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Economy

AG: Local governments may not assist businesses negatively impacted by shutdown

Brandon Moseley

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Alabama Attorney General Steve Marshall wrote in an opinion Tuesday that county and city governments can not provide public funds to private businesses that were impacted by the forced economic shutdown to fight the coronavirus.

“During the COVID-19 pandemic, this Office has received numerous inquiries from counties and municipalities regarding whether a program could be developed using Amendment 772 (Section 94.01 of the Alabama Constitution) as a vehicle for giving economic development grants and loans to small businesses,” Marshall wrote. “While the desire to keep these businesses afloat during the crisis is understandable, unless the grants and loans contemplated under these proposed programs serve a public purpose rather than merely confer a private benefit, they violate section 94 of the Alabama Constitution.”

“Section 94 prohibits the Legislature from “authoriz[ing] any county, city, town, or other subdivision of this state to lend its credit, or to grant public money or thing of value in aid of, or to any individual, association, or corporation whatsoever, or to become a stockholder in any corporation, association, orcompany, by issuing bonds or otherwise (emphasis added).” ALA. CONST. art.

“The Alabama Supreme Court, howeve r, held in Slawson v. Alabama Forestry Commission, 631 So.2d 953, 956 (Ala. 1994) that Section 94, as amended, is not violated when the funds of a subject governmental entity are appropriated for a “public purpose.” Whether the funds are appropriated for a public purpose depends on if they bring about a “direct public benefit of a reasonably general character . . . to a significant part of the public ” rather than merely a “remote and theoretical benefit. ”

Amendment 772 is widely cited by proponents of such a grant or bridge loan program as providing a constitutional basis for the program.

Marshall explained, “The Legislature passed Amendment 772 as a codification of Slawson insofar as economic and industrial development is concerned. Amendment 772 specifically gives a county or municipality authority “to lend its credit to or grant public funds and things of value in aid of or to any individual, firm, corporation, or other business entity, public or private, for the purpose of promoting the economic and industrial development of the county or the municipality. ”

There are two requirements under Amendment 772, the county or municipality must comply with: “(1) The action proposed to be taken by the county or municipality is approved at a public meeting of the governing body of the county or municipality, as the case may be, by a resolution containing a determination by the governing body that the expenditure of public funds for the purpose specified will serve a valid and sufficient public purpose, notwithstanding any incidental bene fit accruing to any private entity or entities and (2) At least seven days prior to the public meeting, a notice is published in the newspaper having the largest circulation in the county or municipality, as the case may be, describing in reasonable detail the action proposed to be taken, a description of the public benefits sought to be achieved by the action, and identifying each individual, firm, corporation, or other business entity to whom or for whose benefit the county or the municipality proposes to lend its credit or grant public funds or thing of value.”

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“Although Amendment 772 gives counties and municipalities flexibility to grant or loan funds to private entities without violating section 94, the definition of “economic and industrial development” for purposes of Amendment 772 must be read in light of Slawson’s requirement that the benefit conferred be a “direct public benefit of a reasonably general character . . . to a significant part of the public,.” Marshall wrote. “Whether the expenditure is made for a public purpose is a factual question to be determined by the local governmental body making the expenditure by looking to the statutes setting forth that body’s authority. Opinion to Honorable Robert S. Presto, Escambia County Attorney, dated August 24, 1995.”

“Grants, loans, interest payments, and other similar awards to a private business for the sole reason of keeping that business operating would not meet the Slawson test,” Marshall stated. “Whereas such payments would bestow a significant private benefit, any benefit to the public -at-large would be remote and indirect. The governing body of the county or municipality must be able to articulate a rationale for the expenditure which benefits the public-at large in a more direct manner and is supported by the governing body’s statutory authority. Furthermore, using entities such as the Chamber of Commerce or private banks as “pass-throughs” to facilitate the expenditures does not change this analysis so long as ultimately public money is being lent or granted in aid of a private entity and no public benefit is served.”

