New York City restaurants wait for $25 billion federal grant program as Paycheck Protection Program stalls

“PPP was a band-aid for our industry,” said Rob Bookman, general counsel for the New York City Hospitality Alliance. “It was never designed for the restaurant industry.”

Many of the terms in the PPP loan that convert the money to a forgivable grant—employee payroll retention, utility payments, and interest paid on loans—were not applicable to restaurants paying their vendors or re-fitting their exteriors for outdoor dining in the winter.

A new solution is presently being devised by Congress amid negotiations for the $1.9 trillion stimulus package pushed by Democrats. Senate Majority Leader Chuck Schumer placed an amendment for a $25 billion restaurants relief grant in the latest budget reconciliation procedure vote last week, one that passed the Senate in a bi-partisan 90-10 vote.

Nothing has been formally written regarding the $25 billion amendment, but the plan is to use the money to create a grant program that would tie the amount of money allocated to applicants to the difference each restaurant lost in revenue between 2019 and 2020. Chains or franchises with more than 20 locations would not be allowed to participate, and the grant amount could reach a maximum of $10 million per applicant.

“This is a straight grant that would not create unnecessary debt for restaurants,” said Andrew Rigie, executive director of the New York City Hospitality Alliance. “The most important thing is this restaurant program has the right structure.”

Even though Congress is intent on creating the fund, the money may not be enough for the New York restaurants looking to gain relief from a national program  

“$25 billion alone would be enough for New York State, but this will be nationwide, so it will be a race to get the money before it runs out,” Melissa Fleischut, president of New York State Restaurant Association, said. Her group estimates that restaurants lost $240 billion in sales last year.

Schumer is working on language to make sure New York gets a sizable chunk of the funds, as the state’s restaurants have been among the hardest hit. 

Timing is another issue.

The true plight of New York City restaurants has been masked by the success of outdoor dining in the summer and fall months—and the persistence of some New Yorkers to dine outside under heat lamps in the winter—according to Bookman, who described the external activity as an illusion that fails to reveal what’s lurking in the ledger books.

“What they don’t see is the house of cards: nobody is paying their full rent and most people are paying no rent,” he said. “At the same time, they are increasing every month the amount of debt they owe to the landlord.”

Many restaurants have been kept alive by a combination of state and city emergency measures. Gov. Andrew Cuomo issued Executive Orders extending eviction moratoriums for commercial tenants, which expire May 1, 2021, while the City Council passed a law that prohibits the enforcement of personal guarantees on commercial leases until Mar. 31, 2021. 

“But as soon as the executive orders and the protections end, we’re going to have a tsunami of people turning in their keys and a lot of vacant storefronts,” Bookman explained.  

State Comptroller Thomas DiNapoli estimated permanent closures for one-third to one-half of all city restaurants which existed prior to the pandemic. The Hospitality Alliance found that the city lost 130,000 restaurant jobs last year, with the indoor dining closures mandated by Cuomo in the winter costing an additional 14,000 jobs in December alone.

Even though indoor dining in New York City opens up at 25% capacity on Feb. 12, Congressional negotiations over the $1.9 trillion stimulus in the House and Senate may drag on for weeks.

“Hopefully we’ll know soon,” Rigie said. “We’re ringing the alarm on the urgency and timeliness of the matter.”