Mr. Chairman, I rise today as a proud cosponsor of H.R. 1361, the RECOVER Act. I want to thank Chairwoman Velazquez for her leadership in crafting this important piece of legislation and in bringing it to the floor. The storm that hit the…
Mr. Chairman, I rise today as a proud cosponsor of H.R. 1361, the RECOVER Act.
I want to thank Chairwoman Velazquez for her leadership in crafting this important piece of legislation and in bringing it to the floor.
The storm that hit the gulf coast nearly 2 years ago exposed major flaws in the disaster planning system across all agencies of the Federal Government. Perhaps most appalling is that these storms exposed the fact that so many agencies had no plan at all for disasters such as Hurricanes Katrina and Rita. The Small Business Administration was just one of many agencies caught behind the curve, and the RECOVER Act aims to ensure that this never happens again by providing commonsense remedies for the many problems brought to light by the storms.
We are all quite familiar with the problems of the SBA in the aftermath of Hurricanes Katrina and Rita. Six weeks after the storms, there had been about 54,000 disaster loan applications received from the region. Ninety-five
percent of these applications were denied, while only 1,050 loans were approved, and only 58 checks, totaling $533,400 or so, were sent out. During the 6-week period that followed Hurricane Charley in 2004, the SBA disbursed four times the amount that was disbursed after Hurricanes Katrina and Rita.
Additionally, many people in the gulf coast region fell victim to long delays in the process of the applications, and their paperwork was lost because the SBA lacked a fully functioning disaster processing system, as well as the required staff. The SBA lacked adequate service and support for its information and telecommunications systems. Only one vendor in the region of the SBA's primary telecommunications hub could service the type of phone system that the SBA uses. The SBA also failed to completely stress test the agency's sole loan processing system prior to its implementation.
The RECOVER Act mandates that the SBA develop a comprehensive written plan in order to deal with catastrophic disasters of this magnitude, as well as test the capacity of the system at least once each year.
Administrator Steve Preston came before the Small Business Committee and made the claim that the problems involved in the loan processing system have been solved through a team case management solution. Yet in talking with various small business owners and homeowners as well, and in closely examining the loan processing numbers, doubt is cast on this assertion.
One such example is Donna Colosino of New Orleans, who came before the committee and demonstrated the serious flaws that exist that this bill aims to remedy. After the storms flooded her electrical equipment business under 12 feet of water, she applied for a disaster loan from the SBA and was approved for $250,000. After 15 months of resubmitting paperwork lost by the SBA, she finally received a disbursement of $10,000 in May of this year.
Under the current repayment structure, she would have to begin paying back her loan as if she had received the full $250,000, though she has only received $10,000 to date. This is just one more nonsensical policy of the SBA Disaster Loan program the RECOVER Act will change by altering the payment schedule so that repayment only begins on the money received.
Perhaps the most troubling aspect of the current program to me, as well as to many of my constituents back home, is the requirement that money received from the Road Home program must be used to repay any outstanding loans from the SBA.
Assume your home has a pre-Katrina value of $150,000, and it was completely destroyed by the storm. You qualify for an SBA loan in the amount of $100,000. The Road Home grant comes through in the amount of $50,000, enough perhaps to cover your pre-Katrina value, but you must then take the $50,000 Road Home grant and use it, not to complete your home, but to pay down the SBA loan by $50,000. The result is, you end up with only $100,000 in your hands to rebuild, $50,000 short of what you need.
The truth is, replacement cost of a home now is much, much more, given the spikes in the cost of rebuilding with building materials and insurance far exceeding their pre-Katrina value. The requirement to pay down the SBA disaster loan to the extent of the Road Home grant will leave the homeowner with less than is needed to replace the lost home no matter the Road Home grant award.
This SBA requirement has also kept many people from closing on their Road Home awards as they wait for this body to resolve this situation. The RECOVER Act would address this serious problem by allowing the SBA administrator to provide grants to replace compensation that has already been taken by the SBA as a duplication of benefits, as well as going forward to assist those who have yet to receive the Road Home awards to fully recover.
The requirement in the bill to impose discretion in the SBA administrator not to treat a Road Home grant as an automatic double dip is safeguard enough to prevent true double dipping from occurring. Grants are authorized in the bill to selective businesses that have been in business 2 years, who are, in fact, true pioneers in going back, because there is no guarantee that they are going to have customers there to meet the demand is a reasonable addressing of the problem there.
The flaws of the SBA Disaster Loan program have been exposed by the 2005 storms, and it now falls to this body to remedy these flaws. We have long since moved past the rescue phase. We are now focused on recovery. Yet we cannot recover under the existing structure, as 77,000 small businesses were damaged, along with 275,000 homes.
Operating under the idea of business as usual is not enough. It is only through the passage of this bill and careful oversight in the coming months that we can ensure the SBA fulfills its obligations, not only to the victims of the storms of 2005, but also to deal more responsibly and efficiently with future disasters.
I urge my colleagues to oppose any amendments that would weaken this bill and to vote on this bill for its final passage.
Mr. Chairman, I thank the gentlewoman for yielding.
The flaw in Mr. Chabot's argument and in this amendment is that the present statute automatically assumes in every instance where one receives a grant and a loan that there is double dipping. That is just not true. In the case where there is double dipping that is true double dipping, this bill permits the administrator to make a decision about that and to prevent it. In a case where there has been an insurance award, one would assume the SBA would not make a disaster loan award if there is sufficient insurance. Only in a case where the insurance isn't sufficient will we assume that the loan would be justified.
So fundamentally here what we are doing is taking away the automatic assumption that is built into this law that, every time you receive a payment of this or that nature, it is a double dip. We remove that notion from the statute and put in place a more reasonable and commonsensical one and one that gives the administrator flexibility where he determines whether or not a double dip may take place. If it doesn't, then he permits the victim of the storm to receive the award. If it is, then, of course, he denies it.
So I think there is no danger here of double dipping in this bill. None of us agree to double dipping in this bill.
I thank the gentlelady for yielding.
I also would like to thank the gentleman from Louisiana (Mr. Jindal) for offering this amendment. If anyone has been to the gulf coast recently, particularly if anyone has been to New Orleans recently, you will see that there are still many businesses that are still shuttered from the storm that happened now going on close to 2 years, and they are not at all ready to begin repaying loan obligations. There are still many obstacles to their recovery. This rightly recognizes that the reality is that these businesses will take a long time to get themselves back together.
It is very important to understand one simple thing here. This is not just a call from the people of our State for humanitarian assistance in the wake of a natural disaster. The Corps has admitted that its negligence in constructing, maintaining and designing our levees is the major reason why our city drowned and why so many businesses were put out of business. And so there is a special responsibility, it seems to me, to make special rules to overcome these problems. I really appreciate this solution that is being offered here because I think it helps to address this extraordinary devastation we have caused in great respect by the action, or lack of action, the negligence, of an agency of our Federal Government.
I thank you for the amendment. I really urge the Members to support it.