[Congressional Record Volume 146, Number 100 (Thursday, July 27, 2000)]
[Extensions of Remarks]
[Pages E1369-E1370]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       FINANCIAL INSTITUTIONS SHOULD PROVIDE LENDING CAPITAL FOR 
   ENVIRONMENTALLY RESPONSIBLE DRY AND WET CLEANING SMALL BUSINESSES

                                 ______
                                 

                        HON. DONALD A. MANZULLO

                              of illinois

                    in the house of representatives

                        Thursday, July 27, 2000

  Mr. MANZULLO. Mr. Speaker, today, I am introducing a Sense of the 
Congress Resolution that would urge financial institutions to promote 
environmentally responsible dry and wet cleaning processes and to work 
with business enterprises to provide streams of capital to protect the 
environment.
  I am offering this important resolution to help bring to light the 
situation that our nation's small dry and wet cleaning businesses face 
with regard to the cleaning process that most of the small cleaning 
establishments utilize--namely, percholoroethelyne (perc) and petroleum 
based solvents. Perc and petroleum based solvents are known pollutants; 
they contaminate the air, land and groundwater. However, there are 
other options available to small dry and wet cleaning businesses.
  On Thursday, July 20, 2000, the Small Business Subcommittee on Tax, 
Finance and Exports, which I chair, held an extraordinarily important 
hearing on H.R. 1303, the Environmental Dry Cleaning Tax Credit Act. 
This bipartisan bill, introduced jointly by Representatives Dave Camp 
and David Price, is an incentive-based approach to resolving the 
complex environmental problems the dry cleaning industry faces as a 
result of its use of perc, a hazardous waste when it is emitted into 
the air and groundwater. There are nearly 35,000 dry cleaners across 
the country. Most employ only a handful of workers. They are truly 
small businesses.
  H.R. 1303 provides a 20 percent tax credit toward the purchase of new 
equipment that uses non-hazardous waste producing wet and dry cleaning 
technology. Recent technological developments utilize carbon dioxide--
the same chemical compound found in sodas (or pop, depending on what 
part of the nation you represent). Carbon dioxide is obviously not 
harmful to the environment, since we consume it and our vegetation 
thrives on it.
  Like all new ideas on the market, this technology is expensive. That 
is exactly why the tax credit is necessary. While there are costs 
associated with H.R. 1303, they are far outweighed, in our view, by the 
expenses associated with cleaning up the dry cleaning solvents that 
have been used for decades. For example, in North Carolina, it is 
estimated that once the assessment and remediation for sites 
contaminated from the use of perc, costs using the state's own ``cost-
per-site'' estimates could approach $72 million to $90 million 
annually. The State of Florida has estimated that it has 2,700 
contaminated dry cleaning sites that are requiring almost $1.5 billion 
needed for clean-up. The numbers are staggering for nationwide clean up 
costs, which could approach nearly $20 billion--far outweighing the 
costs estimated for H.R. 1303.

[[Page E1370]]

  After we heard testimony from the witnesses at our hearing, I was 
approached by a gentleman from the Bank of America, who shared with me 
the situation facing the dry and wet cleaning industry from the 
perspective of banks. He stated that the ``severe and costly nature of 
environmental issues has virtually eliminated dry cleaners' access to 
conventional bank capital over the past seven to eight years.'' He 
pointed to one overwhelming reason: fear over liability as a result of 
contamination from perc and petroleum solvents.
  I submit his letter for printing in the Record. However, I want to 
share with you the assessment by the Bank of America that financial 
institutions face because of these environmental risks. These include: 
(1) direct legal liability; (2) complete asset value loss; (3) partial 
asset value loss; and (4) indirect operation risk.
  Mr. Speaker, it is quite obvious that the concerns of our nation's 
financial industry are serious enough to shy away from lending to a 
specific industry. But what is striking is the extent upon which the 
Bank of America is willing to share with Congress about why they will 
not lend to dry cleaners that use perc or petroleum based solvents.
  What is encouraging is that the Bank of America, along with other 
lending institutions, such as the Central Carolina Bank, have 
determined that dry and wet cleaning processes that utilize carbon 
dioxide technology and other non-hazardous waste causing substances 
deserve financial backing. I am sure that other banks across the 
country have similar lending policies. Although I do not know 
specifically which one, I invite those banks to contact and confirm 
this with me. I, in turn, will share this information with my 
colleagues.
  I want to reiterate the important of this resolution. There is a need 
that must be met. We have an enormous number of dry and wet cleaning 
businesses in the United States that find it difficult to obtain 
financial backing from lending institutions because of environmental 
concerns. The reason I am offering this resolution, along with my 
colleagues, is that I believe the American public needs to be aware of 
this safer, environmentally sound dry and wet cleaning technology. 
There are options out there, and I encourage our financial institutions 
to work with our dry and wet cleaners to expand this new 
environmentally safe technology.

