• Donny Willis

Glitch Prevents Cultural Venues from Getting Billions in Federal Aid

Thousands of desperate applicants waited in line at noon on Thursday to apply their paperwork for a $16 billion relief fund for music clubs, theaters, and other live event companies, as the government prepared to begin accepting applications.

Then they sat and waited. And then I waited. The device was still not functioning about four hours later, sending applicants into panic attacks.

Eric Sosa, the owner of C'mon Everyone, a Brooklyn nightclub, tweeted at the department, "This is an absolute disaster."

The Small Business Administration, which oversees the project, the Shuttered Venue Operators Grant program, abandoned its attempt to repair the broken system shortly after 4 p.m. and shut it down for the day. There were no applications that were processed.

“Despite several satisfactory evaluations of the application process, technical problems arose,” said Andrea Roebker, an agency spokeswoman, in a written statement.

Following talks with the system's developers, the department agreed to "close the portal to ensure fair and equitable access until it is reopened, because this is first-come, first-serve," according to Ms. Roebker. “We did not take this decision lightly because we recognize the urgency of which this hard-hit industry needs relief.”

Applicants vented and expressed their frustrations in social media networks and Zoom calls.

“It's frustrating to keep hearing ‘help is on the way,' but not being able to apply,” said Tom Weyman, the Columbus Theater's director of programming in Providence, R.I. “I don't think any of us expected the application process to go smoothly, but this is a life or death situation for our venues.”

The meltdown was reminiscent of issues the department had accepting applications for the Paycheck Protection Program, which it also regulates, last year. As that initiative began, the agency's overburdened processes froze up — and when a new round of funding became available a few weeks later, the same thing happened.

Applicants for the grant program were surprised that the agency was not better prepared, particularly because the funds are to be allocated in order of application. Those that submit their applications as soon as possible have the greatest chance of receiving assistance before the funds run out.

In an interview, Mr. Sosa, the Brooklyn club owner, said, "It pits venues against each other because we're all mad-dashing for this." “It shouldn't be like this. We're just part of the same family.”

Having a grant is a matter of life and death for companies like Crowbar, a music venue in Tampa, Fla. Crowbar's primary owner, Tom DeGeorge, took out over $200,000 in personal loans to keep the company going after it closed last year, including one that used the liquor license as collateral.

Mr. DeGeorge said the club has reopened with a smattering of activities at reduced capacities more than a year later, but the company is still in the red.

Mr. DeGeorge said, "We missed an entire year of concerts in the blink of an eye, which was close to $1 million in sales." “That is why we are in desperate need of this grant.”

After months of lobbying by an ad hoc alliance of music venues and other organizations that warned of the loss of an entire sector of the arts economy, Congress approved the aid late last year.

The last year has been a scramble for local music venues to stay alive, with owners of local clubs launching crowdfunding projects, selling T-shirts, and racking their brains for some inventive way to raise funds. For the holidays, the Subterranean club in Chicago, for example, agreed to put patrons' names on its marquee in exchange for $250 or more in donations.

Even before Thursday's disaster, the reopening of the shuttered venue program was fraught with ambiguity.

Late Wednesday night, the Small Business Administration published a 58-page guide for applicants, which was quickly taken down. On Thursday, just minutes before the portal opened, an updated version of the guide was released. (A spokeswoman for the department said the guide had to be revised due to "some last-minute device changes.")

The agency's inspector general issued an alert less than two hours before it was expected to begin accepting applications, warning of "significant issues" with the program's waste and fraud controls. The inspector general wrote in a report that the Small Business Administration's new audit strategy "exposes billions of dollars to possible abuse of funds."

From 2019, successful applicants can receive a grant of up to $10 million, equivalent to 45 percent of their total earned revenue. Those who lost 90% of their sales (compared to the previous year) after the coronavirus pandemic hit will be given a 14-day priority window to receive the funds, followed by another 14-day window for those who lost 70% or more. If there are any funds left over after that, they will be distributed to applicants who experienced a 25% revenue loss in at least one quarter of 2020. Corporate-owned venues, such as Live Nation or AEG, are not eligible.

The application process is lengthy, with specific questions about the budgets, personnel, and facilities of the venues.

“They want to make sure you're not just setting up a piano in the corner of an Italian restaurant and calling yourself a music venue,” said Blayne Tucker, an attorney representing a number of Texas music venues.

Also with the grants, music festivals will have to wait a long time for touring and live shows to return to pre-pandemic levels.

The grant program even helps Broadway theaters, performing arts centers, and even zoos, many of which face similar financial challenges.

According to Jason Jon Anderson, executive director of the Pablo Center at the Confluence in Eau Claire, Wis., the organization was able to collect around $1 million from donations and grants during the pandemic, but it is still $1.2 million short on its annual fixed operating expenses.

“By the time we reopen, in October 2021 at the earliest,” he said, “we will have been closed for longer than we had been open.” (At a cost of $60 million, the center opened in 2018.)

Thousands of small clubs dotting the national concert map don't have access to large donors and have been living on fumes for months in many cases.

The owner of the 300-seat Rebel Lounge in Phoenix, Stephen Chilton, said he had taken out "a few hundred thousand" in loans to keep the business afloat. It reopened in October with a pop-up coffee shop on the premises, and the club hosts activities such as quiz competitions and open mic nights.

Mr. Chilton said, “We're losing a lot less than we were when we were absolutely closed, but it's not making up for the missed income from doing events.”

The Rebel Lounge is hoping for a grant to help it thrive before it can resume its full schedule of concerts. What happens if the application isn't successful?

Mr. Chilton said, "There is no Plan B."