Ready, shoot, aim best describes Morehead City’s decision to offer short term loans to city businesses facing financial hardships as a result of the state’s forced closure of many retail businesses in response the COVID-19 virus pandemic.

Tuesday evening the city council, on a three to two vote, authorized the creation of a special loan program for distressed city businesses just hours after approving the furlough of “non-essential” part-time city staff. This decision raises major concerns that the city council failed to address but which will become a political and financial challenge on top of an already distressed financial environment.

The town on Tuesday afternoon approved the manager’s decision to furlough “non-essential” part time city staff due to concerns about lost revenue because of the governor’s restrictions on retail store operations in the wake of the COVID-19 pandemic. This was a wise and yes, difficult decision since the town’s tax revenues will be significantly reduced due to lower sales tax collections.

That same evening, as reported in today’s News-Times by Elise Clouser, the city approved a resolution to provide low interest loans to small businesses from a $300,000 fund the city is setting aside from its general fund. The purpose is to aid city “store-front” businesses located in the town for rent or mortgage expenses up to $2,500 maximum for a two-month period.  Payments will be made directly to mortgage companies or landlords and not to the businesses.

Criteria for potential loan recipients are discriminatory. The recipients must employ 25 or fewer people, have been in business before March 10, and must demonstrate that the financial difficulties are directly attributable to the governor’s stay-at-home orders. Certain businesses are excluded such as car dealers, property management companies and “vice businesses” such as vape shops and massage parlors. This exclusion raises the specter of unfair discrimination for businesses the town has licensed for operation.

Morehead City’s decision to provide unsecured loans from the general fund the same day furloughs were approved, regardless of essential or not, makes for a bad visual when it comes to those laid off. Yes, the furloughed employees will have access to unemployment compensation, assuming the state solves its very tardy delivery of funds, but it is a shocking contrast all the same.

The city is now using taxpayer revenues to provide short term funding that is the regular job of banks and other lending institutions. The private market financial lenders, using private funds, are better able to discern the viability of those business requesting loans and are better prepared should the borrowers fail to repay the loans.

The city’s loan program, notwithstanding the good will and judgment of the committee selected to make the final decision on what businesses are selected for the loans, makes the city the arbiter of winners and losers. Since there is a cap of $300,000 available, there stands a good chance that some deserving businesses will not benefit from the 6.75 per cent unsecured loan. This will result in questions about the decision making process and possible charges of bias.

The greatest flaw with this program is that it ignores the financial distress that many of the city’s residents also face due to the loss of jobs and income resulting from the governor’s executive orders closing businesses.  Just like the businesses, many of the city’s residents have mortgages and rent payments too. But unlike the businesses that are targeted for this special loan package, those residents needing bridge funding to weather the economic downturn will be going to the private market, banks and lending institutions, for financial assistance.

There is no question the city should be concerned about the success of its business community but to do so by using public funds that rightfully belong to ALL taxpayers is questionable and politically charged. The town would be better served in providing assistance to all by reducing taxes or possibly expenses for services such as water and sewer or garbage for a period of time. Not only will this benefit a larger number of people and businesses, it removes the risk of unpaid loans that will require costly legal action and eliminates charges of discrimination on the part of the town or its committee.

Morehead City’s small business loan program, albeit designed with the best of intentions, is discriminatory in too many ways. Morehead City should aim for a broader solution for all taxpayers, not a targeted shot for a select few.

(3) comments

David Collins

Well stated Editor . The city needs to leave the lending business to those already in the business . There are so many holes in the stated criteria that it resembles a turkey shoot target . Government has already shown how inept it is at rendering financial aid so why have more of it ? The last thing we need are more stinkers in the mix . Just run the town . Doing that is daunting enough . Isn’t it ?


Exactly! It's a nice idea, but it's not as though we don't need the $ for other projects. With 1 million spent on a playground and several millions on new administrative offices, the city is spending money freely w/o much oversight it seems.


Um, i think you missed the BIG PICTURE, ie: i doubt your freedoms will be returned to you, therefore, when we are collectively out of all funds, and the banks move on, and you think its SAFE to go back outside, but the GOVERNMENT still has an order to stop you, well, just take it from there, because you may all be forced to take TOWN funds? (after all, they cannot risk letting you move to another town with the unseen enemy out there).

Welcome to the discussion.

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