                                                  Bank of America,


                               Small Business Risk Management,

                                       Raleigh, NC, July 25, 2000.
     Re H.R. 1303, the Environmental Dry Cleaning Tax Credit Act.
     Hon. Donald A. Manzullo,
     Member of Congress, Chairman, House Small Business 
         Subcommittee on Tax, Finance, and Exports, Washington, 
         DC.
       Dear Chairman Manzullo: Thank you for speaking with me at 
     last Thursday's post-hearing luncheon briefing. As I stated 
     then, the severe and costly nature of environmental issues 
     have virtually eliminated dry cleaners' access to 
     conventional bank capital over the past 7-8 years. There is 
     one overwhelming reason for this--chemical contamination from 
     perchloroethylene and petroleum solvents.
       The historical environment risk to banks of lending to dry 
     cleaners can be broken down into four groups:
       (a) Direct Legal Liability--Simply being in the chain of 
     title after a foreclosure can create varying degrees of bank 
     responsibility for funding property cleanups.
       (b) Complete Asset Value Loss--The extent of contamination 
     is often such that banks will ``walk away'' from foreclosure 
     and write off the entire asset value.
       (c) Partial Asset Value Loss--Even if the bank is not 
     liable for cleanup operations, or the cleanup is not so 
     extensive to justify a complete loss, banks can only sell 
     contaminated, foreclosed properties for a small fraction of 
     what the appraised value was at loan origination--before the 
     contamination! Banks must write off the difference.
       (d) Indirect Operational Risk--Even if the bank is not 
     taking a lien on real property, there is still a high risk 
     due to the potential for significant unexpected expenses 
     associated with dry cleaning operations. These expenses 
     include spill clean-up costs, regulatory fines, operational 
     interruption due to permit loss, and increased costs due to 
     various employee health issues.
       Regardless of how much better today's perchloroethylene or 
     petroleum based dry cleaning machines are when compared to 
     older machines, the risks noted above persist. While updated 
     perchloroethylene and petroleum equipment may decrease the 
     discharge of hazardous chemical solvents, they cannot 
     eliminate them. Thus, banks will continue to avoid financing 
     the equipment, the property on which they're located and the 
     operator who uses them.
       The complete elimination of the risks noted above by the 
     CO2 process would clearly be the single most 
     important positive development in the relationship between 
     banks and dry cleaners in over a decade. However, this does 
     not mean that banks will immediately be welcoming back dry 
     cleaners. The removal of the environmental bank risk due to 
     hazardous solvents is replaced with the financial risk of 
     high leverage due to the cost of the new CO2 
     technology. Tax incentives such as those included in H.R. 
     1303 would significantly help to make this important new 
     technology financially viable for dry cleaners and thus 
     create a credit risk atmosphere acceptable to federally 
     insured banks and banking regulatory agencies.
       Bank of America is the leading lender to small businesses 
     in the United States with $6.8 billion in commercial loans to 
     businesses with less than $10 million in annual revenue. The 
     average dry cleaner personifies what we would love to include 
     in our portfolio--small, hard working, mostly family owned 
     businesses with close ties to their communities. Legislation 
     such as H.R. 1303 should allow these business owners to 
     replace existing high interest loans, expensive leases, and 
     less than desirable commercial locations with access to the 
     conventional bank capital needed for commercial viability and 
     sustainable long-term growth.
           Sincerely,
                                                 Joseph C. Bonner,
         Vice President, Small Business Risk Management, 
           Commercial Credit Policy Development.

           

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