The federal government pumped a staggering amount of money into 5,804 Mesa businesses, nonprofits and other entities to hold on to 78,492 jobs as the economy began reeling during the first few months of the pandemic.
Records released by the U.S. Small Business Administration last week show that the agency gave Mesa entities at least $482.2 million and as much as $894.5 million in Paycheck Protection Program loans – most of which likely won’t have to be repaid.
The loans to Mesa entities – including some churches and private schools – ranged from as little as $34,000 to as much as $10 million.
The number of jobs the borrowers said they were saving didn’t necessarily reflect the size of the loan they received, with some entities obtaining seven-figure loans despite listing no jobs to save, according to the SBA data.
The SBA did not identify the 4,936 Mesa entities that each borrowed less than $150,000.
And while it did provide names and addresses for another 867 Mesa entities that obtained loans of at least $150,000, the agency did not disclose the specific amount they got.
The incomplete data was released by the SBA after weeks of pressure from Congressional Democrats and government watchdogs about the lack of transparency in 4.9 million loans totaling $520.6 billion that it has approved so far nationwide. Congress last week also extended the deadline for applying for some of the estimated $130 billion that remains unspent.
The PPP loan funds – described by the SBA as “a direct incentive for small businesses to keep their workers on the payroll” – are part of the $2 trillion pandemic relief package approved by Congress in March that also included other assistance to individuals, businesses and local and state governments.
The loans comprised the largest portion of the multi-aid effort, accounting for $670 billion, or 26 percent, of the total package.
Arizona’s share of the PPP money totaled between 6.5 billion and $12.5 billion.
If you’re wondering why the loan amounts aren’t more precise for large borrowers and why the identities of thousands of smaller ones remain a secret, it’s because the SBA wanted it that way.
For weeks, the SBA and the Treasury Department squabbled with Congress and others over the paucity of data it had been releasing about the way it was doling out public money as the economy buckled beneath the weight of business shutdowns.
Treasury and the SBA said they were protecting the borrowers’ privacy.
Lobbyists for organizations like the National Federation of Independent Business were reported to be concerned that businesses would be hurt competitively or subjected to “public shaming” if identities were disclosed.
While refusing to list much information beyond an itemization of the amount of each loan below $150,000 and the number of jobs being saved, the SBA included the names and addresses of those that borrowed $150,000 or more but only listed them within one of five categories of loan ranges: $150,000-350,000, $350,000-1 million, $1-2 million, $2-5 million and $5-10 million.
Treasury Secretary Steven Mnuchin said the way the loan data was released “strikes the appropriate balance of providing the American people with transparency, while protecting sensitive payroll and personal income information of small businesses, sole proprietors, and independent contractors.”
But in a June 25 report, other problems with the program were cited by the federal U.S. Government Accountability Office, the federal government’s primary auditing agency.
“SBA moved quickly to establish a new nationwide program, but the pace contributed to confusion and questions about the program and raised program integrity concerns,” the GAO said.
It said borrowers and lenders “raised a number of questions about the program and eligibility criteria” and noted that the agency issued multiple rules to address confusion among prospective borrowers.
Moreover, the GAO warned, “to help quickly disburse funds, SBA allowed lenders to rely on borrower certifications to determine borrowers’ eligibility, raising the potential for fraud.”
The data related to Mesa PPP recipients lists three recipients of loans in the $1-million-$2-million range with no jobs listed.
At least one borrower in that same category was identified only with four initials that is not listed in Arizona Corporation Commission records.
According to the data released last week by the SBA, five Mesa companies each received loans between $5 million and $10 million. One listed two jobs.
The PPP loans were available not to just businesses but to nonprofits, schools and even churches on the premise since the money not only could save jobs but also help them cover rent or mortgages, utilities and other costs so they could provide services.
“The SBA Paycheck Protection Program has helped stabilize many nonprofit organizations with critical funding that enables them to retain and compensate their workers, many of whom are providing essential services during this public health crisis,” said Alliance for Strong Families and Communities president and CEO Susan N. Dreyfus in an interview with Philanthropy News Digest.
“Organizations of all sizes need clarity on funding, forgivable loans,” she said in the April 30 interview, “and a dedicated funding stream so they aren’t competing with for-profit entities for the funding that enables them to run homeless shelters, residential centers for foster youth, emergency child care centers, homes for seniors and individuals with disabilities, food banks, and more in this time of crisis.”
Of the 22 recipients of Mesa loans between $2 million and $5 million, four were nonprofits: Child Crisis Arizona, A New Leaf and two interconnected agencies, Marc Community Resources and Partners in Recovery. The latter two are now under the umbrella name of Copa Health.
The remaining 18 recipients in the $2-5-million bracket included Mesa companies such as Golfland, the water park, which reported 222 jobs.
Two restaurant groups representing a combined reported total of 1,000 jobs also were listed in the same bracket: Kind Hospitality, the umbrella for eight airport restaurant brands Panera Bread and Macayo’s, and Rucker Restaurant Holdings, which runs Jack in the Box eateries.
Among the 51 Mesa recipients in the $1 million-$2 million bracket were two of the city’s most prominent law firms, Udall Shumway and Jackson White, as well as Central Christian Church.
Another recipient in that bracket was an apparent rap music production company that listed its principal address as an apartment and claimed 29 jobs.
Still another recipient was identified by only four initials and appeared related to a wedding venue in Mesa. It claimed 450 jobs – the second highest number of employees behind the 500 associated with Pulmonary Associates, which runs six clinics across the Valley.
According to the SBA’s data, the five Mesa recipients that received a total amount of money between $25 million and $50,000 represented 1,671 employees. The 42 recipients of loans ranging between $2 million and $5 million represented a total 6,165 jobs while the 51 Mesa companies that each received $1 million to $2 million accounted for 6,451 jobs.
The 262 Mesa recipients of loans ranging between $350,000 and $1 million accounted for the most jobs at 15,350 while the 548 entities that received loans between $150,000 and $350,000 had the second highest number of jobs at 13,714.
The 4,936 Mesa recipients of loans under 150,000 for a total $194 million reported 35,394 jobs.
It's unclear how SBA will verify that the jobs were actually saved, although the agency has said they will be forgiven if 60 percent of the amount goes to payroll.
"Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels," it said in a recent memorandum. "Forgiveness will be reduced if full-time headcount declines or if salaries and wages decrease.
The loans carry a 1 percent interest rate and required no collaterol.
There also has been conflicting statements as to whether the loans will be audited, as the Treasury Department initially stated that all loans under $2 million would be assumed forgiven and later said all were "subject" to audit.