[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                      SMALL BUSINESS RECOVERY FROM 
                     THE MIDWEST DISASTERS OF 2008 

=======================================================================

                           HEARING BEFORE THE

               SUBCOMMITTEE ON CONTRACTING AND TECHNOLOGY

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                           SEPTEMBER 24, 2008

                               __________

                    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                               

            Small Business Committee Document Number 110-114
Available via the GPO Website: http://www.access.gpo.gov/congress/house

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


HEATH SHULER, North Carolina         STEVE CHABOT, Ohio, Ranking Member
CHARLES GONZALEZ, Texas              ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington              SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona               TODD AKIN, Missouri
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas                 STEVE KING, Iowa
DAN LIPINSKI, Illinois               JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin                LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa                   DAVID DAVIS, Tennessee
YVETTE CLARKE, New York              MARY FALLIN, Oklahoma
BRAD ELLSWORTH, Indiana              VERN BUCHANAN, Florida
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii

                  Michael Day, Majority Staff Director

                      Tim Slattery, Chief Counsel

               Kevin Fitzpatrick, Minority Staff Director

                                 ______

               SUBCOMMITTEE ON CONTRACTING AND TECHNOLOGY

                    Subcommittee on Finance and Tax

                      BRUCE BRALEY, IOWA, Chairman


HENRY CUELLAR, Texas                 DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania             TODD AKIN, Missouri
                                     MARY FALLIN, Oklahoma

        .........................................................

                                  (ii)

  









                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Braley, Hon. Bruce...............................................     1
Davis, Hon. David................................................     3

                               WITNESSES

Carranza, Hon. Jovita, Deputy Administrtator, U.S. Small Business 
  Administration.................................................     6
Tully, Mr. Mike, President and CEO, Aerial Services Inc., Cedar 
  Falls, Iowa....................................................    18
Wilke, Mr. David, Wilke's Grocery Store, Elkader, Iowa...........    20
Bowers, Mr, Don, Owner, Tapken's Convenience Store, Anamosa, Iowa    23
Monnahan, Mr. Mike; President, the Blue Strawberry Coffee 
  Company, Cedar Rapids, Iowa....................................    27
Pilkington, Mr. Randy, Executive Director, Business and Community 
  Services, the University of Northern Iowa......................    29

                                APPENDIX


Prepared Statements:
Braley, Hon. Bruce...............................................    44
Davis, Hon. David................................................    49
.................................................................
Carranza, Hon. Jovita, Deputy Administrtator, U.S. Small Business 
  Administration.................................................    50
Tully, Mr. Mike, President and CEO, Aerial Services Inc., Cedar 
  Falls, Iowa....................................................    55
Wilke, Mr. David, Wilke's Grocery Store, Elkader, Iowa...........    59
Bowers, Mr, Don, Owner, Tapken's Convenience Store, Anamosa, Iowa    63
Monnahan, Mr. Mike; President, the Blue Strawberry Coffee 
  Company, Cedar Rapids, Iowa....................................    73
Pilkington, Mr. Randy, Executive Director, Business and Community 
  Services, the University of Northern Iowa......................    75

                                 (iii)

  


                      SMALL BUSINESS RECOVERY FROM
                     THE MIDWEST DISASTERS OF 2008

                     Wednesday, September 24, 2008

                     U.S. House of Representatives,
                    Subcommittee on Contracting &Technology
                                       Committee on Small Business,
        Washington, DC.
    The Subcommittee met, pursuant to call, at 2:00 p.m., in 
Room 1539 Longworth House Office Building, Hon. Bruce Braley 
[chairman of the Subcommittee] presiding.
    Present: Representatives Braley, Cuellar and Davis.
    Also Present: Representative Loebsack.
    Chairman Braley. I now call this hearing to order. This 
hearing on the SBA's response to the 2008 Midwest flooding and 
tornadoes is now called to order.
    I would like to thank all of the witnesses who have taken 
time out of their busy schedules to come from Iowa to testify 
on how these disasters have affected their lives.
    This is the Subcommittee's last hearing of the year. And I 
would also like to take a moment to thank my friend the 
honorable David Davis for all of the insight and hard work he 
has brought to the table as Ranking Member. Thank you, David.
    In today's era of modern technology and abundant creature 
comforts, it is easy for Americans to feel beyond Mother 
Nature's reach. But the truth is we are not.
    In my own home State of Iowa, we are keenly aware of that 
fact. And I am personally aware of that fact because my brother 
Brad and his wife, Rhonda, had five and a half feet of the 
Cedar River in their home as part of this flooding event.
    This past spring and summer, the series of storms and 
flooding tore through the entire region that I represent. And 
while much of the nation's focus has since shifted to the 
aftermath of Gulf Coast hurricanes, Iowa and the rest of the 
Midwest are still recovering.
    Natural disasters do much more than knock down trees and 
level homes. They devastate local economies. In addition to 
considerable human cost, the flooding in Iowa reeked serious 
financial havoc. In fact, the damage is expected to rank among 
the costliest in our nation's history.
    Preliminary estimates show that the destruction in my state 
alone will cost billions of dollars. SBA's Disaster Assistance 
Program has helped Iowa to weather some of this financial 
storm. However, much still remains to be done.
    In this afternoon's hearing, we will evaluate SBA's 
response to the Midwest flooding and address some of the 
program's limitations. We will also discuss other potential 
avenues for recovery assistance.
    It is estimated that between 40 and 60 percent of 
businesses fail to recover from natural disasters. This is 
largely because of the cost of damage when paired with lost 
revenue is simply too great for most firms to sustain.
    In Iowa, for example, total damages to small and 
intermediate firms will run upwards of $5.36 billion. And the 
unmet need for damages is at $2.78 billion, over half of the 
total.
    While all businesses suffer from natural disasters, small 
firms, in particular, are generally the hardest hit. This is 
primarily the result of a weakened ability to generate profits, 
paired with revenue gaps and a basic lack of capital.
    Altogether 4,800 non-manufacturing small firms were 
affected in Iowa alone while another 800 medium-sized 
businesses also suffered losses.
    In the wake of a natural disaster, SBA is trusted to 
dispatch a number of relief programs. In keeping with this 
charge, the administration provided Midwest businesses and 
homeowners with working capital in a number of low-interest 
loans. As of the beginning of this month, SBA had issued 77,993 
disaster assistance applications throughout the Midwest region.
    SBA has already granted 3,359 loans, worth $222 million to 
Iowans. The administration has come a long way since the 
aftermath of hurricane Katrina. But while SBA has managed to 
fulfill its standard policies in the Midwest, it is clear that 
the system is still flawed in some respects.
    Unfortunately, much of the money marked for the Midwestern 
flood relief is still tied up in bureaucratic red tape, out of 
the reach of thousands of flood victims.
    Additionally, of the $46.8 million awarded in rebuilding 
contracts so far, only one million, or less than 2 percent, of 
these contracts has been awarded to small Iowa firms.
    What is more, nearly ten percent of the rebuilding 
contracts were miscoded and given to large corporations, like 
Northrop Grumman, instead of small businesses.
    Because of all of the challenges small businesses are 
facing trying to recover from these disasters, I recently 
introduced, along with Congressman Steve King and other members 
of the Iowa delegation, H.R. 6641, the Small Business Owner 
Disaster Relief Act of 2008. This bill would amend the Stafford 
Act to allow emergency assistance grants for small businesses 
with 25 or fewer employees. And I should add that a hearing was 
held on this recently in the Transportation Committee. These 
grants could be used to repair, restore, or replace damaged 
facilities in small businesses.
    I have also co-introduced a bill, along with my colleague 
from Iowa Congressman Dave Loebsack, who is seated to my right, 
H.R. 6587, the Midwestern Disaster Tax Relief Act. It is a tax 
package that would help homeowners and small business owners 
affected by the storms and flooding get back on their feet.
    Among other things, it reduces the 2008 tax burden for 
small and midsized businesses by substantially increasing 
allowable deductions for the depreciation and expensing of 
business property.
    Small businesses are the glue that hold local economies 
together. When they suffer, entire regions suffer along with 
them. In the case of the Midwest floods, we are also seeing 
reverberations across the region. And while we are grateful for 
the assistance that SBA has provided, certain aspects of the 
system need to be reassessed. Meanwhile, more help is needed in 
the Midwest. It is critical that the rebuilding continue and 
that our nation's and region's economy get back on track.
    I urge both my colleagues and the President to pass 
additional disaster assistance before we adjourn. And we took a 
very major step just before we came here to this hearing by 
passing $22.3 billion in additional disaster assistance funding 
for Iowa, the Midwest, and other parts of the country.
    I also encourage the administration to expedite the release 
of already appropriated funds so the communities in my district 
and throughout Iowa and the Midwest can get back on track.
    I now yield to my colleague and friend from Tennessee, 
Ranking Member Davis for his opening statement.
    Mr. Davis. Thank you, Mr. Chairman. I would like to say I 
have enjoyed working with you as well. Thank you for your 
friendship and leadership on the Committee.
    In 2005, hurricanes Katrina, Rita, and Wilma devastated the 
Gulf Coast region. No one disputes the response by various 
governmental entities was inadequate. The failures included 
problems with Small Business Administration, the agency tasked 
with providing disaster loans to homeowners and small 
businesses that are vital to the recovery of regions that have 
suffered natural disasters.
    Former Administrator Preston recognized that the SBA's 
disaster response operations needed updating and streamlining 
to assure that the agency would become part of the solution to 
rebuilding communities suffering from disasters, rather than 
being a hindrance. Today's hearing examines whether the efforts 
of the Administrator Preston and Deputy Administrator Carranza 
were successful.
    Earlier this year floods devastated the upper Midwest, 
particularly southeast Iowa. This represented the SBA's first 
test of its new disaster-planning procedures in response to 
large-scale disasters.
    I will be interested in hearing from our witnesses whether 
SBA's responses were adequate and whether any action of 
Congress is needed in providing the agency with appropriate 
resources to answer the call to those in need after a disaster.
    I know that the Deputy Administrator is very busy working 
on the response to hurricane Ike. Given those very important 
responsibilities, I would like to thank Deputy Administrator 
Carranza for taking time out of her schedule to be with us 
today. And I look forward to working with the rest of the 
members on this panel for solutions.
    And, with that, I yield back the balance of my time.
    Chairman Braley. Thank you, Mr. Davis.
    We are fortunate to have with us today, sitting in by 
special agreement of the Chairman and Ranking Member of the 
Small Business Committee, my friend and colleague from Iowa 
Congressman Dave Loebsack, who represents the Second District 
of Iowa, which experienced the worst of the flooding. And at 
this time, I would recognize him for an opening statement.
    Mr. Loebsack. Thank you.
    I would like to thank Chairman Braley and Ranking Member 
Davis for inviting me to join the Small Business Subcommittee 
on Contracting and Technology for this very important meeting.
    I have never been on this Committee, obviously. I serve on 
two other committees. But it's my pleasure to be here and to be 
here, obviously, as well with Ms. Carranza, whom I last saw in 
the district a number of months ago now.
    Also, if I may take a point of personal privilege, I want 
to introduce a couple of other folks from the audience. Is that 
okay, Mr. Chairman? Thank you.
    First of all, my wife, Terri, is here, sitting in the back. 
And she has quite a stake in this as well since she also lives 
in the Second District of Iowa.
    And, second, Chuck Peters is here. He is the President and 
CEO of the Cedar Rapids Gazette, the largest newspaper in my 
congressional district. But that is a big reason why he is 
important.
    He is also very important because he is playing an 
incredibly active role in the reconstruction, the redevelopment 
of the Second District of Iowa; in particular, Cedar Rapids and 
the Iowa City area, that whole corridor. And he has been a 
leader in the efforts to take a more regional approach to the 
recovery efforts in the area. So I am really happy that Chuck 
is able to sit in today on this meeting.
    I would also like to thank all of the witnesses who have 
traveled from Iowa to inform us of their experience in coping 
with the disasters that hit Iowa and nine other Midwestern 
states this year.
    I know that you each have faced incredible hardship over 
the past few months. And your willingness to travel to 
Washington, even as you attempt to clean up, rebuild, and 
reopen as a demonstration of Iowans' resiliency and tenacity of 
spirit, your testimony today will help to assure that Congress 
provides proper support and assistance to small businesses in 
Iowa and in all areas affected by disasters, past, present, and 
future.
    My district, as Congressman Braley mentioned, was 
particularly hard hit by the floods of June of 2008. Over 1,300 
businesses in Cedar Rapids alone were damaged by the floods. 
And the damage estimates for the downtown businesses top $366 
million.
    We will hear from a witness from Cedar Rapids today, Mr. 
Mike Monnahan, President of the Blue Strawberry Coffee Company. 
Mr. Monnahan, welcome. I know you are behind that pillar 
somewhere.
    The impact of the floods on Cedar Rapids' economy is yet to 
be determined. It is the second largest city in Iowa. The 
revenue loss for the first year of recovery alone will exceed 
$600 million. Meanwhile, small rural cities in my district 
experience complete devastation of their local economies.
    The City of Palo, with a population under 1,000, lost not 
only every one of its businesses but also all but 2 of its 
homes. The city estimates that its business district saw $1.75 
million in damage, this in a city that has already spent its 
entire budget on flood recovery and is currently operating in a 
deficit.
    Sadly, stories such as these are all too common in the 
Midwestern areas affected by the severe storms, tornadoes, and 
flooding in this past year. Yet, the Small Business 
Administration has disbursed only $16 million out of the $225 
million in loans that have been approved for Iowa. In other 
words, only 53 percent of loans approved by the SBA have been 
closed since their approval, and only 26 percent have been 
fully disbursed to disaster victims.
    Furthermore, in an apparent response to an Office of 
Management and Budget directive, SBA has dramatically increased 
the disbursement of high interest loans in the place of the 
traditional low interest rate small business loans. These loans 
are often above market value and are all but useless to 
businesses and homeowners, who are able to get better deals at 
their local banks.
    What is deeply troubling to me is that only two percent of 
the loans distributed after hurricane Katrina were high-
interest. In Iowa, apparently in compliance with the OMB 
directive, they make up 30 percent of SBA loans.
    Deputy Administrator Carranza, it is my hope that you will 
be able to provide some explanation for the delay in 
disbursement of funding and the 15-fold increase in high-
interest rate loans. And, more importantly, I hope you will 
provide information regarding SBA's plans to speed up the 
disbursement process and to provide Iowans with loans that will 
help them to recover and rebuild.
    Small businesses, as we know, are the heart and soul of the 
Iowa economy. In 2006, Iowa had some 258,000 small businesses 
that employed about 650,000 people. That is out of a population 
of three million. Clearly the recovery of the small businesses 
impacted by this year's disasters is a crucial component of the 
recovery of Iowa's economy.
    Again I would like to thank Chairman Braley for holding 
this important hearing. And I look forward to hearing from the 
witnesses and from Deputy Administrator Carranza. Thank you.
    Chairman Braley. Thank you, Congressman. We appreciate your 
remarks. And, Chuck, I just want to acknowledge you and commend 
you for the fabulous photographic display of flooding that is 
on display at the Cedar Rapids Museum. When we were touring the 
state with the Speaker and had an opportunity to see the 
photographic evidence of the devastation, especially in your 
leadership area, it was very impressive. And I know it made an 
impact on her. So thank you.
    We will now move on to testimony from our witnesses. And 
for all of the witnesses, this is just a general reminder that 
you will be allowed five minutes to deliver your opening 
statements.
    There is a light display in front of you. And the light 
will go on with one minute remaining. The yellow light will 
come on. And when your time is up, the red light will come on. 
So you will have a short amount of time to wrap up your 
remarks.
    But your written statements will be included in the 
Committee's record. So even if you can't get to everything that 
you brought with you, we will have a record of that that will 
be part of the Committee proceedings.
    We will begin with our first panel. And at this time, it is 
my privilege to introduce the honorable Jovita Carranza, who is 
the Deputy Administrator of the Small Business Administration. 
The SBA is the primary federal agency whose mission is to aid, 
counsel, assist, and advocate for our nation's small businesses 
while strengthening the economy. Prior to joining the SBA, Ms. 
Carranza worked for UPS, where she served as Vice President of 
Air Operations.
    I just want to thank the Deputy Administrator personally 
for her efforts in visiting the state of Iowa. I can tell you 
that your presence there was a reflection of your personal 
interest in what was happening to devastated homeowners and 
small business owners in my state. We greatly appreciate that.
    And I will just give you advance warning that none of the 
questions that come out today are in any way a reflection upon 
you or your commitment to making sure that the agency is 
accountable in doing what it can for the people in Iowa.
    Please share your opening remarks.

