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Transcript of JoCo on the Go podcast 04/27/2020

Theresa Freed [00:00:00] On this episode, you'll hear from local economy experts. They'll talk about the industries hardest hit and about those who have been able to adapt to these challenging times. Find out how you can protect your own finances when there's so much uncertainty and learn how the county is helping the recovery process with a new task force.

Announcer [00:00:17] Whether you live in or just love, Johnson County, Kansas, JoCo on the Go has everything. Johnson County. Here's what's happening and what's coming up in the community you call home.

Theresa Freed [00:00:30] Thanks for joining us for JoCo on the Go. I'm your host Theresa Freed, a Johnson County, resident and employee of Johnson County Government. The stay-at-home order has been a challenging one for many people, local businesses in particular. Essential work continues, but some industries are facing tough times. With more on the impact and some hope, we'll start our conversation with Doug Davidson with CERI. That's the County Economic Research Institute. Thanks for joining us.

Doug Davidson [00:00:56] My pleasure. Thanks for having me.

Theresa Freed [00:00:58] All right. To start off with, what has been the economic impact to businesses with this pandemic?

Doug Davidson [00:01:03] Well, it depends really on on what kind of business you're in. Obviously, if you're a restaurant or retail business, the impact has been dramatic with the closure orders to stay-at-home orders. If you're a a non essential business and are required to close, the impact has been significant,.

Theresa Freed [00:01:27] Which of those businesses are really struggling the most?

Doug Davidson [00:01:30] You know, I think the businesses that are struggling the most would be those that are not able to operate at all. If they don't have any sort of online presence, their client base is is walk in traffic that they have to see in person. And if they're not able to be open and see those customers, then those are the ones, obviously, that are that are being impacted the most. Those that have an online presence or can do some sort of curbside service and they're allowed to be open, such as restaurants, for example. Many of those are able to operate at a reduced staff or lower their their operating costs and are hopefully going to be able to get through this. But those that don't have those sorts of options of either an online model or a curbside service model, they are really struggling.

Theresa Freed [00:02:26] So are are the chains being impacted at the same level as the mom and pop type stores or is it the other way around or how are you seeing those those businesses really being hit?

Doug Davidson [00:02:40] Yeah, well, they're all being affected. But one advantage that the chains likely have that the mom and pops don't is a broader financing options for them to be able to get through the downturn. And the mom and pops typically don't have as many backup financial resources. The large chains obviously have a larger banking networks and financing sources. If they're publicly traded, you know that that gives them additional options and resources. It's the mom and pops, really the local small businesses that are typically most strapped right now and finding it harder to get through this tough time.

Theresa Freed [00:03:27] All right. And so just next question, are we in a recession right now? Are we expecting to be in a recession or kind of how do we define what's happening financially?

Doug Davidson [00:03:37] Well, we don't officially statistically have the data to show that we're in a recession till after the fact. But having said that, we're undoubtedly in a recession. The reason we were we've already started the recession. Numerous early national forecasts have already been made. Most of them are predicting this to be a very sharp and deep recession, deeper, in fact, than the Great Recession. Hopefully much shorter lived. Hopefully the recovery will come sooner and faster than the Great Recession. But some forecasts are calling for in the second quarter of this year for GDP or gross domestic product to decline by 30 percent just in the second quarter. And that will start to recover in the third quarter. But by year end, GDP still is forecast to be negative 4 percent or so depending on the forecast you look at so that that's significantly deeper and a steeper decline than we experienced during the Great Recession. To give you a little bit of comparison between what some of these forecasts are, are predicting versus what we experienced the Great Recession. GDP during the Great Recession declined about 4 percent, a little over 4 percent from the peak prior to the recession to the trough at the deepest point of the recession. And that took about a year to a year and a half for that decline to occur. Forecasts for this recession are talking about a 10 percent decline from peak to trough, and that occurring pretty much in one quarter, so much faster and deeper.

