- SURVEYING STORMS: A DEEPER DIVE INTO SBA'S DISASTER RESPONSE

[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]

SURVEYING STORMS: A DEEPER DIVE INTO SBA'S DISASTER RESPONSE

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HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTEENTH CONGRESS

SECOND SESSION

__________

HEARING HELD
SEPTEMBER 5, 2018

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[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

Small Business Committee Document Number 115-088
Available via the World Wide Web: http://www.govinfo.gov

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Small Business Committee Document Number 115-088
Available via the GPO Website: www.govinfo.gov

HOUSE COMMITTEE ON SMALL BUSINESS

STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
TRENT KELLY, Mississippi
ROD BLUM, Iowa
JAMES COMER, Kentucky
JENNIFFER GONZALEZ-COLON, Puerto Rico
BRIAN FITZPATRICK, Pennsylvania
ROGER MARSHALL, Kansas
RALPH NORMAN, South Carolina
JOHN CURTIS, Utah
NYDIA VELAZQUEZ, New York, Ranking Member
DWIGHT EVANS, Pennsylvania
STEPHANIE MURPHY, Florida
AL LAWSON, JR., Florida
YVETTE CLARKE, New York
JUDY CHU, California
ALMA ADAMS, North Carolina
ADRIANO ESPAILLAT, New York
BRAD SCHNEIDER, Illinois
VACANT

Kevin Fitzpatrick, Majority Staff Director
Jan Oliver, Majority Deputy Staff Director and Chief Counsel
Adam Minehardt, Staff Director

C O N T E N T S

OPENING STATEMENTS

Page
Hon. Steve Chabot................................................ 1
Hon. Nydia Velazquez............................................. 2

WITNESS

Mr. James Rivera, Associate Administrator, Office of Disaster
Assistance, United States Small Business Administration,
Washington, DC................................................. 4

APPENDIX

Prepared Statement:
Mr. James Rivera, Associate Administrator, Office of Disaster
Assistance, United States Small Business Administration,
Washington, DC............................................. 26
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Letter from Hon. Jennifer Gonzalez-Colon to Hon. Linda
McMahon, Administrator, Small Business Administration...... 31

SURVEYING STORMS: A DEEPER DIVE INTO SBA'S DISASTER RESPONSE

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WEDNESDAY, SEPTEMBER 5, 2018

House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 11:00 a.m., in Room
2360, Rayburn House Office Building. Hon. Steve Chabot
[chairman of the Committee] presiding.
Present: Representatives Chabot, Kelly, Blum, Gonzalez-
Colon, Fitzpatrick, Curtis, Velazquez, Evans, Clarke, Chu,
Adams, Espaillat, and Schneider.
Chairman CHABOT. The Committee will come to order.
As you can see, there is no problem too big or too small
that this Committee cannot deal with in a hurricane or anything
else. So thank you all for being here.
On April 5th last year, soon after being confirmed,
Administrator McMahon provided testimony to this Committee. At
that hearing, the Administrator said SBA's Disaster Relief
Program is ``paramount''.
Approximately 5 months after she testified at that hearing,
Hurricane Harvey made landfall in Texas. A few days later
Hurricane Irma hit Florida. And again, a few days later,
Hurricane Maria devastated Puerto Rico and the U.S. Virgin
Islands.
The 2017 storm season, by all accounts, was historic. The
nation was responding to three devastating hurricanes all at
the same time. As we know, SBA plays a large role in the long-
term recovery needs for the United States. Its Disaster Loan
Program, which provides fixed-term and low-interest direct
loans to victims, is vital for businesses and homeowners as
they begin to replace, repair, and rebuild.
Given that we are roughly a year out from those massive and
damaging storms making landfall, it is imperative that we spend
time reviewing the SBA's response efforts. Going back many
years, Hurricane Katrina and Hurricane Sandy proved extremely
challenging for SBA at that time.
We are here today to gain a better understanding of whether
the changes made over the years at the SBA have made
improvements in their disaster response. I look forward to
hearing more about the outreach SBA made during the 2017 storm
season to victims on the ground after these disasters.
Additionally, I am interested in hearing how efficiently and
quickly the SBA was able process loans to those impacted by the
storms. And finally, I hope we will hear more about what SBA
learned from the 2017 storm season and how they are preparing
for future disasters, including Tropical Storm Gordon that is
hitting the Gulf Coast and Mississippi as we speak.
As rebuilding efforts are ongoing and continue even today,
it is important we evaluate the 2017 response. Victims of
storms count on the SBA and their response during their darkest
days. I agree with Administrator McMahon, this program is
paramount.
I would now like to yield to the Ranking Member for her
opening remarks.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
A little less than a year ago, Hurricane Maria made
landfall in my hometown of Yabucoa, Puerto Rico. In the
following days, Puerto Rico and the U.S. Virgin Islands
suffered historic devastation. Sustained winds exceeding 150
miles per hour, ravaged bridges, roads, and seriously damaged
more than 472,000 homes. Physical damage is estimated to be
over $90 billion just for Puerto Rico.
The entire Commonwealth, all 3.4 million American citizens
lost power. Thousands of businesses and hundreds of thousands
of residents would not regain electricity for 9 months, marking
the longest blackout in American history. It will probably
remain unknown the exact number of Puerto Ricans who lost their
lives as a result of Hurricane Maria.
Just last week, the Government of Puerto Rico finally
acknowledged that Maria actually killed nearly 3,000 Puerto
Ricans after 9 months of insisting that the official death
count was 64. This would make Maria among the deadliest
hurricanes to strike the U.S.
FEMA's own After-Action Report acknowledged that the
administration deployed resources that were inadequate in terms
of the response. And while President Trump may believe his
response to Maria was fantastic, I know the people of Puerto
Rico viscerally disagree.
While Maria was historic in scope, 2017 was a project year
for natural disasters throughout our nation. Harvey devastated
Southeastern Texas and caused an estimated $125 billion in
damage. Irma, on the other hand, was one of the strongest
hurricanes in recorded history. At the same time out west,
California experienced the most destructive wildfire season on
record.
While it is certainly the subject of much debate, I believe
that as our planet continues to warm, the intensity and
frequency of natural disasters like these will increase. No
matter the scope or the cost of a disaster, the first weeks are
critical for small businesses. FEMA estimates that between 40
and 60 percent of businesses impacted by natural disasters fail
to fully recover.
Recognizing this need, Congress created the SBA low-
interest Disaster Loan Program to serve as a lifeline to aid
both businesses and homeowners. As such, it is critical that
SBA process and disburse disaster loans quickly. I must
acknowledge that responding to three major hurricanes in the
span of just one month presents significant challenges.
However, the three OIG reports evaluating SBA's response to
each of the storms highlight ways SBA's response fell short.
OIG identified several reasons for SBA's disaster response
shortcomings. These included failing to quickly staff-up;
underutilizing staffing management tools; not including
performance standards in purchase agreements; and
underestimating the extent to which Spanish language
translation services would be needed to help hurricane victims
in Puerto Rico.
Given the shock, all disaster agencies failed during the
2017 hurricane season. It is imperative that they all,
including SBA, learn hard lessons from their shortcomings. SBA
must work now to improve and optimize their system and
procedures before the next Maria strikes. Should this require
further legislative action, I am confident that this is an area
where we can work together to ensure these programs operate
efficiently and effectively, and that entrepreneurs and
homeowners harmed by disaster receive the assistance they need.
I want to thank the witness for his participation, and I
yield back, Mr. Chairman.
Chairman CHABOT. Thank you very much. The gentlelady yields
back.
And the chair would like to recognize and thank both the
Ranking Member, Ms. Velazquez, as well as Ms. Gonzalez-Colon
for their leadership and their hard work and their dedication
in assisting the people of Puerto Rico through the devastation
that they suffered as a result of Hurricane Maria.
And I would now like to recognize Ms. Gonzalez-Colon for 2
minutes for an opening statement.
Ms. GONZALEZ-COLON. Thank you, Mr. Chairman.
First of all, thank you for having this hearing and having
SBA here.
You all know about the landfall of Hurricane Maria, but the
magnitude of the devastation of this hurricane includes the
total collapse of the electrical system on the island, the
total collapse of the telecoms on the island, and even 70
percent of the drinking water treatment and distribution system
even failed. Ninety-one percent of the cellular towers were
lost, schools remained closed for about a month, and more than
half a million housing units suffered major damages.
Even the Small Business Administration recognized that they
received from FEMA more than 468,000 referrals for home loans
and 77,000 for business loans. Of them, when approved, $1.6
billion for the home loan and $182 million for the business
loan. We also know that thanks to the communities, our fellow
Americans in the continental U.S. and, of course, the
intervention of the Federal Government, without that kind of
help we will never receive the water, the food, and the medical
assistance for our communities, especially those in the center
part of the island.
We are still struggling for the complete recovery of the
island. It has been identified by the fiscal, but more than
$139 billion are going to be needed for the reconstruction of
the island. Of those, just $45 billion have been allocated by
the House and the Senate and the President, so we still have a
long path to that recovery. And as the sole representative for
the District of Puerto Rico here, I want to thank the Small
Business Committee and all the members and the Ranking Member
for allowing us to receive those allocation of funds that
continues public hearings and oversight we are doing for a lot
of those agencies. Without that kind of help, we do not have
two senators. I cannot even vote on the floor. So you became my
tools to help the island of Puerto Rico.
So thank you, and with that I yield back. And I welcome the
remarks of Mr. Rivera.
Chairman CHABOT. Thank you very much. The gentlelady yields
back.
And if other members have opening statements, I ask they be
submitted for the record.
And I would like to take just a moment to explain our
timing lights, Mr. Rivera, although you have testified before
the Committee before so you are familiar with them. The green
light will be on for 4 minutes. The yellow light lets you know
you have a minute to wrap up, and then the red light will come
on. And I request that you stay within those, but if you go
over a little bit we will understand.
And I would now like to introduce our witness. Mr. James
Rivera is the associate administrator for the Office of
Disaster Assistance at the Small Business Administration (SBA).
In this capacity, Mr. Rivera directs the Disaster Loan Program.
He began his SBA career on the ground in Texas in 1989 serving
as a disaster loan specialist. Mr. Rivera then transitioned to
the Washington office for the SBA in 1994. Over his nearly 30-
year SBA career there, he has also served as the associate
administrator for the Office of Financial Assistance, and prior
to his public service, Mr. Rivera was a commercial loan officer
in the private sector. And you are an expert on the Disaster
Loan Program, Mr. Rivera, and we are very anxious to hear what
you have to say and answer our questions.
And we welcome you back to the Committee, and you are
recognized for 5 minutes.