      STATEMENT OF THE HONORABLE JOVITA CARRANZA, DEPUTY 
       ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION

    Ms. Carranza. Thank you, Congressman Braley. Good morning, 
Chairman Braley, Ranking Member Davis, and members of the 
Committee. Thank you for inviting me to discuss the Small 
Business Administration's work to help the victims of the 
Midwest floods.
    The SBA is best known for our work with entrepreneurs and 
small businesses, but when disasters strike, we provide 
critical pieces of the national recovery effort. This mission 
allows us to help those in desperate need, and from my personal 
experiences it is one of the most important and consequential 
things our agency does.
    After the Midwest flooding, I personally visited the area 
three times as then Acting Administrator of SBA. I saw the 
devastation firsthand, but I also saw how SBA and, indeed, the 
entire federal government had learned from the painful lessons 
of the 2005 hurricane season. These lessons have led to reforms 
that have dramatically improved our performance.
    Of course, this is little comfort to those whose homes and 
businesses were destroyed. The speed of our response and the 
resources we deployed cannot undo the damage caused by nature. 
But in assessing the response to the Midwest floods, I think it 
would be helpful for the Committee to contrast the situation in 
2005 with our current response.
    To put this in perspective, the goal for processing a home 
loan before Katrina was 12 days. As SBA grappled with Katrina 
applications, the actual time needed stretched to 90 days. 
Today the goal for processing a disaster home loan is 10 days, 
but in responding to the floods, the actual time has been 4.7 
days.
    Before Katrina, the goal for processing a business loan was 
17 days, but in the hurricane's aftermath, the actual time 
needed was 70 days. Today, the goal for processing a disaster 
business loan is 16 days, but the actual time is 9 days.
    The goals are more demanding, but SBA's performance is 
exceeding them, a testament to our reforms. Moreover, these 
efforts continue. On August 4th, SBA introduced an electronic 
loan application, and while not available initially for the 
Midwest flood, it is currently in use and capable of receiving 
5,600 applications per hour.
    In financial terms, as of September 21, SBA has approved 
over 7,140 loans for more than $358 million. Of these more than 
6,260 are home loans totaling more than $257 million, 855 are 
business loans for more than $98 million, and 28 are Economic 
Injury Disaster Loans for $2.4 million.
    More specifically, in Iowa, more than 3,450 loans have been 
approved for $230 million. This includes more than 2,88o home 
loans, for $150 million; 541 business loans, for $78 million; 
and 16 EIDL loans, for $1.9 million. The total amount of these 
loans is nearly double the $112 million issued after the 1993 
Iowa floods.
    Beyond financial help, SBA also provides technical 
assistance and coordination with state and local officials. On 
June 24, SBA opened our Business Recovery Center in Cedar 
Rapids, a week before the crest. Co-located with FEMA's 
Disaster Recovery Center, it allows businesses to work with our 
staff to learn about recovery programs, receive counseling, and 
get face-to-face answers to their questions. At our peak 
response, which occurred on June 30th, SBA had 194 staff 
working from 67 centers in Iowa, with coverage over 81 
counties.
    To publicize the help available, communication specialists 
from our Office of Disaster Assistance provided more than 29 
TV, 34 radio, and 62 newspaper interviews. Also, SBA officials 
have made more than 60 visits to Chambers of Commerce.
    On the coordination front, SBA participates in FEMA's 
Interagency Long-Term Community Recovery Task Force, and SBA is 
working with the Iowa Rural Development Council and the Rebuild 
Iowa Office.
    This vigorous response is possible because of our efforts 
to improve disaster response after the 2005 hurricane season. 
Today, by applying lessons learned, SBA's Disaster Assistance 
Program and our sister federal agencies have overhauled the 
response protocols, and these improvements are seen across the 
country, including the Midwest region.
    And while that is a brief of our reforms, now I would like 
to describe the implementation of the disaster provisions in 
the 2008 Farm Bill. A number of these were already in 
operation, and we welcomed their codification. Specifically, we 
are talking about the Disaster Response Plan, regular reports 
to Congress, and other reforms instituted by SBA.
    For those provisions of the Farm Bill that augmented our 
efforts, SBA has been working to implement these features as a 
part of our overall Disaster Response Plan.
    To date the following have already been implemented. Non-
collateralized loan limits for physical disaster loans have 
increased to $14,000 from $10,000. Loan caps for businesses 
have increased to $2 million from $1.5 million. Use of net 
earnings clause in the first five years of repayment has been 
prohibited. And non-profit organizations are now eligible for 
Economic Injury Disaster Loans.
    In closing, thank you for the opportunity to testify. As I 
mentioned, I have visited the area three times, twice with you, 
Mr. Chairman, seeing the damage firsthand. I also had the 
privilege of traveling to the region with Secretary of Commerce 
Carlos Gutierrez. I met with Iowa Governor, Chet Culver; Cedar 
Rapids Mayor, Kay Holloran; your former colleague Jim Nussle; 
your colleague Congressman Dave Loebsack; and other state and 
local officials.
    I appreciate the long-term consequences the floods will 
have and I welcome the opportunity to answer your questions. 
Thank you.
    [The prepared statement of Jovita Carranza is included in 
the appendix at page 50.]

