[Senate Hearing 112-903]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 112-903
 
                 HURRICANE SANDY: ASSESSING THE FEDERAL 
              RESPONSE AND SMALL BUSINESS RECOVERY EFFORTS 

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                           DECEMBER 13, 2012

                               __________

    Printed for the Committee on Small Business and Entrepreneurship
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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                      ONE HUNDRED TWELFTH CONGRESS

                              ----------                              
                   MARY L. LANDRIEU, Louisiana, Chair
                OLYMPIA J. SNOWE, Maine, Ranking Member
CARL LEVIN, Michigan                 DAVID VITTER, Louisiana
TOM HARKIN, Iowa                     JAMES E. RISCH, Idaho
JOHN F. KERRY, Massachusetts         MARCO RUBIO, Florida
JOSEPH I. LIEBERMAN, Connecticut     RAND PAUL, Kentucky
MARIA CANTWELL, Washington           KELLY AYOTTE, New Hampshire
MARK L. PRYOR, Arkansas              MICHAEL B. ENZI, Wyoming
BENJAMIN L. CARDIN, Maryland         SCOTT P. BROWN, Massachusetts
JEANNE SHAHEEN, New Hampshire        JERRY MORAN, Kansas
KAY R. HAGAN, North Carolina
  Donald R. Cravins, Jr., Democratic Staff Director and Chief Counsel
              Wallace K. Hsueh, Republican Staff Director



                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana.     1
Vitter, Hon. David, a U.S. Senator from Louisiana................     4
Menendez, Hon. Robert, a U.S. Senator from New Jersey............     5
Blumenthal, Hon. Richard, a U.S. Senator from Connecticut........    10
Cardin, Hon. Benjamin L., a U.S. Senator from Maryland...........    11
Gillibrand, Hon. Kirsten, a U.S. Senator from New York...........    72

                               Witnesses
                                Panel I

Rivera, James, Associate Administrator, Office of Disaster 
  Assistance, U.S. Small Business Administration.................    12
Chodos, Michael, Associate Administrator, Office of 
  Entrepreneurial Development, U.S. Small Business Administration    16

                                Panel II

Zimmer, Hon. Dawn, Mayor, City of Hoboken, NJ....................    51
King, James L., State Director, New York State Small Business 
  Development Center.............................................    57
Law, Kevin S., President and Chief Executive Officer, Long Island 
  Association....................................................    65

          Alphabetical Listing and Appendix Material Submitted

Association of Small Business Development Centers
    Letter dated December 13, 2012, to Chair Landrieu............   118
Blumenthal, Hon. Richard
    Opening statement............................................    10
Cardin, Hon. Benjamin L.
    Opening statement............................................    11
Chodos, Michael
    Testimony....................................................    16
    Prepared statement...........................................    18
Gillibrand, Hon. Kirsten
    Opening statement............................................    72
King, James L.
    Testimony....................................................    57
    Prepared statement...........................................    59
Landrieu, Hon. Mary L.
    Opening statement............................................     1
    Documents for the Record.....................................    22
    Responses to post-hearing questions from:
        James Rivera.............................................    84
        Michael Chodos...........................................    96
        Hon. Dawn Zimmer.........................................    98
    Letter dated December 6, 2012, from Senators to SBA 
      Administrator Mills........................................   113
    Note for the record..........................................   116
    Chart titled ``Hurricane Sandy & SBA Disaster Loans: Business 
      Loans Account for 13% of Overall Sandy Applications''......   121
    Chart titled ``Hurricane Sandy & SBA Disaster Loans: 
      Homeowner Loans Account for 87% of Overall Sandy 
      Applications''.............................................   122
    Chart titled ``Hurricane Sandy SBA Disaster Staff on the 
      Ground''...................................................   123
    Chart titled ``Damage Comparison''...........................   124
    Chart titled ``Average SBA Disaster Business Loans''.........   125
    Chart titled ``SBA Resource Partners: SBDCs, WBCs and SCORE''   126
Lautenberg, Hon. Frank R.
    Prepared statement...........................................    82
Law, Kevin S.
    Testimony....................................................    65
    Prepared statement...........................................    67
Lieberman, Hon. Joseph I.
    Prepared statement...........................................    80
Manhattan Chamber of Commerce
    Letter dated December 10, 2012...............................   120
Menendez, Hon. Robert
    Opening statement............................................     5
    Prepared statement...........................................     7
Rivera, James
    Testimony....................................................    12
    Prepared statement...........................................    14
Snowe, Hon. Olympia J.
    Responses to post-hearing questions from:
        James Rivera.............................................    99
        Michael Chodos...........................................   105
        James Rivera and Michael Chodos..........................   107
        James L. King, Hon. Dawn Zimmer, and Kevin S. Law........   110
        James L. King............................................   111
Vitter, Hon. David
    Opening statement............................................     4
Zimmer, Hon. Dawn
    Testimony....................................................    51
    Prepared statement...........................................    53


                     HURRICANE SANDY: ASSESSING THE

          FEDERAL RESPONSE AND SMALL BUSINESS RECOVERY EFFORTS

                              ----------                              


                      THURSDAY, DECEMBER 13, 2012

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:06 a.m., in 
Room SD-428A, Russell Senate Office Building, Hon. Mary L. 
Landrieu, Chair of the Committee, presiding.
    Present: Senators Landrieu, Cardin, Vitter, and Risch.

 OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, AND A U.S. 
                     SENATOR FROM LOUISIANA

    Chair Landrieu. Good morning. Thank you all for joining us 
today to discuss the Small Business Administration's response 
to Hurricane Sandy, the President's recent supplemental request 
in this space, and State and local small business recovery 
efforts in the impacted region.
    I would like to thank our witnesses that will be testifying 
in just a moment, and I will introduce them in just a moment, 
but let me make a couple of brief opening statements.
    We are here today to evaluate the response and recovery 
effort in the aftermath of Hurricane Sandy, which struck the 
Northeastern United States on October 29 as the largest sized 
storm system in U.S. history. Hurricane Sandy claimed the lives 
of 132 Americans, damaging or destroying more than 651,000 
homes and 459,000 businesses, leaving more than 8.5 million 
families without power, heat, or running water. Most of the 
water and electricity and power grid has been turned back on, 
but yet I understand there are still communities that are 
challenged.
    The scale of this disaster has created significant housing 
and transportation challenges, and successful recovery will 
require a sustained effort on the part of the Federal, State, 
and local officials, private businesses, voluntary 
organizations, neighbors, and survivors, of course, themselves.
    Earlier this week, I had the chance to tour some parts of 
the tri-State area that were hardest hit. I was led on that day 
trip by Senator Menendez. Senator Lautenberg's staff was in 
attendance. Senator Tester and Senator Stabenow took the 
opportunity, Senators from Montana and Michigan, to come and 
tour the area, because we are very concerned, and Senator 
Vitter, who will be joining us today, was scheduled to come and 
planned to, but weather delayed him. So we have both 
Republicans and Democrats with their eyes on the disaster.
    One of the reasons we are here today, however, is to make 
sure that the Federal Government, through the Small Business 
Administration, is doing everything in its power to assist the 
thousands of small businesses that have been hurt in this 
natural disaster.
    By and large, the Federal response has been robust to 
Hurricane Sandy. More than 500,000 people have registered for 
temporary housing and individual assistance. FEMA, they were on 
the ground right away, has provided over 15 million meals, 20 
million liters of water, 1.7 million blankets, and 135,000 
tarps. DOD has delivered 9.3 million gallons of gasoline to 
over 300 gasoline stations, and 270 million gallons of salt 
water have been pumped out of transit tunnels. There have been 
over 17,000 Federal personnel and over 11,000 National 
Guardsmen, and I want to take a minute to thank, again, the 
first responders at every level, from firehouses to police 
stations to volunteers in the neighborhood as well as the 
National Guard from so many States that came to the aid of the 
Northeast.
    The President and numerous administration officials have 
been on the ground surveying damage and meeting with State and 
local leaders. In fact, Governor Cuomo and Governor Christie 
have been here to the Capitol to express their desperate need 
for help and support.
    I want to start with some positive statistics and then go 
into just a few areas that I am concerned about. One of the 
areas that I am concerned about is the fact that the SBA has 
only approved $205 million in disaster loans to approximately 
32,000 homeowners, renters, and businesses. However, the 
disbursement--while those numbers sound fairly impressive--the 
disbursement is only $6 million, and we want to get to the 
bottom of that today. I understand this number is expected to 
grow, and, in fact, since this statement was put together, 
those statistics have changed. But I think it is important to 
keep our eyes on the results, what is happening right on the 
ground for businesses and homeowners making decisions about 
when to rebuild, how to rebuild, and where to rebuild, and if 
they are going to rebuild. It is a big decision.
    As Chair of this committee and a Senator from one of the 
hardest hit States in recent years, I believe that one of the 
most important responsibilities of our committee is to ensure 
that the SBA be fully staffed, better prepared, and ready to 
quickly assist businesses following disasters. In the aftermath 
of Hurricanes Katrina and Rita, I took the opportunity as Chair 
of this committee to really tune up this response, and I am 
very proud to see it in operation today.
    In the past, planning was insufficient. Staff and funding 
came up short. There were just immeasurable delays, red tape, 
and paperwork. Following the 2005 storms, it took over 74 days 
to process a home loan and 66 days to process a business loan, 
even longer for disbursement of disaster funding. SBA pushed 
disaster victims for mountains of tax records which had been 
lost in flooding. I think all those days are behind us, I hope, 
and I hope we will hear testimony that the red tape has been 
eliminated, that we are not requiring survivors to produce 
multiple copies of tax records that, in many cases, were lost 
in the storm itself.
    So for this reason, I am pleased to see that we have had a 
great deal of improvement with the SBA and your response to the 
disaster today. And I want to note that these reforms included 
a disaster loan limit increase for businesses from $1.5 million 
to $2 million. New tools were authorized, such as bridge loans 
or private disaster loans following catastrophic disaster. As I 
said, improved coordination between the SBA, IRS, and FEMA. 
And, very importantly, allowing nonprofits, for the first time, 
to be eligible for economic injury disaster loans.
    In a storm like this, the first groups that are going to be 
turned to are your faith-based organizations, your volunteers, 
your Chamber of Commerce, your local organizations that were 
themselves devastated, losing headquarters, losing membership, 
losing staff members, sometimes geographically if not in loss 
of life. People have moved away or are not living in the 
community where they lived. It is very important to get these 
nonprofit organizations back up. They will become the leaders, 
of course, in the recovery.
    Building on these reforms, the 2010 Small Business Jobs Act 
also included a provision allowing aquaculture businesses to 
receive economic injury loans, a very important business to the 
State that Senator Vitter and I represent and to many coastal 
communities. I hope these will come in handy this time around.
    So I am pleased to report that the time frame for home 
loans has been reduced from nine days to 74 days after Katrina 
and Rita. That is good. Business loans for Sandy are averaging 
ten days, compared to the 66 days in 2005. However, I do think 
that we need to do more in terms of getting money on the 
ground, and we will share with you some of what you have shared 
with us in terms of actual disbursement.
    We also, I believe, need to modify SBA requirements that 
borrowers must use their personal home as collateral when other 
collateral is available, and I have asked for that provision to 
be included in the supplemental, to give borrowers the maximum 
flexibility that they need at a time like this, particularly 
businesses that have been utterly destroyed. And believe me, I 
saw for myself thousands, literally thousands, in just the few 
hours that I was on the ground.
    Senator Blumenthal, we did not make it to your State, but 
we were in New Jersey, in Longview Beach, a small community. I 
think Mayor Mancini has been the mayor there, and his father 
was the mayor before. He, of course, said to us they have never 
seen anything like this in 50 years, and block after block 
after block, restaurant, gas station, barber shop, toy store, 
hairdresser, on and on and on, just completely gutted with the 
debris out front.
    Now, we have seen these visuals before at home and it is 
heartbreaking. And right now, at a very sensitive time in the 
calendar, holiday season, with Christmas coming up, these 
families and businesses that have, in large measure, Senator, 
invested their entire lives building a business that is 
successful and somewhat seasonal, because you are on a coastal 
area, have to make a decision whether they are going to reopen 
or not for Memorial Day. So getting these loans out and getting 
them with the reduced paperwork, of course, the care for the 
taxpayer, is what our goal is.
    I am going to not go into the examples that I have about 
some of those businesses because I do want to hear from the 
leaders of the Small Business Administration. But I will say 
that the President sent up just yesterday, the day before, a 
$6.4 billion supplemental request--I am sorry, last week he 
sent it up--and the Chairman issued his mark last night, and 
that document is now public. I believe that the sooner we pass 
the $6.4 billion supplemental, which provides absolutely 
essential mitigation, help for small businesses, homeowners, 
and most importantly, flexible community development disaster 
grants is absolutely essential for the recovery of this region, 
because, as we knew going after Gustav and Ike and Katrina and 
Rita, if the people do not have confidence that at least their 
local leaders have been given access to serious money, and $60 
billion is a serious amount of money, they will lose hope, 
because a disaster is so overwhelming. And that is the last 
thing you want people to do, is lose hope. You need to really 
harness that resiliency and the human spirit, to believe that 
they can rebuild these communities in the face of overwhelming 
odds, and to build them stronger and more resilient.
    So we are going to get into the testimony in a minute. Let 
me call on Senator Vitter, and I thank him for sitting in for 
Senator Snowe--he brings a tremendous amount of experience to 
this issue--and recognize him for a short opening statement. 
And then we are joined by Senator Blumenthal and Senator 
Menendez, and I would be looking very forward to their comments 
of their own eyes on the ground and personal experience with 
their constituents in this situation. Senator Vitter.