STATEMENT OF JAMES RIVERA, ASSOCIATE ADMINISTRATOR, OFFICE OF
DISASTER ASSISTANCE, U.S. SMALL BUSINESS ADMINISTRATION

Mr. RIVERA. Good morning, Chairman Chabot, Ranking Member
Velazquez, and members of the Committee. I appreciate the
opportunity to testify about SBA's Disaster Assistance response
to the 2017 hurricanes, and also to share the outlook for the
2018 hurricanes.
One year ago, the agency was in the early stages of
responding to Hurricane Harvey. Little did we know that we were
about to experience Hurricanes Irma and Maria and embark on a
much broader agency effort.
When I look back on last year, I am incredibly proud of the
work done by our SBA staff. We went from a core staff of around
800 employees to over 5,000 at the height of our hurricane
response, accomplished in the span of 90 days. To date, we have
received over 1.2 million calls for assistance from disaster
survivors. We received over 339,000 applications, processed on
average in 17 days. We approved over 140,000 loans to
homeowners and businesses. For all three hurricanes combined,
these loan approvals total over $7.5 billion. This marks the
second largest disaster event in SBA history.
At the same time, the agency experienced a very high volume
of other disasters. In fiscal year 2017, SBA dealt with 23
presidentially declared disasters. We also administered 53
agency declarations. We would not be able to sustain this level
of activity were it not for the oncoming support of the
Committee. We want to thank you for the key initiative you
sponsored as part of the RISE Act. Among those provisions were
important measures for disaster survivors, such as increasing
the unsecured threshold from $14,000 to $25,000 for the amount
of money a disaster survivor can receive in their initial loan
disbursement. This provision unfortunately sunsets in November,
and we look forward to working with the Committee on a
potential renewal.
Other measures, like mitigation assistance and the creation
of a Disaster Loan Assistance Portal have had very significant
impact as well. The portal has provided disaster survivors with
quick and easy access to filing requirements, their loan
application status, and has enabled document uploads and
electronic signature. This advancement has allowed us to more
effectively and efficiently process applications, cutting in
half the time it takes the agency to approve loans.
In less than 45 days, SBA has approved over $1 billion for
Hurricanes Harvey, Irma and Maria combined. This record time
compares to past major disaster events such as Hurricanes
Katrina, Rita and Wilma; Superstorm Sandy; and the Northridge
Earthquake in 1994, which all took over 90 days to reach the $1
billion milestone.
While I have been part of the Disaster Assistance office
for over 20 years, I have only had the opportunity to work for
Administrator McMahon for the past year. During this time, I
have appreciated her direction and how she has challenged SBA
to be prepared for large-scale disasters, the magnitude of what
we experienced with the 2017 hurricanes. In leading SBA, the
administrator has pushed us to test our disaster response
models and for our program to be proactive and not reactive.
In the months leading to the 2017 hurricane season, we
tested our system along the lines of Hurricane Katrina times
three. That foresight played a large role in our agency's
preparedness and subsequent response.
At the administrator's direction, we also continue to
review and evaluate lessons learned and best practices and
apply them to our 2018 disaster response. Recently, we
implemented a new Disaster Credit Management System, which will
allow us to even further increase our loan processing cycle
times. We have also conducted internal after-action reports and
evaluated the inspector general inspection reports. These are
areas in which we may not have performed as effectively as
desired, and we continue to work to address them.
Over the past year, the agency has communicated with the
Committee to share data and inform you on the disaster response
to the hurricanes. We hope that the information has been of
value to the Committee members and staff in understanding our
programs and activities, and we continue to communicate with
you throughout the 2018 season.
So far this year, the agency is dealing with 10
presidential disaster declarations and 33 agency declarations.
We are providing disaster assistance across 22 states in
response to severe storms, tornados, wildfires, floods, and
even lava flows. We have also just approved an agency
declaration for toxic algae bloom and red tide.
With Hurricane Elaine, and as Tropical Storm Gordon reaches
the Gulf Coast states, we stand ready on these and other
potential disasters that might impact states across the
country.
Mr. Chairman and Committee members, thank you again for the
opportunity to testify, and I look forward to your questions.
Chairman CHABOT. Thank you very much.
And I will begin with myself for 5 minutes. And I will
begin with a general question.
By all accounts, the 2017 storm season was monumental.
Broadly speaking, how do you think the SBA responded to
Hurricanes Harvey, Irma, and Maria?
Mr. RIVERA. As you mentioned, I have been with the Small
Business Administration for 30 years. We have never been
faster. We have never provided assistance quicker. So
generally, you know, at the 50,000 foot level, we were as quick
as we possibly could. We did the best possible job we could.
And there is room for improvement. But at the same time, I am
proud of what we have been able to do overall.
We have cut times from 70 days in Katrina to 40 days in
Sandy to 25 days for businesses in Harvey, Irma, and Maria. And
on the home side it is much quicker.
Chairman CHABOT. Thank you very much.
And as you know, significant reforms were instituted at the
SBA after Hurricane Katrina in 2005 and Hurricane Sandy in
2012. You mentioned the time, that we are doing it more quickly
than we did before. Are there any other reforms that helped
that you could specifically point out to and say, yeah, we
changed this and this made a difference to these.
Mr. RIVERA. So two thoughts come to mind immediately. You
gave us the ability, or actually, required us to go out and get
an electronic disaster portal. So in the past, we would get
stressed at the call center because a lot of people would call
the call center for status, where now you can go online through
the Disaster Loan Application Portal. Ninety-seven percent of
our applications come through the electronic loan application
portal. You can find out your status. You can do an electronic
upload for your tax transcript request. There is just a host of
opportunities. We give you the status of where you are at as
far as if you are in the approval que, and then disbursement
que, what you need to do. You can upload, download documents,
so forth and so on.
The one that I am hoping that we can work together on is
the sunset of the RISE. As a result of the RISE Act, the
unsecured threshold of $14,000 to $25,000, if it sunsets--it
does sunset in November of this year and the unsecured
threshold would go back to $14,000. So we would prefer to be
consistent and stay at that $25,000 level because that initial
disbursement, as all of you have mentioned before, is very
important for that initial cash infusion for the disaster
borrower.
Chairman CHABOT. Thank you very much.
And although the response efforts continue, what did you
learn from 2017, this past year, the storm season, and how is
the SBA preparing for the next big one? And obviously, we have
something occurring currently. Hopefully, it is not going to be
to the magnitude of the ones that we are discussing here this
morning, but what preparations are you looking at down the road
to improve?
Mr. RIVERA. So I have to give a lot of credit to
Administrator McMahon. I have worked for several
Administrators. I have never had an Administrator that actually
has challenged me to the level that she has challenged me. In
her first couple of months in the agency, we ran a scenario of
100,000 application disaster. It was pretty much cookie-cutter
from our perspective. That is within our sweet spot. And she
says, well, that is nice, but I want you to look at Katrina
times three on your models, and what does that do to the
agency? And then she also said, you need to make your jobs
simpler by doing, you know, leaning forward and preparing more
and stop being so reactive from that perspective. So it is true
criticism that I took, you know, head on. We are much more
prepared now.
We have still 2,200 employees onboard. We are still in
Puerto Rico. We have 350 staff on the ground in 50 locations.
But from my perspective, we are much better prepared.
And then we are taking advantage of technology like we have
never taken before. We are trying to simplify our processes
internally, and on the flip side, making the process for the
disaster survivors as simple as possible.
Chairman CHABOT. Okay. Thank you.
And then one final point. I represent Ohio, and Ohioans
sometimes spend half the time or more in Ohio and they are
retired now and they maybe have some property down in Florida.
And I was discussing last weekend or the weekend before with
some folk in that circumstance, they were talking about the red