    Chairman Braley. We will now proceed with questioning. And, 
Ms. Carranza, let me start with an issue that was of concern to 
the entire Iowa delegation, including Senator Harkin and 
Senator Grassley and every member of the House of 
Representatives, a bipartisan concern. It was contained in the 
letter that we sent to Budget Director Nussle and Acting 
Administrator Baruah on August 22nd of 2008.
    The concern is this. Prior to October of last year, 
applicants who couldn't secure credit elsewhere after a 
disaster qualified for SBA loans with lower interest rates and 
longer repayment terms. However, your agency, the Small 
Business Administration, recently abandoned that approach to 
follow a directive from the OMB mandating that the SBA issue 
more high-interest loans.
    Given that the goal of these loans is to help victims in 
times of need, can you explain why the SBA is 
disproportionately pushing loans that could threaten recovery 
efforts?
    Ms. Carranza. I would like to address that question by 
indicating the three areas of responsibility that we have. One, 
the statute requires that SBA provide the lowest interest rate 
to individuals or applicants that aren't able to obtain credit 
elsewhere, and those who are capable of acquiring credit 
elsewhere would do so, and they would get a higher rate and, 
again, a less subsidized rate to the government.
    The IG did express some concerns of our particular process; 
our test. As a result of some of the recommendations they made, 
we revisited the test and made the necessary adjustments.
    Thirdly, we do test frequently our credit elsewhere policy. 
And with that, the concern is always, is whether it is market-
based and is it reasonable? And if there are particular 
concerns, Congressman Braley, I offer the opportunity to review 
those particular cases that you have cited or the situation 
that you cited, where individuals acquired other loans at a 
lower rate than the Office of Disaster Assistance loan.
    Chairman Braley. But your response implies that it was the 
Inspector General, whose responsibility it is to oversee the 
operations of the Small Business Administration that prompted 
this change. My understanding is that the reason for the change 
was a directive from the Office of Management and Budget, 
headed by Mr. Nussle, that caused that change in SBA policy.
    Ms. Carranza. Congressman Braley, I wouldn't be able to 
comment with any specificity because I can only tell you what I 
am responsible for based on statute.
    Chairman Braley. What we will do is we will make sure you 
get a copy of this letter of August 22nd. And I would really 
appreciate it if you would take that back to the Acting 
Administrator because this letter was signed by every member of 
the Iowa delegation, bipartisan, House and Senate. And we would 
very much like to know what the official position of the agency 
is in response to that specific concern.
    Do you have any specific provision of the Small Business 
Act that you can point us to that would indicate that there is 
a justification for having a two-tier loan system?
    Ms. Carranza. The two-tier loan system, again, is by 
statute in that we are to identify section 7(d)(5)(D).
    Chairman Braley. Is that a requirement in the statute or is 
that an interpretation by the agency of the statutory 
requirement?
    Ms. Carranza. It is a directive.
    Chairman Braley. But does that mean that it is included in 
the language of the statute you just cited?
    Ms. Carranza. I wouldn't be able to accurately state that, 
sir.
    Chairman Braley. Well, let me move on, then. After 
hurricane Katrina, just two percent of all SBA loans were at 
higher interest rates and shorter repayment terms. Your agency 
spokesman recently stated that over 95 percent of the loans 
made in Iowa after this disaster occurred carried higher 
interest rates. Do you expect that the proportion of these 
higher-interest loans will continue to occur at such high rats?
    Ms. Carranza. I am very supportive of your concern, 
Congressman Braley. And I would like to take this opportunity 
to correct those statistics.
    The number that was quoted was a misrepresentation from a 
field representative. It is actually representing five percent 
of the revenues or I should say the loan value is reflective of 
a ten percent business loan volume.
    So it is the reverse. It is not 95 percent of the higher 
rate. It is actually ten percent of the businesses are at the 
higher rate, reflecting five percent of the loan amounts.
    Chairman Braley. Do you have any understanding as to why 
the spokesman made the claim that 455 loans, totaling $67.6 
million, in post-flood loans in Iowa were made at the market 
rate while only 3.3 million were made in long-term loans at the 
4 percent rate?
    Ms. Carranza. I am sorry. Could you pose that question 
again, Congressman Braley?
    Chairman Braley. Yes. The quote that I was referring to by 
the agency spokesman claimed that the SBA had made 455 loans, 
totaling $67.6 million at the market rate, but it also made 
$3.3 million in long-term loans at 4 percent.
    Ms. Carranza. Any misrepresentation of the information that 
was given was corrected with the newspapers. So I can't 
specifically state about the numbers that you are giving me, 
but I can attest to the correction on the 95 percent figure 
mentioned earlier.
    Chairman Braley. Well, I think that the biggest concern 
that people have is that when people whose lives have been 
devastated by epic flooding, the likes of which our state has 
never seen before, are in need of loans at a time of crisis, 
they are in need of loans that meet their needs at that time, 
which would be the lowest possible interest rate to ensure 
their long-term viability.
    Is it your statement here today that, in fact, that is a 
reality of the loans that have been processed in Iowa?
    Ms. Carranza. Congressman Braley, I can assure you that the 
numbers I referred to in my testimony are the number of loans 
that have been approved. The amount that has been approved is 
over $230 million.
    The fact that they have not been disbursed is twofold. The 
money is available. The loans have been approved. Now it is up 
to the recipient, the borrower, to access those funds. 
Typically when funds are not disbursed, it is because either 
the borrower is still waiting on permits or contractors.
    So we have taken the position that we don't want the victim 
to have to wait on our turnaround time because, as I noted in 
the testimony, once the disaster victim applies, within the 
same week, we will call up the applicant to verify whether they 
received the application.
    Once the application is approved, we have case managers 
that will follow up and inquire into the status of their 
concern or whether we have to provide counseling or some 
advice. But we do follow up on those individuals that have been 
approved for funds and question why they are taking a certain 
length of time to draw the funds.
    Money has been approved. And, again, it is $230 million. It 
is not that we have not appropriated the funds. They are 
available.
    Chairman Braley. And I want to follow up on that because 
the SBA boasts that 7,000 loans were approved. And, yet, my 
understanding is that 46 percent of those loans are currently 
in a queue for closing.
    Is it your testimony today that all of those loans have not 
been closed because of some problem on the part of the 
homeowner or small business owner, as opposed to a delay in 
releasing funds for an approved applicant?
    Ms. Carranza. I would like to answer your question in this 
manner. The funds are not disbursed in totality. They will be 
disbursed as needed. So if the applicant is holding back from 
drawing those funds, it could be that they do not want to incur 
any of the interest rates that would be incurred. By allocating 
those funds prematurely, they would be charged the interest 
rate.
    And if they, again, don't meet the schedule for the permits 
or contractors, as you know, it is always on a priority basis. 
Construction is at a great demand. And so if they are on the 
rebuild mode, the burden really is on the borrower.
    Now, can I tell you that all of those individuals are 
facing that predicament? I couldn't tell you what percentage 
are facing that, but I look forward to going back and checking 
those that are in the queue that are waiting to be disbursed, 
what are the reasons for that.
    Chairman Braley. Small businesses in Iowa are still 
struggling to recover after sustaining nearly $5.35 billion in 
damages. And many small business owners that I talked to claim 
that their money is being held up by red tape and that these 
disaster loans aren't a practical option.
    The one remaining hope for many small firms is some of the 
$2.65 billion already set aside for relief and potentially more 
to come is used for small business contracts. Will the SBA 
commit to meeting with FEMA, the Army Corps, and other major 
agencies receiving this funding and outline a plan for 
incorporating small and local firms?
    Ms. Carranza. Congressman Braley, I am very encouraged by 
the collaboration not only with FEMA but the Corps of 
Engineers, state and local officials because our focus in our 
reform agenda is expediency, collaboration, and immediate 
policy implementation. And all three have been deployed very, 
very effectively.
    We not only have communicated with the Corps of Engineers 
via letter but also the main agencies, whether it is DOD, GSA, 
to engage them very proactively in considering small businesses 
to pursue some of the work that is available.
    Chairman Braley. Well, the reason why that is so 
significant to me--and we have had this conversation before--on 
overall federal procurement and the role that small businesses 
could and should play in receiving those federal contracting 
dollars is our information indicates that small businesses in 
Iowa have received just over $1 million in contract dollars in 
flood recovery contracts, which averages out to about 17,000 
per contract. Meanwhile firms in Maryland, Virginia, and even 
Georgia are receiving million-dollar awards.
    What is SBA doing to make sure that the directive that we 
have talked about over and over in this Committee becomes 
reality, especially in a disaster situation, where small 
businesses in my district are hungry to get back on their feet 
and could be performing much of the duties that are currently 
being outsourced to firms in Maryland, Virginia, and Georgia?
    Ms. Carranza. We have taken several proactive steps; one, 
research the data about the average contract value. I do know 
that both of our PCRs, one who is a supervisor from Illinois, 
who is overseeing the PCR that is very active in Iowa, to 
ensure that we are engaging all other agencies--I call them 
sister agencies, but also the communication is frequent, 
collaboration, and utilizing the infrastructure that we put in 
place so that all small businesses, whether it is in Iowa or 
the Texas area. And all of them have experienced government 
contracting representatives.
    Let me put in perspective one of the contracts that was 
granted. They are not all an average of 14 or 17 thousand 
dollars. I believe one of the small businesses was able to 
experience a $400,000 contract. And so when you take the 
smaller and you take the larger, you average it out, and it may 
come to that.
    Chairman Braley. Can you identify which business in Iowa 
received that kind--
    Ms. Carranza. Yes. I look forward to bringing that 
information to you. In addition to that, Environmental 
Regulatory Associates--
    Chairman Braley. And where are they located?
    Ms. Carranza. In Iowa.
    Chairman Braley. Where in Iowa?
    Ms. Carranza. I wish I had an exact address, but I will get 
you that information.
    Chairman Braley. Okay. That is important because Iowa is a 
large state geographically. The primary damage from these 
events occurred in the First and Second Districts of Iowa. So I 
am interested, and I am sure Congressman Loebsack is interested 
in knowing the location of that business.
    Ms. Carranza. Yes. And we have reports. We track the number 
of calls that are coming in from small businesses. At this 
point we have approximately up to 700 calls that are coming in 
from small businesses.
    Let me digress for a moment, Congressman Braley. We have 
put in an infrastructure so that we can capture as many small 
businesses that are pursuing contracting, regardless of the 
disaster area.
    We have dedicated personnel at our Buffalo phone center. 
And they are dedicated to informing interested businesses about 
available contracting.
    If they need additional assistance, they are referred to 
our headquarters and the leadership--and I am talking about the 
management in the Government Contracting Office who then 
accepts that call and will dispatch the work out to the PCRs. 
So we have a very focused, fully engaged agency to ensure that 
small businesses are receiving contracting opportunities.
    Secondly, I chair the Procurement Advisory Council. 
Yesterday I spoke to 24 government contracting OSDBU's and 
informed them of our Buffalo phone center network, and the 
commitment that we have in headquarters. Karen Hontz, who is 
responsible for the Government Contracting Office, will oversee 
that dispatch of work. Also we are tracking the PCR's 
performance. There are definitely a lot more performance 
metrics, a lot more communication and interaction with the 
agencies, and I would welcome the opportunity to show you that 
performance report.
    Chairman Braley. Okay. And I have to yield now to my friend 
and Ranking Member for his questions. But for the small 
businesses in Iowa, we would just like to see those numbers 
increase and improve because they are in desperate need of 
opportunity.
    Mr. Davis. Thank you, Mr. Chairman. And I think they are 
going to be calling votes in a few minutes. So I am going to be 
fairly brief.
    Based on the SBA's response to the Midwest floods, are 
there additional changes that may be needed to improve the 
disaster response plan?
    Ms. Carranza. Could you ask that question again? I am 
sorry.
    Mr. Davis. Yes. Based on the floods,--
    Ms. Carranza. Yes.
    Mr. Davis. --Midwest, are there additional changes that may 
be needed to your disaster response plan at the SBA or do you 
think it is working well?
    Ms. Carranza. Well; it is working well, but I would like to 
explain why it is working well. Each time we experience a 
disaster, we keep improving the process, but let me tell you 
about the reform that has occurred in the disaster operation. 
Not only have we been training for the past two years through 
simulations and engaging the entire agency integrating ODA; 
that is, the Office of Disaster Assistance, to the SBA, we have 
increased the capacity, either in automation, resources, 
reservists; personnel, I should say, reservists, from ODA and 
also fully engaging the SBA personnel.
    So you are talking about what used to be 1,000 to 3,000 
employees now immediately deploying, and engaging up to 3,000 
employees in disaster recovery.
    We we have an electronic application that has immediate 
interface with the disaster victims. We have increased 
reservists deployed to have a partnership with the FEMA 
members. So now you have joint field offices.
    And we also have a daily review of the disaster areas and 
their operations. So every office has to report back on a daily 
basis. We conduct conference calls at 9:00 am in the morning to 
address any exceptions.
    So I believe we are a fully engaged agency. And if there is 
room for improvement, I would be glad to speak with you on 
areas that you think we may be able to perfect.
    Mr. Davis. Those daily reviews that you do at 9:00 a.m., is 
that something new since the hurricanes of 2005?
    Ms. Carranza. Yes. We included in our disaster response 
plan that was submitted to Congress the need to assemble what 
we call a disaster assistance information center or council, 
and we feed in all of the activities, results, open issues at 
that session.
    All of the SBA leadership is all hands on deck mode. And we 
review either the COOP Plan or the Office of Disaster 
Assistance Deployment, any of the communications, any of the 
press releases, and anything else that bubbles up.
    We also are very concerned about our own employees, in 
addition to our infrastructure, to make sure that we give them 
the necessary tools so that they can get back to business and 
provide the services to all of the victims in the communities.
    So it is a double-edged sword. We have to not only think of 
the local community, but we also have to think of the SBA 
facilities that are in 68 particular areas. We have 68 district 
offices.
    Mr. Davis. Thank you.
    We have just gone through another disaster with hurricane 
Ike. As you went through that disaster, did that affect your 
ability to work with the people and businesses in the Midwest?
    Ms. Carranza. Absolutely not. We utilize the headquarters 
personnel in the Office of Disaster Assistance. We are fully 
integrated with our resource partners as well as with FEMA. So 
our capacity has not only expanded through the electronic loan 
application, resource partners, but definitely the 
partnerships, the collaboration with other agencies.
    So yes, we are very much engaged with the Chambers of 
Commerce. They are much more accessible to us, and we are 
accessible to them as well. Also, we developed an MOU and the 
Red Cross. So I think we have nonprofit, not-for-profit, and 
for-profit, and also public service.
    Mr. Davis. Do you have enough resources to handle two major 
issues, like the floods and the hurricanes, at the same time?
    Ms. Carranza. I am glad you asked that question. We have a 
capacity in our phone center to receive 20,000 calls a day. I 
mentioned in my testimony that we have an electronic loan 
capacity of 5,600 applications per hour (this is a correction 
from "per day" which was the testimony. We have a ramp-up 
capability of a couple of thousand employees, whether they are 
reservists, national or local.
    And so, to answer your question, we have currently based on 
the reforms and all of our process engineering the capacity to 
handle up to 250,000 applications. That would be at the cusp of 
a level 2 and a level 3. So we are watching that daily.
    We thought we were going to hit a level 3 with Ike. And we 
were able to manage it quite adequately.
    Mr. Davis. Does SBA have any one individual if people in 
the Midwest and Iowa are having problems, that they could 
contact for assistance?
    Ms. Carranza. Yes. As part of the farm bill we had 
proactively identified an individual. You may know him as 
Admiral Steve Smith. He is the Associate Administrator of our 
Disaster Assistance Recovery Office which we call Chief 
Executive of the Executive Office of Disaster Strategic 
Planning and Operations and he is responsible for the strategy 
and planning of our disaster operation. So he is accessible and 
so he looks at not only the deployment of daily resources but 
he is also responsible for the long-term recovery after a 
disaster.
    So Steve Smith and I, as Congressman Braley knows, are 
accessible. And so is Acting Administrator Baruah. And we have 
here Herb Mitchell, who is the Associate Administrator of the 
Office of Disaster Assistance. And he has testified many times, 
I understand, before this Committee.
    Mr. Davis. I have one last question. Was the SBA able to 
implement any of the disaster provisions of the farm bill in 
responding to the floods in the Midwest?
    Ms. Carranza. Yes. There were approximately 13 provisions, 
and we have implemented all but six or seven of them. They are 
the most complicated provisions and that has to do with the 
private lender loan program.
    We do have a working group that is very much engaged in 
developing regulations. We are talking to the lending partners 
to understand and realize either the cost or the capacity of 
these lending institutions that could support us during a 
catastrophic situation. We have not had to employ any of that 
capacity outside of the SBA.
    I should indicate, one, that we have updated our disaster 
response plan, and it is an ongoing work. I mentioned Admiral 
Steve Smith, who is now on board and has I think about two 
months under his belt. He probably thinks it is six months 
under his belt, but it is two months under his belt.
    We have regular reports to Congress. We have the non-
collateralized loan limits, as I mentioned in my testimony, to 
$14,000 from $10,000. We also have put in the business loan 
caps at $2 million, from $1.5 million, and the other 2 
provisions of the net earnings clause as well. The nonprofits 
are now eligible for the EIDL. So we made significant progress 
in that area.
    Chairman Braley. At this time I would recognize Congressman 
Loebsack for his questions.
    Mr. Loebsack. Thank you, Mr. Chairman. And thank you, Madam 
Deputy Administrator Carranza for coming today. And thanks for 
coming into the district on July 1st with the Commerce 
Secretary Gutierrez. We really did get around Cedar Rapids, I 
think, quite a bit that day and even went out to Palo, if I 
recall correctly, and saw the damage out there at that point. A 
lot of it was still very new.
    And there was a lot of debris, you will recall. A lot of it 
has been cleaned up, but people of Cedar Rapids, Iowa City, all 
of Iowa that has been affected have been doing a pretty 
tremendous job, I think, and cleaning things up.
    I think one of the big fears, though, is that we are doing 
such a good job that we are going to be forgotten by the 
federal government. Congressman Braley and I and the whole 
delegation are going to make sure that doesn't happen. And I 
hear that all of the time from folks in Iowa that we have got a 
great spirit and a can-do spirit and all of the rest, but we 
still need help. That is the important thing to keep in mind 
throughout. But thank you for coming in when you did and paying 
so much attention to Iowa and to the Cedar Rapids area, in 
particular.
    I just have, I guess, a number of questions still because I 
guess I am just a little bit confused about what some of the 
terms mean. Obviously processing, SBA has been doing a great 
job, it sounds like, certainly compared to what happened during 
Katrina but then the issues of closing and disbursement. I 
think I understand what closing is. I am still not clear about 
disbursement and exactly who has the onus there.
    Can you explain that a little bit more because I think 
Congressman Braley was trying to get at that sort of, you know, 
where the responsibility lay in terms of disbursement?
    Ms. Carranza. Let me explain the mapping of the application 
because I visited the Dallas-Fort Worth processing center and 
personally saw 45,000 applications ready to go out to the post 
office; some of them came in electronically.
    The document goes out to the applicant. The applicant then 
completes the document and then submits it for consideration. 
If it is approved, then we assign a case manager to the 
applicant, which is part of our reform agenda, which has become 
much more customer-centric with a very timely turnaround.
    So, if you submit your application on Monday, within a 
week's time, we would be able to not only follow up with a 
phone call on your application but also assign a case manager 
to that borrower if they require assistance. They would then 
work through the process of that application being approved.
    Once it is approved, the money is held until the applicant 
is ready to access the funds. So based on the applicant's 
rebuilding schedule, their capacity to withdraw the monies; we 
are there, in other words, within 48 hours, so those funds can 
be disbursed to the applicant. So it has nothing to do with the 
fact that there is a delayed reaction on our part.
    Mr. Loebsack. Right. Well, you mentioned allocating 
prematurely. What does that mean exactly, allocating these 
funds prematurely, these loans?
    Ms. Carranza. For instance, if you applied and were 
approved for $200,000 and I sent you $100,000, you would 
immediately start paying back that loan and would accrue 
interest.
    Yet, you don't have your permits. You don't have the 
contractors. And so we don't want to over-leverage an 
individual if it is not necessary. So we hold on to the funds 
until they are ready to--
    Mr. Loebsack. And the criteria that you use to determine 
whether they are ready or not?
    Ms. Carranza. Yes. They would have to present a schedule of 
work and contractors so that there is some validation for the 
need of funds.
    Mr. Loebsack. Is it fair to say that might be part of why a 
relatively small percentage of all SBA loans that have been 
approved have been disbursed in Iowa? Is that part of the 
explanation?
    Ms. Carranza. Congressman, I wouldn't take that position 
because we do have representatives that could help them in the 
process if they're experiencing any delays.
    We have put in some expediting processing for permits. Herb 
can help me out with the one processing that used to be very 
problematic for us: title search. So we have tried to 
anticipate the type of delays that these borrowers would 
experience and try to remedy the situation for them.
    Mr. Loebsack. Right. Okay. And also Congressman Braley 
mentioned I guess what we thought was an arbitrary decision 
made by OMB and perhaps SBA to increase the number of high-
interest disaster loans to 30 percent. Did I hear you 
correctly? Is that something that is in the statute? Is that 
correct?
    Ms. Carranza. Could you repeat that question again? I'm 
sorry.
    Mr. Loebsack. And I may have incorrect numbers, but there 
appears to have been an arbitrary decision made at some point 
by OMB and possibly SBA to increase the number of high-interest 
disaster loans to 30 percent compared to the 2 percent of these 
loans that were approved during hurricane Katrina. Did we have 
those numbers incorrect? Is that what you were saying earlier?
    Ms. Carranza. I am not familiar with the numbers, 
Congressman Loebsack, and so I mentioned to Congressman Braley 
that I would get back to them on that.
    There is not a goal or a target that we hit. We look at a 
test. There are a couple of variables that are considered when 
we go through that test. Our October 2007 criteria or test that 
just recently occurred was as a result of some compelling 
concerns that the IG had. So to be responsive to their 
particular concerns, we--
    Mr. Loebsack. Would more high-interest loans likely be 
issued?
    Ms. Carranza. Excuse me?
    Mr. Loebsack. Would more high-interest loans likely be 
issued, then, using those criteria?
    Ms. Carranza. Well, again, we revisit the test. It is a 
process that has been ongoing. Interest rates are reviewed on a 
quarterly basis to make sure that they are reasonable and are 
at the market or industry rate.
    Mr. Loebsack. I want to go to the low-interest loans. And 
this will be my final question. What criteria are used for 
applicants to qualify for the lower-interest loans?
    Ms. Carranza. Their inability to access funds from 
commercial or other means. We have probably the best loan terms 
because we have longer loan terms. In other words, they have up 
to 30 years to pay a loan. Also, the need for collateral isn't 
as aggressive as some commercial loans.
    So I believe that we take a lot of factors into 
consideration when we establish what we consider a statutory 
level of credit.
    Mr. Loebsack. Mr. Chairman, I do have one more question--
I'm sorry--to follow up on that. I did a week's worth of flood 
assistance meetings in early August, when we went back for the 
district work period.
    I had a number of folks who have small businesses, you 
know, beauty salon, you know, hair cutting, a number of things. 
A number of these business owners were operating out of their 
homes, that sort of thing. I mean, they are small business 
people.
    Ms. Carranza. Yes.
    Mr. Loebsack. And they could not qualify because of credit 
or whatever the reason may be. They couldn't get an SBA loan. 
What do I tell someone who can't get a loan and, you know, they 
have been doing fine but, for whatever reason, they can't get a 
loan and they can't get a loan necessarily at their bank 
either? What do I tell them when they come to me and they want 
assistance?
    Ms. Carranza. Congressman Loebsack, when we defer some of 
the applicants, we defer them for a FEMA grant. So between SBA 
and FEMA, there is financial assistance. I would be pleased to 
consider those particular cases that you have, look into them 
and perhaps there is something that we need to further look 
into, and assist them.
    Mr. Loebsack. Because there are a lot of people falling 
between the cracks, you know. And that is what I think we hear 
a lot, you know, in our jobs with these folks.
    Thank you for your service. Thanks for all you are doing. I 
really appreciate that. And I will give the balance of my time.
    Ms. Carranza. Thank you very much, Congressman Loebsack.
    Mr. Loebsack. Thank you.
    Chairman Braley. And, with that, we have concluded our 
first panel. I would like to thank you, Deputy Administrator 
Carranza, for taking time from your busy schedule to join us 
and hope that we can have an ongoing conversation about some of 
the concerns that were raised today.
    Ms. Carranza. Yes. I look forward to supplying you with all 
of the reports that we have committed to. Thank you very much.
    Chairman Braley. Thank you.
    And then we will call the second panel up. We do have votes 
that are pending, but we are going to try to keep going and get 
as much in as we can before we adjourn for votes. So if the 
second panel could please come up?
    Ms. Carranza. Congressman Braley, I would love to stay 
because I had plans to do that, but our congressional 
legislative representative is going to be here as well as our 
Director of Disaster Office so that they can participate. I 
have a flight out to Sacramento, where we do have a processing 
center.
    Chairman Braley. Thank you.
    Ms. Carranza. Thank you.
    Chairman Braley. Thank you all for joining us. I would like 
to remind you of the earlier statement I made about the five-
minute rule. When you see the red light come on, if you can 
wrap up your presentation, we will make sure that your entire 
written statement is included in the record.
    I would like to begin by introducing our first panelist, 
someone I have known for some time. Mike Tully is President and 
CEO of Aerial Services, Inc. in Cedar Falls, Iowa. And we have 
on the board behind us a shot that shows some of the 
devastation near Cedar Falls Utility, which is also in Cedar 
Falls.
    Mike's company has been based in the heartland for 40 years 
and provides aerial photography, mapping, and other geographic 
information services. And, Mike, I know you are also located 
out in that North Sea area, where my brother lives. And so we 
are glad to have you here and look forward to your statement.