“Conclusion While the Office sympathizes with the desire of municipalities to assist small business during the COVID-19 crisis, the current dire circumstances do not provide for a workaround to the requirements of Section 94 of the Alabama Constitution,” Marshall concluded. “As previous Attorney General’s Opinions have found, unless the grants and loans contemplated under these proposed assistance programs serve a public purpose rather than merely confer a private benefit, they violate section 94 of the Alabama Constitution.”

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The Attorney General’s opinion effectively bars efforts by city councils and county commissions to help businesses in their towns with grants or bridge loans in order to make it through the forced economic shutdown to stop the spread of the coronavirus.

There is some federal assistance available through the CARES Act and Senate Majority Leader Mitch McConnell, R-Kentucky, has proposed a $250 billion package to provide assistance businesses; but that bill has encountered resistance from Senate Democrats.

Nationally recognized financial consultant Dave Ramsey and other persons in the financial consulting field have long recommended that businesses, and even families should maintain an emergency fund equal to three to six months of expenses. Unfortunately, many business (including very profitable ones) failed to follow that advice and were overleveraged with insufficient cash reserves when they were unexpectedly forced to close by county health officers and orders from Alabama Governor Kay Ivey (R).

The forced economic shutdown to fight the spread of the coronavirus began to be implemented in early March and will not be lifted before April 30. On Thursday, Treasury Secretary Steve Mnuchin expressed optimism that the economy will be able to reopen at some point in May. All Alabama citizens remain under a shelter in place order thru April 30.

Globally 1,491,829 persons have been confirmed as having COVID-19 and 87,458 have died. In this country 468,566 Americans have contracted COVID-19 and 16,691 have died. Alabama has had 2,838 confirmed cases of COVID-19. 78 Alabamians have died and 339 are hospitalized with COVID-19.

To read Marshall’s opinion, click here.


EDITORIAL NOTE
– Yesterday morning the Alabama Political Reporter published an article based on a legal opinion we were forwarded that we wrongly believed was written by Steve Marshall. That story was immediately retracted when the AG’s office reached out to us. We deeply regret the error, and we apologize for any confusion that our error may have caused.

 

Brandon Moseley is a senior reporter with eight and a half years at Alabama Political Reporter. You can email him at [email protected] or follow him on Facebook. Brandon is a native of Moody, Alabama, a graduate of Auburn University, and a seventh generation Alabamian.

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Economy

Alabama weekly unemployment claims dip below 10,000 for first time since March

It is the lowest number of initial claims filed in a week since the number first spiked in the third week of March, when it jumped from 1,824 to 10,982 — though still much higher than before the pandemic began.

Micah Danney

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(APR GRAPHIC)

There were 9,468 unemployment claims filed in Alabama last week, down from 11,692 the previous week, according to the Alabama Department of Labor.

It is the lowest number of initial claims filed in a week since the number first spiked in the third week of March, when it jumped from 1,824 to 10,982 — though still much higher than the normal before the pandemic began. The most weekly claims filed during the pandemic was 106,739 in the week ending April 4. In 2019, an average of 2,500 people per week filed unemployment claims.

65 percent of the claims — or 6,110 claims — from Aug. 2 to Aug. 8 were related to COVID-19, according to the Alabama Department of Labor. That compares to 76 percent the week before.

New claims dropped sharply in May and declined fairly steadily, then increased over the first half of July as cases resurged in Alabama but began declining again in the second half of July. Average daily COVID-19 cases peaked on July 19 before beginning a new decline.

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Economy

Small businesses faring better than chain stores as sales economy rebounds, retail group says

Micah Danney

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(STOCK PHOTO)

The state collected more in sales tax from stores, restaurants and online retailers in the first half of this year than in the same period last year, and that bodes well for Alabama’s retail sector, according to the Alabama Retail Association.

Revenue from state sales taxes and the simplified sellers use tax program for online retailers was up nearly 6 percent during the first six months of 2020 compared to the same period last year, according to the Alabama Department of Revenue.

Collections were down in March and April compared to 2019 but increased significantly in May and June. While sales tax collections for June were up 11.32 percent over June of last year — the first such double-digit growth since a 10.99 percent increase in April 2019 — part of the increase is due to some small businesses being allowed to delay remitting sales tax from February, March and April until as late as June 1.

