Nearly 400,000 jobs have been lost in North Carolina’s restaurant and hotel industries because of the COVID-19 pandemic, industry advocates told state lawmakers Tuesday.
The halting of most travel and closing of dine-in service at restaurants has devastated the state’s approximately 18,000 restaurants and 1,800 hotels, said Lynn Minges, president and CEO of the North Carolina Restaurant and Lodging Association. Businesses are asking for help from state lawmakers as they wait for federal emergency relief funds and the Golden LEAF Foundation is offering bridge loans
In a presentation to the N.C. House Select Committee on COVID-19’s Economic Support working group, Minges said many restaurants closed entirely after March 17, when dine-in service ended to ensure proper social distancing. Those that remain open are “essentially on life support,” she said.
“Many of those restaurants are limping along, on limited capacity serving only though drive-through, carry out and delivery,” Minges said. “But that is really not a sustainable model for them to be able to maintain for very long.”
The abrupt closure left little time for most restaurants to plan, Minges said. Owners are cash-strapped as their businesses’ incomes have dropped to a fraction of pre-pandemic levels; they are being forced to lay off employees for whom they don’t have enough work, she said. Many are making their existing payroll through credit cards.
Hotels are also beginning to see an enormous impact as business and leisure travel, concerts and conventions and other major drivers of the industry have stopped.
Many of these businesses have insurance for business interruption in the case of disasters, Minges said, but their claims are being denied because insurers are invoking pandemic clauses relieving them of coverage requirements. These clauses became more common in response to the SARS outbreaks that began in 2002.
The argument could be made that the business interruption is not being caused by the pandemic but by the government action taken to prevent its further spread, Minges said. Either way, businesses aren’t getting the coverage for which they thought they paid.
Rep. Billy Richardson (D-Cumberland) suggested the legislature should act to prevent insurance companies from avoiding responsibility in a health crisis.
“These restaurants and businesses bought this interruption coverage and these carve-outs are ridiculous,” Richardson said.
Minges highlighted three areas of immediate need when the legislature comes back into session, whether as scheduled on April 28 or — as appears increasingly likely — in a special session before then. The association is asking for several provisions:
* A dedicated state grant fund for the hospitality industry to help pay for fixed costs like rent, equipment leasing, utilities and loan payments that are due.
* Extension of deadlines for sales and income taxes with a waiver of interest and penalties so that businesses keep the cash they do have and keep employees on the payroll.
*Assistance with employer obligations due to the Unemployment Insurance Fund.
Some association members have asked about the possibility paying businesses that retain their employees, including continuing their benefits, equal to the amount their unemployment insurance claims might otherwise cost the state, Minges said.
It’s in the best interest of both businesses and employees, Minges said, as there have been a record number of unemployment claims — more than 200,000 — Minges said.
On Tuesday afternoon, shortly after the committee meeting, the North Carolina Department of Revenue announced an expansion of tax relief that excludes penalties for late filers and payments of a variety of tax types: withholding tax, sales and use tax, motor vehicle lease and subscription tax, solid waste disposal tax and scrap tire disposal tax.
The department won’t impose penalties for failure to obtain a license, to file a return, or to pay a tax that is due March 15, 2020 through July 15, 2020, if the corresponding license is obtained, return is filed, or tax is paid on or before July 15, 2020.
The department can’t waive interest from the due date under current state law, though — 5 % per year. The legislature will have to act to prevent interest from accruing from the original due date, a fix lawmakers have been discussing.
Andy Ellen, president and general counsel for the NC Retail Merchants Association, told the committee many essential businesses like grocery stores and pharmacies are seeing increased traffic even as they try to implement proper social distancing and increased cleaning to slow the spread of the disease. Others, like clothing stores and non-essential specialty retail, have closed in-person spaces.
Inventory is not a forgivable expense under federal assistance programs, Ellen said. That’s a problem for businesses left with unsold goods and that can’t order new inventory until they are current on the money they owe suppliers.
Stores are also struggling with what Ellen called a “patchwork of orders” on COVID-19 related restrictions, some of which go further than the governor’s statewide stay at home order.
“We have 22 local orders and 12 curfews,” Ellen said. “You can’t buy a car in New Hanover County. Curbside food an option in some places but not others.”
Where local orders impose additional restrictions like curfews, they remain in place irrespective of whether they are also part of the governor’s order. That may make it harder for some people to understand the rules, Ellen said.
For example, local curfews could also make it more difficult for people to shop for food as grocery stores change their hours to allow for proper restocking and cleaning. People need to know the times they can shop throughout in the state. The governor’s order was well crafted, he said, and should govern all 100 counties.
Looking forward to the summer, travel industry advocates say they worry about the impact of North Carolina’s vacation and tourism industries.
Vince Chelena, executive director of the NC Travel Industry Association, said “the rug was quite literally pulled from under our feet.”
Tourism is North Carolina’s second largest industry, he said, and its businesses expect to feel the effects of the COVID-19 pandemic and its economic aftershocks even if the the infection rate peaks in the state by early summer.
Adjusting school schedules so that students would come back to school in early August would likely hurt summer vacation rentals and travel in the state, Chelena said — which could be disastrous for coastal communities that depend on tourism.
“Businesses in these places only have a couple of months to make their money,” Chelena said.