[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
FULL COMMITTEE HEARING ON
HEROES OF SMALL BUSINESS
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
May 20, 2009
__________
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
Small Business Committee Document Number 111-024
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
DENNIS MOORE, Kansas
HEATH SHULER, North Carolina
KATHY DAHLKEMPER, Pennsylvania
KURT SCHRADER, Oregon
ANN KIRKPATRICK, Arizona
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine
MELISSA BEAN, Illinois
DAN LIPINSKI, Illinois
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
BRAD ELLSWORTH, Indiana
JOE SESTAK, Pennsylvania
BOBBY BRIGHT, Alabama
PARKER GRIFFITH, Alabama
DEBORAH HALVORSON, Illinois
SAM GRAVES, Missouri, Ranking Member
ROSCOE G. BARTLETT, Maryland
W. TODD AKIN, Missouri
STEVE KING, Iowa
LYNN A. WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
BLAINE LUETKEMEYER, Missouri
AARON SCHOCK, Illinois
GLENN THOMPSON, Pennsylvania
MIKE COFFMAN, Colorado
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Karen Haas, Minority Staff Director
.........................................................
(ii)
?
STANDING SUBCOMMITTEES
______
Subcommittee on Contracting and Technology
GLENN NYE, Virginia, Chairman
YVETTE CLARKE, New York AARON SCHOCK, Illinois, Ranking
BRAD ELLSWORTH, Indiana ROSCOE BARTLETT, Maryland
KURT SCHRADER, Oregon TODD AKIN, Missouri
DEBORAH HALVORSON, Illinois MARY FALLIN, Oklahoma
MELISSA BEAN, Illinois GLENN THOMPSON, Pennsylvania
JOE SESTAK, Pennsylvania
PARKER GRIFFITH, Alabama
______
Subcommittee on Finance and Tax
KURT SCHRADER, Oregon, Chairman
DENNIS MOORE, Kansas VERN BUCHANAN, Florida, Ranking
ANN KIRKPATRICK, Arizona STEVE KING, Iowa
MELISSA BEAN, Illinois TODD AKIN, Missouri
JOE SESTAK, Pennsylvania BLAINE LUETKEMEYER, Missouri
DEBORAH HALVORSON, Illinois MIKE COFFMAN, Colorado
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine
______
Subcommittee on Investigations and Oversight
JASON ALTMIRE, Pennsylvania, Chairman
HEATH SHULER, North Carolina MARY FALLIN, Oklahoma, Ranking
BRAD ELLSWORTH, Indiana LOUIE GOHMERT, Texas
PARKER GRIFFITH, Alabama
(iii)
?
Subcommittee on Regulations and Healthcare
KATHY DAHLKEMPER, Pennsylvania, Chairwoman
DAN LIPINSKI, Illinois LYNN WESTMORELAND, Georgia,
PARKER GRIFFITH, Alabama Ranking
MELISSA BEAN, Illinois STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania GLENN THOMPSON, Pennsylvania
BOBBY BRIGHT, Alabama MIKE COFFMAN, Colorado
______
Subcommittee on Rural Development, Entrepreneurship and Trade
HEATH SHULER, Pennsylvania, Chairman
MICHAEL MICHAUD, Maine BLAINE LUETKEMEYER, Missouri,
BOBBY BRIGHT, Alabama Ranking
KATHY DAHLKEMPER, Pennsylvania STEVE KING, Iowa
ANN KIRKPATRICK, Arizona AARON SCHOCK, Illinois
YVETTE CLARKE, New York GLENN THOMPSON, Pennsylvania
(iv)
?
C O N T E N T S
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OPENING STATEMENTS
Page
Velazquez, Hon. Nydia M.......................................... 1
Graves, Hon. Sam................................................. 2
WITNESSES
Reister, Mr. Stephen, Principal, Steel-T-Heating and Air
Conditioning, Englewood, CO.................................... 3
Storey, Ms. Dona, President, Quality Technical Services, Inc./
GOVtips, LLC, Virginia Beach, VA............................... 6
McClain, Ms. Barbara, McClain COntracting, Andalusia, AL......... 8
Mirman, Mr. Lee, Broker/Owner, Investments in Sarasota, Sarasota,
FL............................................................. 10
Pochapsky, Dr. Gene, Vice PResident, OmniTech Group, Freeport, PA 12
Prestemon, Mr. Greg, President, Economic Development Center of
St. Charles County, St. Charles, MO............................ 15
Bacon, Mr. Sutton, President & CEO, Nantahala Outdoor Center
Inc., Bryson City, NC.......................................... 17
Brown, Ms. Chandra, Vice President, Oregon Iron Works, Inc.
Clackamas, OR.................................................. 19
Farra, Mr. Kirk, In-Synch Systems, Zelienople, PA................ 22
APPENDIX
Prepared Statements:
Velazquez, Hon. Nydia M.......................................... 35
Graves, Hon. Sam................................................. 37
Reister, Mr. Stephen, Principal, Steel-T-Heating and Air
Conditioning, Englewood, CO.................................... 39
Storey, Ms. Dona, President, Quality Technical Services, Inc./
GOVtips, LLC, Virginia Beach, VA............................... 45
McClain, Ms. Barbara, McClain COntracting, Andalusia, AL......... 54
Mirman, Mr. Lee, Broker/Owner, Investments in Sarasota, Sarasota,
FL............................................................. 59
Pochapsky, Dr. Gene, Vice PResident, OmniTech Group, Freeport, PA 61
Prestemon, Mr. Greg, President, Economic Development Center of
St. Charles County, St. Charles, MO............................ 69
Bacon, Mr. Sutton, President & CEO, Nantahala Outdoor Center
Inc., Bryson City, NC.......................................... 72
Brown, Ms. Chandra, Vice President, Oregon Iron Works, Inc.
Clackamas, OR.................................................. 76
Farra, Mr. Kirk, In-Synch Systems, Zelienople, PA................ 82
(v)
FULL COMMITTEE HEARING ON
CELEBRATING OUR SMALL BUSINESS HEROES
----------
Wednesday, May 20, 2009
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in Room
2360 Rayburn House Office Building, Hon. Nydia Velazquez
[chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Shuler, Dahlkemper,
Schrader, Nye, Altmire, Ellsworth, Bright, Graves, Bartlett,
Akin, Buchanan, Luetkemeyer, and Coffman.
Chairwoman Velazquez. Good morning. I call this hearing to
order. Today we are celebrating Small Business Week and the men
and women who keep our economy running.
It takes a special kind of person to start a business. As
most of you know, being your own boss doesn't mean a 40-hour
work week and 2 months' paid vacation. Quite the opposite, it
means spending more time in the office than your friends with
conventional jobs.
At the end of the day, you don't do it for the hours. You
do it because you are the hardest working people in America.
You are also some of the most resourceful and the most
resilient. These are the traits that have helped people like
you who lost out of past recessions. And these are the traits
that will lead the way back to prosperity.
When entrepreneurs do well, America does well. Whether it
is the tech start-up in Silicon Valley or the family-owned
restaurant down the street, small businesses are the engine
driving this economy. In fact, entrepreneurs create roughly 70
percent of all American jobs. They also have a proven record
for stemming recessions.
Take the down turn of the mid 1990s, for example. During
that time, entrepreneurs created 3.8 million new jobs. With
unemployment now at 8.9 percent, we could use that kind of
growth again. That is why both this Committee and the rest of
Congress have taken steps to strengthen entrepreneurship.
On its own, the American Recovery and Reinvestment Act
contains $15 billion in tax relief for small firms. It is also
expected to generate $21 billion in loans and investment. That
is capital you all can use to start growing again. Meanwhile
the stimulus contains important provisions for helping small
firms win government contracts. In terms of infrastructure
projects alone, entrepreneurs stand to gain $29.9 billion.
But we aren't just giving you the opportunities. We are
also giving you the tools to seize those opportunities. Later
today I will be with my ranking member on the House floor to
present H.R. 2352, the Job Creation Through Entrepreneur Act of
2009. That bill is going to provide critical resources to help
your business grow and adapt.
Because let's be honest. The economic landscape looks very
different today than it did a year ago. H.R. 2352 will give you
the training you need to re-tool your businesses and emerge
from the recession stronger than before. That is critical
because we are really counting on you to turn things around.
This morning we have a very diverse cross-section of the
small business community. We have a finance firm. We have a
heating and air conditioning business. We have the nation's
only streetcar manufacturer. And you have come from all over
the country: Clackamas, Oregon; Andalusia, Alabama; Virginia
Beach. But while it may seem like your businesses have nothing
in common, you do share one critical common thread: the key to
recover.
As Americans reevaluate the old way of doing business, we
are increasingly looking to small firms. Men and women like
yourselves who are the real heroes of American industry, today
we celebrate you.
I would like to thank all of our witnesses for being here
today. I am so pleased they could join us and look forward to
hearing from you.
So I now would like to recognize the ranking member, Mr.
Graves, for his opening statement.
Mr. Graves. Thank you, Madam Chair. And thank you for
holding this hearing, highlighting the successes of our
entrepreneurs from all across the nation. It is very fitting
that we honor these folks given that it is Small Business Week.
And thank you all for coming from so many different places.
Each year we pay tribute to America's small business owners
and workers. These are the men and women who use their
entrepreneurial talents to make our lives better, help sustain
our economy, and expand opportunities for all.
Small business owners from across the country are gathered
in Washington to be honored for their accomplishments.
Entrepreneurs exemplify the value of hard work, ingenuity, and
achievement. It is especially important to recognize small
businesses that have prospered despite the difficult economy.
We salute small companies for the strong commitment to
their communities and their contributions to our nation. Small
businesses empower America's economy. Small firms create the
bulk of new jobs and account for 51 percent of our workforce.
These companies are on the cutting edge of research, hiring 40
percent of all technology employees, and acquiring 13 times
more pathos per employee than large firms.
Small firms are also leaders in trade. Trade boosts our
prosperity and strengthens our ties with other nations and
creates new opportunities for America's workers. Almost one-
third of all U.S. exports are generated by small businesses.
And 97 percent of all U.S. exporters are small companies.
The number of women minority and veteran-owned businesses
are growing rapidly and comprises an increasing percentage of
our economy. These successes are impressive, but there is a lot
more we can do. Our economy is lagging, and many small
businesses are hurting.
Let's make sure small firms have the tools to prosper. They
need the access to capital, counseling, and programs to help
expand their businesses. Increasing taxes, employer mandates,
and regulatory burdens will simply cripple smaller firms. By
supporting legislation to keep taxes low, promote free trade,
and allow small businesses to pool together to purchase health
insurance and reduce frivolous lawsuits, we can help small
companies compete.
Again, Madam Chair,--I think she had to step out for a
little bit--I thank you for holding this hearing.
Mr. Nye. [Presiding] Thank you, Mr. Graves. I will be
filling in for the Chairman just for a few minutes here.
I want to recognize my colleague, Mr. Coffman, for the
purposes of introducing our first panelist from his district.
