CRENSHAW/LAX PILOT BUSINESS SOLUTION CENTER (BSC) and METRO'S PILOT BUSINESS INTERRUPTION FUND (BIF) MONTHLY REPORT

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1 One Gateway Pl aza Los Angeles, CA Tel met ro. net 55 CONSTRUCTION COMMITTEE EXECUTIVE MANAGEMENT COMMITTEE April 16, 2015 SUBJECT: ACTION: CRENSHAW/LAX PILOT BUSINESS SOLUTION CENTER (BSC) and METRO'S PILOT BUSINESS INTERRUPTION FUND (BIF) MONTHLY REPORT RECEIVE AND FILE STATUS REPORT RECOMMENDATION Receive and file monthly status report on the implementation of the Crenshaw/LAX Transit Project Business Solution Center and Metro's Pilot Business Interruption Fund. ISSUE In July 2014, Metro's Board issued Motion 79 (Attachment A) which authorized the CEO to establish a Pilot Metro Business Solution Center (BSC) along the Crenshaw Corridor (Corridor). Thereafter, the Board of Directors issued Motion 57 (Attachment B) that authorized the CEO to establish a pilot program for a special Business Interruption Fund (BIF) for mom and pop businesses along the Crenshaw Line, Little Tokyo area along the Regional Connector and Phase I of the Purple Line Extension. The motions require monthly updates to the Construction Committee. This report covers activity for the period January 2015 through March DISCUSSION Since the adoption of the aforementioned Board motions, staff has completed a series of actions leading to the implementation and launch of the BSC including the "soft launch" of the BIF. In addition, Metro's Construction Relations staff has advanced efforts for the establishment of the Little Tokyo Small Business Assistance Center (SBAC). Also, the business loss management firm, GCR, was retained and subsequently completed a BIF analysis identifying the potential participation levels of eligible businesses along Crenshaw/LAX, the Little Tokyo area of Regional Connector and Purple Line Phase I Extension. (1) Crenshaw/LAX Pilot Business Solution Center Update Metro staff continued to work in collaboration with the BSC Contractor, Del Richardson and Associates (ORA) to implement and complete a series of activities and milestones for the formal launch and on-going operation of the BSC.

2 The formal BSC launch was commemorated by a ribbon cutting ceremony and press event hosted February 9, In addition, the BSC's website launched February 4, The website serves as an additional platform for small businesses within the Crenshaw/LAX corridor to gain information on the BSC, access to the complement of services provided by the BSC through online capability to complete and submit a BSC Intake Form. In addition to the website launch. The BSC staff continues to advance outreach and case management efforts for businesses located within the BSC target area of 48th- 60th Street. BSC staff also maintains continuous outreach activities for other businesses located along the project corridor. Metro staff in collaboration with ORA continues to assess early observations and lessons learned. Early observations that have been identified as near-term areas of focus and on-going assessment are as follows: More than 50% of businesses seeking BSC services are outside of the BSC targeted area of 48th - 60th Street. This demonstrates elevated demand and need for support services for businesses outside the targeted area thus potentially requiring a more focused strategy to provide intake and referral for businesses. Significantly high number of businesses within the assessment process thus demonstrating the need to streamline the intake, referral and case management process for businesses. In review of the BSC activities and program structure, there is a need to establish defined cycle time for overall progression from intake, referral and case management including the development of key performance factors for continued assessment of the pilot program. In response, the following activities will be initiated: Streamline the intake process to support expedited intake and referral for businesses located outside target area of 48th -60th to BSC Business Development Partners. The streamlined intake process for businesses outside the target area will be structured with consideration to the BSC's scope of services and resource capacity with the objective of getting businesses referred to BSC Development Partners that can provide the business resources and support that is needed. On-going review of the intake, assessment, referral and case management process in combination with defined processing times for businesses to progress throughout the phases of intake, referral and case management. ORA will make ongoing enhancements to strengthen the network of BSC Business Development Partners to provide the supplemental business development support services and resources to referred businesses. Continued analysis of BSC monthly report data to track the overall performance of the pilot project remains a priority. Crenshaw/LAX Pilot Business Solution Center and Pilot Business Interruption Fund Update Page 2

