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114th Congress }                                         { Report
                                 SENATE
 2d Session    }                                         { 114-293

======================================================================
 
  RECOVERY IMPROVEMENTS FOR SMALL ENTITIES AFTER DISASTER ACT OF 2015

                                _______
                                

                  July 6, 2016.--Ordered to be printed

                                _______
                                

Mr. Vitter, from the Committee on Small Business and Entrepreneurship, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1470]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 1470) to amend the Small 
Business Act to provide additional assistance to small business 
concerns for disaster recovery, and for other purposes, having 
considered the same, reports favorably thereon with an 
amendment in the nature of a substitute and recommends that the 
bill, as amended, do pass.

                   I. INTRODUCTION

    The Recovery Improvements for Small Entities (RISE) After 
Disaster Act of 2015 (S. 1470) was introduced by Chairman 
Vitter, on May 31, 2015. The bill incorporates language from 
Senator Heitkamp's Small Business Disaster Reform Act of 2015 
(S. 956), providing clarification of collateral requirements 
for disaster loans. The purpose of the RISE Act is to provide 
additional assistance to small business concerns for disaster 
recovery. In order to achieve this, the RISE Act seeks to 
provide long-term recovery loans to small businesses through 
community banks after their opportunities to receive SBA 
disaster assistance are no longer available. The bill will also 
direct Federal agencies to utilize local contractors in 
recovery efforts for disaster affected areas as well as 
authorize counseling and technical assistance to help small 
businesses in their recovery efforts and resume operations as 
quickly as possible.
    During the markup of the bill, the bill was approved 
unanimously by voice vote.

             II. HISTORY (PURPOSE AND NEED FOR LEGISLATION)

    Hurricane Katrina struck Louisiana, Alabama, Florida, and 
Mississippi in 2005, with residual effects going on to impact 
much of the Northeast United States. New Orleans, Louisiana was 
particularly hard hit by the storm. In the aftermath of a 
disaster of this scale, the recovery process is extensive. 
Unfortunately, recovery efforts were prolonged, in part, 
because small businesses remained closed.
    The primary provider of Federal disaster assistance loans 
for private sector, non-agricultural, disaster victims is the 
Small Business Administration's Office of Disaster Assistance. 
Following Hurricane Katrina, a series of hearings and 
roundtables highlighted shortcomings in the recovery process 
following particularly large disasters, and found that small 
businesses require additional help to aid in their recovery.

             III. HEARINGS AND ROUNDTABLES

    In the 109th Congress:
    In the 109th Congress, the Senate Committee on Small 
Business and Entrepreneurship held a hearing entitled ``The 
impact of Hurricane Katrina on small businesses'' on September 
22, 2005 to assess the current relief programs of various 
federal agencies. Despite significant efforts by FEMA and the 
SBA to rapidly increase the size of their disaster programs to 
maximize aid, witnesses expressed the need for a more 
comprehensive system to handle duplicate payments so that 
business owners with insurance could receive additional aid 
faster. Other ideas presented at the hearing included a greater 
emphasis on local contracting in disaster recovery projects as 
well as a grant program, in addition to the SBA's loan program, 
to account for the difficulties in repaying loans after 
disasters. The presiding Chair of the committee expressed a 
desire to see certain bureaucratic barriers eliminated from the 
process, such as agencies being unable to help business owners 
that were outside of their jurisdiction.
    The Committee also held a hearing entitled ``Strengthening 
hurricane recovery efforts for small businesses'' on November 
8, 2005, in which they discussed the failures of the SBA's loan 
disaster program in quickly distributing aid after Hurricanes 
Katrina and Rita. Business owners and members expressed extreme 
frustration with the SBA's loan approval process, which left 
business owners waiting for several months to receive any form 
of notification regarding their request. The SBA Administrator 
at the time introduced the GO Loans program, which was intended 
to temporarily expedite the loan process following a disaster, 
as he stated that the current loan program was intended for 
long-term recovery and not equipped to handle the immediate 
after-effects of such a large-scale disaster.
    In the 110th Congress:
    In the 110th Congress, the Senate Committee on Small 
Business and Entrepreneurship held a hearing entitled 
``Oversight: Gulf Coast disaster loans and the future of the 
disaster assistance program'' on July 25, 2007. The hearing 
assessed the SBA's disaster assistance program and its 
shortcomings after Hurricanes Katrina and Rita. An SBA employee 
testified that the organization was so overwhelmed by and 
unequipped to handle the volume of loan applications that it 
created a system centered on declining as many loans as 
possible to take them out of the system. Witnesses repeatedly 
expressed the need for a better, expedited loan process.
    The Committee held a field hearing in Lake Charles, LA 
entitled ``Rebuilding the Gulf Coast: small business recovery 
in south Louisiana'' on February 20, 2008 to assess how federal 
agencies were continuing to provide aid several years after the 
disasters. Witnesses again expressed the need for an SBA grant 
program to supplement the disaster loan program. The GO Loans, 
temporarily implemented by the SBA in 2005 after Hurricanes 
Katrina and Rita, were discussed favorably by Gulf Coast 
business owners.
    In the 111th Congress:
    In the 111th Congress, the Senate Committee on Small 
Business and Entrepreneurship held a hearing entitled ``A year 
later: lessons learned, progress made, and challenges that 
remain from Hurricane Ike'' on September 25, 2009 to discuss 
the SBA and FEMA's responses to Hurricane Ike. Again, witnesses 
expressed the need to expedite the loan approval process at the 
SBA. Business owners also emphasized the importance of local 
leaders having the ability to respond to disasters immediately, 
rather than waiting for federal action.
    The Committee also held a hearing entitled ``Impact of the 
Deepwater Horizon oil spill on small business'' on May 27, 
2010. The hearing analyzed the effects of and responses to the 
Gulf oil spill. Witness reiterated the difficulties of paying 
back the interest on SBA disaster loans as well as expressed 
the need to change collateral requirements on loans. Because of 
the influx of disaster loans in the Gulf region following the 
series of disasters over several years, many businesses did not 
have the collateral to secure loans, as it had already been 
used to secure other outstanding loans.
    In the 112th Congress:
    In the 112th Congress, the Senate Committee on Small 
Business and Entrepreneurship held a hearing entitled 
``Hurricane Sandy: assessing the Federal response and small 
business recovery efforts'' on December 13, 2012 to assess the 
federal response to Hurricane Sandy. Witnesses reiterated the 
need for an SBA grant program as well as an improved 
application process. Although the SBA claimed it had 
significantly decreased processing time, there were still very 
few processed, approved, and distributed loans from the 
disaster. The SBA also attempted to pull resources from various 
offices as part of its ``One SBA'' approach; however, this was 
only regional and did not utilize resources outside of the 
immediate disaster area.
    In the 114th Congress:
    Several sections from this bill were later amended into, 
and became law as part of, the RISE After Disaster Act of 2015, 
H.R. 208 (Public Law No. 114-88).