Theresa Freed [00:05:27] OK, and so we're hearing a lot about, you know, businesses that are kind of easing their like payment deadlines and we're seeing money going directly to families and to businesses at the federal and state level. So are are those going to those efforts going to make much of a difference in the way of helping economic recovery?

Doug Davidson [00:05:50] Absolutely. Accommodation measures can be made to businesses and then also even to consumers in terms of mortgage loans or debt service or rental payments from landlords, both from the residential market, but also particularly for businesses who, you know, have these ongoing fixed cost bills that they have to pay each month. But they don't have the revenue stream coming in from their customer base. Right now, any forbearance that can be provided by those landlords and you know, whether if for your utilities, you know, those fixed ongoing expenses, that can go a long way to helping these businesses get through this time and live to see the other side.

Theresa Freed [00:06:42] All right. And there are families that have been impacted severely, perhaps both adults in the home, unemployed, furloughed, and then some families. Essential workers. So their income is very stable. What should people be doing at this point? You obviously want economic recovery to happen. So that would suggest maybe spending. But others really are in a position maybe not to do that. How how can people protect their own financial situation?

Doug Davidson [00:07:10] So some of those decisions are kind of made for you. You know, if you've lost your job, if you have a significant reduction in your income, you're probably not in a position to to save. However, if you are employed and you may actually find that you're sort of saving by default, some of your expenses may actually be lower right now if you're not commuting to work. Gasoline prices are are down quite, quite a bit. You know, they're in the dollar. Fifty dollars. Sixty range. Last I saw. But if you're not driving as much, in addition to that, you're probably at least saving money on gasoline, if not on other day to day expenses if you're not out and about carrying on your normal daily activities. So you may be your expenses may be lower. If you're if you're in that position, it might be a good idea to try to save a little. You know, we don't know exactly how bad this recession is going to get. We have some some educated guesses, but we really don't know and we don't know how long it's going to last. It all depends, really. It all hinges on what what the what the coronavirus does and our ability to combat that. On the flip side of that, though, to your point about wanting to spend, I mean that, is important for us to think about that as as local consumers? If we're in a financial position to spend, we should maybe make a concerted effort to to try to patronize those small businesses, especially local businesses in general, and especially those mom and pops, if they're a restaurant that has has curbside service, make an effort to to patronize them and try to get them through this crisis.

Theresa Freed [00:09:03] All right. That's some great advice. Just last question. We have obviously a new task force in Johnson County that is really responsible for helping come up with a plan to help the businesses in our community recover. Just thoughts on how important that advance planning is.

Doug Davidson [00:09:20] Well, I think it's critical. I you know, I think it's a great idea that the county has come up with to form this task force, to plan for how we're going to open up the economy and progress through through the recovery. You know, it's a great assemblage of expertise on that panel from public health to health care, economics, law enforcement, local government. I think the committee will have important decisions to make, not only in when and how to open up and maybe, maybe how to phase that opening. But I think it can provide an important role in providing guidance and advice to both Johnson County residents and to the local business community to on what measures and what steps they need to take to to to open up safely. And I think that will go a long way toward instilling confidence in the consumer that it's safe for them at a certain point in time as we go forward to patronize these businesses. It's really that consumer confidence that's going to drive the flow of business as we move through the next several months.

Theresa Freed [00:10:44] You can tune into those task force meetings on the JoCoGov Facebook page. We also have a web page on jocogov dedicated to the task force where you can watch rebroadcasts of those meetings and find out what they're doing. Next up, we have with us Jeff Shackelford with the Enterprise Center of Johnson County. Thanks for being here. Oh, my pleasure. All right. Just start off with. Can you tell us what are some of the primary concerns for businesses right now?

