Welcome back, San Mateo County. To what?
With some restrictions being eased even as the Covid-19 pandemic continues, a debate has broken out throughout the nation: What should be the balance between lives and livelihoods?
Here in the Bay Area, the “saving lives” argument has taken precedence, with unparalleled restrictions on daily life.
In downtown Redwood City, the change has been striking. At the height of the shutdown in April, streets were almost deserted. The only sign flashing “OPEN” was at All-Pro Bail Bonds. Among the few other places doing business were the post office and the Dignity Health urgent care center, which offered Covid-19 tests.
By late May, some restrictions had been relaxed and so-called quarantine fatigue had set in. Much of the auto and pedestrian traffic had returned, along with an increased number of restaurants offering curbside and table service. Less than half the pedestrians wore face masks, which are required for entering businesses but only recommended for outdoor exercise.
Even after the virus recedes, the scene won’t return exactly to what it was in January, as society adjusts to a “new normal.”
The restaurant industry faces one of the greatest adjustments. Open Table reports that even in states that have allowed table service to reopen, bookings remain down 75 percent or more.
According to a working paper by the National Bureau of Economic Research, “The restaurant industry seems particularly vulnerable to a long crisis. Restaurateurs believe that they have a 72 percent chance of survival if the crisis lasts one month, but if the crisis lasts four months, then they give themselves only a 30 percent chance of survival. If the crisis lasts for six months, then they expect to survive with only a 15 percent probability.”
Redwood City suffered a loss on May 19 when Specialty’s Bakery and Café, known for its giant cookies, permanently closed its 50 bakery-cafes, including one in Redwood Shores, after 33 years in operation.
In Palo Alto, Dan Gordon’s, a beer and barbecue spot owned by the Gordon Biersch co-founder, announced April 13 it would not reopen.
But Freewheel Brewing Co. in Marsh Manor, which sells homemade craft beers as well as food, is hanging in there. Since reopening for takeout in April after a five-week shutdown, General Manager Devin Roberts has seen traffic picking up.
“We actually had a pretty good last couple weeks,” Roberts said. “We’re lucky to have a lot of support from the community and we’re preparing to reopen fully whenever authorities give the go-ahead.”
Federal Guidelines
Guidelines issued by the U.S. Food and Drug Administration call for infection control and social distancing measures including discontinuing salad bars, buffets, and beverage stations, increased wiping down of surfaces, practicing social distancing when delivering food, and maintaining six-foot spacing for pickups.
Freewheel’s prior seating arrangement—including barstools and a long 16-person table for large groups having happy hours—likely won’t be allowed due to proposed rules calling for maximum table sizes and six-foot spacing between tables. Roberts is making plans to arrange smaller tables both inside and on the patio.
Despite the disruption, “for me personally, I think it’s fair.” He and the two owners “are all of the same mind, it’s for the greater good. Nobody’s complained nobody’s said this is BS It’s obviously very hard for businesses like ours predicated on socializing.
“We are fortunate that we don’t have that big a space and have a dedicated community pushing people to drink local independent beer, made down the street. They want to see you succeed.”
The possibility of a second wave of Covid-19 infections concerns him, though. “One thing we’re apprehensive about, if we did see another surge, that would be tough.”
Don Burrus, Redwood City economic development manager, said one of the first steps the city took was to allow temporary parking in front of every restaurant, so delivery-service drivers could pull up and grab food to go.
David Kassouf, owner of The Sandwich Spot on Broadway, has been making do with takeout and to-go orders, but has lost up to 94 percent of his business from the prior level of 500 to 600 sandwiches a day. Through April, his losses totaled $23,000.
“I am hurting big-time. It’s not just me, it’s the whole world.”
He hasn’t laid anyone off but nonetheless lost four employees who couldn’t or didn’t want to work during the pandemic. With so many restaurant workers laid off, he received a record 90 applicants through a single Facebook posting for a job opening.
