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SMALL BUSINESS RECOVERY FROM 

THE MIDWEST DISASTERS OF 2008 

HEARING BEFORE THE 

SUBCOMMITTEE ON CONTRACTING AND TECHNOLOGY 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

SEPTEMBER 24, 2008 

Small Business Committee Document Number 110-114 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


Congress.#13
HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

HEATH SHULER, North Carolina 

CHARLES GONZALEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

BRIAN HIGGINS, New York 

MAZIE HIRONO, Hawaii 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

MICHAEL DAY, Majority Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director 

SUBCOMMITTEE ON CONTRACTING AND TECHNOLOGY 

Subcommittee on Finance and Tax 

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Braley, Hon. Bruce .................................................................................................. 1 

Davis, Hon. David .................................................................................................... 3 

WITNESSES 

Carranza, Hon. Jovita, Deputy Administrtator, U.S. Small Business Administration ................................................................................................................... 6 

Tully, Mr. Mike, President and CEO, Aerial Services Inc., Cedar Falls, Iowa .. 18 

Wilke, Mr. David, Wilke’s Grocery Store, Elkader, Iowa ..................................... 20 

Bowers, Mr, Don, Owner, Tapken’s Convenience Store, Anamosa, Iowa ........... 23 

Monnahan, Mr. Mike; President, the Blue Strawberry Coffee Company, Cedar 

Rapids, Iowa ......................................................................................................... 27 

Pilkington, Mr. Randy, Executive Director, Business and Community Services, the University of Northern Iowa ................................................................ 29 

APPENDIX 

Prepared Statements: 

Braley, Hon. Bruce .................................................................................................. 44 

Davis, Hon. David .................................................................................................... 49 

Carranza, Hon. Jovita, Deputy Administrtator, U.S. Small Business Administration ................................................................................................................... 50 

Tully, Mr. Mike, President and CEO, Aerial Services Inc., Cedar Falls, Iowa .. 55 

Wilke, Mr. David, Wilke’s Grocery Store, Elkader, Iowa ..................................... 59 

Bowers, Mr, Don, Owner, Tapken’s Convenience Store, Anamosa, Iowa ........... 63 

Monnahan, Mr. Mike; President, the Blue Strawberry Coffee Company, Cedar 

Rapids, Iowa ......................................................................................................... 73 

Pilkington, Mr. Randy, Executive Director, Business and Community Services, the University of Northern Iowa ................................................................ 75 

(III) 

(1) 

SMALL BUSINESS RECOVERY FROM 

THE MIDWEST DISASTERS OF 2008 

Wednesday, September 24, 2008 

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON CONTRACTING &TECHNOLOGY

Committee on Small Business, 

WASHINGTON, DC. 

The Subcommittee met, pursuant to call, at 2:00 p.m., in Room 

1539 Longworth House Office Building, Hon. Bruce Braley [chairman of the Subcommittee] presiding. 

Present: Representatives Braley, Cuellar and Davis. 

Also Present: Representative Loebsack. 

Chairman BRALEY. I now call this hearing to order. This hearing 

on the SBA’s response to the 2008 Midwest flooding and tornadoes 

is now called to order. 

I would like to thank all of the witnesses who have taken time 

out of their busy schedules to come from Iowa to testify on how 

these disasters have affected their lives. 

This is the Subcommittee’s last hearing of the year. And I would 

also like to take a moment to thank my friend the honorable David 

Davis for all of the insight and hard work he has brought to the 

table as Ranking Member. Thank you, David. 

In today’s era of modern technology and abundant creature comforts, it is easy for Americans to feel beyond Mother Nature’s 

reach. But the truth is we are not. 

In my own home State of Iowa, we are keenly aware of that fact. 

And I am personally aware of that fact because my brother Brad 

and his wife, Rhonda, had five and a half feet of the Cedar River 

in their home as part of this flooding event. 

This past spring and summer, the series of storms and flooding 

tore through the entire region that I represent. And while much of 

the nation’s focus has since shifted to the aftermath of Gulf Coast 

hurricanes, Iowa and the rest of the Midwest are still recovering. 

Natural disasters do much more than knock down trees and level 

homes. They devastate local economies. In addition to considerable 

human cost, the flooding in Iowa reeked serious financial havoc. In 

fact, the damage is expected to rank among the costliest in our nation’s history. 

Preliminary estimates show that the destruction in my state 

alone will cost billions of dollars. SBA’s Disaster Assistance Program has helped Iowa to weather some of this financial storm. 

However, much still remains to be done. 

In this afternoon’s hearing, we will evaluate SBA’s response to 

the Midwest flooding and address some of the program’s limitations. We will also discuss other potential avenues for recovery assistance. 

2 

It is estimated that between 40 and 60 percent of businesses fail 

to recover from natural disasters. This is largely because of the cost 

of damage when paired with lost revenue is simply too great for 

most firms to sustain. 

In Iowa, for example, total damages to small and intermediate firms will run upwards of $5.36 billion. And the unmet need for 

damages is at $2.78 billion, over half of the total. 

While all businesses suffer from natural disasters, small firms, 

in particular, are generally the hardest hit. This is primarily the 

result of a weakened ability to generate profits, paired with revenue gaps and a basic lack of capital. 

Altogether 4,800 non-manufacturing small firms were affected in 

Iowa alone while another 800 medium-sized businesses also suffered losses. 

In the wake of a natural disaster, SBA is trusted to dispatch a 

number of relief programs. In keeping with this charge, the administration provided Midwest businesses and homeowners with working capital in a number of low-interest loans. As of the beginning 

of this month, SBA had issued 77,993 disaster assistance applications throughout the Midwest region. SBA has already granted 3,359 loans, worth $222 million to 

Iowans. The administration has come a long way since the aftermath of hurricane Katrina. But while SBA has managed to fulfill 

its standard policies in the Midwest, it is clear that the system is 

still flawed in some respects. 

Unfortunately, much of the money marked for the Midwestern 

flood relief is still tied up in bureaucratic red tape, out of the reach 

of thousands of flood victims. 

Additionally, of the $46.8 million awarded in rebuilding contracts 

so far, only one million, or less than 2 percent, of these contracts 

has been awarded to small Iowa firms. 

What is more, nearly ten percent of the rebuilding contracts were 

miscoded and given to large corporations, like Northrop Grumman, 

instead of small businesses. 

Because of all of the challenges small businesses are facing trying to recover from these disasters, I recently introduced, along 

with Congressman Steve King and other members of the Iowa delegation, H.R. 6641, the Small Business Owner Disaster Relief Act 

of 2008. This bill would amend the Stafford Act to allow emergency 

assistance grants for small businesses with 25 or fewer employees. 

And I should add that a hearing was held on this recently in the 

Transportation Committee. These grants could be used to repair, 

restore, or replace damaged facilities in small businesses. 

I have also co-introduced a bill, along with my colleague from 

Iowa Congressman Dave Loebsack, who is seated to my right, H.R. 

6587, the Midwestern Disaster Tax Relief Act. It is a tax package 

that would help homeowners and small business owners affected by 

the storms and flooding get back on their feet. 

Among other things, it reduces the 2008 tax burden for small 

and midsized businesses by substantially increasing allowable deductions for the depreciation and expensing of business property. 

Small businesses are the glue that hold local economies together. 

When they suffer, entire regions suffer along with them. In the 

case of the Midwest floods, we are also seeing reverberations across 

3 

the region. And while we are grateful for the assistance that SBA 

has provided, certain aspects of the system need to be reassessed. 

Meanwhile, more help is needed in the Midwest. It is critical that 

the rebuilding continue and that our nation’s and region’s economy 

get back on track. 

I urge both my colleagues and the President to pass additional 

disaster assistance before we adjourn. And we took a very major 

step just before we came here to this hearing by passing $22.3 billion in additional disaster assistance funding for Iowa, the Midwest, and other parts of the country. 

I also encourage the administration to expedite the release of already appropriated funds so the communities in my district and 

throughout Iowa and the Midwest can get back on track. 

I now yield to my colleague and friend from Tennessee, Ranking 

Member Davis for his opening statement. 

Mr. DAVIS. Thank you, Mr. Chairman. I would like to say I have 

enjoyed working with you as well. Thank you for your friendship 

and leadership on the Committee. 

In 2005, hurricanes Katrina, Rita, and Wilma devastated the 

Gulf Coast region. No one disputes the response by various governmental entities was inadequate. The failures included problems 

with Small Business Administration, the agency tasked with providing disaster loans to homeowners and small businesses that are 

vital to the recovery of regions that have suffered natural disasters. 

