AD HOC COMMITTEE ON COVID-19 ECONOMIC IMPACT AND RECOVERY
3.
Meeting Date:
05/07/2020
Subject:
COVID-19 IMPACTS ON LOCAL INDUSTRY AND BUSINESSES
Submitted For:
David Twa,
Department:
County Administrator
Referral No.:
Referral Name:
Presenter:
Contact:
Julie DiMaggio Enea (925) 335-1077
Referral History:
FEDERAL COVID-19 GUIDELINES
During the April 16 White House Coronavirus Task Force Briefing, President Trump unveiled the Administration’s “Guidelines for Opening Up America Again,” a three-phase plan to assist state and local officials with moving forward from the pandemic by reopening their economies and getting people back to work. The plan includes guidelines for individuals and employers, with Phase 1 encouraging individuals to practice good hygiene, schools to remain closed, and employers to continue teleworking, and with Phases 2 and 3 gradually decreasing the number of restrictions. The guidelines in full may be found here.
CONTRA COSTA COUNTY HEALTH OFFICER COVID-19 ORDERS
Health Order 09: Shelter through May 31 with Limited Resumption of Some Activities Date of Order: April 29, 2020 This updated Order, effective May 4, 2020, continues to restrict most activity to essential functions and needs but, in recognition of progress made in slowing the spread of the disease and limiting hospitalizations, the Order allows certain additional essential businesses and activities to resume, allows certain low-risk outdoor businesses to being operating again, and authorizes certain additional outdoor activities to take place even though they are not essential. The new Order also introduces a framework to guide the Health Officer’s decisions about further easing of restrictions, focusing on progress achieved addressing COVID-19 and ensuring that there are adequate health care resources available. This “New Order” replaces the “Old Order” issued on March 31, 2020.
Under the New Order, all construction projects will be allowed to resume as long as the project complies with safety protocols included with the order. All real estate transactions will also now be able to resume, but with continued restrictions on open houses and limitations on in-person viewings. Any employee allowed to return to work at a facility can also access childcare programs that are allowed to operate.
Certain outdoor businesses can also begin operating again, and people are allowed to visit those businesses to perform work or obtain goods, services, or supplies. This includes wholesale and retail nurseries, landscapers, gardeners, and other businesses that primarily provide outdoor services as set forth in the order. Outdoor businesses do not include restaurants, cafes or bars, regardless of whether they have outdoor seating.
Other activities that can resume under the new order include residential moves and the use of certain shared outdoor recreational facilities that were previously ordered closed, like skate parks, but not others that involve shared equipment or physical contact.
Referral Update:
ECONOMIC IMPACTS OF COVID-19 TO CONTRA COSTA COUNTY
The COVID-19 shelter in place orders and other restrictions have required many businesses to radically modify the manner in which they operate, close down temporarily, or close down permanently. Most impacted are those businesses that involve large venues and the congregation of people in close proximity and/or that involve contact with a high number of public touch points where the virus can be transmitted. Examples include but are not limited to gyms, libraries, movie theaters, restaurants, sports arenas, retail and mass transportation. Many high-risk businesses have made adaptations to continue operating at some level during the crisis. Examples of adaptations have included curbside pick-up/delivery of food and goods; digital streaming of paid media; and internet meetings. Nonprofit organizations and places of worship have made similar adaptations, such as video streaming of church services via YouTube. Some businesses could not be sustained even with such adaptations and were forced to close permanently.
Employment and Businesses:
There is a great deal of uncertainty about the short- and long-term economic effects of this pandemic, but it’s safe to say the short-term impact on employment will be significant. At the national level, the latest report from the Department of Labor on unemployment insurance claims shows an increase of three million in initial claims in the week ending March 21 compared with the previous week. A 15% reduction in the workforce of higher-risk industries alone would add 5.7 million workers to the unemployment rolls. This would result in an almost immediate doubling of the U.S. unemployment rate from 3.5% to 7%. In contrast, it took nearly two years for the unemployment rate to double during the Great Recession as it climbed from 5% in December 2007 to 10% in October 2009.
The State of California reported an estimated unemployment rate for Contra Costa County of 4% for March 2020, meaning 22,000 job seekers out of the estimated labor force of 554,200. This is an increase from 2019’s annual estimated unemployment rate of 3.1%, with 17,300 job seekers. (Source: State of California Employment Development Department, April 2020 preliminary data) Countywide, there were about 24,000 businesses with employees in 2017, and 98,000 business entities without employees. (Source: U.S. Census Quick Facts)
Following is a report from the Employment and Human Services Department for the period ending April 18, 2020, showing the number of weekly new unemployment insurance claims in Contra Costa County. Attachment 1 is a report on the number of employee layoffs stemming from both temporary and permanent Contra Costa business closures or modified business models.