Mr. Coffman?
Mr. Coffman. Thank you, Mr. Chairman.
It is a pleasure to welcome a fellow Coloradan and
constituent as Stephen Reister to the Committee. Mr. Reister is
the owner of Steel-T Heating and Air Conditioning in Englewood,
Colorado. He has received several industry awards for his
ozone-friendly business practices and his community awareness
efforts.
Outside of his business, Mr. Reister is also a civic leader
who sits as a board member on the Cline Valley Water and
Sanitation Districts. He is active in a number of civic
organizations, including the United Way's gift of warmth
program.
Welcome to the Committee, Mr. Reister. We look forward to
hearing your testimony.
STATEMENT OF STEPHEN REISTER, PRINCIPAL, STEEL-T HEATING AND
AIR CONDITIONING
Mr. Reister. Madam Chairwoman Velazquez, Ranking Member
Graves, and members of the Committee, Madam Chairwoman
Velazquez, Ranking Member Graves, and members of the Committee,
thank you for having me here today.
Once again, I am Steve Reister, one of the owners of Steel-
T Heating and Air Conditioning in Englewood, Colorado. I am
here to represent both our employees, the fantastic 41 of them
that we have right now, and our company.
My father purchased this company in 1989, amidst a
recession that looked very similar to the one that we are
looking at today. His friends counted him down, assumed he
would soon file bankruptcy and go out of business.
Many changes quickly occurred in our business. The first
thing he did was not gave a pay cut. He gave all the employees
a raise. That's what small business owners do. They take care
of their people. And he knew by taking care of his people,
happy employees make happy customers. And happy customers tell
a friend.
My father opened the first 401(k) plan in our industry,
gave paid vacation, four-star competitors to follow suit if
they wanted to keep up with us. Our company grew leaps and
bounds over those first few years.
My brother and I have taken over the company, and we are
now 20 years old. We do have those 41 employees. We are down
from the 100 that we had just a few years ago. Many of them
have now only been with us since the beginning, but they have
retired with our company. And that makes us very proud.
We have 26 American-made Ford trucks on the road today. We
would like to add to that fleet. We are increasing our
advertising this year in hopes of offsetting the nation's woes.
We have three distinctive divisions of the company: new
construction making up 70 percent of the company, replacement
or retrofit making up 18 percent of our company, and 12 percent
commercial building.
Our revenues have been as high as $12 million a year. This
year we hope to have half of that. But I don't want the
Committee to feel bad for us. We have a plan. We have gotten
together as a team of managers and owners, and we decided we
are not going to participate in this recession.
We as Americans have 100 percent control over one thing in
our life: our attitude. And our attitude at Steel-T in our team
is very strong, and we will keep her going.
Colorado has a 50,000-unit furnace replacement market. That
market is one we plan on tapping into. We have 20 competitors
that have already gone out of business. And we see no reason to
be one of them.
In the past, we have questioned our father and how he
didn't want to take advantage of bank loans or lines of credit.
We had paid taxes on our profits already. Why didn't he
disburse them to us? Why not take advantage of those banks and
government agencies who for so many years gave out excessively
high lines of credit with zero or no accountability?
My father held steadfast. Now my brother and I follow in
his footsteps, even if our education was a bit slower than he
would have liked. His leadership has placed us in a position to
ride out this storm. A storm we should have all seen coming,
one we should have made provisions for.
So what can this federal government and this body do for us
today? Give small business tax incentives to help drive the
economy out of this mess. Give us a reason to buy new vehicles.
Allow us to depreciate them over two years, instead of the
current seven.
Newer vehicles are better for the environment. They leave a
much smaller carbon footprint. And if you saw some of the
vehicles my competitors are driving today with black smoke
pouring out of them, you would want them off the road, too.
Offer tax credit when we purchase new manufacturing
equipment. As we earn money to educate our employees, allow us
to keep more of that money to reinvest in them. Our
manufacturers all offer extended training. We can send them all
over the country for this training. We will have better
employees, who are able to work faster and longer in our
industry without injury.
Our current federal tax rate is extremely high. We don't
see any of the loopholes that so many people talk about. We,
like most other companies here, are subchapter S corps, which
means our personal taxes and company profit taxes are the same.
They all come from one pool.
We pay full tax on those profits and very rarely get the
opportunity to remove them from the company; instead, leaving
them in the bank for operating capital to keep employees
working.
If you leave the money in there too long, though, we can
either loan it back to ourselves and pay ourselves interest or
we can pay taxes on it again. That doesn't make a lot of sense
to me.
We also have health care for our employees, to the tune of
$145,000 a year and rising. Help us keep those soaring costs
down, not by giving us socialized medicine but by limiting the
paperwork that we have to do for both the insured and the
insurer.
Give small business' smart guys out there the opportunity
to create software plans to manage our health care system in
the private sector. This will keep premiums low, reduce
overhead so doctors can spend time with their patients. This
nation will persevere through this current economic down turn.
We are a nation of believers in God and the innate goodness
that dwells in its citizens.
This is the greatest nation on Earth. Our entrepreneurs
will strive to reach the American dream, the dream pursued by
our forefathers and offered in our Constitution to those who
are willing to sacrifice to achieve it. This body of Congress
and Obama administration should embrace those entrepreneurs and
reward them for their risks we take and our willingness to grow
the economy and employ its people.
Thank you, Madam Chairwoman Velazquez, Ranking Member
Graves, and members of the Committee, for your time and
willingness to hear my testimony. I pray that God will grant
you the wisdom to leave this country and nation, restore its
shine as a beacon to the world of what a democracy can and
should be.
[The statement of Mr. Reister is included in the appendix.]
Mr. Nye. Thank you very much for being with us.
I am going to introduce Ms. Storey next for her opening
statement. Mr. Bacon, I did not forget you. I understand that
Mr. Shuler is interested to introduce you, and we want to give
him the opportunity if he can make it to do that. So we will
just put you on hold for a few more minutes.
Ms. Dona Storey is President and CEO of Quality Technical
Services, Incorporated, located in my district, in Virginia
Beach. QTS is a minority and women-owned business that provides
consulting and manages interior design projects. Ms. Storey has
earned several awards for her contributions to the business
community, including being named by the SBA in 2007 as
Virginia's Women in Business Champion of the Year.
I met yesterday with Ms. Storey yesterday. And I was
impressed with her perspective on the small business community
and with the fact that she has spent a lot of her time giving
speeches and participating in mentoring programs, educating
other entrepreneurs about how to navigate the often difficult
world of government contracting. So we appreciate what you have
been doing for the small business community, looking forward to
hearing your thoughts, Ms. Storey.
Ms. Storey. Thank you very much.
STATEMENT OF DONA A. P. STOREY, PRESIDENT, QUALITY TECHNICAL
SERVICES, INC./GOVtips, LLC
Ms. Storey. I will not read from my text, but I would like
to hit some of the highlights. I come here, actually, to
express two very strong feelings: number one, gratitude. I am
the American dream. I am the daughter of a Filipino steward
post-World War II who came to this country, who had lost
everything and believed this was the land of opportunity. He
taught this to his two daughters, I being the older of the two.
My dad at the age of mid 30s became a millionaire. And he
did so by figuring out what coin-operated laundromats were all
about. He grew a business from that, building into buy shopping
centers.
Unfortunately, he died a very young man, leaving two
daughters. And what he left behind was the legacy of this is
the land of opportunity.
I have been in business for 29 years. In the last 15, I
have had the great opportunity to learn how to do business with
the federal government. Now, some people might laugh and say
that is an opportunity. But I will tell you being a successful
management consultant for 14 and a half years did not in any
way allow me to even dream of how I could actually grow my
firm.
I took all of the lessons learned from my father as an
entrepreneur, and I put them in place. And I learned the
federal government, all of this stuff around contracting.
Now, what I am here to talk about today is when I say in
gratitude, I am so grateful for what has happened to me and my
firm and my company. But what I am here to talk about is how we
need to shortcut and re-engineer small business program. I am
not here to complain. I make a big issue of that. But I am here
to say, what can we do to think like entrepreneurs and
reexamine our small business programs?
As an example, we have women's centers. We have PTACs. We
have SBDCs. In tight times like this, I as a taxpayer know that
they need more funding, but I know that it is very difficult to
continue to fund more projects. I think we need to take a look
at how we can consolidate some of the administrative sides of
these programs.
The one thing I did find out in the drum that I pound out
around this country is there is no better customer than the
federal government. And having done business with a lot of the
big names, the J&J, Ritz Carlton, J.P. Morgan Chase,--I could
go on and on--when I do business with the federal government, I
know my rights. I can read the regs.
If I hit a bump in the road on any contract, I don't need a
team of lawyers. I will never outgun the corporate attorneys
that they have in the country. But what I can do is read a reg,
understand what my rights are, and go into any meeting on my
investment.
In taking a look at some of the programs that we have out
there today, they are excellent pointer programs. But what they
miss is the one thing that people call me for.
Years ago we laughingly said that the SBA should call my
business ``1-(800)-Dona, can you help me?'' The SBA sent me
hundreds of companies. People find me from around the country.
I don't know how they are finding me, but they find me through
different contacts.
What our programs are missing is the lessons learned from a
person like me, who stumbled. I didn't know what I didn't know.
And I kept hitting walls, and I kept asking. I was very needy,
but I was tenacious in finding out.
Nothing can grow a small company like doing business in the
federal sector. It is absolutely the single fastest way of
catapulting your firm to that true next level. The hurdle is
understanding the culture. But any corporation I go into, they
have their own culture.
Secondly, the one challenge financially is--and I am sorry
I am speaking so fast, but the one challenge is lines of
credit. Because the opportunity is so great, you will find
yourself needing a larger line of credit than you typically
would be if you grew commercially.
You have to know how to read and be tenacious and willing
to read the regs, but they are understandable. And I am
convinced that all of these things around you can't get paid,
it is too difficult to get through the door, folks, I continue
to say this is a myth that is perpetrated by all the big firms
that are trying to keep the small guys out.
If I can learn--and I used to never say this publicly, but
I came out of school working for a cosmetics industry, Estee
Lauder and Revlon. Now, yes, it is a girlie industry, but it is
the toughest industry I have ever worked in. I mean, federal
government is nothing compared to what cosmetics was. And so I
keep saying if I can do this, I know others can. And I am
trying to get the word out to encourage them.
I thank you all, Mrs. Velazquez, certainly Congressman Nye,
Mr. Graves, for allowing me this opportunity to talk here about
how we need to get the word out more efficiently and
effectively to let other businesses do for themselves what this
country allowed for my family.
Thank you.
[The statement of Ms. Storey is included in the appendix.]
Mr. Nye. Thank you very much.
At this time I am going to yield to Mr. Bright to introduce
the next witness.
Mr. Bright. Mr. Nye, thank you very much.