Former Administrator Preston recognized that the SBA’s disaster 

response operations needed updating and streamlining to assure 

that the agency would become part of the solution to rebuilding 

communities suffering from disasters, rather than being a hindrance. Today’s hearing examines whether the efforts of the Administrator Preston and Deputy Administrator Carranza were successful. 

Earlier this year floods devastated the upper Midwest, particularly southeast Iowa. This represented the SBA’s first test of its 

new disaster-planning procedures in response to large-scale disasters. 

I will be interested in hearing from our witnesses whether SBA’s 

responses were adequate and whether any action of Congress is 

needed in providing the agency with appropriate resources to answer the call to those in need after a disaster. 

I know that the Deputy Administrator is very busy working on 

the response to hurricane Ike. Given those very important responsibilities, I would like to thank Deputy Administrator Carranza for 

taking time out of her schedule to be with us today. And I look forward to working with the rest of the members on this panel for solutions. 

And, with that, I yield back the balance of my time. 

Chairman BRALEY. Thank you, Mr. Davis. 

We are fortunate to have with us today, sitting in by special 

agreement of the Chairman and Ranking Member of the Small 

Business Committee, my friend and colleague from Iowa Congressman Dave Loebsack, who represents the Second District of Iowa, 

which experienced the worst of the flooding. And at this time, I 

would recognize him for an opening statement. 

Mr. LOEBSACK. Thank you. 

4 

I would like to thank Chairman Braley and Ranking Member 

Davis for inviting me to join the Small Business Subcommittee on 

Contracting and Technology for this very important meeting. 

I have never been on this Committee, obviously. I serve on two 

other committees. But it’s my pleasure to be here and to be here, 

obviously, as well with Ms. Carranza, whom I last saw in the district a number of months ago now. 

Also, if I may take a point of personal privilege, I want to introduce a couple of other folks from the audience. Is that okay, Mr. 

Chairman? Thank you. 

First of all, my wife, Terri, is here, sitting in the back. And she 

has quite a stake in this as well since she also lives in the Second 

District of Iowa. 

And, second, Chuck Peters is here. He is the President and CEO 

of the Cedar Rapids Gazette, the largest newspaper in my congressional district. But that is a big reason why he is important. 

He is also very important because he is playing an incredibly active role in the reconstruction, the redevelopment of the Second 

District of Iowa; in particular, Cedar Rapids and the Iowa City 

area, that whole corridor. And he has been a leader in the efforts 

to take a more regional approach to the recovery efforts in the 

area. So I am really happy that Chuck is able to sit in today on 

this meeting. 

I would also like to thank all of the witnesses who have traveled 

from Iowa to inform us of their experience in coping with the disasters that hit Iowa and nine other Midwestern states this year. 

I know that you each have faced incredible hardship over the 

past few months. And your willingness to travel to Washington, 

even as you attempt to clean up, rebuild, and reopen as a demonstration of Iowans’ resiliency and tenacity of spirit, your testimony today will help to assure that Congress provides proper support and assistance to small businesses in Iowa and in all areas affected by disasters, past, present, and future. 

My district, as Congressman Braley mentioned, was particularly 

hard hit by the floods of June of 2008. Over 1,300 businesses in 

Cedar Rapids alone were damaged by the floods. And the damage 

estimates for the downtown businesses top $366 million. 

We will hear from a witness from Cedar Rapids today, Mr. Mike 

Monnahan, President of the Blue Strawberry Coffee Company. Mr. 

Monnahan, welcome. I know you are behind that pillar somewhere. 

The impact of the floods on Cedar Rapids’ economy is yet to be 

determined. It is the second largest city in Iowa. The revenue loss 

for the first year of recovery alone will exceed $600 million. Meanwhile, small rural cities in my district experience complete devastation of their local economies. 

The City of Palo, with a population under 1,000, lost not only 

every one of its businesses but also all but 2 of its homes. The city 

estimates that its business district saw $1.75 million in damage, 

this in a city that has already spent its entire budget on flood recovery and is currently operating in a deficit. 

Sadly, stories such as these are all too common in the Midwestern areas affected by the severe storms, tornadoes, and flooding in this past year. Yet, the Small Business Administration has 

disbursed only $16 million out of the $225 million in loans that 

5 

have been approved for Iowa. In other words, only 53 percent of 

loans approved by the SBA have been closed since their approval, 

and only 26 percent have been fully disbursed to disaster victims. 

Furthermore, in an apparent response to an Office of Management and Budget directive, SBA has dramatically increased the 

disbursement of high interest loans in the place of the traditional 

low interest rate small business loans. These loans are often above 

market value and are all but useless to businesses and homeowners, who are able to get better deals at their local banks. 

What is deeply troubling to me is that only two percent of the 

loans distributed after hurricane Katrina were high-interest. In 

Iowa, apparently in compliance with the OMB directive, they make 

up 30 percent of SBA loans. 

Deputy Administrator Carranza, it is my hope that you will be 

able to provide some explanation for the delay in disbursement of 

funding and the 15-fold increase in high-interest rate loans. And, 

more importantly, I hope you will provide information regarding 

SBA’s plans to speed up the disbursement process and to provide 

Iowans with loans that will help them to recover and rebuild. 

Small businesses, as we know, are the heart and soul of the Iowa 

economy. In 2006, Iowa had some 258,000 small businesses that 

employed about 650,000 people. That is out of a population of three 

million. Clearly the recovery of the small businesses impacted by 

this year’s disasters is a crucial component of the recovery of Iowa’s 

economy. 

Again I would like to thank Chairman Braley for holding this important hearing. And I look forward to hearing from the witnesses 

and from Deputy Administrator Carranza. Thank you. 

Chairman BRALEY. Thank you, Congressman. We appreciate 

your remarks. And, Chuck, I just want to acknowledge you and 

commend you for the fabulous photographic display of flooding that 

is on display at the Cedar Rapids Museum. When we were touring 

the state with the Speaker and had an opportunity to see the photographic evidence of the devastation, especially in your leadership 

area, it was very impressive. And I know it made an impact on her. 

So thank you. 

We will now move on to testimony from our witnesses. And for 

all of the witnesses, this is just a general reminder that you will 

be allowed five minutes to deliver your opening statements. 

There is a light display in front of you. And the light will go on 

with one minute remaining. The yellow light will come on. And 

when your time is up, the red light will come on. So you will have 

a short amount of time to wrap up your remarks. 

But your written statements will be included in the Committee’s 

record. So even if you can’t get to everything that you brought with 

you, we will have a record of that that will be part of the Committee proceedings. 

We will begin with our first panel. And at this time, it is my 

privilege to introduce the honorable Jovita Carranza, who is the 

Deputy Administrator of the Small Business Administration. The 

SBA is the primary federal agency whose mission is to aid, counsel, 

assist, and advocate for our nation’s small businesses while 

strengthening the economy. Prior to joining the SBA, Ms. Carranza 

6 

worked for UPS, where she served as Vice President of Air Operations. 

I just want to thank the Deputy Administrator personally for her 

efforts in visiting the state of Iowa. I can tell you that your presence there was a reflection of your personal interest in what was 

happening to devastated homeowners and small business owners in 

my state. We greatly appreciate that. 

And I will just give you advance warning that none of the questions that come out today are in any way a reflection upon you or 

your commitment to making sure that the agency is accountable in 

doing what it can for the people in Iowa. 

Please share your opening remarks. 

STATEMENT OF THE HONORABLE JOVITA CARRANZA, DEPUTY 

ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION 

Ms. CARRANZA. Thank you, Congressman Braley. Good morning, 

Chairman Braley, Ranking Member Davis, and members of the 

Committee. Thank you for inviting me to discuss the Small Business Administration’s work to help the victims of the Midwest 

floods. 

The SBA is best known for our work with entrepreneurs and 

small businesses, but when disasters strike, we provide critical 

pieces of the national recovery effort. This mission allows us to help 

those in desperate need, and from my personal experiences it is one 

of the most important and consequential things our agency does. 

After the Midwest flooding, I personally visited the area three 

times as then Acting Administrator of SBA. I saw the devastation 

firsthand, but I also saw how SBA and, indeed, the entire federal 

government had learned from the painful lessons of the 2005 hurricane season. These lessons have led to reforms that have dramatically improved our performance. 

