[Congressional Record Volume 149, Number 56 (Tuesday, April 8, 2003)]
[Senate]
[Pages S4970-S4972]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Mr. Harkin, Ms. Landrieu, Mr. Pryor, 
        Mr. Lieberman, Mr. Daschle, Mr. Bingaman, and Mr. Johnson):
  S. 822. A bill to create a 3-year pilot program that makes small, 
non-profit child care businesses eligible for SBA 504 loans; to the 
Committee on Small Business and Entrepreneurship.
  Mr. KERRY. Mr. President, with most of the country's attention 
focused on the war in Iraq, important issues at home are falling 
through the cracks. Today I rise to talk about one of the needs of 
working moms and dads and their children--child care. We have a 
shortage of childcare in this country, and it is a problem for our 
families, a problem for our businesses, and a problem for our economy. 
The Census Bureau estimates that there are approximately 24 million 
school age children with parents who are in the workforce or pursuing 
education, and the numbers are growing. There has been a 43 percent 
increase in dual-earner families and single parent families over the 
last half a century. As parents leave the home for work and education, 
the need for quality child care in America continues to increase.
  As the Ranking Democrat of the Committee on Small Business and 
Entrepreneurship, I think we can foster the establishment and expansion 
of existing child care businesses through the Small Business 
Administration, SBA. Today with Senators Harkin, Landrieu, Pryor, 
Lieberman, Daschle, Bingaman, and Johnson. I am introducing the Child 
Care Lending Pilot Act of 2003, a bill to create a three-year pilot 
that allows small, non-profit child care providers to access financing 
through SBA's 504 loans.
  There is a real need to help finance the purchase of buildings, to 
expand existing facilities and improve the conditions of established 
centers to meet the demand for child care. It is appropriate to provide 
financing through the 504 program because it was created to spur 
economic development and rebuild communities, and child care is 
critical to businesses and their employees. Financing through 504 could 
spur the establishment and growth of child care businesses because the 
program requires the borrower to put down only between 10 and 20 
percent of the loan, making the investment more affordable. Another 
advantage of 504 loans is that they have terms of up to 20 years, with 
fixed interest rates, allowing small businesses to keep their monthly 
payments low and predictable.
  As anyone with children knows, quality childcare comes at a very high 
cost to a family, and it is especially burdensome to low-income 
families. The Children's Defense Fund has estimated that child care for 
a 4-year-old in a child care center averages $4,000 to $6,000 per year 
in cities and states around the Nation. In all but one state, the 
average annual cost of child care in urban area child care centers is 
more than the average annual cost of public college tuition.
  These high costs make access to child care all but non-existent for 
low-income families. While some states have made efforts to provide 
grants and loans to assist childcare businesses, more must be done to 
increase the supply of childcare and improve the quality of programs 
for low-income families. According to the Child Care Bureau, state and 
federal funds are so insufficient that only one out of 10 children in 
low-income working families who are eligible for assistance under 
federal law receives it.
  For parts of the country, when affordable child care is available, it 
is provided through non-profit child care businesses. I formed a task 
force in my home state of Massachusetts to study the state of child 
care, and of the many important findings, we discovered that more than 
60 percent of the child care providers are non-profit and that there is 
a real need to help them finance the purchase of buildings or expand 
their existing space. Child care in general is not a high-earning 
industry, and the owners don't have spare money lying around. Asking 
centers to charge less or cut back on employees is not the way to make 
child care more affordable for families and does not serve the children 
well. An adequate staff is needed to make sure children receive proper 
supervision and support. Furthermore, if centers are asked to lower 
their operating costs in order to lower costs to families, the safety 
and quality of the child care provided would be in jeopardy.
  I urge my colleagues to join us in supporting this legislation so 
non-profit childcare providers can access funds to start new centers or 
expand and improve upon existing centers. As we have done in 
Massachusetts, Senators could bring together 504 lenders, childcare 
providers not for-profit and non-profit--and the state department of 
child welfare to facilitate the increase of childcare providers in 
their states.
  As common sense tells us, and the child advocates if we listen, there 
is no magic bullet to addressing the shortage of safe and affordable 
child care in this country--it takes coordinated and complementary 
efforts to make a real difference. This is as much a child welfare 
issue as a workforce issue, and it makes sense to leverage one of SBA's 
effective resources to try and contribute to making a positive 
difference. I argue--we argue--that allowing non-profit child care 
centers to receive SBA loans can increase the availability of child 
care in the United States. Non-profit child care centers provide the 
same quality of care as the for-profit centers, and non-profit centers 
often serve our nation's neediest communities. I hope that my 
colleagues will recognize the vital role that early education plays in 
the development of fine minds and productive citizens and realize that 
in this great nation, child care should be available to all families in 
all income brackets.
  I ask unanimous consent that several letters of support be printed in 
the Record. These letters demonstrate that this is a good investment 
and good for our country.
  There being no objection, the additional materials were ordered to be 
printed in the Record, as follows:

                                              Omni Bank, N.A.,

                                    Houston, Texas, July 30, 2002.
     Hon. John F. Kerry,
     U.S. Senate,
     Washington, DC.
       Dear Senator Kerry: Please accept this letter as my full 
     support of the bill, soon to be introduced, proposing a Pilot 
     Program, operating through the Small Business 
     Administration's 504 Loan Program, that would allow Day Care 
     facilities designated as non-profits to be eligible for the 
     program.
       I believe the demand for such a product is strong, and is 
     fiscally sound. My reasons are as follows:

       1. Day Care Centers must carry a non-profit designation in 
     order to accept children to the center from low-income 
     families.

[[Page S4971]]

       2. These businesses benefit low-income neighborhoods and 
     enterprise zones by purchasing property, improving the 
     physical appearance of the community and providing safe 
     facilities for the children. The ability to utilize the SBA-
     504 program would enable these businesses to decrease lease/
     payment expense and hence, help more children.
       3. These families are in the most need for quality day care 
     facilities in their community, since many use mass transit to 
     get to work.
       4. Small businesses have provided most of the job growth in 
     this country in the last ten years. By enabling these Day 
     Care Centers to operate efficiently and provide quality 
     facilities, we will be helping small business gain and 
     maintain employees.
       5. Designation as a non-profit business does not equate to 
     an inability to pay loans, or other business expenses.
       OMNIBANK, a 50-year-old community bank in Houston, Texas, 
     has experienced a consistent demand for loans to Day Care 
     Centers. Most loan requests from these entities are for the 
     purpose of acquiring or expanding property (real-estate) or 
     acquiring transportation equipment. An example of a specific, 
     recent request follows:
       The Executive Director and Owner of Teeter Totter Day Care 
     Center approached OMNIBANK about a loan to purchase the 
     building used to house the Center. The owner, an African-
     American woman, was experienced in this business. Cash flow 
     to service the debt was sufficient and appropriate under 
     prudent leading guidelines. The only deterrent from making a 
     conventional loan was the amount available for down payment. 
     Twenty percent or more is usually required.
       Under the SBA-504 Program, a ten percent down payment is 
     allowed and standard procedure for multi-use buildings. 
     Additionally, it offers a fixed rate on the SBA portion of 
     the loan. Most small businesses do not have access to fixed 
     rate mortgages, due to the size of the loan requests, which 
     enhances the attractiveness of the SBA-504 Program even 
     further.
       As we were preparing the request package, we realized that 
     a non-profit did not quality. The owner would personally 
     guarantee the loan, and even agreed to form a for profit 
     corporation to hold the property, because the underlying 
     tenant was non-profit it would not work. The owner could not 
     change Teeter Totter into a for profit corporation without 
     jeopardizing its subsidies for low-income children.
       OMNIBANK and the day care center are located in Houston's 
     fifth ward, most of which is classified as low to moderate 
     income. Its population is primarily low-income African 
     Americans and Hispanics. The project was viewed by the Bank 
     as a good loan from a business perspective, with many 
     additional benefits to the community at large.
       Ultimately, after appealing to SBA for an exception, and 
     spending a great deal of time on the project, the loan was 
     not completed. This delayed a good project from improving 
     many aspects of an already underserved community, due to a 
     simple tax classification.
       As stated earlier, OMNIBANK receives consistent requests 
     from day care centers, most of which are non-profit. I 
     believe that a Pilot Program as proposed, will prove that 
     these are viable and valuable businesses. I would recommend 
     that all other standard criteria, proven track record, cash 
     flow, management expertise, etc. remain.
       I look forward to any questions you may have, or any 
     further examples I can provide.
           Sincerely,
                                                    Julie A. Cripe
     President and Chief Operating Officer.
                                  ____