That fudges the numbers somewhat, but the overall takeaway is that Alabamians have continued to spend despite the global health pandemic, albeit in different ways, said ARA spokesperson Nancy King Dennis.

When places like grocery stores and home improvement stores were the only businesses that were open, their sales went up. Consumers continued to buy even though their options were limited, many with help from federal unemployment insurance that created an influx to the local economy, Dennis said.

While some businesses, including large chain stores, have closed due to the pandemic, shops and restaurants that were able to pivot and adapt did better, she said. Businesses that sell on as many channels as possible — in-store and online, including using social media — have been particularly successful.

“Smaller retailers are actually probably doing better than the larger big chain stores because they’re closer to their customers, they know their customer base,” Dennis said. “For the time that stores were closed, they were selling over Facetime, they were doing a lot of social media sales.”

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The retail industry employs a quarter of Alabama’s private-sector workers, more than any other industry, according to the ARA. It provides the state with almost $2.5 billion in sales tax each year, which was about 20 percent of state revenue last year.

“When looking at the numbers back in March and April, my thought was we wouldn’t see an increase over the previous year for any months until probably 2021,” she said.

Rick Brown, president of the ARA, urged Alabamians to shop local in order to keep open small businesses that contribute to their communities.

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“Alabama’s retailers and restaurants are leading our state’s recovery,” Brown said in a statement. “They continue to put people back to work, pivot to make their businesses safe for their customers and employees and innovate to serve customers however those customers prefer.”

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Economy

USDA announces more eligible commodities for CFAP

Brandon Moseley

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(STOCK PHOTO)

The U.S. secretary of agriculture, Sonny Perdue, announced that additional commodities are covered by the Coronavirus Food Assistance Program. This decision was made in response to public comments and data, and the USDA is extending the deadline to apply for the program to Sept. 11, and producers with approved applications will receive their final payment.

After reviewing over 1,700 responses, even more farmers and ranchers will have the opportunity for assistance to help keep operations afloat during these tough times.

“President Trump is standing with America’s farmers and ranchers to ensure they get through this pandemic and continue to produce enough food and fiber to feed America and the world,” Perdue said. “That is why he authorized this $16 billion of direct support in the CFAP program and today we are pleased to add additional commodities eligible to receive much-needed assistance. CFAP is just one of the many ways USDA is helping producers weather the impacts of the pandemic. From deferring payments on loans to adding flexibilities to crop insurance and reporting deadlines, USDA has been leveraging many tools to help producers.”

Economic developer Nicole Jones said, “A stable food supply at all times is critical to any nation’s survival. The United States Department of Agriculture and the Trump Administration listened to producers and acted based on results of feedback. Adding specific commodities to the Coronavirus Food Assistance Program, loan payment deference, and flexibilities on reporting deadlines are some of the many ways USDA and the Trump Administration have demonstrated support for America’s farmers. Agriculture and food production is a dominant industry in Alabama, and farmers across our state have been beneficiaries of this assistance.”

USDA collected comments and supporting data for consideration of additional commodities through June 22, 2020.

The following additional commodities are now eligible for CFAP:

  • Specialty Crops including aloe leaves, bananas, batatas, bok choy, carambola (star fruit), cherimoya, chervil (french parsley), citron, curry leaves, daikon, dates, dill, donqua (winter melon), dragon fruit (red pitaya), endive, escarole, filberts, frisee, horseradish, kohlrabi, kumquats, leeks, mamey sapote, maple sap (for maple syrup), mesculin mix, microgreens, nectarines, parsley, persimmons, plantains, pomegranates, pummelos, pumpkins, rutabagas, shallots, tangelos, turnips/celeriac, turmeric, upland/winter cress, water cress, yautia/malanga, and yuca/cassava.
  • The program has also been expanded to include liquid eggs, frozen eggs and all sheep. Only lambs and yearlings (sheep less than two years old) were previously eligible.
  • Also now eligible are aquaculture including catfish, crawfish, largemouth bass and carp sold live as foodfish, hybrid striped bass, red drum, salmon, sturgeon, tilapia, trout, ornamental/tropical fish, and recreational sportfish.
  • Farmers with nursery crops and cut flowers are also eligible.