Number of Weekly New Unemployment Insurance (UI) Claims for Contra Costa County
Week Ending
Local Workforce Development Area (LWDA)
Number of Weekly New UI Claims
1/4/2020
Contra Costa County
306
1/11/2020
Contra Costa County
633
1/18/2020
Contra Costa County
825
1/25/2020
Contra Costa County
526
2/1/2020
Contra Costa County
458
2/8/2020
Contra Costa County
432
2/15/2020
Contra Costa County
486
2/22/2020
Contra Costa County
392
2/29/2020
Contra Costa County
491
3/7/2020
Contra Costa County
534
3/14/2020
Contra Costa County
840
3/21/2020
Contra Costa County
4,252
3/28/2020
Contra Costa County
28,108
4/4/2020
Contra Costa County
22,808
4/11/2020
Contra Costa County
15,553
4/18/2020
Contra Costa County
10,371
The County issued 5,661 business licenses in 2019. This figure includes businesses located in unincorporated Contra Costa County as well as other businesses required to obtain a license because they are doing business within the unincorporated County, such as contractors. (Source: Treasurer-Tax Collector, January 2020)
Industrial Lease Rates:
Industrial space (warehouse, production, and repair) is more concentrated along the Northern Waterfront corridor and Richmond. For the fourth quarter of 2019, industrial lease rates were $0.86/SF, and vacancy was around 4.3% (Source: Colliers International, April 2020). In the North Concord area, without much new product and well located for highway access, some properties were asking $1.00/SF, according to local brokers.
Retail Sales and Sales Tax:
The County receives quarterly sales tax reports from consultant HdL. The most recent reports (as of late April) cover through the fourth quarter of 2019. Due to the limited amount of traditional large-format retail in our unincorporated communities, Contra Costa’s sales tax profile is a little unusual. The largest sectors are fuel/service stations (including retail sites and refinery-related operations) and business/industry (including some refinery supply chain and a wide variety of other industrial companies), followed by the “pool”, which is the unincorporated County’s pro-rata [not per-capita] share of all the sales tax in the entire County unattributable to a physical site, most typically online sales.
Contra Costa is relatively underserved for retail compared to the rest of the Bay Area, as the following chart shows. While in normal times this is an opportunity to grow revenue, in the current times it means that the upcoming sales tax revenue losses are relatively less impactful to the County than to other jurisdictions where sales tax is a greater revenue source.
(Source for all sales tax data: HdL, April 2020 for taxable sales through Dec. 2019)
Small Business Assistance:
The Federal Reserve recently announced they will be expanding the scope and eligibility of the Main Street Lending Program by lowering the minimum loan size and expanding the pool of businesses eligible. A press release announcing this expansion may be found here. The Federal Reserve established the Main Street Lending Program in early April to provide enhanced support for small and mid-sized businesses in good financial standing prior to the outbreak with up to 10,000 employees or revenues of less than $2.5 billion in the form of 4-year loans. Businesses with up to 15,000 employees or up to $5 billion in annual revenue will now be able to receive loans under this program. Additionally, the minimum loan size has been lowered from $1 million to $500,000 to offer more loans and loan options to a wider variety of small to mid-sized businesses. An updated term sheet may be found here, an updated Frequently Asked Questions (FAQs) document here.
Local Business Owners’ Comments:
The East Bay Economic Development Alliance (EDA) has a business survey out to assess impacts. With responses due on May 3, the full survey results are expected sometime in May. The EDA provided a mid-survey preview of the results to local jurisdictions. Some of the responses from the very small segment of unincorporated Contra Costa businesses included one owner who took out a personal line of credit against her home to continue to pay employees, another manager of a fitness chain who expects the entire chain to go out of business nationally, and a sole proprietor who was continuing to do his work independently inside private residences, so far unaffected by the crisis. (Source: East Bay EDA, April 2020)
Additionally, the County has received many phone calls, letters and emails from local businesses requesting accommodations to permit operations under the Shelter in Place Order. Correspondence that was received prior to the publication of this packet are attached hereto, organized by industry/business sector. Any correspondence received after publication of this packet will be added to the public record of this meeting.
Recommendation(s)/Next Step(s):
Attachments-Y
Attachment 1: Contra Costa Layoff Report 4-22-2020