Jeff Shackelford [00:11:08] You know, not to be too direct, but really just survival. And then I think second behind that would be kind of the unknown. You know, business owners tend to be incredibly resilient. Many have pivoted, learned how to adapt, re-engineered the business under known conditions. The challenge now is we're living in a world of unknown conditions. There's really not enough known yet information to help them devise that that plan of how do I. How do I survive? How do I pivot?. I think secondly is as we all hopefully look to the lifting of the stay-at-home and then social distancing and reopening our businesses. You know, what are the parameters going to be around that? How do I protect my employees? How do I protect my customers? What are my risks as a as a business owner associated with reopening the business? And then I think finally, as for many of them, how do I restaff my operations?

Theresa Freed [00:12:01] From what I'm hearing, it sounds like maybe some of the businesses they're used to a certain number of people working at their operations. But because people need income, they may end up leaving those those businesses and going finding other work. Is that what I'm hearing?

Jeff Shackelford [00:12:13] And early on before some of these some of the federal programs came out? You know, if you're if you're a I've talked to a gentleman who runs a small construction company, you know, it became evident he wasn't gonna have the work. And so, you know, he furloughed the people they moved to the to to collect unemployment and so on. And we were talking the other day about how do you get them all back? When do you get them all back? It's not as easy as you know. Hey, I throw the light switch on and the doors are back open and I've got all my people back there redo or my current employees, they're trained and ready to go. You know, the world as we knew it is not going to return to the world as we knew it. It will be a much different environment as we talked about staging which businesses can be opened and when. And then I think you'll see parameters around if you're opening your business. We're going to ask you to continue to to maybe limit the number of people that can be in one place. You know, one of the big issues, I think is the entire cleaning of offices. You know, let me empty the trash and run the sweeper is now. Wait a minute. Do we need to sanitize all of the furniture? Do we need to sanitize computers that come in and out on it on a regular basis? So so, you know, that's kind of that unknown of of a business owner saying, I don't have a plan for things that you can't you can't give me the requirements of the restriction.

Theresa Freed [00:13:33] So what sorts of relief options are available right now, both with just financially surviving but then also answering some of those questions that you mentioned, mentioned on how to reopen safely?

Jeff Shackelford [00:13:47] Well, from a financial standpoint, the largest the majority of financial relief programs are at the federal level. So through the Small Business Administration. So you've got your payroll, your your paycheck protection program, as they refer to it, which gives businesses the opportunity to get up to about two and a half months worth of payroll, rent, utilities through a loan, through a forgivable loan. With the idea behind that being, if you keep your staff, if you keep the same the same staffing level you had before the COVID-19 crisis, that loan will be forgiven. There's the economic injury disaster loan, commonly referred to as IDOL, offers low interest loans up to as much as two million dollars. And you can defer when you start paying those back. You've still got SBA type of express loans that are out there in Kansas City and around this region. There was a local fund set up the KC 19, KC COVID-19 through AltCap, but it's more of a microloan program. So if you need that ten twenty thousand dollar type stuff. Beyond that, there's just not a lot available for the numbers that we need. As far as where do I go to find out more, you've got any of your SBA affiliate organizations. So here you got the SBDC at Johnson County College. You have another SBDC that's part of the UMKC Innovation Center and they do work across the state line. We under the Enterprise Center here, have a women's business center that is an SBA affiliate. We have a district office. The best place for accurate and timely information is through the SBA. But we still have organizations. KC SourceLink is a terrific organization here. Anybody who is kind of working in that small biz entrepreneurial community by now is up to speed on what's out there. And I would encourage people to reach out, don't get frustrated if somebody doesn't answer the phone first time e-mailing is great. Ask any and all questions that you want to ask. For instance, our organization as we get them, if we don't know the answer, we will find you one from somebody and try to refer you to the right resource that has the best opportunity to help you out.

Theresa Freed [00:15:56] All right. And so what are you seeing among businesses in Johnson County? Are are people adapting what they're doing with business? As I know, a lot of restaurants, obviously, you know, can't allow people into that into their operation. So they're doing curbside service delivery, things like that. What else are you seeing?

