Capitola in December 2020
An aerial view of Capitola, including its downtown business district.
(Kevin Painchaud / Lookout Santa Cruz)

Capitola set to give $7,500 grants to help businesses stay afloat during COVID-19

Capitola businesses should soon be eligible to apply for grants of $7,500 each to help them pay rent and utilities amid the pandemic economic downturn, with as many as 32 grants to be awarded.

City council members voted Thursday night for Capitola to submit a final application to get $320,261 from the California Department of Housing and Community Development in the form of Community Development Block Grants. Cities must use any money they get to address “preparation, prevention, response and recovery of the COVID-19 pandemic,” according to a report from city staff.

The state agency gave initial approval on Jan. 14 to Capitola’s first application for funding, and the city’s second application is due March 5. Staff reports to the city council didn’t identify a date by which the funds would be accessible, but the money is expected to be a lock given Capitola’s previous participation in the program.

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Of the money Capitola would get in the latest round of funding, $264,761 would be used on forgivable loans to local businesses. To qualify, at least half of a business’s employees must make below moderate income wages — a maximum income of $74,350 for a one-person household.

The $7,500 grants should be used to pay for rent and utilities, city officials said.

Many local businesses have been bruised by an unstable economy the past 11 months. In a survey the city conducted in December and January, 43% of Capitola business owners who responded said they were in danger of closing in the next year. Most business owners (61%) also reported “significant decreases” in customer demand, and 54% of businesses closed temporarily during the pandemic. Many of the 132 respondents said they worked in the food and beverage industry, hospitality and tourism, personal services and/or retail.

Although direct payments from the federal government’s Paycheck Protection Program helped some cover payroll and stay afloat, a majority of those who responded to the survey (69%) indicated interest in a local grant program. The Santa Cruz Small Business Development Center will administer the program in partnership with the city.

Of the remaining CDBG funds, $45,000 would be split among three food programs: Community Bridges Meals on Wheels, Grey Bears and Second Harvest Food Bank. Each food nonprofit would receive $15,000, a decrease from what those programs had previously received from the city. During the last round of CDBG funding, Meals on Wheels was given $66,924, Grey Bears received $15,750 and Second Harvest received $37,298.

Capitola also previously awarded $20,000 to the Community Action Board for its rental assistance program, but opted this time to use funding for the business loan program instead. City leaders said they are counting on county rental assistance programs to help renters who are struggling. Nearly $17 million in rental assistance will be allocated to Santa Cruz County residents through a program that will be administered by the state.

Council members also decided on goals for items to include in their next annual budget, which takes effect July 1. Two of the budget goals were grant-related: Seeking out funding for public safety projects and other improvements, and revamping Capitola’s community grants program, which was cut from the budget last year due to the pandemic.