 PANEL II WITNESSES: MIKE TULLY, DAVID WILKE, DON BOWERS, MIKE 
                 MONNAHAN AND RANDY PILKINGTON

 STATEMENT OF MIKE TULLY, PRESIDENT AND CEO, AERIAL SERVICES, 
                     INC, CEDAR FALLS, IOWA

    Mr. Tully. Thank you, Chairman Braley, Ranking Member 
Davis, and Subcommittee members, for inviting me to testify. My 
name is Mike Tully. And I am the President and CEO of Aerial 
Services, located in Cedar Falls, Iowa. It is indeed an honor 
to be here to contribute to the Small Business Administration's 
activities in disaster assistance.
    Aerial Services is a professional services company that 
employs about 40 people and acquires aerial photography 
throughout this country and creates maps and other geospatial 
data. We provide mapping and other professional services for 
government and private businesses.
    Our business was severely impacted by the Midwest floods 
that occurred in June. In early June, the Cedar River crested 
and destroyed our office buildings. And they were, in fact, 
declared a total loss by our insurance company.
    Over the course of the following six weeks, we were able to 
restore some order of normalcy to the business in newly leased 
office space and are currently deciding how to replace our 
offices.
    Within one week following the disaster, we applied with the 
SBA for a loan covering physical damages and economic injury, 
totaling approximately $2.7 million.
    Less than two weeks later, the SBA called to inform us that 
they had processed our application and approved a loan for 
physical damage but had denied any award for economic injury. 
The net award totaled approximately $214,000 at 4 percent 
interest, to be repaid at a rate of $6,700 per month, or in 
about 33 months.
    No documentation was provided at that time to describe how 
the SBA calculated this amount. This seemed unreasonable and 
confounding considering our losses.
    In mid July, we filed an appeal because our claims of 
economic injury had been denied. We then filed a second appeal 
contesting the physical damage loan amount because we felt that 
the valuation was unacceptably low.
    Then, surprisingly, in late August, we were informed that a 
new loan amount had been approved for approximately $475,000, 
with much more favorable terms, 20 years at 4 percent interest. 
The loan included approximately $418,000 for physical damage 
but only $57,000 for economic injury. But, as with the first 
award, supporting documentation showing how these values were 
derived from our losses totaling in the millions of dollars was 
not included.
    Equally puzzling was the larger size of this loan compared 
to the first. Was the first award a mistake? Was the second, 
larger award influenced by our appeals to state and federal 
representatives? Why only $57,000 for economic injury when we 
documented far more?
    Then as recently as last Wednesday, we learned quite by 
accident that because Aerial Services has been displaced, we 
may be eligible for a substantially different and more 
favorable loan. Although this sounds promising, we are 
disappointed that this apparently important detail was not 
discovered earlier, thereby avoiding what will be more delay.
    My recommendations for the SBA include the following. 
Number one, include with all notices of loan amounts the 
supporting documentation showing how damage assessments were 
derived. This will help minimize many questions and delays.
    Second, allow the business, especially in disaster 
scenarios, the freedom to use the funds with fewer 
restrictions. Our SBA loan includes several requirements that 
the money be spent only in defined ways. Our biggest need is a 
new building. Restrictions on how the proceeds are spent can be 
burdensome and counterproductive to getting the business back 
up and thriving.
    Third, when economic injury is assessed, financial measures 
of injury other than disruptions to cash flow should be 
considered. It is our understanding that economic injury 
determinations are based only on disruptions of cash flow. But 
because our revenues are mostly derived from long-term 
projects, our injury shows up as lost or delayed billings that 
may not be evident for weeks or months following the disaster.
    Fourth, change the disaster loan application form so 
pertinent details about the business, like displacement, and 
anticipated losses can be flagged early on.
    Last, improve the responsiveness to small business concerns 
by facilitating a rapid transfer of important business 
documents and applications using modern methods, like e-mail 
and overnight mail. And, as the Deputy Administrator said, they 
now have a digital filing application system, which is good.
    This concludes my recommendations for the SBA. We are 
thankful that the SBA and FEMA were in Iowa. We were pleasantly 
surprised and, quite frankly, impressed that the SBA presented 
to us loan documents within two weeks. Considering the sheer 
number of other businesses that were impacted by this disaster, 
that was impressive.
    Although we hope to achieve a more favorable consideration 
from the SBA with continued communication and clarification, we 
are grateful for the assistance we have received and are 
hopeful that these recommendations will contribute to even 
better government and smarter business after the next disaster.
    Thank you, Mr. Chair. This concludes my remarks. I am open 
to questions at a later time.
    [The prepared statement of Mike Tully is included in the 
appendix at page 55.]

    Chairman Braley. Thank you, Mr. Tully.
    Our next witness is David Wilke. He is the owner of Wilke's 
Grocery Store in Elkader, Iowa. His store has been in business 
since 1867 and currently provides income for his family and 20 
employees that work for him.
    And, Mr. Wilke, the last time we spoke, we were standing in 
your grocery store. This is a photo of Elkader at the height of 
the flooding. And, if I am remembering this correctly, this is 
where your store is located, right across from the fire station 
and across from the bank.
    And, to put this in perspective, Elkader is the little 
Cedar Rapids in Iowa because they had almost the identical 
flood stage, almost the identical flood crest forecast, and 
both had epic flooding beyond their 500-year floodplain, 31 
feet in Elkader, 32 feet in Cedar Rapids. And you can see the 
Turkey River and the devastation it caused the entire downtown.
    So we really appreciate your ability to come with you. I 
know I have talked about your business many times and the 
impact that losing a grocery store, losing a convenience store, 
losing a bank has on a community the size of Elkader. And we 
look forward to your comments.