3 Following is a summary of BSC activities for the period of December 19, 2014 through February 27, 2015: Total number of BSC clients: 151 Number of Intakes (completed): 119 Number of Assessments (in progress): 92 Number of Referrals (completed): 54 Number of Case Management (in progress):17 Number of businesses refusing BSC services:_1. Note: Business referrals to PCR for the Business Interruption Fund. Metro's project staff will continue to work in collaboration with ORA on the development and on-going review of key performance indicators demonstrated through the: The defined cycle time for BSC client's progression from intake, referral and case management. Overall client satisfaction with the BSC Program and support services. (2) Little Tokyo Small Business Assistance Center Update Metro's Construction Relations staff has been leading activities necessary for the establishment of the Little Tokyo Small Business Assistance Center (SBAC). The SBAC serving Little Tokyo is operated by the Asian Pacific Islander-Small Business Program (API-SBP), a collaborative of five community organizations: the Ch inatown Service Center; Koreatown Youth & Community Center; Little Tokyo Service Center CDC Search to Involve Pilipino Americans; and Thai Community Development Center. The API-BSP began operations from Metro's Regional Connector Little Tokyo Community Office, located at 360 E. 1st Street on February 23, Since 1999, the API- SBP's mission has been to assist in sustaining and promoting the growth of area small businesses. Their team will conduct case management and individualized business counseling from the Regional Connector's community office and respond to the unique needs of ethnic small businesses during the term of construction of the Regional Connector. API-SBP is currently tasked with designing a business survey in conjunction with Little Tokyo stakeholders. The business survey will establish priority services the community is most interested in accessing on a continuum. The survey will be conducted in English, Japanese, Korean and Spanish and findings are scheduled to be presented in July (3) Pilot Business Interruption Fund Update In November 2014, Metro's Board of Directors approved the approach to outsource BIF fund administration to an external Community Development Financial Institution (CDFI) and authorized the CEO to enter into negotiations for a contract with Pacific Coast Regional Small Business Development Corporation (PCR). Upon entering into agreement with PCR in December 2014, Metro staff progressed through a series of activities for the implementation of the BIF. Between December Crenshaw/LAX Pilot Business Solution Center and Pilot Business Interruption Fund Update Page 3

4 2014 and February 2015, Metro's internal working group including both PCR and GCR's contract staff convened series of meetings leading to the development and adoption of the BIF Administrative Guidelines. Thereafter, the BIF soft launched February 12, The BIF "soft launch" commenced with PCR activating the BIF online application and BIF Program Advisors contacting small businesses referred by the Crenshaw/LAX BSC. As of date, PCR's BIF program staff continues on-going outreach to impacted "mom and pop" small businesses within the Crenshaw/LAX transit corridor including door-todoor canvassing to impacted small businesses. Keeping with the objective of developing a pilot program that is prudent yet provides a seamless process for "mom and pop" small businesses to apply and access financial assistance through the BIF, PCR's web-based application allows businesses to apply through the website yet BIF advisors are readily accessible to provide hands-on support and guidance to business owners. Following is a summary of BIF grant application activities for the period of February 12, 2015 through March 13, 2015: BIF applications completed and submitted: 27 BIF applications pending online (not completed or submitted): 12 BIF applications declined:.1 Note: One formal decline was issued during the specified reporting period due to the business no longer being in operations as of December 1, 2014; thus the business does not meet the BIF eligibility requirements. Moreover, PCR established a defined process for the administration and processing of BIF grant applications and grant funding awards. Completed applications accompanied by the required financial documents are advanced by PCR's BIF Program Advisors to the BIF Grant Award Committee for review and grant funding award determination. PCR conducted the first BIF Grant Award Committee (Committee) on March 19, 2015, which five (5) of the twenty-seven (27) grant application requests advanced to the Committee. Following is summary of the Committee activities: Total number of BIF grant application staff recommendations:. Total value of BIF grant staff recommendations: $142,442 Number of BIF grant staff recommendations approved for funding:~ Number of BIF grant staff recommendations with conditional approval : ~ Number of BIF grant staff recommendations tabled for additional review:.1. The BIF "soft launch" afforded Metro and PCR the opportunity to assess the application and grant award process with focus on impacted businesses within the Crenshaw/LAX corridor, the first of the three active transit construction projects for which the BIF provides financial assistance to directly impacted "mom and pop" small businesses. Moreover, Metro and PCR will continue to advance activities for the development of comprehensive outreach and communication strategy in coordination with the formal launch in April Crenshaw/LAX Pilot Business Solution Center and Pilot Business Interruption Fund Update Page 4

