whether they could still work if they had contracts to service essential businesses. He said PPP loans were a big help to those contractors.
Some struggle, others thrive
The Scranton Times LP, publisher of The Citizens’ Voice 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 Citizens’ Voice and its sister papers The Times-Tribune in Scranton, 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 WZBA in Baltimore, and two other companies that develop ads and distribute the newspapers.
The situation was much different for the recipient of the second-largest loan in Luzerne County — Bradley Caldwell Inc., a wholesale distributor of farm and home equipment and pet supplies in West Hazleton.
Owner Jim Bradley said that while many companies suffered economic losses during the shutdown, his was determined to be essential, and the pandemic “actually enhanced our business.”
“When we applied, this was all an unknown. We were simply trying to maintain a payroll” for over 350 employees, Bradley said, explaining that he had no idea how his business would eventually fare when he applied for a nearly $4.4 million loan. He thinks the bailout was “a good idea, but a poorly executed program from the government.”
Bradley, who used most of the funding as hazard pay for his warehouse and maintenance employees and truck drivers, said he would not apply for a new loan.
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 expands 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 received in the first draw.
“The way the new PPP works, it is much more favorable to small businesses,” Farrell said. “It will basically cover almost all operating expenses.”
Andrew Chew, a senior research and policy analyst with The Institute for Public Policy and Economic Development in Wilkes-Barre, said the change is among several that address key criticisms of the first round of funding, including lax lending rules that permitted any business that met the employee threshold to seek loans, regardless if they were negatively impacted by the pandemic.
“There is an argument that can be made that certain businesses got funding that probably could have withstood the pandemic without the funding,” Chew 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 Luzerne County, 18 businesses classified as supermarkets and other grocery stores received a total of $2.1 million. The largest loans were for Schiel’s Markets, which has two stores in Wilkes-Barre. One under, Schiel Inc., and the other under CCFFG Inc., totaled $920,909.
In Lackawanna County, 12 markets received $1.68 million. The largest loan, for $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.
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 declined comment.
Joe Fasula, coowner 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 spokesperson for the National Grocers Association, a trade group for independent supermarkets, acknowledged the industry as a whole saw increased revenue. There was a lot of uncertainty when the pandemic began, however, so there was no way to predict the sales boon.
Strange said 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 Carlton’s 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, which is a public company, obtained a combined total of $2.2 million under 18 different corporations that are variations of the name Gills, Inc., all of which have a mailing address of 116 S. State St., Clarks Summit.
Attempts to reach Hardy Gill, president of several of the corporations, for comment regarding whether he will seek additional loans were unsuccessful.
In Luzerne County, eight separate corporations affiliated with Metz Culinary Management received $2.6 million on top of the $10 million Metz received for the culinary management company, which provides on-site dining services for various industries.
One of those companies, Northeast Restaurant Group Inc., includes restaurants that are publicly traded companies — 11 T.G.I. Friday’s and one Ruth’s Chris Steakhouse. The restaurant group will still qualify for loans because the restaurants in the group are franchise locations.
Maureen Metz, executive vice president, said the eight 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 has 4,500 employees at 356 locations, across 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.