Madam Speaker, I am proud to welcome Ms. Barbara McClain to
the Small Business Committee today. Ms. McClain is from the
great Town of Andalusia, Alabama, is one of my constituents. As
you know, she has been named a small business hero for the
success of her small business in Covington County or Andalusia,
Alabama.
Ms. McClain is owner and President of McClain Contracting
Company, Inc., a firm that has provided a range of services to
military basis and other federal installations. Ms. McClain
began her career as a bookkeeper and payroll clerk in 1968 and
worked for several firms before incorporating her own business
in 1990, selling ATVs and watercraft.
Ms. McClain later transformed the business and became a
license construction company receiving an SBA certification as
a HUBZone and 8(a) firm in timber 2005. With the program's
assistance, McClain Contracting proposed by expanding its work
to the federal level.
The company has been awarded over $13 million in contracts
by Kessler Air Force Base and performed work for other military
and veteran service facilities in Mississippi. Having gained a
reputation for quick, quality work, McClain Contracting is
currently seeking to expand its services throughout the
Southeast United States or the Southeastern region.
In these uncertain economic times, it is incredibly
important that we cultivate and support the entrepreneurs in
our communities like Ms. McClain. Small businesses created, as
our Chairman indicated, 70 to 80 percent of all the new jobs in
our economy. Additionally, many small businesses are started
during recessions, when the entrepreneurs have nothing but a
vision and the work ethic to make their businesses successful.
So, again, I commend Ms. McClain and the thousands of small
business owners around the country for the work they are doing.
It is my pleasure and privilege today to welcome Ms. McClain to
the Small Business Committee and ask for her testimony this
morning.
STATEMENT OF BARBARA MCCLAIN, McCLAIN CONTRACTING
Ms. McClain. Madam Chairwoman, distinguished members, it is
like a dream come true for a sharecropper's daughter from south
Alabama to be in this building and in the presence of such an
elite group of dedicated Americans. I am so humbled and
overwhelmed. This could happen only in America. To be asked to
testify to this Committee under the heroes of small business is
such an honor.
McClain contracting company, is a small woman-owned, Native
American-owned construction company located in the Southeast
Alabama town of Andalusia. The corporation is owned by me and
my son, Kevin McClain.
The company got its start in 1990 as McClain Motors,
Incorporated, doing business as McClain Yamaha, a Yamaha
dealership that sold ATVs and watercraft. We changed the name
of the corporation in '97 and became McClain Contracting. The
company became a general licensed contractor by the State of
Alabama.
We had achieved some success and had won some contracts on
road and bridge projects in Alabama, but it was tough to find
regular work. Our workforce consisted of me, my son, and four
employees.
Sometimes the only recourse to laying off our workforce was
to go to the bank and borrow money to make the payroll so our
valuable employees could take their wages home to meet their
obligations. We did this without hesitation because we have
always tried to treat our employees like family. We do what was
best for them.
I was not content and decided to pursue opportunities with
the federal government. I was aware of the opportunities that
could be available to our company in this direction. I
contacted the Troy University Small Business Development Center
for Assistance. Counselors with the Troy Small Business
Development Center first met with me and my son in October of
'04. I began the process of applying for 8(a) and HUBZone
certification.
Much of my time in '04 and '05, 14 months, in fact, was
spent working through the exhausting and frustrating 8(a) and
HUBZone certification process. I was certified 8(a) by the U.S.
Small Business Administration September 15th of '05.
It wasn't like the federal government suddenly started
handing over work, far from it. But certification was the best
thing that ever happened to our family and our employees'
families.
After marketing to the federal government for 11 months, I
negotiated my first federal contract August 24th of '06 with
Kessler Air Force Base, Biloxi, Mississippi. The contract was
called SABER. SABER is a simplified acquisition of engineering
requirements, which was a on-call service of the air force base
to do odd jobs, things like fixing and replacing air
conditioners, plumbing, building remodeling.
The contract was for one year. We completed this task in
four months. The contracting officer was so pleased with the
quality of our work, our ability to meet our commitments, that
I negotiated another contract. Believe me things haven't been
the same since.
Our reputation spread to other nearby federal installations
like the Navy Seebee base in Gulfport and the VA hospital in
Biloxi, awarding us contracts. Soon we began to expand beyond
our success in Mississippi and secured contracts in the Florida
panhandle.
We Have completed $24,400,000 of contracts for federal
agencies, such as the Air Force, the Navy, the Army Corps of
Engineers, the Veterans Administration, and the General
Services Administration. We actually completed these contracts
in 32 months. I am grateful more than words can express.
We now have 31 full-time employees. Our strength lies with
our employees. And we could not do what we have accomplished
without them. The success of our business is due to hard work
and dedication of our personnel, and I also give much of the
credit of our business success to the staff at the Troy Small
Business Development Center and the SBA office in Birmingham
for their assistance in helping me apply for the SBA
certification.
I am feeling really good about our recent success, but I am
not content to enjoy it without expressing an interest in
sharing my story to help others who might be tempted to give up
when thing get tough.
We have all heard the comment that ``I am from the
government, and I am here to help you.'' This is really true
with the U.S. Small Business Administration. The personnel, the
different programs, and training available to help anyone to
succeed in the business world is available for the asking.
Don't give up. Don't be afraid to Ask for help. Help others
anytime you can.
In Alabama, 97 percent of employment is by small business.
This means we Really need Mr. Tom Todt and his staff at the
Alabama District Office of the U.S. Small Business
Administration in Birmingham, Alabama. Only in America and with
grace of God could someone like me have the opportunity for
help and the chance to help others.
In closing, I want to thank each of you for the support you
give the Small Business Administration. You touch so many lives
all over the U.S. through the Small Business Administration.
And one other thing. I am so thankful that I live in
Congressman Bobby Bright's district. Although he is young in
Congress, you will see great things happen because he is here.
[The statement of Ms. McClain is included in the appendix.]
Mr. Bright. That was great. I added that last statement for
her, Madam Chairman.
[Laughter.]
Chairwoman Velazquez. Thank you, Ms. McClain. That wasn't
supposed to be part of the script
Ms. McClain. Thank you.
Chairwoman Velazquez. But thank you for such a beautiful
story--
Ms. McClain. Thank you.
Chairwoman Velazquez. --and sharing it with us.
And now I will recognize the gentleman from Florida, Mr.
Buchanan.
Mr. Buchanan. Thank you, Madam Chair.
You can add that tagline at the end of mine, too, if you
would like.
[Laughter.]
Mr. Buchanan. It is my pleasure today to introduce one of
my constituents from the great State of Florida, Lee Mirman, to
the Committee. Mr. Mirman is an owner of investments in
Sarasota, not just real estate but in the high tech business.
He is located, obviously, in my district. His business has been
awarded Sarasota Magazine's 5-star real estate award for two
consecutive years. He is very entrepreneurial, owned many
businesses. And he is in a very successful high tech and real
estate business.
I welcome you here to the Committee and am delighted to
have you from my district and look forward to your comments
today.
Mr. Mirman. Thank you.
Chairwoman Velazquez. The gentleman is recognized for five
minutes.
STATEMENT OF LEE MIRMAN, TRC CIPS, BROKER/OWNER, INVESTMENTS IN
SARASOTA
Mr. Mirman. Good morning. Chairwoman Velazquez, thank you
for convening this panel to spearhead the conversation about
what is required to have success in today's environment.
Congressman Buchanan, it is a pleasure to come up from Florida.
Thank you very much for your focus on empowering small
businesses.
To provide a context from my perspective, I will share that
my instincts and interests have drawn me to explore various
experiences in different parts of the world. Both my wife and I
are Duke MBAs, but much of what we have learned comes from
getting our hands dirty, from working from the ground up, and
learning by trial and error. This morning, though, I am not
going to focus on the processes that have led to my success
but, rather, the underlying philosophies.
First, relationships are fundamental. We seek out the win-
win by interacting with each individual we come in contact with
with respect and integrity. We look for ways to collaborate and
build synergies. In our vision, someone does not need to lose
for us to gain. There is plenty of opportunity to go around.
I believe that in doing this, we also attract the type of
individuals that value these principles. I don't think in terms
of hierarchy.
We are all working together toward a common goal. We have a
policy about who we work with. We must know, like, and trust
them. In the big picture, it does not matter how much money
they have or how smart they might be, but if they are nice
people, good people, then we will do business.
I would like to borrow the meaning behind the word
``sustainable.'' For me it applies to respecting the
environment and also respecting people. Making decisions based
on the long-term relationship, this is a sustainable business
practice.
In the spirit of honoring the important contributions of
individuals, allow me to acknowledge the part one young lady,
Sara Del Monte, daughter of my colleague, played in bringing us
here today. You and your mom embrace the spirit of
collaboration and cooperation that will continue to nurture
success of all of us.
Being a citizen of the globe, the United States is a
conglomeration of immigrants, wanderers, who come from
generations of immigrants. Americans of past generations have
wanted to stay close to home, but each generation is a
completely new one. Some amongst this great melting part are
seeking out their ancestral homes. They are returning to
villages they once fled in places like India.
My wife speaks to our children exclusively in Spanish. We
also teach our children Chinese and expose them to many
European languages. We want them to be world citizens. While we
would love to be wired to be able to speak many languages
ourselves, we want them to stand on our shoulders, to have
access to more of their potential, and to be equipped to do
things differently than the previous generation.
Diversifying the international markets makes sense
pragmatically. Investors still need to put their money to work
for higher risk protection. And we have identified
opportunities abroad.
That said, however, I have always had the instinct to
engage with many countries and cultures. It only feels natural
to leverage that same intuition as I take my business and the
people working with me abroad so that we may follow our
children.
Sustainable business practices. Lisa and I aim to be
emissaries in this respect as well. Our goal is progress, not
perfection. While in France recently, I interacted with several
thought leaders on this topic of sustainable development. One
was a commercial building developer from here in Philadelphia.
He operates 200 commercial centers around the United States.
Going forward, they will only build green, not just because
it is the healthier thing to do but because governments and
insurance companies will require it in the future. He is
getting a head start. In my business, we are seeking out
opportunities to contribute to keeping our air, land, and water
cleaner to set an example.
In conclusion, I am looking to align myself with people
that are not encumbered by previous ideas. All of us in this
room can not even fathom what will transpire in the
globalization and sustainability fronts.
Lisa and I both come from entrepreneurial parents that
encouraged us to follow this path. We were able to emulate what
it means to go out on your own, to work hard, and struggle to
build something. It certainly has made us stronger. So I
appreciate the opportunity to engage with you here this
morning.
Today's hearing is entitled ``Heroes of Small Business.''
At the age of 40, I feel I am still too young to be considered
a hero for deeds I have done. I hope to have the courage,
however, to lead and contribute my energy towards the health
and harmony amongst people, country, and the world.
[The statement of Mr. Mirman is included in the appendix.]
Chairwoman Velazquez. Thank you, Mr. Mirman Just
incredible. It is so beautiful to listen to all of these
wonderful stories. Especially here in Washington, it is a
breath of fresh air. Thank you.