    STATEMENT OF DAVID WILKE, OWNER, WILKE'S GROCERY STORE, 
                         ELKANDER, IOWA

    Mr. Wilke. Thank you for the opportunity to be able to 
speak to you today. I do want you to look at that picture. Look 
at the top. Do you see the bypass go by right there? That is a 
lot of Elkader's problem right there is they built this bypass 
around town, and they didn't put enough spots for the water to 
get out.
    And it actually gets worse. If the picture had wrapped 
around to the right further, the bypass goes around down to the 
right. And it is actually worse further down to the right. So 
one of the first things that we really need is to open up that 
water, you know, just open it up more, put more culverts 
through or bridges through or whatever we need to, so when this 
type of thing happens again, it doesn't waste the whole town 
because of a bypass.
    When this had happened, there was a flood wall right 
alongside. If you look at that little building--well, actually, 
it is this building right here. If you recognize that one, it 
sits in front of our grocery store. There was a flood wall that 
went from there up to the left off the screen. And because of 
this, that has been seriously damaged. So that is going to need 
repair.
    And I was told by people from the fire department that this 
building is actually leaning toward the river and it is going 
to have to be replaced. And, like you had mentioned, we do have 
a grocery store in town. And we had followed the river levels. 
What is this river level going to end up being? We were told it 
was going to be 23-5. You know, we said that about three days 
in a row as a geological survey had said, ``Give us those 
numbers.'' And it is from their Web site. And it went to 30.9. 
Well, our business from where you just pointed, that is not 
even in the floodplain, but we ended up having substantial 
damage from it.
    So the next morning was Tuesday. We had to quickly assess 
the damage, which was difficult because everything was still 
four feet under water, as a family make a determination on our 
course of action.
    I appreciate you saying the length of time it takes for 
these loans, but we had to decide within hours, you know, are 
we going to walk away from this thing or are we going to make 
the commitment and the financial commitment and the personnel 
commitment that we are going to try and go back into this.
    The business, like you said, had been in our family since 
1867. Just 2 years after Abraham Lincoln's presidency, we 
started selling groceries. We are the only supermarket within 
15 miles. Our store is the only source of income for over 20 
people. It was our family's only income. For these reasons, we 
decided to open the doors and ask people to come in and help.
    What we did that first night was we basically went in with 
shovels, and we started shoveling out the water away from the 
front door because we knew that the next morning people were 
going to come in to try and help us and they weren't going to 
be able to do anything if we still had a bunch of water in. So 
we basically just went shovel after shovel, made a train of 
these shovels, trying to get the water basically out and 
filling the dumpster that we had out at the time.
    While the water was still up, I think we have got a picture 
here. This picture, this is our parking lot. Okay? When we came 
down the next morning, the water had already dropped about two 
feet by this time. And we had decided we were going to go back 
home. And I started making phone calls for people to come in 
and help.
    You know, we were going to have--we called the 
refrigeration people and electricians and all kinds of people 
to make sure we were on their list, the local lumber yard and 
stuff, to make sure that, you know, if we were going to do 
this, then we were going to have to do it really fast because 
we had to do it before we would get any mold in the building or 
any mildew or any flood damage and problems and stuff because 
we are in there trying to sell something that has to be sold 
out of a sanitary environment.
    So we didn't have the luxury of sitting around for days and 
days waiting to see if we were going to get a loan or do 
something. We had to decide right now what we were going to do.
    We knew that this financial commitment would be way beyond 
our resources but at the time believed FEMA or another agency 
had a problem that would help. During the time of our cleanup, 
I attended three meetings that explained the procedures for 
obtaining assistance. They were open to all flood victims but 
oriented only to residential needs.
    When a FEMA representative came to the store, he had his 
hand-held computer with him and started asking me questions. 
They were residential in nature. When I explained to him that 
it was our business that was damaged, not our home, he said 
``Sorry. My computer is set for housing questions.'' And he 
left. And then a little later, I got a rejection letter from 
them saying I didn't have enough damage to qualify.
    I went to a fourth meeting where FEMA had set up stations 
where flood victims could fill out forms. At the SBA station, I 
asked the representative, ``At these meetings I have attended, 
they keep referring to a four percent or an eight percent loan. 
How do I know which interest rate I will be getting?''
    His response was-``Would you qualify for a bank loan?''
    I said ``Yes.''
    ``Then you get the 8 percent loan.''
    With that, I stopped filling out the forms. That was the 
ultimate insult to me. I had been a responsible citizen, taking 
care of the needs of our employees and our family, always 
paying our bills and taxes on time. Because of that positive 
ethic, I am given an interest rate double that of someone who 
is not fiscally responsible, a rate that is higher than any of 
the local banks charged at the time.
    Before I had gone to that meeting, I had asked the bankers 
in town about it. And I could get a loan in the six range. So 
then I get this, you know, assistance at eight percent. I 
thought it was an insult.
    I have been asked many times by customers and vendors what 
assistance FEMA has given us, assuming we would have a package 
similar to the private residences. They were mostly shocked and 
some appalled that we are left out of the assistance.
    I was not personally expecting the government to cover all 
of our family's losses, but I was expecting to be treated 
equally compared to the residential assistance offered. I also 
was expecting an interest rate and a period of time to pay that 
would soften the blow of our huge loss.
    Perhaps our loss will not end with the flood of '08. 
Although we reopened the store on a smaller scale just ten days 
after the flood receded, much to the credit of our community 
and volunteers--
    [The prepared statement of David Wilke is included in the 
appendix at page 59.]

    Chairman Braley. Mr. Wilke, I am going to have to interrupt 
you.
    Mr. Wilke. Sure.
    Chairman Braley. Your entire statement will be part of the 
record and will be considered by the Subcommittee.
    Mr. Wilke. Okay.
    Chairman Braley. Thank you for your testimony.
    Our next witness is also a constituent of mine, Mr. Don 
Bowers, the owner and operator of Tapken's Convenience Plus in 
Anamosa.
    Anamosa sits along the Wapsipinicon River, one of the nine 
major inland rivers that had epic flooding in Iowa, in addition 
to the Mississippi, which is also in my district.
    Tapken's is a gasoline service station and groceries 
retailer and has been in operation since 2005. Prior to 
starting his company, Mr. Bower served as Chief Executive 
Officer of Go America in Cedar Rapids, Iowa.
    And, Mr. Bowers, the last time I was in Anamosa at the peak 
of the flooding along the Wapsi, I was in a boat riding over 
the wastewater treatment facility, which is located within eye 
distance of where your store is located. So we are very glad 
you took time from your busy schedule to come and share your 
story with us.

  STATEMENT OF DON BOWERS, OWNER, TAPKEN'S CONVENIENCE STORE, 
                         ANAMOSA, IOWA

    Mr. Bowers. Thank you, Congressman Braley and Committee 
members. I would like to thank you for the privilege of telling 
our story, which demonstrates to small towns in Iowa that 
Congress does care and voices can be heard.
    I was asked to explain basically what happened and what our 
response was, what the SBA or Congress can do to help. The 
flooding began in Anamosa, which is about 20 miles northeast of 
Cedar Rapids on Thursday, June 12th. And it became apparent 
fairly quickly that the rains weren't going to let up, the 
levies weren't going to be high enough.
    So there were about 100 volunteers assembled that day, 
raised the levy across the street from our store, added 
sandbags alongside our store, sandbag along the street that 
leaves the town, and also sandbagged the sewage treatment plant 
area.
    We left that night thinking our business had been secured. 
And we slept pretty well. And we were surprised at what we saw 
in the morning.
    The night brought more rain on already saturated land and 
overflowing riverbanks. A five-inch rain fell that night, which 
softened the levies that were raised.
    By the morning of Friday, the 13th, there was two and a 
half feet of water surrounding our store. The Wapsi riverbank 
basically destroyed the city sewage treatment plant.
    Over the next couple of days, my wife and I watched from 
about a half a block away. We could see the water recede from 
our store. And as we observed the damage the first day we got 
in the store, it was pretty shocking. Basically it would be 
like if you threw everything in a blender and it just got 
stirred up and the blender was shut off and everything and just 
dropped where it fell amidst all the mud and the muck.
    On Monday, four days after the flood, we were in the store 
with squeegees, much as you mentioned, just pushing everything 
out of the store we could get out, an inch or two of muddy 
water. It was key to get in there while you still had some 
water to work with, enabling it to be moved out easier.
    We moved things around because we made calls that day. We 
had big dumpsters coming. We needed to be able to get into the 
store. So we kind of just moved things out of the road so we 
could maneuver.
    On Tuesday, day 5, we had over 40 volunteers as we began to 
throw away over $60,000 worth of our store's inventory, which 
is basically everything in the store.
    We moved refrigeration equipment outside and disassembled 
all of the shelving, moved it out as well, and began power 
washing the floors, knocking holes in the walls so we could get 
air circulating. That is critical in preventing additional mold 
from developing.
    The following morning we had electricity returned to the 
store with just the ceiling lights being able to be turned on 
so we could see what we were doing.
    The next few days we began cutting the walls to a height of 
four feet, removing all of the insulation and drywall, 
scrubbing and bleaching the studs. When you say, ``scrubbing 
walls,'' it is not just scrubbing walls. It is scrubbing the 
studs with brushes and sponges.
    We took all of the refrigeration equipment outside and 
hosed it with clear water while it was still wet with mud. If 
you let that dry on there, it is just no good.
    We did find later that by moving the refrigeration 
equipment, washing it down with clear water, a few days later 
after it air-dried, we would start it up. And most of the 
equipment worked. Since then we have had to replace a couple of 
timers on the defrosters. That is about it. Once we found it 
worked, then we would clean and sanitize it.
    Skipping to the end, after a long six weeks of grueling off 
of back-breaking work, my wife and I would go home too tired to 
do anything but shower and fall into bed.
    I do believe what happened here could be replicated almost 
anywhere. We had a lot of volunteers, but every community, 
every business has people around them that come alongside them 
and can help. The key is to get in quickly. I believe it can 
help.
    We basically are back in full operation. I have an original 
mortgage. The second mortgage if we get that through the SBA is 
difficult. What needs to happen in our case is the merging of 
the two mortgages together. That is really kind of critical in 
our future success.
    The business is up and running. We are running about 20 
percent over what we did a year ago. Now we have got to figure 
out how to pay for it all.
    To simply restate, we went through a natural disaster, came 
out stronger. We are rebuilt without governmental help. We now 
need financial help on the back side. We saved money in this 
process and are even closer to the community we serve. We are 
not seeking a handout or a bailout, just a lower interest rate 
to help a good business remain strong.
    Thank you.
    Chairman Braley. Thank you, Mr. Bowers.
    Unfortunately, one of the realities of our life here in 
Washington is that there are things that happen beyond our 
control. One of those things is occurring right now. We have 
votes on the floor. It is a series of three votes. The first 
vote is a 15-minute vote. And we are probably about five 
minutes from that time expiring. There will be two five-minute 
votes after that.
    So we are going to adjourn the hearing. And we will make 
every effort to return as quickly as votes end so that we can 
finish up with the testimony of our last two witnesses and then 
proceed to questions.
    So I appreciate your continued indulgence. And, with that, 
we are adjourned.
    [Brief recess.]
    Chairman Braley. Ladies and gentlemen, I think we are going 
to resume the hearing. Mr. Loebsack is on his way back and will 
be introducing our next witness, but, Mr. Bowers, because of 
some confusion about our bizarre bell system here, I know you 
intentionally cut some of your testimony short. So what I would 
like to do is give you another two minutes to finish up your 
statement because we are all very interested in what you have 
to say.
    Mr. Bowers. Thank you very much.
    By the end of the second week, the store was a shell. The 
walls and studs had been scrubbed, bleached, and sealed with a 
spray sealant and ready for the next step. All this work had 
been done with volunteers in 14-hour days. Those of you who 
have my statement, you will see pictures in there that kind of 
show a lot of this.
    I can't overstate the importance of the caring community. 
Our first estimate to do the work was almost a quarter of a 
million dollars if we hired it all out, not counting the 
inventory already lost. I knew the business simply couldn't 
support that.
    It was at this point after the cleanup that the volunteer 
work began to diminish and the need for expert workmen 
increased. My customer base included a plumber, an electrician, 
furnace man, drywall installers, and contractors.
    And as they came forward and donated their time, either 
free or very low-cost, it is when I began to understand what 
the word ``community'' truly meant. We had 4 other men in the 
community, ranging in ages from my age up to 83 years old, that 
came in virtually every day. We nicknamed them the Fantastic 
Four. Three of them were retired, and one was a gentleman who 
took most of his vacation time, about three weeks' worth, to 
work there every day.
    Others in the community would stop by and offer words of 
encouragement that lifted our spirits. It is amazing how little 
it takes to make you feel like it does matter. An elderly lady 
donated $10 to us. We used to pump her gas when we were open. 
The man who mowed our lawn gave us $100. We used that money to 
buy food for the volunteers as they were there working.
    As I mentioned earlier, it was a long six weeks, often 
grueling and back-breaking work. My wife and I would fall into 
bed at night after getting home. Exactly six weeks after the 
floor, we reopened. And, as also mentioned, we were back to 
normal at that point. And now we are running almost 20 percent 
ahead of last year.
    The people are incredible. I am proud to be a part of that 
community. But I do believe this can be replicated almost 
anywhere. Getting into the store quickly is critical or even in 
your home. It is critical to prevent mold, which prevents the 
need of respirators and air purifiers, which slow the progress.
    Another key to it all, getting there quickly, is you get in 
there while people are still thinking about you. And it brings 
hope and enthusiasm. And it increases more volunteerism. If you 
sit for a month before you do anything, all of that disappears.
    Living in the City of Cedar Rapids and having a mother-in-
law and a niece who both lost their homes there, I believe the 
difference is the speed with which we responded. Weeks after 
the floods, many of them haven't done anything at all except 
being told they have to make sure they keep their lawns mowed 
and get ready to remove the snow from their sidewalks this 
winter when they have no house.
    Part of the confusion is just that different things are 
being told from the different governmental entities, which 
causes despair and depression. I do think one agency needs to 
be able to speak for all of them, I mean, the need to get a 
consistent answer.
    As an example, the City of Anamosa caught the cross-hairs 
of the DNR and the SBA and what financially can be done with 
the sewage treatment plant. They have gone forward with what 
they needed to do to get the sewage treatment plant back up, 
and now they are getting different information from the two 
entities. And they are afraid they are going to have to pass on 
the cost of all of this to the residents of the city.
    There are real-world limitations to what a city the size of 
Anamosa and its residents can afford. And somewhere along the 
lines, common sense needs to prevail.
    As I mentioned before, as for us, we are back in business, 
running 20 percent ahead of last year. We are strong and doing 
well. We are not seeking a handout or a bailout, but in our 
particular case, it is critical that we be able to find a way 
to merge the original mortgage with the mortgage to improve or 
rebuild into one. It is difficult to handle the two separate 
mortgages.
    I guess that is the end of my statement. Thank you very 
much.
    [The prepared statement of Don Bowers is included in the 
appendix at page 63.]

    Chairman Braley. Thank you.
    And before we go to our next witness, who will be 
introduced by his congressman, I just want to point out all of 
the folks from Iowa who are here today that I am extremely 
proud of the fact that this Committee would not function 
without the valuable daily assistance we get from our staff 
counsel. And the Small Business Committee is very fortunate 
that both the minority staff counsel, Mr. Pineles, and the 
majority staff counsel for the Democratic Party are both 
graduates of the University of Iowa College of Law, like 
myself. And we are very proud of that on the Committee.
    So, with that, I will yield to Congressman Loebsack to 
introduce the next witness.
    Mr. Loebsack. Thank you, Mr. Chairman.
    I am, in fact, very proud today to introduce Mike Monnahan. 
He is the President of the Blue Strawberry Coffee Company. 
Since the Blue Strawberry opened in 2003, it really has been a 
fixture in downtown Cedar Rapids. In fact, I spend a heck of a 
lot of time there myself, as Mike knows.
    It is a great place in the heart of downtown. It is great. 
Not only do they have wonderful paninis and other great food, 
but it is a really wonderful place to have informal meetings. 
And it is a great place to go at lunch just to see people and 
talk to people. It is an institution.
    Mike built the Blue Strawberry from the ground up. And in 
this sense, he is the quintessential small business owner. He 
put untold amounts of time and dedication of the business, even 
opening a location in the Cedar Rapids Airport.
    And one day when I was heading back to Washington, I 
stopped over at that particular location to get Mike's cell 
phone number in the midst of all of this so that I could give 
them a call. And his employee probably wasn't supposed to give 
me his cell phone number, but she did. And so I was able to 
check on Mike and see how he was doing and how the business was 
after the floods.
    Unfortunately, his downtown location was and is in the very 
heart of the Cedar Rapids business district, which was 
inundated by the floods this past June. I don't have any photos 
of the downtown, but if you were even a casual observer at that 
time, Cedar Rapids was on CNN, MSNBC, FOX, all of those 
networks all of the time. So I am sure you have a lot of those 
images just sort of seared into your memory.
    The downtown area is still largely in the cleanup and 
assessment process, but I know that with small business owners 
such as Mike at the helm, Cedar Rapids downtown can and, in 
fact, will rebuild and thrive once again if given the proper 
resources and support.
    So, Mike, it really is an honor to have you before us 
today. And I really look forward to hearing from you.

