[Congressional Record Volume 152, Number 94 (Tuesday, July 18, 2006)]
[Senate]
[Pages S7762-S7763]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY:
  S. 3680. A bill to amend the Small Business Investment Act of 1958 to 
reauthorize and expand the New Markets Venture Capital Program, and for 
other purposes; to the Committee on Small Business and 
Entrepreneurship.
  Mr. KERRY. Mr. President, in 1999, President Clinton unveiled the New 
Markets Investment Initiative to counter an unmet challenge in the 21st 
century: building economically vibrant communities in underserved 
places such as inner cities and distressed rural areas, where there is 
a great need for jobs and economic development. The goal was to build a 
bridge between Wall Street and our untapped markets in Main Street 
America. In that same year, Senators Paul Wellstone, Jeff Bingaman, 
Paul Sarbanes, Carl Levin, Max Cleland, and I introduced the Community 
Development and Venture Capital Act to spearhead this innovative New 
Markets initiative in the Senate. In 2000, our New Markets initiative 
was enacted with bipartisan support in Congress as part of the 
Consolidated Appropriations Act of 2001. The New Markets Venture 
Capital Program, NMVC, which specifically promotes the creation of 
wealth and job opportunities in low-income areas, was only one part of 
the initiative agreed to by Speaker Hastert and then-President Clinton. 
The other elements of that agreement included the New Markets Tax 
Credits, NMTC, additional empowerment zones, and a new program: 
Community Renewal Zones. The overall goal of the legislation was to 
provide a number of different approaches to alleviating poverty so that 
we could better understand what works best. With the exception of the 
NMVC Program, all of the other programs have moved forward. However, 
the NMVC Program has not been given the opportunity, the funding, or 
the support to reach its full potential as Congress intended.
  The NMVC Program has had many successes since its inception 5 years 
ago. CEI Community Ventures, Inc. from Maine--close to my home State of 
Massachusetts--has invested venture capital funds in Look's Gourmet 
Food Company, which manufactures and sells all-natural, high-quality, 
shelf-stable seafood products under the ``Bar Harbor T'' and ``Atlantic 
T'' brands. Another example can be found in Vermont, where Carolyn 
Cooke and Poppy Gall founded Juno Rising/Isis Women's Apparel, an 
outdoor clothing company targeting the needs of today's active women. 
Their products can be found in outdoor stores throughout the country.
  Today, I rise to introduce legislation that will not only reauthorize 
the New Markets Venture Capital Program for 3 years, but will provide 
critical components for success: providing appropriate funding 
authorization levels, expanding the NMVC program into all regions of 
the country, encouraging investment in small manufacturers, making the 
NMVC Program consistent with the NMTC as Congress intended, 
incorporating the operational assistance grant model from the Rural 
Business Investment Program, and establishing a long-overdue Office of 
New Markets Venture Capital. The legislation is a companion to H.R. 
4303, introduced by Representatives Gwen Moore of Wisconsin and Hal 
Rogers of Kentucky. While few differences exist between our bills, both 
send a clear legislative signal that there is strong bipartisan and 
bicameral support from Congress to reauthorize this program.
  Mr. President, this program has a history of strong bipartisan 
support. In fiscal year 2001, together we appropriated $150 million for 
debenture guarantees and $30 million in grant financing to support up 
to 15 NMVC companies. Unfortunately, only half of this money was 
obligated to support 6 NMVC companies, and the remaining funds were 
rescinded in the Fiscal Year 2003 Omnibus Appropriations Act Conference 
Report. Now today this program faces further challenges with the 
President's Fiscal Year 2007 budget request asking for no funding for 
the NMVC Program. This is the sixth year in a row the President has not 
backed this program, although Congress restored funding in 2002 and 
initially provided funding in 2003. The Small Business 
Administration's, SBA's, failure to obligate the remaining funds and 
the President's lack of support for funding the NMVC Program raises an 
important question: Has the challenge in the 21st century of improving 
local economies in low-income urban and rural communities been met? All 
evidence says no. A 2006 report on America's Children by the Federal 
Interagency Forum on Child and Family Statistics stated that in 2004, 
17 percent of children live in poverty--a total of 12.5 million. In 
addition, 42 percent of children with single mothers and one in three 
African-American children live in poverty. The Bureau of Labor 
Statistics shows that in areas such as Flint, MI, where the NMVC has 
not yet had the time or resources to reach, the unemployment rate is at 
7.3 percent, well above the national average of 4.6

[[Page S7763]]

percent. Congress must use this reauthorization process as an 
opportunity to stimulate business activity in all communities and 
create jobs for low-income residents throughout the entire country.