Now the Chair recognizes the gentle lady from Pennsylvania,
Ms. Dahlkemper.
Ms. Dahlkemper. Thank you, Madam Chairwoman.
It is my pleasure today to introduce Dr. Eugene Pochapsky
from Western Pennsylvania. Dr. Pochapsky is the founder,
shareholder, and Vice President of OmniTech Partners,
Incorporated. Located in Freeport, Pennsylvania, OmniTech
produces electro-optical systems for military and law
enforcement applications.
Dr. Pochapsky is responsible for new product design and
development, engineering, and technical support. He lends his
expertise to some of the most advanced equipment, keeping
America's Service men and women safe.
OmniTech's and Dr. Pochapsky's efforts are a true small
business success story. Dr. Pochapsky earned a BSEE degree at
the University of Pittsburgh and then went on to achieve his
Master's and doctoral degrees from Carnegie Mellon University.
He began his career as an electrical engineer for Syracuse
Research Corporation in Syracuse, New York. Before coming to
OmniTech in 1996, Dr. Pochapsky was the chief technical person
for Star-Tron Technology, where he personally designed multiple
night vision products.
His lifelong dedication to his work has garnered him
numerous patents in the electro-optics and night vision fields.
I welcome Dr. Pochapsky and thank him for his time today.
Mr. Pochapsky. Thank you, Congresswoman Dahlkemper.
STATEMENT OF GENE POCHAPSKY, VICE PRESIDENT, OmniTECH GROUP
Mr. Pochapsky. Madam Chair, Ranking Member Graves, I
appreciate this opportunity to testify this morning before this
Committee.
OmniTech Partners is located, as we said, in Freeport,
Pennsylvania, about an hour northeast of Pittsburgh. Our
mission is to provide state-of-the-art night vision
technologies to U.S., state, and local governments in the
United States and around the world. On behalf of our 70
employees, we are honored to be invited to testify here this
morning.
We have three business units: Optical Systems Technology,
where we actually manufacture and sell night vision equipment,
service it; Keystone, where we design, develop, and prototype
these advanced night vision systems; and FrigiLite,
Incorporated, which designs environmentally safe remote source
lighting solutions for refrigerated display cases.
We have grown from 6 to 70 employees since our founding in
'95 because we invent, design, and manufacture real products,
including over 7,500 AN/PVS-22 and 27 night vision sites. Our
success relies upon our dedicated employees, who design,
fabricate, and deliver these cost-effective, leading-edge,
high-quality systems to our customers.
We offer all of our employees competitive salaries and
training opportunities, top-of-the-line medical benefits, and a
company-matched 401(k) program. And we recently purchased an
additional facility for optical fabrication three or four miles
down the road from our existing facility.
Our customers are principally war-fighters and law
enforcement agencies. And in the past they have possessed a
significant nighttime tactical advantage to perform operations
at night to limit casualties and offset disadvantages in
numbers or in available intelligence. Today, we are facing an
increasingly well-equipped opponent at home and abroad. And we
no longer enjoy this advantage fully. But Optical Systems
Technology is working to counteract this.
We invented and developed the first generation of in-line
sites that now predominate in the DOD and DOJ. We provide
thermal systems for augmenting goggles to provide multi-
spectral capabilities to the war-fighter.
And, as I mentioned before, we are installing a new
facility for manufacturing optics, which are currently
manufactured offshore, such as source, does not exist in the
U.S. And this exposes critical technology to the non-U.S.
citizens and allows our national security interests to be
compromised often when this information goes overseas.
I cite these programs as examples from our business
perspective of what innovative small business can do at finding
solutions and reducing costs. But there are issues which affect
these high tech small business like us, and I appreciate that
you have provided me with this opportunity to address them.
Even though we are flexible and efficient, small companies
have trouble with federal acquisitions successfully because
they view small businesses as risks.
Although the system currently allows small business to bid
on production opportunities, the best value criteria encourages
procuring agencies to select large businesses over small
businesses, even when the latter offer significant price and/or
performance advantages.
Taxes are also a major impediment to the growth of small
businesses. High marginal income tax rates directly affect S
corporations, like us. We generate federal income tax burden
that is about ten times what our shareholders currently
withdraw from the company every year.
We are typical of high tech small businesses in that we
require and indeed reinvest in facilities, equipment, and
inventory to help hold our current market share, allow for new
product development, and continue our growth.
Only a small portion of these investments can be expensed.
Thus, we pay income taxes, in a large part, from the same pool
that is available for reinvestment to the business. These taxes
cannot currently be deferred until the shareholders might
withdraw them in the future as taxable income. And that would
be most helpful to small businesses to be able to do that.
In fact, in our case, we could probably employ about 20
more manufacturing personnel, about one-third more employees if
we could defer those taxes until they were actually applied to
income and withdrawn.
The fewer taxes we pay, the more people we can employ, the
better benefit packages we can introduce for our employees, and
the more competitive we are in the world market. And we do
export all over the world and compete all over the world. We do
it very well, actually.
Conversely, high marginal tax rates can also impede our
ability to develop technology and encourage entrepreneurs like
us to sell our technology to large and possibly foreign
companies and then increase the potential for technology
transfer to offshore interests.
The federal government can strengthen innovative small
businesses by ensuring that the federal acquisition regulations
protect and encourage small businesses. And you can strengthen
us by reducing the tax burden on small companies that invest in
their employees and in our own technologies.
Madam Chair, members of the Committee, on behalf of
OmniTech Partners, thank you for this special recognition and
for the invitation to testify today. I would be glad to answer
any questions afterwards. Thank you.
[The statement of Mr. Pochapsky is included in the
appendix.]
Chairwoman Velazquez. Thank you.
The Chair recognizes Messrs. Luetkemeyer and Akin.
Mr. Luetkemeyer. Thank you, Madam Chairwoman. It is
certainly an honor today to be able to present to you Mr. Greg
Prestemon, who is one of the leaders, not only in our area but
in the nation, with regards to economic and small business
development.
Since Greg's arrival at the Economic Development Center in
1993 in St. Charles County, the county has grown from 232,000
to 350,000 today. In fact, St. Charles County continues to be
one of the fastest growing counties in the State of Missouri,
which is located just outside the St. Louis area.
As President and Chief Executive Office of the Development
Center of St. Charles County, Greg has served 16 successful
years at the helm of the Economic Development Center, which
highlights the way that St. Charles County has grown and
prospered, particularly through its work at the Economic
Development Center and Partners for Progress.
Since 2000, the St. Charles Economic Development Center's
504 loan program has helped finance projects around the state
totalling nearly $250 million while creating or retaining 5,774
jobs. These accomplishments do not even include the thousands
who have attended EDC business training events and Greg's and
his staff's involvement in countless special projects, such as
workforce housing, health care, and education initiatives, and
the road tax campaign.
Recently the center was named the 504 lender of the year by
the U.S. Small Business Administration as part of National
Small Business Week 2009. Congratulations, Greg.
In calendar 2008, the EDCs boasted more than $22.5 million
to 37 businesses throughout Missouri, with a total project
value of more than $60 million, that helped create or retain
jobs.
Not only Greg has been a good friend of my district as well
as Mr. Akin's, we greatly appreciate his being here today and
look forward to his testimony. And I will yield the balance of
my time to my fellow congressman, Congressman Akin.
Mr. Akin. Thank you, Blaine.
We just are so thankful to have Greg Prestemon here today.
I have been in Congress nine years. I don't hardly remember a
time when we are not coming out to St. Charles and chatting
with Greg about what is going on in the small business
community. They have really accomplished a lot there.
And it shows that what happens when you take a town,
basically was a town, and you put this kind of leadership in
place and now it's becoming the fastest growing area in the
State of Missouri and it's a lot more city-like. In fact, you
can go from where Greg's office is, and it's about as far from
there into the bridge into St. Charles as it is from the bridge
into the downtown St. Louis area, just a tremendous amount of
growth. That is because of the attention to the needs of small
business and really understanding it.
Greg, we are delighted to have you up here in Washington,
D.C. Thanks so much for joining us. And thank you for your
leadership through this matters.
I yield back, Madam Chair.
Chairwoman Velazquez. The gentleman is recognized for five
minutes.
Mr. Prestemon. Thank you very much.
STATEMENT OF GREG PRESTEMON, PRESIDENT, ECONOMIC DEVELOPMENT
CENTER OF ST. CHARLES COUNTY
Mr. Prestemon. On behalf of the Board of Directors of the
EDC and our members, I want to thank Chairwoman Velazquez,
Ranking Member Graves, and all of the members of the Committee
for the opportunity to speak today.
The people of St. Charles County are very fortunate to have
not one but two congressional representatives that appreciate
and support small business in Representatives Akin and
Luetkemeyer. We appreciation that. We have seen great benefit
from having had that.
The EDC has operated the 504 program on a regional basis
for nearly 20 years and as of 3 years ago on a statewide basis.
We hope incidentally to secure the permission to operate in
southwestern Illinois shortly.
We have benefited from a close relationship with the Small
Business Development Center of the University of Missouri--we
provide office space, use of our conference rooms, and office
support.
Finally, we have benefited from a close relationship with
the Small Business Development Center of the University of
Missouri, which I know is under the auspices of this Committee.
We provide office space and basic administrative support, and
they provide the expertise.
And then, finally, we have benefited over time from support
from the U.S. Department of Commerce for our incubator
facilities that we have ongoing. So we are been blessed to
have, I think, an integrated system to help small businesses in
our area grow. And I want to thank on behalf of my board this
Committee for the leadership in this area.
Congressman Luetkemeyer went over some of the activity of
the EDC and our 504 program over the last few years. And so I
won't belabor those or restate those stats.
Each one of these business expansions translates into real
benefits for real people. You know, like certified development
companies all around the United States, that's the kind of
entity we are.
We finance businesses, really, of all types, from auto
repair shops to restaurants to day care centers to advanced
manufacturing facilities and everything literally in between
that.
In our case, all of the jobs created are in Missouri, but
the 504 program is national in scope. And this Committee should
feel very proud, I think, of the impact the groups like the EDC
have by enabling success for the real heroes of our economy,
which are the folks who are sitting at the table with me: the
owners and the employees of these growing companies.
Like the rest of the country, St. Charles County has felt
the impact of the turbulence in our national economy. Our
largest industries are home building, financial services, and
automotive assembly, all of which are obviously facing
significant challenges.
So if there was ever a time when our flagship program, the
504 program, was indispensable, this was that time. I am here
to report to you some encouraging signs of some local recovery
that we think we are seeing.
The last quarter of 2008, we saw a precipitous decline in
504 loan application activity, which we attribute to the
general loss of confidence at both the borrower's standpoint
and the lender's standpoint. However, I am happy to report that
we seem to be seeing a bubbling up of some new activity.
Since April 1st, we have approved seven loans. And our loan
officers are attributing that to the temporary reduction and
fees that were part of the package earlier this year.
