Kiawah Island community association gets $1M coronavirus loan from federal government

Kiawah Island community association gets $1M coronavirus loan from federal government

Charleston Post and Courier
April 29, 2020

By Andrew Brown

An association for property owners on wealthy Kiawah Island obtained a $1 million forgivable loan from the federal government as small businesses throughout South Carolina struggle to access the same emergency financing amid the COVID-19 pandemic.

The Kiawah Island Community Association was eligible for the loan through the Small Business Administration’s new Paycheck Protection Program as a nonprofit organization.

But the association, which represents one of the more affluent communities in South Carolina, is being criticized for accepting the money while small businesses throughout the country go without. Residents on the resort island had an average income of $143,750 per year, according to the most recent census estimates.

Frank Knapp, CEO of the S.C. Small Business Chamber of Commerce, questions whether the association’s need is greater than small businesses that don’t have access to other forms of emergency financing.

At the end of 2019, the Kiawah nonporfit reported it had $13.6 million in operating and reserve funds in its bank accounts. It also had full access to a $2.5 million low-interest line of credit, according to its annual financial report.

“Does anyone question the survival of the Kiawah community?” Knapp said. “Whatever the Kiawah community is suffering pales in comparison to the many small businesses that are shut down.”

Officials with the association did not answer questions about the loan or the group’s finances. Jimmy Bailey, chief operating officer, confirmed that the nonprofit applied for and received the emergency loan to “address economic uncertainty associated with COVID-19.”

The group is not the first recipient of the government-backed loans to come under scrutiny. The rollout of the new emergency financing has been widely criticized for allowing big hotel chains, large restaurant franchises, publicly traded companies and a professional sports teams to capture millions of dollars.

That public outcry has led to companies like Ruth’s Chris Steak House, Shake Shack and the NBA’s Los Angeles Lakers to return the money.

The new loans are in hot demand because of the terms of the financing. Companies and nonprofits are eligible for up to $10 million based on their employment numbers, and that money can be forgiven if it is used to cover payroll and other expenses such as rent and utilities.

In the first round of PPP funding, about 23,000 South Carolina applicants were approved for loans that averaged around $165,000 each. According to the SBA, the state has more than 418,000 small businesses.

The Kiawah Island Community Association announced it had received its $1 million loan through the program last week.

The web page containing that information was later stripped from the group’s website, but screenshots of the message from treasurer Dave Morley continued to circulate on social media this week.

In it, Morley told members of the gated community that the $1 million would be used to maintain some of the association’s staffing levels during the public health crisis.

In his written message online, Morley explained the association expects revenue from property transfer fees and its gate fees to decline this year. Morley estimated that slowdown could cost the association $1.2 million to $1.4 million.

Knapp of the S.C. Small Business Chamber questioned if Kiawah should actually be eligible under the federal rules established for the loans.

“I just think that could be challenged,” Knapp said. “I don’t know who would challenge it. I don’t know if it would be SBA or Treasury. But it does not seem like they are suffering because of the virus.”

In recent days, U.S. Treasury Secretary Steven Mnuchin has scolded large companies for taking the loans. And he’s emphasized that groups with access to other sources of capital are not eligible for the money.

“It’s the borrowers who have criminal liability if they made this certification and it’s not true,” Mnuchin told the Wall Street Journal.

For now, the association is keeping the loan. It’s just one of a number of steps the group has taken to shore up the companies finances during these difficult times, Bailey said.

https://www.postandcourier.com/health/covid19/kiawah-island-community-association-gets-1m-coronavirus-loan-from-federal-government/article_79715cce-896a-11ea-8543-7b5516ab5754.html