The PPP — Just because you can?

By Randall Poulton | Jul 23, 2020

The list of companies that received “loans” as part of the Paycheck Protection Program has been released. In case you don’t remember, the PPP was a key part of the CARES Act and intended to provide financial help to business that were impacted by the government-mandated coronavirus shutdown.

Conceptually, the PPP made sense: If the government is going to order businesses to close their doors, it is only fair that the government try to mitigate the consequences of that order. (What would have been even better was not to issue the shutdown order at all, but that is a different story for another day.) As with all government programs, and on balance the PPP was a good one, there are some problems.

First, a look at how the program worked. Most private-sector businesses with fewer than 500 employees could apply for a PPP loan. The amount of the loan was limited by the size of the applicant’s payroll — big companies could get more money. The idea was that the loan would cover an organization’s expenses for a term of eight weeks, including the cost of paying its workers. The underwriting for this loan was minimal. Importantly, there was no test to determine if, or to what extent, a business was impacted by the shutdown. Here is the bottom line: If the business paid its employees for that eight-week term, the loan would be forgiven. In other words, the loan became a gift, courtesy of the taxpayers.

Now we have the list of Maine organizations that were approved for PPP loans. It is a very long list — over 2,800 companies were approved for the free money. Some deserved it because they were shut down by government order or their business was otherwise clearly impacted. Others seem questionable. Nationally there was outrage over Stanford, Harvard and the Los Angeles Lakers asking for PPP money. While not as egregious, the Maine list is not without controversy. More on that later.

Lots of hotels, motels and restaurants are on the list. Obviously, the hospitality industry has been hit hard. Many of the restaurants that have reopened are struggling. On Friday we ate at Anglers. It appeared business was pretty slow. One of the staff described their volume as “not good.” Monday, I asked a longtime server at Applebee’s “How’s business?” He replied: “It sucks.” He went on to explain that his work hours have been cut from five shifts a week to two shifts. It looks like, even with help from the PPP, we may be seeing a lot of “closed” signs showing up on eateries and lodging houses.

Health care providers also got big money, which seems fair. Hospitals in particular took a major financial hit, essentially closing down except for emergency cases. MDI Hospital and Penobscot Community Health Center were listed among the seven health care organizations receiving $5 million to $10 million. Good for them. Doctors and nurses are on the front line in the war against COVID and deserve combat pay.

Locally, it was good to see that Reny’s and Mathews Brothers scored in the money. Reny’s was forced to close for two months while big box stores stayed open. That was grossly unfair. Mathews Brothers makes windows. While so far construction-related companies may have done OK, the 2021 forecast is bleak. One way to gauge the volume of future work is the number of pages in the industry publication Construction Summary. In the good times, this Maine weekly magazine is 20 or even 30 pages long. The latest issue is 12 pages and most of the projects listed are transportation-related. It looks like building construction activity is going to be down for a few years.

But there are companies that appear less deserving: Do car dealerships really need a taxpayer bailout? Listed in the $5 million to $10 million loan range are Darlings and Lee Holdings. Bill Dodge Auto Group, Rowe Ford and Charlie’s were runners-up at “only” $2 million to $5 million. Really? And, there are plenty more car dealers approved for lesser amounts. Locally, Dutch Chevrolet was approved for at least $150,000. Since many of the names at the top of the PPP list would also be at the top of the list of Maine’s richest families, it feels like taxpayers are subsidizing millionaires. Plus, in May, I tried to buy a truck and the Bangor dealership didn’t really seem interested! Probably too busy counting all their free money!

Another head-scratcher is Johnny’s Seeds. It was approved for $2 million to $5 million. Humm. Because of the stay-at-home order, many people are planting new and bigger gardens. In fact, Johnny’s ran out of some seeds. At least that was what they told us when we didn’t get everything we ordered. (We ended up getting a refund.) If your business is so busy you sell out of product, do you really need a bailout? Just because you can, doesn’t mean you should.

A whole bunch of private schools got PPP money, led by Husson University at $5 million to $10 million. What bothers me about schools getting PPP money is they didn’t lose any paying customers. When COVID hit, schools implemented online learning and their customers simply moved from the classroom to the bedroom. It seems to me this virtual schooling, along with the cancellation of all extracurricular activities, including sports, should result in reduced expenses. So why the need for taxpayer subsidy?

I raised that very question with Mel Mackay, head of school for John Bapst Memorial High School. Mackay explained that many private schools, including Bapst, have borrowed money to build student housing (predominantly to serve foreign students). No students on campus means no room-and-board income and as Mackay stated: “we still have the mortgage” (payment).

I saved my worst fleecing for last: The Maine Public Broadcasting Network has been approved for $1 million to $2 million! Unlike for-profit media, MPBN did not lose advertisers (it has none), and no doubt the stay-at-home order increased its audience. In my lifetime, MPBN has evolved from a taxpayer-subsidized local network that televised unique content not available on ABC, NBC and CBS, to just another spot on the TV dial; among 100s of channels that all air the same junk. Worse, Maine Public Radio has become an organ of the Democratic party. I believe in free speech, but I vehemently object to my taxpayer dollars being spent to forward one particular political agenda.

(Note: Maine Today Media, the parent company for most Maine newspapers, including The Republican Journal, was approved for a $2 million to $5 million PPP loan. The coronavirus shutdown was devastating to newspapers, in part because business that were ordered closed stopped buying ad space.)

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