The point that I want to make is that this has moved
borrowers and probably lenders from being on the fence to off
the fence. It's been enough to spur the new activity. And I
think you should be encouraged to be seeing that. From talking
with my colleagues around the United States, they are seeing
the same kind of activity.
One final point. We have been fortunate to have a very
excellent relationship with the St. Louis District Office of
the SBA. I want you to know that you have a hard-working,
responsive, and dedicated group of people who are doing a great
job for the people, a job to stimulate small business growth in
eastern Missouri. I suspect you don't hear as many compliments
about SBA staff as you might. And I want to say that, at least
from our district office standpoint, it has been terrific.
So, again, Chairwoman Velazquez, Ranking Member Graves,
members of the Committee, I sincerely appreciate the
opportunity to testify before you today and would be more than
happy to answer questions.
[The statement of Mr. Prestemon is included in the
appendix.]
Chairwoman Velazquez. Thank you.
I now recognize the gentleman from North Carolina, Mr.
Shuler.
Mr. Shuler. Thank you, Madam Chair. Again, thank you for
your leadership, a wonderful panel today.
Our next witness is Sutton Bacon, the President and CEO of
the Nantahala Outdoor Center. Although it is a small business
of a core of 120 employees and obviously grows during the
spring, summer, and fall, the NOC is noted as one of the
largest outdoor recreation companies in the United States.
With some 80 different river and land activities at the
NOC, Mr. Sutton is responsible for the overall business
strategies and operations for 38 individual business units
managed by the companies' comprehensive real estate portfolio.
I will add that some 22 Olympians actually train and call
my hometown, Swain County, home and obviously the crossroads of
the Nantahala River and the Appalachian Trial.
And, with that, congratulations to the Nantahala Outdoor
Center by being one of our great economic thriving businesses
within an area. And this is an example of how utilizing and
through conservation utilizing our God's great gifts of our
environment, land, water, and our mountains to be able to
utilize that resource in the right way to be able to create
jobs and activity for people in this country.
So, with that, I yield back, Madam Chair.
Chairwoman Velazquez. The gentleman is recognized for five
minutes.
STATEMENT OF SUTTON BACON, PRESIDENT AND CEO, NANTAHALA OUTDOOR
CENTER INC.
Mr. Bacon. Madam Chairwoman, Ranking Member Graves, and
members of the Committee, thank you for the opportunity to
testify today. My name is Sutton Bacon. I live in Asheville,
North Carolina. And I am the CEO of the Nantahala Outdoor
Center.
Established in 1972, NOC is an employee-owned company
located at the intersection of the Appalachian Trail and the
Nantahala River near Bryson City, North Carolina. We are one of
the largest outdoor recreation companies in the country,
offering 80 different adventure programs in 10 states and 12
countries. We receive over 500,000 visitors annually. In fact,
NOC guests paddle enough river miles on federal lands each year
for 2 trips to the moon and back.
We are also a diverse company. We operate five retail
stores, four restaurants, a summer camp, and lodging for all
price ranges. And, as Representative Shuler mentioned, 22
Olympians and Olympic coaches have called NOC home.
During my tenure at NOC, we have been recognized as the
Nation's premier paddling school by The New York Times, the
best place to learn by Outside Magazine, and as one of the best
outfitters on Earth by National Geographic ADVENTURE Magazine.
Our economy in western North Carolina continues to suffer
from the loss of traditional manufacturing jobs as textile,
garment, and furniture plants continue to close. This evolving
economic paradigm is particularly acute given the large federal
land holdings in our area, most notably the Great Smoky
Mountains National Park, Nantahala National Forest, which
diminish our tax base to fund public services. Fortunately,
outdoor tourism, led by NOC, is becoming the backbone of our
region's future.
A recent study conducted by Western Carolina University
quantified the economic impact of NOC on western North Carolina
to be $48 million per year while supporting 579 full-time jobs.
In these tough times, instead of hunkering down, we feel
that a down turn is a terrible thing to waste and that it is
more important than ever to innovate through a recession to
gain long-term strategic advantage.
We are busy reevaluating our business models, employing
high technology to streamline processes, and gain greater
efficiencies and developing aggressive strategies to grow
revenue through innovation and new product development.
In 2009 we anticipate growing revenues by nearly 20 percent
and in 2010 by as much as 40 percent. We are replacing all of
our enterprise technology systems, which will make us more
efficient.
We are launching a new e-commerce Web site, opening a new
riverside restaurant, rebranding several retail operations, and
introducing numerous new programs' itineraries and destinations
to increase our top line. Most importantly, we are creating 300
new seasonal jobs and up to 80 new full-time jobs.
In addition, today I am eager to announce NOC's plans to
open an 18,000 square foot flagship retail store and activity
center in Gatlinburg, Tennessee. The new store will occupy an
anchor position in Gatlinburg's downtown shopping and
entertainment district and is located at the entrance to the
Great Smoky Mountains National Park, the nation's most visited
National Park. It will serve as an outdoor activity center and
will be a launching pad for a wide range of outdoor activities
in the Smokies, including whitewater rafting, kayaking,
flyfishing, hiking, and biking. It will also be LEED-certified,
which is a national certification program for green building.
And we will be the first retailer in the entire Smokies gateway
to be LEED-certified.
When it opens, it will become the largest retail store in
the Smokies and will create approximately 55 new jobs in North
Carolina and Tennessee.
In closing, I fell in love with the outdoors at summer camp
in western North Carolina. And I can personally attest to the
value of being introduced to the outdoors as a child and of the
federal government's efforts to enhance outdoor recreational
opportunities for our country's youth.
NOC takes over 100,000 children from diverse backgrounds on
outdoor experiences every year. And we are creating a new
nonprofit foundation to take even more. We are a testament that
small businesses from across the country can capitalize on
these new youth development initiatives.
As you have heard, America's outdoor recreation economy is
an increasingly strong and vital part of our nation's economy,
especially in rural areas like western North Carolina. In these
tough times, Americans, both children and adults, need more
than ever the physical, emotional, and psychological benefits
that outdoor recreation provides. In the last 37 years,
whenever there has been economic uncertainty, our guest numbers
have always increased, affirming the importance of outdoor
recreation during difficult times.
I appreciate the opportunity to speak with you today. Thank
you for your attention, and I would be pleased to answer any
questions you may have. Thank you.
[The statement of Mr. Bacon is included in the appendix.]
Chairwoman Velazquez. Thank you, Mr. Bacon.
And now I recognize Mr. Schrader.
Mr. Schrader. Thank you very much, Madam Chairwoman.
It is my honor to introduce a true friend of small business
growth in Oregon. That would be Ms. Chandra Brown. Chandra is
currently Vice President of Oregon Iron Works and President of
a newly created subsidiary of Oregon Iron Works called United
Streetcar. That is the only modern streetcar manufacturer in
the United States of America. This is an innovative company
that strives to keep manufacturing jobs here in this country.
In 2005, Chandra was also appointed to the Oregon
Innovation Council by Governor Ted Kulongoski and in the same
year selected as one of Oregon Business Magazine's top 50
business leaders in our state.
She is also a founding member in her spare time and Vice
Chair of the Oregon Wave Energy Trust, a nonprofit that
promotes wave energy and creates more energy-efficient and
sustainable jobs in Oregon.
Chandra and this company in my opinion are a testament to a
small business' ability and willingness to evolve and grow in
creating opportunities or taking advantage of opportunities
here in our economy, even in the worst of times. In my opinion,
she is truly a heroine of small business.
Thank you, Madam Chair.
Chairwoman Velazquez. Proceed.
STATEMENT OF CHANDRA BROWN, VICE PRESIDENT, OREGON IRON WORKS,
INC.
Ms. Brown. Good morning, Chairwoman Velazquez and Ranking
Member Graves. And I would very much like to thank you for your
kind introduction, Congressman Schrader. It is a pleasure to be
here representing Oregon Iron Works.
I think on this panel I am representing the big and the
old. I am not going to be actually reading my testimony. What I
am going to do is share a story with you. And that is about how
U.S. manufacturing is absolutely alive and well. So I am tired
of hearing about all of the stuff with U.S. manufacturing
because this small business is going to tell you some of the
good stories and how we are achieving that.
I think the best story to start out with, really, is with
United Streetcar. But to give you a little bit of history,
about what is Oregon Iron Works, the name doesn't really
indicate what we do. We were actually founded in 1944. I wasn't
around then, but I hear it was an old foxhole in the City of
Portland, a couple of guys working there during the war,
welding and fitting up machinery parts.
Basically in the '70s we moved from Portland -- and current
management bought. And we moved from the City of Portland to
Clackamas County, which is where our headquarters are now.
We also have a facility in Vancouver, Washington. Basically
in the '70s, we had gone from about 4 or 5 employees to 40
employees. Where are we at now? Again, just kind of compressing
history, now we have almost 400 employees. We do over $100
million annually in revenue. We have just recently formed this
wholly owned subsidiary: United Streetcar. Basically we have
had approximately a growth rate of 13 percent annually since
1984. And we have about 305,000 square feet on almost 38 acres
of land.
We are still a small business, and we are very proud of
that fact. And we are very grateful. Some of our land purchases
were done due to SBA financing. And so credit given back in the
'70s even. So we are very grateful for that.
What are we doing right now with United Streetcar? We
realize that to be alive and well in manufacturing, what must
you have? Diversity, innovation, and an incredible workforce.
You have to have those three criteria.
And we have been blessed to have an incredibly skilled
workforce. We have got the machinists, the welders, the fitters
that have been trained up in the Northwest. It was due to the
shipbuilding industry in the war. We have been able to retain
that skilled workforce, which enables us to build the projects
that we do.
We started out doing hydroelectric work. Then we started
building bridges across the United States. Then we went into
some defense work. We started building boats. And we have been
very successful in some federal appropriations and getting some
funding for some special operations boats.
From boats we went into aerospace. We built some space
launch complex work down at Vandenberg and Cape Canaveral. But
we are always looking to the future. So diversity has been one
of the keys, why we have had this nice continued growth rate.
But diversity means you have to be continually innovating.
You must be looking to the future. So what is the next product?
You know, we hear about manufacturing going down. Let's talk
about where the future is.
We believe the future is in things like renewable energy.
So it doesn't take a rocket scientist to know if you can build
boats and things that survive a harsh marine environment that
hopefully we could build wave energy. So we have built one of
these devices which was off the coast of Oregon. There are
several more that we believe are going to be built in the next
year or two.
So that's a new market that we think will be emerging in
the United States. So I think at some point wave could surpass
solar as a renewable energy for this country. So we want to be
at the cutting edge. And we want those jobs in the United
States being done here as we build this new renewable energy.
Now, talking about streetcars, I am the President of United
Streetcar, a wholly owned subsidiary of Oregon Iron Works. We
are incredibly excited about this because the story of United
Streetcar is a story of insourcing jobs. What we have done is
taken jobs from the Czech Republic and brought them to the
United States. We formed an agreement with Skoda as our Czech
partner. So we have the license to manufacture, exclusive
license to manufacture, modern streetcars throughout the United
States.