tide and what a disaster it has been this year recently. Could
you discuss that just a little bit? It is a little bit
different from what we were talking here but for them it is
clear disaster.
Mr. RIVERA. Absolutely. So we declared two disaster
declarations yesterday for Florida. One is for Lake Okeechobee,
and it is the toxic algae bloom. It is that green-bluish stuff.
There is a strong odor to it and it keeps fishermen away. It
keeps tourist industry away. And then along the gulf side on
the southern part of Florida is this red tide. So toxic algae
bloom is freshwater and red tide is salt water. And what that
does is, you know, the tourism industry, the supply side of a
restaurant, you know, who supplies the restaurant, so forth and
so on. And so we are providing the working capital loan for
those businesses that are impacted by that specific event.
Chairman CHABOT. Thank you very much. My time has expired.
The Ranking Member is recognized for 5 minutes.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
As you know, Maria caused an island-wide blackout that took
almost a year completely to fix. Do you think that the blackout
negatively impacted the ability of Puerto Rican survivors of
Maria to apply for SBA disaster loans?
Mr. RIVERA. The blackout did stress our ability to respond
from a technology perspective. We did have a lot of----
Ms. VELAZQUEZ. Yes, for the administration. But in terms of
survivors not having access to internet or electricity, my
question is, do you have the numbers as far as how many
businesses applied for Hurricane Hugo and Georges compared to
now where this was an epic, monumental destruction of Puerto
Rico?
Mr. RIVERA. I do not have the numbers of Hugo with me but I
can get back to you for the record.
Ms. VELAZQUEZ. So only 10,000 businesses have applied for
disaster loans. I found that very, very, very small. You
mentioned the RISE Act, legislation that I introduced and was
enacted into law. Given those dynamics, I intend to reintroduce
similar language and hopefully work with the administration to
open up the program so that we provide the ability for
survivors, businesses and homeowners, to be able to apply for
disaster loans.
Any comments on that?
Mr. RIVERA. We welcome working with you on the RISE Act. I
think that is----
Ms. VELAZQUEZ. So in the last 2 weeks after the deadline
expired and we worked with FEMA to extend the deadline, 400
businesses in Puerto Rico applied only in 2 weeks. What does
that tell you?
Mr. RIVERA. Well, so, a lot of businesses are usually, they
wait to see what kind of insurance recovery they have. They
wait to see what resources are available from that perspective.
So historically, the businesses do apply later. But as I
mentioned earlier, we are still co-located with FEMA, 50
different locations. We have 350 people on the ground and we
will be there for the long term.
Ms. VELAZQUEZ. So as I mentioned to you, the number of
applications is low, very low, and then the fact that only in 2
weeks, the last 2 weeks, 400 had applied shows the need for
extending the program.
Mr. Rivera, the OIG also found that as of the end of March
2018, only 22 percent of the loans approved for Hurricane Maria
victims have been disbursed. That is over 6 months after the
storm. Why is it that it is taking this long to disburse these
approved loans?
Mr. RIVERA. So that was a snapshot that was done when they
did the audit, I am sorry, the inspection back several months
ago. We are currently at about 80 percent of the numbers, and
about 60 percent of the dollars have been disbursed. So we do
not do one disbursement for the full amount. We disburse up to
that unsecured threshold, $25,000, and we follow the building
project, like the private sector does. So the IG is factual. At
the time they did the snapshot, they were in that process.
Ms. VELAZQUEZ. And after the end of March, do you have any
data?
Mr. RIVERA. I do not have as of the end of March but I can
get back to you.
Ms. VELAZQUEZ. I would like to get that data.
Mr. RIVERA. Okay. Sure.
Ms. VELAZQUEZ. The OIG reports for Hurricane Harvey and
Irma do not contain similar data on loan disbursement; yet this
information is critical for evaluating disbursement rates
across the hurricanes. What are the disbursement rates for
Hurricanes Harvey and Irma, and why was the data not shared
with OIG?
Mr. RIVERA. Oh, I believe the data was shared with OIG. I
am shocked that they would say that if that is what they are
saying. We are very transparent with respect to----
Ms. VELAZQUEZ. Well, what I am saying, it is not in the
report.
Mr. RIVERA. Well, I do not write the report.
Ms. VELAZQUEZ. I understand that. So I would like for me
and for the Committee to have the ability to assess whether or
not the disbursement rates regarding Puerto Rico compare to the
disbursement rates for Hurricanes Harvey and Irma.
Mr. RIVERA. Okay. Absolutely.
Ms. VELAZQUEZ. According to the IG, there were serious
problems with Spanish translation services that resulted in
many disaster survivors having their calls to SBA dropped. In
other cases, wait times exceeded 45 minutes, which is simply
unacceptable. What did SBA do to keep track of dropped calls?
Mr. RIVERA. So what happened is Harvey hit? There is a
pretty big Hispanic population in Texas. Irma hit. There is a
pretty big population in Florida. And then Maria hit. And
obviously, there is a big Spanish-speaking population in Puerto
Rico. So we had one contract at the time. It was small. It had
worked for the last 10 years. What we did not realize is that
we got stressed based on that. What we have done since then----
Ms. VELAZQUEZ. And you terminated that contract?
Mr. RIVERA. Yes, ma'am.
Ms. VELAZQUEZ. Yeah? What was the reason?
Mr. RIVERA. Performance.
Ms. VELAZQUEZ. Performance?
Mr. RIVERA. Yes, ma'am.
Ms. VELAZQUEZ. So that is what I am saying. You know, it is
important that we have a disaster preparedness plan that is
comprehensive, that you have a list of potential vendors that
provide Spanish translation services.
Mr. RIVERA. Yeah, I agree.
Ms. VELAZQUEZ. Or bilingual services.
Mr. RIVERA. So we have gone from a $50,000 contract----
Chairman CHABOT. The gentlelady's time has expired but you
can go ahead and answer.
Mr. RIVERA. We spent $2 million on language services, and
we have taken 600,000 calls. I mean, so absolutely, it was a
stress point for us. I do not disagree with what you are saying
from that perspective.
Chairman CHABOT. And the Ranking Member's time has expired.
Ms. VELAZQUEZ. Thank you.
Chairman CHABOT. And the gentleman from Mississippi,
Mr. Kelly, who is the Chairman of the Subcommittee on
Investigations, Oversight, and Regulations, is recognized for 5
minutes.
Mr. KELLY. Thank you, Mr. Chairman.
Mr. Rivera, thank you for being here.
Kind of going back and touching on the last question, I
have spent a lot of time in the military in my life and you
constantly get lessons learned and refine plans to make sure
that you can respond. And also, going from that same strategy
thing, you know, we are prepared to respond to different levels
of threats throughout the world in the military.
So prior to this you had never seen the Spanish-speaking
requirements that you had in this one? The last 10 years it was
fine and all of a sudden you have a new requirement that is
there that you were not prepared for. And I totally understand
that. And you also did not have this many major disasters in
this quick of a time frame as you did in this one.
So what is the SBA prepared to respond to now? Did you
change what you are prepare? Can you respond to two
simultaneous disasters at the same time, two and a half, 1.5?
Have you started planning in that way? And how many are you
prepared, the SBA, to respond right now simultaneously or in
close proximity.
Mr. RIVERA. That is a great question, and thank you for
that question.
So we have a Disaster Preparedness and Response Plan. As I
mentioned earlier, the Spanish language line did trip us up.
The contract was 10,000. It worked for the last 10 years. We
get stressed with the Spanish line. We did a new contract. We
have three contracts now. We have segmented out. I mean, we
have exercised this a couple of months ago at the national
level exercise. We can handle up to X number amount. It just
depends based on the funding level. So we did do 360,000
applications in 18 days--17-18 days overall. Our response time
was pretty quick. It was the quickest we have ever had.
Technology is a big asset for us, and we continue to exercise
from that perspective. The administrator flipped it on us. She
said Katrina times three, so that is a million two. So that is
what our charge is, a million two in 90 days.
Mr. KELLY. You know, I represent the northern part of
Mississippi, so I do not have the Mississippi Gulf Coast where
hurricanes hit, but I feel a deep obligation to my friends and
neighbors and state, people in the south. What organizations
does SBA use to get out the good word of what you can provide
and what services you can provide? Because there are a lot of
other organizations, and a lot of times people are not aware of
what products or what services are available. So what other
organizations, whether that be FEMA, the National Guard of that
