Lawsuits over venue relief grants help some applicants secure millions

Organizations are taking the Small Business Administration to court after being denied funds from a federal relief program for arts venues.

Two silhouetted figures walk through a Christmas light maze

Guests explore Enchant Christmas, a traveling holiday light maze and market at T-Mobile Park, Dec. 5, 2019. Enchant Christmas, a Vancouver, British Columbia-based company, sued the U.S. Small Business Administration after being denied a grant and was awarded $10 million. (Genna Martin/Crosscut)

Giant snowflakes. Mega candy canes. Oversized baubles, tall hedges and massive wrapped gifts: Everything was decked out in a dazzling array of lights. For a few weeks during the winters of 2018 and 2019, the stadium now called T-Mobile Park — home of the Seattle Mariners — became home base for holiday cheer.

The spectacle was called Enchant Christmas, and it slid down the chimneys of multiple cities, including Seattle, St. Petersburg and Dallas, where hundreds of thousands of visitors paid up to $32.99 to enter the “World’s Largest Christmas Light Maze,” replete with an ice skating rink and Christmas market.

But in 2020, with COVID-19 playing Grinch, the Santa suits and light displays remained in storage. Enchant Christmas’ revenue plummeted. When the Vancouver, British Columbia-based company applied to receive a federal Shuttered Venue Operators Grant last April, it was one of more than 17,000 organizations that would end up vying for a piece of the $16.2 billion program, which was meant to help save performing arts and live entertainment businesses and organizations across the U.S.

But the U.S. Small Business Administration, which oversees the grant program, denied Enchant Christmas’ application. So the company appealed. When this appeal got shot down, too, it sued the SBA in federal court. Within weeks, the company received $10 million, the maximum amount available under the program, and the lawsuit was dropped. 

Enchant Christmas — which applied for the venue operators grant as a Seattle business but is also registered in Delaware and other U.S. states — is not alone.

Nearly 50 rejected venue grant applicants have taken the SBA to court, including escape rooms, a dance convention, a circus arts company, a ministry, a Manhattan jazz club, a “pet event” organizer and Michigan’s state fair. About fifteen cases have been resolved, with $52.7 million in venue grants awarded to those businesses.

Many of the plaintiffs, including Enchant Christmas, have taken a similar approach (and hired the same Washington, D.C., law firm). They say the SBA’s denial of their applications without explanation was potentially unlawful and unsupported by substantial evidence, particularly as some competitors snapped up grants. 

People ice skate down a frozen pathway flanked by Christmas light trees

Guests ice skate through Enchant Christmas, a holiday light maze and market at T-Mobile Park, Dec. 5, 2019. (Genna Martin/Crosscut)

Guests ice skate through Enchant Christmas, a holiday light maze and market at T-Mobile Park, Dec. 5, 2019. (Genna Martin/Crosscut)

With its $10 million award, Enchant Christmas is one of just three organizations in Washington state receiving the maximum amount (which comes with a mandatory audit), along with the Museum of Flight in Tukwila and the Tacoma Dome. It’s one of just 279 nationwide.

Meanwhile, other organizations across the state — mostly smaller and community-centered organizations — have struggled to access the venue relief money due to a lack of staff, know-how, capacity and financial means. While the program has been successful in getting more than $14 billion to shuttered arts venues and businesses across the country, some have fallen through the cracks — and not everyone is willing or able to sue. 


This story is a part of Crosscut’s WA Recovery Watch, an investigative project tracking federal dollars in Washington state.


This past summer, Seattle Arts & Lectures, a 34-year-old local arts nonprofit that organizes live talks with writers, thinkers and artists (alongside its youth programs), received word that its shuttered venue application was denied. When its appeal didn’t convince the SBA either, the organization’s staff of 12 felt “totally crushed,” said its executive director, Rebecca Hoogs. “It was a very dark time.” 

It was confusing, too. Sister organizations like Literary Arts in Portland and Pittsburgh Arts & Lectures did receive the venue grant. Plus, said Hoogs: “We were never able to get an answer specifically [on] why our grant and also our appeal [were] denied other than that we were ineligible — which was confusing: We checked every eligibility box.” 

But the organization never considered suing. “I don’t think we could afford it,” Hoogs said. 

Rebecca Hoogs and Mary Ruefle are seated holding microphones on a stage

Seattle Arts & Lectures Executive Director Rebecca Hoogs, right, speaks with poet Mary Ruefle during an event at Seattle Central  College in 2019. The 34-year-old local arts nonprofit, which organizes live talks with writers, thinkers and artists (alongside its youth programs), had its shuttered venue grant application denied by the Small Business Administration. (Courtesy of Seattle Arts & Lecture)

Seattle Arts & Lectures Executive Director Rebecca Hoogs, right, speaks with poet Mary Ruefle during an event at Seattle Central  College in 2019. The 34-year-old local arts nonprofit, which organizes live talks with writers, thinkers and artists (alongside its youth programs), had its shuttered venue grant application denied by the Small Business Administration. (Courtesy of Seattle Arts & Lecture)

Santa, elves and townsfolk 

Like Seattle Arts & Lectures, Enchant Christmas was never told why, precisely, the company was considered ineligible, according to federal court records. (Enchant Christmas representatives declined to comment for this story.) The SBA also declined to comment on the company’s case, but the lawsuit and other public records offer a glimpse into the application process. 

