A Run on the Bank
Like everyone else, I suppose, I am watching the corona drama unfold with a mixture of horror and fascination. All the while looking at my own books and trying to determine how long I can hold my breath underwater.
And recognizing, of course, that it’s only just started. The first few miles of a lengthy marathon.
Mistakes made at the outset can be forgiven. There’s adrenaline at the start. Maybe you go off too fast. Maybe you overestimate the depth of your resources. I get it.
But once that euphoria wears off, it’s time to make the hard decisions.
Take, for example, the Food Bank being run by Mammoth Lakes Tourism.
You’re feeding people. It feels good. You’re keeping the employees busy. You’re emphasizing community. You’re tamping down the initial shock of displacement.
But now it’s time to settle into the marathon. And by settling into the marathon, I mean offloading the Food Bank to the professionals at IMACA and the like, and laying off the entire staff until May 15 at the earliest.
That or keep people on and reduce salaries 50% through the end of the year.
In the leisure industry, such a move is the norm right now.
Marriott CEO Arne Sorenson’s salary will be suspended the rest of the year. His top executives are all taking 50% cuts.
Movie theater chain AMC furloughed 600 executives on Wednesday, including its CEO.
Mammoth Lakes Tourism Board Chairman John Morris says he wants the organization to be nimble and ready to go when the occasion warrants to begin marketing in earnest. But we have an advertising agency on-call (Mering Carson) to do our bidding. The agency makes the vast majority of our media buys.
The Board itself can make that determination. To give Mering Carson the green light. The rest of the staff can be hired back at that time. I hardly see a “ramp up” period required. Your staff knows their jobs. And you know they’re not going elsewhere. Elsewhere has no work.
Keep them on the sidelines until you’re back running. And save the $25,000/week in payroll.
Right now, you have an Executive Director who all-in makes about $300,000/year (including benefits) running a Food Bank. He’s the highest-compensated Food Bank CEO in the history of Food Banks.
Enough. You want to support the community? Give IMACA the $25,000/week. Or with the salary savings, select a TBID-paying restaurant and offer the community a certain dollar amount in free vouchers every day to go and eat there. Maybe Bleu one day, Roberto’s the next, etc.
Keep the rest of the powder dry for, you know, marketing.
The request MLT made Thursday for further donations from far and wide to keep this thing going … it’s embarrassing.
You can’t pay people $25,000/week to run a food bank. That’s quite the overhead. Never mind the cost of the food.
Former Mammoth Lakes Town Councilman Michael Raimondo laid it out for me like this on Tuesday, We dealt with the same type of emergency during the airport lawsuit bankruptcy. The public sector, he said, is inclined to sit on its hands and burn money in a crisis. It gets paralyzed. It doesn’t want to react. But you’ve got to be really aggressive in these situations, said Raimondo. “We can’t sit around until August.”
While MLT is the most obvious target for cutbacks since we have actively shut down marketing and are discouraging visitation, I did ask Mammoth Town Councilman John Wentworth and Town Manager Dan Holler what Mammoth’s staffing strategy was moving forward.
When asked about when the town might tackle furloughs, layoffs, et. al., Wentworth said yes, the Town will ultimately address it, but he has no idea what that timeline looks like. He referred to it as a “balancing act.”
Holler said that through February, the Town had hit/exceeded budget numbers. Currently, all job vacancies within town government are on a hiring freeze. Staff, said Holler, is currently “analyzing” the corona impacts and he anticipated they’ll have a plan moving forward by the end of April.
“We’ve had discussions with staff,” said Holler. “They know that others in town are suffering.”
He added that the Town’s conservative fiscal planning and its “reserve” policy are really paying off right now.
News and notes
I see a great marketing opportunity for Distant Brewing. Six Feet Distant Ale. Six Feet Under Stout …
Speaking of social distancing, I was social-distance shamed last week while waiting for the papers to arrive from Carson City. I was shooting the bull with my writer Owen Page by the sidewalk outside Stellar Brew when Dr. Mike Karch stopped his truck in the middle of Main Street to tell us we were too close together.
Chastened, we both backed up a few paces. I’ve been very conscious of it ever since, doc!
From the March 24 edition of the Wall Street Journal: Small businesses, which account for about half of U.S. employment, according to the Small Business Administration, are among those most at risk.
In a 2016 study, researchers at JPMorgan Chase Institute, the bank’s think tank, found that the median small business had a cash balance that would last just 27 days. Some were operating closer to the edge. The median retailer had a cash buffer that would last 19 days. The median restaurant’s would last 16.
In a 2018 survey conducted by software and business-services provider Womply, 21% of small businesses said they would fail after a month without any cash flow. An additional 34% said they couldn’t last more than one to three months. “Time is just ticking,” says Brad Plothow, who co-leads Womply’s research group. “If it takes 90 days to get an SBA loan, for example, it may not be useful to you. You might be out of business by then.”
Many consumers can’t last very long without a paycheck, either. In a survey conducted last year by research organization NORC at the University of Chicago, 31% of working adults said missing a single paycheck would mean that they couldn’t cover necessities. An additional 20% said they couldn’t miss more than one paycheck.
Harvard economist Lawrence Katz says the scope of what the government may need to do if the epidemic drags on may need to be unprecedented in most living Americans’ memory. When the U.S. economy entered World War II, government spending went into overdrive. Federal spending represented as much as half of gross domestic produce, but it kept the economy going. “This is, I think, our World War II,” he said.
The most reassuring thing Mammoth Town Manager Dan Holler said is that he assumes this is a 12-week deal, not two.
The town has also arranged for a short-term emergency housing agreement with Sierra Nevada Resort. This could accommodate not only those displaced by loss of housing, but also potential overflow housing for those who need to be isolated for medical reasons.
And he mentioned this offhand. Schools apparently can’t arrange for food delivery – kids literally have to go to the school to get their lunches. This is insane on many levels …