Young and Hungry

Street Food: Should the D.C. Government Help Fund Restaurants and Bars?

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When the owners of Ivy and Coney first set out to open their Midwest-inspired bar in Shaw, they planned for the small spot to serve only beer, Chicago-style and Detroit-style hot dogs, and a few other snacks.

But when it opens in the coming months, Ivy and Coney will have built out a full kitchen, expanded its food offerings to a longer menu, and installed a deck with a retractable glass roof, doubling its occupancy. Co-owner Josh Saltzman, who is also a co-owner of Kangaroo Boxing Club, says he and his partners initially planned to staff the place themselves. But with the additions, they expect to double their revenues, meaning that Ivy and Coney should be able to hire eight additional employees.

All that work—the kitchen, the retractable roof, and other small improvements—will cost around $85,000. But private investors, who typically fund restaurants, didn’t pony up for it. Crowdfunding, which has become popular with food entrepreneurs lately, isn’t to thank either, though Ivy and Coney also raised $6,220 on Indiegogo. Instead, the money will come from taxpayers via a District government grant.

That grant is part of the Great Streets Small Business Capital Improvement Program, which the Office of the Deputy Mayor for Planning and Economic Development first launched in late 2011 with the goal of growing and supporting small businesses in underdeveloped neighborhoods, while adding new jobs.

To date, the program has awarded 65 new and existing businesses more than $4.7 million in amounts of up to $85,000 each. The grantees include everything from pet stores to yoga studios to auto repair shops, but roughly a quarter are restaurants, bars, markets, or other food ventures. The grants are not meant to incentivize businesses to open in certain locations—they must already have leases or own property—but rather to fund expansions and renovations. The money has paid for new awnings and signage, electrical and plumbing upgrades, outdoor patios, and rooftop solar panels.

Last week, Great Streets announced its largest payout to date: $2.1 million for 29 businesses across 11 corridors, which spread from 7th Street NW to Benning Road NE to Pennsylvania Avenue SE. (The program was restricted to H Street NE in its first year, when it was known as the H Street NE Retail Priority Area Grant.)

In his weekly radio address Sunday, Mayor Vince Gray said the grants will help revitalize “underutilized” neighborhoods. He anticipates the 29 newest grantees will create 200 new jobs. Grant recipients past and present say they have hired or will be able to hire more people than they would have otherwise. Some also say that because of the extra money, they’ll have the potential to grow their businesses, adding more activity to their neighborhoods, and bring in more revenue, ultimately paying back the city in more taxes.

But the program also raises questions about whether the government should invest in notoriously risky businesses like restaurants and whether a new facade or a better roof deck will really transform a neighborhood. Ivy and Coney, in particular, raised some eyebrows about whether its retractable glass roof is the best use of government dollars when there’s so much need elsewhere.

The grant program has also been inconsistent in who it says is eligible to receive funding and who actually gets it. H Street NE is the only corridor that’s part of the Great Streets program where restaurants are not officially eligible. But one got the money anyway. In May 2012, “restaurant and social gathering place” DC Conscious Cafe at 1413 H St. NE was awarded $85,000 from Great Streets for facade improvements and to open its floor plan.

DMPED spokeswoman Chanda Washington says she was not around when the decision was made, and the one person who might be able to provide an explanation about why DC Conscious Cafe received the grant is out of the office all week.

DC Conscious Cafe, which planned to have book readings, live entertainment, and a retail component, was the first restaurant in the city to win the grant. But despite the financial assistance, its building remains vacant more than a year and a half later. The owners did not respond to requests for comment. According to Washington, the restaurant experienced some “unexpected challenges” due to a “personal situation,” which are delaying the opening.

Also ineligible for the grant citywide: bars, nightclubs, liquor stores, banks, and hotels. But two of the most recent grant recipients—Ivy and Coney and Pub and The People coming to 1648 North Capitol St. NW—will have tavern, not restaurant, liquor licenses. Restaurant licenses require food to account for at least 45 percent of the businesses’ gross sales; tavern licenses, which bars typically have, require some food but no specific amount.

Washington did not know exactly how DMPED defines “bar” and again said the person who might know was unavailable this week. But Pub and The People co-owner Jeremy Gifford says even he wasn’t sure how the grantmakers were distinguishing what was a bar versus a restaurant. “We called to say what’s the difference? Who’s ultimately making the decision ‘No, you’re a bar, no, you’re a restaurant?’” he says. “And they didn’t really seem to have an answer, quite frankly.”