  OPENING STATEMENT OF HON. DAVID VITTER, A U.S. SENATOR FROM 
                           LOUISIANA

    Senator Vitter. Thanks, Madam Chair, and thanks to all our 
witnesses. I just wanted to make three points briefly.
    First of all, I want to again express my real sympathy for 
and support of all the victims of Sandy. This was a horrible, 
devastating disaster, wiping out homes and businesses and 
livelihoods and it has a very tragic human face and we always 
need to keep that in mind. So I am certainly supportive of 
acting quickly in terms of help and aid that is going to 
directly, immediately help those victims. And we also need to 
do that in a thoughtful, responsive, and responsible way with 
the American taxpayer in mind. We can do both of those things. 
So I certainly support that.
    Secondly, on the SBA side, I think there is good news and 
there is room for continuing improvement. The good news is, I 
do think we have come a long way positively since Katrina and 
Rita, and the SBA disaster response has been significantly 
improved. The initial response at SBA in 2005 was slow and 
inadequate before Steve Preston took over and really turned the 
disaster program around, and it has improved since then.
    We were able to work on this committee in a very bipartisan 
way to write and enact further improvements and reforms that 
Senator Landrieu mentioned, and I was proud to work with Mary 
and Senators Kerry and Snowe and others on those improvements, 
including the SBA disaster reforms in the 2008 farm bill. But 
we can continue to learn and can continue to improve and enact 
reforms and we need to do that, including in this context.
    And third and finally, I want to touch on an area that is 
outside this committee's jurisdiction, but nevertheless very 
important, which is the Corps of Engineers and Corps reform. 
The Corps is obviously another Federal agency that is very 
important with regard to any disaster like this and we have to 
improve the Corps process and address real reforms so that we 
can work quickly and adequately, address needs like this. We 
have been working on that, including in a bipartisan way, and I 
hope to include many further significant Corps reforms in the 
next water bill, which Senator Boxer and I are actively working 
on now.
    So, again, thanks to all of you, and I am certainly all 
ears.
    Chair Landrieu. Thank you.
    I would like, if I could, Senator Blumenthal, because 
Senator Menendez has a time crunch, would you allow him----
    Senator Blumenthal. Absolutely.
    Chair Landrieu. Thank you. Senator, you have been such a 
champion for the people of New Jersey and the entire region. 
Thank you for joining us this morning and we are happy to hear 
your opening remarks.

OPENING STATEMENT OF HON. ROBERT MENENDEZ, A U.S. SENATOR FROM 
                           NEW JERSEY

    Senator Menendez. Well, Madam Chair, thank you very much 
for the opportunity, and thank you for coming to New Jersey 
with several of our colleagues and touring the devastation 
along the Jersey Shore. And I want to thank Senator Vitter, who 
was on his way to join us. I appreciate it. Unfortunately, 
weather deviated his flight and we could not get together, but 
I appreciate the effort.
    Senator Vitter. I got a wonderful tour of the Pittsburgh 
airport rather than seeing what Sandy had done.
    Senator Menendez. Well, it looked a lot better than what 
you would have seen in New Jersey, I will tell you that. But 
thank you very much for the effort and for your comments and to 
my colleagues for their courtesy.
    You know, Madam Chair, you and Senator Vitter are certainly 
no strangers to natural disasters and you have been an 
incredibly important friend and ally throughout the process and 
helping us understand the lessons of Katrina.
    This is the worst natural disaster that my State has ever 
faced. The surge came quickly. It destroyed whole communities. 
It took houses from their foundations. It changed the 
topography of the coastline. It devastated some of the most 
densely populated communities in the country. It took lives and 
property.
    More than two-thirds of our residents and businesses lost 
power. Forty percent of the nation's transit riders had their 
commutes disrupted. Many still today have their, not only their 
rides disrupted, but costing them a lot more to make their 
transit commute to work, so much more of their income is being 
bit out of the process. And a countless number of small 
businesses are now faced with the overwhelming job of cleaning 
up and trying to get back to business.
    In New Jersey alone, there are more than 34,000 
applications for SBA disaster loans that have been submitted. 
These small businesses simply do not have the resources or 
capital that larger companies do to quickly rebuild. It can 
often take weeks, if not months, to get back up and running, 
valuable time and revenue lost at the worst possible moment. 
And as you saw, Madam Chair, on Monday on Long Beach Island, 
power has still not been restored and small businesses are 
still closed as a result.
    And while SBA loans can be helpful, many small businesses 
simply do not have the capacity to add more debt to their 
books. Small business owners around the State have told me that 
they already took out significant debt to either start up their 
business, survive the great recession, or even repairs after 
Hurricane Irene struck in the summer of 2011.
    So for those small businesses, like shopkeepers and the 
little ferry in Munaki--I see the distinguished Mayor of 
Hoboken is here who is going to tell you some of those 
experiences. Pam Bond and Jeff Spinardi, who own the store in 
Hoboken called ``Greetings from Hoboken,'' they have three 
full- and four part-time employees. They lost power for a week. 
They lost one of the most critical times for their sales. They 
could not even make the rent. And despite their own struggles, 
when the shelter did not have any electricity, they gave up 
their stock so that, in fact, they could light up the place 
with candles. That is the type of tremendous response we have 
seen, and there is so much more.
    So, Madam Chair, what you are doing here is incredibly 
important.
    My final comment is I appreciate that the supplemental 
appropriation that we will be considering has CDBG monies that 
can give us the wherewithal with the flexibility, based on some 
of your own experiences with businesses in Louisiana, to be 
able, when it is appropriate, to give them a grant, which may 
very well make the difference between staying open and closing, 
or getting open or closing, or getting their business back or 
not, and in so doing, also hiring so many people that, in fact, 
were hired by these small businesses, which are the engine of 
our entire economic background.
    And I would ask consent to have my entire statement put 
into the record.
    [The prepared statement of Senator Menendez follows:]
    
    [GRAPHIC(S) NOT AVAIILABLE IN TIFF FORMAT]
    
    Chair Landrieu. Thank you, Senator Menendez, and without 
objection.
    Senator Blumenthal.

 OPENING STATEMENT OF HON. RICHARD BLUMENTHAL, A U.S. SENATOR 
                        FROM CONNECTICUT

    Senator Blumenthal. Thank you, Madam Chairman. I, first of 
all, want to thank you for giving me the opportunity to 
participate this morning, and second, for your personal 
involvement and outreach to these communities, not only in New 
York and New Jersey, but also Connecticut, and not just in this 
disaster, but also going back to 2011 and the catastrophes that 
Connecticut suffered--three of them--in that period of time, 
when you personally contacted me and offered assistance. So I 
want the people of Connecticut to know they have a real friend 
in the Senator from Louisiana. Your leadership has been really 
tremendous in this area. Thank you to Senator Vitter, as well.
    I want to just briefly say thank you to the President for 
providing the strong leadership that he has in the wake of this 
disaster in Connecticut. He promptly declared Connecticut an 
emergency area and that permitted the SBA to come forward, 
along with FEMA, and I want to thank the folks who came from 
SBA, the people on the ground who have been there for quite 
some time now, many of the FEMA officials in advance of the 
storm.
    And unfortunately, many of these recent storms in their 
depth and scope and the devastation they have caused indicate 
that we may face a new normal in this kind of catastrophic 
weather-related event and we need to prepare for it in the 
longer term as well as the short term, and that is why I think 
those reforms of 2008 and the suggestions made by Senator 
Landrieu this morning and other improvements that will be made 
are so critically important.
    I think you need to know that the Connecticut SBA office 
has already approved about $6.7 million in disaster assistance 
for struggling businesses in Connecticut as well as residents. 
That figure is significant, but there are a large number of 
requests for funding that are still being processed, and, 
therefore, a large number of homeowners and small businesses 
that need assistance. The requests for assistance, quite 
frankly, are still in the pipeline and we would appreciate even 
prompter attention and processing of them.
    Nearly a month and a half after Hurricane Sandy, many 
Connecticut residents are still waiting to hear if they are 
able to repair their storm damaged homes, and small business 
owners are still waiting to find out if they will have enough 
capital to restore their equipment to pre-disaster conditions. 
And these struggling victims have waited long enough to put 
their lives and their livelihoods back on track. They deserve 
to have that opportunity and I hope that the supplemental will 
be approved promptly with the additional $250 million for SBA 
that will enable it to service these loans as quickly as 
possible. I appreciate your assistance, hope we can contact 
you, reach out to you, and work with you in accomplishing these 
goals.
    Thank you, Madam Chairman.
    Chair Landrieu. Thank you, Senator Blumenthal.
    Senator Cardin.

 OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, A U.S. SENATOR 
                         FROM MARYLAND

    Senator Cardin. Well, Senator Landrieu, I want to join in 
thanking you for your leadership, not just from the Small 
Business Committee but on the Appropriations Committee. We have 
had many conversations, and the legislation that I hope you 
will be considering as early as today on the supplemental 
Appropriations emergency bill is critically important to move 
forward and I thank you for the support there, not only for the 
small business programs, but also for FEMA, for the Department 
of Housing and the CDBG funds. All those are going to be 
critically important for the recovery of those communities that 
have been so devastated by Sandy.
    Maryland was hit hard, now, not as hard as New Jersey or 
New York, and our prayers and help go out to those communities 
that are much broader in the amount of damage that was done. 
But if you lived in Crisfield, Maryland, on the Eastern Shore, 
lower Eastern Shore, a community in which almost one-third of 
the population lives below the poverty level, your homes have 
been destroyed. You are looking to your government to help you 
during this time. That community needs a Federal partnership.
    If you live on the other end of our State, in Oakland, 
Maryland, in Appalachia, where just about every home lost 
power, 3,000 trees came down--this is a county that has 30,000 
population. Thirty inches of heavy snow fell in a very short 
period of time. So both ends of our State were hit very, very 
hard and need help from the Federal Government, and I very much 
appreciate the fact that this committee is holding this hearing 
to see how the small business programs can be effectively 
brought into play during this disaster to help small 
businesses.
    Oakland, Maryland, and Crisfield, Maryland, have something 
in common. They may be separated by the shore to the mountains, 
but their economies are dependent upon small businesses. That 
is where the people work. So we do need to focus on how we can 
help the small businesses get back on their feet so that we can 
have the type of economic progress in both of these communities 
that have been so disrupted because of Sandy.
    Let me also thank you for your help on an issue that 
originated in this committee, the surety bond level, which 
during the Recovery Act we increased from $2 million to $5 
million. It worked very successfully, helped create jobs and 
helped deal with a problem of procurement that was difficult 
for small businesses because of the surety bond limit. I 
appreciate the fact that you are addressing that also in the 
supplemental, and thank you for your help. I think that will 
also provide some additional relief to not just the communities 
affected by Sandy, but our country in helping small businesses 
deal with our current economic pressure.
    So thank you for this hearing and thank you for your 
leadership.
    Chair Landrieu. Thank you, Senator Cardin.
    Michael Chodos is with us, the Associate Administrator for 
the Office of Entrepreneurial Development at the SBA. He is 
responsible for overseeing the agency's counseling, mentoring, 
and training programs for current and future entrepreneurs. I 
am going to ask him to speak second and have James Rivera, who 
is the Associate Administrator for the SBA Office of Disaster 
Assistance. Mr. Rivera basically runs the disaster program, but 
we asked Mr. Chodos to be here because he is responsible for 
the counseling, mentoring, and training which is going to 
obviously have to step up its game in the Northeast to help 
people with the technical assistance and training they are 
going to need to get back on their feet, potentially change a 
business model, potentially make some adjustments to help them 
stay in business.
    But, Mr. Rivera, please keep your remarks to five minutes 
so we can do a round of questions, and we will call on Mr. 
Chodos, because we have a very distinguished panel coming up 
and we are going to start that second panel in probably about 
20 minutes.

 STATEMENT OF JAMES RIVERA, ASSOCIATE ADMINISTRATOR, OFFICE OF 
    DISASTER ASSISTANCE, U.S. SMALL BUSINESS ADMINISTRATION

    Mr. Rivera. Good morning, Chair Landrieu and distinguished 
members of the committee. Thank you for inviting me to discuss 
SBA's efforts in response to Superstorm Sandy and our role in 
disaster response and recovery. SBA appreciates your strong 
support of the agency's disaster operation and continued 
leadership in making our country better equipped to deal with 
large natural disasters.
    Administrator Mills and Deputy Administrator Johns have 
seen firsthand the tremendous damage caused throughout the 
Northeast by Sandy, and as you know, the damage is immense. 
This is one of the largest disasters our country has confronted 
since Hurricane Katrina ravaged the Gulf Coast more than seven 
years ago.
    I can assure you that the Federal Government is leveraging 
all of its resources to provide timely and effective assistance 
to all of the affected areas. SBA is working closely with our 
response and recovery partners at FEMA and HUD. We are closely 
coordinating with local and State agencies and regular contact 
with local officials to ensure we are doing everything possible 
to assist the maximum number of businesses and homeowners in 
the affected communities.
    In terms of our efforts, we are providing a ``one SBA'' 
approach to our Sandy response. Directors from across SBA are 
leveraging public and private sector resources, including our 
partners at the SBDCs throughout the affected areas. Thus far, 
we have deployed over 300 Disaster Customer Service 
Representatives to the region. As you know, SBA is providing--
is responsible for providing affordable, timely, and accessible 
financial assistance in the form of low-interest loans to 
businesses of all sizes, homeowners, renters, and nonprofit 
organizations in the aftermath of a disaster.
    SBA has made a number of improvements in recent years that 
have allowed us to better respond to the disaster survivors. 
For example, we have reduced disaster loan processing times, 
streamlined application forms, and implemented a redesigned 
electronic loan application, all of which have led to a more 
transparent and efficient application process. We continue to 
meet our goal of processing all disaster applications within 14 
to 18 days. We have now designated a case manager for each 
approved application so borrowers know their principal point of 
contact when they have a question or need help.
    Last year, we signed a Memorandum of Understanding with 
HUD, improving our coordination on duplication of benefits to 
ensure that those with unmet needs are still eligible for HUD 
Community Development Block Grants. SBA and HUD now have a 
transparent mechanism to share data across agency regarding 
loan borrowers and grant recipients.
    Superstorm Sandy disaster survivors in New York, New 
Jersey, Connecticut, and Rhode Island, all of which received 
Presidential Disaster Declarations, can apply for home and 
business disaster loans online or in person at any of the 100 
centers across the area, including the FEMA-led Disaster 
Recovery Centers or the SBA-run Business Recovery Centers, with 
additional assistance from local resource partners such as 
SBDCs, SCORE, and Women's Business Centers. Additionally, North 
Carolina and Virginia received an SBA Administrative Disaster 
Declaration, making affected homeowners, renters, and 
businesses eligible for SBA disaster assistance. To date, SBA 
has approved over 3,600 applications for $230 million.
    Many disaster survivors do not have ready access to 
television, radio, or Internet. To address these situations, 
SBA has a Disaster Customer Service Center that is handling 
disaster victim calls seven days a week and also providing 
language translation services. As of this week, SBA has 
personally met more than 50,000 people on the ground. SBA has 
responded to over 80,000 phone calls in its Disaster Customer 
Service Center with a wait time of less than 60 seconds. 
Between our processing centers, call centers, and on-the-ground 
staff, SBA has over 2,300 disaster employees currently working 
on Superstorm Sandy. This is in addition to our SBA District 
Offices and all of our resource partners.
    Whether on the ground in the affected areas or at a 
regional center, the SBA is keenly focused on one primary goal: 
Meeting the needs of the families and businesses who have been 
affected by this tragic event and helping to rebuild following 
this devastating storm. We know that this is a long-term 
process and we are committed to doing the hard work necessary 
to ensure that these small business owners and their 
communities are able to emerge stronger than before the 
disaster.
    I appreciate the opportunity to update this committee on 
SBA's disaster recovery efforts for Superstorm Sandy. We firmly 
believe that the reforms we have instituted are helping us 
efficiently and effectively respond to the needs of our 
nation's disaster survivors.
    I look forward to answering any questions, and thank you.
    [The prepared statement of Mr. Rivera follows:]

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    Chair Landrieu. Thank you.
    Mr. Chodos.

STATEMENT OF MICHAEL CHODOS, ASSOCIATE ADMINISTRATOR, OFFICE OF 
ENTREPRENEURIAL DEVELOPMENT, U.S. SMALL BUSINESS ADMINISTRATION

    Mr. Chodos. Chair Landrieu, Senator Vitter, and members of 
the committee, thank you for the opportunity to testify 
regarding the role we and our partners play in helping affected 
individuals and communities respond and recover from Hurricane 
Sandy.
    Since Sandy struck, SBA has been on the ground across the 
affected region providing individuals and businesses with 
information, support, and access to disaster recovery loans. As 
communities rebuild, SBA is there from day one and we will stay 
deeply involved over the long term. That is why, in addition to 
our Disaster Response Team, SBA's Office of Entrepreneurial 
Development and its vast network of business counselors and 
economic development partners play a key role in immediate 
disaster response and also in helping the region's small 
businesses restart, rebuild, and thrive again.
    There are hundreds of thousands of small businesses in the 
affected areas across the Mid-Atlantic and Eastern Seaboard. 
With 44 Small Business Development Centers, 14 Women's Business 
Centers, and hundreds of SCORE volunteers in the affected area, 
our partners work collaboratively with SBA's Office of Disaster 
Assistance to help staff Disaster Recovery Centers. They also 
provide intake space for Business Recovery Centers in their own 
service center locations and set up informational events in 
communities across the area.
    In this early period, our resource partners help business 
owners map out the recovery process, collect information, and 
apply for disaster loans. They also connect business owners 
with other local, State, and Federal resources ranging from 
help accessing local governmental and utility programs to 
connections with the IRS to obtain copies of critical tax 
documents. And they help small businesses take the first 
concrete steps to get the capital, resources, and mentoring 
they need to get back up and running.
    For example, our New York SBDC created an excellent one-
stop Sandy recovery website to provide information about 
important resources with FAQs for small businesses. It is now a 
critical tool for individuals and businesses across the State.
    But in addition to access to resources, thousands of 
affected businesses will need individual help, one business at 
a time. In just one recent example, our Women's Business Center 
at Hunts Point Economic Development Center in the Bronx was 
contacted by a local manufacturer and distributor which 
experienced significant damage to critical machinery and 
equipment and needed help accessing capital. Our WBC helped the 
business apply for an SBA disaster loan, reviewed its financial 
information and plans, and helped to craft a long-term plan to 
recover and rebuild sales. This process is being repeated by 
our SBDCs, WBCs, and SCORE volunteers across the region and 
will increase substantially in the coming months.
    SBA-supported counseling and training makes a difference. 
Those who receive counseling and training are more likely to 
start, their businesses are more likely to survive over the 
ensuing years, and they are better prepared to seek financing 
and to plan effectively for future growth. Together, our 
resource partners will play a key role in economic rebuilding 
and growth across the region.
    In addition to the on-the-ground support being provided by 
our resource partners, SBA also takes a comprehensive industry-
focused approach to strengthening and rebuilding sectors and 
supply chains where small businesses have been hit the hardest. 
No small business is an island. Every small business has its 
own suppliers and vendors, and thousands of small businesses 
across the region, in turn, play key roles in supply chains for 
manufacturers and distributors.
    The affected region is a vibrant center for small business 
participation and innovation in manufacturing, health care, 
finance, and numerous other sectors. Through its extensive 
experience with regional innovation clusters and accelerators, 
SBA knows that successful regional economic growth depends upon 
effectively connecting small businesses with investment and 
growth capital, networking and procurement opportunities, and 
supply chain connections. Our existing cluster and accelerator 
initiatives work, and in the coming months, we plan to use what 
we have learned to support targeted and networked economic 
development in affected industries across the region.
    SBA and its partners are already on the ground and we will 
make sure businesses affected by Sandy will get the help they 
need in the days and months ahead. We thank you for your 
support, and I look forward to answering any questions.
    [The prepared statement of Mr. Chodos follows:]

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    Chair Landrieu. Thank you all very much.
    We have been joined by Senator Risch. Any opening 
statement, Senator?
    Senator Risch. No.
    Chair Landrieu. Okay. Let me just submit for the record one 
of the successes post-Sandy, post-Katrina, was a more efficient 
application process, and I want to submit for the record the 
two-page disaster loan application, the one-page personal 
financial statement, and the one-page request for tax 
information. The fact that this has been streamlined is very, 
very important, but as I said, we still have a great deal more 
to do, and without objection, I will put that into the record.
    [The information of Chair Landrieu follows:]