While the company is headquartered in British Columbia, if it employs American citizens and files taxes in the United States, it could be eligible for the venue relief program.

Although a 2019 document from a workplace safety inspection from the Washington State Department of Labor and Industries noted all of the company’s full-time employees were Canadian citizens, LinkedIn profiles suggest the company currently employs at least a few American citizens. Online job advertisements show that Enchant is also hiring for remote, full-time positions in the U.S.

In the lawsuit, Enchant describes itself as “a promoter of immersive Christmas events featuring performing artists” and claims to meet all of the general eligibility requirements for the grant. To be considered an eligible promoter under the program, an organization’s principal business activity has to consist primarily of selling tickets to or promoting live events. It must also charge a cover or sell tickets for and market most performances. 

Enchant hires local performers who dress up as Santa, elves and Dickensian “townsfolk” to welcome and guide visitors through the maze and pose for photos, as well as local bands and carolers who perform on a small stage. But those performances are largely secondary to the main attractions of the maze and ice skating rink. 

Enchant sued in September and, according to another grant application the company submitted to King County, received the $10 million in October (which the company said made up only half of its lost revenue.) In November, a Seattle nightclub/event space, Vue Lounge, also sued the SBA, claiming its application was unjustly denied while competitors received funding. Vue Lounge ended up receiving $508,573. 

Overall, the median grant allocation to companies that sued the SBA is $1.4 million, though there are a few outliers. Texas-based company Medieval Times and its nationwide subsidiaries, which host four-course dinners amid live jousting and other medieval theatrics, received just under $21 million, making it the largest beneficiary among the litigators. With its $10 million award, Enchant Christmas is the second-largest recipient of those who have sued the SBA. 

Technical glitches 

When Congress passed a $900 billion coronavirus relief package in December 2020 — 10 months into the COVID-19 pandemic and half a year into a national lobbying effort by the newly formed National Independent Venue Association — the live music and performance sector breathed a sigh of relief. The billions earmarked for live entertainment venues, indie movie theaters and cultural institutions marked a lifeline finally dangling into reach. As “the first to close, last to reopen,” particularly in first-hit Washington state, venues were drowning. 

But, as technical glitches, confusing guidance and other issues mired the process, thousands of venues ended up having to hold their breath for six more months before any relief would come their way. 

In total, 12,869 organizations across the country were awarded grants under the program, 73% of 17,637 applicants who vied for a piece of the $16.2 billion Shuttered Venue Operators Grant pie. (The SBA denied Crosscut’s records request for a list of all of the rejected applicants from Washington state.) 

While many local organizations described the program as a godsend for the sector, the process hasn’t been without issues. Since the program’s launch, the Office of Inspector General and Government Accountability Office have raised concerns about the SBA’s oversight. In an October 2021 report, the Government Accountability Office also noted the SBA’s updates to and reversal of guidance resulted in confusion for applicants. 

“The SVOG has been a blessing,” said Chris Serface, managing artistic director of the Tacoma Little Theatre, which received roughly $300,000. “It has helped keep ourselves and other organizations functioning as we return to our ‘new normal.’ ”

That said, “the process was not easy, due to the SBA having several errors in their systems and conflicting information,” Serface said. “The initial FAQ they sent out changed dramatically in a short amount of time to some new requirements, so many were scrambling at the last minute for some items on their application.” But, he added, “Once they fixed all of that, it turned around quite quickly.” 

In a statement, the SBA said it invited more than 5,000 applicants to appeal their rejections for venue grants (approximately 3,000 businesses did so) and that it offered all recipients to have the amount of their funding reconsidered. It added that applicants also benefited from the government's Paycheck Protection Program, which covered payroll costs for some small businesses.

“[N]early half of all applicants declined for SVOG funding received PPP funds to support their recovery,” the SBA added in a statement attributed to Diedra Henry-Spires, SBA senior adviser for COVID programs. 

“After making improvements to the Shuttered Venue Operators Grant program, the SBA delivered money quickly, efficiently and fairly …,” SBA Administrator Isabel Casillas Guzman said in a statement via email. “When I began my tenure at the SBA, this first-of-its-kind SVOG program was not where I wanted it to be. I’m proud that, thanks to the hard work and dedication of our talented team, we have turned the ship around.” 

Overwhelming

For some, the ship had sailed before the program was up and running. Smaller local organizations Crosscut spoke with, such as Red Eagle Soaring, a theater company serving at-risk Native youth, said they didn’t apply for venue grants because they thought operating their own venue was a requirement. The SBA clarified this six days after sending out its first ‘‘preliminary application checklist.”’ 

“A lot of organizations had already ruled themselves out before any of the evolvement for that program came about,” said Kathy Hsieh, the racial equity in grant-making strategist at Seattle’s Office of Arts & Culture, who is also co-executive producer at SIS Productions, an all-Asian American, volunteer-run theater company. 

