‘Clear as mud’: How Pa.’s chaotic coronavirus waiver program hurt small businesses

This story originally appeared on Spotlight PA.

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On a Saturday in March, after Gov. Tom Wolf urged nonessential businesses to close, Cameron Peters turned off the lights in her flower shop on Phoenixville’s main street, pulled the candy-pink door closed, and started sobbing.

She was unsure when, or if, she would be able to come back. The picturesque downtown, normally bustling with activity, was eerily quiet.

“I was locking the door on my dreams,” she said.

Five days later, Wolf issued a sweeping order to close all but “life-sustaining” businesses, ensuring Peters’ flower shop and thousands of other businesses would remain closed indefinitely as part of some of the strictest shutdown rules in the nation.

Public health experts agree the move was necessary to slow the spread of the coronavirus and prevent hospitals from becoming overwhelmed. But the Wolf administration has faced widespread criticism for how it carried out the closures.

Central to those complaints were a lack of enforcement, allowing for wide variation in how businesses and competitors interpreted the rules, and a controversial waiver process decided entirely in secret, allowing certain businesses to reopen.

Those waivers, while well-intentioned, gave state officials the power to determine winners and losers in the market. Sometimes, direct competitors received conflicting guidance, with one being allowed to reopen while another had to stay closed.

Now — as most counties move into the green phase of reopening, and business owners face tough choices about how to move forward — the long-term consequences of those inconsistencies are coming into sharper focus.

Some have already announced permanent layoffs, while others are still taking stock of the financial damage done by the shutdown but fear they won’t survive.

“To this day, there’s no doubt that businesses were harmed because they were shut down and shouldn’t have been,” said Guy Ciarrocchi, president and CEO of the Chester County Chamber of Commerce. “There’s no doubt that there are people who will lose their jobs because their employer was shut down and may not need to have been.”

Casey Smith — a spokesperson for the state Department of Community and Economic Development, which oversaw the waiver process — said the effort was organized in just a few days and steps were taken to make it as fair as possible.

“Quality control efforts were ongoing throughout the duration of the process to ensure that there was consistency across industries,” Smith said.

If the department received “valid complaints” from business owners that led state officials to believe they had made a mistake, “the team would review that application and revise the determination if necessary,” she said.

Dennis Davin, secretary of the Department of Community and Economic Development, declined an interview request, citing “pending litigation.”

That includes a federal lawsuit brought by businesses including a Bucks County pool store that was denied a waiver, despite the fact that two local competitors remained open, according to a complaint filed in the case. Senate Republicans have also sued the Wolf administration to enforce a legislative subpoena seeking thousands of pages of records relating to the waiver process, including emails, notes, and internal memos. Auditor General Eugene DePasquale’s office is separately reviewing the process.

A fraught process

Pennsylvania was one of 13 states that developed its own rules about which businesses could stay open, according to an analysis by Multistate Associates, a lobbying firm. Others followed federal guidance issued by the Department of Homeland Security.

The business shutdown was fraught from the start. The administration’s guidelines for which businesses were considered “life-sustaining” continuously changed, sowing confusion in communities across the state.

In an attempt to better respond to individual circumstances, the Department of Community and Economic Development launched the waiver system, but officials there were quickly deluged by tens of thousands of requests.

As the process lurched forward, frustration mounted throughout the business community because the department refused to state exactly what criteria it was using to consider applications, or explain to applicants why waivers were granted or denied.

For weeks, it also refused to make public even the names of businesses that were approved or denied, moving to do so only after coming under intense public scrutiny and pressure from the legislature.

The state relied on information provided by businesses, but gave little guidance on how to fill out the three-question application. Small differences in how businesses completed the form could lead to very different outcomes.

In some instances, business owners watched as their competitors reopened, gaining a valuable advantage. In others, after state officials were questioned about why a business was deemed life-sustaining, they reversed course and revoked a waiver.

“There was no real, true standard,” said Ciarrocchi, of the Chester County Chamber of Commerce.

When the administration launched the waiver process, Peters, the flower shop owner, emailed the Department of Community and Economic Development, confused.

“I don’t want my shop open to the public, only for phone and web orders,” she wrote. “Please advise. I am a tiny business who without any revenue could close due to these circumstances.”

Peters said she never got a response and so, later that day, she submitted a waiver application, making the same plea. To her surprise, the department denied her request via form email. Yet just a month later, as Peters observed other flower shops doing deliveries, she confirmed with the governor’s office that she never needed a waiver.

“Some businesses did open and probably shouldn’t have been open, and others closed and found out later that they might have been able to be open,” said Michelle Crowley, president and CEO of the Carlisle Chamber of Commerce.

“Some of these things have been clear as mud.”

Two shops, one waiver

According to the Wolf administration, the waiver program was an attempt to make the shutdown more fair and responsive to individual business needs. But business owners like Miguel Cabrera Jr. of Avondale said it had the opposite effect.

Cabrera’s company, A&A Auto Tags, sells license plates and insurance, offers notary services, and processes title transfers. Auto Tags Plus, in a neighboring Chester County borough just 12 miles away, is in the same business.

A&A was denied a waiver, while Auto Tags Plus received one.