                                           Guild of St. Agnes,

                                      Worcester, MA, July 3, 2002.
     Senator John Kerry,
     Chairman, Senate Committee on Small Business and 
         Entrepreneurship, Russell Senate Office Building, 
         Washington, DC.
       Dear Senator Kerry: It has come to my attention that your 
     committee is working on legislation that would expand the SBA 
     504 loan program to non-profit child care centers.
       As the Executive Director of the Guild of St. Agnes Child 
     Care Agency and a member of the Advisory Committee on Child 
     Care and Small Business, wholeheartedly support this 
     legislation. The Guild of St. Agnes is a non-profit child 
     care agency providing child care in Worcester, MA and its 
     surrounding towns. Presently we care for 1200 children aged 
     four weeks to twelve years in child care centers, family care 
     providers' homes and public schools. Of our seven centers, we 
     currently own one.
       Four of our centers are in old, worn-down buildings, 
     causing us difficulty in recruiting new clients. As we look 
     towards the future, the Guild of St. Agnes has set a goal of 
     replacing these centers with new buildings. In order to 
     accomplish this goal, we need to look for creative funding 
     sources to support our capital campaign. The SBA 504 loan 
     program would allow us to invest 10 percent of our own funds 
     for capital expenses, borrow 50 percent from the government 
     and secure a bank loan for 40 percent. Not only is this loan 
     program attractive to banking institutions, it allows child 
     care agencies like the Guild of St. Agnes to continue to grow 
     during these economically challenging times.
       I urge you to support the SBA 504 loan program legislation. 
     The future of non-profit child care agencies such as the 
     Guild of St. Agnes depends no it!
           Sincerely,
                                                 Edward P. Madaus,
      Executive Director.
                                  ____



                                                   Accion USA,

                                         Boston, MA, July 8, 2002.
     Hon. John Kerry,
     Chairman, Senate Committee on Small Business and 
         Entrepreneurship, Russell Senate Office Building, 
         Washington, DC.
       Dear Senator Kerry: My name is Erika Eurkus, and as a 
     member of your Advisory Committee on Child Care and Small 
     Business, I am writing to voice my support of expanding the 
     SBA 504 loan program to include nonprofit child care centers.
       I am the greater Boston program director for ACCION USA, a 
     nonprofit ``micro'' lender whose mission is to make access to 
     credit a permanent resource to low- and moderate-income small 
     business owners in the United States--helping to narrow the 
     income gap and provide economic opportunity to small business 
     owners throughout the country. Many of the struggling 
     entrepreneurs we serve are the owners of small, family-based 
     day care centers.
       At ACCION, I regularly come into contact with women and men 
     whose dream is to operate a successful child care center--to 
     provide a service to the community while making a better life 
     from something they love to do. Often, what keeps these 
     hardworking entrepreneurs from fully realizing that dream is 
     a lack of working capital to begin and grow their businesses. 
     Microlenders like ACCION are the only place they can turn for 
     the crucial capital they need for their businesses. Mauro 
     Leija, an ACCION client in San Antonio, Texas, has tried--and 
     failed--to secure capital from commercial banks. ``The loan 
     officer at the bank said, `Be realistic--you'll never get a 
     loan. You have no college diploma, no capital, no history 
     with any bank,' '' Mauro remembers. This lack of economic 
     opportunity is too often the reality for countless child care 
     providers--most of whom earn an average of $3 per hour for 
     their services.
       With increased access to capital through the expansion of 
     the SBA 504 loan program, small, nonprofit day care centers 
     can continue to provide their valuable services to the 
     community--and build a better life for their own families at 
     the same time. Suzanne Morris of Springfield, Massachusetts, 
     a longtime ACCION USA borrower, already illustrates the 
     potential successes that an expanded SBA 504--and an 
     opportunity for capital--will bring to day care owners across 
     the country. After years of hard work and several small loans 
     from ACCION, Suzanne has moved her day care out of the home 
     and has expanded her staff to include seven members of the 
     community. The business supports her family of four. She also 
     gives back by training other local home-based day care 
     providers in Federal nutrition guidelines.
       It is my hope that we can all witness more successes like 
     those of Suzanne by opening the door to funding for small day 
     care providers. Please include nonprofit child care centers 
     in the scope of SBA 504.
           Sincerely,
                                                     Erika Eurkus,
     Greater Boston Program Director.
                                  ____



