[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
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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
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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:]
[GRAPHIC(S) NOT AVAIILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAIILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAIILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAIILABLE IN TIFF FORMAT]
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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