    [GRAPHIC(S) NOT AVAIILABLE IN TIFF FORMAT]
    
    Chair Landrieu. Let me make sure we start with the facts, 
because I am going to have a series of these hearings through 
this disaster because it is a long haul. I mean, Senator Vitter 
and I are in the seventh year of recovering from Katrina, and I 
do not want to frighten people that are listening to this, but 
it is a long road for recovery after a catastrophic disaster. 
We still have neighborhoods and business corridors that are 
struggling.
    But I just want to start with making sure we know what our 
challenges are. The record that I have, and I want to see if it 
matches with what you have, is that in New York, the documents 
that have been submitted show that there are 265,000 businesses 
that have been destroyed. And in New Jersey, it is 189,000. Is 
that generally the records that you have, Mr. Rivera?
    Mr. Rivera. Senator Landrieu, yes, that is correct.
    Chair Landrieu. Okay. Now, just for comparison, in Katrina, 
which was no question a catastrophic disaster on the Gulf 
Coast, we only lost 18,700 businesses. So I am going to repeat 
these numbers, because this is a big effort. Two-hundred-and-
sixty-five-thousand businesses have been lost in New York, and 
189,000 in New Jersey.
    Now, the only program that I know of in the Federal 
Government that is specific to meet the needs comes through 
your agency. We are pushing very hard for the Community 
Development Block Grant to change into a much more flexible and 
better designed tool, which is one of the primary tasks in this 
supplemental, which I hope Congress will say yes, to maybe use 
some of that money to craft more robust assistance.
    But given that, you can understand why I was a little bit 
concerned to hear that in New Jersey, we have 1,498 
applications have been received. Sixty-eight have been approved 
and only nine have been disbursed to date. In New York, we have 
2,474 applications received. We have 105 have been approved and 
12 loans have been disbursed. And the average loan, according 
to the documents preparing for this hearing, was $13,000. Now, 
I understand those loan amounts have increased because this is 
a real moving target. I mean, every 24 hours, these numbers 
move.
    But just to give some reference, in Katrina, the average 
business loan was $1,116 [sic]. In Rita, it was $95,000. Wilma 
was $135,000. Ike was $129,000. Gustav, $59,000. Isaac, 
$39,000. And yet we are at a fairly low amount for Sandy. Now, 
that number will go up, the average loan amount.
    But I want the members of this committee to know and for 
the administrators to know that my eyes are on the results, not 
the process, not how many people we have in the field, not how 
many offices we have opened, not how much money we are 
spending. My eyes are going to be for the next year, with the 
help of this committee, and I think I have the support of both 
Republicans and Democrats on this, on the results of getting 
loans quickly into the hands of businesses or grants.
    It is impossible for these communities to recover without 
small business leading the way. It is just not going to happen. 
Homeowners can rebuild, but if there are no gas stations open, 
if there are no grocery stores, if there are no retail shopping 
centers--and I am telling you, seven years after Katrina, we 
still have neighborhoods that are looking for business 
opportunities.
    Now, I do not think the Federal Government can do it all, 
but I do think the Federal Government can be a big supporter in 
this effort and I am looking for smart partnerships.
    So would you please comment on these numbers. Keep your 
responses short because I do have another question.
    Mr. Rivera. Okay, thank you, Senator Landrieu. You know, 
you are absolutely correct. We are very early into this 
disaster. Generally, we get most of our applications between 
week four and week eight, and then we have a 14- to 18-day 
processing goal. We are currently processing these applications 
within ten days. So what is happening is we are now--this is 
week six from the disaster. We are now starting to get a lion's 
share of influx of disaster applications and we process within 
that time frame, accordingly. But we are confident that we are 
going to be able to get these applications processed timely, 
and then once we get the loan approved, we will generate the 
loan closing documents and we get the initial disbursement out 
within the first five days of the date of the application----
    Chair Landrieu. Let me ask you this. What are the deadlines 
for application, because I believe we may have to have those 
extended. In my experience, people are still so traumatized at 
this time after the disaster. I mean, they are having a hard 
time getting their head around the fact that they have lost 
their home, they have lost their church, they have lost their 
business. It is difficult to make decisions, particularly when 
you do not know what your neighbors are doing or what the 
business next door is doing, and people may need more time. So 
what are the deadlines, and do you have the authority to extend 
them?
    Mr. Rivera. So the current deadline in New York was just 
recently extended. For all the States, the deadline is December 
31. In New York, the deadline was extended to January 28. But 
under the Presidentially Declared Disasters, we will work with 
FEMA to see if we can get a possible deadline.
    Chair Landrieu. So you are saying you do have the authority 
to extend deadlines if you find that it is necessary?
    Mr. Rivera. We do not, but FEMA does, because it is a 
Presidentially Declared Disaster, but we will definitely work 
with them.
    Chair Landrieu. Okay, because I am going to ask the next 
panel, do they believe the businesses in their community need 
more time to fashion their loan request.
    Mr. Rivera. Right.
    Chair Landrieu. My third question, and I am sorry to go a 
little bit over--I will turn it over to Senator Vitter in a 
minute--explain in some detail, if you can, what the 
preliminary conversations have been with Secretary of HUD, who 
is probably the best person in America to lead this disaster, 
in my humble opinion, Shaun Donovan--he is well experienced, he 
is educated, he is from that region--what have the initial 
conversations been about the possibility of some express 
business loans--$10,000, $20,000, $25,000 loans--to proven 
successful, businesses, longstanding? I am not talking about 
new entrepreneurs taking opportunities in the aftermath, as 
legitimate as that may be. I am talking about longstanding 
businesses, so that we can answer the question, are loans the 
only thing that is available? What is your answer to that, and 
what are the outlines of that preliminary discussion?
    Mr. Rivera. So, our initial discussions with HUD are that 
we are working together with them. I mean, he is obviously 
going to be the point person for the President in responding to 
the disaster of Superstorm Sandy across the area.
    We have had some initial discussions on the flexibility of 
how we can coordinate. We have the Memorandum of Understanding 
that we had signed, thanks to your efforts. But we are looking 
at coordinating between how we can make the disaster loans and 
how the CDBG funds and the flexibility that they may be able to 
be provided as part of the supplemental.
    Chair Landrieu. For a possibility for some small express 
grants? Have you all gotten into any of that discussion yet, or 
is it still very preliminary?
    Mr. Rivera. It is still preliminary. You know, as I 
mentioned, we are still early in the disaster. It is week six 
and we are working as hard as we can, as fast as we can, to get 
the best results we can. But we are still early in that 
process.
    Chair Landrieu. Okay. Senator Blumenthal, questions, and 
then I will get to you, Senator Risch.
    Senator Blumenthal. Thank you, Madam Chair.
    One quick question. Could you comment specifically on the 
different alternatives in terms of collateral that may be 
available? Senator Landrieu raised that point earlier, which I 
think is very well taken.
    Mr. Rivera. Okay. So, we follow the private sector 
practice. We will generally take the business assets, and if 
there is a residence available, we will pick up the residence. 
But as part of the proposed language, we will see, from our 
perspective, how that works from a collateralization. But we do 
follow private sector practices.
    Senator Blumenthal. Well, would you then use collateral 
other than someone's home, and would that be a departure from 
existing policy or----
    Mr. Rivera. Yes, it would be a departure from our existing 
policy and we would look at what other collateral is available 
based on the proposed legislation.
    Senator Blumenthal. So you will undertake that policy?
    Mr. Rivera. We will look at if we can do that. You know, 
once the legislation is passed, we will come back and we will 
figure out if that is the best approach we can take.
    Senator Blumenthal. Thank you.
    Chair Landrieu. Senator Risch.
    Senator Risch. Thank you, Madam Chairman.
    Mr. Chodos, you used an example of a business that you have 
helped since the catastrophe, and I think, where did you say it 
was, in New York? Was it in----
    Mr. Chodos. The Bronx.
    Senator Risch. Okay. What kind of business was that?
    Mr. Chodos. That is a beverage distributor, I believe.
    Senator Risch. And what type of insurance did they have?
    Mr. Chodos. So, I will get back to you on that, Senator, 
and find out specifically what insurance they had. I will say 
that the availability of insurance is one of the key items of 
information that is obtained when a business is applying for 
immediate either FEMA grants or SBA disaster loans. So getting 
the full packet of information is part of that intake process, 
and more broadly, our resource partners who help staff both the 
Disaster Recovery Centers and the Business Recovery Centers 
take a holistic approach when a business walks in the door to 
find out, where are they overall? What do they have? What are 
the needs? What is the plan going forward?
    Senator Risch. Perfect, except. I am looking here at the 
application, U.S. Small Business Administration Disaster 
Business Loan Application, and it has got a form number and 
what have you on it. You know, if I was a claims processor or 
someone in your position looking at one of these, this thing 
would be incredibly short of information when it comes to 
making a decision as to whether taxpayers' money should go into 
this.
    I look at item number 16, insurance coverage, parentheses, 
if any, and I am going to get to the ``if any'' part here 
pretty quick. You do not even ask how much coverage a person 
has on this application. You have got coverage type. You have 
got name of insurance company or agent and phone number of 
insurance agent and policy number. Now, I have not had time to 
study this thing, so maybe it shows up somewhere else here, but 
Mr. Rivera, you seem anxious to answer that question.
    Mr. Rivera. Well, Senator, that is part of the application 
process. It is the SBA Form 5, or 5C, and basically, what we do 
is the loan officer will have that discussion with the disaster 
survivor and with the insurance agent. So that communication 
does occur. We make sure that there is no duplicative funding 
that occurs from that.
    Senator Risch. One would hope so. It seems to me, though, 
that--and I understand you want to keep this short and you want 
to keep it concise and easy to fill out, which is good. But to 
me, the most important thing after a disaster a person reaches 
for is their insurance policy. Bless the Federal Government, 
but even insurance companies are better than the Federal 
Government, generally, to responding to claims. And it would 
seem to me that if you looked at the claims forms that you are 
required to fill out for an insurance company, you could 
probably take a lesson there to get yourself quite a bit of 
information.
    For instance, item number 16, insurance coverage, if any, 
it says coverage type. Most people, when they say coverage 
type, they are kind of at a blank because they do not deal with 
that all the time. But if you listed and had them check a box, 
such as property, contents, business interruption, they could 
check the box very quickly, I would think, and let you know 
what it was and how much the coverage was, because that would 