  STATEMENT OF MIKE MONNAHAN, PRESIDENT, THE BLUE STRAWBERRY 
               COFFEE COMPANY, CEDAR RAPIDS, IOWA

    Mr. Monnahan. Thank you.
    The Blue Strawberry Coffee Company was established in 2003 
as what has been referred to as a ground-breaking establishment 
preceding the revitalization of downtown Cedar Rapids. Over the 
last five years, it has become an icon in the downtown district 
and a must-stop for visiting politicians, performers, and 
tourists alike. The local business community has embraced it 
and voted it the Corridor's best coffee house for business 
meetings. As a result of the Blue Strawberry's success, other 
establishments have ventured into the downtown district.
    On June 11th, 2008, the City of Cedar Rapids was devastated 
by an unprecedented flood, magnanimous in scope. I was cynical 
at first, assuming that the water would crest far short of 118 
2nd Street and believed I would be back in business brewing 
coffee and making lattes within a few days. After all, we were 
not in the so-called 500-year floodplain.
    I soon realized that the situation was going to be much 
more serious than I had imagined. Now, more than three months 
later, we are still out of business and awaiting the renovation 
of the building we used to occupy.
    When I fully realized the extent of the damage and the 
amount of time and money it would take to rebuild, I began to 
weigh the options. Bankruptcy was an obvious choice. However, I 
ruled that out rather quickly given the fact that the Blue 
Strawberry had been a vital part of the downtown community and 
its presence was an important part of the rebuilding process. 
The business had been profitable, and I was not willing to 
throw five years of hard work down the drain.
    Consequently, I made the decision to look seriously at 
rebuilding the Blue Strawberry. In doing so, I had to look long 
and hard at the financial position of the company.
    Not only had I lost nearly all of the equipment, inventory, 
furniture and fixtures, and improvements associated with the 
flooded location, I also lost all the equipment and furniture 
from another recently closed shop that had been stored at the 
downtown site. I was now faced with two outstanding bank loans, 
no collateral, and no means to make payments on those loans. In 
addition, there were other outstanding payables to vendors.
    Because of this significant existing debt, I was reluctant 
to even attempt to borrow additional money. I was encouraged by 
my banker and others to at least apply for an SBA loan amid 
rumors of possible grants and/or forgivable loans for those who 
participated. With this in mind, I submitted my paperwork.
    The individual assigned to verify and asses the damage was 
in contact with me immediately and made his on-site visit 
shortly thereafter. I received word approximately two weeks 
later that my loan was denied.
    After a brief discussion, the loan officer re-evaluated the 
application and approved a loan for around $107,000 at 4 
percent over a period of 19 years. This amount was about 
$50,000 less than what I had requested based on the damage 
assessor's conclusions.
    Unfortunately, when the paperwork arrived, there was an 
error in the listing of officers of the company. I had noted 
the change on an addendum filed with the application, but it 
had been overlooked. As a result, the paperwork had to be 
resubmitted.
    I received my final loan package about two weeks ago. The 
amount of the loan was reduced to $102,000 because of a $20,000 
grant and forgivable loan I had received from the city's 
recovery fund.
    Throughout the process, the individuals at the SBA that I 
dealt with at all levels were helpful and seemed eager to make 
things happen as quickly as possible. That is not the case with 
many other applicants that I have talked to.
    Some are still awaiting word on loans submitted in July. 
Others are puzzled as to why they have been turned down. And 
many who have been approved can't understand why the SBA 
interest rates are higher than those available at local banks.
    The frustration level is high. I hear again and again that 
we don't need more debt, we need grants and forgivable loans. 
People are upset with the lack of attention the disaster is 
receiving from the government.
    The situation is serious. As one businessman put it, ``Just 
as a beach is many grains of sand, a local economy is many 
small businesses. Wash away the sand, and there is no beach.'' 
I think the analogy is clear.
    Thank you.
    [The prepared statement of Mike Monnahan is included in the 
appendix at page 73.]

    Chairman Braley. Thank you, Mr. Monnahan.
    Our next witness is someone I first met on a junior high 
basketball court in North English, Iowa in 1970. He has done a 
great job as the Executive Director of Business and Community 
Services at the University of Northern Iowa.
    It is my pleasure to welcome Randy Pilkington to the 
Committee. His office has provided integrated approaches to 
meeting the needs of businesses, entrepreneurs, and communities 
throughout the State of Iowa in his special capacity assisting 
small businesses all over the state through the University of 
Northern Iowa.
    Welcome, Randy.

STATEMENT OF RANDY PILKINGTON, EXECUTIVE DIRECTOR, BUSINESS AND 
      COMMUNITY SERVICES, THE UNIVERSITY OF NORTHERN IOWA

    Mr. Pilkington. Thank you, Chairman Braley and Ranking 
Member Davis, for inviting me here today to talk to you about 
some of the disaster recovery.
    My role at the University of Northern Iowa is in business 
and community services. That is an umbrella group for all of 
our economic development, small business assistance, and tech 
transfer programs.
    After the floods and the tornado in Parkersburg, we 
immediately started to work with some of our business and 
community services programs, dedicating literally hundreds, if 
not thousands, of hours over the summer, over the last four 
months.
    Through on-site meetings with businesses, through on-on-one 
counseling, and through at least 1,000 phone calls, we estimate 
that 1,200 small businesses were impacted just in our part of 
northeast Iowa. And that is just in the First District. Really, 
it's one county around Blackhawk, so 1,200 small businesses 
that were impacted during that time.
    The focus of my presentation really relates to those 
companies, even though I think by the presentations today it is 
reflective of what happened throughout all of eastern Iowa.
    In the short-term recovery process, there were critical 
financial needs right away within the first 30 days after the 
floods receded. There were mortgage payments that were still 
due or at least payments that were still due. There was payroll 
to meet. There were utility bills that were still due for our 
small businesses. And I think you captured that.
    Some of the smallest companies probably suffered the most. 
And they had layoffs. They had delinquencies in their payments 
to their commercial loans.
    And keep in mind many of these individuals also suffered 
personally. They had floods or lost their home in a tornado. So 
the business people not only lost their businesses, but they 
were dealing with these disasters in their personal life as 
well.
    Longer-term, the reopening of many of those businesses is 
still in limbo. Unfortunately, many of our small businesses, 
especially those smallest businesses, are waiting for some type 
of word from the state or from Congress on what help can come 
because the help that has been offered so far is unacceptable 
to them and won't put them back into business.
    Those businesses that went back into business right away 
had the wherewithal to do so because they had cash flow or they 
were larger or had assets. So they put together an alternative 
plan quickly, as Mr. Tully did, to find an alternative location 
to quickly get back into processing or get back into business 
of whatever their business might be. But, really, there were 
very few companies that did that. The smaller firms, those with 
fewer than ten employees, we estimate that 50 percent are still 
not back in business in our area alone.
    So what worked well? Well, first of all, there was very 
good coordination and communication between federal, state, and 
local leadership--that worked very well--good communication 
between the SBA, our Small Business Development Centers, and 
our local economic developers. So that communication line was 
open and frequently happened.
    At the risk of sounding like I am tooting our own horn, we 
had a program that worked very well at the University of 
Northern Iowa called MyEntreNet. MyEntreNet is an 
entrepreneurship delivery system that puts entrepreneurs in 
touch with the information they need, the capital they need, 
and the resources they need in a quick basis.
    We touched about 700 out of those 1,200 businesses within 
the first 30 days after the disaster, learning more about what 
their needs were. Because of MyEntreNet, we were able to deal 
with these entrepreneurs faster and to find out what services 
and products really were working and what improvements were 
needed.
    We had a very good working experience with the SBA staff. 
The SBA staff were on the ground after the tornado and after 
the floods almost immediately working with businesses. 
Unfortunately, the products they had to offer were not what the 
businesses wanted. They found themselves standing in front of 
angry crowds of businesses, offering a debt tool, a debt 
structure, a loan, when, in fact, what these companies needed 
was something completely different. Therefore, it was quite the 
struggle.
    And I know my focus is to be on SBA, but I just want to say 
a couple of sentences about FEMA. While the FEMA staff were 
good people, even in the first disaster in Parkersburg, within 
the first week, they were transferred out. They became a 
transient group of individuals working with these communities 
and businesses, led to miscommunication, misinformation, missed 
meetings, and ultimately were told to call the 800 number, very 
angry small businesses as we put this all together and look at 
the summary, quite a bit different in the attitude toward the 
SBA. They were very helpful. It was just the product that was 
not sufficient.
    In order to meet the needs locally, a Cedar Falls banker 
went ahead and created a 30-year term on a 2 and a half percent 
loan for $25,000, very patient capital. So here we had a 
private banker taking the risks that we really thought should 
have been taken by the SBA.
    So what is needed as we move forward? Well, first of all, 
80 percent of the small businesses in our disaster-declared 
counties in Iowa have fewer than ten employees. And they 
muddied through the summer. And here are in summary the three 
things that they asked for.
    Number one is non-collateralized, forgivable capital. This 
doesn't have to be a large amount of money, but they need it 
immediately. They need it right after the disaster occurs, in 
that $25,000 to $30,000 range.
    They need one-on-one time to talk to business professionals 
with that technical assistance that they need that can put them 
back in business and lead them to the resources they need. They 
get really tired of getting bounced from person to person.
    And they need acknowledgement that their small business is 
as valued as those larger companies, many of which have already 
received state or local incentives and are back in business.
    Those are the three items if we summarize all the 700 
businesses that we have talked to. That is a little simplified, 
but I think if you came up with that first one, with that 
forgivable, non-collateralized capital, you could keep a lot of 
these small businesses in business.
    Most of all, I think we need to change our focus and not 
expect all businesses to reopen. We cannot expect them all to 
reopen, but, at the same time, we ought to offer them an 
opportunity to reposition themselves in an entrepreneurial 
market and with economic assistance of some type.
    Thank you.
    [The prepared statement of Randy Pilkington is included in 
the appendix at page 75.]