Jeff Shackelford [00:16:13] Those that already have a significant online presence? You know, kind of even if they were brick and mortar environment, if they had incorporated the online e-commerce world, have had the best chance to pivot and push much more of their business clients, customer support order taking and so on online and then figuring out how to fulfill that. You know, you saw we saw several of the local distilleries switch from alcohol to hand sanitizer. We've seen small manufacturing organizations pivot to do masks, face masks. Well, one of my favorites, we've even seen the golf courses open back up to figure out how to operate in a cashless society. So clubhouse isn't open, restrictions on how many people could ride. One in a cart. All the social distancing, those that could quickly figure out how to operate to generate some form of revenue. You know, I was you know, I think you would ask any of them now. Nobody is reproduced, is producing a hundred percent of the revenue they had before this. But could you get 40, 50 percent to help you cut expenses, cover payroll and stay alive through this? Are the ones that that seem to be having the best opportunity to come out of this thing in a good position? You know, we will lose many of our small businesses. I don't know any way around it. I don't think there's any amount of government funding that could be thrown at it. So that's going to be the challenge.

Theresa Freed [00:17:43] OK, and I just brings me to my last question. What does the road to recovery look like for for Johnson County businesses? I know you mentioned that some of them will not be able to to survive, but for it, for those who can, I imagine this will be kind of a slow process, even if the stay-at-home order's lifted.

Jeff Shackelford [00:18:01] Well, I think the easy answer is it's going to be very bumpy. You know, we clearly are in an unknown world that none of us have experienced and hopefully won't have to again. I think it goes back to, you know, in our case, what's the county guidelines going to be for me, whether I'm a typical brick and mortar and people need to walk in my facility or whether I'm delivering product. What are those guidelines going to be? Again, you know, simple things as all of us who work in an office environment, are there going to be those guidelines that you do have to sanitize all the furniture in your office? Well, who's going to fulfill that that business need? Because it's not as though the typical office cleaning company is going to be prepared to ramp up to take much longer do those things. I would tell you, I think it's going to depend heavily on us driving as much entrepreneurship as we can. And I see entrepreneurship from driving folks to start new businesses, but also those that are in businesses thinking much more entrepreneurially. How do I. How do I pivot and change to modify this? You know, I think there'll be opportunities. I think if you look at what's happened, finally, telemedicine is taking off. You know, it seems to have been around for years, but not really become prevalent. Now, it is it will be the ability to have a virtual doctor anywhere, almost any time. Virtual banking, we've learned, you know, we're not all going to be run back into to do that. Distance learning our education system has had to overnight learn how to teach kids without being in a classroom. Cyber security will continue to be huge because we're all going to continue to work remotely. And I think, you know, those of us that sit on five, six Zoom calls a day and learn video conferencing is probably here to stay. So maybe less business travel, but there will be opportunities to exploit those. I think as a county and a state, we probably ought to look at how do we how do we encourage that and how do we help promote taking advantage of what could be new opportunities. At the same time, kind of coddling and holding hands of those. You know, if you weren't in a strong position heading into this crisis, it's going to be difficult to survive if you were in a strong position. It's still difficult. But you'll get through it. And then how do we how do we help? I'm hoping all of us, me included, turn to our local businesses a lot more. It may cost a few pennies more, but it's building the community. So I think it's it's going to be a long road. I've heard as much as the predictions that it will take four years to get back to where we are today. And that's probably accurate.

Theresa Freed [00:20:38] And for much more information about COVID in Johnson County. Visit us at jocogov.org/coronavirus.

Announcer [00:20:45] You just heard JoCo on the Go. Join us next time for more everything Johnson County. Have a topic you want to discuss? We want to hear from you. Follow us on Facebook and Twitter at JoCoGov. For more on this podcast, visit jocogov.org/podcast. Thanks for listening.