Of course, this is little comfort to those whose homes and businesses were destroyed. The speed of our response and the resources 

we deployed cannot undo the damage caused by nature. But in assessing the response to the Midwest floods, I think it would be 

helpful for the Committee to contrast the situation in 2005 with 

our current response. 

To put this in perspective, the goal for processing a home loan 

before Katrina was 12 days. As SBA grappled with Katrina applications, the actual time needed stretched to 90 days. Today the 

goal for processing a disaster home loan is 10 days, but in responding to the floods, the actual time has been 4.7 days. 

Before Katrina, the goal for processing a business loan was 17 

days, but in the hurricane’s aftermath, the actual time needed was 

70 days. Today, the goal for processing a disaster business loan is 

16 days, but the actual time is 9 days. 

The goals are more demanding, but SBA’s performance is exceeding them, a testament to our reforms. Moreover, these efforts continue. On August 4th, SBA introduced an electronic loan application, and while not available initially for the Midwest flood, it is 

currently in use and capable of receiving 5,600 applications per 

hour. 

In financial terms, as of September 21, SBA has approved over 

7,140 loans for more than $358 million. Of these more than 6,260 

7 

are home loans totaling more than $257 million, 855 are business 

loans for more than $98 million, and 28 are Economic Injury Disaster Loans for $2.4 million. 

More specifically, in Iowa, more than 3,450 loans have been approved for $230 million. This includes more than 2,88o home loans, 

for $150 million; 541 business loans, for $78 million; and 16 EIDL 

loans, for $1.9 million. The total amount of these loans is nearly 

double the $112 million issued after the 1993 Iowa floods. 

Beyond financial help, SBA also provides technical assistance 

and coordination with state and local officials. On June 24, SBA 

opened our Business Recovery Center in Cedar Rapids, a week before the crest. Co-located with FEMA’s Disaster Recovery Center, 

it allows businesses to work with our staff to learn about recovery 

programs, receive counseling, and get face-to-face answers to their 

questions. At our peak response, which occurred on June 30th, SBA 

had 194 staff working from 67 centers in Iowa, with coverage over 

81 counties. 

To publicize the help available, communication specialists from 

our Office of Disaster Assistance provided more than 29 TV, 34 

radio, and 62 newspaper interviews. Also, SBA officials have made 

more than 60 visits to Chambers of Commerce. 

On the coordination front, SBA participates in FEMA’s Interagency Long-Term Community Recovery Task Force, and SBA is 

working with the Iowa Rural Development Council and the Rebuild 

Iowa Office. 

This vigorous response is possible because of our efforts to improve disaster response after the 2005 hurricane season. Today, by 

applying lessons learned, SBA’s Disaster Assistance Program and 

our sister federal agencies have overhauled the response protocols, 

and these improvements are seen across the country, including the 

Midwest region. 

And while that is a brief of our reforms, now I would like to describe the implementation of the disaster provisions in the 2008 

Farm Bill. A number of these were already in operation, and we 

welcomed their codification. Specifically, we are talking about the 

Disaster Response Plan, regular reports to Congress, and other reforms instituted by SBA. 

For those provisions of the Farm Bill that augmented our efforts, 

SBA has been working to implement these features as a part of our 

overall Disaster Response Plan. 

To date the following have already been implemented. Noncollateralized loan limits for physical disaster loans have increased 

to $14,000 from $10,000. Loan caps for businesses have increased 

to $2 million from $1.5 million. Use of net earnings clause in the 

first five years of repayment has been prohibited. And non-profit 

organizations are now eligible for Economic Injury Disaster Loans. 

In closing, thank you for the opportunity to testify. As I mentioned, I have visited the area three times, twice with you, Mr. 

Chairman, seeing the damage firsthand. I also had the privilege of 

traveling to the region with Secretary of Commerce Carlos Gutierrez. I met with Iowa Governor, Chet Culver; Cedar Rapids Mayor, 

Kay Holloran; your former colleague Jim Nussle; your colleague 

Congressman Dave Loebsack; and other state and local officials. 

8 

I appreciate the long-term consequences the floods will have and 

I welcome the opportunity to answer your questions. Thank you. 

[The prepared statement of Jovita Carranza is included in the 

appendix at page 50.] 

Chairman BRALEY. We will now proceed with questioning. And, 

Ms. Carranza, let me start with an issue that was of concern to the 

entire Iowa delegation, including Senator Harkin and Senator 

Grassley and every member of the House of Representatives, a bipartisan concern. It was contained in the letter that we sent to 

Budget Director Nussle and Acting Administrator Baruah on August 22nd of 2008. 

The concern is this. Prior to October of last year, applicants who 

couldn’t secure credit elsewhere after a disaster qualified for SBA 

loans with lower interest rates and longer repayment terms. However, your agency, the Small Business Administration, recently 

abandoned that approach to follow a directive from the OMB mandating that the SBA issue more high-interest loans. 

Given that the goal of these loans is to help victims in times of 

need, can you explain why the SBA is disproportionately pushing 

loans that could threaten recovery efforts? 

Ms. CARRANZA. I would like to address that question by indicating the three areas of responsibility that we have. One, the statute requires that SBA provide the lowest interest rate to individuals or applicants that aren’t able to obtain credit elsewhere, and 

those who are capable of acquiring credit elsewhere would do so, 

and they would get a higher rate and, again, a less subsidized rate 

to the government. 

The IG did express some concerns of our particular process; our 

test. As a result of some of the recommendations they made, we revisited the test and made the necessary adjustments. 

Thirdly, we do test frequently our credit elsewhere policy. And 

with that, the concern is always, is whether it is market-based and 

is it reasonable? And if there are particular concerns, Congressman 

Braley, I offer the opportunity to review those particular cases that 

you have cited or the situation that you cited, where individuals acquired other loans at a lower rate than the Office of Disaster Assistance loan. 

Chairman BRALEY. But your response implies that it was the Inspector General, whose responsibility it is to oversee the operations 

of the Small Business Administration that prompted this change. 

My understanding is that the reason for the change was a directive 

from the Office of Management and Budget, headed by Mr. Nussle, 

that caused that change in SBA policy. 

Ms. CARRANZA. Congressman Braley, I wouldn’t be able to comment with any specificity because I can only tell you what I am responsible for based on statute. 

Chairman BRALEY. What we will do is we will make sure you get 

a copy of this letter of August 22nd. And I would really appreciate 

it if you would take that back to the Acting Administrator because 

this letter was signed by every member of the Iowa delegation, bipartisan, House and Senate. And we would very much like to know 

what the official position of the agency is in response to that specific concern. 

9 

Do you have any specific provision of the Small Business Act that 

you can point us to that would indicate that there is a justification 

for having a two-tier loan system? 

Ms. CARRANZA. The two-tier loan system, again, is by statute in 

that we are to identify section 7(d)(5)(D). 

Chairman BRALEY. Is that a requirement in the statute or is that 

an interpretation by the agency of the statutory requirement? 

Ms. CARRANZA. It is a directive. 

Chairman BRALEY. But does that mean that it is included in the 

language of the statute you just cited? 

Ms. CARRANZA. I wouldn’t be able to accurately state that, sir. 

Chairman BRALEY. Well, let me move on, then. After hurricane 

Katrina, just two percent of all SBA loans were at higher interest 

rates and shorter repayment terms. Your agency spokesman recently stated that over 95 percent of the loans made in Iowa after 

this disaster occurred carried higher interest rates. Do you expect 

that the proportion of these higher-interest loans will continue to 

occur at such high rats? 

Ms. CARRANZA. I am very supportive of your concern, Congressman Braley. And I would like to take this opportunity to correct 

those statistics. 

The number that was quoted was a misrepresentation from a 

field representative. It is actually representing five percent of the 

revenues or I should say the loan value is reflective of a ten percent business loan volume. 

So it is the reverse. It is not 95 percent of the higher rate. It is 

actually ten percent of the businesses are at the higher rate, reflecting five percent of the loan amounts. 

Chairman BRALEY. Do you have any understanding as to why the 

spokesman made the claim that 455 loans, totaling $67.6 million, 

in post-flood loans in Iowa were made at the market rate while 

only 3.3 million were made in long-term loans at the 4 percent 

rate? 

Ms. CARRANZA. I am sorry. Could you pose that question again, 

Congressman Braley? 

Chairman BRALEY. Yes. The quote that I was referring to by the 

agency spokesman claimed that the SBA had made 455 loans, totaling $67.6 million at the market rate, but it also made $3.3 million in long-term loans at 4 percent. 