Kassouf has installed feet stickers on the floor and a Plexiglass screen dividing customers from the pickup counter. He is awaiting guidelines on what will be necessary to fully reopen.
“I love Redwood City,” he says. Although he counts several city officials as customers, he says they haven’t been able to tell him much pending instructions from health authorities.
On-Street Dining
A wild card is whether the city decides to block off Broadway to auto traffic, a proposal that’s being formulated at the staff level.
Under the plan, restaurants could put tables and chairs in the street for open-air food halls, making up for the loss of interior seating. Broadway already has characteristics of downtown pedestrian malls in other cities, including wide cobblestone sidewalks, planter boxes, and a focal point at Courthouse Square. Under one version of the plan, temporary closures would last until the start of rainy season.
While traffic and parking are concerns, more customers might dine out on warm sunny days if they had confidence they were only being served the right kind of Corona.
“I think it would be good depending on how they do it,” Kassouf said.
Besides downtown, outdoor expansions could be done at other retail centers including malls. For example, a furniture company could have clearance sales in its parking lot, Burrus said.
In San Carlos, city staff presented the council with a proposal to close the 600, 700 and 800 blocks of Laurel Street temporarily to encourage pedestrian activity and allow restaurants to serve more patrons while practicing social distancing.
“We want to see if we can figure this out. We’re reaching out to restaurant owners and a couple others,” Mayor Ron Collins said.
He noted that while the city is in relatively good fiscal shape thanks to recent surpluses and a rainy-day fund, it needs to manage expected sharp declines in sales tax and hotel tax revenue.
“The more we can do to encourage businesses on Laurel Street, it helps everybody,” he said.
Regina Van Brunt of the 95-member Redwood City Downtown Business Group said a key step in reopening is getting clear guidelines from the San Mateo County Health Department on what will be necessary, so businesses can get prepared now.
Those preparations include spacing measures, such as stickers on the floor and Plexiglass shields.
One concern she has is that “not a lot of people who are visiting downtown Redwood City are wearing masks.”
City Budgets Slammed
Covid-19 also poses a challenge to the budgets of most municipalities, including Redwood City. At a recent council meeting, staff estimated there would be a $5.1 million shortfall for the fiscal year that ends in June. That is expected to be made up by measures including delayed filling of vacancies and a $1.5 million reduction in an extra contribution to CalPERS that had been planned to work down the shortfall in pension funds.
However, in fiscal 2020-21, the challenges get more severe. City Manager Melissa Stevenson Diaz told the council the source of 32 percent of city revenues was at significant risk, including sales tax reductions each of the next two years, and business license taxes.
Sources of an additional 45 percent may be at risk, including property tax, with a preliminary forecast showing a decline starting in 2021-22.
The crisis also has required additional spending estimated at $2.6 million thus far.
There is special concern for undocumented immigrants, many of them in the Fair Oaks neighborhood, who are not eligible for the $1,200 federal stimulus checks.
Working through the Fair Oaks Community Center, the city had distributed $644,719 for emergency rental assistance to 349 households as of mid-May, with hundreds of applications still pending.
“They’re the ones struggling the worst. They’re having a really hard time making the rent payment,” council member Alicia Aguirre said. Many have lost their jobs at restaurants. Others are jeopardizing their health working in hard-hit senior care facilities.
About two-thirds of the county’s Covid-19 deaths as of May 21—50 out of 76—were associated with residents or staff at long-term care facilities.
The council also approved the contribution of $300,000 to the San Mateo County Strong Fund’s Small Business Grant Program to help small businesses in Redwood City. The donation was matched by the Chan Zuckerberg Initiative.
Pension Shortfall
Looking ahead, the crisis turns the city’s $300 million obligation to pay its workers’ pensions into even more of a fiscal cliff. CalPERS, which manages the pension program, assumes a 7 percent annual rise in the value of its investments. However, recent stock market declines have changed the forecast return for 2019-20 to minus 4 percent. The shortfall would mean increased contributions starting in 2023 and continuing through 2027 totaling more than $10 million.
