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Olympia’s PPP bank roll: Following the money

“Keeping American Workers Paid and Employed” is the name of Title I of the Coronavirus Aid, Relief and Economic Security Act (CARES) that Congress passed at the end of March, 2020. Section 1102 of Title 1 authorized $340 billion for a Paycheck Protection Program (PPP) and laid out the terms for lenders to give loans to “small businesses” starting February 15 and ending June 30, 2020.

In Olympia, the program provided somewhere between $92.5 million and $232.6 million in bank-facilitated, forgivable loans to 322 corporate addresses.  The data covers only loans of at least $150,000 up to $5 million, and doesn’t show the actual amount but a range, as in “Company A received a loan between $350,000 and $1 million dollars.” (1)

Based on a review of data provided by the Small Business Administration for Olympia, Section 1102 might have been more accurately titled the Mortgage Protection Program, the Lease Protection Program or even the Utility Protection Program. Of the 322 loan recipients in Olympia, 103 have a “0” in the “jobs retained” column and 28 recipients have a blank. column.  Combine those two figures and you have a solid 40% loan recipients who indicated no jobs were retained.

Who was eligible?

The criteria were expansive. Small businesses were defined as less than 500 employees “per physical location.” If a business had more than 500 employees, but they were in different locations of 500 or less, the business was eligible.

Nonprofit, veteran, tribal, sole proprietors, self-employed and independent contractors could also qualify as small businesses. “Employees” could also mean full time, part time “or other basis.”

Eligibility for a loan required the business to make a “good faith certification” that economic “uncertainty” made the request necessary for continued operation, and that the funds would be used to “retain workers and maintain payroll or make mortgage payments, lease payments and utility payments.” (my bold).

Turning the loan into a grant

A key aspect of these loans is their forgiveness. The loan is for 8 weeks beginning on the date of origination. The amount to be forgiven would be equal to the sum of costs during this loan period for payroll, interest on a mortgage, rent obligation or utility payments. There is some indication that “due to expected high subscription” 60% of the loan must have been used for payroll—otherwise the interest rate is 1%.

At the end of the loan period, the business supplies its forgivable cost information to the lender and states that it is “true and correct.” Within 90 days after the amount of forgiveness has been determined, the Small Business Administration sends this amount plus interest to the lender.

Who are the lenders?

Of the 322 loans made to Olympia addresses, almost half, 155, were made by three banks: Olympia’s Heritage Bank (71), Hoquiam’s Timberland Bank (52) and Tulsa’s Bank of Oklahoma Financial (32). The remaining top ten loan-originating banks were Columbia State Bank (21), Commencement Bank (17), Twin Star CU (13), Key Bank (11), Washington Business Bank (8), First-Citizens Bank and Trust (8) and Umpqua Bank (7).

Unlike other banks, the Oklahoma Bank made its 32 loans to one group of inter-connected corporate entities and LLCs, all located at 111 Market Street across from the Olympia Farmers Market. This is the address of Koelsch Construction, Inc and inter-related LLCs consisting primarily of memory care facilities owned by Aaron Koelsch.  The Tulsa bank facilitated loans between $8.6 million and $23.5 million to these 32 entities.

Jobs retained—or not

One of the columns in the PPP report is “Jobs Retained.”  For example, number of jobs retained by Koelsch’s corporate entities is given as 2,146.  Although the jobs may not be in Olympia, this is by far the highest number of jobs retained associated with one Olympia address.

There are 12 other loan recipients who state they have retained more than 100 jobs: Mud Bay Inc (495), Olympia Orthopedic Associates PLLC (291), Nisqually Markets—Government Corporation (236), Behavioral Health Resources (188), HBO Enterprises Inc (173), Evergreen Christian Community (169), Rotter’s Inc (145), Hawks Prairie Casino LLC (136), Stormans Inc (121), Hanson Motors, Inc (103), Mullinax Ford of Olympia LLC (100) and Dairy Fresh Farms, Inc (100).

You would imagine with the title “Paycheck Protection” anyone who received one of these loans would retain jobs. For whatever reason, this is not the case.

For example, of the six Olympia addresses with loans between $2 and $5 million dollars, one Forma Construction Company, has a “0” in the jobs retained column, and for another, Life Therapeutic Works LLC, the column is blank.

As noted at the outset, 103 loan
recipients out of the 322 in Olympia have a “0” in this column, while for 28 recipients there’s a blank. The absence of jobs retained is readily apparent in the bank column: in 71 loans made by Heritage Bank, not one job was retained and only 17 of 52 loans by Timberland bank showed jobs retained (a total of 514). By contrast, jobs were retained by every loan made by Commencement Bank (17), Twin Star CU (13), Key Bank (11) and Umpqua (7).  The loans from these four banks show 2,587 jobs retained.

How did downtown Olympia fare?

Addresses in downtown Olympia don’t necessarily mean the business is located downtown. Still, it’s possible to identify some known entities that received loans.

Several non-profits and cooperatives received forgivable loans: Community Youth Services, Senior Services South Sound, the Washington Association for Community Health, the Washington State Coalition against Domestic Violence, Working Systems Cooperative, South Puget Sound Habitat for Humanity, Washington Center for the Performing Arts and the Hands on Children’s Museum.

Several well-known downtown businesses also received forgivable loans: Stormans Inc, Cascadia Research Collective, Olympia Fireplace Supply, Olympia Oyster House LLC, Well 80 Brewing Company, Acme Fuel Company, Budd Bay Cafe LLC, Mud Bay Inc, Meconi’s Italian Subs LLC, Chelsea Farms Oyster Bar, Hung Right Doors LLC, Thomas Architecture Studio, Treinen Associates Inc, Wagners Bakery LLC, Three Magnets Brewing Co and Sea Level Coffee Inc.

Some downtown law firms also got loans: Bauer Pitman Snyder Huff Lifetime Legal, Connolly Tacon & Meserve PS, Phillips Burgess PLLC, and Freimund Jackson & Tardif PLLC.

End times

The Paycheck Protection Program ended on June 30, 2020.  Now the recipients must document their costs and submit documentation to their lender that is “true and correct” in order to have these costs paid for  by the Small Business Administration. After that, the SBA reimburses the lenders for those costs, adding to our Nation’s debt load.

Dan Leahy lives on Olympia’s Westside and likes making charts.

(1) There were Paycheck Protection Program loans for less than $150,000, but the SBA did not identify recipients of these loans and they’re not included in this article.

The “Paycheck Protection” program of loans to businesses to retain workers (or pay the mortgage, or utilities, or other expenses) hasn’t stemmed the tide of unemployed Americans. Infection in “opened” economies, millions more are out of work. Was this inevitable? The situation in Europe suggests that it was not. There, the government subsidized jobs directly, instead of giving “Paycheck Protection” loans to businesses for everything from retaining jobs to paying the mortgage, utilities or other expenses.

In Germany, for example, employees had their hours scaled back, and the government pays them up to two-thirds of their normal salary, while the employer pays little or nothing. Once the employer is ready to pay full wages again, everything returns to normal—there are no layoffs.

The partial unemployment safety net is helping Europeans weather the storm by sustaining the employee-employer relationship and keeping the economy temporarily running. Additionally, workers have income to spend and should return to work faster once pandemic dangers diminish.

 

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