Ms. CARRANZA. Any misrepresentation of the information that 

was given was corrected with the newspapers. So I can’t specifically state about the numbers that you are giving me, but I can attest to the correction on the 95 percent figure mentioned earlier. 

Chairman BRALEY. Well, I think that the biggest concern that 

people have is that when people whose lives have been devastated 

by epic flooding, the likes of which our state has never seen before, 

are in need of loans at a time of crisis, they are in need of loans 

that meet their needs at that time, which would be the lowest possible interest rate to ensure their long-term viability. 

Is it your statement here today that, in fact, that is a reality of 

the loans that have been processed in Iowa? 

Ms. CARRANZA. Congressman Braley, I can assure you that the 

numbers I referred to in my testimony are the number of loans 

10 

that have been approved. The amount that has been approved is 

over $230 million. 

The fact that they have not been disbursed is twofold. The money 

is available. The loans have been approved. Now it is up to the recipient, the borrower, to access those funds. Typically when funds 

are not disbursed, it is because either the borrower is still waiting 

on permits or contractors. 

So we have taken the position that we don’t want the victim to 

have to wait on our turnaround time because, as I noted in the testimony, once the disaster victim applies, within the same week, we 

will call up the applicant to verify whether they received the application. 

Once the application is approved, we have case managers that 

will follow up and inquire into the status of their concern or whether we have to provide counseling or some advice. But we do follow 

up on those individuals that have been approved for funds and 

question why they are taking a certain length of time to draw the 

funds. 

Money has been approved. And, again, it is $230 million. It is not 

that we have not appropriated the funds. They are available. 

Chairman BRALEY. And I want to follow up on that because the 

SBA boasts that 7,000 loans were approved. And, yet, my understanding is that 46 percent of those loans are currently in a queue 

for closing. 

Is it your testimony today that all of those loans have not been 

closed because of some problem on the part of the homeowner or 

small business owner, as opposed to a delay in releasing funds for 

an approved applicant? 

Ms. CARRANZA. I would like to answer your question in this manner. The funds are not disbursed in totality. They will be disbursed 

as needed. So if the applicant is holding back from drawing those 

funds, it could be that they do not want to incur any of the interest 

rates that would be incurred. By allocating those funds prematurely, they would be charged the interest rate. 

And if they, again, don’t meet the schedule for the permits or 

contractors, as you know, it is always on a priority basis. Construction is at a great demand. And so if they are on the rebuild mode, 

the burden really is on the borrower. 

Now, can I tell you that all of those individuals are facing that 

predicament? I couldn’t tell you what percentage are facing that, 

but I look forward to going back and checking those that are in the 

queue that are waiting to be disbursed, what are the reasons for 

that. 

Chairman BRALEY. Small businesses in Iowa are still struggling 

to recover after sustaining nearly $5.35 billion in damages. And 

many small business owners that I talked to claim that their 

money is being held up by red tape and that these disaster loans 

aren’t a practical option. 

The one remaining hope for many small firms is some of the $2.65 billion already set aside for relief and potentially more to 

come is used for small business contracts. Will the SBA commit to 

meeting with FEMA, the Army Corps, and other major agencies receiving this funding and outline a plan for incorporating small and 

local firms? 

11 

Ms. CARRANZA. Congressman Braley, I am very encouraged by 

the collaboration not only with FEMA but the Corps of Engineers, 

state and local officials because our focus in our reform agenda is 

expediency, collaboration, and immediate policy implementation. 

And all three have been deployed very, very effectively. 

We not only have communicated with the Corps of Engineers via 

letter but also the main agencies, whether it is DOD, GSA, to engage them very proactively in considering small businesses to pursue some of the work that is available. 

Chairman BRALEY. Well, the reason why that is so significant to 

me—and we have had this conversation before—on overall federal 

procurement and the role that small businesses could and should 

play in receiving those federal contracting dollars is our information indicates that small businesses in Iowa have received just over 

$1 million in contract dollars in flood recovery contracts, which 

averages out to about 17,000 per contract. Meanwhile firms in 

Maryland, Virginia, and even Georgia are receiving million-dollar 

awards. 

What is SBA doing to make sure that the directive that we have 

talked about over and over in this Committee becomes reality, especially in a disaster situation, where small businesses in my district are hungry to get back on their feet and could be performing 

much of the duties that are currently being outsourced to firms in 

Maryland, Virginia, and Georgia? 

Ms. CARRANZA. We have taken several proactive steps; one, research the data about the average contract value. I do know that 

both of our PCRs, one who is a supervisor from Illinois, who is 

overseeing the PCR that is very active in Iowa, to ensure that we 

are engaging all other agencies—I call them sister agencies, but 

also the communication is frequent, collaboration, and utilizing the 

infrastructure that we put in place so that all small businesses, 

whether it is in Iowa or the Texas area. And all of them have experienced government contracting representatives. 

Let me put in perspective one of the contracts that was granted. 

They are not all an average of 14 or 17 thousand dollars. I believe 

one of the small businesses was able to experience a $400,000 contract. And so when you take the smaller and you take the larger, 

you average it out, and it may come to that. 

Chairman BRALEY. Can you identify which business in Iowa received that kind— 

Ms. CARRANZA. Yes. I look forward to bringing that information 

to you. In addition to that, Environmental Regulatory Associates— 

Chairman BRALEY. And where are they located? 

Ms. CARRANZA. In Iowa. 

Chairman BRALEY. Where in Iowa? 

Ms. CARRANZA. I wish I had an exact address, but I will get you 

that information. 

Chairman BRALEY. Okay. That is important because Iowa is a 

large state geographically. The primary damage from these events 

occurred in the First and Second Districts of Iowa. So I am interested, and I am sure Congressman Loebsack is interested in knowing the location of that business. 

Ms. CARRANZA. Yes. And we have reports. We track the number 

of calls that are coming in from small businesses. At this point we 

12 

have approximately up to 700 calls that are coming in from small 

businesses. 

Let me digress for a moment, Congressman Braley. We have put 

in an infrastructure so that we can capture as many small businesses that are pursuing contracting, regardless of the disaster 

area. 

We have dedicated personnel at our Buffalo phone center. And 

they are dedicated to informing interested businesses about available contracting. 

If they need additional assistance, they are referred to our headquarters and the leadership—and I am talking about the management in the Government Contracting Office who then accepts that 

call and will dispatch the work out to the PCRs. So we have a very 

focused, fully engaged agency to ensure that small businesses are 

receiving contracting opportunities. 

Secondly, I chair the Procurement Advisory Council. Yesterday I 

spoke to 24 government contracting OSDBU’s and informed them 

of our Buffalo phone center network, and the commitment that we 

have in headquarters. Karen Hontz, who is responsible for the Government Contracting Office, will oversee that dispatch of work. 

Also we are tracking the PCR’s performance. There are definitely 

a lot more performance metrics, a lot more communication and 

interaction with the agencies, and I would welcome the opportunity 

to show you that performance report. 

Chairman BRALEY. Okay. And I have to yield now to my friend 

and Ranking Member for his questions. But for the small businesses in Iowa, we would just like to see those numbers increase 

and improve because they are in desperate need of opportunity. 

Mr. DAVIS. Thank you, Mr. Chairman. And I think they are 

going to be calling votes in a few minutes. So I am going to be fairly brief. 

Based on the SBA’s response to the Midwest floods, are there additional changes that may be needed to improve the disaster response plan? 

Ms. CARRANZA. Could you ask that question again? I am sorry. 

Mr. DAVIS. Yes. Based on the floods,— 

Ms. CARRANZA. Yes. 

Mr. DAVIS. —Midwest, are there additional changes that may be 

needed to your disaster response plan at the SBA or do you think 

it is working well? 

Ms. CARRANZA. Well; it is working well, but I would like to explain why it is working well. Each time we experience a disaster, 

we keep improving the process, but let me tell you about the reform that has occurred in the disaster operation. Not only have we 

been training for the past two years through simulations and engaging the entire agency integrating ODA; that is, the Office of 

Disaster Assistance, to the SBA, we have increased the capacity, either in automation, resources, reservists; personnel, I should say, 

reservists, from ODA and also fully engaging the SBA personnel. 

So you are talking about what used to be 1,000 to 3,000 employees now immediately deploying, and engaging up to 3,000 employees in disaster recovery. 