seem to me to be critical when you are examining one of these 
claims.
    I would assume you have a group that works with a claimant 
as far as dealing with their insurance company.
    Mr. Rivera. The loan officers do deal with the actual 
insurance agent when they are processing the application, yes, 
sir.
    Senator Risch. And you feel comfortable with their area of 
expertise in that regard?
    Mr. Rivera. Yes----
    Senator Risch. Insurance companies can be somewhat 
difficult, at times, when it comes to claims time.
    Mr. Rivera. We have pretty good success dealing with the 
individual, the disaster survivor and the insurance agent. I 
mean, it is a pretty transparent process from our perspective.
    Senator Risch. Okay, thank you. I can see I am way over 
here, but I have got a number of other questions.
    Chair Landrieu. Go ahead.
    Senator Risch. Okay. All right. In any event, if I were 
you, I would take a look at that application form. Again, I do 
not want to see the usual kind of Federal form that looks like 
the phone book, but rather--I like this idea of keeping it 
simple, but you need more information, it seems to me, than 
what you have.
    Out of the--go back to Katrina for a minute. Madam Chairman 
indicated there were 18,000 businesses either destroyed or 
affected or what have you. What percent of those had insurance?
    Mr. Rivera. I would have to go back and check our records. 
I was not in the Office of Disaster Assistance. I was with the 
agency, but I was not with the Office of Disaster Assistance at 
the time, but we can get back with you for the record.
    Senator Risch. Do you head the Office of Disaster 
Assistance?
    Mr. Rivera. Yes, sir, I do.
    Senator Risch. It would seem to me that that is a critical 
question. Can you give me a ballpark? Was it half of them? Was 
it three-quarters of them?
    Mr. Rivera. I do not venture to guess. I really do not 
know, but we can get that information for you.
    Senator Risch. I am disappointed in that. Did you do 
anything with Katrina as far as making it a learning experience 
for other small businesses in America about how important 
insurance is in these situations?
    Mr. Rivera. Oh, absolutely. I mean, we have a pretty good 
preparedness package that goes out. I mean, we have a marketing 
and outreach program where we talk about insurance being key. 
We do make loans for uninsured or underinsured losses. We do 
make the loan up front and then we will take an assignment of 
the insurance policy. I mean, there are a lot of lessons 
learned here, but I do not want to just state a specific 
percentage without knowing the actual factual number. So we can 
get that number for you.
    Senator Risch. Please. Also, the 265,000 in New York and 
the 189,000 in New Jersey, I would be really interested as far 
as your determination on how many of those people had insurance 
and how many did not.
    Mr. Rivera. Okay. We can get back with you on that, also.
    Senator Risch. I am assuming you would agree with me that 
that is critical, the amount of insurance that they have, when 
people are looking to the Federal Government to step in and 
fill a gap.
    Mr. Rivera. Well, just to clarify, that is part of our 
process. I mean, if you have insurance--we will make a loan for 
$100,000 and let us say you have $50,000 of insurance. We will 
either make the loan up front and then reduce the full amount 
by that $50,000, or we will make the net loan of $50,000. But 
we only make loans for uninsured or underinsured losses.
    Senator Risch. And will you also take an assignment on 
insurance proceeds?
    Mr. Rivera. We do when we make a loan commitment before the 
insurance is settled.
    Senator Risch. I think that is enough for this round.
    Chair Landrieu. Thank you, Senator.
    Let me assure you, we can get that information. I think 
that is very important. But for the record, is not the 
insurance given on SBA Form 5, which has to be completed and 
attached to this?
    Mr. Rivera. Yes, ma'am.
    Chair Landrieu. Okay. So in addition to the two pages, 
which are--as the Senator pointed out, we do want a simple but 
complete process--there are five other forms, one for 
insurance, one from the IRS, a 1413 Form, which is another SBA, 
and another, 2202, which is a schedule of fixed liabilities and 
all fixed debt. So if there are some improvements, Senator, 
that you want to suggest, please let us know.
    But I do think that the insurance is required, and very 
important, because this is really the Federal Government is 
helping to fill the gap, helping to step up and provide some 
funding quickly and in advance. Sometimes those insurance 
proceeds can be very slow. And, frankly, some insurance 
companies are much better than others about honoring the 
contracts that they have with these businesses, and that is 
another important oversight that I hope that the committee of 
jurisdiction, which is not this committee, but can provide in 
this recovery.
    Are there any other questions, because I would like to move 
to the second panel and give them an opportunity. Anything else 
you all want to add?
    Mr. Rivera. No, ma'am. Thank you.
    Senator Risch. Madam Chairman, can I----
    Chair Landrieu. Go ahead.
    Senator Risch. We have been hit with a $60 billion request 
from--did that come from the White House?
    Chair Landrieu. It did. It came from the White House and 
the Appropriations Committee has reviewed it.
    Senator Risch. What part of that would be attributable to 
or within this committee's jurisdiction? Does anybody have an 
idea?
    Chair Landrieu. Go ahead. You can----
    Mr. Chodos. Roughly, it would be--the request for the SBA 
are a $500 million disaster subsidy, $250 million for disaster 
administration, $40 million for the economic development 
initiatives we discussed, $10 million for related 
administrative expenses, and $5 million for the IG.
    Chair Landrieu. And how much of that loan authorization, 
how much of that money--how much will it leverage in additional 
loans?
    Mr. Rivera. Approximately $4.5 billion for lending 
authority.
    Chair Landrieu. Okay.
    Senator Risch. I have got one other that is not related to 
that, but who put those numbers together, by the way? Was that 
you, Mr. Rivera, that put those together, your shop?
    Mr. Rivera. The agency?
    Senator Risch. Yes.
    Mr. Rivera. I am sorry. Which numbers are you----
    Senator Risch. These numbers that you just gave us as far 
as how much----
    Mr. Rivera. So it is a ``one SBA'' approach. Part of it is 
mine in the Office of Disaster Assistance. Part of it is 
Michael's in the Office of Entrepreneurial Development. And 
then there is a surety bond piece up in Capital Access, also.
    Senator Risch. I assume if we want to know more about how 
you put those numbers together, we can get in touch--staff can 
get in touch with your shop to find that out?
    Mr. Rivera. Oh, absolutely. Yes, sir.
    Senator Risch. Okay. When someone applies for a Small 
Business Administration loan, is their insurance vetted at that 
time?
    Mr. Rivera. Yes, sir. When the loan officer gets the 
application, that is part of their underwriting due diligence, 
is that they have to contact the insurance company as part of 
that processing effort.
    Senator Risch. So, theoretically, anybody with a small 
business loan will receive compensation from their insurance 
company as opposed to having an issue with coming to the SBA 
for it and just asking----
    Mr. Rivera. Well, you know, that is one of the decisions a 
small business owner needs to make, I mean, if they feel they 
have adequate insurance or if they feel they are underinsured. 
We are just providing one option for their tool box from a loan 
commitment perspective.
    Senator Risch. When you do your due diligence, do you 
require that they satisfy you that they are fully insured for 
losses as to their structures, their inventory, their 
interruption of business and that sort of thing?
    Mr. Rivera. Yes, sir. When we speak with the insurance 
agent, we do have exactly what the insurance settlement is at 
that time or what they anticipate the insurance settlement to 
be, and we work----
    Senator Risch. I am sorry. I am talking about for before 
any disaster, when somebody comes to you for a loan.
    Mr. Rivera. For a disaster loan or----
    Senator Risch. No, I am sorry. Maybe this is more 
appropriate for Mr. Chodos, but I am looking for someone who 
comes in for an SBA loan, no disaster on the horizon or 
anything else. I am----
    Mr. Rivera. Yes, sir. The guarantee loan program that is 
run through the banks, that we run through our lending 
partners----
    Senator Risch. Right.
    Mr. Rivera [continuing]. That is part of the normal private 
sector practice, that insurance is required. Correct.
    Senator Risch. Go back to Katrina, if you would, or if you 
can give me these kinds of numbers. What do you find as far as 
people who have an SBA loan coming back to the SBA after a 
disaster and wanting either a loan or disaster relief or 
something like that?
    Mr. Rivera. So, for an individual that has already received 
a disaster loan?
    Senator Risch. Right.
    Mr. Rivera. So there is an opportunity in the event that 
there is uninsured or underinsured losses. I mean, there may be 
a situation where we require flood insurance because they are 
in a flood plain and there may be additional damage above 
whatever the flood insurance policy covers because of the 
different footprint or the different type of event that occurs 
from one disaster to another.
    Senator Risch. Thank you, Madam Chairman.
    Chair Landrieu. And, Senator, we can get you some 
information about the stand-alone SBA program. I just was 
checking with the staff. The default rate in that program is 
very comparable to the private sector default rate and it is a 
modest, in my view, subsidy for that program relative to the 
leverage it provides for small businesses when they are sort of 
the lender of last resort.
    And I want to make clear, and I think the Senator has a 
very good line of questioning, that insurance underlies this 
whole recovery process. Homeowners have insurance. There is 
flood insurance. Now, these insurance policies can be 
expensive, but it is required in many of these communities.
    The small business loans are there, really, to fill the gap 
or to get money more quickly until insurance proceeds come in. 
But it would be important for the record to submit how many of 
the businesses that are successful in not just applying but in 
receiving loans, what is their level of insurance coverage.
    But let us go to the second panel, if we could. Thank you 
very much. The second panel, thank you all. And if you all 
could stay and listen to the second panel, I would appreciate 
it. I think it is very important to hear from mayors and 
business leaders on the ground.
    The first is the Honorable Dawn Zimmer, who became the 
first female Mayor of Hoboken, New Jersey, in 2009. Mayor 
Zimmer began her career in public service as an advocate for 
public park space but has become a successful mayor dedicated 
to fiscal responsibility, public-private partnerships, and 
improving the quality of life for local residents. 
Unfortunately, Hoboken is one of the more devastated 
municipalities in the region, and no mayor can appreciate what 
you and your city council and citizens have been going through. 
We just offer you our best in this effort.
    Mr. Jim King has been the State Director of the New York 
Small Business Development Center network since 1984. He 
oversees 24 Regional Centers, 35 Outreach Centers that serve 
over 35,000 small businesses each year. All of your experience, 
Mr. King, will most certainly be called on and tested for the 
job that is ahead of you.
    Mr. Kevin Law is the President and CEO of Long Island 
Association, one of the most respected business organizations 
in New York. The Long Island economy is made up of over 100,000 
businesses, 90 percent of which employ 20 people or less. We 
are looking forward to hearing directly from you, Kevin, about 
what your businesses are saying, many of them struggling to 
recover, and how we can be as helpful as possible.
    But, Mayor, let us start with you, and again, our hearts go 
out to the people that you have lost and are devastated, but we 
are going to stay with you for the long haul, the long road 
ahead.

