RI restaurants ask help and compassion from state government as COVID-19 shuts them down

A group of four independent food service operators sent a letter to RI Gov. Gina Raimondo on March 17, desperately asking for help from state government: “The COVID-19 crisis, and the necessary government-mandated gathering restrictions, [have] shuttered most of us. Those still left open are seeing as much as a 75% decrease in sales. While we applaud your administration for taking the appropriate measures to ensure the health and safety of all Rhode Islanders, the reality of the financial impact to many of us and our employees will mean even greater challenges ahead.”

The letter was signed by Rebecca Brady of Hometown Poké; Paul Kettelle of PVDonuts; Christopher Weitecha of Providence Bagels; and Alexis Moniello of Bayberry Beer Hall. Motif spoke with Brady on March 19, and she said that the specific requests in the letter were listed in priority order, the first three items asking for (1) delaying “sales, meals & beverage, and tangible tax payments for six months,” (2) “waiving tax penalties for late payment” on those, and (3) “waiving state payroll taxes for a 90-day period.”

Brady said, “For many small businesses who’ve been forced to close, they might not survive to open back up again if assistance doesn’t come very, very quickly.”

Later that afternoon at her daily press conference, the governor responded to what she described as a common question: “Are you reconsidering the Friday deadline for restaurants to pay, to remit their sales and meals tax? And the answer is no. The deadline is tomorrow. If you have a particular hardship or you need a little extra time, call the [Division] of Taxation…. But again, I want to be clear. This is for the sales tax that the customers have already paid, and that you’re holding in escrow. So remit it by the deadline tomorrow, please. And if you have some extraordinary circumstances, give us a call and we’ll help you out and work you through it.”

While payroll taxes are required by law to be escrowed by depositary account, no comparable requirement exists for sales taxes or meal-and-beverage taxes: nearly all businesses simply keep a ledger of what they owe each month and pay it like any other ordinary expense.

Asked by Motif to respond to the governor, Brady said no business she knows about puts sales taxes or meal-and-beverage taxes into escrow, since the money is “lumped in with the total” collected from customers when they pay their bill. “Our payment system doesn’t even have the option to escrow taxes. The governor’s response shows a very clear lack of understanding of how small businesses operate and survive. Cash flow is a revolving door and the profits are razor thin, especially in the food industry,” Brady said. “The money that we are collecting is used immediately to pay our employees, pay our vendors, pay for product, pay our rent and insurance, and the millions of other expenses that we, as small businesses, have. Since taxes are paid [for the prior month], if you had a very good month last month and then have a month where everyone is told to stay home and you shut down your business for several weeks, that is incredibly damaging.”

The letter also asks for “expediting and increasing unemployment benefits to staff who have been laid off due to decreased business related to COVID-19” and “ensuring unemployment insurance does not increase due to COVID-19 related layoffs.” While the state has waived the usual waiting period to collect unemployment insurance, tipped employees can earn a minimum cash wage as low as $3.89 per hour (RIGL §28-12-5(c)) and it is unclear how this figures in. Brady said her employees are all paid a base above minimum wage and pooled tips supplement that by about $5.50 per hour, but it would be a big concern for bartenders and servers at sit-down restaurants. Her business, Hometown Poké, sells take-away from its brick-and-mortar store at 185 Camp Street in the Mount Hope neighborhood on the East Side of PVD, and, although it remains open, Brady said the sharply declined demand would have forced layoffs except that four of her employees were students at Johnson and Wales University and had to leave anyway because of their school closure. Besides, Brady said, “Unemployment is only 60% of what people make. And if you are an hourly wage worker, you’re already trying to make ends meet, for most people, and so 60% of that is probably not going to be enough.”

The letter requests “a state-funded, no interest relief program that would make loans available to businesses who have seen a decrease in sales, with the option to defer payments for six months.” Although the US Small Business Administration (SBA) offers a disaster loan program, Brady said it is of limited value. “I know that the governor keeps talking about SBA loans… Most of us don’t qualify for those loans. If you have access to any capital, you don’t qualify. And most of us have access to some sort of capital; it’s just very, very high-interest. I know at least one business who applied last week for an SBA loan and was declined… I feel like the state is trying to punt off financial assistance to SBA but… I think very few businesses are actually going to be able to get SBA loans.” Brady cited the example of Massachusetts where Gov. Charlie Baker announced with much publicity the creation of the $10 million Mass Growth Capital Corporation’s Small Business Recovery Loan Fund on March 17, but he shut down applications on March 19 (only hours after our interview with Brady) citing the availability of SBA loans.

