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Local Restaurants Battle Red Tape To Get Federal COVID Funding Only To Have The Money Snatched Away

Blowfish BBQ photo.jpg
An-Li Herring
90.5 WESA
Justin "Hootie" Blakey, owner of Blowfish BBQ, prepares ribs on Saturday, July 24, at Roundabout Brewery's pop-up beer garden in Chateau. Blowfish BBQ, a food truck and catering business, had been approved this spring to receive about $13,000 in federal COVID-19 relief, but the money was rescinded after a lawsuit contested a plan to prioritize women, minority and veteran-owned firms as recipients of the funds.

At least two local eateries are among roughly 3,000 businesses across the country that will not receive federal COVID-19 aid they'd been promised in the spring.

The reversal stems from three lawsuits that challenged an effort by Congress to steer the restaurant relief to women, minority and veteran-owned businesses.

Spice Island, in Pittsburgh’s Oakland neighborhood, and Blowfish BBQ, a food truck and catering company, had the money clawed back last month, after being approved weeks earlier to receive the relief funding.

It is unclear whether other businesses in the region were affected. A spokesperson for the Small Business Administration, which administers the funding, would say only that, nationally, the agency withheld funding from 2,965 applicants who initially had been approved to receive the money.

Federal courts in Tennessee and Texas halted the priority program for women, minority, and veteran-owned businesses in May, after finding that the plaintiffs likely will prevail in showing that the initiative violated their constitutional right to equal protection.

The news was an especially cruel development for businesses such as Spice Island and Blowfish BBQ, given that they already had been promised the money as part of the priority group. Both establishments had applied for the aid on the day the application window opened in early May.

Spice Island owner Ron Lee said he was “floored” when he learned in a June 23 email from the SBA that the money had been rescinded.

Spice Island photo.jpg
An-Li Herring
90.5 WESA
Spice Island, a southeast Asian restaurant in Pittsburgh's Oakland neighborhood, delayed its return to dine-in service after losing a grant it had been awarded through the federal Restaurant Revitalization Fund. The Small Business Administration canceled the funding after courts paused an initiative to prioritize women, minority, and veteran-owned businesses for the relief money.

He said he had suspected the lawsuits against the priority program could become an obstacle. But losing the money still caused him to feel “anger” and “disappointment.”

“I did all my homework," Lee said. “I did everything right. I was approved. And I waited, I waited, I waited. And then they took it away.”

Blowfish BBQ owner Justin “Hootie” Blakey said that, although he also had “heard some chatter” online about the lawsuits, he didn’t think the prospect of federal aid could simply evaporate “after we were already funded.”

“That's like me purchasing a home and getting to [the] closing and saying, ‘Oh no, we can't give you these keys after you already paid your down payments and everything,'" he said. "I didn't think that was actually possible.”

While Blakey said the priority program for minority business owners like him “is a nice idea, and I do appreciate it," he questioned why federal officials had ignored the likelihood it would invite litigation. Conservative groups, including one run by former Trump administration officials, are backing the lawsuits.

“That’s where I’m kind of mad at the [government], that they [were] not ready for something like that, or [did] not have a smarter process of how to run the program,” said Blakey, who has no employees. He wishes the government had given preference to small businesses, considering that larger corporations were among the top grant recipients.

In its June 23 email to firms whose grants were rescinded, the SBA said its leadership also was “frustrated” with the situation. But because of the lawsuits, the agency said it would switch to processing restaurant relief applications in the order in which they were submitted.

Originally, lawmakers ordered the SBA to award the grants only to firms owned by women, military veterans and “socially and economically disadvantaged” individuals during the first 21 days of the grant application period. The money was to come from a $28.6 billion Restaurant Revitalization Fund that Congress created in March as part of its latest coronavirus relief package.

Those funds quickly ran out after businesses applied for $72 billion in aid, two and a half times the amount of money available, an SBA official said. Only about one in every four applicants ended up winning a grant, with more than 100,000 establishments getting the funds.

Lawmakers have introduced bills to provide $60 billion in additional relief. But although the proposals have bipartisan support, Lee said, “I'm not counting on it. [Legislators] have a lot on their plate as it is, and it seems to be kind of a tug-of-war all the time.”

Lee, however, had once relied on the promised restaurant relief to plot his return to dine-in service at Spice Island. His restaurant has operated exclusively on a take-out basis, and with limited hours and a skeleton crew, since the beginning of the pandemic.

As a result, Lee said, revenues took a 70 percent hit. He said relief programs such as the federal Paycheck Protection Program helped him to stay afloat. But he has yet to hire back the workers he had to lay off when COVID-19 first arrived. The restaurant once employed about a dozen people but now has just six workers, including Lee.

While he declined to say how much money he’d been granted through the Restaurant Revitalization Fund, Lee said it would have enabled him to cover maintenance expenses, which he has deferred due to the pandemic. It also would have helped him to restore his staff while simultaneously paying higher wages in a tight labor market and bankrolling increased supply costs.

But now, without the relief money, Lee doesn't know when he will reopen for in-person dining.

“I'm still moving forward. I'm just kind of taking my time a little bit more now and rethinking strategies,” he said.

While Blakey, of Blowfish BBQ, said his food truck gave him some advantages during the pandemic, his costs still soared.

The truck has become a staple at area breweries, Blakey said, thanks largely to COVID-19 restrictions that once required drinking establishments to serve food with alcohol. The threat of the coronavirus also favored outdoor venues where food trucks already set up shop.

But to prevent the spread of disease, Blakey had to spend more on individually-wrapped cutlery sets and sauce cups. The time to fill each cup required significantly more time than simply setting out shared condiment bottles, Blakey said. Then there were the costs associated with supply shortages and extra sanitation. And all the while, Blowfish BBQ’s catering business had ceased along with in-person gatherings.

Blakey said he’s taken on debt to cover his losses. The nearly $13,000 he’d initially been awarded through the Restaurant Revitalization Fund would have helped him to pay off those loans and expand his business.

“It would have been nice to get that [debt] out of the way and have that little cushion,” he said. “But that just kind of disappeared into the wind.”

An-Li Herring is a reporter for 90.5 WESA, with a focus on economic policy, local government, and the courts. She previously interned for NPR Legal Affairs Correspondent Nina Totenberg in Washington, DC, and the investigations team at the Pittsburgh Post-Gazette. A Pittsburgh native, An-Li completed her undergraduate studies at the University of Michigan and earned her law degree from Stanford University. She can be reached at aherring@wesa.fm.