5 Furthermore, Metro's project staff will continue to work in collaboration with PCR on the development of a comprehensive monthly BIF project report for the continued assessment of overall performance of the pilot project including a comprehensive reporting of BIF application requests, business demographics and financial accounting by project corridor. In addition to on-going review of the established key performance indicators demonstrated through the: Number of completed applications processed within 9 business days. Number of "mom and pop" small businesses remaining in business post grant award (sustaining through construction term). Overall client satisfaction with the BIF Program and support services. (4) Pilot Business Interruption Fund Analysis In addition to advancing efforts for the BIF launch, Metro advanced efforts and retained GCR to provide advisory services in the development of the final BIF Administrative Guidelines, with consideration to developing guidelines that do not reduce or waive insurance coverage afforded to Metro by our Design Build Contractors for insurable business interruption losses; and to provide a comprehensive BIF analysis of potential eligible businesses within the three targeted project corridors. GCR employed an interactive method of assessment and analysis that included focused meetings with Metro's internal working group inclusive of County Counsel, Risk Management, Management Audit Service Department, OMB including Vendor/Contract Management and Communications' Construction Relations staff; discussions with Metro's construction management team for each project; and site visits of each project corridor. The BIF analysis provides Metro with estimates of the total number of eligible businesses and the potential ("likelihood)" corresponding claims activity through use of the best possible data available including the aforementioned interactive method of assessment and analysis. To estimate the number of eligible businesses along each construction project corridor GCR: a) Obtained an inventory of all businesses in Los Angeles County from Dun & Bradstreet (D&B). Data includes business name, number of employees, sales volume, and dates of operation; b) Identified each business in the D&B database situated directly along each route; c) Identified those businesses from which have 25 or fewer employees and have been in business since 2013*; and d) Employed additional tools for comparative analysis of D&B data; and e) Identified businesses that may also be ineligible. *Note: Per the Board adopted Motion #57, the definition of "mom and pop" small businesses as businesses with 25 or fewer total employees. Per Metro's BIF Administrative Guidelines businesses must also demonstrate continuous operation for at least two years along the corridor. Crenshaw/LAX Pilot Business Solution Center and Pilot Business Interruption Fund Update Page 5

6 GCR identified an estimated 7,736 small businesses located directly adjacent to the three project corridors. Understanding that construction activity does not affect all types of businesses equally, GCR assigned a likelihood (probability) of businesses participating in the BIF. The likelihood categorized as high, low, moderate and none was defined based on several factors such as type of business (NAICS code) and business setting along the project alignment. It is projected that approximately 2,448 of the 7,736 businesses are likely to participate in the BIF between FY 14/15 through FY 17/18. Estimated number of eligible businesses: Number of Businesses by Route Crenshaw/LAX Little Tokyo Purple Total 1 Total Businesses (from D&B) ,633 7,734 2 Total Businesses w/ ~ 25 Employees ,352 7,390 3 Total Businesses w/ ~ 25 Employees in Operation> 2 Years ,163 7,154 4 Total Businesses w/ 0 Employees Reported and in Operation> 2 Years ,461 1,636 5 Adjustment Factor Based on Streetview Analysis (Business Count) 136% 105% 112% 113% 6 Adjustment Factor Based on Streetview Analysis (Ineligible Business Type) 15% 3% 4% 5% 7 Adjustment for (5) Total Businesses ,903 8,169 8 Adjustment for (6) Total Anticipated Eli~ble Businesses ,626 7,736 Furthermore, the comprehensive analysis derived estimates of potential annual claims activity by combining analysis of eligible businesses, estimated participation rates and claims rates based on construction schedules. The rates of claims are subject to any number of variables including construction schedules, overall economic conditions, overall performance of the BIF and other unknown factors with consideration to the pilot project. The estimated number of annual claims in FY is approximately 460 and 560 with the number potentially exceeding 3,000 by FY The estimated number annual claims does take into account various assumptions. Estimated number of potential annual claims: Rout:e FY FY FY FY Crenshaw/LAX Little Tokyo Purple ,989 2,363 Tot:al ,437 2,563 +:LO% S6:L 8:19 3,780 2,820 -:LO% ,093 2,307 In addition, a BIF funding capacity analysis was also conducted which demonstrates the funding capacity by fiscal year by predefined maximum claim amounts based upon the annual program fund allocation of $10 Million. The funding capacity analysis does take into account various assumptions. Using the predefined average claims values it provides a basic capacity analysis of BIF funds to serve as a baseline. Crenshaw/LAX Pilot Business Solution Center and Pilot Business Interruption Fund Update Page 6

