The Mobile County Commission seems to have found a way to work around guidance Alabama’s attorney general issued in April suggesting they could not lawfully provide financial assistance to small businesses negatively impacted by the COVID-19 pandemic.
Last week, Commissioner Connie Hudson unveiled a collaborative initiative with the Mobile Area Chamber of Commerce that aims to provide financial assistance to small businesses “experiencing extreme hardships” due to the COVID-19 crisis. Through the Mobile County Small Business Relief Fund Program, applicants could obtain up to $25,000 for their businesses depending on the level of need.
Weeks of statewide public health orders shuttered or limited the operations of many local businesses, but Hudson said small businesses throughout the county have suffered the most. The relief program she is proposing aims to stimulate the local economy by keeping those small businesses afloat.
“The state came in and closed these businesses and they’re the ones that have been suffering the most,” she said. “They’re the ones that have less resources to stay in business for a long period of time, and two months is a long time for small businesses to survive when they’re not getting revenue.”
While other federal relief efforts like the Payroll Protection Program have also extended financial assistance to some small businesses, Hudson said those programs require owners to spend the lion’s share of the money they receive on personnel costs. The county’s relief fund would encourage the same, but would also allow businesses to use the funds for things like mortgages, lease payments and other expenditures.
According to guidelines released by the commission, businesses would submit applications to the Mobile Area Chamber of Commerce, which would then review the applications using a five-member committee of volunteers from the banking, accounting, county government, legal and small business sectors.
So far, the county has not publicly named who will sit on the review committee, but their selections would be reviewed and receive final approval at a public meeting of the commission. The funding would be distributed to the business directly through the chamber, Hudson said.
As part of the plan, the county would invest an initial $1 million, though Hudson said the chamber has expressed interest in working with local banks to build up the fund in the future.
While the county hasn’t officially launched the program, it has begun publicly advertising.
The advertisements are required under Amendment 772 of Alabama’s Constitution — a passage Attorney General Steve Marshall cited in guidance from April that concluded giving public dollars to private businesses solely to keep them open wouldn’t constitute a “public purpose” under state law.
The public purpose exception to Amendment 772 was carved out by the Alabama Supreme Court and has allowed taxpayer dollars to support a number of private endeavors that serve a greater public benefit.
Reached by Lagniappe, a representative of the office said Marshall remains “deeply sympathetic to the desire to assist small businesses” due to COVID-19, but the attorney general’s position on the matter — one based on “[Amendment 772’s] express language and decades of precedent” — hasn’t changed.
“Note that the title of our April 7 document indicates its purpose — it is guidance,” a statement from Marshall’s office reads. “It was requested by numerous city and county officials from across the state and is intended to help guide local governments in their decision-making in a manner that best protects them from private litigation. At this point, that risk is a matter for Mobile County to weigh and evaluate with its attorneys, as it appears to be doing.”
Against Marshall’s guidance, Mobile County is looking to join other municipalities that have proceeded with some type of financial lifeline to small businesses in their area. Cities such as Tuscaloosa and Auburn have rolled out their own efforts to help small businesses, and last month the city of Mobile launched a grant program for entertainment venues and close-contact service providers called Ignite Mobile.
Mobile County has argued supporting small businesses serves a public purpose by safeguarding revenues it receives from sales taxes generated by those businesses. That has been an easier sell for cities, which derive a larger percentage of their revenue from sales tax than counties. So far, Mobile County appears to be the only one of Alabama’s 67 counties offering direct financial aid to private businesses.
County Attorney Jay Ross told commissioners he’s been working with the Alabama Department of Examiners of Public Accounts to make sure their auditors were comfortable with guidelines built into the proposed grant program. As the agency in charge of auditing public bodies, state examiners would be in charge of reviewing or responding to any irregularities resulting from the program.
Ross said, “there is no writing from the department of examiners that says [the grant program] is OK,” but he wrote the guidelines for it based on their input. Speaking to Lagniappe, Hudson said issuing legal opinions was “beyond the examiner’s purview,” and with their verbal approval of the guidelines, she is “very comfortable” moving forward with the grant program.
“It is sorely needed,” Hudson said. “You still see businesses closing every day, and I just think this is an opportunity for the county to step up and help. With the assistance we’ve gotten from the examiners, I feel confident that we’re on the right track.”
Not all of Hudson’s colleagues have been as enthusiastic about the program she spearheaded.
Commission President Jerry Carl, who voted with Hudson to start advertising for the program, said he absolutely supported the idea but also wanted to use COVID-19 relief funds the county expects to receive through the federal CARES Act to provide additional help for businesses in the future.
“This is a Band-Aid when we need open-heart surgery, but it is a great place to start,” Carl added.
On the other end of the spectrum, Commissioner Merceria Ludgood, an attorney, seemed to be opposed to the program entirely. Though she doesn’t debate the need to help small businesses, Ludgood expressed discomfort about the legal footing for the program and the way the county came upon it.
“We asked the attorney general for an opinion as to whether we could do this and whether it satisfied a public purpose, and he said no. Then we started shopping to find someone who would say yes or at the very least wouldn’t say no, and I’m not just not comfortable with it,” Ludgood said. “I think it’s a great program, I just don’t think we have the authority to do it and we move ahead with it at our own peril.”
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