That’s an equity issue, Hsieh said. Usually, it’s smaller nonprofits and organizations run by people of color that, because of years of structural underfunding and other barriers, don’t own or operate their own space. Many of these organizations are volunteer-run, she added. They may not have the funding, know-how, staff capacity or time to disentangle the complicated web of federal funding or stay up to date on the intricacies of changing guidance. 

“It just felt overwhelming to a lot of organizations,” Hsieh said. 

Simon Javan Okelo of One Vibe Africa, which organizes African cultural events and festivals in the Seattle area, emphasized outsourcing grant-writing is expensive and there’s no guarantee it will pay off. 

“I have to pay $2,000 to a grant writer, [just] to be turned down,” Okelo said, explaining why he didn’t apply for a venue grant, considering it a financial risk. 

Northwest Folklife co-directors Reese Tanimura and Benjamin Hunter stand on a grassy hill with the partial downtown Seattle skyline and Space Needle behind them

Northwest Folklife co-directors Reese Tanimura and Benjamin Hunter are seen at Seattle Center, March 4, 2022. “It was a very hard and uneven system to navigate,” said Tanimura, describing how the system was not set up to work with nonprofits who had an accessible ticketing structure or functioned by donation potentially. “For some,  the true scale of their losses were not recognized in their award amounts,” Tanimura said. (Genna Martin/Crosscut)

Northwest Folklife co-directors Reese Tanimura and Benjamin Hunter are seen at Seattle Center, March 4, 2022. “It was a very hard and uneven system to navigate,” said Tanimura, describing how the system was not set up to work with nonprofits who had an accessible ticketing structure or functioned by donation potentially. “For some,  the true scale of their losses were not recognized in their award amounts,” Tanimura said. (Genna Martin/Crosscut)

Northwest Folklife, Seattle’s beloved 50-year-old multicultural summer arts festival, was “lucky” to be able to fall back on a dedicated staffer to navigate these challenging systems, said Reese Tanimura, the festival’s managing director. While the organization received $771,576 in venue grant money, the original award was way below what the nonprofit qualified for, Tanimura said. 

The organization spent countless hours crafting an appeal to explain that Folklife doesn’t sell tickets but runs on suggested donations to ensure the festival is accessible to everyone and that donations should be considered — and counted as — ticket revenue.

While Tanimura is grateful the SBA accepted the appeal, “it was a very hard and uneven system to navigate,” she said, and later added: “The banks and the SBA are not really prepared to work with nonprofits.” 

Some of this is likely because the program evolved from legislation meant to help live, for-profit music venues. At lawmakers’ requests, the bill was later expanded to include a wider swath of cultural venues, including museums, movie theaters and aquariums. But museums were eligible only if they had permanent seating, which rendered ineligible most smaller and often more rural museums across the state. 

“The idea of ‘fixed seating’ in a museum is one that favors only very large museums and almost completely disqualifies any museums in the already underserved areas of south and north King County,” said Rachael McAlister of the White River Valley Museum. 

But even larger museums like the Northwest African American Museum and National Nordic Museum in Seattle found themselves ineligible because of the fixed seating requirement. For the Nordic, a brand-new museum featuring a large performance hall purpose-built with movable seating, this felt especially ironic.

$2 billion remaining

Overall, smaller, volunteer-led and rural organizations were less likely to obtain venue grants. Data from ArtsFund’s COVID Cultural Impact study, which surveyed more than 200 Washington state arts organizations, found that a majority of large organizations accessed those venue dollars while few of the smaller organizations did. 

In general, smaller organizations — which are more likely to be BIPOC-identifying — are the least likely to access relief funds, the survey also found, particularly federal funding, which generally offered the highest dollar amounts. 

Data also show that location made a difference. Organizations in places with a more robust public funding infrastructure, such as King County and Seattle, had the highest rates of access to public local and regional emergency relief funds. Those funds often proved vital for filling in the gaps, particularly for smaller community organizations. 

While the venue grant application window has closed, roughly $2 billion remains in the program’s coffers. Rejected applicants were invited to appeal that decision during a two week window following the denial. The SBA did not answer a question about how many appealed cases are still pending, but as of now, more than 30 are still tied up in the courts. 

There is no guarantee that funding will remain available for applicants who appeal after their window closes.

Meanwhile, a group of venues is hoping some of the remaining funds can go toward businesses and venues still reeling from the omicron variant and struggling to get back to prepandemic audience levels. Others are pinning their hopes on other, more local funding, as well as federal dollars spent through the state Legislature.

For Manny Cawaling of Inspire Washington, which is currently lobbying state representatives to send funding to the state’s cultural sector, it’s important to recognize the shortcomings of the Shuttered Operators Venue Grant program while not dismissing how groundbreaking this injection of funds has been for the sector. The task at hand now, he says: finding solutions for the local venues and programs that still need help.

“I want to have a conversation about how we get them the support that they need,” he said. “​There's federal dollars in our state that could be spent to support those important efforts.”

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