We we have an electronic application that has immediate interface with the disaster victims. We have increased reservists deVerDate Aug 31 2005 14:25 Oct 27, 2008 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\44253.TXT RUSS
13 

ployed to have a partnership with the FEMA members. So now you 

have joint field offices. 

And we also have a daily review of the disaster areas and their 

operations. So every office has to report back on a daily basis. We 

conduct conference calls at 9:00 am in the morning to address any 

exceptions. 

So I believe we are a fully engaged agency. And if there is room 

for improvement, I would be glad to speak with you on areas that 

you think we may be able to perfect. 

Mr. DAVIS. Those daily reviews that you do at 9:00 a.m., is that 

something new since the hurricanes of 2005? 

Ms. CARRANZA. Yes. We included in our disaster response plan 

that was submitted to Congress the need to assemble what we call 

a disaster assistance information center or council, and we feed in 

all of the activities, results, open issues at that session. 

All of the SBA leadership is all hands on deck mode. And we review either the COOP Plan or the Office of Disaster Assistance Deployment, any of the communications, any of the press releases, 

and anything else that bubbles up. 

We also are very concerned about our own employees, in addition 

to our infrastructure, to make sure that we give them the necessary tools so that they can get back to business and provide the 

services to all of the victims in the communities. 

So it is a double-edged sword. We have to not only think of the 

local community, but we also have to think of the SBA facilities 

that are in 68 particular areas. We have 68 district offices. 

Mr. DAVIS. Thank you. 

We have just gone through another disaster with hurricane Ike. 

As you went through that disaster, did that affect your ability to 

work with the people and businesses in the Midwest? 

Ms. CARRANZA. Absolutely not. We utilize the headquarters personnel in the Office of Disaster Assistance. We are fully integrated 

with our resource partners as well as with FEMA. So our capacity 

has not only expanded through the electronic loan application, resource partners, but definitely the partnerships, the collaboration 

with other agencies. 

So yes, we are very much engaged with the Chambers of Commerce. They are much more accessible to us, and we are accessible 

to them as well. Also, we developed an MOU and the Red Cross. 

So I think we have nonprofit, not-for-profit, and for-profit, and also 

public service. 

Mr. DAVIS. Do you have enough resources to handle two major 

issues, like the floods and the hurricanes, at the same time? 

Ms. CARRANZA. I am glad you asked that question. We have a capacity in our phone center to receive 20,000 calls a day. I mentioned in my testimony that we have an electronic loan capacity of 

5,600 applications per hour (this is a correction from ′′per day′′ 

which was the testimony. We have a ramp-up capability of a couple 

of thousand employees, whether they are reservists, national or 

local. 

And so, to answer your question, we have currently based on the 

reforms and all of our process engineering the capacity to handle 

up to 250,000 applications. That would be at the cusp of a level 2 

and a level 3. So we are watching that daily. 

14 

We thought we were going to hit a level 3 with Ike. And we were 

able to manage it quite adequately. 

Mr. DAVIS. Does SBA have any one individual if people in the 

Midwest and Iowa are having problems, that they could contact for 

assistance? 

Ms. CARRANZA. Yes. As part of the farm bill we had proactively 

identified an individual. You may know him as Admiral Steve 

Smith. He is the Associate Administrator of our Disaster Assistance Recovery Office which we call Chief Executive of the Executive Office of Disaster Strategic Planning and Operations and he is 

responsible for the strategy and planning of our disaster operation. 

So he is accessible and so he looks at not only the deployment of 

daily resources but he is also responsible for the long-term recovery 

after a disaster. 

So Steve Smith and I, as Congressman Braley knows, are accessible. And so is Acting Administrator Baruah. And we have here 

Herb Mitchell, who is the Associate Administrator of the Office of 

Disaster Assistance. And he has testified many times, I understand, before this Committee. 

Mr. DAVIS. I have one last question. Was the SBA able to implement any of the disaster provisions of the farm bill in responding 

to the floods in the Midwest? 

Ms. CARRANZA. Yes. There were approximately 13 provisions, and 

we have implemented all but six or seven of them. They are the 

most complicated provisions and that has to do with the private 

lender loan program. 

We do have a working group that is very much engaged in developing regulations. We are talking to the lending partners to understand and realize either the cost or the capacity of these lending 

institutions that could support us during a catastrophic situation. 

We have not had to employ any of that capacity outside of the SBA. 

I should indicate, one, that we have updated our disaster response plan, and it is an ongoing work. I mentioned Admiral Steve 

Smith, who is now on board and has I think about two months 

under his belt. He probably thinks it is six months under his belt, 

but it is two months under his belt. 

We have regular reports to Congress. We have the noncollateralized loan limits, as I mentioned in my testimony, to 

$14,000 from $10,000. We also have put in the business loan caps 

at $2 million, from $1.5 million, and the other 2 provisions of the 

net earnings clause as well. The nonprofits are now eligible for the 

EIDL. So we made significant progress in that area. 

Chairman BRALEY. At this time I would recognize Congressman 

Loebsack for his questions. 

Mr. LOEBSACK. Thank you, Mr. Chairman. And thank you, 

Madam Deputy Administrator Carranza for coming today. And 

thanks for coming into the district on July 1st with the Commerce 

Secretary Gutierrez. We really did get around Cedar Rapids, I 

think, quite a bit that day and even went out to Palo, if I recall 

correctly, and saw the damage out there at that point. A lot of it 

was still very new. 

And there was a lot of debris, you will recall. A lot of it has been 

cleaned up, but people of Cedar Rapids, Iowa City, all of Iowa that 

15 

has been affected have been doing a pretty tremendous job, I think, 

and cleaning things up. 

I think one of the big fears, though, is that we are doing such 

a good job that we are going to be forgotten by the federal government. Congressman Braley and I and the whole delegation are 

going to make sure that doesn’t happen. And I hear that all of the 

time from folks in Iowa that we have got a great spirit and a cando spirit and all of the rest, but we still need help. That is the important thing to keep in mind throughout. But thank you for coming in when you did and paying so much attention to Iowa and to 

the Cedar Rapids area, in particular. 

I just have, I guess, a number of questions still because I guess 

I am just a little bit confused about what some of the terms mean. 

Obviously processing, SBA has been doing a great job, it sounds 

like, certainly compared to what happened during Katrina but then 

the issues of closing and disbursement. I think I understand what 

closing is. I am still not clear about disbursement and exactly who 

has the onus there. 

Can you explain that a little bit more because I think Congressman Braley was trying to get at that sort of, you know, where the 

responsibility lay in terms of disbursement? 

Ms. CARRANZA. Let me explain the mapping of the application because I visited the Dallas-Fort Worth processing center and personally saw 45,000 applications ready to go out to the post office; some 

of them came in electronically. 

The document goes out to the applicant. The applicant then completes the document and then submits it for consideration. If it is 

approved, then we assign a case manager to the applicant, which 

is part of our reform agenda, which has become much more customer-centric with a very timely turnaround. 

So, if you submit your application on Monday, within a week’s 

time, we would be able to not only follow up with a phone call on 

your application but also assign a case manager to that borrower 

if they require assistance. They would then work through the process of that application being approved. 

Once it is approved, the money is held until the applicant is 

ready to access the funds. So based on the applicant’s rebuilding 

schedule, their capacity to withdraw the monies; we are there, in 

other words, within 48 hours, so those funds can be disbursed to 

the applicant. So it has nothing to do with the fact that there is 

a delayed reaction on our part. 

Mr. LOEBSACK. Right. Well, you mentioned allocating prematurely. What does that mean exactly, allocating these funds prematurely, these loans? 

Ms. CARRANZA. For instance, if you applied and were approved 

for $200,000 and I sent you $100,000, you would immediately start 

paying back that loan and would accrue interest. 

Yet, you don’t have your permits. You don’t have the contractors. 

And so we don’t want to over-leverage an individual if it is not necessary. So we hold on to the funds until they are ready to— 

Mr. LOEBSACK. And the criteria that you use to determine whether they are ready or not? 

16 

Ms. CARRANZA. Yes. They would have to present a schedule of 

work and contractors so that there is some validation for the need 

of funds. 

Mr. LOEBSACK. Is it fair to say that might be part of why a relatively small percentage of all SBA loans that have been approved 

have been disbursed in Iowa? Is that part of the explanation? 

Ms. CARRANZA. Congressman, I wouldn’t take that position because we do have representatives that could help them in the process if they’re experiencing any delays. 