7 BIF funding capacity analysis: FY FY FY FY Total BIF Fund Amount $ 1D,DOO,DDD $ 1D,DDD,DDD $ 1D,DDD,DDD $ 1D,DDD,OOD Approximate Administrative Costs $ 4SD,DDD $ S8D,DDD $ S8D,DDD $ S8D,DDD Net Amount for Awards $ 9,SSD,DDD $ 9,42D,DDD $ 9,42D,DDD $ 9,42D,DDD Quarters Rema ining in Fiscal Year l.s Funds Per Remaining Quarter $ 6,366,667 $ 2,3SS,DDD $ 2,3SS,DDD $ 2,3SS,OOD BIF can fund the following number of claims... FY FY FY FY Number of Claims@ $SDK Maximum (1 Quarter) Number of Claims@ $SDK Maximum (1 Year) OR Number of Claims@ Avg. of $3DK (1 Quarter) Number of Claims@ Avg. of $3DK (1 Year) OR Number of Cla ims@ Avg. of $2SK (1 Quarter) 2SS Number of Cla ims@ Avg. of $2SK (1 Year) OR Number of Cla ims@ Avg. of $2DK (1 Quarter) Number of Cla ims@ Avg. of $2DK (1 Year) The BIF analysis of potential business participation levels provides Metro with baseline data for assessment and benchmarking throughout the span of the pilot project. The analysis along with the PCR's monthly project reports will be used to assess the overall impact of the program in meeting the objectives of providing financial assistance to "mom and pop" small businesses directly impacted by Metro transit rail construction; inturn supporting businesses' ability to sustain throughout the construction period. ATTACHMENTS A. Motion 79 B. Motion 57 Prepared by: Shalonda Baldwin, Deputy Executive Officer, Project Management Vendor/Contract Management, (213) Ann Kerman, Deputy Executive Officer, Community Relations Communications, (213) Crenshaw/LAX Pilot Business Solution Center and Pilot Business Interruption Fund Update Page 7

8 Executive Director, Vendor/Contract Management Arthur T. Leahy Chief Executive Officer Crenshaw/LAX Pilot Business Solution Center and Pilot Business Interruption Fund Update Page 8

9 ATIACHMENTA Motion by Supervisor Mark Ridley-Thomas, Mayor Eric Garcetti and Director Jacquelyn Dupont-Walker Implementation of a Pilot Business Solution Center for the Crenshaw/LAX Line Relates to Item 79 July 24, 2014 Since construction began on the Crenshaw/LAX Line Project (the Project) earlier this year, doing business on the Crenshaw Corridor (the Corridor) has become more challenging for businesses and patrons. Many businesses are already experiencing significant impacts created by construction activities, specifically at the intersections of Crenshaw Boulevard and Martin Luther King Jr. Boulevard and Exposition Boulevard where work is underway to lay the groundwork for future underground stations. Businesses between 48th Street and 60th Street, where the line will run at-grade, are also anticipated to face significant challenges when construction begins on that segment. Under both Federal and State law, Metro is prevented from providing direct cash subsidies to businesses unless access to the business is denied due to construction impacts. While this has not technically been the case on the Corridor, there is a clear nexus between construction activities and reduced business activity, especially the walk-in traffic that many of the retail businesses rely on. In April 2014, Metro retained a consultant to assess and provide recommendations on how to address the economic impacts of construction activities on small businesses on the Corridor. The consultant's report encourages the development of a pilot Business Solution Center that would provide direct sector-specific technical assistance to businesses along the Corridor to help them through construction activities. Services that could be provided to businesses include financial planning and advice on small business operations as well as dealing with municipal permits and regulations, legal assistance, marketing and grant/loan application management. The consultant specifically suggests that a pilot effort be established to provide proactive and hands-on business assistance to support the over 100 businesses at the at-grade portion of the

10 ATTACHMENT A Project between 48th and 60th Streets, as well as a walk-in location along the Corridor for which businesses along the entire rail alignment can receive information, resources and referrals. The establishment of a Business Solution Center would meaningfully enhance Metro's construction and external relations protocol. While serving as a relatively nominal financial investment for Metro, it would go a long way in helping to build the capacity of small businesses to survive the construction period and ultimately contribute to a vibrant transit corridor upon completion of the Line. If the Metro Board wants to pursue future funding measures to fully build out the system, it will be fundamental that we demonstrate to local small businesses that we are a committed partner during construction periods. This pilot Business Solution Center can serve as a model for such an effort, and to do so, it is essential that Metro partner with a capable and well established service provider to roll-out these services as quickly as possible. Furthermore, it is consistent with Metro's Construction Impact Response Program (CIRP) which was developed in response to construction on the Gold and Red Lines in the 1990s. The CIRP program provided various forms of relief for businesses including economic support and rapid response teams. These resources should also be made available for the Crenshaw Corridor. The pilot Business Solution Center would also complement Metro's other ongoing efforts to address business' needs during construction. For example, Metro continues to modify construction signage based on the feedback of surrounding business' to highlight the names of businesses, parking locations and to clarify that businesses are open during construction. In addition, Metro is finalizing a communications strategy to promote an "Eat, Shop and Play Local" campaign during construction. WE THEREFORE MOVE THAT THE BOARD OF DIRECTORS: 1. Receive and file the "Recommendations for a Pilot Metro Business Solution Center";