                  IV. DESCRIPTION OF BILL

    The bill works to address small business's access to 
capital, as well as prioritize funding and assistance for small 
business and streamlining federal involvement. The RISE After 
Disaster Act of 2015 provides long-term recovery loans to small 
businesses through community banks when opportunities to 
receive SBA disaster assistance are no longer available. The 
bill instructs federal agencies to utilize local contractors 
for response and recovery efforts. Counseling and technical 
assistance to help small businesses recover and resume 
operations is also made available through the bill. The RISE 
After Disaster Act also seeks to address contractor malfeasance 
by allowing homeowners and businesses to increase the size of 
their loans from the SBA to remediate their property. Small 
businesses affected by major disasters are able to access 
federal government surplus property in order to aid in their 
recovery.
    Additional provisions of the RISE After Disaster Act of 
2015 include coordinating duplicative benefit reviews between 
agencies; allowing for nation-wide assistance from Small 
Business Development Centers; fast-tracking SBIC applications 
to quickly return investment dollars to disaster areas; 
allowing physical damage disaster loans to be used for 
preventative measures; planning ahead for Business Recovery 
Centers in order to prevent confusion and delay in delivering 
services; and reducing paperwork so small businesses are not 
further burdened while already struggling after a disaster.

                     V. COMMITTEE VOTE

    In compliance with rule XXVI (7)(b) of the Standing Rules 
of the Senate, the following vote was recorded on June 3, 2015.
    A motion to adopt the Recovery Improvements for Small 
Entities After Disaster Act of 2015, a bill to amend the Small 
Business Act to provide for increased assistance to small 
businesses affected by disaster, was favorably reported by 
voice vote.

                   VI. COST ESTIMATE

    The Congressional Budget Office estimate of the costs of 
this measure has been requested but was not received at the 
time the report was filed. When the report is available, the 
Chairman will request it to be printed in the Congressional 
Record for the advice of the Senate.

                 VII. EVALUATIONS OF REGULATORY IMPACT

    In compliance with rule XXVI (11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation. There will be 
no additional impact on the personal privacy of companies or 
individuals who utilize the services provided.

                  VIII. SECTION-BY-SECTION ANALYSIS

Section 1: Short title and table of contents

    This section provides the title, the ``Recovery 
Improvements for Small Entities After Disaster Act of 2015'' of 
the ``RISE After Disaster Act of 2015''.

Section 2: Definitions

Section 101: Use of data sharing

    Amends section 312 of the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act.

Section 102: Additional awards to small business development centers, 
        women's business centers, Score, and Fast recipients for 
        disaster recovery

    Amends section 7(b) of the Small Business Act to allow the 
Small Business Administration to provide financial assistance 
to a small business that receives an award from the 
administration to spur recovery after a disaster. This section 
also specifies the form of financial assistance as well as 
requirements for those receiving the funds. This section also 
sets down a term for any form of financial aid given.

Section 103: Collateral requirements for disaster loans

    Amends section 7(d)(6) of the Small Business Act by 
increasing the amount of money given for disasters from $14,000 
to $25,000. The section also sets down an expiration date for 
the previous change, and mandates that a report be made to 
gauge the benefits of the previous change.

