NBC Today Show
September 23, 2020
Watch Video, Pa.
Brunetti’s Pizza and Deli of Scranton, Pa., was so beloved customers volunteered to shovel its sidewalk on snowy days. Then came the coronavirus pandemic.
By Gretchen Morgenson, Didi Martinez, Kenzi Abou-Sabe and Cynthia McFadden
Brunetti’s Pizza and Deli opened in Scranton, Pa., in 1958 and was so beloved by the community that customers would volunteer to shovel its sidewalk on snowy days. Mike Brunetti, the son of the founder, and his wife Therese took over the operation. They got engaged in the shop and their kids all worked there.
Then came COVID. Shuttered in March, Brunetti’s had no revenues until May, when it reopened. The owners kept up their payments to suppliers, but sales were vastly reduced because of the shop’s small size and social-distancing requirements. Even a $14,000 loan under the federal government’s Paycheck Protection Program wasn’t enough.
This summer, with just $100 in the bank, Therese said they had no choice but to shut Brunetti’s permanently.
The couple has only a small nest egg and no pension. Therese is now looking for work.
“My husband and I sat many nights in tears,” Therese told NBC News.
Small businesses like Brunetti’s are vital to the American economy. They employ 60 million people, almost half the nation’s private-sector workforce, and create prosperity for U.S. families. They generate tax revenues that fund public safety, schools, parks and other municipal services and bring local color to their communities.
But misery has swept through Main Street, thanks to COVID, dealing body blows to owners, workers, landlords and town budgets. And although the Paycheck Protection Program supplied almost $700 billion to help small businesses crushed by COVID, many merchants’ operations — and futures — remain in peril.
Even in late 2019, before the virus hit and when the economy was thriving, small businesses were ill-equipped to deal with setbacks. Federal Reserve Bank of New York research from April showed only one in five healthy small firms had sufficient cash reserves to continue normal operations if they experienced a two-month revenue loss.
So it was no surprise that 1.4 million small businesses either closed or suspended operations in the three months that ended in June 2020, according to figures from Oxxford Information Technology Ltd. The Saratoga, N.Y., company tracks more than 26 million U.S. businesses with less than $10 million in annual sales and says it expects that 4 million small businesses could be forced to shut down permanently this year. Such closures would equal 13 percent of the 30.7 million small businesses that operate nationwide, as counted by the Small Business Administration.
Around a dozen have already shut in Scranton, a former coal and steel city of 76,000 in northeastern Pennsylvania. With 3,256 businesses, several universities, a Black merchant community and historic Main Street, Scranton is Exhibit A for the impact COVID is having on families, merchants and municipalities across America. Some of its businesses have been around for almost 100 years.
The virus’s human toll on Scranton has been high. As of mid-August, Lackawanna County, where Scranton is located, averaged 100.6 deaths per 100,000 people, the fourth-highest death rate from COVID in Pennsylvania. For now, the situation is better than in the early days of the pandemic, however; since Aug. 14, the county has registered three new COVID fatalities, according to the Pennsylvania Health Department.
“Scranton has had its tales of woe,” said Donna Simpson, consultant manager at The University of Scranton’s Small Business Development Center, a unit that advises merchants. “We were doing so great this year and then boom — this hit. Now we’re worse off than we’ve ever been.”
Before COVID struck, Scranton was on the upswing. In each of the past two years, city budgets had been balanced and improvements in its financial management had led to higher debt ratings and, therefore, lower borrowing costs. Although Scranton remained on Pennsylvania’s list of “distressed” cities, under a 1987 law requiring the state to help counties and municipalities experiencing severe financial difficulties, sufficient progress had been made that the state had planned to take Scranton off the list in July 2020.
That didn’t happen. And lower expected tax receipts, a result of COVID-19, caused Standard & Poor’s to cut Scranton’s debt rating in June.
A glimpse of the challenges faced by local area businesses and nonprofits is evident in a May survey taken by The Institute for Public Policy and Economic Development, a partnership of 13 local universities and the business community.
Of the 160 entities surveyed, 86 percent reported reduced revenues as a result of COVID, with 24 percent of those reporting declines of between 90 and 100 percent in the period. Approximately 58 percent said they had laid off employees permanently, without pay, and over 80 percent said they had sought financial assistance, including from the Paycheck Protection Program. Almost half said they were having problems meeting expenses.
Peter Ventura knows how that is. The third-generation owner of Coney Island Lunch, a hot dog joint in the heart of downtown Scranton since 1923, his business went into freefall in March, when the city shut down.