Great Streets has a 100-point scoring system to evaluate applications, which takes into consideration financial viability, previous experience running a successful business, the market for the products or services provided, new jobs created or retained, and commitment to using D.C.-based contractors.

But in the grant’s early stages, Great Streets Program Executive Director Polina Bakhteiarov says they’re trying to reward “every business that is eligible,” as long as they’re located in one of the approved corridors and have their finances in order. Of those “eligible,” no type of business is prioritized over another, Bakhteiarov adds, meaning a market isn’t given more weight than, say, a hair salon or a photo studio.

The grant recipients aren’t just given blank checks: The city reimburses their expenses after they submit receipts, which means the businesses still need to have some upfront cash. But in terms of what kinds of renovations or expansions are permitted, there aren’t too many restrictions. “We look at it from a more holistic perspective,” Bakhteiarov says. The few no-nos include using the money for things like product inventory, rent, payroll, and day-to-day operations.

Gifford says the $85,000 grant for Pub and the People will allow them to dig out a full basement, which will be used for storage, at their once-blighted building in Bloomingdale. Without the grant, Gifford says they probably would have just dug out a very small part of the basement rather than the full thing. The extra space will allow them to double the occupancy upstairs, which will mean they can hire four or five additional people, most of whom will likely come from the neighborhood.

The extra clientele, in theory, also means more feet on the street. “People don’t sell drugs on the corner when there’s that many people walking around,” Gifford says. He anticipates that having nicer and busier places to eat and drink will help draw other businesses to the neighborhood. “Restaurants tend to be the first in,” Gifford says, “and then you start getting hardware stores and artsy things.”

Since the grant program is so new and many of the businesses are still in the process of opening, it’s too soon to see much of a neighborhood impact—or really be sure there is one.

The money is definitely helping some individual businesses. Three Little Pigs Charcuterie & Salumi in Petworth was awarded $62,500 in June. Carolina Gomez, who runs the shop with her husband, Jason Story, says they’ve used part of their grant for a new air-conditioning system and renovations to the basement, which gives them more space for production and charcuterie-making classes. Between savings on energy costs and extra production capabilities, Gomez says Three Little Pigs has been able to hire a part-time baker and a part-time farmers market representative, who have the potential to become full-time.

Gomez and Story also plan to use some city funds for a larger meat grinder and an automatic sausage stuffer so they can make more product faster. Other future investments will include a more visible sign out front, a mural on the side of the building, and a new deli case, which will allow Three Little Pigs to become more of a grocery store than a charcuterie shop, with butchered meats and local dairy and produce. Gomez says it will take about a year to make improvements that would otherwise have taken five or six years.

At Ivy and Coney, Saltzman says the grant will fast-track improvements that would have taken at least three years. The result? The city should get its money back in sales, employee, and property taxes in a year and a half, he says, “and then they’re going to continue to get that money.” But more than that, Saltzman says the grant is providing a much better space for the community, not to mention the addition of jobs.

“It’s not like it’s a handout,” Saltzman says. “This is something that we and the other grant receivers worked to show to the city small business department that we’re going to have an effect on people’s lives, and this is a good thing. This is helping neighborhoods.”

Still, some are cautious of how loudly they boast about what the city has given them, even though the city promotes the grant recipients through press releases and events. “We debated whether we wanted to publicize that we got this grant and how people would look at it, whether it was right for the government to help bars open,” says Pub and The People’s Gifford. “I totally get both sides.”

But, Gifford argues, it’s not like the money was removed from the budgets to help children or the homeless. “This is a budgeted line item in Mayor Gray’s budget,” he says. “Ultimately, it’s a good thing, but I see where people have a tough time swallowing it when we see need in other parts of the city for services.”

Eatery tips? Food pursuits? Send suggestions to hungry@washingtoncitypaper.com

Photo by Darrow Montgomery

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  • yup yup

    So the "DC Conscious Cafe" is not so conscious with my taxpayer dollars. Shouldn't they have to pay it back? I have personal situations too, but I don't make my problems a burden on my fellow citizens...

  • sbc

    If Ivy & Coney hire 8 new employees who make minimum wage for 30 hours a week each, that's $12,375 per person...in DC taxes, that's $542.50 each, so $4340 additional in income taxes. Let's also assume that they spend 1/3 of their non-taxed income on things that cost the 6% DC sales tax, garnering an additional $1980 in revenue.