Section 104: Assistance to out-of-state business concerns to aid in 
        disaster recovery

    This section allows the Small Business Association to 
provide services, such as development centers, to small 
business concerns located outside of the State if the area of 
the small business has been declared a major disaster. This 
section also sets down a term for which this aid may be 
provided, and guidelines regarding extensions to this aid.
    This section states that the Administrator should try to 
ensure that the small business center is reimbursed for any 
legitimate expenses incurred.

Section 105: SBIC program

    Amends section 301(c)(2) of the Small Business Investment 
Act of 1958 by giving priority to applications for a license to 
operate as a small business investment company that is from an 
applicant within a disaster area.
    The section also sets down rules for calculating the 
outstanding leverage of a company licensed under section 301(c) 
and the time limit for which these calculations shall be used.

Section 106: Fast program

    Amends section 34(a) of the Small Business Act by giving 
special consideration to applications located in an area 
affected by a catastrophic disaster. This section also provides 
for giving additional assistance to applicants in catastrophic 
disaster areas.
    It also amends section 34 of the Small Business Act by 
changing ``2005'' to ``2017'' in subsection (h) and ``September 
30, 2005'' to ``September 30, 2017'' in subsection (i).

Section 107: Use of federal surplus property in disaster areas

    Section 107 amends the Small Business Act section 
7(j)(13)(F) by allowing the Administrator to transfer 
technology or surplus property to small business in a disaster 
area on a priority basis. This section also sets down 
regulations for the small businesses receiving a transfer.

Section 108: Recovery opportunity loans

    This section amends section 7(a)(31) of the Small Business 
Act by allowing the Administrator to guarantee an express loan 
to a small business concern located in a disaster area. It also 
specifies that the maximum for these loans is to be $150,000 
and the guarantee rate shall not be more than 85 percent. This 
section also states that the small business concern receiving a 
guaranteed loan had to be in operation at the time of the 
disaster. These guaranteed loans may only be made to small 
business concerns that demonstrate sufficient capacity to repay 
the loan. According to this section, the administrator shall 
have 90 days after receiving an application to determine 
whether to pay the guaranteed loan. The section also sets down 
the procedure for fees concerning the guaranteed loans.

Section 109: Contractor malfeasance

    Section 7(b) of the Small Business Act is amended by 
allowing the Administrator to increase the amount of the loan 
to a small business concern if a contractor engages in 
malfeasance that results in substantial economic damage to the 
recipient. The Administrator may increase the amount of the 
loan as necessary to cover the cost of repairs, rehabilitation, 
or replacement needed to address the cause of the economic 
damage.
    This section also sets down requirements that must be met 
in order for the Administrator to increase the amount of the 
loan. These include proper certification from the borrower and 
the person performing the mitigation.

Section 110: Local contracting preferences and incentives

    This section of the RISE After Disaster Act of 2015 amends 
section 15 of the Small Business Act. This section states that 
a contracting preference should be given to a small business 
concern in the disaster area if the small business concern will 
perform the work required in the disaster area. This section 
also states that if preference is given to a small business 
concern, the value of the contract should be doubled.

Section 111: Clarification of collateral requirements

    This section amends the Small Business Act section 7(d)(6), 
so that the owner of a small business concern is not required 
to use his primary residence as collateral for a loan if the 
Administrator determines that the owner has assets of equal 
quality with equal or greater value. In this case, those other 
assets may be used as collateral for a loan.

Section 201: Use of physical damage disaster loans

    Amends section 7(b)(1)(A) by allowing loans used to modify 
structures to include the construction of safe rooms and storm 
shelters designed to protect property and occupants from 
natural disasters.

Section 202: Business recovery centers

    Section 202 amends section 7(b) of the Small Business Act 
in order to identify locations that may be used as recovery 
centers in the event of a disaster. This section also sets down 
the requirements for identification of these recovery areas.

Section 301: Increased oversight of economic injury disaster loans

    Section 7(b) of the Small Business Act is amended in this 
section. Oversight of entities receiving loans shall be 
increased. This increased oversight includes scheduled site 
visits and reviews of the use of loan proceeds in order to 
ensure compliance with requirements. This section states that 
no additional funds should be used to carry out the 
requirements of this section.

Section 302: Reduction of paperwork

    This section states that it is the sense of Congress that 
paperwork burdens on small business concerns should be reduced 
when applying for disaster assistance. The application for 
disaster assistance should deter and detect possibilities of 
waste, fraud, and abuse.

Section 303: Report on web portal for disaster loan applicants

    This section amends the Small Business Act to provide for a 
report relating to the creation of a web portal to be used to 
track the status of applications for disaster assistance. This 
section also stipulates what information this report should 
include.

Section 304: Local disaster contracting fairness

    This section stipulates that when possible, local 
subcontractors should be used to carry out contracts for debris 
removal or demolition services in connection with natural 
disaster reconstruction efforts. Preference should be given to 
prime contractors who certify that any work that is to be 
performed by subcontractors will be performed by local 
subcontractors.

                                  [all]