State, or any other thing, what resources do you use? What
other resources do you use to get out word of what is
available?
Mr. RIVERA. So we start with the SBA resources, our Small
Business Development Centers, SCORE, Women's Business Centers.
We also just recently signed a memorandum of understanding with
the Institute for Business and Home Safety (IBHS), who is a big
industry player when it comes to disaster assistance. We also
work closely with FEMA. Wherever FEMA is at, SBA is at.
Obviously, the President gives FEMA the opportunity to be the
lead, but we are not far behind from that perspective. And we
work with state and local governments. We are reaching out to
counties and mayors and trying to cascade as much as we can. On
the preparedness side, and that is back to the Administrator's
message. Let's talk about preparedness before it happens so we
can all understand what we need to do versus being reactive as
we have been historically.
Mr. KELLY. You must have been reading my mind. That is kind
of in the realm of my next question or suggestion or a
combination of both. Mississippi responded well to Katrina, and
that was based on our National Guard response and years and
years of rehearsals for a hurricane that we hoped and prayed
would never happen, but it did happen. And so every year since
I have been in for almost 33 years, and every year I can
remember being in the Mississippi National Guard, around March
or April, non-hurricane season, we do a statewide rehearsal of
how we are going to respond to not only hurricanes but to
earthquake on the fault line near Memphis and those things, or
tornados or other disasters. Does SBA get involved in those
rehearsals? Because most states, whether it is wildfires in
California, or earthquakes in California, or hurricanes or
tornadoes in Mississippi or Oklahoma, do you get involved in
the planning process and meet all those key people early in the
rehearsal process so that you are more prepared?
Mr. RIVERA. Yes, sir, we do. We participate in all the
national level exercises under the national disaster recovery
framework. With Department of Homeland Security, FEMA, we are
on the recovery side, but we participate on the response and
the recovery.
Mr. KELLY. I would just maybe make a suggestion; look at
the state level organizations because that is who bears the
brunt of those things. And rehearsing with those National
Guards and their disaster response, I think you would get a lot
of value and meet a lot of people up front.
My time has expired, Mr. Chairman.
Chairman CHABOT. Thank you very much. The gentleman's time
has expired.
The gentlelady from California, Ms. Chu, is recognized for
5 minutes.
Ms. CHU. Thank you.
Mr. Rivera, I know that the primary topic of this hearing
is hurricane disaster response, but I would like to talk about
an issue that is severely impacting the small businesses and
the communities in my state of California, and that is
wildfires.
Wildfires have devastated California in recent years, but
in particular, in 2017, nearly 1.2 million acres of land were
burned and 10,800 structures and 46 people were killed. So this
is extremely devastating. And SBA was active in responding to
some of the disasters at the request of Governor Brown, but
could you tell us SBA's timeline for processing disaster loan
applications for the California wildfires and whether SBA has
met those goals?
Mr. RIVERA. So to answer your question, on average, we do
it in 18 days; 14 days for homes and 18 days for businesses.
When we respond to disasters, we intentionally focus on
different disasters that may be occurring at the same time we
are responding to larger disasters. So we make sure that we
take care of, from my perspective, it does not matter where the
disaster is. If you are a disaster survivor, that is the most
important thing to your business or your home, so we spread out
teams that focus on, for example, the California wildfires, the
lava flows in Hawaii, the flooding up in the Midwest. So we
make sure that we are servicing the entire country as best we
can at the same time.
So generally speaking, I can get the exact specific turn
times on that, and I can get that for the record, but
generally, we are in that 14 to 18 day timeframe for an
approval, withdrawal, or decline.
Ms. CHU. Yeah. I would like to know how many have applied
and how many of the applications have been processed and by
what kind of timeline.
Mr. RIVERA. Okay. Absolutely.
Ms. CHU. And do you know, you said an 18-day framework, but
what are the biggest challenges to ensuring this short
processing time for the loan applicants?
Mr. RIVERA. Usually it is data that we request. Now, we
have streamlined our application and we streamlined the data
request that we have. So from our perspective, fires are
horrific, especially when everything is burned down. So we have
to rely on third-party resources. So for repayment ability, we
rely on the Internal Revenue Service and whatever they provide
from a tax perspective. We get an electronic feed from the IRS
once we get the access from the disaster survivor. We used to
go on the ground and do field inspections and send somebody out
to a pad that was completely burned down. We now have changed.
This was a result of Harvey, Irma, Maria, since then. We do a
desktop verification. And what we do is we get a footprint of
the home and then we call the disaster survivor. We can tell
from what they are talking about and what the estimate is. We
have models that say based on the footprint of the home. We can
do that for floods or for fires from that perspective. So that
is a process improvement.
And if I can just spend one more second. Superstorm Sandy,
it took us 10 days to be on the ground to do a field
inspection. We cut it to 6 days in Harvey, Irma, Maria because
we did a desktop verification. So those are some of the small
things we do internally to try to speed up the timeframe.
Ms. CHU. I understand that through California, 3,527 SBA
loan applications were received from those affected by separate
fires in eight counties last year. How many of these were home
loans and how many of these were business loans, and
ultimately, how many were approved?
Mr. RIVERA. I will have to get back to you for the record.
I apologize; I do not have the California numbers. But the
general rule of thumb is 80/20. It is 80 percent homeowners to
20 percent businesses, and the dollars are 50/50. Fifty percent
of what we approve across board. I really apologize; I have my
sheet here but I do not want to waste time flipping through it.
Ms. CHU. Yeah, again, I would appreciate that information.
So the wildfires are caused largely by weather changes,
which means that wildfires are an ongoing problem in California
and will likely continue. Right now there are 21 wildfires over
500 acres in California that are burning. Given the constant
nature of this disaster, is the SBA ready to take steps to
ensure that California businesses and homes are ready to access
SBA assistance in the future?
Mr. RIVERA. Oh, absolutely. I mean, as soon as the governor
says that they have been overwhelmed and they need the request
and they need the financial assistance from a Federal
perspective, we are ready and prepared.
Ms. CHU. Okay, thank you.
Mr. RIVERA. Thank you.
Chairman CHABOT. Thank you. The gentlelady's time has
expired.
The gentlelady from Puerto Rico, Ms. Gonzalez-Colon, is
recognized for 5 minutes.
Ms. GONZALEZ-COLON. Thank you, Mr. Chairman. And thank you,
Mr. Rivera.
I was reviewing how long it took for SBA to process the
business loan and the home loan, taking the experience of
Sandy, Katrina, and Maria. And you say that in Katrina it was
60 days for business and 74 for home; Sandy, 45 days for
business, 38 for home; and in the case of Maria, it is in the
high 20s and in the low, 30 days in home assistance. That is
correct?
Mr. RIVERA. Yes, ma'am, overall.
Ms. GONZALEZ-COLON. Overall. Then my main problem will be
is that most of the cases that we are receiving in my office
from small businesses is that once their loan is approved, it
takes from 2 to 6 months to get a disbursement. So why, if you
are taking less than 20 days or 30 days in making that
application reviewed and approved, why then is it taking up to
6 months for the small businesses on the island to get the
disbursement?
Mr. RIVERA. So it is a partnership. Once we make the loan
as a lender, we need the disaster borrower to sign the loan
closing documents. We give them 60 days to sign the loan
closing documents. We do not push them to close the loan. We
are patient with them. We let them figure out what insurance
they have, what other personal resources they have. We could
take the opposite approach though. We could drive them to a
disbursement, but we take kind of a very passive approach. When
they need the money, we call them. We assign a case manager and
we serially disburse based on that.
Ms. GONZALEZ-COLON. My question with that is that we do not
have as many banks on the island as we used to have before, so
the lenders that we do have on the island, this continues to be
the main source of controversy by the small businesses on the
island because of the time of the waiting. What can SBA do to
rectify or help us out to get new steps on how to make this
