Home National Weather The Restaurant Revitalization Fund gave Baltimore-area businesses grants to stay open. So why did some close? – Baltimore Sun

The Restaurant Revitalization Fund gave Baltimore-area businesses grants to stay open. So why did some close? – Baltimore Sun

by DrewLUD

In 2021, the owners of the Wharf Rat in Fells Point got a lucky break, receiving a roughly $300,000 grant from the Restaurant Revitalization Fund, a federally funded program designed to help businesses during the coronavirus pandemic.

The money paid for employee wages, outdoor seating and HVAC upgrades, but it was gone as quickly as it came, according to owner Jennifer Oliver Martin.

Within months the Wharf Rat closed, making it one of more than a dozen Baltimore-area restaurants that shut down after receiving federal funds intended to keep them open.

“The Wharf Rat was unable to maintain the level of customer service on which it had built its reputation,” Martin said in an email to The Baltimore Sun. “It was with great sadness that the Oliver family decided to close the Wharf Rat after 35 years of service to the community.”

During the pandemic’s early days, restaurant advocates successfully lobbied Congress to create the Restaurant Revitalization Fund (RRF), which would allocate billions of dollars in grants to businesses across the country struggling to survive the coronavirus crisis, which shuttered dining rooms and slashed customer traffic for months.

Demand overwhelmed the effort: In Maryland, fewer than four out of every 10 applicants were approved. Some $562 million was distributed to 2,024 eligible businesses across the state. And it helped many of them survive. According to the National Restaurant Association, the funds saved 900,000 restaurant jobs across the country, and 96% of recipients said the funds helped their establishments remain open.

But a year after the majority of that money was distributed, questions have been raised about the effectiveness and oversight of the $28.6 billion program, which is part of the American Rescue Plan and run by the U.S. Small Business Administration. Some restaurants closed despite receiving the grants, a fact that frustrates business owners who lost out on the money.

A Sun analysis of U.S. Small Business Administration data on Baltimore-area restaurants shows that more than a dozen restaurants have shut down since receiving grants last year, including some that were awarded more than $1 million. Some owners say their businesses are closed temporarily, but offer no timeline for reopening. At least one restaurant announced it was closing its dining room before it received a grant of $260,000.

While there is no requirement to pay back the funds as long as the money is spent by March 2023 on eligible operating expenses — including payroll, utilities, rent or mortgage, and supplies — restaurants are supposed to return unused money if they shut down. The Sun does not know whether any money was returned by Baltimore area-businesses that have closed, and Christopher Hatch, an SBA spokesman, said he could neither confirm nor deny any returns.

“There is no publicly releasable list of returnees,” Hatch said.

Hatch declined to comment on individual restaurants or participate in an interview. Another SBA spokesperson offered this statement: “The funding provided by the American Rescue Plan’s Restaurant Revitalization Fund, together with other SBA assistance programs, has helped more than 100,000 restaurant and other food and beverage business owners get back on their feet and survive the pandemic.”

A recent report from the U.S. Government Accountability Office found issues with the SBA’s oversight of the program. Nationwide, nearly a third of grant recipients are at least six months late in submitting required annual accounting reports to the SBA, according to the GAO. And the SBA hasn’t kept track of businesses that closed.

“SBA should be more on top of businesses that don’t do the required reporting,” said Lisa Moore, the GAO’s assistant director of financial markets and community investment, in an interview. “It’s a big red flag. If someone’s not reporting, you should immediately be taking steps to proactively look into that.”

She added that the SBA reporting portal doesn’t currently allow businesses to say whether they’re open or closed.

In response to a Freedom of Information Act request last year, the SBA released the names of all grant recipients, including more than 2,000 with Maryland addresses. For this article, The Sun focused primarily on those Baltimore businesses that won grants, then scaled back operations or closed.

Some grants were given to restaurants that say they have suspended operations temporarily. In May 2021, a business with an address at 1400 Warner St. received nearly $1 million through the program, according to SBA records. Earlier this year, the building at that address was demolished. The pub located at that address, Game, is slated to relocate to a new space, co-owner Jimmy Trujillo said through his attorney, though he declined to say when and where that will be.

It’s unclear whether any area grant recipients that are temporarily closed are using the RRF funds to remodel. The SBA’s Hatch said he did not know whether RRF money could be used to finance a restaurant’s redevelopment or relocation.

SBA data shows Woodberry Kitchen, considered one of Baltimore’s top dining destinations before the pandemic, received $1.8 million through the program. That money, according to an email from owner Spike Gjerde, “allowed us to pay rent, keep our core staff employed throughout the last two years, and to keep buying as much food as possible from our local farmers — who were also struggling — as we tried various pivots.” The restaurant also expanded its outdoor seating options, something that has been vital during the pandemic.