    Chairman Braley. Thank you.
    Mr. Tully, I am going to start my questions with you. One 
of the things that we hear from a lot of people who were caught 
up in this disaster for the first time in their lives is that 
the initial response from FEMA, from SBA, and from other 
federal agencies created the appearance that there was a much 
greater understanding on the part of these federal agencies of 
the need to get out into the field, have resources available at 
the point of greatest impact and to start the processing of 
information that hopefully leads to eventual access to federal 
resources.
    But what my staff and I have heard repeatedly is after that 
initial honeymoon period, the feel-good period, that a lot of 
people felt like they were getting bogged down in the process, 
that the ability to communicate with the agency in question was 
sometimes compromised by a lack of access to online resources 
because they have been destroyed in the flood or the tornado or 
an inability to get through to the person who was having 
decision-making authority over their own particular 
application.
    I was hoping you could share with us from your perspective 
and from talking to other affected business owners in your 
community what you are hearing is the most needed type of 
assistance that is not currently being provided.
    Mr. Tully. I think your observations are correct. There was 
an initial honeymoon. Their communication with the press was 
very good. We knew what we needed to do, having never gone 
through it before up front, which was really good.
    Once you get dealing with the SBA, things get a little 
slower. And by nature, maybe it has to get that way because you 
are dealing with a lot of technical financial information. And 
it takes time and effort to get all of that paperwork in order 
and understood.
    By and large, the number one need is cash. We have got a 
lot of pressing need for cash resources right today. And that 
is probably the most pressing need right out of the gate.
    Chairman Braley. Thank you.
    Mr. Wilke, we had an opportunity to discuss some of the 
struggles you were going through as you were coming to the 
decision in the immediate aftermath of the flooding about 
whether to go forward with your business. And I had had the 
exact same conversation with a grocery store owner in Greene, 
Iowa the day before I got to Elkader.
    One of the things that I am interested in hearing from you 
is how do you juggle the incredible burden of dealing with the 
initial disaster response inside your store, the displacement 
of some of your employees and your own family members from the 
flooding event in the community, the lack of access for 
suppliers to get into your store when they don't have any place 
to put their supplies once they get there, and creditors who 
are demanding payment for the goods and services you provide 
without any source of capital to reimburse them, and how that 
makes this process such a burden on individuals who are going 
through it at a time when it's one of the biggest crises they 
have dealt with in their lives.
    Mr. Wilke. I think you just have to take one step at a 
time. You know, if you sat and thought about the whole thing 
all at once, you know, it would be a very unfortunate mental 
situation.
    But I think what we did is we just saw the immediacy of 
what had to get done. And for the volunteers that came in, the 
first days were actually the easiest days because it was real 
obvious what was muddy and what was wet and things like that, 
the things that had to get taken care of and get taken out.
    The deal about having to make a commitment, I personally 
would not go bankrupt. It would just be against my moral 
conviction to do that. I thought if I have gone in good faith 
to people, I owe them for what I am getting from them. And I 
think under the circumstances, they have to realize that maybe 
it would take me a little bit longer to pay for some of those 
things.
    I only had one supplier that I had had a verbal commitment 
from the president that they were going to not run some ACHs 
through and they ran through anyway. And I called them. You 
know, I called the banker that said, ``Hey, this had happened. 
Was it supposed to?'' And they took care of it. Between that 
supplier and the banker, they postponed overdrawing us.
    Those are things that, you know, come up. If you are 
working on one deal and here is the next one and here is the 
next one and right on down the line, I guess in my talk, that 
is why I had expressed that I really thought that there was 
going to be some assistance.
    You know, we heard all of these FEMA stories about the 
residences getting a water heater, getting a furnace, or 
getting this or getting that. I honestly thought there was 
going to be something to help us tide over some of this 
immediate cash flow disaster.
    I guess I was very disappointed for them to come and say, 
``Oh, you qualify for an eight percent loan.'' No thank you.
    Chairman Braley. One of the things I mentioned in my 
opening statement was the fact that Congressman King and I had 
introduced the Small Business Owner Disaster Relief Act to 
amend the Stafford Act to address that shortage of cash in the 
form that we already make available to other people that are 
affected by disasters but currently don't provide to small 
business owners.
    The purpose of this bill is to say, taking the same amount 
of limits that currently apply to small business disaster 
loans, making available an amount of cash to qualified 
applicants who can use it for the type of needs that you. And 
Mr. Tully, Mr. Bowers, Mr. Monnahan have been talking about how 
do you think that would affect business owners in the same 
position you found yourself in having to make a decision about 
going forward with your business or shutting it down?
    Mr. Wilke. It would definitely be a help. I mean, it just 
absolutely would because you have got the situation where you 
have structured your debt based on what your sales are going to 
be.
    And, all of a sudden, one day you have got no sales. You 
have still got your payroll expenses. You have got to pay for 
this product that has now gone out in the dumpsters, you know.
    And somehow you have got to make a decision right away, 
``Am I going to be able to make a go of this business and make 
a living for my family doing it or are we going to have to cut 
our losses and leave?''
    And it would be one thing that would help you make a 
decision that, ``Yes, I am going to keep doing this and earn my 
chance to pay taxes or am I going to be a financial burden to 
the system because, you know, 'Okay. No. I think I will take 
food stamps instead'?''
    Chairman Braley. Thank you.
    Mr. Bowers, a lot of people probably don't have a real 
understanding of what communities in Iowa are like and how they 
depend upon local small businesses as the lifeblood to provide 
them with essential goods and services, but you own a 
convenience store. And for some communities in my district, the 
convenience store is the only place where a resident can buy 
any type of groceries, the only place where they can buy 
gasoline to fuel their vehicles.
    And, in fact, a good example of that is New Hartford, Iowa, 
which not only was hit with the tornado, the most powerful 
tornado in the United States this year, but less than ten days 
after the tornado went through, the entire town had to be 
evacuated because of flooding. And there were stories of 
homeowners and business owners who had their businesses 
destroyed, moved into town, and then had it flooded out.
    So one of the things I would like you to share with the 
panel is how critical providing immediate disaster response is 
not just to the business owner but to the people in that 
community, many of whom are making decisions on whether they 
are going to stay in a community and rebuild or move away to 
some other community and how essential that is to the tax base 
of those devastated communities and to school enrollment and so 
many things that add to the quality of life of a city like 
Anamosa.
    Mr. Bowers. Well, as I mentioned in my speech or 
presentation, just the number of volunteers that come forward. 
And, as he mentioned as well, Mr. Wilke, those early days 
trying to decide what you are going to do, most of us kind of 
get into an automatic mode and you just start doing it without 
a lot of thought about how it is going to work, how you are 
going to pay for it. You just start cleaning and start the 
process. And all of the volunteers come forward and do all of 
this.
    The volunteers for the most part assume that you are 
getting aid somewhere. They assume that the government is going 
to come in and help. Over and over again I had the questions 
about ``So if FEMA helping you take care of this? What is FEMA 
doing?''
    ``Well, FEMA isn't really designed for businesses.''
    ``So where are you getting money? Is SBA helping?''
    ``Well, at this point we really don't know how it is all 
going to work out. A lot of questions remain. You don't want to 
jump through hoops too soon because what is going to come 
later. Is there going to be--there are just so many unknowns.'' 
And that is what would help a business, is clearing those 
things up in the early stages so you know what is going to be 
available, what do you have to do, how much is it going to be, 
what can happen to make it work.
    The community, the people in the community I don't know, 
really, how they would respond if I closed my doors now after 
they spent six weeks working there.
    The reason my sales are back up to what they are is because 
the only other convenience store in town is a KC's. And here 
you don't know what they are, but they are a local Iowa-based 
convenience store chain, I think around 1,200 stores. In small 
town Iowa, a lot of people want to do business with the local.
    This store has been there three generations. And although 
we are not the owner for three generations, just a year and a 
half or so, they want to see us succeed. And that is where the 
help comes from. You develop relationships. We are the only 
convenience store around that has tables off in an area for 
people to come in and have coffee.
    It is the local coffee clubbers that I give the cup of 
coffee to for a quarter. You know, kind of begrudgingly, if 
they are getting that quarter coffee, that really saved us. It 
kept us from spending a quarter of a million dollars, which 
there is no way we could have done that.
    I guess in the very early days, you are thinking a quarter 
of a million dollars and how is this going to work. But, again, 
you just go through it. And everybody comes alongside you from 
the community.
    I want to emphasize that I don't think Anamosa is unique to 
that. I think in Cedar Rapids or any other city, you have your 
unique customers surrounding that store. In a small business, 
the small business owner develops those relationships. I don't 
know if that is so much the case in the bigger chains, but in 
the small business owner, where you are the owner/operator, you 
develop those relationships with those locals and you become a 
part of their everyday life.
    You know their kids. You know what is going on in their 
life. They know what is going on in your life. And that is 
really what community is. And that is what needs to be saved.
    What happens in those early days I think is crucial in 
helping make a determination. In our case, it was primarily we 
put a couple of major suppliers with their agreement, ACH 
accounts. They agreed to not do anything for a while. That 
allowed us the cash to keep moving forward to get things done 
that needed to be done. But how much easier would it have been 
had we had some assurances along the line from SBDC consultants 
that can be there to help when you need it.
    I guess that is kind of where we are now. We are at the 
point now we have got to figure out how to pay for all of this. 
We have got to figure out how to put it all together 
financially.
    It is a big deal in a small community. It really is. I 
mean, the people of Anamosa, this is big news. Cedar Rapids TV 
station met us at the airport, 5:00 a.m. yesterday morning and 
did their live remote there for the 5:00 news, did a segment 
for later in the day, followed us, videotaping our bag as we 
are heading down to get on the airplane. It is a big deal to 
the smaller communities.
    Chairman Braley. Well, it sounds from all of your testimony 
like there is an enormous multiplier effect because so many of 
these core anchor businesses in a small community are viewed as 
hope by the people who are going through their own crises in 
their personal lives when they lose their home and they wonder 
whether they are going to stay in a community.
    But if they see that convenience store or that grocery 
store or that bank reopen and say, ``We are staying here for 
the long haul,'' then that money that gets to them and provides 
that hope early on in a disaster helps rebuild the spirit of a 
community and in some cases may determine whether a community 
thrives or does.
    Mr. Monnahan, you have had the experience, I am sure, that 
not only are you dealing with your own business struggles from 
the devastating flooding in Cedar Rapids, but your client base 
in the downtown area includes many other small businesses, 
people who work and live in the downtown area.
    So I imagine you hear a lot from people in addition to just 
the specific needs of your own business in responding to this 
disaster. And if you could share with us how that has affected 
some of the business decisions you have made and how that 
interacts with the funding issues we have been talking about 
with SBA?
    Mr. Monnahan. Sure. Well, I have talked with the people 
that are involved in the reconstruction effort in the building. 
They have volunteered to me that hands-down, the first question 
that they are asked when they are approached by anybody on the 
street is, ``Is the Blue Strawberry coming back?'' And that 
speaks volumes.
    And recently a lot of the larger companies have moved into 
the second floor and above offices in the downtown area. And I 
just spoke with some last week, and they are lost. There are no 
services downtown right now. So it is almost like a morgue down 
there at times. And it used to be such a vibrant environment 
and atmosphere.
    You try not to let the emotions and the ego enter into your 
business decision to go back into business, but obviously there 
is a lot of pride in what everyone here has done as a small 
business person and the end result. It does play into your 
decision. And when you have all of these professional people 
and businesses in your downtown location really encouraging you 
to come back, it makes a difference.
    And the financial thing, I have at this point put my SBA 
loan on hold. I have decided not to take on additional debt. I 
am going to reopen, but it is going to be in a different form 
with additional investors unless something comes along in the 
line of the forgivable loan or grant.
    Chairman Braley. Thank you.
    Mr. Pilkington, one of the things you mentioned in terms of 
your recommendations was the need for non-collateralized, 
forgivable capital. I assume that that is similar to what we 
are talking about with the disaster assistance bill that I 
mentioned earlier in my testimony.
    Mr. Pilkington. Yes. Congressman Braley, I commend you and 
Congressman King because you are right on with what is needed 
for these small businesses. If you can buy time for these small 
businesses with that $28,000, you are giving them some means to 
move ahead and have some hope of reopening.
    One thing we haven't really talked about--and I don't know 
how you work this in, but there are a lot of small businesses 
that are suffering that didn't go through the flood. But they 
are suffering because so much of the other businesses in the 
community have been damaged. So the ripple of this is much more 
than just the numbers we have kind of told you, 1,200 here, 
1,300 here. It is much more substantial than that.
    And so we need to get these small businesses back and 
operating. And the forgivable loan, the grant, whatever we want 
to call it, is critical. We don't want to call it a grant 
because then it is probably taxable. But if it is a forgivable 
loan, it is a little better for their structure.
    Chairman Braley. Somewhat about what we are talking about 
doing with Wall Street this week.
    Mr. Pilkington. Yes, yes.
    Chairman Braley. I think there are a lot of us in this room 
who think that the people on Main Street deserve just as much 
attention. The collateral and combined impact of the small 
businesses in this state and this country who were impacted by 
a variety of disasters has an enormous ripple throughout our 
economy. And I think that it is time that we start looking at 
some of the critical needs that come up over and over every 
time there is a disaster of this magnitude because this isn't 
the first time we have heard about the need for available cash.
    And, with that, I will turn it over to the Ranking Member.
    Mr. Davis. Thank you, Mr. Chairman. Thanks, everyone, for 
their testimony. I know you have been through some amazing 
things this year. Thank you for your fortitude to continue on, 
to continue down the line that the Chairman was just talking 
about.
    If you look at the things we are talking about on Capitol 
Hill this week, some of those are somewhat manmade. The things 
that you went through this year are natural disasters and no 
fault of your own. And we understand that.
    I have been a small business owner myself for about 20 
years. So I know what it is and the impact that it has on the 
local community.
    You have made decisions in your own businesses over time. I 
know there is a place for government to come in and help. But I 
am just going to ask all of you, did you have flood insurance 
in your business? And did flood insurance work in your 
businesses? We will just go down the line.
    Mr. Tully. Yes. We did have flood insurance, and it did 
work well for us.
    Mr. Davis. What role did it play? And did it come in more 
quickly than the SBA? And what role did SBA then take on to 
help fill the gap that the flood insurance didn't cover? Help 
me understand that. We will just talk that through as we go 
down the line.
    Mr. Tully. Yes. The flood insurance, we actually were paid, 
if I remember right, about a month after the flood. Our flood 
insurance made a payment to us.
    And then, of course, the SBA loan documents are derived so 
that any proceeds you get from insurance are deducted from the 
loan amount. So you have to wait and make a lot of decisions 
because you don't know what a decision today with the SBA is 
going to affect tomorrow. So that is kind of a complication.
    Mr. Davis. Okay.
    Mr. Wilke. We did not have any flood insurance. When we 
asked about it years ago, they said that we were not in the 
floodplain. At the time I was only hearing bad comments about 
it. You know, it was people thought that they had been paying 
this premium along and they had a problem. And when they end up 
getting their settlement, their settlement wasn't anything what 
they were expecting it to be.
    I know from the current flood, I heard the story from a 
business in Elkader that they had flood insurance. They had to 
get it because of their loan at the bank. And when they went to 
get the amount, they were only getting paid for the physical 
damage to the building. Well, the problem that they had was 
most of their value was in their inventory and in their tools 
and different things they had.