process a more streamlined process?
Mr. RIVERA. Well, if there is a lender out there that wants
to make a bridge loan, we are glad to take a look at that and
take out that bridge loan. I mean, that has always been the
practice from the Disaster Loan Program. If a bank is out there
and can make a temporary loan in the interim for us, I mean, we
are glad to do that.
But the disbursement process, I just need to be really
clear. We just need to get the documents we requested and then
we just need to provide the disbursement. It is pretty clear-
cut. Some of the wait times are based on they are waiting for a
contractor to start the rebuilding process. I mean, there is a
host of issues that result in that. It is not because we are
sitting back and doing nothing. In most instances it is we are
just waiting for the disaster survivor to start the rebuilding
from that perspective.
Ms. GONZALEZ-COLON. One of the main problems we have got is
that in order to get some of the assistance from FEMA, you need
to go through the SBA application to know if you are going to
get a loan by SBA or if you do not qualify to have a loan being
approved, even business or home by SBA. Then you will get the
assistance from FEMA. So the whole process, I mean, we have got
more than 50 percent of the applications coming from FEMA being
denied. Most of them, they need to wait through the processing
SBA.
So I was in a briefing last week, and we were wondering why
it takes so long for the SBA to review that application, then
going again back to FEMA, how is the interaction between SBA
and FEMA in order to let the people know? I, even myself,
submitted the application. It was so complicated to the regular
citizen on the island that I decided to see how many papers
they needed to sign. And when we saw that, the process is so
long, so difficult, it is not a clear path to getting a loan
being approved. It is not a clear path to get FEMA assistance
being approved. And I think that process should be streamlined
between SBA and FEMA, and I want to know if you already got
meetings to get something done in that regard.
Mr. RIVERA. We are continuously working with FEMA. I am a
little bit confused on the comment of why it takes so long. I
mean, we are processing these loans in 18 days for a home--17,
18 days for a home, and 20-something for a business.
Ms. GONZALEZ-COLON. But people need to wait 6 months to get
it.
Mr. RIVERA. Yeah, but again, I mean, in all due respect, it
is a partnership. We cannot make a disbursement. We have our
own internal controls. We have responsibility to the taxpayer.
Ms. GONZALEZ-COLON. Then let us know how we can help to
streamline that process. And that is the question I am doing
today. It is not about that it is your fault; it is how we can
make that process to be a streamlined one so the people can get
the resources that I provided for them. Because you are doing
the whole process in less than 20 days but, you know, you do
not have power. You do not have water. You do not have telecoms
on the island. The whole business community gets affected. But
then you need to wait 6 months to get the money. So most of
these small businesses are still closed because of that. Thank
God this Congress approved a reimbursement for all the
employers that still paid their payroll during that time. And
with that kind of money, some of those small businesses are
opening their workshops.
I know my time has expired, but thank you, Chairman.
Chairman CHABOT. Thank you very much. The gentlelady's time
has expired.
The gentleman from Illinois, Mr. Schneider, who is the
Ranking Member of the Subcommittee on Agriculture, Energy, and
Trade, is recognized for 5 minutes.
Mr. SCHNEIDER. Thank you very much. And Mr. Rivera, thank
you for your time here today for the work you are doing.
I have a lot of questions, but you touched on something you
were talking about specifically right now, the red wave and the
algae blooms in Florida. We, this summer, have seen the
horrific fires on the West Coast, record-setting fires. We
talked about last year record-setting pace between Harvey,
Irma, Maria, and other crises. And the charges that you were
given by the administrator was let's figure out how to do
Katrina times three. And you talked about achieving that. But
it still seems from where I am sitting that we are running
faster and barely keeping on pace. In fact, running times three
may even be leaving us behind. And it seems the common thread
through all of these is climate change.
So my question to you is, how is the SBA adapting to the
expected increase in incidents that next year is probably going
to be worse than last year? We are going to see increasing
impact, higher intensity, more frequency. How do we make sure
that we have the resources and are able to provide the services
to small businesses dealing with the impacts of these storms
and other aspects of climate change?
Mr. RIVERA. So I have been with the Small Business
Administration for 30 years. I mean, I do not know. I am not in
a position to talk about climate change. I am in a position
from SBA to, as the head of the----
Mr. SCHNEIDER. I appreciate that, but we are seeing this
increasing pace. The fires----
Mr. RIVERA. It has always been like this.
Mr. SCHNEIDER. No, the fires we have seen have never been
like this. We have had earlier and longer and more intense,
ever record-setting. We are seeing an increase. Am I am not
talking about--I am not trying to debate with you the causes of
climate change. What I am saying is our communities, our
nation, our small businesses are seeing more severe impacts
from natural disasters, and how do we make sure that we have
the resources available to them?
Mr. RIVERA. So they are in place. I mean, we had a Disaster
Preparedness and Recovery Plan. I have 1,000 core employees. I
have 4,000 reservists. We can service up to 350,000
applications within 20 days, 18 days. We just experienced that
in 2017. So we are at that point there. I cannot predict what
is going to happen next year. This year we are off to a slow
start with the hurricane season. We just had our first
experience in Mississippi. Hurricane Layne was 100 miles south
of Hawaii. There is just minimal damage from that perspective.
So I can tell you we are prepared. The overarching goal is a
good stretch goal. I think we can meet it with technology and
ability to use third-party independent verifications. I think
we can move faster, and we can provide the best service that we
can from that perspective.
Mr. SCHNEIDER. Are there any steps we can take to help
small businesses prepare better for disasters to mitigate the
impact after the event by taking steps now to prevent? As my
colleague from Mississippi mentioned, working to help National
Guard and other agencies respond more quickly?
Mr. RIVERA. Part of our outreach plan is to reach out to
the local communities, so forth and so on. My experience has
been we teach everybody to get a business plan; right? But we
do not teach them what happens in a disaster. I mean, so from a
social media perspective, when are you going to reopen? From a
supply chain, you know, where is your list of your vendors and
what happens if your primary vendor is impacted, so forth and
so on. So those are the kind of things that we are pushing out
now. We have a really good partnership with Institute for
Business and Home Safety. I think that is going to launch us,
and then we are going to continue to push forward on the
preparedness side.
Mr. SCHNEIDER. Shifting gears a little bit but still
related, last summer in my district we had record-setting
floods, and the floods caused devastating damage. It was a one-
two punch. We had direct rainfall that caused unprecedented
damage. And then from rains further north, as the rivers rose,
we had a second flooding event. It did not qualify for FEMA
relief. The SBA, because there is a lower threshold for
disaster assistance, the SBA did provide help. But can you talk
about how SBA's assistance helps fill the gap by disasters that
have a serious economic impact on a community but are not large
enough for FEMA assistance?
Mr. RIVERA. Yes, I can. We have, the SBA, in our Code of
Federal Regulations, we have by regulation what the thresholds
are for disaster declaration. So it is really easy from our
perspective--easy, I say, going out and doing a survey and
estimating what it costs to repair or replace a property. But
FEMA's guidance is much broader. It is based on the economic
impact that it has to the GDP of that state, so forth and so
on. So ours is more focused and more scoped. I should not say
focused, more scoped, and it is very clear. It is pretty black
and white. Twenty-five homes or businesses which sustain 40
percent or more uninsured loss. That is for an agency. Five
businesses the governor needs to certify for just an economic
injury disaster threshold. So it is pretty clear-cut from our
perspective. And I am glad we are able to provide the support
and that is the purpose of it. Not everything meets the
threshold of a presidential declaration, but we are there to
serve. Because all disasters are local from that perspective.
Mr. SCHNEIDER. Absolutely. And I am out of time, but thank
you again. I yield back.
