PROVIDENCE, R.I. (WPRI) — In the summer of 2021, Providence leaders approved a tranche of federal COVID relief money without taking public input on how to spend it, arguing it was urgent to get the money out the door — including to struggling small businesses — as quickly as possible.

One year later, the $7 million small business fund created at the time is set to expire, but only a fraction of the money has been given out to small businesses, Target 12 has learned.

A total of 229 businesses have received the $2,500 checks offered by the program, totaling $572,500, according to Faith Chadwick, a spokesperson for Mayor Jorge Elorza. That represents just 8% of the federal American Rescue Plan Act (ARPA) funding that the city set aside for small business relief.

With the program set to expire July 1, city officials expanded eligibility for the money on Wednesday, removing a provision that businesses must have at least $5,000 in tangible assets in order to apply. Chadwick said the city will automatically process applications from rejected applicants that are now eligible.

The leftover money in the fund — right now around $6.4 million — is set to be rolled into the regular city budget set for final approval by the City Council on Thursday. The proposed budget says the money will be evenly split by ward for “small business infrastructure and other capital improvements,” rather than going directly to businesses harmed by the pandemic.

‘I warned them’

Jennifer Ortiz, owner of the downtown barbershop Executive Cuts, says she applied for a patchwork of different small business grants and loans during the pandemic to stay afloat.

Even after reopening her shop during the pandemic, Ortiz says revenue has remained low because her primary clientele — businesspeople downtown — have not returned to pre-pandemic levels.

Ortiz, who is also the vice-chair of the Rhode Island Small Business Coalition that formed during the pandemic, said she knew as soon as it was proposed there was going to be a problem with Providence’s relief program.

“I told them that this was going to be an utter failure, and it is,” Ortiz said. “I warned them.”

The main issue, according to Ortiz, was the requirement that businesses report assets worth at least $5,000 on their tangible tax bills in order to apply for the relief. (Real estate assets do not count.)

Her barbershop’s equipment was worth more than $10,000 a decade ago, but has depreciated over the years to below the required threshold. Other small businesses in the coalition had the same problem, she said.

“We have a yoga studio, she’s just one big room with blankets and blocks,” Ortiz said.

Ortiz said she alerted city officials to the problem, and even met with City Council Chief of Staff Jim Lombardi in October. But the $5,000 minimum requirement remained in place until Wednesday.

She was not surprised when told by Target 12 that more than $6.4 million of the $7 million remains unspent.

“We knew it was going to be a disaster,” Ortiz said. “I foresaw this.”

Ortiz said she is now scrambling to complete the application for the funds for herself and other small businesses that she’s assisting.

Lombardi, who also pays out the funds as city treasurer, confirmed he met with Ortiz, but said city officials decided to set the minimum tangible threshold in order to avoid running out of money.

“We had to go through the first phase to find out if the money would be available or not,” Lombardi told Target 12. “To make sure the money wasn’t exhausted.”

With thousands of small businesses in the city, Lombardi said there was concern that the $2,500 checks would be gone quickly.

Instead, very few businesses applied. Lombardi said some did not want to hand over tax returns and other required proof that they were harmed financially during the pandemic, as necessary in order to comply with federal rules for the funds.

He acknowledged that businesses also didn’t apply because they didn’t meet the $5,000 tangible tax threshold.

Now, after dropping that minimum requirement, the city is rushing to get businesses to apply. There are no current plans to extend the July 1 deadline.

“We going to keep on pushing, we’re going to do another big push to get them to apply,” said Council President John Igliozzi. “But like anything else, you can lead a horse to water but you can’t make them drink.”

The slow pace in getting the small business grants out has been known for months, and came up at a meeting of the council’s Finance Committee back on March 22.

Diana Perdomo, the mayor’s policy chief, said at the meeting the program had not issued many grants and could benefit from a loosening of the eligibility rules, which were created jointly by both the Elorza administration and the City Council.

Lombardi told the council that discussions were also underway to give the small businesses larger checks, considering the excess of funds. (That did not happen.)

“I’m quite alarmed,” said Councilwoman Helen Anthony at the March meeting. “Obviously there’s something wrong here. We can’t seem the get the money out the door.”

Anthony was one of the councilors who objected to the initial passage of the ARPA funds because the public was not given a chance to weigh in on how the money should be spent.

Providence did convene a task force last summer to take public feedback on how to spend $166 million in ARPA money that Congress sent to Providence. But the first $42 million of the money — including the $7 million small business fund — was approved in July, prior to the first meeting of that task force.

At the time, city leaders defended the decision not to seek public input on how to spend the federal money, arguing there was an urgent need.

“I’m more than willing to entertain a public hearing going forward on the remainder of the dollars, but these are essential, immediate needs,” Finance Chair Jo-Ann Ryan said during a floor debate on the measure in July.

With just two weeks now left in the small business program, Ryan said Wednesday she was disappointed so little of it was spent.

“I thought that it would fly out the door,” Ryan told Target 12. “We made provisions for the funding because we thought it was a critical need.”

Despite the stated urgency to allocate the funds — and the July 1 expiration date — the city had not started giving out the $2,500 checks yet when Target 12 inquired about the program’s status in late September. It finally launched the following month.

At an October news conference touting the new program, Elorza noted how difficult the pandemic was for the business community.

“We need to remember that our small businesses and entrepreneurs were there for us when we needed them the most, and we need to be there for them when they need us the most,” he said.

Chadwick says the Elorza administration and the City Council “coordinated several methods of outreach” to encourage small businesses to apply.

That included “direct outreach to the business community throughout the City, including letters and business walks, as well as outreach through radio, newsletters, and social media posts, among other methods,” Chadwick said.

Who got the small business grants?

A list obtained by Target 12 shows nearly half of the 229 businesses that have received $2,500 checks from the city are food and beverage establishments, including well-known spots like Hot Club, Knead Doughnuts, Patrick’s Pub, Oberlin and Seven Stars Bakery.

The restaurant industry was hit hard by pandemic closures, restrictions and fewer customers visiting indoor bars and restaurants even once allowed.

Salons and fitness centers are also among the top categories of businesses that received grants. Checks also went out to medical practices, laundromats, grocery stores and at least one “holistic healing service.”

Another 136 businesses that applied were rejected as being ineligible. The rejected businesses include salons, cleaning services, a record store and other retailers.

Two shops across the street from each other on Hope Street — Kreatelier, a fabric and decor store, and Frog & Toad, a gift and craft store — illustrate the problems businesses faced due to the program’s original design. Kreatelier was deemed eligible for a $2,500 relief check, while Frog & Toad was denied.

A city spokesperson said with the minimum property threshold now dropped, Frog & Toad will become eligible for a check.

Despite the low proportion of funds given out since October, Igliozzi said, “I still would stay the program was successful.”

You can see the full list of businesses that have received Providence small business relief funds, and apply here for the $2,500 grant before the program closes on July 1.

Steph Machado (smachado@wpri.com) is a Target 12 investigative reporter covering Providence, politics and more for 12 News. Connect with her on Twitter and on Facebook.