There are over 64 cities looking at streetcars right now
across the United States. It is fantastic, not only as a model
of transport, but it is green jobs. And it is an economic
development model for our urban centers. It is an incredible
success story in Portland.
So we are very, very proud. We recently were awarded a
contract to build a production run of six cars for the City of
Portland. And we currently have finished our prototype car,
which is under testing right now. And hopefully this summer it
will be given to the city, and the public will be riding on the
first modern streetcar built in the United States in 58 years.
So something that we are incredibly proud of and incredibly
happy, but how did it start? It started with the upper
management of our company knowing how incredibly skilled our
workers are that we could do it.
You know, I basically heard that there were no streetcars
built in the United States except for old and historic
trollies, which are wonderful, but that is not a modern
transportation option.
So when we heard that, I said, ``Well, my company can build
it. We build boats. We build bridges. We build lots of
different things. Of course, we could build a streetcar.'' And
then it is making that work. And there was a federal
appropriation involved for this prototype streetcar, thanks to
our delegation, which did a great job. And that started us down
this path.
And now we believe this could be another 100 million dollar
business unit that could be spun out of this company building
green transit projects here in the United States because right
now even Portland's cars were all imported from Europe. So at
now least we are giving that U.S. option.
And that is where we would like to say in terms of issues,
one, we are incredibly supportive of the Buy America Act and
all that everyone has done with that. We think that is critical
to U.S. manufacturing. We appreciate that.
The one issue we do see coming down the pipeline is related
to bonding. We talk about the credit issues. All streetcars
will have to be bonded. And while we have a bonding capacity of
over $100 million that we can bond with this decrease in AIG
and the security companies' willingness and ability to give the
bonds out as well as our increasing growth, we don't ever want
to turn work away because we can't get a bond.
And it wouldn't be because we couldn't. It is because we
have passed our capacity. We have too much work bonded because
right now more work needs bonding because of the higher risk
cities don't want to take on.
So we worry a little bit about that and would wonder how
the federal government could potentially help with backing that
up for bonding. As I said, we don't just want to turn away work
once we hit our bonding cap. Hopefully we are not there yet.
In addition, there are issues with incremental funding,
which we would love to see something for small projects, not
these huge, large projects, things that are maybe under 30
million, where they are not incrementally funding the Corps of
Engineers so we have to wait each year to see if they will have
enough money to build the whole hydroelectric project, which
causes delays and much greater costs.
So, again, in the interest of the taxpayers, we think small
projects that can be fully funded from the start will have much
greater benefit across the line.
[The statement of Ms. Brown is included in the appendix.]
Chairwoman Velazquez. Time has expired, Ms. Brown.
Ms. Brown. Oh. Thank you.
Chairwoman Velazquez. Thank you very much for your
testimony. And you will have time during the question and
answer period to expand on your testimony.
Now I recognize the gentleman from Pennsylvania, Mr.
Altmire.
Mr. Altmire. We are so proud to have all of you here.
Congratulations. It is wonderful to hear all of these stories,
one after the other, of the good news that is happening in the
country.
We have had some good news in western Pennsylvania, too, on
the small business front, one of whom we are very happy to
have, Mr. Kirk Farra here, from the spectacular Town of
Zelionople. It is a great place.
He is President of In-Synch Systems, LLC in Zelionople. In-
Synch is a veteran-owned software company that creates state-
of-the-art products for the law enforcement community. It was
founded in 1999. And the company has rapidly expanded and
serves clients all across the company. The company's top
product, a record management software, allows agencies to
better communicate within the entity and to outside legal
organizations.
Again, congratulations to all of you. And welcome, Mr.
Farra.
STATEMENT OF KIRK FARRA, IN-SYNCH SYSTEMS
Mr. Farra. I am very pleased and honored to be here,
Chairman Velazquez. I am a man of few words. So I doubt very
much that I could possibly talk for five minutes.
I am a very technical person, founded In-Synch Systems back
in 1999, after working for about 15 years in the industry. I
really wanted to make a difference and kind of had chosen kind
of the law enforcement field, providing software and services
there because we had analyzed that there weren't that many good
software systems, spent a lot of years developing a product,
kind of finally had some opportunities where we actually made
some money. The past few years we have really accelerated in
our growth.
We have been hiring through the recession. We are hiring
now. So if you know any technical people that need jobs?
I just want to talk a little bit about our company. We
really try to hire people that can become family members. We
are a very family-oriented business. Everybody enjoys working
together.
We are passionate about supplying systems that could really
provide safe and just communities. That is really what we are
all about. Chances are someone, some police department in or
around where all of you live is using our system to make a
safer and juster community.
Just one other thing that I wanted to talk about is the
federal grants for law enforcement. It is very, very important
for our business because it indirectly is the way that we are
funded. In prior years, we were in two federal programs where
the appropriations have gone away that directly helped us.
But we really, really expect a stimulus package for the
burn grant and the cops technology grants and all those other
grants that when that money is released we are really going to
go grow rapidly again and be able to provide our system to even
more communities throughout the United States.
That is about all I had.
[The statement of Mr. Farra is included in the appendix.]
Chairwoman Velazquez. Thank you, sir. Thank you for the
great stories. It is just wonderful to be here in the presence
of so many hard-working businesses in America, especially at a
time when n to only we are facing an economic down turn but the
news that we watch or that we read just how it has been
difficult to get this economy growing.
We all know, at least the members who sit on this
Committee, that you hold the key to success and how can we get
this economy growing again by creating jobs.
I would like to make a question and have all the members of
the panel answer it. What do you think is the single biggest
challenge facing small businesses today? And how should it be
addressed? We can start with Mr. Bacon.
Mr. Bacon. I think that from my perspective, one of the
biggest challenges is consumer confidence. And I think it is
important for government and the media to convey the good news
and the work that many of the panelists are doing here today
and the success stories, that there are segments and sectors of
the American economy that are growing. There is good news.
I think that if that can permeate down to consumers and
increase consumer confidence, I think we will all be better
off.
Chairwoman Velazquez. Mr. Reister?
Mr. Reister. I would agree that the media has just
cannibalized what business is doing right now. And the
negativity that they are thriving on continually just depresses
the people who have funds to buy to produce new products, to
purchase homes, to improve their homes. That is one of the
biggest challenges we face.
There were a few things in the stimulus package that
address that but not in a manner that I would have seen or
believed truly is going to strive to grow the economy. And so
that would help if we could get more money into the hands of
small business owners and allow them to feed from the bottom
up, not from the top down.
Ms. Storey. In our particular case, since I speak from the
aspect of doing business with the government, a couple of
things are happening. And that is in my area, we do not bid in
the small business area. I always have to go up against the big
guys, unrestricted. We are seeing profit margins and bids
coming in at what we consider to be crazy prices that they are
absolutely doing to keep the door open.
Well, the big guys can bid that low. It is very difficult
for us to be competitive because that would put me in the hole.
So you take that. And then you take a look at every year I call
it the grovel to the bank. And that grovel means that I have
got to stand there and justify my profitability or lack thereof
of those contracts that we do bring in because the bank--and I
apologize if there are any bankers in the room, no offence, but
they will look for any reason not to have you hold onto that
line of credit or, heaven forbid, you are in the best and worst
case scenario, ``I won a big contract,'' worst case scenario,
need to expand the line of credit, they don't want to do it. So
for right now that is a big challenge.
Chairwoman Velazquez. Thank you.
Mr. Mirman?
Mr. Mirman. I would like to see a little bit more of a
longer-term focus. Right now you have cities around the world
that are focusing on their bid for the 2016 Olympics, cities
like Chicago, Madrid. And, in fact, in Chicago, they are
working on a technology right now that as they expect millions
of people to come to Chicago for the Olympics, they are looking
to harness the energy created by people walking on floors.
And it is not so much the floor and the energy that they
are going to create that the Olympics will not have to rely on
outside sources of energy, they are going to create all their
own energy from the technologies that they are using, but they
are focusing on something that is not going to happen. It is
still seven years out.
And I think that we have this preoccupation in the United
States that we need to have something by this afternoon or by
tomorrow. When I was abroad, there are lots of cycles, ups and
downs. And there are going to be many more. But the focus is
from a much longer-term perspective. And I would like to see us
embrace that here.
Chairwoman Velazquez. Ms. Brown?
Ms. Brown. Our biggest challenge is actually related to a
skilled workforce. We hear this again and again, but
particularly for us, we are looking for welders, fitters,
drillers, machinists. We have a very aging workforce.
We are a union shop, very blessed to have many of our guys
40-50 years with us. It has been an incredible run. But they
are getting older, and they are getting tired. And we don't
have the folks coming in behind because things like industrial
arts have left our high schools for some folks that have never
even experienced welding or fitting or some of these jobs of
your hands.
And we actually don't have much trouble finding, funnily
enough, the engineers and the project managers and the
professionals, but if we can't continue to have a skilled
workforce, which earn way better than family wage jobs, health
care taken care of, all sorts of other great things, I think
that is going to be a problem for us in the future.
Chairwoman Velazquez. Yes, Mr. Prestemon?
Mr. Prestemon. Well, two things. One is I think speaking
positively about the economy from a leadership standpoint, from
the presidential as well as the congressional leadership is
important. So I don't disagree with what I heard Mr. Bacon say.
I hear recurring concerns about the escalation in health
care costs. And small business owners are not advocating any
particular solution to that other than that they do believe
that it has the potential to undo a lot of the profitability of
some of their companies.
Mr. Farra. Just as a follow-on to what he said, as an
employer, we want to provide very, very good health care to our
employees. The challenge is we don't have any control over the
cost of it. And it just goes up and up and up. And you just
don't know what to do sometimes, you know. Getting control of
that would help a lot of small businesses, I think.
Chairwoman Velazquez. I guess we are working on that.
Ms. McClain?
Ms. McClain. I didn't intend to complain. I am so honored,
you know, and so excited to be here. But since you have asked--
[Laughter.]
Ms. McClain. The real problem we face is bonding. Now, we
have perfect credit. My husband and I have been married 44
years. You know, there is not a thing in the world wrong with
us or what we are doing, but our bonding company wants us to
leave all the profit in the company, not to take anything out
ourselves.
We leave it in the company, we pay 38 percent taxes. Okay.
Then we take it out, we have got to pay 51 percent taxes. We
pay 30 percent federal, 5 percent state, 7.65 percent for
Social Security and Medicare. Then we have to match that 7.65
as the employer. So that is 51 percent.
Well, I can't make them understand that that is not
logical. You can't pay 38 and then 51 and work for 11 percent.
I mean, I don't really know what the answer is, but our problem
has been bonding.
Like the lady down there said, we have to compete with the
larger companies. And we have to have large bonded in order to
do this.
Chairwoman Velazquez. Thank you.
Ms. McClain. That has really been our struggle, is bonding.