We have put in some expediting processing for permits. Herb can 

help me out with the one processing that used to be very problematic for us: title search. So we have tried to anticipate the type of 

delays that these borrowers would experience and try to remedy 

the situation for them. 

Mr. LOEBSACK. Right. Okay. And also Congressman Braley mentioned I guess what we thought was an arbitrary decision made by 

OMB and perhaps SBA to increase the number of high-interest disaster loans to 30 percent. Did I hear you correctly? Is that something that is in the statute? Is that correct? 

Ms. CARRANZA. Could you repeat that question again? I’m sorry. 

Mr. LOEBSACK. And I may have incorrect numbers, but there appears to have been an arbitrary decision made at some point by 

OMB and possibly SBA to increase the number of high-interest disaster loans to 30 percent compared to the 2 percent of these loans 

that were approved during hurricane Katrina. Did we have those 

numbers incorrect? Is that what you were saying earlier? 

Ms. CARRANZA. I am not familiar with the numbers, Congressman Loebsack, and so I mentioned to Congressman Braley that I 

would get back to them on that. 

There is not a goal or a target that we hit. We look at a test. 

There are a couple of variables that are considered when we go 

through that test. Our October 2007 criteria or test that just recently occurred was as a result of some compelling concerns that 

the IG had. So to be responsive to their particular concerns, we— 

Mr. LOEBSACK. Would more high-interest loans likely be issued? 

Ms. CARRANZA. Excuse me? 

Mr. LOEBSACK. Would more high-interest loans likely be issued, 

then, using those criteria? 

Ms. CARRANZA. Well, again, we revisit the test. It is a process 

that has been ongoing. Interest rates are reviewed on a quarterly 

basis to make sure that they are reasonable and are at the market 

or industry rate. 

Mr. LOEBSACK. I want to go to the low-interest loans. And this 

will be my final question. What criteria are used for applicants to 

qualify for the lower-interest loans? 

Ms. CARRANZA. Their inability to access funds from commercial 

or other means. We have probably the best loan terms because we 

have longer loan terms. In other words, they have up to 30 years 

to pay a loan. Also, the need for collateral isn’t as aggressive as 

some commercial loans. 

So I believe that we take a lot of factors into consideration when 

we establish what we consider a statutory level of credit. 

Mr. LOEBSACK. Mr. Chairman, I do have one more question—I’m 

sorry—to follow up on that. I did a week’s worth of flood assistance 

17 

meetings in early August, when we went back for the district work 

period. 

I had a number of folks who have small businesses, you know, 

beauty salon, you know, hair cutting, a number of things. A number of these business owners were operating out of their homes, 

that sort of thing. I mean, they are small business people. 

Ms. CARRANZA. Yes. 

Mr. LOEBSACK. And they could not qualify because of credit or 

whatever the reason may be. They couldn’t get an SBA loan. What 

do I tell someone who can’t get a loan and, you know, they have 

been doing fine but, for whatever reason, they can’t get a loan and 

they can’t get a loan necessarily at their bank either? What do I 

tell them when they come to me and they want assistance? 

Ms. CARRANZA. Congressman Loebsack, when we defer some of 

the applicants, we defer them for a FEMA grant. So between SBA 

and FEMA, there is financial assistance. I would be pleased to consider those particular cases that you have, look into them and perhaps there is something that we need to further look into, and assist them. 

Mr. LOEBSACK. Because there are a lot of people falling between 

the cracks, you know. And that is what I think we hear a lot, you 

know, in our jobs with these folks. 

Thank you for your service. Thanks for all you are doing. I really 

appreciate that. And I will give the balance of my time. 

Ms. CARRANZA. Thank you very much, Congressman Loebsack. 

Mr. LOEBSACK. Thank you. 

Chairman BRALEY. And, with that, we have concluded our first 

panel. I would like to thank you, Deputy Administrator Carranza, 

for taking time from your busy schedule to join us and hope that 

we can have an ongoing conversation about some of the concerns 

that were raised today. 

Ms. CARRANZA. Yes. I look forward to supplying you with all of 

the reports that we have committed to. Thank you very much. 

Chairman BRALEY. Thank you. 

And then we will call the second panel up. We do have votes that 

are pending, but we are going to try to keep going and get as much 

in as we can before we adjourn for votes. So if the second panel 

could please come up? 

Ms. CARRANZA. Congressman Braley, I would love to stay because I had plans to do that, but our congressional legislative representative is going to be here as well as our Director of Disaster 

Office so that they can participate. I have a flight out to Sacramento, where we do have a processing center. 

Chairman BRALEY. Thank you. 

Ms. CARRANZA. Thank you. 

Chairman BRALEY. Thank you all for joining us. I would like to 

remind you of the earlier statement I made about the five-minute 

rule. When you see the red light come on, if you can wrap up your 

presentation, we will make sure that your entire written statement 

is included in the record. 

I would like to begin by introducing our first panelist, someone 

I have known for some time. Mike Tully is President and CEO of 

Aerial Services, Inc. in Cedar Falls, Iowa. And we have on the 

18 

board behind us a shot that shows some of the devastation near 

Cedar Falls Utility, which is also in Cedar Falls. 

Mike’s company has been based in the heartland for 40 years 

and provides aerial photography, mapping, and other geographic 

information services. And, Mike, I know you are also located out 

in that North Sea area, where my brother lives. And so we are glad 

to have you here and look forward to your statement. 

PANEL II WITNESSES: MIKE TULLY, DAVID WILKE, DON 

BOWERS, MIKE MONNAHAN AND RANDY PILKINGTON 

STATEMENT OF MIKE TULLY, PRESIDENT AND CEO, AERIAL 

SERVICES, INC, CEDAR FALLS, IOWA 

Mr. TULLY. Thank you, Chairman Braley, Ranking Member 

Davis, and Subcommittee members, for inviting me to testify. My 

name is Mike Tully. And I am the President and CEO of Aerial 

Services, located in Cedar Falls, Iowa. It is indeed an honor to be 

here to contribute to the Small Business Administration’s activities 

in disaster assistance. 

Aerial Services is a professional services company that employs 

about 40 people and acquires aerial photography throughout this 

country and creates maps and other geospatial data. We provide 

mapping and other professional services for government and private businesses. 

Our business was severely impacted by the Midwest floods that 

occurred in June. In early June, the Cedar River crested and destroyed our office buildings. And they were, in fact, declared a total 

loss by our insurance company. 

Over the course of the following six weeks, we were able to restore some order of normalcy to the business in newly leased office 

space and are currently deciding how to replace our offices. 

Within one week following the disaster, we applied with the SBA 

for a loan covering physical damages and economic injury, totaling 

approximately $2.7 million. 

Less than two weeks later, the SBA called to inform us that they 

had processed our application and approved a loan for physical 

damage but had denied any award for economic injury. The net 

award totaled approximately $214,000 at 4 percent interest, to be 

repaid at a rate of $6,700 per month, or in about 33 months. 

No documentation was provided at that time to describe how the 

SBA calculated this amount. This seemed unreasonable and confounding considering our losses. 

In mid July, we filed an appeal because our claims of economic 

injury had been denied. We then filed a second appeal contesting 

the physical damage loan amount because we felt that the valuation was unacceptably low. 

Then, surprisingly, in late August, we were informed that a new 

loan amount had been approved for approximately $475,000, with 

much more favorable terms, 20 years at 4 percent interest. The 

loan included approximately $418,000 for physical damage but only 

$57,000 for economic injury. But, as with the first award, supporting documentation showing how these values were derived 

from our losses totaling in the millions of dollars was not included. 

19 

Equally puzzling was the larger size of this loan compared to the 

first. Was the first award a mistake? Was the second, larger award 

influenced by our appeals to state and federal representatives? 

Why only $57,000 for economic injury when we documented far 

more? 

Then as recently as last Wednesday, we learned quite by accident that because Aerial Services has been displaced, we may be 

eligible for a substantially different and more favorable loan. Although this sounds promising, we are disappointed that this apparently important detail was not discovered earlier, thereby avoiding 

what will be more delay. 

My recommendations for the SBA include the following. Number 

one, include with all notices of loan amounts the supporting documentation showing how damage assessments were derived. This 

will help minimize many questions and delays. 

Second, allow the business, especially in disaster scenarios, the 

freedom to use the funds with fewer restrictions. Our SBA loan includes several requirements that the money be spent only in defined ways. Our biggest need is a new building. Restrictions on how 

the proceeds are spent can be burdensome and counterproductive 

to getting the business back up and thriving. 