The final requests in the letter are for “abating or deferring rent/mortgage payments for a 90-day period” and for “abating or deferring utility payments for a 90-day period.” Temporary 30-day moratoriums have been imposed that prevent filing of eviction actions in court and prevent utility shutoffs, but do not affect the bills incurred or the obligation to pay. “I know that those get into sticky territory because you’re asking a private sector to make to make sacrifices themselves. Not all commercial landlords are the same, right? Some people have a lot of money where that might be something that they can do and not collect rent for three months, whereas there are probably other commercial landlords who have mortgages that they’re paying, so they need that money,” Brady said. “I know that this is a really difficult thing that we’re asking. We’re not the only city, though, who is looking into this,” she said, citing New York City as well as places in California and Massachusetts.

Despite sales down 75%, Hometown Poké probably is fortunate and faring better than many others in food service, Brady acknowledged, since it was never focused on dine-in, but she said that 30% of her annual revenue is from events that may all be canceled. Two and a half years ago, she said, the operation started as a food truck and the brick-and-mortar storefront only opened a year and a half ago. While the food truck has not been running over the winter, “We were supposed to start the food truck going up to Boston April 1, but that doesn’t look like it’s going to happen… That’s a huge loss for us. We go up there three days a week,” she said, and their catering business has also tanked with $7,000 canceled in the past week.

Nevertheless, the personal consequences to Brady are significant and she is worried. “I bought a house in October. So now I have a mortgage. Things had been going really well with our business before and so it felt like things were pretty stable at that point. They are obviously not now. If I don’t have money, I’m not going to be paying myself and then I can’t pay my mortgage. That means that [they] foreclose on your house. Again, there’s just a lot of downstream effects from this,” she said.

The mortgage may not be the worst of it, either. “My parents, I’m obviously concerned about their health. My dad was diagnosed with cancer in November, and then went through radiation in December and he just finished a couple of weeks ago. So obviously, he is one of the most at-risk populations for this right now. I’m really worried about him. I won’t have any contact with him right now. He wants to see me, but I can’t: I work with the general public and I just don’t want to take that risk with him. So I haven’t seen my dad for a couple of weeks now,” she said. “My dad is 74 years old and he really is the worst person to to get this. If he got this, I don’t know that he would survive it. So I think about that a lot. That weighs on me.”

Brady supports the moves the state has made in support of social distancing, even with the dire economic consequences, because she sees that as a moral obligation, she said. “Either people are kind of really freaked out about it, or they’re taking it very lightly. For me, my biggest fear is getting somebody else sick. I obviously don’t want to get sick myself. But my biggest fear is getting somebody, somebody I care about, sick: my parents, customers, my staff – I would never want that. There’s definitely a weight of that and a feeling of personal responsibility to make sure that I’m doing my part. If I’m not at the store or at my house, then that’s it.”

Responding to the comments by Gov. Raimondo at her press conference, Brady was doubtful that the magnitude of her situation had been appreciated in light of her contributions as a small business owner. “As a new business, I don’t have years of profits that I am just sitting on. I dutifully pay our sales and [meal-and-beverage] taxes every single month. I pay our payroll taxes. I pay our tangible taxes. I pay our state and federal taxes. I do so because that is the cost of doing business in a state and country that I love. These taxes pay for things that I care about. But, when we are staring down the abyss with no end in sight, and my friends and I are at risk of losing the businesses that we poured our hearts and souls into, I am asking the government to do their duty by us, as we have done by them. I am asking for compassion during a time when we are making personal sacrifices and gut wrenching decisions to ensure our businesses can survive this, and we can continue to employ our staff. This is not the airline industry. This is not 38 Studios. This is your favorite coffee shop, restaurant, cafe, boutique and salon. We are your friends and your neighbors, and we are asking for help.”