Even during the Great Depression Ventura’s forebears had never failed to meet an obligation, such as rent or taxes on the restaurant. But at the end of March, when the quarterly property tax payment was due, Ventura decided against making it.
“I thought, I can’t send them $2,500 and not know how much cash I’m going to have on hand,” Ventura told NBC News. So he’s waiting until December to get current on his property tax bills, knowing that he will also owe a 10 percent penalty.
In the meantime, Ventura worries that foot traffic won’t return to downtown, post-COVID. “One thing that kept us going was the fact that you were always getting younger customers in here,” he told NBC News. “They remember when their father brought them here, and so you wonder if you’re still going to get that when it’s over.”
Trying to help merchants and residents hit by COVID, the Scranton community has come together, said Paige Gebhardt Cognetti, the city’s mayor. Landlords have let Scranton merchants defer rent payments, she told NBC News, and in June, the city offered $560,000 in grants and loans to small businesses.
But these are temporary fixes, Cognetti acknowledged; revenue shortfalls in the city could reach $8 million this year, she said, or 8 percent of expected revenues for 2020.
Like many cities, Scranton’s biggest financial challenge involves costs it cannot trim, such as pension and retirement benefits owed to current and former municipal workers. In Scranton these are 20 percent of total city outlays, double the average, according to Cora Bruemmer, an analyst in S&P’s local government group. Other expenditures bring Scranton’s fixed costs to 30 percent of its budget.
Early on in the crisis, Scranton furloughed 43 employees, but some have recently returned to work. Cognetti has cut other spending.
“Of course, I would like to pave every street in Scranton, but we’ve scaled that back,” she said. “It’s hard to make these decisions — some of them are about peoples’ livelihoods.”
Some bright spots have emerged in the Scranton merchant community since the crisis. Some Black-owned businesses, for example, have seen a boost in revenues, said Glynis Johns, founder and chief executive of the Black Scranton Project, a nonprofit supporting local Black-owned merchants since 2008. Interest in the organization’s list of Black businesses exploded, Johns said, after the protests related to the murder of George Floyd in Minneapolis.
“People love the history of the city and love the cultural dynamics of Scranton,” Johns told NBC News. “More people are interested in Black perspectives and Black stories, so that has amplified what we’re doing.”
The Black-owned Vanity Boutique Salon has seen its revenues rise, said Koni Bennett, its owner. Since reopening in June, the response has been overwhelming. “The pandemic just created a bigger demand for us,” Bennett said. “We were able to fully recover the hit of the pandemic within a month.”
Local real estate agents are also reporting a boom as an influx of New Yorkers seek lower-cost homes there. Jackie Ruddy, a realtor, said buyers are willing to pay above asking price, a big change from pre-COVID days when demand was soft owing to the city’s relatively high wage and transfer taxes.
Unfortunately, local area food banks and charities offering help with rent and utility bills are also fielding big increases in demand.
Meghan Loftus is president and chief executive of Friends of the Poor, a nonprofit founded in 1986 to help supply food and financial assistance to people in Scranton.
Since March, the nonprofit has operated drive-through food distributions at Scranton High School and a local church, Loftus said. For the first food drive, the organization expected 400 to 500 families to show up; 1,000 came. Between April and July, it served 70,000 people, compared with 24,000 during the same period in 2019, according to Loftus.
Scranton has a large working-poor population that doesn’t qualify for help from the city, Loftus said. And her organization has seen demand from people seeking help with water bills and rents — those figures are more than double last year’s.
Still, Loftus said she saw people donate their stimulus checks to help the community.
On Sept. 1, a COVID-related moratorium on evictions in Scranton expired, so local charities are bracing for an increase in the homeless population.
“There are a lot of people who are laid off, are still not back to work, or their job no longer exists,” Loftus told NBC News. “Most people are one or two paychecks from crisis.”
Like other communities across the country, those in Scranton are hopeful that this fall will not bring further woes. Even before COVID, Scranton had lost more than 1,500 small businesses since 2012.
“I am most concerned about our small businesses and the feel of our downtown and our neighborhoods,” Cognetti said. “We can’t be blind to fact that if we lose some of the small businesses they may be gone forever.”
Brunetti’s is one of them. On Aug. 15, the restaurant sold at auction for less than half last year’s appraised value. Repayment of the PPP loan will come out of those diminished proceeds.
“It’s best for us to walk away, standing tall, than to crawl out the door,” Therese said.