Chairwoman Velazquez. Okay. I hear you.
Dr. Pochapsky?
Mr. Pochapsky. Thank you. We have similar issues, but I
think for a smaller high tech manufacturing and development
company, probably the most important for us is getting capital
equipment, facilities, and then keeping highly compensated and
skilled employees.
We do that, specially in a small, growing S corporation.
The funds that you have available to do that are the same funds
that are being taxed. And most of your expenses against that
are either deferred or they can't be taken because you are
putting it into inventory.
So I would say protecting the pool of cash that is
available for a small company to grow, especially growing small
S corporations are going to pay very high tax rates without
actually taking money out of the business.
If that structure can change so that yes, if the owners
take money out of the business, that should be taxed. But you
want to be able to protect the pool that helps small companies
grow.
Chairwoman Velazquez. Thank you.
Mr. Pochapsky. Thank you.
Chairwoman Velazquez. Mr. Luetkemeyer?
Mr. Luetkemeyer. Thank you, Madam Chairwoman.
I appreciate everybody being here this morning and their
testimony. It is interesting to listen to the concerns. And, as
you have described your various businesses and opportunities
that you have taken advantage of, it was great to listen to
some of the things. I wrote down some of the highlights of some
of your comments.
I was grateful for the opportunity that is available in
this country. As an entrepreneur, you have visions, small
business person. You have to have an attitude of self-reliance,
of determination; a strong work ethic; respect for your
employee; sacrifice; innovative ideas; willing to be able to
change or adapt to whatever situation you have; and, most of
all, get the government out of the way, do no harm to you. And
this is what we here on this Committee hopefully are able to
do--
Chairwoman Velazquez. Will you yield?
Mr. Luetkemeyer. Yes, ma'am.
Chairwoman Velazquez. Did I hear that or did you add that?
I am just teasing you.
Mr. Luetkemeyer. So we are excited that you are here giving
some ideas and getting help. And you are helping us. Chairman
Velazquez has been instrumental in trying to do this and trying
to get government out of the way to help you do what you do
best, which is lead our country.
One quick question for you here with regards to something
that we are currently considering legislation that would have
an effect on raising energy prices. Producers, consumers,
transportation firms, everybody, how would a steep increase in
energy prices affect your company?
And we can just go down the line very quickly. We don't
have to have a lengthy explanation but just briefly give us an
idea of how these are going to impact you.
Mr. Bacon. One of the things that we are making strategic
investments in is green energy, solar. We purchase most of our
electricity from hydropower. So we are looking at bringing and
adding to the grid additional packs. So that is our
perspective.
Mr. Luetkemeyer. Okay. Very good.
Mr. Reister. We saw this last year and the year before when
gas prices soared through the roof. And we had to charge strip
charges to our customers to get to their houses. In many cases,
they don't have the money to pay the service call in the first
place. And we donate a lot of those service calls back, but we
can't afford to do that on a long-term basis.
So if the energy costs keep going up, we have to come up
with new ways to provide that service, whether that be from
satellite locations so we are not driving as far or
diversifying our deployment field. But if we do that, they are
not going to be working full days because we are going to move,
then, throughout the Denver metro area. Obviously our traffic
has increased over the years.
It will help us sell more energy-efficient furnaces, but
that is going to cost our homeowners money to do that.
Mr. Luetkemeyer. Thank you.
Ms. Storey. In our particular case, it costs our customers
more because there are trip charges or transportation charges
from the manufacturers. Therefore, any time the customer has to
pay more for fuel, they are going to look at us to say, ``What
else cane you cut out of our end.''
Number two, what we did was a 20 percent cutback, having
our employees stay home one day a week we set up to
telecommute. The good news is that was great. The bad news is I
am now paying overhead for the office space I took, thinking I
had the employees there. So the impact is negative as the
energy cost goes up.
And we must work in the LEED program. So energy impacts us
in a 360 mode.
Mr. Mirman. In real estate, energy cost, increasing energy
cost, actually increases somebody's overall cost of living. And
what that means is they have less disposable income all across
the board, whether it is for incidental health care or their
mortgage payment, et cetera. And so how it affects our
business, it affects our business because people can afford to
buy less house and have less money to spend.
And so it reconfigures the way people live. They don't want
to commute. They want to live in urban centers. Urban centers
are not prepared yet to deal with that huge influx of people
because there are a lot of density issues that we are seeing.
The other thing that happens is people are looking
elsewhere. We expect ten percent of the baby boomers to leave
the United States and move to foreign countries because there
are lower costs of living there.
Ms. Brown. That is actually a very complicated question for
us. Obviously increasing energy negatively impacts us because
we transport such huge goods. I mean, some of our things weigh
250 million pounds. And that is by barge or by truck or by
rail. Certainly that is a huge expense.
However, on the other side, it is an equation because, for
example, when the gas prices have risen, obviously public
transit goes up. And the investment in streetcars goes up. So
we can potentially sell more product or more wave energy
devices. So for us it is a mixed bag.
Mr. Prestemon. Yes. And that is an incredibly complex
question.
A couple of things. In Missouri, the vast majority of the
electrical power that is produced is produced by coal. And that
is both good and bad, I guess, in that the rates are really
low. So I can't say that electric utility rates have been an
impediment to growth in Missouri up to this point in time.
What we are concentrating on over the next few years is to
come up with programs and strategies to help businesses,
really, of all types use less energy, use the energy more
efficiently, and wait to see how, regardless of whatever
happens with the regulatory environment from Washington, D.C.,
we think that is a reasonable strategy to take.
Mr. Farra. I think it would definitely negatively affect
our company because our customer base is police officers. And
they have to drive their vehicles around. And if energy prices
go up, their whole budget gets taken up by feeding the gas
tanks of the cars. And that eats up their discretionary income
to spend on other products.
Ms. McClain. Well, it is my opinion that the fuel process
actually pushed the economy to the point it is now. It was
already going down, but when the price of gas went up rapidly,
everybody's utilities, their gas bill, you know, everything
affects something else. And that is what happened when the gas
prices went up. It took away a lot of profit from everybody's
business.
Mr. Pochapsky. I don't have anything to add to that.
Chairwoman Velazquez. I recognize Mr. Bright.
Mr. Bright. Thank you, Madam Chairman. I will tell you this
has been one of the best. I am a new member to this Committee.
And I will say that over the last five months, I have had the
opportunity and privilege to sit in on many of these hearings.
And, Madam Chairman, to me this has probably been if not the
best, one of the best. And I want to thank the panelists.
I really don't have any questions, just basically a
statement for the record and for your information. I want to
thank you. You truly are the heroes that make our economy and
our country strong. So thank you for your time, your
dedication, your commitment.
One last statement, and I will close. You truly are heroes.
And you truly are the product of the American dream. So keep up
the good work.
It is my privilege to have Ms. McClain in my district and
to see how she just resonates with honesty and integrity. And I
know that goes for each one of you. So thank you for what you
are doing for our country and our economy.
Just let us stay plugged in with you. And you stay plugged
in with the U.S. House and the Congress and let us know what we
can do to make your businesses strong and not just be a person
that is committed to helping you in your small business but
help us be your partner and help you be successful in the
future.
So thank you very much. And thank you very much, Madam
Chairperson, for allowing us to have this great opportunity to
hear within the Beltway.
Chairwoman Velazquez. Thank you.
Mr. Coffman?
Mr. Coffman. Thank you, Madam Chairman.
And I want to say coming here today, you truly are the
heroes, I think. And the American dream is to own your own
business. I was in small business for a while and also served
in Iraq with the United States Marine Corps. And I am not sure
which one is tougher.
Mr. Reister, a question of you. When we heard the testimony
today, it seems that most of the witnesses were heavily engaged
in government in some capacity as a customer or as a contractor
related to government.
And, yet, can you tell us about your business in terms of
what your--I mean, have you benefited from government programs?
What is your interaction with government? If you could
elaborate on that, please?
Mr. Reister. Thank you, Congressman Coffman.
I would have to say having a gun pointed at you is much of
a hero than what we are doing out here. So thank you for your
service to our country.
We don't pursue government jobs. And the reason we don't
pursue government jobs is we really don't want government
involved in our business and we don't want to be in
government's business. It affects us.
The jobs that we have done in the past, Davis-Bacon jobs,
we have hired employees to do those jobs outside of the current
employment pool. We took specific employees and allowed them to
run the jobs for us.
Then when the Davis-Bacon job ran out, they didn't want to
come back to work for us at a competitive wage that we were
able to offer that was competitive with the marketplace. They
wanted the Davis-Bacon wages to continue. And that is just not
reality.
Their lifestyles exceeded their income in those cases
because they left for a year and a half. But they spent what
they made, spent more than what they made, put themselves in a
bad position. And then many times, the ones who did come back,
we had to give personal loans to get them out of financial
trouble. Those monies were never replaced by us.
So we don't typically pursue government jobs based on those
types of issues.
Mr. Coffman. Let me ask you about financing, your financing
of these. And anybody else can certainly elaborate on this. And
that is that we had met when you came into my office as a
constituent, expressed concerns to me about credit lines and
just small business. At the time that you met with me, you
expressed concern that the credit markets were really frozen at
the grass roots of our economy.
And I wonder if you could expand on that to the Committee?
And certainly anybody else can expand on that as well. Please,
Mr. Reister?
Mr. Reister. Those markets are still frozen. The monies are
not there. We have had them pursue us, our banks, to loan us
money. But we don't need the money. So it's very easy to give
money to somebody who doesn't need those funds.
When you do need to pursue those funds and you are trying
to apply for them, most of the competitors that we have out
there, they have closed out the lines of credit. They have
turned them off.
And, as I said, 20 heating contractors, qualified heating
companies, not a guy, his son, and his dog. I am talking about
employing 20, 30, 40 people have gone out of business. They
don't exist anymore. And these are companies that existed for
20, 30, 40 years in our marketplace.
So, as I see it, I don't know how you turn the faucet back
on, but the efforts that this body has made through the
stimulus package did not achieve the desired effects. They may
be giving it to GM through your guy's body, but GM is not
giving it to the tier three suppliers that work for them. They
are holding back financing, our companies are, that we work
for, the builders, or the bank. They are allowing us to go 120,
200 days to achieve and receive our payment.
And then usually it is a partial payment, not a full
payment. We are able to absorb those costs because we continue
to reinvest in our company, even at the cost of being taxed on
those funds. Other companies out there didn't do that, and they
have folded up as a result.
Mr. Coffman. Would anybody else like to comment on that?
Ms. Storey. I would like to comment, if I could. I would
start by saying I am married to a retired Marine, who now works
with me. And he does declare that my small business is tougher
than his 21 years in the Marine Corps. So I had to get that in.
I will say that what Mr. Reister has just described is what
we in government contracting call bundling. It is just that
bundling in the government is a little different--and I spoke
to that a little bit earlier--than bundling in the commercial
world.
I agree with exactly what he says about the lines of
credit. You know, when you don't want it, they chase you down
like a dog. And when you really need it, they just run from
you.