                               Neighborhood Business Builders,

                                        Boston, MA, July 10, 2002.
     Senator John Kerry,
     Chairman, Senate Committee on Small Business and 
         Entrepreneurship, Russell Senate Office Building, 
         Washington, DC.
       Dear Senator Kerry: I am writing on behalf of Neighborhood 
     Business Builders and the Jewish Vocational Service of Boston 
     in support of legislation to expand availability of SBA 504 
     loans to non-profit child care centers.
       I am currently the Director of Loan Funds at Neighborhood 
     Business Builders, which is an economic development program 
     and US SBA Intermediary Microlender. I have been lending and 
     consulting to small businesses for the past year after 
     fifteen years in the private sector as founder of three 
     different companies in Boston and Los Angeles. I have an MPA 
     from the Kennedy School at Harvard University.
       I am on Senator Kerry's Child Care and Small Business 
     Advisory Committee, and am Co-chair of the Sub Committee on 
     Family Child Care.
       I support legislative change to the 504 loan program 
     because our committee has uncovered a need for government 
     support of non-profit child care centers. The basic reason 
     for this is that, while we recognize a demand for child care 
     in every part of the country, we do not consider that the 
     market fails to profitably supply child care in every part of 
     the country.
       For-profit entities are able to access the capital they 
     need by: (1) Demonstrating demand for the service provided 
     and (2) Demonstrating ability to service market rate debt 
     with acceptable risk. Non-profit centers emerge when: (1) 
     Demonstrated demand for the service is evident, but (2) The 
     market will not support the true cost of the service 
     provided. These non-profit centers are unable to access 
     traditional forms of capital because they cannot demonstrate 
     an ability to service debt at an acceptable risk.
       The SBA 504 loan program would help mitigate the risk to 
     lenders who will then be able to provide the necessary 
     capital for the service that we know is in demand. The tax 
     status of a child care center should be irrelevant, since the 
     501(C)3 status is only granted

[[Page S4972]]

     when there is evidence of a public good being provided.
           Sincerely,
                                                       Eric Korsh,
     Director of Loan Funds, Neighborhood Business Builders.
                                  ____

                                            South Eastern Economic


                                      Development Corporation,

                                       Taunton, MA, July 10, 2002.
     Chairman John Kerry,
     Senate Committee on Small Business and Entrepreneurship, 
         Russell Building, Washington, DC.
     Re non profit child care center eligibility under the SBA 504 
         program.

       Dear Senator Kerry: As a member of the Advisory Committee 
     on Child Care and Small Business as well as Vice President at 
     South Eastern Economic Development (SEED) Corporation, I am 
     writing in support of the idea of expanding the SBA 504 
     program to allow for non profit child care centers to be 
     eligible for financing under the program. SEED Corporation is 
     a Certified Development Company certified and accredited to 
     administer the SBA 504 program throughout southeastern 
     Massachusetts. Over the past 2 years, SEED has been the 
     number one SBA 504 lender in the state. SEED is also an 
     approved SBA Microenterprise Intermediary and we have enjoyed 
     and made use of the ability to provide micro loans to non-
     profit child care businesses since the microenterprise 
     intermediary legislation made the special provision for non 
     profit child care providers to be eligible for SBA micro loan 
     funds. My primary responsibilities at SEED include 
     origination, underwriting and closing SBA 504 loans as well 
     as the oversight and development of SEED's micro loan and 
     business assistance activities.
       Over the past five years, SEED has assisted over 10 FOR-
     PROFIT child care businesses to obtain SBA 504 financing for 
     their start-up or expansion projects. However, we have also 
     had to turn away an equal number of non-profit child care 
     centers that were seeking similar assistance due to the fact 
     that non profit entities are not eligible under the SBA 504 
     program.
       As we have learned from discussions and analysis with the 
     Advisory Committee on Child Care and Small Business, access 
     to long term, fixed market or below-market rate financing is 
     essential to any child care center. The slim margins that 
     characterize this industry limit any child care center's 
     ability to grow. The SBA 504 program offers the type of fixed 
     rate financing that not only assists the business to keep its 
     occupancy costs under control but also serves to stabilize 
     its operations over the long term. The program also provides 
     an incentive to a bank to provide fixed asset financing to a 
     business that might not otherwise be able to afford a 
     conventional commercial mortgage. The non-profit child care 
     centers provide the same quality of care as the for-profit 
     centers. Preventing non-profit child care centers from making 
     use of the SBA 504 program when their for-profit competitors 
     are able to results in discrimination against the children 
     they serve; and, in general, the majority of child care 
     centers operating in our state's neediest areas are non-
     profit.
       For these reasons, I would like to support your efforts to 
     expand the SBA 504 program enabling non-profit child care 
     centers to be eligible for fixed asset financing under the 
     504 program. Thank you for your efforts.
           Sincerely,
                                                   Heather Danton,
     Vice President.
                                  ____