11 ATTACHMENT A 2. Authorize the CEO to immediately solicit proposals to establish a Pilot Metro Business Services Center along the Crenshaw Corridor that includes a physical presence with consistent staffing hours for the duration of the construction of the Crenshaw/LAX Line, as well as a Business Solutions Outreach Strategy for the atgrade portion of the alignment on Crenshaw between 48th and 60th Streets and other locations that are determined to be significantly impacted by construction activities, and authorize the CEO to execute a contract with the most responsive and qualified bidder, with the objective of beginning operations by October 2014; 3. Direct the CEO to identify up to $250,000 and amend the current budget to fund the initial year activities, with an overall project budget expected to be approximately $1,000,000, to be included in future budgets for fiscal year 2016, 2017 and 2018 at $250,000 per year; 4. Direct the CEO to report back in September on a plan to utilize existing Full-Time Equivalent position(s) to staff the Business Solutions Center. 5. Direct the CEO to incorporate the following elements into the Pilot Business Solution Center Program: a. A single point-of-contact or case management approach for each business; and b. A 72 hour quick response plan. 6. Direct the CEO to establish an additional mitigation menu and criteria based on MTA's previous Construction Impact Response Program that includes: a. Marketing campaigns for impacted businesses; b. Rent and mortgage subsidies to businesses; c. A low-interest loan fund that is accessible to small and micro-businesses; d. Report back to the Board in September with funding recommendations; 7. Direct the CEO to report back on a Post-Construction Fa9ade Improvement Program in conjunction with the approved Design-Build Contract for the Crenshaw/LAX Transit Line; 8. Direct the CEO to report back on the feasibility of establishing Memorandums of Understanding with local business and community stakeholder groups, as has been

12 ATIACHMENTA done in Denver, Colorado, to ensure that we are maximizing community involvement and engagement as it relates to construction activities; 9. Direct the Diversity and Economic Opportunity Department to manage and oversee the Business Solution Center Project; and 10. Provide quarterly updates to the Executive Management and Construction Committees on the Pilot Business Solution Center and the "Eat, Shop and Play Local" campaign beginning in September 2014.

13 Amendment to Item 57 Attachment B Motion by Directors Molina, Dupont-Walker, Rid lev-thomas and Garcetti Business Interruption Fund September 18, 2014 WE, THEREFORE, MOVE that the Board direct the Chief Executive Officer to: 1. Establish a pilot program for a special Business Interruption Fund for mom and pop businesses located along the Crenshaw Line, within the Little Tokyo area along the Regional Connector, and Phase I of the Purple Line Extension immediately. 2. Define mom and pop businesses as those meeting the following criteria: a. Having 25 employees or fewer, b. A minimal operational history of two years; c. Being in good standing with local, state and federal tax requirements; and d. Able to produce financial records (i.e. gross receipts. business license information, pay roll taxes and other pertinent financial information) demonstrating the loss of business revenue directly related to the period of construction disruption. 3. Conduct a baseline survey of all businesses within the project areas.

14 4. Identify and designate $10.000,000 of Metro funds annually to be used for the implementation of the Business Interruption Fund. Funds shall be distributed through the projecfs administration and/or respective Business Solution Center. 5. Each business should be eligible for a maximum of $ annually, not to exceed 60 percent of their annual business revenue loss. 6. Participation in the program would release MTA and the general contractor from further liability claims for business loss unrelated to specific incidents of damage and would be voluntary. 7. Direct the Chief Executive Officer to work with Los Angeles County and local cities to seek all appropriate legislation that would temporarily reduce or waive taxes and fees imposed on impacted businesses during transit-related construction activities and work with the Los Angeles County Assessor's Office to immediately initiate outreach activities to businesses impacted by transit-related construction activities in order to inform them of the Assessor's Office Proposition 8/Decline-in-Value Review process. s. Report back to Construction Committee monthly, beginning in October, with an implementation plan and report back to the Board of Directors in September 2015 with an evaluation of the program including utilization levels and recommendations for program modification.