Mr. KELLY. [Presiding] The gentleman's time has expired.
I now recognize Mr. Curtis from Utah.
Mr. CURTIS. Thank you, Mr. Chairman, and the Ranking Member
for holding this important hearing. And thank you, Mr. Rivera,
for being here to help us better understand the Small Business
Administration's disaster relief operation.
In Utah, we are no stranger to natural disasters, but I can
only remember one hurricane in 60 years. But this summer,
almost every morning we wake up to the news of a new fire,
mostly caused by nature. This year we are looking at 875
different fires.
I recently drove by one of these fires, the Dollar Ridge
Fire in Duchesne and Wasatch County that consumed 70,000 acres.
It is almost out thankfully, but we actually predict that we
will see smoke from that fire until the snow falls later this
year.
My understanding is SBA's disaster response has not been
involved in the Utah fires. And can you walk me through a
scenario where you would be involved in the fires and help me
understand what triggers that decision.
Mr. RIVERA. Yes, sir, thank you.
From SBA's perspective, as I mentioned earlier, we have
regulatory guidance. Fires, generally there is insurance
involved, and most homeowners do have homeowner's, a hazard
policy that includes if their home gets burned they are covered
by hazard insurance from that perspective. One of the things
that we do is when we go out and do an assessment, we need to
find a population that shows sufficient damage to meet the
threshold for us to meet from that perspective. There are some
fires where it is just an open area and there is not any
damages to any businesses or any homeowners, but when there is
a pocket of businesses or homes in a general area we can go in
and step in.
Mr. CURTIS. We face this problem in rural Utah where
numbers do not add up. They would in a more dense area. And so
while it can be extremely devastating to a rancher or even the
tourist business, they are few and far between out in these
rural areas. And I guess one of my questions is, is that a
policy that can be visited to see even though we do not have
thousands of businesses being impacted, the only ones that care
are those that are being impacted and that may be one.
Mr. RIVERA. No, I agree. I agree with you.
So the threshold for an economic injury disaster loan is
for the governor to find 5 small businesses that have sustained
substantial economic injury. I do not know if we can move that.
We can definitely continue the conversation offline as far as
if there are pockets in your state that are not being
identified, we would be glad to reach out and figure out how to
make this work.
Mr. CURTIS. Terrific. Thank you.
Can you help me identify the difficulties of responding to
a fire versus some of these other natural disasters?
Mr. RIVERA. Fires are challenging from the perspective of
there is just no documentation. No tax records, no paperwork.
So we have leaned on technology. I mean, we get a copy of a tax
transcript. Part of our application you can submit a request
for us to get a copy of a tax transcript from the IRS. So that
eliminates that need for that additional paperwork. We do a
footprint of a home or a business, and we estimate based on
that footprint of that home and the structure and the makeup of
the facilities what we can make for a loan and estimate based
on that.
The biggest challenge we have in fires is most people do
not want to borrow even though it is at a low-interest rate.
They want to collect from their insurance claim. But we will
work. We encourage everybody to go and apply. It does not cost
anything, and we can make a commitment up front, a loan
commitment up front, and we can work with the insurance company
on the backside.
Mr. CURTIS. Thank you.
Mr. Chairman, I would like to yield the balance of my time
to my colleague, Ms. Gonzalez-Colon.
Mr. KELLY. Without objection.
Ms. GONZALEZ-COLON. Thank you, Mr. Chairman. And thank you,
Congressman Curtis, for letting us that time.
Some of the people that are presenting cases in my office
regarding the SBA is the issue of doing business as or the
DBAs. Most of the people that are filing for an application to
get a loan are filing those using the model of doing business,
the DBA model, but those cases are not being approved. Is there
any reason why SBA is not managing the DBA business structure
in order to get the loans being approved?
Mr. RIVERA. I am not quite clear on why you would be
hearing that. A sole proprietor, doing business as a sole
proprietor. So for example, if it is me, I am doing business as
something else, we would look at my individual tax return and
it would be a Schedule C or Schedule E or Schedule, you know.
Ms. GONZALEZ-COLON. Yeah. It is the personal tax----
Mr. RIVERA. Right. But I would like to reach out to you and
see if there are specific issues, because I am not aware of any
DBA issues as a sole proprietor.
Ms. GONZALEZ-COLON. We have plenty of cases of DBAs
applying and not getting their application being approved.
Mr. RIVERA. Okay.
Ms. GONZALEZ-COLON. Thank you, Mr. Chairman.
Mr. KELLY. The gentleman's time has expired.
I now recognize the gentleman from Pennsylvania, Mr. Evans,
the Ranking Member on the Subcommittee of Economic Growth, Tax,
and Capital Access.
Mr. EVANS. Thank you, Mr. Chair.
Mr. Rivera, do you have any statistics on the number of
small businesses who have requested and received $25,000 under
the new revised, unsecured loan limits?
Mr. RIVERA. So we do not make a loan based on the unsecured
threshold; we make a loan based on the amount of damage that
they have. So if you have $50,000 worth of damage, the loan
commitment will be at $50,000. If the individual homeowner or
business opts to only borrow $25,000 and they have means for
the additional $25,000, we will go ahead and move forward with
that loan commitment.
Mr. EVANS. So you do not keep track of number?
Mr. RIVERA. Well, for the record, I can get back to you the
breakdown between unsecured and secured between that $25,000.
Mr. EVANS. Okay. Because you said that is going to be
sunset.
Mr. RIVERA. Yes, sir. So the initial disbursement currently
allows us to go up to $25,000, but it used to be $14,000, but
because of the RISE Act we are able to maintain that $25,000
threshold. But I can provide you that information.
Mr. EVANS. Okay.
Mr. Chairman, for the balance of time, I would like to
yield my time to the Ranking Member so she can follow up.
Mr. KELLY. Without objection.
Ms. VELAZQUEZ. Thank you, Mr. Chairman. And thank you, Mr.
Evans.
Mr. Rivera, the OIG reports show the same disaster loan
process applied for Hurricanes Harvey and Irma. However, the
OIG found a much longer and burdensome process applied to
victims in Puerto Rico. Can you explain to me why they have to
go through all this burdensome, complex process compared to
those who were victims in the mainland that applied for
disaster loans during Harvey and Irma?
Mr. RIVERA. I do not have a copy of the report. I cannot
see what you are pointing to.
Ms. VELAZQUEZ. But do you know that the process for the
people of Puerto Rico to apply for a disaster loan was much
longer?
Mr. RIVERA. It is the same process.
Ms. VELAZQUEZ. And many more complex requirements?
Mr. RIVERA. It is the same process. The only difference is
that we----
Ms. VELAZQUEZ. So the OIG is wrong?
Mr. RIVERA. I am not saying the OIG is wrong. All I am
saying is that it is the same process as if you are in the
island of Puerto Rico as if you are in any of the islands,
Guam, American Samoa. The Hacienda Taxing Authority is the
equivalent of the IRS and we just need to get a copy of the
taxing authority as far as for a primary source of repayment.
Ms. VELAZQUEZ. So you are telling me that the OIG is wrong
in his----
Mr. RIVERA. No, I am not.
Ms. VELAZQUEZ.--in his assertion----
Mr. RIVERA. No, ma'am. That is absolutely incorrect.
Ms. VELAZQUEZ.--that the process to apply for disaster
loans in Puerto Rico was more burdensome and complex?
Mr. RIVERA. I disagree. The IG is just simply stating that
there are more steps in that process because of the Taxing
Authority.
Ms. VELAZQUEZ. I yield back, Mr. Chairman.
Mr. KELLY. Mr. Evans, do you yield back?
Mr. EVANS. As of 6 months following Hurricane Maria, only
about 20 percent of all approved loans have been disbursed. Why
is that rate so low? Can you speak to that?
Mr. RIVERA. Yes. That is a snapshot of when the inspector
general did the inspection. We are currently at 80 percent of
loans are disbursed and 50 percent of the dollars. So, I mean,
that was early on in the disaster and it is more mature at this
point.
Mr. EVANS. I yield back the balance of my time.
Mr. KELLY. The gentleman yields back.
I now recognize Mr. Fitzpatrick from Pennsylvania for 5
minutes.
Mr. FITZPATRICK. Thank you, Mr. Chairman. Thank you, Mr.
Rivera for being here.
I want to focus on Puerto Rico, specifically. I had the
opportunity to be there with my friend and colleague, Ms.
Gonzalez-Colon, over Thanksgiving to inspect what at the time
was the Convention Center in San Juan and all the different
components to the recovery operation.
Did SBA have a presence there initially?
Mr. RIVERA. Yes, sir. We have been co-located with FEMA
since the very beginning.
Mr. FITZPATRICK. So I guess my question is what has the