   STATEMENT OF HON. DAWN ZIMMER, MAYOR, CITY OF HOBOKEN, NJ

    Ms. Zimmer. Thank you very much. Good morning, Chairwoman 
Landrieu.
    Chair Landrieu. Make sure your buttons are pressed and that 
you are speaking directly into your microphone.
    Ms. Zimmer. Good morning, Chairwoman Landrieu and committee 
members. It is a privilege and an honor to be here today. 
Again, my name is Dawn Zimmer and I am the Mayor of Hoboken, 
New Jersey.
    Hoboken is located just across the river from New York 
City. We are the proud birthplace of baseball and Frank Sinatra 
and the home of ``Cake Boss.'' We have more than 50,000 
residents and hundreds of businesses call our square-mile city 
their home, which is why we are one of the most densely 
populated cities in America, actually, more than New York City. 
We are proud to be one of the most walkable communities in the 
country, and we rank number one in per capita use of public 
transportation for commuting. We are a vibrant urban community 
filled with hundreds of boutiques, restaurants, and outdoor 
cafes.
    But Hurricane Sandy was devastating for Hoboken, our 
businesses, and our residents. For the first time in history, 
the Hudson River spilled into Hoboken from both the north and 
the south, and more than half of our city was flooded. Our 
community center, public works garage, three of our four 
firehouses, and more than 1,700 homes were flooded. We estimate 
the total damage to our community at well over $100 million. 
Thankfully, our main street, Washington Street, did not flood, 
and is again open for business. But hundreds of businesses 
located off of our main street were severely flooded.
    Even the businesses that did not flood have been severely 
impacted by one of our principal means of transportation to New 
York. The PATH train was flooded and still has not been 
restored. Many businesses report up to a 60 percent reduction 
in business due to the difficulty of getting to and from 
Hoboken.
    Some businesses that flooded remain closed or are forced to 
operate at an alternate location as they try to navigate the 
insurance gauntlet. I call it an insurance gauntlet because the 
National Flood Insurance Program is not designed to meet the 
needs of the urban environments. I believe there is a 
fundamental unfairness to the system that I respectfully ask 
Congress to try to address.
    When businesses located in a flood zone buy their 
properties, they are forced to purchase flood insurance by 
their mortgage companies. But the flood insurance program 
treats garden-style businesses as if they were basements. If 
they rent, which many businesses do, then the direct uninsured 
costs are often passed on to the small business renters.
    Under FEMA's definition of a basement, the coverage is 
greatly limited to only those things like the boiler, hot water 
tanks, and electrical control panels. These rules do not 
reflect the reality that in places like Hoboken, New York City, 
and other urban areas, the premises characterized as 
``basements'' house vibrant businesses and principal 
residences, which are critical elements to the vibrancy of our 
cities. A store or apartment that requires you to walk down one 
or two steps is, plain and simply, not a basement.
    The business owners and residents who work and live in 
these stores and homes are required to buy flood insurance, are 
required to pay premiums into the Flood Insurance System, yet 
they receive virtually no coverage. After having paid flood 
insurance premiums for years, many discover for the first time 
that their claims are denied because the flood insurance they 
were required to purchase does not actually insure them. What 
we have is, unfortunately, not a rule that protects against 
moral hazard, but a trap that victimizes people in their 
greatest time of need.
    For many businesses, their only option is from the Small 
Business Administration. But many business owners I have spoken 
with tell me they cannot afford more debt. But they do need 
help, and we are at risk of losing the small businesses that 
make our community special.
    So I respectfully ask that this committee and the Congress 
consider other options for providing direct relief to our small 
business owners. Unfortunately, those businesses without flood 
insurance who do seek assistance from the SBA will be the next 
victims caught in the flood insurance trap. If they are able to 
receive an SBA loan, they will be required to get flood 
insurance and pay into a program that offers virtually no 
assistance for the urban garden-style business. Their insurance 
costs will go up excessively, but unless Congress takes action 
to address the definition of a basement or the coverage 
provided to those units, then the garden-style business or 
homeowner will be forever caught funding a flood insurance 
system that fails to benefit them in any meaningful way.
    The inequity of this system is apparent when we see 
homeowners receiving $250,000 in coverage for vacation homes on 
the shore while primary homes and businesses fall through the 
cracks of the flood insurance program.
    In the immediate term, I strongly urge Congress to provide 
direct assistance for businesses and residents caught in the 
flood insurance trap. Specifically, I ask you to take action to 
address the unfair basement issue for the future. I suggest 
that rather than denying people coverage, businesses and 
residents should be given incentives to invest in taking the 
necessary steps to reduce the impact of flooding. For example, 
there could be a system of encouraging the installation of 
energy-efficient waterless tanks on higher floors that could be 
installed in closets. But the current system does not provide 
incentives. It just inflicts pain on innocent victims at a time 
when they are most vulnerable.
    I thank you so much for your willingness to listen to our 
concerns and for the opportunity to speak to you.
    [The prepared statement of Ms. Zimmer follows:]

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    Chair Landrieu. Thank you, Mayor, for that excellently 
crafted statement. I have already directed the staff to begin 
working on some of those suggestions. And although the flood 
insurance is not the jurisdiction of this committee, we most 
certainly are going to ferret that request as quickly as we can 
over to the appropriate jurisdiction.
    Mr. King.

  STATEMENT OF JAMES L. KING, STATE DIRECTOR, NEW YORK STATE 
               SMALL BUSINESS DEVELOPMENT CENTER

    Mr. King. Madam Chair and members of the committee, thank 
you so much for inviting me to speak about Hurricane Sandy.
    Since the storm hit, we have done very little else. Our 
previous experience with disasters probably helped prepare us. 
We were among the first responders in 9/11 for the small 
business community, and a few years later, I was privileged to 
travel to Louisiana and work with Mary Lynn when she was--Mary 
Lynn Wilkerson--when she was confronting Hurricane Katrina and 
laying out a strategy for that effort. She has since returned 
that favor many times over by sharing much information, 
materials, and she also chairs our association's National 
Committee on Disaster Recovery, which is working to 
institutionalize the best practices found nationally so that we 
can be even better in the future.
    The sheer magnitude of the destruction can be overwhelming 
to small businesses as well as responders. It is hard to know 
where to begin to determine the steps that will be most 
productive and to deal with the feeling of isolation.
    SBDCs are part of the community, so that creates a bond 
where small business people tend to turn because they are 
familiar with us. The same occurs within the SBDC family. 
Immediately after the disaster, I had other States reaching out 
to me with offers of support, from personnel and equipment and 
just about everything else you could think. Our plan is to get 
through the holiday season pretty much on our own and then 
reach out to request their assistance soon thereafter.
    With that background, I would like to comment on what I 
have seen about the Federal response. There have been definite 
improvements, especially since 9/11, and I think since 
Hurricane Katrina. The change in the past disaster teams, when 
they came in after 9/11, they had all the answers. They did not 
want to listen to anybody. That has changed dramatically since 
then. Immediately after the hurricane, I received a call from 
James Rivera wanting to coordinate efforts, and that is 
something I just would not have anticipated.
    Prior to the hurricane, we had eight offices in the primary 
disaster areas with two outreach locations. Today, we have 25 
offices that are operational because we transferred staff 
around to be in proximity to where the businesses that were the 
hardest hit need the assistance, and that is because a lot of 
these folks cannot afford to travel distances to get the help 
they should be receiving.
    We also have our staff going basically mobile. We have 
given them laptops. Verizon Communication has donated 
communication devices for us. And we are actually going into 
the businesses so that we can deliver information and the 
assistance needed.
    The day after the hurricane, we had 30 volunteers from 
Upstate. We have been deploying those 30 individuals in the 
areas of highest need since the initial days of the recovery.
    The loss of power was a critical factor, also, not so much 
that it is blaming the utilities, but when you do not have the 
power, you do not have communications, you do not have the 
Internet, and most of the modes of communication we use these 
days are electronic, so they just went out the window.
    So far, we have had 72 local events, basically providing 
information, and we have had to go back to the old-fashioned 
way of putting up posters and word of mouth to get the 
attendees in position.
    Many of the documents that the Office of Disaster 
Assistance uses are now online, and that is a phenomenal 
improvement over what I can remember from the previous 
disasters. And their communication with us made a huge 
difference in an area like Staten Island, which was extremely 
hard hit. We were able to put them in touch with our local host 
sponsor, the College of Staten Island, and they located their 
Business Recovery Center there with the college and that made a 
huge difference.
    The Rockaways--I do not know whether you are familiar with 
it, but it is basically a peninsula area, the south part of 
Queens--they had 1,100 businesses operational before the 
hurricane. The week after the hurricane, they had five open 
businesses. Today, they still have just a handful. We recently 
held an event out in Howard Beach. We had 45 businesses show up 
and we were able to provide assistance at the event for all 45 
of them, get them started in the process.
    I think here in New York, we have about 600,000 businesses 
that are in the disaster area. I consider about 100,000 of them 
to be the primary disaster folks. And we are estimating that we 
could see up to 40,000 of them.
    Chair Landrieu. I am sorry. Could you repeat the last two 
lines?
    Mr. King. We have about 100,000 businesses in the primary 
disaster area that received the most damage and we are 
anticipating seeing over the next several years up to 40,000 of 
them ourselves. That is a huge undertaking, especially when you 
consider the amount of services they require.
    I reviewed the correspondence with SBA. I received over 100 
e-mails since the storm from SBA. That includes my entire SBA 
team and all the way to the Administrator, and that is not 
counting telephone calls.
    I would also like to give a shout out to our delegation. A 
lot of those 72 events we have been holding have been 
cosponsored with our delegation members, both in the House and 
the Senate.
    [The prepared statement of Mr. King follows:]

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    Chair Landrieu. Thank you, Mr. King.
    Mr. Law.

   STATEMENT OF KEVIN S. LAW, PRESIDENT AND CHIEF EXECUTIVE 
                OFFICER, LONG ISLAND ASSOCIATION

    Mr. Law. Yes, Madam Chairwoman, thank you very much, other 
Senators of the committee. I want to thank you for the 
opportunity to be with you today. I would also like to thank my 
home State Senators Chuck Schumer and Kirsten Gillibrand, who 
have truly been great advocates for New York State and our 
country.
    My name is Kevin Law. I am the President and CEO of the 
Long Island Association, which is a leading business 
organization in the Long Island metropolitan region. For those 
not familiar, Long Island is a long island. It goes from 
Brooklyn to Montauk Point, but Brooklyn and Queens are 
politically part of New York City and so the Long Island I am 
referring to is Nassau and Suffolk Counties. We are America's 
first suburb, a region of about three million people, and we 
are the home of the middle class and the middle class is built 
on our small businesses. The Long Island economy is made up of 
over 100,000 businesses, and 90 percent of those businesses 
have 20 employees or less, and thus, small businesses are 
clearly the backbone of the Long Island economy.
    Superstorm Sandy had a devastating impact to Long Island, 
including hundreds of millions of dollars in damages to our 
roads and rail system, a record setting 945,000 residential and 
commercial customers who lost power, which is more than 90 
percent of the entire grid, nearly 100,000 individual homes 
affected by flood surge of nearly 15 feet, and breaches to our 
barrier beaches.
    The wrath of Hurricane Sandy extended to the business 
community. Tends of thousands of small businesses lost power 
for weeks, which resulted in lost sales, and many small 
businesses were flooded and damaged beyond a simple repair. 
Small businesses that were already struggling in this slow and 
bumpy economic recovery now question whether they can still 
survive and remain open for business.
    We thank the efforts and the hard work of FEMA and the SBA. 
These two Federal agencies have been on the ground on Long 
Island since Sandy hit, doing everything they can to help us 
recover. In fact, just two days ago, the LIA, we hosted an 
event with Congressman Steve Israel and SBA Administrator Karen 
Gordon Mills and we invited the businesses that were impacted, 
and the horror stories that they shared with us were gut 
wrenching. In addition to all the lives lost and homes lost, to 
hear the stories of folks' businesses ruined and destroyed, as 
well, was indeed gut wrenching.
    And while the SBA has made available to the business 
community those resources which it legally can, we think some 
changes may be warranted. Almost all the Federal money that is 
available to small businesses is in the form of loans. After 
this storm and in this economy, small business owners are 
resistant to taking on more debt. Most of the money lost by 
small businesses can never be recovered.
    If you are a homeowner, you may be eligible for a grant 
from FEMA. But if you are a business owner, your only Federal 
option is an SBA loan, and this has to change because those 
that do not get back into business fast may find themselves 
unable to ever open again. Small businesses often live in week 
to week, have fewer reserves, and are more dependent on daily 
cash flow, and thus, rebuilding on loans alone is problematic. 
And thus, I urge you to enhance SBA's programs so that it could 
include grants to small businesses, as well.
    You know, there are other items. Senator Chuck Schumer 
recently proposed new legislation that would also aid small 
businesses in the aftermath of Hurricane Sandy. That would 
provide tax credits and deductions for clean-up expenses, and 
we certainly support those.
    Additional Federal efforts could also include recognizing 
that businesses may not have suffered physical damage from 
Hurricane Sandy, but rather extraordinary losses of revenue due 
to the power failures and the ability for customers to even 
come and patronize their establishments.
    And so, currently, most businesses are ineligible for any 
kind of Federal storm relief, and the storm recovery funding 
that is approved by Congress should have some flexibility in it 
so that the State and local governments can adequately respond 
to small businesses who may never recover from their 
substantial numbers of lost sales.
    We are not only looking to the Federal Government. You 
know, as the Senator mentioned before, of course, there is 
insurance, and our local governments are trying to help. They 
are providing sales tax relief and property tax exemptions 
where they can to businesses impacted. Our Governor, Governor 
Cuomo, has created a State fund to assist small businesses and 
has created also an Empire State Relief Fund, which I have 
asked to be an advisory committee member of, to help small 
businesses and homeowners with the gap that is not covered by 
insurance and FEMA grants.
    But we need Federal help, too. Long Island has always been 
there for America. We have helped put the man on the moon. We 
are the region where the DNA genetic code was cracked. And we 
have always been there for America. We need America there for 
Long Island now. And, thus, we are supporting the President's 
bill that has been before you because we need those resources 
to get our businesses back on their feet.
    And, Madam Chairwoman, I thank you very much for the 
opportunity to present to you and to the committee today, and I 
see my dear friend and our great Senator from New York, Senator 
Kirsten Gillibrand. Thank you, Senator.
    [The prepared statement of Mr. Law follows:]