“There has to be some legislator somewhere who understands the potential for this to bankrupt cities,” council member Ian Bain said at a recent meeting. “I’d like to think how we can proactively advocate for something that will create a long-term structural change for cities.”
Worries about fiscal disaster are even more acute for transit agencies. Shelter-in-place has reduced the number of Caltrain commuters by more than 95 percent. Near-empty trains chug up and down the Peninsula hourly. (The situation at SamTrans is similar, except that the drop in bus ridership isn’t quite as severe).
“It is clear that the railroad is facing a financial crisis for at least FY21,” staff wrote in a recent presentation for the board. Preliminary projections show revenue gaps of $22 million to $66 million for fiscal 2020-21, with additional declines in Go Pass sales since employers probably will not need to buy as many for their workers.
Before the crisis, commuter trains ran at 130 percent of seated capacity during peak hours. This could be reduced to 50 percent or less due to social distancing rules and riders’ unwillingness to board packed trains.
Once the orders are lifted, “We expect to promote social distancing and the wearing of face coverings for as long as medical experts recommend doing so. Given that these practices dramatically decrease the odds of contracting Covid-19, we expect that to be the norm for the near future,” spokesman Dan Lieberman said.
Caltrain in Peril
“Due to Caltrain’s heavy reliance on farebox revenues, and its lack of a dedicated revenue source, the pandemic has been financially devastating. The federal relief package has been sufficient to keep the agency funded through August, but we will likely need further support to cover us until we can return to our usual levels of ridership. We’re currently evaluating a host of financial and service scenarios in an effort to stay flexible as riders return.”
“Caltrain’s funding and maybe even its governance model looks utterly unsustainable for the foreseeable future … and there’s long been an excellent case to be made that it never was,” said Adrian Brandt, who runs the Friends of Caltrain Facebook group.
If public transit is significantly reduced, traffic could get much worse.
A model created by Vanderbilt University researchers showed the San Francisco area facing the worst delays in the country, even more than New York and Los Angeles, once workers return to their daily commutes.
If only one in four transit and casual carpool users switches to driving alone, the two-way commute time is projected to rise by 20 minutes a day. If three out of four drove solo, the additional time would be 80 minutes.
The Bay Area is particularly vulnerable by virtue of being relatively transit-heavy, with roads already close to maxed out at peak hours.
“Cities that depend on transit are at risk for extreme traffic unless transit systems can resume safe, high throughput operations quickly,” the authors noted.
Effective transit also depends on having enough workers going back to their offices.
Redwood City has about 6,600 business license holders. Burrus said the city is working on preparing guidelines for businesses to reopen safely. For example, offices typically require 175 square feet per employee. With social distancing, more space per employee might be needed. “If on your floor there are ten cubes, that could go to five because of social distancing.”
As an offset to lower densities, telecommuting is expected to become more of an option since companies have become accustomed to holding meetings via teleconferencing. For employers, this has long-term potential to save money on rent.
Out of the Office
A Bay Area Council survey of 123 top executives in May found that 89 percent were planning policies that allowed working remotely, with 66 percent figuring on rotating work schedules during the week to reduce the number of employees coming into the office. Almost a fifth of the companies were planning to move to full remote work.
Major tech companies are taking the lead. Twitter and Square, which share Jack Dorsey as CEO, announced they would allow employees to continue working remotely after shelter-in-place orders expire. Facebook CEO Mark Zuckerberg said as many as half his company’s employees could be working remotely within 10 years.
The commercial real estate company Cushman & Wakefield has come up with a concept called Six Feet Office that uses a variety of techniques to keep employees away from one another. These include widely spaced desks with circles on the carpets to remind employees not to come too close, and patterns to guide one-way foot traffic.
“The six feet rule isn’t going away anytime soon,” the company said.