interface been? Because I also, in addition to this Committee,
I sit on the Committee on Homeland Security. We have oversight
over FEMA. What has the interface been? What is working? What
is not working? And I know it was originally centered in the
Convention Center. It has since been disbursed to various sites
and locations across the island.
Mr. RIVERA. On the technology side, we have a computer
matching agreement with FEMA. SBA and FEMA do. So we share data
constantly back and forth. When we approve a loan, when they
approve a grant, so that information flows freely back and
forth between the agencies.
We are co-located with FEMA in all their centers. They
started the disaster recovery centers. We have our own business
recovery centers, and we invite FEMA to join us at the business
recovery centers. We are now transitioning into community
recovery centers. We still have 350 people there in 50 centers,
so we are there for the long term.
Mr. FITZPATRICK. Thank you.
So has this Committee given SBA what it needs to fully
effectuate the mission on the island? Is there anything more
that you need?
Mr. RIVERA. I believe this Committee has been really
helpful throughout this process. I mean, I have given examples
about the RISE Act. I have given examples about the Disaster
Loan Application Portal. There is a lot of positive coming from
the Committee to the program. It is very helpful for the
disaster survivors.
Mr. FITZPATRICK. Mr. Chairman, I am going to yield the
balance of my time to my colleague from Puerto Rico, Ms.
Gonzalez-Colon.
Mr. KELLY. Without objection.
Ms. GONZALEZ-COLON. Thank you, Mr. Chairman. And thank you,
Mr. Fitzpatrick, not just for lending us the time now but your
visit to the island during the difficult process and all the
help for the different bills we have been approving here.
One of the issues that I just want you to tell me, you got
51,000 loans approved to the island. How many of them are still
waiting for disbursement?
Mr. RIVERA. I can get back to you for the record or I can
look real quick.
Ms. GONZALEZ-COLON. Please get back with the information
for the record.
And we sent a letter to the SBA Administrator because I
know the new goals for the small business technology
development centers and the one in Puerto Rico just increased a
lot of the requirements for business start. One hundred seventy
new businesses, an increase of 57 percent from the last year,
and capital information, an increase of 85 percent. And when
you compare those numbers with the numbers of 2017 for the
island, we are still recovering in an economy that a lot of
those businesses closed because of the hurricane. So I am
asking SBA to review the goals imposed, in this case to Puerto
Rico after the hurricane because we are not going to meet all
those new goals and provisions and that will affect directly
the amount of money and funds that small business technology
centers on the island will receive as part of that. And that
includes the jobs supported when you are losing a lot of those
small businesses. I do not know if you are aware about that.
Mr. RIVERA. That is a different division, but we will go
back and we will communicate this to them.
Ms. GONZALEZ-COLON. The other area that I was telling you
before was how the process between FEMA and Small Business are
managing up with the centers that you have still got on the
island? There are still many centers and you still got
personnel in those centers. Many of the people that applied for
the first assistance from FEMA were denied. A lot of them were
denied. We were managing to have different codels to the
island, and FEMA are just accepting again all the applications
and reviewing them, and that means that the SBA process is
getting involved again in that. So having that information, do
SBA have enough resources to face not just the 2017 hurricane,
but another hurricane in this season? Or do we need to fund
again SBA?
Mr. RIVERA. I think we have plenty of resources currently.
And when there is a FEMA appeal with the disaster survivor,
that does not have to come back through SBA. If somebody is
with FEMA, they stay with FEMA. If they are referred to SBA,
they have to get declined to get back to FEMA. That is the
federal process. But if they ask for an appeal through FEMA,
that does not need to come back to SBA. So I can reach back and
we can clarify on that.
Ms. GONZALEZ-COLON. Yes. Because the information, I mean,
we are having the revenue from the centers. And even the FEMA
directors on the island it is different.
Mr. RIVERA. Okay. Thank you.
Ms. GONZALEZ-COLON. I yield back.
Mr. KELLY. The gentlelady's time has expired.
I now recognize the gentlelady from New York, Ms. Clarke,
for 5 minutes.
Ms. CLARKE. I thank you, Mr. Chairman. I thank our Ranking
Member. I thank you, Mr. Rivera, for your testimony here today.
The SBA's Disaster Loan Program is an essential component
to the Federal Government's efforts in providing relief to
American citizens in the wake of natural disasters. Nearly 75
percent of small businesses lack disaster relief plans, and
despite 70 percent of small businesses feeling vulnerable to
natural disasters, when natural disasters do hit, as was the
case with Hurricanes Harvey, Irma, Maria, which ravaged
Houston, the U.S. Virgin Islands, and Puerto Rico, they can
lead to damage that permanently shutters 40 to 60 percent of
small businesses. When businesses are not forced to close, they
can expect to pay between $100,000 to $250,000 on average, as
was the case with many businesses in my district of Central
Brooklyn in the wake of Superstorm Sandy.
The SBA's Disaster Loan Program helps address these
challenges by providing personal loans of up to $200,000 in
small business loans, of up to $2 million in the wake of
disasters. While these loans are essential to helping small
businesses in the wake of crises, a series of SBA OIG reports
recently highlighted ways in which the SBA could improve its
functioning.
So Mr. Rivera, the Inspector General Report for Hurricane
Harvey concluded that a significant percentage of calls went
unanswered, despite the increasing number of available agents.
While I understand that three hurricanes can overwhelm an
agency, it is still alarming that the 90 percent goal of
incoming calls was never achieved. What are the primary
challenges in answering calls? And was it staffing levels? Was
it funding?
Mr. RIVERA. So we were stressed, obviously. So we received
1.2 million calls. As the calls come in, often what happens is
there is a wait time associated with it, but from our
perspective, we learned a lot from that. We are retooling the
way we handle calls. We are using technology as much as we can.
One of the things, for example, we have a callback feature now.
So instead of calling and waiting 30 minutes, you can call and
you can do the callback feature and then we can queue you up
for a conversation later on. Some of the times we call and then
they are not available, the survivor is not available from the
call center to tell them to apply with an SBA loan and they
push the callback number. So that self-imposed a lot of calls
from that perspective.
The IG's report just basically highlighted. In week four,
we have two sister offices, one in Atlanta, one in Sacramento
that back up the call center in Buffalo, New York. And what
happened is we deployed for Harvey and Irma and we dropped the
number of agents. In hindsight----
Ms. CLARKE. But ironically, the wait times, nor the option
to return phone calls was available to customers following the
recent hurricanes.
Mr. RIVERA. So 65 percent of the calls were answered. Let
me just be really clear. Sixty-five percent of the calls were
answered, so only 35 percent were not answered on a million
two.
Ms. CLARKE. Listen, if you want to believe that and you
think that is great, that is fine. What I am saying to you
today is that we got to find a way to make sure that the agency
has the resources it needs to answer calls of distress and be
able to make sure that we are reaching everyone in need of your
services. So it is not about being defensive about what the
agency does; it is how we can be helpful in making sure that
you have what you need to answer these calls when they come in
and that we are communicating effectively with the public about
what they need to do. Because I can tell you that every single
day that a small business is shuttered and unable to access
you, it is a hardship. Not only are you stressed, our
communities become stressed.
Let me also add to this that we are going to be seeing more
and more simultaneous events, so that is only going to add even
more stress to your agency. So my hope is that we can recognize
the efforts of the agency while simultaneously recognizing that
we either need to build redundancy somewhere else. We need to
have a contingency plan in place. Because when you have
wildfires, you have hurricane season, you have volcano
eruptions all happening at the same time, everyone can
recognize an agency becoming stressed.
Mr. RIVERA. We agree.
Ms. CLARKE. All right. That is what I needed.
With that, Mr. Chairman, I yield back.
Mr. KELLY. The gentlelady's time has expired.
I now recognize the gentleman from Mr. York, Mr. Espaillat,
for 5 minutes.
