Alabama A.G. says cities and counties cannot provide small business grants or loans

Coronavirus

Unlike economic development incentives, programs would not serve a "public purpose."

Efforts to do more at the local level in Alabama for small businesses received a setback Tuesday when Attorney General Steve Marshall sent out a letter saying cities and counties cannot use economic development laws to provide grants or loans to small businesses.

Marshall said unlike public incentives for industrial projects, a loan program would “merely confer a private benefit” and not “serve a public purpose.” 

The AG’s office provided its opinion following a request from the Mobile County Commission which was considering a program to give grants or loans to small businesses suffering during the coronavirus pandemic. Marshall, however, said “grants, loans, interest payments, and other similar awards to a private business for the sole reason of keeping that business operating would not” be constitutional. The letter continued, “using entities such as the Chamber of Commerce or private banks as ‘pass-throughs’ to facilitate expenditures does not change this…”

A federal initiative called the Paycheck Protection Program is designed to keep workers at small companies on the payroll during the crisis. It has already been allocated $350 billion in funds, and President Donald Trump indicated Tuesday that an additional $250 billion could be added to the program.

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