South Lake Tahoe City Council votes to not collect $382,500 in small business loans

SOUTH LAKE TAHOE, Calif. - During the pandemic, the South Lake Tahoe City Council issued $382,500 in small business loans to 53 businesses through its Small Business Sustainability (SBS) Loan Program. The loans issued were between $3,000 and $15,000 (one at $3,000, one at $4,500, 33 at $5,000, 12 at $10,000 and six at $15,000). Two more loans applications totaling $25,000 were rejected.

During the Council meeting this week, they voted 3-1 to forgive the loan balances and instead make them a grant.

The loans were to be paid back at zero percent interest with the first payment deferred to June 1, 2022, and to date, only one business made a payment, $138.89 by La Barberia toward their balance of $5,000. Another loan in the amount of $5,000 issued to Burger Lounge is being collected since the business violated state, county, and local public health COVID-19 requirements that invalidated the loan agreement. That loan is not being forgiven with the new vote.

Mayor Devin Middlebrook was the lone dissent, stating many of the businesses could repay the loan and the funds could be better spent on other items. Though the other councilmembers voted to make the loans a grant, they also supported John Friedrich's idea for businesses paying it forward, and using their loan repayment as support to a local nonprofit.

"More may have applied if they'd known it was going to be forgiven," said Middlebrook of the loans.

In January 2021, City Council had originally approved $700,000 to be allocated of the City's undesignated fund balance to establish the SBS program. Since not all had been applied for, the rest was reallocated for one-time payments to fire and police safety and other personnel in recognition of ongoing risk and exposure to the COVID-19 virus.

A Short Term Economic Taskforce was formed to discuss how to help businesses, and the loan program was one way they backed. The City's Director of Finance Olga Tikhomirova told the council it would be a burden on her staff to manage a seven-year repayment plan for the 53 businesses, and time spent could be better utilized on other duties.

"Forgiving will help out businesses," said Councilman Cody Bass. "It's a well-spent use of ARPA funds to relieve them of the debt. It will help our economy and help out businesses."

The City received funds from the American Rescue Plan Act (APRA) and will use the balance to replace what was loaned out to the general fund.

Bass made the motion to forgive. "I strongly encourage donations to community benefited organizations," he said.