Third, when economic injury is assessed, financial measures of 

injury other than disruptions to cash flow should be considered. It 

is our understanding that economic injury determinations are 

based only on disruptions of cash flow. But because our revenues 

are mostly derived from long-term projects, our injury shows up as 

lost or delayed billings that may not be evident for weeks or 

months following the disaster. 

Fourth, change the disaster loan application form so pertinent 

details about the business, like displacement, and anticipated 

losses can be flagged early on. 

Last, improve the responsiveness to small business concerns by 

facilitating a rapid transfer of important business documents and 

applications using modern methods, like e-mail and overnight mail. 

And, as the Deputy Administrator said, they now have a digital filing application system, which is good. 

This concludes my recommendations for the SBA. We are thankful that the SBA and FEMA were in Iowa. We were pleasantly surprised and, quite frankly, impressed that the SBA presented to us 

loan documents within two weeks. Considering the sheer number 

of other businesses that were impacted by this disaster, that was 

impressive. 

Although we hope to achieve a more favorable consideration from 

the SBA with continued communication and clarification, we are 

grateful for the assistance we have received and are hopeful that 

these recommendations will contribute to even better government 

and smarter business after the next disaster. 

Thank you, Mr. Chair. This concludes my remarks. I am open to 

questions at a later time. 

[The prepared statement of Mike Tully is included in the appendix at page 55.] 

Chairman BRALEY. Thank you, Mr. Tully. 

20 

Our next witness is David Wilke. He is the owner of Wilke’s Grocery Store in Elkader, Iowa. His store has been in business since 

1867 and currently provides income for his family and 20 employees that work for him. 

And, Mr. Wilke, the last time we spoke, we were standing in 

your grocery store. This is a photo of Elkader at the height of the 

flooding. And, if I am remembering this correctly, this is where 

your store is located, right across from the fire station and across 

from the bank. 

And, to put this in perspective, Elkader is the little Cedar Rapids 

in Iowa because they had almost the identical flood stage, almost 

the identical flood crest forecast, and both had epic flooding beyond 

their 500-year floodplain, 31 feet in Elkader, 32 feet in Cedar Rapids. And you can see the Turkey River and the devastation it 

caused the entire downtown. 

So we really appreciate your ability to come with you. I know I 

have talked about your business many times and the impact that 

losing a grocery store, losing a convenience store, losing a bank has 

on a community the size of Elkader. And we look forward to your 

comments. 

STATEMENT OF DAVID WILKE, OWNER, WILKE’S GROCERY 

STORE, ELKANDER, IOWA 

Mr. WILKE. Thank you for the opportunity to be able to speak to 

you today. I do want you to look at that picture. Look at the top. 

Do you see the bypass go by right there? That is a lot of Elkader’s 

problem right there is they built this bypass around town, and they 

didn’t put enough spots for the water to get out. 

And it actually gets worse. If the picture had wrapped around to 

the right further, the bypass goes around down to the right. And 

it is actually worse further down to the right. So one of the first 

things that we really need is to open up that water, you know, just 

open it up more, put more culverts through or bridges through or 

whatever we need to, so when this type of thing happens again, it 

doesn’t waste the whole town because of a bypass. 

When this had happened, there was a flood wall right alongside. 

If you look at that little building—well, actually, it is this building 

right here. If you recognize that one, it sits in front of our grocery 

store. There was a flood wall that went from there up to the left 

off the screen. And because of this, that has been seriously damaged. So that is going to need repair. 

And I was told by people from the fire department that this 

building is actually leaning toward the river and it is going to have 

to be replaced. And, like you had mentioned, we do have a grocery 

store in town. And we had followed the river levels. What is this 

river level going to end up being? We were told it was going to be 

23-5. You know, we said that about three days in a row as a geological survey had said, ‘‘Give us those numbers.’’ And it is from 

their Web site. And it went to 30.9. Well, our business from where 

you just pointed, that is not even in the floodplain, but we ended 

up having substantial damage from it. 

So the next morning was Tuesday. We had to quickly assess the 

damage, which was difficult because everything was still four feet 

21 

under water, as a family make a determination on our course of action. 

I appreciate you saying the length of time it takes for these 

loans, but we had to decide within hours, you know, are we going 

to walk away from this thing or are we going to make the commitment and the financial commitment and the personnel commitment 

that we are going to try and go back into this. 

The business, like you said, had been in our family since 1867. 

Just 2 years after Abraham Lincoln’s presidency, we started selling 

groceries. We are the only supermarket within 15 miles. Our store 

is the only source of income for over 20 people. It was our family’s 

only income. For these reasons, we decided to open the doors and 

ask people to come in and help. 

What we did that first night was we basically went in with shovels, and we started shoveling out the water away from the front 

door because we knew that the next morning people were going to 

come in to try and help us and they weren’t going to be able to do 

anything if we still had a bunch of water in. So we basically just 

went shovel after shovel, made a train of these shovels, trying to 

get the water basically out and filling the dumpster that we had 

out at the time. 

While the water was still up, I think we have got a picture here. 

This picture, this is our parking lot. Okay? When we came down 

the next morning, the water had already dropped about two feet by 

this time. And we had decided we were going to go back home. And 

I started making phone calls for people to come in and help. 

You know, we were going to have—we called the refrigeration 

people and electricians and all kinds of people to make sure we 

were on their list, the local lumber yard and stuff, to make sure 

that, you know, if we were going to do this, then we were going 

to have to do it really fast because we had to do it before we would 

get any mold in the building or any mildew or any flood damage 

and problems and stuff because we are in there trying to sell something that has to be sold out of a sanitary environment. 

So we didn’t have the luxury of sitting around for days and days 

waiting to see if we were going to get a loan or do something. We 

had to decide right now what we were going to do. 

We knew that this financial commitment would be way beyond 

our resources but at the time believed FEMA or another agency 

had a problem that would help. During the time of our cleanup, I 

attended three meetings that explained the procedures for obtaining assistance. They were open to all flood victims but oriented 

only to residential needs. 

When a FEMA representative came to the store, he had his 

hand-held computer with him and started asking me questions. 

They were residential in nature. When I explained to him that it 

was our business that was damaged, not our home, he said ‘‘Sorry. 

My computer is set for housing questions.’’ And he left. And then 

a little later, I got a rejection letter from them saying I didn’t have 

enough damage to qualify. 

I went to a fourth meeting where FEMA had set up stations 

where flood victims could fill out forms. At the SBA station, I asked 

the representative, ‘‘At these meetings I have attended, they keep 

22 

referring to a four percent or an eight percent loan. How do I know 

which interest rate I will be getting?’’ 

His response was-‘‘Would you qualify for a bank loan?’’ 

I said ‘‘Yes.’’ 

‘‘Then you get the 8 percent loan.’’ 

With that, I stopped filling out the forms. That was the ultimate 

insult to me. I had been a responsible citizen, taking care of the 

needs of our employees and our family, always paying our bills and 

taxes on time. Because of that positive ethic, I am given an interest 

rate double that of someone who is not fiscally responsible, a rate 

that is higher than any of the local banks charged at the time. 

Before I had gone to that meeting, I had asked the bankers in 

town about it. And I could get a loan in the six range. So then I 

get this, you know, assistance at eight percent. I thought it was an 

insult. 

I have been asked many times by customers and vendors what 

assistance FEMA has given us, assuming we would have a package 

similar to the private residences. They were mostly shocked and 

some appalled that we are left out of the assistance. 

I was not personally expecting the government to cover all of our 

family’s losses, but I was expecting to be treated equally compared 

to the residential assistance offered. I also was expecting an interest rate and a period of time to pay that would soften the blow of 

our huge loss. 

Perhaps our loss will not end with the flood of ’08. Although we 

reopened the store on a smaller scale just ten days after the flood 

receded, much to the credit of our community and volunteers— 

[The prepared statement of David Wilke is included in the appendix at page 59.] 

Chairman BRALEY. Mr. Wilke, I am going to have to interrupt 

you. 

Mr. WILKE. Sure. 

Chairman BRALEY. Your entire statement will be part of the 

record and will be considered by the Subcommittee. 

Mr. WILKE. Okay. 

Chairman BRALEY. Thank you for your testimony. 

Our next witness is also a constituent of mine, Mr. Don Bowers, 

the owner and operator of Tapken’s Convenience Plus in Anamosa. 

Anamosa sits along the Wapsipinicon River, one of the nine 

major inland rivers that had epic flooding in Iowa, in addition to 

the Mississippi, which is also in my district. 