    And the big thing is if they can increase their own revenues. Let's say they go from an average of 50 people a night to an average of 75 a night (I am totally making these numbers up) and all patrons go from spending $15 on average to $20 on average. Over the year, that adds up to an increase of $237,750 in revenue, so $27,375 in tax dollars.

    These 3 tax revenues combine for $33695 in total tax revenue increases, meaning that the grant would pay for itself in about 2.5 years.

    There are a lot of assumptions in this, of course. I just did a quick analysis. But I'm not sure we can definitively say it's a bad deal.

  • sbc

    I just realized I had some typos in there. And Ivy & Coney seem to think they'll have bigger revenues than I predicted (they say they'll create the increased taxes to equal the grant amount in 1.5 years).

    I don't mind grants or small business loans, but I do wonder if the District could attach some more strings--what if people had to promise to hire DC residents (perhaps even to interview folks who are currently in TANF or DOES job training?) and pay a living wage?

  • 7r3y3r

    Why couldn't this program be structured as a low interest, long term loan (in other words, "generous terms") as opposed to a grant? That way the businesses get a cash infusion and the city is nearly guaranteed to make their money back, which could then be used to fund new loans. Wash, rinse, repeat.

  • Colin

    This is pretty messed up.

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  • Jim Ed

    When I saw the release a few days ago, I initially got angry that they're handing out money to bars that almost certainly don't need the money. But then I remembered that last year they gave handouts to dumpy convenience stores like Missouri Market, which are outright detrimental to the community.

    So in that context, better to give the money to bars that will increase foot traffic rather than stores that contribute to health issues and public drinking in the city.

    Overall, however, this program clearly needs more stringent qualifications before they start cutting checks.

  • Corky

    I don't see a problem with it. Anyting that helps small businesses grown and create new jobs is a good thing. Afterall, since when did anyone in DC give a damn about spending? We have a multimillion dollar street car to nowhere that, when it ever gets running, will literally follow metro buses down H Street. And we are supposed to care about $85,000 for a bar? That's chump change in the world of DC waste!!

  • Pete

    Shocked this wasn't broken by Tom Sherwood?

  • Sean B

    Totally agree with 7r3y3r. A long-term loan with little to no interest is a better idea than a grant. Or, at a minimum, as Jim Ed said, have more stringent qualifications for the grant.

  • http://blog.heterodoxhomosexual.com Doctor Whom

    If the grants are such a good deal for the city, why did private investors determine that investment would be a bad deal for them? How is investors' unwillingness not a market signal? Also, it's ironic that the city government, which is not exactly famous for making it easy to start and run a business, is giving these grants.

  • Sally

    Anyone surprised that DMPED has screwed this program up hasn't been paying attention.

    And don't expect Bowser to do any meaningful oversight. She has neither the brains nor the gumption to dig deeply into this. Heck, she's probably pissed off she doesn't get to claim credit for this boondoggle.

  • Jess

    Ridiculous! It's one thing to provide loans or grants for community-focused disadvantaged businesses in rough areas, but providing GRANTS to restaurants and freaking charcuterie spots is just helping the well-to-do serve the other well-to-do recent DC transplants. Sickening.

  • A. M.

    I agree with you Jess. A lot of the well established businesses that have supported the neighborhoods surrounding H Street NE have shut their doors due to great losses during construction of the Street Car to nowhere, and the lack of support from the newcomers to the area. Many of these business didn't get the loans while many others opened their doors to the well-to-do recent DC transplants.

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  • Thom

    It is too had that Gray, Bow-wowser, and their ilk don't have the brains, vision, or competency to discover other engines of economic development and job growth that might benefit from creative stimulus mechanisms. It would seem the last sector that needs government support is the bar business.

    Imagine if Gray, Bow-Wowser et al had been in charge back when Dave Clarke and Abe Pollin struck the deal that built the Verizon Center and set off the renaissance of downtown. We'd have dusty old wig shops with retractable roofs but nary a (as Vinnie likes to point out even though he had absolutely nothing to do with it) crane in the sky.

    Oh, and if Bow-Wowser was in charge the wig shops would have really tricked out closets people could live in.

    How long does Bowser think she can dodge her "issue"?

  • Unfortunately

    The sad thing is that so many of these programs from local government (and SBA) are just rife with abuse and fraud. One audit of a single program is ALWAYS enough to make taxpayers wretch in disgust.

    $85,000 to a bar ownership group with enough capital to launch a food truck and open 2 bars within 3-4 years is a great example.

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