[House Report 106-33]
[From the U.S. Government Publishing Office]
106th Congress Report
1st Session HOUSE OF REPRESENTATIVES 106-33
_______________________________________________________________________
DISASTER MITIGATION COORDINATION ACT OF 1999
_______
March 1, 1999.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Talent, from the Committee on Small Business, submitted the
following
R E P O R T
[To accompany H.R. 818]
[Including cost estimate of the Congressional Budget Office]
The Committee on Small Business, to whom was referred the
bill (H.R. 818) to amend the Small Business Act to authorize a
pilot program for the implementation of disaster mitigation
measures by small businesses, having considered the same,
report favorably thereon without amendment and recommend that
the bill do pass.
Purpose
The purpose of H.R. 818 is to establish a pilot program for
making loans to small businesses for the purpose of
implementing techniques and technologies that will mitigate the
effects of natural disasters. The Small Business Administration
(SBA) currently administers a disaster loan program that lends
to small businesses and homeowners affected by natural
disasters. Implementation of H.R. 818 will enable the SBA to
lend to small businesses in disaster prone areas and help them
avert and lessen the costs of future disaster inflicted
damages.
Need for Legislation
Since 1953, the Small Business Administration has
administered the disaster loan program authorized by Section
7(b) of the Small Business Act. This program provides loans to
help small businesses and homeowners to rebuild after natural
disasters. In past years the loan program has spent billions of
dollars helping small businesses recover from natural
disasters. In fiscal year 1998, the SBA lent $728 million for
30,154 disaster loans; in 1997 it lent $1.1 billion for 49,515
disaster loans. The SBA's highest demand for disaster loans
came in 1994, when it loaned over $4.1 billion due to the
Northridge Earthquake in California.
The cost of disaster assistance has risen over the past
several years due to increases in construction and other costs.
By implementing a program to help small businesses use
techniques that would lessen damage in the event of natural
disasters the possibility exists to save millions of dollars in
potential losses. The Federal Emergency Management Agency
(FEMA) currently manages ``Project Impact'' which works in
conjunction with communities and businesses on mitigation
policies and techniques. Passage of H.R. 818 will complement
and further these efforts at mitigation by offering small
businesses low interest loans for disaster mitigation.
Committee Action
During the 105th Congress, the Committee on Small Business
passed H.R. 3412, a bill to make technical corrections to the
Small Business Investment Company Program. This bill passed the
House of Representatives on March 24, 1998. When it passed the
Senate, on September 30, 1998, it included language
substantially similar to H.R. 818. Unfortunately, H.R. 3412 was
not taken up again by the House during the 105th Congress due
to time constraints.
In the 106th Congress, the Committee on Small Business held
a hearing on February 24, 1999 to discuss the fiscal year 2000
budget submission for the Small Business Administration. As
part of this hearing, Aida Alvarez, the Administrator of the
Small Business Administration, testified concerning the SBA's
request for $934 million dollars in disaster loans for
anticipated damage in the coming year. She also discussed FEMA
and SBA's current efforts at mitigation and stated that FEMA
estimates a $2 saving for every $1 spent on mitigation. The
Administrator expressed strong support for H.R. 818.
H.R. 818 was introduced on February 24, 1999. On February
25, 1999, the Committee on Small Business met for the purpose
of considering and reporting H.R. 818 and H.R. 774. H.R. 818
was introduced, considered as read, and opened for amendment.
No amendments were offered. Chairman Talent then moved to pass
H.R. 818 and report it to the House. At 11 a.m., by a unanimous
voice vote, a quorum being present, the Committee passed the
bill, H.R. 818, and ordered it reported.
Section-by-Section Analysis
Section 1. Short title
This act may be cited as the ``Disaster Mitigation
Coordination Act of 1999''.
Section 2. Pilot program
(a) This paragraph authorizes the Administrator to
establish a pilot program to make loans to small businesses and
homeowners for the purpose of mitigating the effects of natural
disasters. These loans will be made in support of a formal
mitigation program established by the Federal Emergency
Management Agency. These mitigation techniques will be varied
and include a variety of activities including building
improvements, relocation, etc.
(b) This paragraph authorizes SBA to lend up to $15,000,000
each year through 2004 in support of the disaster mitigation
pilot program. These funds will come from existing Section 7(b)
disaster loan appropriations and will be subject to
appropriations available for that program.
(c) This paragraph requires the Administrator of the SBA to
report to Congress on January 31, 2003. The report will
document the number of loans made, the areas served by the
pilot, and the estimated savings to the government as a result
of the program.
U.S. Congress,
Congressional Budget Office,
Washington, DC, February 26, 1999.
Hon. James M. Talent,
Chairman, Committee on Small Business,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 818, the Disaster
Mitigation Coordination Act of 1999.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Mark Hadley.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
H.R. 818--Disaster Mitigation Coordination Act of 1999
Summary: H.R. 818 would establish a pilot program to make
direct and guaranteed loans to small businesses for preventive
measures that would reduce the long-run costs of disasters. The
bill would authorize a program level of $15 million (for the
total of direct and guaranteed loans) for each of the fiscal
years 2000 through 2004.
Based on information from the Small Business Administration
(SBA) and the historical experience of SBA's loan programs. CBO
estimates that the SBA would require an annual appropriation of
$3 million to cover the subsidy costs of the proposed program.
Outlays would be about $2 million in 2000 and $3 million in
each year during the 2001-2004 period, assuming appropriation
of the necessary amounts.
H.R. 818 would not affect direct spending or receipts;
therefore, pay-as-you-go procedures would not apply. H.R. 818
contains no intergovernmental or private-sector mandates as
defined in the Unfunded Mandates Reform Act (UMRA) and would
not affect the budgets of state, local, or tribal governments.