Mr. ESPAILLAT. Thank you, Mr. Chairman, Madam Ranking
Member.
First, I would like to, Mr. Rivera, I know that with FEMA
and the grants that they provided for home relief, there was a
persistent and serious problem with regard to applicants having
their deeds or documentation that establish ownership or
residency of those homes. Was that a prevalent problem for
these businesses that apply for loans?
Mr. RIVERA. No, sir. We use a third-party contract where we
independently verify, based on a contract, the owner of the
property. So we do not ask for a copy of the deed anymore. We
used to back in the old days but we do not anymore. That is a
process improvement. So we look at a contract that they tell us
who the property owner is.
Mr. ESPAILLAT. And was there any issue with that at all?
Mr. RIVERA. No, sir. Not to my knowledge.
Mr. ESPAILLAT. And what percentage again of the loan
applications are granted?
Mr. RIVERA. In Puerto Rico, 63 percent; Virgin Islands, 65
percent; it was in the mid-40s in Harvey and about close to 50
percent in Florida.
Mr. ESPAILLAT. And you found that one of these stumbling
blocks for these applicants to get their loans was translation
services? Is that one of the major----
Mr. RIVERA. Well, it is one of the stress points we had is
that at first we did not have--the contract we had in place was
not sufficient to handle the throughput because of Harvey,
Irma, and Maria, and the Spanish speakers in Texas, Florida,
and then in Puerto Rico. But we went from a $50,000 contract to
up to a $2 million contract now. We have three separate
contracts that can service and handle this type of volume.
Mr. ESPAILLAT. That is troubling that an agency as
important as the SBA that deals with small businesses and many
of the small businesses across the country are run or owned by
folks who speak other languages, new immigrants that are
entrepreneurs, that you do not have the infrastructure to
respond to language needs of your clients. Google has like
translation services. We are not splicing atoms here. I cannot
believe that you do not have access to technologies that are
available right now on your phone to provide immediate and
efficient translation of documents, of any type of interaction
that you may have with your customers which are small
businesses. Have you looked at the possibility of utilizing
modern technology that is available right now? So if you like,
I will go over and sit with you and I will show you what I can
get on my phone----
Mr. RIVERA. Thank you.
Mr. ESPAILLAT.--to translate, not just to Spanish but to
any other language in the world.
Mr. RIVERA. Thank you.
Mr. ESPAILLAT. So how is it that a Federal agency that
addresses business needs does not even--and is supposed to be
at the cutting edge of technology, you do not have that
availability for your customers?
Mr. RIVERA. We do. We do.
Mr. ESPAILLAT. That is unreal. So why did you not use it?
Mr. RIVERA. Well, back at the very beginning of the
hurricanes we pivoted. We learned from what happened. We were
stressed by the calls and by the Spanish speaking. And now we
spend $2 million a year. We have three separate contracts.
Mr. ESPAILLAT. Mr. Chairman and Madam Rank, we sit here on
an ongoing basis all the time addressing the need of small
business owners. And very often what we discuss here is the
need for them to have access to new and modern technology that
will give them a real advantage to do business. And yet, the
agency that is supposed to provide that opportunity to them
does not have it itself. And in the middle of a storm where we
saw thousands of people die and thousands of businesses
destroyed, you have to go into like, you have to think about
it? Unacceptable, Mr. Chairman. Unacceptable.
Ms. VELAZQUEZ. Will the gentleman yield?
Mr. ESPAILLAT. Yes, I will.
Ms. VELAZQUEZ. Mr. Rivera, I would like to hear from you,
what do you say or how did you respond to Mr. Espaillat's
assertion that what happened to those businesses or homeowners
that did not have a deed? What was your response to that?
Mr. RIVERA. We have a contract that goes and identifies who
the property owner is. We do not ask individuals for copies of
their deeds.
Ms. VELAZQUEZ. But here in the disaster loan process it
says that a Puerto Rico borrower has to submit title report to
SBA to proceed with second closing appointment.
Mr. RIVERA. Right. That is in the event we cannot identify
the property. So if we can identify the property, it is not a
requirement.
Ms. VELAZQUEZ. Okay. Thank you.
Mr. ESPAILLAT. Mr. Chairman, I yield back the remaining
part of my time. Thank you so much.
Mr. KELLY. The gentleman's time has expired.
I now recognize the gentlelady from North Carolina and the
Ranking Member of the Subcommittee on Investigations,
Oversight, and Regulations, for 5 minutes.
Ms. ADAMS. Thank you, Mr. Chairman. Thank you, Ranking
Member Velazquez. Mr. Rivera, thank you for being here.
Today's hearing is primarily focused on the agency's
response to last year's hurricane season, but I would like to
get a sense of how SBA's response efforts have improved over
the past 15 years. Looking back on some of our major disasters
starting with Hurricane Katrina, then Superstorm Sandy, and
then in my state of North Carolina, Hurricane Matthew, was the
most powerful storm of the 2016 Atlantic Hurricane Season.
Matthew brought devastating flooding, strong winds and storm
surge to the Eastern Coast, and finally, going through last
year's historic and destructive hurricane season. So in
addition to what you have said, what has SBA's greatest
challenges and lessons learned been?
Mr. RIVERA. We have taken advantage of technology. And as I
mentioned earlier, we are trying to streamline wherever
processes are and use technology. I go back to the example of
we now do desktop verifications. Our field inspectors no longer
go on the ground. And Sandy took us 10 days for a field
inspector to do an inspection on a home. Now, on average, we
can do it in 6 days by somebody doing a desktop verification.
They get a copy, for example, like a Zillow or Realtor.com, a
footprint of the home. And then what we can do is we can have a
discussion over the phone with the disaster survivor which cuts
some time.
Ms. ADAMS. Thank you.
How has SBA insured the facilitation of more contracting
opportunities for small businesses, particularly minority,
women, and veteran-owned from all Federal agencies through your
procurement center representatives in the rebuilding and debris
removal process after the disasters?
Mr. RIVERA. So FEMA has done a really good job. I mean,
they are tasked with doing mission assignments and in the
category of debris removal, they went from national contracts
to now where they go to local small businesses, have an
opportunity to compete for those type of contracts. If you have
a trucking company that can support debris removal, they will
now allow those trucking companies to step in.
Ms. ADAMS. Thank you.
What specific steps has SBA taken through your PCRs to
advocate that disaster contracting actions benefit small
businesses local to the disaster to the maximum extent
possible?
Mr. RIVERA. So we do focus with our government contracting
team. In the disaster, the PCRs are well aware of the disaster
contracting opportunities, and we do connect them with FEMA and
with all the other Federal agencies that need to provide
contractor support.
Ms. ADAMS. Okay. Thank you.
And can you speak generally on the approval and decline
rates of loans received for each hurricane? For example,
following Matthew, 19,816 applications were processed, and of
those only 7,374 were approved.
Mr. RIVERA. Yes, ma'am. It is the footprint of the
disaster. Like, when I was in the private sector, I could pick
who came in to my office. We do not get that opportunity. We
service all disaster survivors coming in. Sometimes the
disaster footprint hits higher income areas. Sometimes it hits
lower income areas. We try to do our best to try to approve
every possible loan that comes through the door.
Ms. ADAMS. Thank you. Thank you, Mr. Chair. I yield back.
Mr. KELLY. The gentlelady yields back.
I would like to thank you, Mr. Rivera, for being here
today.
The 2017 storm season was clearly----
For what purpose does the gentlelady from Puerto Rico seek
recognition?
Ms. GONZALEZ-COLON. Mr. Chairman, I just want to--sorry
about the interruption--to provide for the record and make part
of this hearing, a letter that I submitted to SBA Administrator
Linda McMahon, regarding the Small Business Administration----
Mr. KELLY. Without objection.
Ms. GONZALEZ-COLON. Thank you.
Mr. KELLY. As we continue to examine the Federal
Government's response, today's hearing will help us better
understand SBA's efforts in helping victims replace and rebuild
their businesses and homes. This Committee will continue to
look at ways to ensure the Disaster Loan Program is operating
efficiently and effectively. This discussion today will help us
in this endeavor.
I ask unanimous consent that members have 5 legislative
days to submit statements and supporting materials for the
record.
Without objection, so ordered.
This hearing is now adjourned.
[Whereupon, at 12:22 p.m., the Committee was adjourned.]
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