Seven commodities — green onions, pistachios, peppermint, spearmint, walnuts and watermelons — are now eligible for Coronavirus Aid, Relief, and Economic Stability Act funding for sales losses. Originally, these commodities were only eligible for payments on marketing adjustments.

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More details can be found in the Federal Register in the Notice of Funding Availability and Final Rule Correction.

To ensure the availability of funding, producers with approved applications initially received 80 percent of their payments. The Farm Service Agency will automatically issue the remaining 20 percent of the calculated payment to eligible producers. Going forward, producers who apply for CFAP will receive 100 percent of their total payment, not to exceed the payment limit, when their applications are approved.

Farmers and ranchers, especially those who have not worked with FSA previously, are recommended to call 877-508-8364 to begin the application process. An FSA staff member can help producers start their application during the phone call.

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On farmers.gov/cfap, producers can download the AD-3114 application form and manually complete the form to submit to their local USDA Service Center by mail, electronically or by hand delivery to their local office or office dropbox.

Complete the application form using the CFAP Application Generator and Payment Calculator. This Excel workbook allows customers to input information specific to their operation to determine estimated payments and populate the application form, which can be printed, then signed and submitted to their local USDA Service Center.

If producers have login credentials known as eAuthentication, they can use the online CFAP Application Portal to certify eligible commodities online, digitally sign applications and submit directly to the local USDA Service Center.

All other eligibility forms, such as those related to adjusted gross income and payment information, can be downloaded from the site. For existing FSA customers, these documents are likely already on file.

All USDA Service Centers are open for business, including some that are open to visitors to conduct business in person by appointment only. All Service Center visitors wishing to conduct business with FSA, Natural Resources Conservation Service or any other Service Center agency should call ahead and schedule an appointment.

Service Centers that are open for appointments will pre-screen visitors based on health concerns or recent travel, and visitors must adhere to social-distancing guidelines. Visitors are also required to wear a face-covering during their appointment. The program delivery staff will be in the office, and they will be working with producers in the office, by phone and using online tools.

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Congress

Alabama Arise calls Trump unemployment order “Band-Aid over a gaping economic wound”

Micah Danney

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President Donald Trump answers a reporter’s question during a news conference Monday, Aug. 10, 2020, in the James S. Brady Press Briefing Room of the White House. (Official White House Photo by Joyce N. Boghosian)

An Alabama nonprofit that advocates for low-income residents says that President Donald Trump’s executive actions to extend federal aid to Americans affected by the pandemic falls far short of what is needed.

“These executive actions put a Band-Aid over a gaping economic wound,” Chris Sanders, communications director for Alabama Arise, said in a statement on Tuesday. “They don’t stem the tide of evictions or extend rental or mortgage assistance to help people stay in their homes. They don’t increase SNAP assistance to help millions of struggling families keep food on the table. And they don’t provide federal relief to help states avoid layoffs and cuts to education, Medicaid and other vital services.”

Sanders noted that weekly federal aid to people who lost their jobs due to the COVID-19 pandemic would drop from $600 to $300, with states required to contribute another $100. That would be an undue burden on “cash-strapped” states like Alabama that have lost significant tax revenues, Sanders said.

The aid would only last a few weeks without new legislation, he added. Sanders said Congress could eliminate that uncertainty by extending the $600 weekly unemployment aid into 2021.

Trump’s orders, announced by the White House on Saturday, were meant to bypass a stalemate in Congress over pandemic-related benefits. They are expected to face legal challenges, which Sanders noted they may not survive.

“Even if they would, they’re inadequate to address the size and scope of suffering across Alabama and across our country,” he said. “There’s simply no replacement for a bipartisan relief package. Congress must step up quickly to ease the suffering and help struggling families make ends meet.”

Alabama Arise calls itself a coalition of congregations, organizations and individuals united in a belief that poverty in Alabama is a result of public policy. It promotes policies it says can improve the lives of residents with low incomes.

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