Estimated cost to the Federal Government: For the purposes
of this estimate, CBO assumes that H.R. 818 will be enacted by
the beginning of fiscal year 2000 and that the necessary
amounts will be appropriated for each year. The estimated
budgetary impact of H.R. 818 is shown in the following table.
The costs of this legislation fall within budget function 450
(community and regional development).
----------------------------------------------------------------------------------------------------------------
By fiscal years in millions of dollars--
------------------------------------------------------
2000 2001 2002 2003 2004
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SPENDING SUBJECT TO APPROPRIATION
Estimated Authorization Level............................ 3 3 3 3 3
Estimated Outlays........................................ 3 3 3 3 3
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Basis of Estimate: Under current law, the SBA lends to
homeowners and businesses that have been victims of disasters.
In 1998, SBA approved about $623 million in post-disaster loans
to homeowners and businesses. H.R. 818 would authorize a new
pilot program to make direct and guaranteed loans to small
businesses for preventive measures that would reduce the long-
run costs of disasters. To be eligible for such a loan, a small
business must be unable to obtain a loan elsewhere for the
purpose of such pre-disaster mitigation.
The Federal Credit Reform Act of 1990 requires
appropriation of the subsidy costs and administrative costs for
credit programs. The subsidy cost is the estimated long-term
cost to the government of a direct loan or loan guarantee,
calculated on a net present value basis and excluding
administrative costs. Based on information from SBA, CBO
estimates that the subsidy costs of making loans under the
proposed mitigation program would be similar to the subsidy
costs of making loans under the existing disaster program, or
about 22 percent of the original value of the loan. Borrowers
under the mitigation program would not be as likely to default
as similar businesses under the disaster program because they
would not yet be victims of disasters. However, the disaster
program also lends to homeowners, which are generally less
risky borrowers than small businesses, and the mitigation loans
would only serve small businesses that are unable to obtain
loans elsewhere. Finally, loans for disaster mitigation would
not increase the gross receipts of a borrower, but would
increase payments for debt.
At a 22 percent subsidy rate, the SBA would need
appropriations of about $3 million a year to make the
authorized loans and loan guarantees. CBO estimates that
subsidy outlays would be $2 million in 2000 and $3 million each
year during the 2001-2004 period. SBA would also incur some new
administrative costs, both for managing the program and
preparing a report that would be required by the bill. CBO
estimates that such costs would be well below $500,000 in any
year.
Pay-as-you-go considerations: None.
Intergovernmental and private-sector impact: H.R. 818
contains no intergovernmental or private sector mandates as
defined in UMRA and would not affect the budgets of state,
local, or tribal governments.
Estimate prepared by: Mark Hadley.
Estimate approved by: Robert A. Sunshine, Deputy Assistant
Director for Budget Analysis.
Committee Estimate of Costs
Pursuant to the Congressional Act of 1974, the Committee
estimates that the amendments to the Small Business Act
contained in H.R. 818 will not increase appropriations over the
next five fiscal years. Furthermore, pursuant to clause
3(d)(2)(A) of rule XIII of the Rules of the House of
Representatives, the Committee estimates that implementation of
H.R. 818 will not significantly increase administrative costs.
This concurs with the estimate of the Congressional Budget
Office.
Oversight Findings
In accordance with clause 4(c)(2) of rule X of the Rules of
the House of Representatives, the Committee states that no
oversight findings or recommendations have been made by the
Committee on Government Reform with respect to the subject
matter contained in H.R. 818.
In accordance with clause (2)(b)(1) of rule X of the Rules
of the House of Representatives, the oversight findings and
recommendations of the Committee on Small Business with respect
to the subject matter contained in H.R. 818 are incorporated
into the descriptive portions of this report.
Statement of Constitutional Authority
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in Article I, Section 8, Clause 18, of the
Constitution of the United States.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SMALL BUSINESS ACT
* * * * * * *
Sec. 7. (a) * * *
* * * * * * *
(b) Except as to agricultural enterprises as defined in
section 18(b)(1) of this Act, the, Administration also is
empowered to the extent and in such amounts as provided in
advance in appropriation Acts--
(1)(A) * * *
(B) to refinance any mortgage or other lien against a
totally destroyed or substantially damaged home or
business concern: Provided, That no loan or guarantee
shall be extended unless the Administration finds that
(i) the applicant is not able to obtain credit
elsewhere; (ii) such property is to be repaired,
rehabilitated, or replaced; (iii) the amount refinanced
shall not exceed the amount of physical loss sustained;
and (iv) such amount shall be reduced to the extent
such mortgage or lien is satisfied by insurance or
otherwise; and
(C) during fiscal years 2000 through 2004, to
establish a disaster mitigation program to make such
loans (either directly or in cooperation with banks or
other lending institutions through agreements to
participate on an immediate or deferred (guaranteed)
basis) as the Administrator may determine to be
necessary or appropriate to enable small business
concerns to implement mitigation measures pursuant to a
formal disaster mitigation program established by the
Federal Emergency Management Agency, except that no
loan or guarantee may be extended to a small business
concern under this subparagraph unless the
Administration finds the concern is otherwise unable to
obtain credit for the purposes described in this
subparagraph.
* * * * * * *
Sec. 20. (a) * * *
* * * * * * *
(f) Disaster Mitigation Pilot Program.--The following program
levels are authorized for loans under section 7(b)(1)(C):
(1) $15,000,000 for fiscal year 2000.
(2) $15,000,000 for fiscal year 2001.
(3) $15,000,000 for fiscal year 2002.
(4) $15,000,000 for fiscal year 2003.
(5) $15,000,000 for fiscal year 2004.
* * * * * * *