“It just kind of felt weird,” Cabrera said. “We didn’t know what they had over us.”

The difference, according to state spokesperson Smith, was how the companies filled out the waiver application.

Smith said Auto Tags Plus was granted a waiver “for one employee to collect insurance premium payments.” A&A also provides insurance services, but did not list that as the reason it should be granted a waiver, Smith said.

Still, the owner of Auto Tags Plus, who declined to be named on the record, said he thought the waiver meant his entire business could stay open, as long as he followed CDC guidelines.

Cabrera’s sister, Zory Baer, who manages the business, was furious when she started getting calls from customers, asking why the competitor company was open.

“He’s raking it in because he’s the only one in town,” Baer said.

But even with the waiver, Auto Tags Plus has lost a lot of business, the owner said. He doesn’t think the system was fair to other businesses, either. And he’s been dragged into the rancor surrounding the process, he said, receiving threatening phone calls and “a lot of negative backlash” about receiving a waiver.

While the waiver process pitted one small business against the other, many big box stores were able to stay open — selling their full range of products.

At first, Matt Muccitelli, vice president of Park Home Stores in Altoona, thought the discrepancy must be a mistake. Then, his company’s waiver application was denied.

In April, Muccitelli posted pictures on Facebook of the crowded parking lot and busy aisles of the local Lowe’s. Some customers responded with promises that they would wait to buy new appliances until Park Home was open again.

“Standing up for local!” one woman posted.

“It’s beyond frustrating that these stores look like it’s Black Friday! Simply crazy!” wrote another.

“Different companies did not get equal treatment,” Muccitelli said. “It was such an arbitrary process.”

For some, a risk worth taking

While the state was able to issue fines and penalties to businesses that defied the coronavirus business closure order and potentially put their employees’ health at risk, Wolf repeatedly said he favored voluntary compliance over enforcement.

But that approach has meant there have been very few consequences so far for businesses who played fast and loose with the rules.

Some nonessential business owners stayed open without seeking a waiver, taking the view that it was better to ask for forgiveness than permission, said Helen Kissick, president and executive director of the Beaver County Chamber of Commerce.

CabinetWorks Group, a cabinet door manufacturer in Mifflinburg, in central Pennsylvania, stayed open during the pandemic, even though many of its competitors were forced to shut down.

Household and kitchen-cabinet manufacturing was not deemed life-sustaining under Wolf’s guidelines. Yet CabinetWorks did not apply for or receive a waiver, according to state officials.

Officials from CabinetWorks did not return calls seeking comment.

Pam Stuter, whose father retired from the company and whose son now works there, said employees were told the business was reclassifying itself as a sawmill, which was considered life-sustaining.

Yet Stuter said the company continued to produce cabinet doors throughout.

“My dad is rolling in his grave right now,” she said. “He never would have had his employees come to work back at that time. He was the plant manager for 45 years.”

Smith, the Department of Community and Economic Development spokesperson, acknowledged that “some businesses may have been taking advantage of the process.”

Responsibility for enforcing the order has been split between the Pennsylvania State Police, which has issued just three citations since March 23, and local police departments, many of which opted not to get involved. District attorneys in some counties said they would not prosecute businesses that violated the order.

As a result, some business owners decided the risk was worth it.

At the beginning of April, Patrick Penfield applied for a waiver for his bait shop — a 12-by-12-foot shed next to the Clarion River in Elk County, with one refrigerator full of sodas, another with worms and night crawlers, and an aquarium of minnows.

A day later, he received a denial. But the following week, with the start of trout season, he opened anyway, defying the shutdown order.

“I never had anybody come to my shop and question me being open,” Penfield said. “I have had police officers come in here to buy bait and nothing was said.”

An unclear future

The future is precarious for Peters’ Phoenixville flower shop. The events she relies on — weddings, proms, graduations — have been canceled or postponed. She and her husband have spent down their savings to keep up with rent and utilities. The business is only a few years old and wasn’t making much of a profit even before the shutdown.

It’s not yet clear whether the uneven playing field created during the shutdown, which the waiver process intensified, will have long-term consequences for local businesses, said Joe Hurd, president and CEO of the Blair County Chamber of Commerce.

Still, when the chamber surveyed all 1,080 member businesses, “the ones who said, ‘We’re doing OK,’ a lot of them followed that statement with, ‘We were able to get a waiver,’ ” Hurd said.

But getting a waiver wasn’t always a golden ticket.

Gitman Bros., a high-end shirt-maker in Schuylkill County that traces its business roots to the early 1930s, received a waiver to manufacture personal protective gear. Unlike some companies that used their exemptions to reopen at full capacity, Gitman halted its shirt-making and limited its work to medical gowns for health networks in the state.

“For us it was a way to keep the lights on,” said Chris Olberding, president of Gitman and Gitman Vintage. “It never crossed our mind to resume normal production.”

Even with a waiver, the financial toll was steep. The storied company recently announced that it will close its factory in Ashland at the end of the summer, and will move production of the Gitman brand to another state. Ninety employees will be laid off, although all have been offered positions at those out-of-state locations, said Olberding.

“It’s a sad time,” he said.

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