I tend to disagree -- and I wouldn't have said this 16
years ago, but right now I feel that, again, government
contracts is one of the safest places to be. I do agree that it
is quite a bit different than the commercial landscape. And I
have been saying this for years, way before the stimulus
program. But now that there is stimulus money on the street,
people want to know how do we get a part of it.
I will end my comment with saying, though, that we are
headed toward what I am calling the perfect storm. The perfect
storm to me is right now we have a very young inexperienced
workforce, acquisition workforce, not only DOD but all the
agencies. If you combine that with a poorly trained,
inexperienced group of contractors, to me that is the storm.
You have a lot of folks that on two sides of that contract
may not really know what they are doing. And it opens the door,
I am sorry to say, for potential corruption but, most
importantly, poorly intended bad consequences that can cost the
government money. So, again, I would advise taking a look at
that.
Mr. Coffman. Thank you, Madam Chairman.
Madam Chairman, can I make one comment on that?
Chairwoman Velazquez. Sure.
Mr. Coffman. Thank you, Madam Chairman.
I just want to let you know that in the Armed Services
Committee, we have a defense acquisition reform panel. We are
moving forward with legislation now out of that committee. In
fact, it was voted on the House floor. It is in conference
committee.
One of the provisions of that bill will be to strengthen,
to really greatly strengthen, the contracting capability of the
Department of Defense.
Chairwoman Velazquez. Yes, coupled with the fact that this
Committee has been proactively looking at contracting practices
and holding the government agencies accountable. Almost every
year we produce a report of how each agency is complying with
the 23 percent goal for small businesses.
Also, the HUBZone, where there has been mismanagement and
fraud. We have requested from the Government Accountability
Office to do not one but two investigations. And, as a result
of that, we are implementing certain controls to prevent fraud.
Let me recognize the gentle lady from Pennsylvania, Ms.
Dahlkemper.
Ms. Dahlkemper. Thank you, Madam Chairwoman.
As a new member of Congress and a former small business
owner, just five months ago, I listened to your stories with
envy in some ways. I miss my small business. I miss being a
part of that. I think you all do what you do because you love
being a small business owner, as well.
When I was running for office, someone said to me,
``Politics is not for the faint of heart.'' I think being a
small business is not for the faint of heart.
I want to thank you for all you do. Thank you for your
testimony. I would like to recognize your monumental
achievements today, and I would also like to recognize that
this is the 46th annual National Small Business Week. I am
pleased that this Committee has invited you heroes of small
business to testify here today.
One of the issues I want to ask the panel to just address
as a whole is health care. This is a debate that we are just
beginning, and we need your input. As the person in our small
business who made those tough decisions every year about our
health care plan for our employees. I know that if one employee
gets sick all of a sudden your premiums go up 24 percent. How
can we continue to sustain this? Many small businesses can't
and then have had to, unfortunately, drop coverage for their
employees. None of us I think want to do that. What I hear from
you and what I did as an employer was treat my employees as my
family. No one wants to do that to your employees.
If I could ask your opinion maybe on a couple of issues?
Individual mandates. Do we need to mandate that everyone have
some kind of health insurance coverage? What about issues of
price transparency, of being able to actually look at your
services and compare price, cost, procedures, doctors,
hospitals or anything else you might want to share specifically
on our health care debate as we move forward?
I will start with Dr. Pochapsky, please.
Mr. Pochapsky. Yes. We just really view that as part of the
compensation package. And it is part of the way we attract
employees. So we shop around for health care. We have a decent
pool. We used to be members of a high tech council. We have
gotten big enough where now we have a big enough pool of
employees where we can shop for health care and provide it to
our employees as a benefit.
So it is getting expensive. We have to be very careful
where we get it from. But it is part of the total compensation
package. It is part of how we attract our employees and keep
our employees.
Ms. Dahlkemper. Do you think everyone should be mandated to
be covered?
Mr. Pochapsky. Who is going to pay for it, then? I mean, I
don't know how that is going to work if that is the case. I
know if it is a mandate and everybody can get health insurance
from somewhere, why would we then offer health insurance? It
would probably be the first thing that a company would do.
Ms. Dahlkemper. So you see it as an advantage to your
company over others to attract?
Mr. Pochapsky. It is just part of the compensation package.
I don't know if it is advantage over anybody else, but it is
part of what you have to pay an employee, someone who works for
you. And if you want to keep a good employee, you give them
good health insurance. You make that part of your compensation
package.
Ms. Dahlkemper. Okay. Ms. McClain?
Ms. McClain. I think any company that could afford to pay
the premium would certainly offer their employees health
insurance. Now, we offer Blue Cross health insurance and dental
insurance. We find that our employees expect this of our. And,
you know, we are glad we can do it.
The first years we was in business we did not offer health
insurance. We did not have the money to pay for it. We pay half
the premium, whether it is single coverage or family coverage.
The company absorbs half of it, and we are glad to do this.
Ms. Dahlkemper. Mr. Farra?
Mr. Farra. We just see it as a cost of doing business. If
there were some sort of mandate that every business had to
provide that, I think you would see a lot of small businesses
go out of business.
But, you know, on the other hand, a small child in an inner
city area, they need to have that. So it is kind of who pays
the bill? Do the businesses pay the bill or does the government
pay the bill?
Ms. Dahlkemper. Right now everybody is paying about $1,000
a year for all of the people who aren't insured. But, you know,
we are paying for it. I am curious, because I want to know I
struggled with this as a small business owner. Where your
feelings are on this because it is a debate that is going to
happen this summer.
Mr. Prestemon. In terms of a mandatory requirement on small
business, that would not be responded to with a well battery of
small business owners.
The recurrent theme that I hear, control costs and get
access to pools, insurance pools, particularly for the company
that maybe only has five people or ten people in it, there is a
recurrent frustration. I know there are both market-oriented
ways and governmental sponsored ways to accomplish that. I
haven't heard business owners talking in any detail about that,
but the pooling and cost control are the two things that I
hear.
Ms. Dahlkemper. Ms. Brown?
Ms. Brown. Well, we are a union shop. And we are a large
shop. And we have incredible health care. We take care of
everyone across the board. That is not an option. It is not
really an issue. It is part, as everyone has said, kind of the
whole package. So we pay a huge amount for that, but that is
part of what we do for the skilled workforce.
I would say we would echo that, of course, we want to
control costs. Of course, the way it is now, it is a huge issue
for the unions and for a lot of other folks across the board.
And you know obviously price transparency, I believe that is
probably a good thing as well. So yes, that is--
Chairwoman Velazquez. Time has expired. But I would allow
for the other members of the panel to respond very briefly. We
are going to have votes in the House any minute. So I would
like to recognize the gentleman, Mr. Schrader.
But do you have any of you who want to comment?
Ms. Storey. May I make a quick comment, please?
Chairwoman Velazquez. Sure.
Ms. Storey. Radically different. Yes, we do a 70/30 split,
but, quite frankly, my opinion is it is none of my business. It
should be a consumer item that they buy. I do not believe it
should be provided by employers.
I am a simplistic thinker. You will have to forgive me. I
don't pay for their car insurance, their home insurance,
shouldn't be medical. And when my employee walks through the
hospital door to the ER, it doesn't cost my employee any more
than the IBM employee or somebody else. I don't understand why
our system is that way. It shouldn't be.
Mr. Bacon. I have a brief comment if you don't mind.
Chairwoman Velazquez. Yes?
Mr. Bacon. We have a unique perspective on health care. We
are self-insured. Our health program is self-insured. And we
take great strides in providing health care. We also offer it
to all employees as a staff benefit to help improve our
retention. So at this point, I think we are okay.
Chairwoman Velazquez. Okay.
Ms. Dahlkemper. Okay. Thank you.
Mr. Reister. Just one brief comment. Just if you allow us
to pool the companies, so my industry, if we were able to pool
together, become--
Chairwoman Velazquez. That is my legislation.
Mr. Reister. Perfect.
Chairwoman Velazquez. So that we could spread the risk.
Mr. Reister. Absolutely. And that will reduce our premium.
Chairwoman Velazquez. And negotiate the premiums. Yes.
Mr. Schrader?
Mr. Schrader. Thank you, Madam Chairwoman.
I, too, would like to thank everyone for making the long
trip from back home to Washington, D.C. It gives us,
particularly in this body when times are so tough and you get a
lot of negotiate news, to see heroes and heroines out there
struggling to make a go of it and coming up with good old
American entrepreneurship to make things happen. So my hat is
off to you and many others, millions of others, across the
country. So I appreciate that.
Quick question for Chandra, if I could. Expand just a
little bit on that incremental funding you were talking about
for some of the small businesses. Is that something that we
have heard before?
Ms. Brown. I would be happy to expand on it. I will try to
be short, since I've worked a long time on these issues,
incremental funding. It is kind of like when we build a boat,
for example, We are only getting, let's say, the boat. Make a
really simple example. It costs $3 million. And we only get one
million in the first year, which can only build a part of the
boat. You are never going to get the full boat for that amount.
This is very common on Corps of Engineers projects and
hydroelectric.
So we bid the one portion. And that is never the best way
to bid. We could possibly do it faster and quicker and cheaper
if you could do the full three million up front, rather than
you get one million. Okay. Next year we are going to decide if
they know it has to be funded because you can't have a quarter
of a boat, but, you know, it goes like that usually over the
course of three years in this incremental funding.
And it's fine for the larger businesses. But for small
businesses if there can be some type of cap, you know, like for
smaller projects, like under 20 million, that those would be
fully funded versus funded year by year and constantly going
back and not 100 percent sure when that money is going to flow,
that would be very helpful for small businesses across the
United States.
Mr. Schrader. Thank you.
Ms. Brown. Thank you.
Mr. Schrader. I yield back.
Chairwoman Velazquez. Okay. Well, I am sincerely, sincerely
grateful for participation this morning. It has been an
extraordinary hearing. And it is just great as a member of
Congress to be able to listen to the stories of small
businesses. I know that you are the one creating the jobs.
And the key to get this economy back on track again is by
providing tools. You know, we might have some difference of
opinion in terms of the role that the government can play. I do
recognize that, but I also recognize that sometimes if we focus
on legislation and programs that are focused on providing tools
for businesses to be able to grow and expand, such as the
federal marketplace, affordable credit.
We all know that all of those large banks are getting help
from the government. It doesn't trickle down to the small banks
that are the ones providing the credits for our communities.
We were able to include provisions in the stimulus package
for the Small Business Administration to work with the
financial institutions so that we could increase the guarantee
for those loans, reduce the fee, and provide a loan
stabilization program that will give a $35,000 loan free,
interest-free, loan for those small businesses who are
struggling to pay existing debt.
So, with that, I ask unanimous consent that members will
have five days to submit a statement and supporting materials
for the record. With objection, so ordered.
This hearing is now adjourned. Thank you.
[Whereupon, at 11:51 a.m., the committee was adjourned.]
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