  Prior to the creation of the NMVC Program, Congress attempted to fill 
this unmet need through various programs. In fact, Congress created the 
NMVC Program based on the SBA's Small Business Investment Company 
Program, SBIC. Since its beginning in 1958, the SBIC Program has 
provided approximately $46 billion of long-term debt and equity capital 
to more than 99,000 small U.S. companies. Although the SBIC Program has 
been popular, it does not sufficiently reach the underserved areas of 
our country that need economic development the most. The NMVC is 
targeted specifically to very low-income areas, including historically 
underutilized business zones--HUB Zones--and low-income rural and urban 
neighborhoods, which are overlooked by traditional venture capital 
investors. I do not have an NMVC Company in my State, and I am sure 
that many Sates, like Massachusetts, could benefit from the 
opportunities that the NMVC creates. To ensure that the NMVC Program 
expands into diverse areas around the country, the legislation 
encourages the SBA Administrator to establish not fewer than one 
company from each of the 10 geographic regions of the country. In 
addition to diversifying the geographic distribution of NMVC companies 
to our underserved communities, there is a great need to diversify the 
types of investments approved by the SBA, particularly in the area of 
manufacturing. According to a 2004 study by the U.S. Department of 
Commerce, the most recent recession in the business cycle hit U.S. 
manufacturers and their workers hardest--a downturn that first was felt 
in 2000. The manufacturing community lost 2.6 million jobs, accounting 
for all of the net job losses from the fourth quarter of 2000 through 
the third quarter of 2003. Much of the manufacturing sector continues 
to operate well below its previous peak and potential. For example, in 
places such as Milwaukee, where in 2002, according to the Bureau of 
Labor Statistics, 59 percent of working-age African-American males were 
either unemployed or out of the workforce. Milwaukee has also lost 
33,000 manufacturing jobs in the past 5 years. We need to do all we can 
to bring back these lost manufacturing jobs, and the NMVC Program could 
play a role. Relying on the market to bring venture capital funding to 
Milwaukee and other manufacturing hubs is not the solution. According 
to a study by the University of Kansas, Milwaukee ranks 49th out of the 
50 largest U.S. cities in terms of venture capital dollars. Imagine the 
difference that a venture capital investment could make in this area, 
creating one job for every $15,000 invested.

  As I mentioned previously, this legislation is a companion to the 
bipartisan legislation introduced by Representatives Moore and Rogers 
in the House. Both of our bills include small manufacturers in the 
mission of the program, by encouraging the SBA Administrator to select 
at least one NMVC company that is primarily involved in the investment 
and development of small manufacturing firms.
  Mr. President, the legislation also makes the NMVC Program and the 
NMTC consistent in defining low-income geographic areas. Both programs 
were designed to work together--the NMTC was intended to be a tool to 
encourage NMVC companies to raise private investment capital in low-
income communities. Conforming their definitions will assure a smooth 
coordination between the two programs for future investors.
  The nexus between the NMVC Program and the NMTC is only one aspect 
that makes this program unique among all of the SBA's programs. Another 
unique aspect is the operational assistance grant program that fund 
managers can use to assist entrepreneurs in low-income communities to 
develop a business plan, manage employees, or market their products and 
services. These grants are an essential tool for fostering community 
development using venture capital firms because investors are able to 
reach out into communities not served by conventional investors. Many 
of the NMVC companies are also members of the surrounding community, 
therefore, they will have the local expertise and guidance for 
entrepreneurs to start and sustain a viable business. Some NMVC 
companies are having a difficult time meeting the SBA requirement that 
each company raise an upfront dollar-for-dollar match in order to 
obtain an operational assistance grant. To avoid this unnecessary 
burden, the legislation incorporates a provision modeled after the 
joint SBA/Department of Agriculture Rural Business Investment Program 
which does not require a match from the company and limits the amount 
of the grant.
  Mr. President, these improvements to the NMVC Program are important 
but they cannot be implemented without dedicated staff at the SBA. In 
October 2005, I wrote a letter to the SBA expressing my concern about 
the lack of staffing and resources devoted to the NMVC office within 
the SBA's Investment Division. The SBA informed me that staff members 
within the Office of SBIC Operations were getting cross-trained on the 
NMVC Program to ensure adequate staffing and provide ample support to 
meet the needs of the six NMVC companies currently assigned to the 
Office of New Markets Venture Capital within the SBIC Program. 
Reshuffling SBA staff to assist six companies is not sufficient. If 
this program grows to its originally intended potential of 15 
companies, there needs to be staff dedicated solely to administering 
the NMVC Program. This legislation establishes an Office of New Markets 
Venture Capital within the Investment Division of the SBA, headed by a 
Director appointed by the SBA Administrator. The Director would be 
responsible for administering and encouraging investment in small 
manufacturing firms and working to expand the number of small 
businesses participating in the NMVC Program.
  This bill is urgently needed now to expand the good work of the NMVC 
Program, and I urge all of my colleagues to show their support for the 
small but growing number of businesses that promise both financial 
returns for their investors and social returns to low-income people and 
distressed regions in which they invest. This double bottom line 
distinguishes the NMVC Program from any other SBA program, and we 
cannot afford to let it expire.
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