    So they were in a world of hurt thinking that they were 
going to get some money back to compensate for trying to get 
them back in business. And all they were going to pay for was 
sheetrock.
    Mr. Davis. Following down that line, is there something 
that needs to be done to fix that program to make that better 
so it covers reinventories?
    Mr. Wilke. What I ended up this time after the flood, I did 
get some insurance. We have our local insurance agent, you 
know, brought choices to me. And we went over what the 
different possibilities were. And I made sure after hearing 
that guy's story that my policy includes a certain dollar 
amount for content and a certain amount for the business.
    The problem is that it won't be enough for me to go back 
into business. It would be enough to help to dampen the damage, 
but I can't take that payment and be up in business again. And 
if you went to a value that high, they have to split it down. 
They can only go up to a certain dollar amount or you have got 
to get an additional policy. So then you are paying on two 
different policies.
    And I just said, ``Okay. I will just go the maximum that I 
can for the one policy. And I will have to be my self-insurance 
again.'' And that is really going to be a problem this time 
because before I owned everything.
    Everything that went out into the dumpsters and everything, 
that was something I have already paid for. Okay? Now I have 
got a loan to put that stuff back in. So if I have got to pay 
on the loan and then I have to pay to try and do it again--that 
is why I started my talk with saying please fix our bypass, you 
know, because, boy, if we had it again, it is going to be a lot 
worse in Elkader the second time than it was this time because 
with that flood wall gone and a lot of those historic buildings 
at risk and the chance of it happening again, it is not a good 
deal. You know, we are going to need some help in that.
    Mr. Davis. Is FEMA working on that for you? I know you have 
got some great members of Congress, and they will be working 
with you. But has FEMA talked about fixing--
    Mr. Wilke. I haven't been in the committees when they have 
talked about it, but I am sure that there are enough people in 
Elkader that want it said. And I know they had a lot of people 
on Main Street wanting me to mention it when I came. You know, 
you know, just try and make it on the front burner a little bit 
because it is not a deal that we can wait two, three years. It 
is something that we need to have help soon.
    Mr. Davis. And it would save taxpayers dollars in the 
future if they fix it before the next flood. And you have got 
some great members who will take care of this.
    Let's go on down the line.
    Mr. Bowers. No, I did not have flood insurance. I did check 
into it in April, when the water levels were high up there at 
that time as well. It wasn't near flood stages for us, but it 
was high.
    I was told by the insurance agent that we use that they 
basically divide it up in A, B, and C levels. And my store is 
in C level, which is the same thing as all the rest of Anamosa. 
And for me to add it to my insurance was almost $1,000 a month.
    Now, why would I add something at $1,000 a month that all 
of Anamosa is in the same class as me? So it is never going to 
happen. A month and a half later, there they were.
    Mr. Davis. Thank you.
    Mr. Monnahan. I did not have flood insurance. And I have 
talked to maybe one person in Cedar Rapids that did have it, 
one business person that did have flood. I don't think anybody 
did. And we were in the 500-year floodplain. So there was 
really no incentive to pay that extra premium for insurance. It 
was never mentioned, in fact.
    Mr. Davis. Do you think that is something that the 
community is taking a look at now, the business owners that you 
know? Do you think it is on people's minds now, maybe we are 
going to need to go back and take a look at that as an option?
    Mr. Monnahan. Definitely.
    Mr. Davis. Mr. Pilkington, if I could ask you a few 
questions? What type of technical assistance did the business 
community services outreach program provide the small 
businesses after the flood?
    Mr. Pilkington. They did through the MyEntreNet, which is 
part in person and part technology. They did daily webinars. So 
the webinars would be at noon every day. There would be a 
different topic from working with SBA to what do you do with 
damaged inventory to those topics that small business wanted. 
And then they started them at night as well. They hosted a 
series of meetings. And then they just did the one-on-one 
counseling with them.
    So that was the type of assistance to reach as many of 
those individuals as we could. And we also connected other 
service providers. We had someone from every SBDC office in the 
State of Iowa come to our area in Parkersburg and New Hartford 
first because that was before all of the floods happened. And 
we had somebody from the entire state.
    We rallied as many resources as we could into our part of 
the state, which were no cost to the small business person. We 
kind of led that effort.
    Mr. Davis. Is MyEntreNet unique to your area? Is it--
    Mr. Pilkington. Yes. MyEntreNet was a program that was 
created because we found we couldn't serve remote rural areas 
the same way we serve a Cedar Rapids, a Waterloo, or a Des 
Moines. And we needed to be able to reach out to those rural 
communities and provide them the same level of business 
counseling guidance and also to help create a supportive 
structure for entrepreneurship.
    And MyEntreNet does that. It creates a system in a 
community. Elkader has that type of system, where they have a 
supportive structure for entrepreneurs. They match them with 
the capital. They also put them together with the resources 
they need. And then it is a networking. So that it is 
entrepreneurs working with entrepreneurs.
    So it is much more than just an online program. It is the 
combination of a complete structure. If you think of it, it is 
a connector. It connects the entrepreneur to what they need or 
to the expertise or to the type of capital they need.
    Mr. Davis. I would think you didn't develop that for a 
disaster.
    Mr. Pilkington. No. We developed that in 2003 just because 
of remote rural areas not being served.
    Mr. Davis. Is that something you are willing to share or 
have thought about sharing with the rest of America? It sounds 
like it worked beautifully.
    Mr. Pilkington. We just presented at the American Small 
Business Development Council, National Small Business 
Development Council. I believe it was two weeks ago in Chicago 
at their national conference. So that has been spread around 
the country. It is in 14 counties formally in Iowa.
    And with the disasters, we think the next thing that should 
happen is there are 35 counties in the State of Iowa that have 
businesses. At least 80 percent of their businesses are less 
than 10 employees. We should get MyEntreNet into those counties 
as quickly as we can.
    Mr. Davis. How do we do that?
    Mr. Pilkington. Just need some resources. Because it is so 
efficient, we would put these into pods of six so a pod of six 
counties would get one staff person. And they would manage six 
counties and run a MyEntreNet system. So you could do this with 
three, four, five people with what we have right now and really 
have an effective system to meet the needs of many 
entrepreneurs around the state.
    Mr. Davis. How did that program work with SBA and FEMA and 
other government agencies? Were you able to pull them in and 
make them part of the program?
    Mr. Pilkington. SBA was very cooperative. They learned 
right away what the resource was. They were very good 
collaborators. They tried hard. They were good people. The 
problem was, once again, it was their product. And the staff 
members who were on the ground didn't have much choice in 
offering any other alternative products.
    Mr. Davis. Was the university affected by the floods
    Mr. Pilkington. Not our university. The University of Iowa 
was severely impacted by the floods. We were quite fortunate.
    Mr. Davis. You were far enough away that--
    Mr. Pilkington. We were high enough ground. We are the 
highest point in Blackhawk County.
    Mr. Davis. Okay. One thing I have heard through all of the 
testimony is you needed the cash and you needed it quickly. One 
of the things that was included in the farm bill was $25,000. 
And that was in the recent changes.
    The disaster loan program provides businesses with an 
opportunity to quickly obtain an immediate loan of 25,000. 
Would that have helped many of the small businesses affected by 
your area if it had been available? It wasn't available during 
the floods, but it happened fairly quickly after that. It would 
have been helpful.
    Mr. Wilke. Yes.
    Mr. Pilkington. Definitely.
    Mr. Davis. That is something that hopefully will be 
available for you next time.
    Thank you. And I yield back.
    Chairman Braley. Thank you.
    At this time I would recognize Congressman Loebsack.
    Mr. Loebsack. Thank you, Mr. Chairman. Thanks again for 
doing this. It has been very helpful for me to listen to these 
stories. Of course, I have been listening to a lot of stories 
since June, as you might imagine, in the Second District of 
Iowa, Mike's, and many others.
    I am just going to say thank you and ask if you want to say 
anything more, but before I do that, I just want to mention, 
Mr. Pilkington, I really appreciate those three points that you 
made. It kind of for me does summarize all of the things that I 
have been hearing from so many business owners, small business 
owners, you know, since the flooding began. So I really 
appreciate the way that you put it into those three points, the 
non-collateralized, forgivable capital, technical assistance.
    I think that one-on-one idea is probably great for 
homeowners, too, obviously, who get passed around from one 
person to the--it is not that the individuals doing those jobs 
aren't doing great jobs, but the individual who gets passed 
around really needs, I think, that one-on-one assistance. It is 
difficult to do that. There is no doubt about it. It takes a 
lot of resources, but I think it is important.
    And then just acknowledging that these businesses are 
valuable and that the owners are valuable, as Congressman 
Braley said, you know, in so many of these small towns, 
especially the convenience stores, I mean, they are the only 
store in town, the only game in town, if you will, in that 
sense.
    And we live in Mt. Vernon. And Gary's is the grocery store 
there. And it is absolutely fantastic that it is there and it 
serves the community.
    And, of course, the other point that you made, Mr. 
Pilkington, about other businesses, some businesses have 
actually thrived, as we know, in the rebuilding process, right? 
Some workers have thrived, the building construction trades, 
for example, because their labor, their services are in high 
demand right now. But many, of course, many businesses have not 
because in some places, there has almost been a recession, if 
you will, as a result of the floods. And so I think we have to 
really keep in mind those other businesses that have suffered 
beyond those that were directly affected by the flooding.
    I admire what you folks on the panel have done. I don't 
know that I could have done the same thing had I been struck by 
such a disaster. The worst thing that happened to us is that we 
had basement flooding related to groundwater, and I had to rip 
up two carpets from the basement and take them out to the curb. 
And that is nothing compared to what people in these towns went 
through themselves. But I am happy to be a proud original co-
sponsor of the Braley-King bill, too. I think it is a great 
idea to try to deal with some of these problems.
    I want to thank also the Chamber in Cedar Rapids for doing 
what they are doing to help people like Mike with that 20,000 
or so dollars. A lot of the folks in these communities have 
stepped forward, but, as I keep saying, for all the things that 
we are doing for ourselves, we continue to need help from the 
federal government. And that is why we are doing this today.
    So I just want to open up. I know that Congressman Braley 
and Congressman Davis have a lot of expertise in this area, and 
they have asked great questions. But, no offense to my 
colleagues, but sometimes we on these panels don't ask all of 
the questions that need to be asked. Therefore, you don't have 
an opportunity to say what you might want to say.
    So is there anything else that you want to say that hasn't 
been elicited by questions? Yes, sir?
    Mr. Pilkington. Just one thing, really two. First of all, 
it is not over. We have gone through the shock, and we have 
gone through the short term. But I am very concerned about 
long-term recovery. We have a lot of small businesses that are 
struggling and are trying very hard to make it. So we can't 
turn our back on them. They need continued assistance. The 
long-term recovery is really the key.
    And the second part is to consider more of a case 
management approach. Rather than getting a different person at 
SBA or FEMA, if we could have a more of a case management 
approach? You wouldn't see a different banker every time you 
went in. And I think we need to take a look at the way that 
assistance is provided.
    Mr. Loebsack. Thank you. Any others who would like to say 
anything?
    Mr. Wilke. I think I would just dovetail a little bit of 
what you said because he had mentioned that their business was 
up. Since the flood, we have not had one week that we have been 
up. And I do wonder what it is going to be like coming into the 
holiday season when you have got that many homes down there 
that don't have windows and doors.
    We could potentially have it worse. I mean, we have sat 
here and say, yes, it was a mess to clean up from the flood, 
but if we have a few homes down here that people want to live 
there and then it's right next door to someplace that looks 
really tacky, you know, that is not going to be a draw for our 
community.
    Our community is a very historic place. It has got a lot of 
places on a national register. And it has been a great 
destination for campers. We have got two good campgrounds.
    And the people that I have talked to virtually unanimously 
want to restore it to the way Elkader was. You know, get it 
back up and going the way that it was. And we do need some 
economic stimulus to get that jump-start going.
    You know, use the paddles on us a little bit right away 
because we want to keep beating. You know, it is not that we 
want to stay on life support. Okay? But we need a little shot 
right away, you know, to get it going.
    Mr. Loebsack. Can I ask a question about Elkader because 
you have a connection? Is it to Morocco or Algeria?
    Mr. Wilke. Algerians.
    Mr. Loebsack. Elkader.
    Mr. Wilke. Yes. And they came through with some--
    Mr. Loebsack. That is what I was going to ask because--
    Mr. Wilke. Yes. They did.
    Mr. Loebsack. --obviously the National Czech and Slovak 
Museum in Cedar Rapids is going to benefit from some assistance 
from the Czech Republic. Okay. Good. I am glad to hear that.
    Mr. Wilke. Yes. Yes, they did. It is from the president of 
the country.
    Mr. Loebsack. It is a beautiful town. I have been there 
many times.
    Mr. Wilke. A certain dollar amount is split up between the 
businesses and certain amount to split up between the 
homeowners. It was nice. I mean, it wasn't a lot, but it was a 
nice, very nice, gesture, very appreciated.
    Mr. Loebsack. That is great. I am all in favor of getting 
assistance wherever we can get it. And so I know it is 
wonderful. Thank you.
    Well, thank you, Mr. Chair. I will yield back. Thank you.
    Chairman Braley. I think that last comment really drives 
home the fundamental point that I saw everywhere I went in my 
district and I am sure Congressman Loebsack, too. And that is 
that we are all in this together. And it is not just people in 
Iowa who are in this together. It is people in Iowa and 
Tennessee and Houston and Florida and California.
    And the best way I think for me to close this hearing is to 
share a story that happened to me. And, to put this in context, 
we had the most powerful tornado in the United States this year 
hit my district that hit the communities of Parkersburg, New 
Hartford, Dunkerton, and Hazelton. Less than ten days later, we 
had epic flooding on every inland river in our state.
    As I was flying back to Washington, at the beginning of the 
flooding event, I flew over on my way from Waterloo to 
Minneapolis the Town of New Hartford, which had been devastated 
by the tornado and was completely under water. And I knew I was 
going to be coming back right away.
    I spent two nights sandbagging on the Cedar River. And I 
was in a neighborhood over on the east side of Waterloo along 
Lafayette Street--Randy, you know right where this is--with my 
city council member. And we finished sandbagging in one area. 
And we were told we had to get down to another area two blocks 
away. And to get there, we had to walk through waist-deep 
water. And it was getting dark out.
    So we walked down there. And I started handing sandbags to 
a 14-year-old boy, who was putting them around the base of his 
grandmother's home. We got done sandbagging her house, and we 
walked out into the streetlight. It was dark now. And he looked 
up at me, and he said, ``Are you Bruce Braley?''
    And I said, ``Yes.''
    He said, ``You are my congressman?''
    I said, ``Yes.''
    He ran off, and he brought over two of his friends because 
he could not believe he was out sandbagging with his 
congressman. And that to me was all the motivation I needed to 
come back to Washington and keep telling this story over and 
over and over because people aren't looking for a handout with 
no strings attached. They are looking for a temporary hand up 
to keep their business open, their home open. And one of the 
biggest problems we saw was people who were so desperate to get 
back into their homes that it was sometimes creating a safety 
risk for the people trying to deal with the immediate 
aftermath.
    I think the testimony we have heard today has been a great 
illustration of why small businesses do provide the backbone of 
our economy. And that is why we can see a ripple effect 
throughout these communities when we take the time to help them 
in their time of need.
    So I want to thank the Ranking Member for his insightful 
comments. I want to thank my colleague from Iowa Congressman 
Loebsack and the great work that the staff did today to prepare 
for the hearing.
    And I also want to make sure that as we move forward, 
people don't forget the stories that we heard today because we 
seem to have a mentality in this country that the disaster of 
the day is all we see on television. And once the flooding 
recedes and the torn buildings are removed, everybody forgets 
about what is happening.
    But to all of you, every day this is part of your lives. 
And we want to make sure we are doing everything we can to 
respond to your needs. So thank you all for coming.
    I ask unanimous consent that members have five legislative 
days to enter statements into the record. Without objection, so 
ordered.
    I want to thank the witnesses again for taking time from 
your lives when you are dealing with the aftermath of all of 
these problems and coming to share your stories.
    And, with that, our hearing is now adjourned.
    [Whereupon, at 5:06 p.m., the foregoing matter was 
concluded.]

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