    [GRAPHIC(S) NOT AVAIILABLE IN TIFF FORMAT]
    
    Chair Landrieu. Thank you very much. We really appreciate 
the testimony.
    I am going to call on Senator Gillibrand in just a moment 
for her opening remarks and potentially some questions, but 
Mayor, let me start with you. You know, as you look out on the 
destruction of Hoboken, one of the communities hardest hit, and 
you have got homeowners, you have got public facilities, and 
you have businesses, and then you have got transit and general 
infrastructure, et cetera, et cetera, how are you thinking 
about organizing the small business recovery? What are the 
tools that you are either using in terms of organization? What 
organizations are you looking to locally to help? And have you 
had this discussion with some of the other mayors about best 
practices that could be applied to help your small businesses 
get back up and running? And I know this is a lot with just a 
few weeks after the storm, but any initial thoughts, besides 
the excellent testimony that you presented this morning, about 
actually having the flood insurance program work for its 
intended purpose to help people in a time of need?
    Ms. Zimmer. I mean, as I mentioned, the concern is, you 
know, basically businesses, and as my fellow panelists have 
testified to, the concern is that in this economic climate, the 
four percent rate offered by the SBA is a challenge for 
businesses. They are really concerned about taking on the four 
percent, and so they are going. The feeling was--we had 
meetings with the Small Business Administration, the Governor's 
Business Action Center was there, and trying to give businesses 
as much information as possible. But the bottom line is, what 
is available through the Federal Government is that four 
percent loan.
    So, I mean, if there is a way to have grants or if there is 
a way to possibly have a lower interest loan--and so we are 
working with the Chamber, we are working with the Hudson County 
Chamber has come in and assisted. I mean, I will say that more 
information sharing would also help us to be able to help the 
businesses, as well, but I think trying to--as you look at 
these numbers, I mean, the numbers that you outlined for both 
New York and New Jersey, I mean, the economic impact is 
tremendous when you look at the total impact.
    So I think this is a situation where we really--we do 
need--we need to do as much as we can on the State level, but 
we need to do as much as we can on the Federal level, because--
you know, so really stepping back and saying, can we give 
grants directly to business owners so that we can make sure 
that they can stay in business? And I can tell you firsthand 
from my personal experience, I mean, I live in Southwest 
Hoboken. I live in the flood zone. My home was flooded. I walk 
every day to work, down First Street, and business after 
business down First Street is boarded up.
    So it is a major concern, what that impact is going to be. 
We are going to continue that process. I mean, certainly, 
extending the deadline would definitely be helpful, but really 
looking at the possibility----
    Chair Landrieu. Extending the deadline, lowering the rate--
--
    Ms. Zimmer. Lowering the rate----
    Chair Landrieu [continuing]. Pushing out some express 
grants as a possibility----
    Ms. Zimmer. Some express grants so that, yes, so that those 
businesses that are really teetering and that grant is either 
going to make the difference between them staying in business 
and being a part of the local economy and providing jobs and 
improving the quality of life for Hoboken residents or 
literally going out of business. And that is where we are at 
right now. These next two months are crucial for so many 
businesses.
    And I know it is a challenge to get to the bottom of, like, 
who is at that stage, but I think that there are many, many 
businesses at that stage, and so that a grant program to help 
to make sure that businesses do stay in business ultimately 
will help the economy. It is going to help on the local level, 
the State level, and the Federal Government level. Otherwise, 
we are going to have--as all of you know, it is a spiraling 
impact, so----
    Chair Landrieu. Yes. And, Mr. King, let me just reconcile 
some numbers. You referred to something in your testimony about 
100,000 businesses. My records show that there are 265,000 in 
New York and 189,000 in New Jersey. That is not counting 
Connecticut or Maryland or, et cetera, some of the other States 
that were hit, as well. So what is your 100,000 number that you 
put out in your testimony?
    Mr. King. Sure. The 100,000 are the firms that we have 
looked at from the population, Census population information, 
that were in the primary disaster area. These are firms that 
incurred the worst of the storm.
    Chair Landrieu. Well, how do these----
    Mr. King. They were flooded with up to ten, 12 feet----
    Chair Landrieu. How do these jive with the FEMA numbers? 
Are you saying you have another set of official numbers?
    Mr. King. I think the--well, the FEMA numbers include the 
primary and the secondary areas. The secondary areas had 
significant disruption of businesses, but not as much physical 
disaster, in our estimation.
    Chair Landrieu. So what would your comparable numbers, 
then, be, if you have different numbers for New Jersey and New 
York? Instead of the 189,000, what would your numbers be for 
New Jersey, and instead of the 265,000, what would your numbers 
be for New York? And if you would give those for the record. 
You do not have to do it today, but get those to us at the end 
of today.
    Mr. King. Sure.
    Chair Landrieu. Now, my other question is, if you do your 
normal business with 24 Regional Centers and 35 Outreach 
offices, how do you handle a surge? I mean, if you are 
processing your daily requirements, which have got to be less 
than ten percent of the pressures that you are feeling now, how 
are you not surging your capacity to take care of the requests 
that must be flying over your transom right now?
    Mr. King. Well, what we did immediately was pretty much 
exhaust my annual travel budget by transferring people into the 
impact area and moving people around into the highest need 
areas. We have pretty much canceled all vacations, eliminated 
anything that gets people out of the office for extended 
periods of time, just making sure that we have as many 
professionals as possible. And we are stretched, I will readily 
admit it. We are looking to increase the capacity and we hope 
that the President's bill goes through and----
    Chair Landrieu. Let me ask you, does this map represent 
the--this map represents all the SBA resource partners in the 
nation, and I wish we had blown it up just for the Northeast. I 
am going to do that for our next hearing. Would you provide him 
with this, please, Amy.
    Does this reflect basically your network, this Northeast 
network? These are SBA, CDBGs, Women's Business Centers, SCORE 
chapters, that could be potentially helpful to the people along 
the Northeast that need to find a regular center that is open. 
And then in addition to these red dots that are there--and 
please provide the committee with a copy of that, as well. In 
addition to these, this map, there are, I guess, Disaster 
Relief Centers that are set up where FEMA is present, HUD is 
present, any flood insurance agencies are present, potentially 
the Red Cross, I believe, as I am, unfortunately, familiar with 
these centers. So in addition to these centers that are 
established, Mr. Law, there are Disaster Centers that are 
established so people can sometimes get there, walk in, besides 
doing their business by telephone or Internet, et cetera.
    But, Mr. King, my point is, if this is what your normal 
operations are, you are going into a very abnormal situation 
over the next year or year and a half or two or three. You have 
got a tremendous responsibility to the hundreds of thousands of 
small businesses that are looking to this network for support 
and help. So I want to make sure that you and I are working off 
the same numbers, because I am not, again, not to take more 
time in this committee--I am going to call on Senator 
Gillibrand in a minute--interested in how many people walk in 
the front door. I am not interested in how many forms are 
filled out.
    I am interested in how many businesses actually receive 
help and support from their insurance companies first, and then 
for any gaps, from appropriate and well crafted and fiscally 
responsible Federal and State programs, because Senator Risch 
knows this, that there will be no recovery without small 
businesses recovering. I mean, homeowners also are workers and 
business owners, and if they cannot get their businesses back 
or show up for work at the local bakery, they will not have the 
money to pay their home loan back for their home in the 
community. So this is essential and we have got to figure out a 
better way to bring help, I think, in my view, more quickly and 
more supportive.
    Senator Gillibrand, let me get you for either questions or 
a statement, and thank you for your leadership.