         The Commonwealth of Massachusetts, Executive Office of 
           Health and Human Services, Office of Child Care 
           Services,
                                        Boston, MA, July 11, 2002.
     Chairman John Kerry,
     Senate Committee on Small Business and Entrepreneurship, 
         Russell Building, Washington, DC.
       Dear Chairman Kerry: The Massachusetts Office of Child Care 
     Services (OCCS) fully supports expansion of the SBA 504 loan 
     program to include non-profit child care programs. OCCS is 
     the state's licensing agency responsible for setting and 
     enforcing strong health, safety and education standards for 
     child care programs throughout the Commonwealth. OCCS is also 
     the lead state agency responsible for the administration and 
     purchase of all human services child care subsidies across 
     the state. As a result, this agency is greatly invested in 
     the availability of these child care programs and in 
     increasing the capacity of child care services to benefit 
     more families in the Commonwealth.
       Currently there are approximately 17,000 licensed child 
     care facilities in the Commonwealth which can provide 
     services to over 200,000 children. Many of these facilities 
     are non-profit programs that serve low-income families that 
     are receiving child care subsidies to help them become or 
     remain employed, and families that are or were receiving 
     TANF. The availability and accessibility of child care is one 
     of the main reasons that families can continue to 
     successfully transition from welfare to work. There are 
     currently approximately 18,000 children on the waiting list 
     for a child care subsidy. The reauthorization of TANF may 
     further increase the number of families seeking subsidized 
     child care and Massachusetts must be ready to provide quality 
     care. Accordingly, current and future non-profit programs 
     will greatly benefit from the expansion of the SBA 504 loan 
     program, as will the families that they serve.
       OCCS is a member of the Advisory Committee on Child Care 
     and Small Business and fully supports the Committee's mission 
     of uniting the small business and child care communities to 
     help providers maximize their income while providing quality 
     child care. Expansion of the SBA 504 loan program will 
     undoubtedly help expand the availability and accessibility of 
     quality child care. Thank you for your support of this 
     important legislation. If I can be of further assistance 
     please do not hesitate to contact me.
           Sincerely,
                                                  Ardith Wieworka,
     Commissioner.
                                  ____

                                             Western Massachusetts


                                        Enterprise Fund, Inc.,

                                    Greenfield, MA, July 12, 2002.
     Senator John Kerry,
     Chairman, Senate Committee on Small Business and 
         Entrepreneurship, Russell Office Building, Washington, 
         DC.
       Dear Senator Kerry: I am writing in strong support of the 
     legislation to expand the use of the SBA 504 program to 
     include the financing of non-profit childcare centers.
       As a member of Senator Kerry's Childcare Advisory Committee 
     and the Executive Director of the Western Massachusetts 
     Enterprise Fund (which makes loans to non-profits), I have 
     seen a clear need for both more flexible and lower cost 
     financing.
       The SBA 504 program meets both those needs. By providing up 
     to 40 percent financing, the SBA 504 program can help 
     childcare centers more easily leverage bank financing. 
     Additionally, the program offers highly competitive interest 
     rates.
       Finally, allowing the SBA to make loans to non-profit 
     childcare centers is not new to the agency. The SBA is 
     already making working capital loans to non-profit childcare 
     centers through its Microenterprise Loan Fund Program.
       If you have any questions, please to not hesitate to 
     contact me.
           Sincerely,
                                                Christopher Sikes,
                                               Executive Director.
                                 ______