Gjerde, who declined to be interviewed, added: “RRF provided a critical lifeline for us, and I know many others have not been as lucky.”

Woodberry Kitchen has largely limited its business to special events during the pandemic and has been closed completely for months, according to its social media accounts. Some of its contents were sold at auction earlier this year.

Gjerde said the restaurant is undergoing renovations that will allow it to reopen “with a new model designed to be more resilient to future disruptions.” Events will resume this fall, he said in a post to the restaurant’s social media account Aug. 9.

Downtown Baltimore’s Cazbar restaurant received nearly $1 million in June 2021, though that location has been shuttered, with brown paper over its windows. The restaurant’s owner Haluk Kantar told The Sun that Cazbar has been closed since August 2020, when its roof collapsed. Kantar, who also owns several Homeslyce locations in Baltimore and another Cazbar in Columbia, said he planned to use the RRF grant money to reopen Cazbar before the March 2023 deadline for using the funds.

According to SBA records, Vita Inc., a business located at the same Little Italy address as Aldo’s, received $1 million through the program. Owner Sergio Vitale has since shut down that restaurant, which was listed for sale. Vitale previously said he was considering relocating his business, but did not respond to emails and calls from The Sun for this article. The restaurant’s phone has been disconnected.

Catonsville’s 818 Market, which opened in 2020, received nearly $900,000 last year before shutting down in 2022. The building is now for sale. The owners told the Baltimore County liquor board this spring that the business was on its “last legs.” Co-owner Pat Baldwin did not respond to a voice message from The Sun; an email sent to a publicly listed address for 818 Market bounced back.

Phillips Seafood shut down its Ocean City crab house six months after receiving more than $3 million through the program. A spokeswoman for Phillips did not respond to emails and calls from The Sun regarding the closure. The Inner Harbor location of Phillips, which received $5 million, remains open.

IBT LLC, which shares an address with Ida B’s Table near Baltimore’s City Hall, got approximately $260,000 from the program in May 2021, about a month after the restaurant announced on social media it was shutting down. An Instagram post dated April 5, 2021, stated: “Effective today, Ida B’s Table has made the tough decision to close our doors.”

In an email, restaurant partner Joe Spinelli clarified that the eatery in fact “stayed open, but limited to just carryout, off site catering, banquets, and small events.” In a follow-up message, he added: “All of the reports have been filed as required.” The business’s phone number has been disconnected.

According to SBA records, companies sharing addresses with Handlebar Cafe, Village Square Cafe and 13.5% Wine Bar each received around $300,000 through the program before closing. Owners did not respond to emailed questions from The Sun.

The closure of restaurants that received the sought-after grants has generated bitterness among business owners who lost out on the RRF program yet remain open while facing increased expenses and pandemic uncertainty.

Damye Hahn, whose business, Faidley Seafood, did not receive a grant from the RRF, said the program gave a boost to some restaurants at the expense of others.

“Those that had it are really going to weather this storm — the high inflation storm, on top of the COVID storm — far better than those of us who didn’t,” Hahn said.

Gjerde, at Woodberry Kitchen, is sympathetic to those views. But in an email, he added: “It’s also clear that getting an RRF grant could not guarantee a restaurant’s survival, given the enormity of the challenges and disruptions.”

Since 2021, Hahn and other business owners have aired frustration over how the Restaurant Revitalization Fund money was distributed.

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“The whole thing is just such a mess,” said Hahn, who wants to see the fund replenished, though that is unlikely to happen.

Hahn was notified initially that Faidley Seafood was approved for an RRF grant, only to be denied later after three lawsuits in June 2021 challenged SBA’s policy, mandated by Congress, to give priority to women-owned businesses and other groups.

Erika Polmar, executive director of the Independent Restaurant Coalition, which formed during the pandemic and advocated for the RRF’s creation, said most cases of restaurant owners shutting down even after receiving federal grants reflect the high cost of running a business.

“Restaurants operate on really, really thin profit margins,” she said. “No one had a lot of money in the bank going into this [pandemic].” Shutdowns are “testament to how hard it is to be a small-business owner in our current economic climate. Every pivot you saw cost money.”

That was the case at Old Goucher eatery Larder, which received $34,000 through the program last spring. The money just “wasn’t enough” to keep the business afloat, said owner Helena del Pesco.

“Between labor and cost of goods, it was gone in a couple months,” she said. “It definitely helped us stay open longer than we would have been able to do otherwise.”

As the small restaurant faced the prospect of another winter with a surge in coronavirus cases and a drop in customers, del Pesco made the difficult decision to shut down for good last year.

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Source: Baltimore Sun