One business that has remained open is Marketing Direct Insurance Services on Brewster Avenue. Martin Sullivan, who has been in the insurance business since 1984, says it’s relatively easy for him to maintain social distancing because customers only come in one or two at a time.
“We mostly serve the Hispanic community. They like to deal with you on a personal basis. If we stayed closed, people would have a difficult time maintaining their car insurance. We take care of those people in difficult times.”
For example, Sullivan has been processing registration renewals, a business that has picked up since Department of Motor Vehicles offices have closed.
New business has been “cut down to almost nothing” from a normal level of 20 new policies a month. “People are scared to come in except those who have talk to you to keep their insurance.”
He believes the stay-at-home orders have gone too far, putting many businesses in danger of closing. “The governor should back off a little. If people don’t start going back to work, I don’t know …”
A burning issue nationwide is whether the government is going too far in restricting movement and free association.
In six Bay Area counties including San Mateo, a shelter-in-place order was issued March 16. Governor Gavin Newsom made the order statewide March 19. An order generally requiring face masks in places of business was issued April 17.
Most notably, the order was challenged by entrepreneur Elon Musk, whose Tesla factory in Fremont was shut down. Never shy with his opinions, Musk termed shelter-in-place “fascist” and said it is “forcibly imprisoning people in their homes against all their constitutional rights,” although the order does allow people to go outside for necessary shopping and exercise.
Musk threatened to move Tesla’s Palo Alto headquarters out of California and reconsider having its plant in Fremont. Eventually, an agreement was reached with Alameda County allowing the factory to resume operations on May 18.
While few others have used such inflammatory language, there is quite a bit of opposition to the safety measures from the conservative end of the political spectrum. A poll by the UC-Berkeley Institute of Governmental Studies found that 78 percent of those who strongly support President Trump thought the state would suffer unnecessary economic damage by leaving shelter-in-place on too long. By contrast, 91 percent of those who strongly oppose Trump had the opposite worry, that that shelter-in-place would end too soon, as did 69 percent of voters overall.
The Tradeoff
In the Bay Area, it hasn’t been socially acceptable to make the lives vs. livelihoods tradeoff explicit. Antioch Planning Commission Chairman Ken Turnage II found that out after a Facebook post that read “In my opinion we need to adapt a Herd Mentality. A herd gathers its ranks, it allows the sick, the old, the injured to meet its natural course in nature.” He also said the virus could cure the homeless problem. The Antioch City Council voted unanimously to remove Turnage from its post after he refused to apologize.
The San Joaquin Valley city of Atwater made headlines in May when it declared itself a “sanctuary city” that would not enforce shelter-in-place orders against businesses that reopened ahead of state guidelines.
In the Bay Area, however, with the exception of Musk, there have been few signs of rebellion.
The general attitude was expressed by Van Brunt. “We want to do this in the right way to protect the businesses as much as possible so that when we do reopen we do it right and no closures will have to happen.”
San Mateo County’s first easing came on April 29, when outdoor businesses, including gardening and construction, were allowed to resume operations. Retail businesses were allowed to resume curbside and delivery service on May 18. Still, the county is early in the governor’s four-phase recovery plan.
As April turned to May, more people hit the streets and gasoline sales picked up, illustrating Admiral David Farragut’s Civil War observation after lobbing shells into besieged Vicksburg: “After people are harassed to a certain extent, they become indifferent to danger.”
Perhaps the closest comparison is the 1918 Spanish flu pandemic, which lasted until the winter of 1919-20, killing an estimated 675,000 Americans. As is true today, the response included quarantining, bans on public gatherings, and mandatory face masks.
In a timely paper published in March, economists including Sergio Correia of the Federal Reserve system found that the 1918 response on average reduced manufacturing output by 18 percent, but less in cities that took strong action.
“We find that cities that intervened earlier and more aggressively do not perform worse, and, if anything, grow faster after the pandemic is over. Our findings thus indicate that (non-pharmaceutical interventions) not only lower mortality; they may also mitigate the adverse economic consequences of a pandemic.”
