When Hurricanes Katrina and Rita devastated the Gulf Coast 18 months ago, the disaster wiped out a lot more than homes. It also wiped out jobs. Businesses of every size had their buildings and vehicles destroyed, their stocks and supplies ruined, their workers and customers scatterred to the four winds. A year and a half later, they’re still struggling to rebuild.

Big companies with their extra financial resources find it easier to recover from natural disasters like Katrina than smaller ones do. Yet throughout the Gulf Coast region, small to medium sized businesses have always provided the lifeblood of the local economies. For every big refinery or global shipping operation, there are hundreds of independently owned small businesses with less than 500 employees—in most cases less than 50, in many cases as few as 5. And those are the ones that are still suffering the most.

In the hurricanes’ aftermath, President Bush stood at a podium in New Orleans’ Jackson Square and promised Gulf Coast residents that

... We will do what it takes. We will stay as long as it takes to help citizens rebuild their communities and their lives.</blockquote

Anyone who’s visited New Orleans recently knows that promise has yet to be kept.

There are still a great many problems to be dealt with in the process of resurrecting the Gulf Coast. A key element in finding solutions to those problems is to help those hundreds of small businesses get back on their feet. As President Bush promised the country in his Jackson Square speech,

Tonight I propose the creation of a Gulf Opportunity Zone, encompassing the region of the disaster in Louisiana and Mississippi and Alabama. Within this zone, we should provide immediate incentives for job-creating investment: tax relief for small businesses, incentives to companies that create jobs and loans and loan guarantees for small businesses, including minority-owned enterprises, to get them up and running again.

In that same speech, President Bush also assured America that their tax dollars would be well spent.

Federal funds will cover the great majority of the costs of repairing public infrastructure in the disaster zone—from roads and bridges to schools and water systems. Our goal is to get the work done quickly. And taxpayers expect this work to be done honestly and wisely, so we will have a team of inspectors general reviewing all expenditures.

According to reports released in recent days, however, the government agencies that are supposed to be providing prudent financial management while aiding those businesses to recover is still falling down on the job. <!-more-> As the New York Times reported ,

Last September, the Small Business Administration, which provides most long-term rebuilding aid to disaster victims, accelerated its lending to homeowners and businesses in the Gulf Coast, responding to criticism that it had been slow to respond to Hurricanes Katrina and Rita of 2005.

But now federal investigators are looking into accusations that in speeding up its work, the agency made thousands of loans without following its own rules to avoid fraud.

[...]

Caroline Pankove, who worked as a lawyer for the disaster-loan program at the agency from June through December of last year, complained to the agency’s managers and its inspector general that employees were improperly pressured to approve loans quickly.

Loan policies were applied inconsistently, Ms. Pankove said, and disaster victims’ paperwork was often misplaced or mailed out with errors.

“The rush to disburse loans put everyone at risk: the taxpayer, the agency and especially the borrowers,” Ms. Pankove said in an interview. “The people that we needed to serve the most were the ones getting hurt the most.”

And according to this Washington Post article,

Large businesses awarded million-dollar government contracts for Hurricane Katrina cleanup are bending or exploiting rules aimed at helping small companies share the work, congressional investigators said Thursday.

The report by the Government Accountability Office focused on small Gulf Coast businesses that lost opportunities as limited-bid contracts were awarded to politically connected companies after the storm hit on Aug. 29, 2005.

Large contractors routinely did not file reports explaining their efforts to find subcontractors, as required under federal rules, according to investigators. At other times, large companies provided figures that complied with the rules but were misleading as to how much work they were sharing.

Because of the widespread problems, investigators could not offer any assurance the large companies were making “good-faith efforts to meet their small business subcontracting goals,” the report said.

(Full copies of the GAO report can be downloaded as a .pdf file here.)

When the GAO report was released, with its frank assessment of failures in the SBA’s post-Katrina rebuilding efforts, Senator Kerry called for comprehensive reviews of disaster recovery contracting practices in a letter to major federal agencies awarding contracts after disasters calling on them to issue and enforce contracting plans to ensure small firms and disadvantaged businesses receive their fair share of contracts.

All the presidential photo opportunities in the world haven’t resulted in more small and local business participation in rebuilding communities devastated by Hurricane Katrina,” said Kerry, Chairman of the Committee on Small Business and Entrepreneurship. “This GAO report reveals a severe gap in the information we need to ensure small businesses are afforded every opportunity to win contracts and help recover after a disaster. We need more information and better oversight to ensure the government is following the law.

The full text of Senator Kerry’s letter can be read here.

President Bush made another stop in his series of high-profile tours of the hurricane-damaged Gulf Coast last week. Once again, he stayed for a short while and made a long list of promises. Time will tell if those promises will finally come true for the remaining residents of the region who are still struggling to rebuild their shattered lives.

Kerry: Gulf Coast Needs More than Empty Promises

Thursday, March 1, 2007

Today Sen. John Kerry (D-Mass.) issued the following statement in reaction to President Bush’s Gulf Coast visit. Kerry is the lead sponsor of bipartisan legislation to overhaul the government’s disaster loan program which the Bush Administration has been blocking since September 2005.

“Long term recovery for the Gulf Coast requires a whole lot more than 18 months of empty promises. Businesses that were once the heart of the Gulf Coast economy are now hanging on by a thread. Yet the bipartisan proposals in Congress to get these businesses back up and running have been blocked by the Bush Administration at every turn. On his last visit to the Gulf Coast, the President predicted a bright future for the region’s entrepreneurs. Yet in the six months since that visit, nothing’s changed. While the Go Zone legislation represented a good first step, we still need fundamental reform of the government’s disaster loan program to permanently remove delays and red tape that have prevented businesses from getting timely financial assistance,” said Kerry, Chairman of the Committee on Small Business and Entrepreneurship.

The Small Business Disaster Response and Loan Improvements Act of 2007 (S. 163) would:

—Establish a Private Disaster Loan (PDL) program that allows banks to make loans directly to victims after meeting SBA criteria. The SBA will provide an 85 percent guarantee for these loans;

—Require the SBA to draft rules within one year that would create a new “expedited disaster assistance business loan program.” These short-term loans would have low interest rates similar to regular disaster loans. This would provide businesses with short-term assistance while they await other forms of federal assistance or insurance payouts following future disasters. It specifically addresses one of the major issues following Hurricanes Katrina and Rita – a lack of access to immediate capital to keep businesses afloat;

—Create a new presidential declaration of “Catastrophic National Disaster,” which will allow the SBA to issue nationwide economic injury disaster loans to small businesses affected by a large-scale disaster;

—Allow the SBA to provide relief to fuel-dependent small businesses when energy prices increase at extraordinarily high rates.

—Provide key tools for processing disaster loan applications more quickly by authorizing the SBA to enter into agreements with qualified private contractors to process disaster loans and requiring the SBA to analyze and report to Congress on how the disaster loan application process can be improved; and

—Increase the maximum size of a Small Business Administration (SBA) disaster loan from $1.5 million to $5 million and allow non-profit groups to be eligible for disaster loans.

The people of the Gulf Coast have learned that they can’t count on President Bush to make sure that his promises are kept. One thing they can count on, however, is Senator Kerry’s continuing commitment to helping them get back on their feet—despite the stumbling blocks left in their paths by those who were supposed to be in charge on that day in Jackson Square.