 OPENING STATEMENT OF HON. KIRSTEN GILLIBRAND, A U.S. SENATOR 
                         FROM NEW YORK

    Senator Gillibrand. Thank you, Madam Chairwoman. Thank you 
for your work on this. I appreciate that you are holding this 
hearing. I think it is essential that we understand----
    Chair Landrieu. You have to turn the microphone on and lean 
into the mic.
    Senator Gillibrand. It is essential that we understand how 
to meet the needs of these business owners, because you are 
quite right. When we talk about what are the biggest needs in 
any State right now, it is the economy, and small businesses 
are the economic engine for growth. They create two-thirds of 
all new jobs. So if we do not have them up and running soon, we 
are not going to have any economic recovery when we so 
desperately need it.
    And so I appreciate the laser-light focus of your 
questions, getting to the bottom of how are we going to meet 
the needs of these businesses.
    I do want to recognize our two New Yorkers. Kevin Law, 
President of the Long Island Association, he has been an 
unbelievable advocate for business growth, for economic 
development. For the past two years, he has been leading the 
effort to strengthen Long Island's economy specifically, trying 
to attract new businesses and strengthen the ones that are 
already there. And Long Island uniquely represents both large 
businesses, major manufacturers, but also small businesses, Mom 
and Pop shops. It has a lot of IT companies, advance 
manufacturers, research institutions. And so the broad array of 
businesses that come out of Long Island will be important to 
make sure we are meeting their needs.
    I also want to welcome James King, our Director of the New 
York State Business Development Center. I appreciate your 
dedication to service, especially in this time of great need. 
You will have enormous burdens placed on your workload, but we 
appreciate what you are doing.
    And Madam Mayor, thank you for joining us. I know how tough 
it is for Hoboken right now, so my heart goes out to the 
families that you represent.
    I just have a couple of basic questions. I was very 
interested in, Mayor, your point that the SBA loan for someone 
who has access to credit is six percent, which seems extremely 
high given that the average interest rate at a conventional 
bank loan is five percent. And I am wondering, if we can get 
that percentage down, do you have a target that you are looking 
for, and how much grants would be useful, as well? If you were 
to devise your ideal support for small businesses in Hoboken, 
what would it look like?
    Ms. Zimmer. Well, actually, my understanding of the loan 
rate is four percent for SBA loans, but still, the feedback 
that we got from the business----
    Senator Gillibrand. It is four percent if you have no 
credit, but if you have other sources, it is even----
    Ms. Zimmer. Okay.
    Senator Gillibrand. So if you are a successful business, 
your lowest interest rate from SBA is six percent. If you have 
a tough time getting loans, it is four percent.
    Ms. Zimmer. So, I mean, people have said, for individuals, 
they can get 1.6 percent, so, I mean, I think going as low as 
possible. For me to give a--I would say getting the same rate 
that the individuals get, I think would be a great start.
    Senator Gillibrand. Mm-hmm.
    Ms. Zimmer. And then as far as the--you are asking, like, 
how much grant money would we want for businesses, or--is that 
what you----
    Senator Gillibrand. Mm-hmm.
    Ms. Zimmer. Yes. I mean, it is--right now--I mean, one 
thing that I will say that is a little bit of a challenge is 
getting the--one thing that would help to make us all more 
effective across the board is more data sharing. So, like, for 
me, I do not have all of the data on our business community, 
and since the SBA has a lot of this information, FEMA has a lot 
of this information, and we have had AmeriCorps come in and 
they have a whole system where they immediately have everyone 
sign a waiver so the information can be shared.
    So if we could start sharing more information, because 
there is assistance coming in from corporations. There are 
donations. There are people who--like, AmeriCorps has been 
coming in and working with our volunteers, literally breaking 
down walls, like doing that initial mucking out that needs to 
be done that some businesses still have not done in Hoboken. So 
I think that is, like, one place to, like, start sharing more 
information right away, and having that system both for the SBA 
and for FEMA to share, so----
    Senator Gillibrand. Let me ask Mr. King, what have you set 
up for New York? I thought Senator Landrieu's question about 
using current infrastructure is--are you able to leverage the 
SBA infrastructure that is available effectively to do this 
outreach and do this data collection? Tell us what you intend 
to do to make sure you are actually contacting, reaching, and 
supporting every business in New York that has been affected.
    Mr. King. Sure. Our approach is kind of a continuum, 
because the SBA represents the largest resource opportunity. So 
we worked with the State and the city in setting up these 
microloan kind of rapid response loans running through New York 
Business Development Corporation on a quick turnaround. Some of 
those turnarounds have been 48, 72 hours. It is totally 
electronic and it is a kind of a seamless transition from that 
microloan initiative into the SBA lending process. So it kind 
of moves the client along in the process and improves the 
efficiency of it. But that is a very small pool of funds that 
is available. It only goes up to $25,000 and I think there is a 
total of about $15 million available. So that is anticipated to 
be consumed rather rapidly.
    I think if there was an opportunity to bolster those 
programs and put some small amounts of--relatively small 
amounts of money into the hands of the business owners so they 
can enhance the recovery efforts, it is very critical. And what 
I am talking about, the 100,000 businesses that we are really 
concerned about. We anticipate that 100,000 are businesses that 
are either not going to return or they need to be totally 
rebuilt. I mean, a lot of other businesses received damage, 
lost a great deal of income, but we think that with the normal 
process, they are going to be back, you know, they are able to 
make it.
    But there are some that they have been operational long-
term. The owner is getting more senior. They do not want to put 
their home up as collateral because that is their retirement 
and they are concerned and they just may not return. They may 
walk away from their business.
    Chair Landrieu. Thank you.
    Senator Risch.
    Senator Risch. Thank you, Madam Chairman.
    First of all, Mayor Zimmer, I, like everyone here, extend 
our condolences to your losses. These things are very, very 
difficult. They are hard to plan for and disrupt lives without 
warning.
    I was interested in your--I spent a share of my career 
litigating coverage questions in insurance policies, so I 
understand that pretty well from both sides of the table. I was 
really interested in your comment about the basements versus 
non-basements and what have you. First of all, who are the 
insurers we are talking about here? Is this a Federal insurance 
policy you are talking about or are these private insurance?
    Ms. Zimmer. Well, the National Flood Insurance Program. I 
mean, it is, as you probably know, it is Federal but it is 
private. I mean, it is Federal because it is backed by the 
Federal Government and the rules are approved by Congress. But 
then it is private because the policy----
    Senator Risch. I do not think those rules are approved by 
Congress. It is the bureaucracy, I would think, more likely 
than by Congress, but----
    Ms. Zimmer. Well, I----
    Chair Landrieu. The Banking Committee.
    Ms. Zimmer. Ultimately, I mean, I have been asking about 
this basement, you know, the definition of a basement, and I 
have been told by FEMA that it would require an Act of Congress 
to change the rules of the basement issue. So--and as far as 
you were saying, like, do businesses have insurance, I mean, 
yes, the businesses, they have--so there are those that have 
flood insurance that are not going to get that much coverage 
because they may be in a basement.
    Then there are those that, quite frankly, never expected 
the Hudson River to come into Hoboken and they were not 
required to have flood insurance and they have never, ever 
flooded before. But when they go to get coverage for all of 
their lost inventory, hundreds of thousands of dollars of 
inventory, they are not going to get the coverage because they 
are told, well, that was a flood, so you are not going to get 
the coverage. So they are trying for an SBA loan. And then once 
they get that SBA loan, then for next year, they are going to 
be required to get flood insurance and they are not going to 
get that much coverage for the flood insurance. So it is kind 
of a--it is a spiraling issue that is a major challenge for our 
local businesses and for our residents, as well.
    Senator Risch. Coverage questions are frequent after an 
event. That is not unusual. But let me say this. I am going to 
have a look. I am going to have staff have a look at the 
question on the basement issue that you have talked about. Can 
you, in a nutshell, give me an executive summary as to what the 
difference is in coverage on a basement versus the first floor?
    Ms. Zimmer. Yes. I mean, a basement, you--apparently, I am 
told, there was someone in 1984 who said a basement, for that, 
you get your hot water tank, your boiler covered, and your 
electrical panels, and that is it.
    Senator Risch. You mean you cannot cover stored inventory--
--
    Ms. Zimmer. Maybe a deep freezer--I am sorry?
    Senator Risch. You cannot cover stored inventory or 
anything like----
    Ms. Zimmer. Nothing. No.
    Senator Risch [cotinuing]. That in a basement? We will 
certainly have a look at that. That is odd, to say the least, 
but I have run into a lot of odd stuff on coverage questions.
    Senator Gillibrand. In the last few weeks, I have learned 
it apparently was a real problem for New Jersey specifically, 
that they had this garden basement rule for their insurers that 
is extremely odd, so we will look into it and get you 
information.
    Senator Risch. We will. Thank you very much for bringing 
that to our attention.
    Ms. Zimmer. Great.
    Senator Risch. Mr. King, you were critical of the Federal 
Government's response, modestly, or at least to a degree. I am 
not going to criticize you for that. I understand, and I was a 
Governor and I dealt with the Federal Government and the 
bureaucracy when we had issues with them. Tell me about your 
State. How is your State as far as responding to this?
    Mr. King. You know, the State has been looking at just 
about everything that it can. One of the problems that always 
comes about when we talk about grants is that our experience is 
it tends to postpone the action of a lot of small business 
owners. So once you start talking about it, you are much better 
off if you announce it and firm it up so that people can put it 
into their total development scenario.
    And our State started talking about grants and they came 
out with, you know, the city came out with a very small grant 
of about $10,000 that was being made to small businesses 
specifically. And that really worked out quite well because it 
was in combination with a microlending program, so it put some 
additional monies in the hands of folks that might not 
otherwise have pulled the trigger and started the recovery 
process.
    Senator Risch. Thank you. My experience is exactly the 
same. When you are dealing with--if you ask for the Federal 
Government, you are going to get the Federal Government. 
Unfortunately, you get everything that comes along with that. 
They are slow. Their paperwork is just awful. If you start with 
the Mayor, she can make things happen. You go to the Governors, 
they can make things happen. But as soon as you get to the 
Federal Government, it is awful, and I appreciate your 
frustration in that regard, and frankly, I would like to 
promise you things would be different, but this has been going 
on for a long time.
    Mr. King. Well, I----
    Senator Risch. A lot better people than us have tried and 
things continue to go on.
    Mr. King. Well, I just want to make it perfectly clear, I 
think it is a heck of a lot better than it was when I first got 
DP involved following 9/11, because we were working with, at 
that time, about 12,000 businesses that were directly impacted 
by the 9/11 disaster in New York, and that was very, very 
difficult.
    In contrast to then, today is a cakewalk, in all honesty. I 
mean, it has hugely improved. Is there still room for 
improvement? Absolutely. I cannot think of a situation where, 
if we did not help every small business that needed it in a 
very short period of time, we would not be at that point of 
perfection. But I think Senator Landrieu said there are going 
to be a lot of businesses needing help and we are struggling 
with that. We are trying to come up with the resources to deal 
with it, and we are some of your biggest cheerleaders on 
getting action on the request for the $60 billion because it 
does include financing for Small Business Development Centers 
to extend this effort. And we do not think it is going to be a 
one- or two-year situation. I mean, we are going to be looking 
at repopulating businesses that do not come back for probably 
five years.
    Senator Risch. Thank----
    Chair Landrieu. And how--go ahead.
    Senator Risch. Well, I will conclude with this. First of 
all, I agree with the Chairman that this recovery is not going 
to take place unless the small businesses recover. 
Unfortunately, Congress is not going to help small businesses 
in one regard, and that is we are going through a kabuki dance 
up here right now, but at the end of the day, small businesses 
and individuals who are under 250 are going to keep their tax 
rates the same. But if they are a small business that is not a 
small small business, you can tell them their taxes are going 
up next year. I think virtually everyone around here agrees 
with that, that if it is over 250, they are going to wind up 
paying more in taxes. My side is not going to vote for that, 
but it is going to happen simply because the tax rates 
automatically go up the first of the year and there are not 
enough votes here to keep that in place. So that is an unhappy 
message to give them, but that is the message, unfortunately, 
that you have to take home and that is not going to be helpful 
to small businesses starting in 2013.
    Thank you, Madam Chairman.
    Chair Landrieu. Thank you.
    I am going to end with asking each of you to say, in your 
view, how important is it for Congress to act or not on the 
supplemental and what are your people saying about the signal 
that that may send to them. And I know $60 billion is a 
significant number, but in your experience, Mayor, what you are 
seeing on the ground, what are your people telling you about 
the importance of that recovery package?
    Ms. Zimmer. It is extremely important to the City of 
Hoboken, both for our local businesses and for our residents. I 
mean, there is a--for the people impacted by the storm and 
people are staying with friends and businesses are located in 
other areas, or they are right now making that decision, am I 
going to open back up or am I just going to go out of business. 
And so it is extremely important, and the sooner the better it 
can be acted on so that we can get those unmet needs met and 
get people back to living in their homes and keep their 
businesses going, which is, as we have all discussed, is so 
important to our local economy. So it is extremely important to 
the City of Hoboken.
    Chair Landrieu. Mr. Law, and then I will get you, Mr. King.
    Mr. Law. Yes. As I mentioned, our counties and local 
governments are doing their part. Our State Government is doing 
their part. Our philanthropic community is doing their part. 
But unless we get the approval of the President's proposed 
package of aid to our region, we are not going to recover. So 
it is critically important that we have that. And as I said 
before, too, Long Island, New York, we have always been there 
for everybody else and we need America to now be there for our 
region, as well.
    Chair Landrieu. Thank you.
    Mr. King.
    Mr. King. You know, I would just like to agree with my 
fellow panelists that it is truly critical. If we are going to 
respond as we should and help the businesses and the people who 
are in the center of the storm, we have to have some resources 
to do it. If we do not have those resources, then we are not 
living up to our own expectations.
    Chair Landrieu. Thank you.
    This committee will come to an end, but the record will 
remain open for two weeks. I thank the members from the region 
for showing up and thank Senator Risch for his leadership.
    Meeting adjourned.
    [Whereupon, at 11:51 a.m., the committee was adjourned.]



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