Tapken’s is a gasoline service station and groceries retailer and 

has been in operation since 2005. Prior to starting his company, 

Mr. Bower served as Chief Executive Officer of Go America in 

Cedar Rapids, Iowa. 

And, Mr. Bowers, the last time I was in Anamosa at the peak 

of the flooding along the Wapsi, I was in a boat riding over the 

wastewater treatment facility, which is located within eye distance 

of where your store is located. So we are very glad you took time 

from your busy schedule to come and share your story with us. 

23 

STATEMENT OF DON BOWERS, OWNER, TAPKEN’S 

CONVENIENCE STORE, ANAMOSA, IOWA 

Mr. BOWERS. Thank you, Congressman Braley and Committee 

members. I would like to thank you for the privilege of telling our 

story, which demonstrates to small towns in Iowa that Congress 

does care and voices can be heard. 

I was asked to explain basically what happened and what our response was, what the SBA or Congress can do to help. The flooding 

began in Anamosa, which is about 20 miles northeast of Cedar 

Rapids on Thursday, June 12th. And it became apparent fairly 

quickly that the rains weren’t going to let up, the levies weren’t 

going to be high enough. 

So there were about 100 volunteers assembled that day, raised 

the levy across the street from our store, added sandbags alongside 

our store, sandbag along the street that leaves the town, and also 

sandbagged the sewage treatment plant area. 

We left that night thinking our business had been secured. And 

we slept pretty well. And we were surprised at what we saw in the 

morning. 

The night brought more rain on already saturated land and overflowing riverbanks. A five-inch rain fell that night, which softened 

the levies that were raised. 

By the morning of Friday, the 13th, there was two and a half feet 

of water surrounding our store. The Wapsi riverbank basically destroyed the city sewage treatment plant. 

Over the next couple of days, my wife and I watched from about 

a half a block away. We could see the water recede from our store. 

And as we observed the damage the first day we got in the store, 

it was pretty shocking. Basically it would be like if you threw everything in a blender and it just got stirred up and the blender was 

shut off and everything and just dropped where it fell amidst all 

the mud and the muck. 

On Monday, four days after the flood, we were in the store with 

squeegees, much as you mentioned, just pushing everything out of 

the store we could get out, an inch or two of muddy water. It was 

key to get in there while you still had some water to work with, 

enabling it to be moved out easier. 

We moved things around because we made calls that day. We 

had big dumpsters coming. We needed to be able to get into the 

store. So we kind of just moved things out of the road so we could 

maneuver. 

On Tuesday, day 5, we had over 40 volunteers as we began to throw away over $60,000 worth of our store’s inventory, which is 

basically everything in the store. 

We moved refrigeration equipment outside and disassembled all 

of the shelving, moved it out as well, and began power washing the 

floors, knocking holes in the walls so we could get air circulating. 

That is critical in preventing additional mold from developing. 

The following morning we had electricity returned to the store 

with just the ceiling lights being able to be turned on so we could 

see what we were doing. 

The next few days we began cutting the walls to a height of four 

feet, removing all of the insulation and drywall, scrubbing and 

bleaching the studs. When you say, ‘‘scrubbing walls,’’ it is not just 

24 

scrubbing walls. It is scrubbing the studs with brushes and 

sponges. 

We took all of the refrigeration equipment outside and hosed it 

with clear water while it was still wet with mud. If you let that 

dry on there, it is just no good. 

We did find later that by moving the refrigeration equipment, 

washing it down with clear water, a few days later after it airdried, we would start it up. And most of the equipment worked. 

Since then we have had to replace a couple of timers on the defrosters. That is about it. Once we found it worked, then we would 

clean and sanitize it. 

Skipping to the end, after a long six weeks of grueling off of 

back-breaking work, my wife and I would go home too tired to do 

anything but shower and fall into bed. 

I do believe what happened here could be replicated almost anywhere. We had a lot of volunteers, but every community, every 

business has people around them that come alongside them and 

can help. The key is to get in quickly. I believe it can help. 

We basically are back in full operation. I have an original mortgage. The second mortgage if we get that through the SBA is difficult. What needs to happen in our case is the merging of the two 

mortgages together. That is really kind of critical in our future success. 

The business is up and running. We are running about 20 percent over what we did a year ago. Now we have got to figure out 

how to pay for it all. 

To simply restate, we went through a natural disaster, came out 

stronger. We are rebuilt without governmental help. We now need 

financial help on the back side. We saved money in this process 

and are even closer to the community we serve. We are not seeking 

a handout or a bailout, just a lower interest rate to help a good 

business remain strong. 

Thank you. 

Chairman BRALEY. Thank you, Mr. Bowers. 

Unfortunately, one of the realities of our life here in Washington 

is that there are things that happen beyond our control. One of 

those things is occurring right now. We have votes on the floor. It 

is a series of three votes. The first vote is a 15-minute vote. And 

we are probably about five minutes from that time expiring. There 

will be two five-minute votes after that. 

So we are going to adjourn the hearing. And we will make every 

effort to return as quickly as votes end so that we can finish up 

with the testimony of our last two witnesses and then proceed to 

questions. 

So I appreciate your continued indulgence. And, with that, we 

are adjourned. 

[Brief recess.] 

Chairman BRALEY. Ladies and gentlemen, I think we are going 

to resume the hearing. Mr. Loebsack is on his way back and will 

be introducing our next witness, but, Mr. Bowers, because of some 

confusion about our bizarre bell system here, I know you intentionally cut some of your testimony short. So what I would like to 

do is give you another two minutes to finish up your statement because we are all very interested in what you have to say. 

25 

Mr. BOWERS. Thank you very much. 

By the end of the second week, the store was a shell. The walls 

and studs had been scrubbed, bleached, and sealed with a spray 

sealant and ready for the next step. All this work had been done 

with volunteers in 14-hour days. Those of you who have my statement, you will see pictures in there that kind of show a lot of this. 

I can’t overstate the importance of the caring community. Our 

first estimate to do the work was almost a quarter of a million dollars if we hired it all out, not counting the inventory already lost. 

I knew the business simply couldn’t support that. 

It was at this point after the cleanup that the volunteer work 

began to diminish and the need for expert workmen increased. My 

customer base included a plumber, an electrician, furnace man, 

drywall installers, and contractors. 

And as they came forward and donated their time, either free or 

very low-cost, it is when I began to understand what the word 

‘‘community’’ truly meant. We had 4 other men in the community, 

ranging in ages from my age up to 83 years old, that came in virtually every day. We nicknamed them the Fantastic Four. Three of 

them were retired, and one was a gentleman who took most of his 

vacation time, about three weeks’ worth, to work there every day. 

Others in the community would stop by and offer words of encouragement that lifted our spirits. It is amazing how little it takes 

to make you feel like it does matter. An elderly lady donated $10 

to us. We used to pump her gas when we were open. The man who 

mowed our lawn gave us $100. We used that money to buy food for 

the volunteers as they were there working. 

As I mentioned earlier, it was a long six weeks, often grueling 

and back-breaking work. My wife and I would fall into bed at night 

after getting home. Exactly six weeks after the floor, we reopened. 

And, as also mentioned, we were back to normal at that point. And 

now we are running almost 20 percent ahead of last year. 

The people are incredible. I am proud to be a part of that community. But I do believe this can be replicated almost anywhere. 

Getting into the store quickly is critical or even in your home. It 

is critical to prevent mold, which prevents the need of respirators 

and air purifiers, which slow the progress. 

Another key to it all, getting there quickly, is you get in there 

while people are still thinking about you. And it brings hope and 

enthusiasm. And it increases more volunteerism. If you sit for a 

month before you do anything, all of that disappears. 

Living in the City of Cedar Rapids and having a mother-in-law 

and a niece who both lost their homes there, I believe the difference is the speed with which we responded. Weeks after the 

floods, many of them haven’t done anything at all except being told 

they have to make sure they keep their lawns mowed and get 

ready to remove the snow from their sidewalks this winter when 

they have no house. 

Part of the confusion is just that different things are being told 

from the different governmental entities, which causes despair and 

depression. I do think one agency needs to be able to speak for all 

of them, I mean, the need to get a consistent answer. 

As an example, the City of Anamosa caught the cross-hairs of the 

DNR and the SBA and what financially can be done with the sewVerDate Aug 31 2005 14:25 Oct 27, 2008 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\44253.TXT RUSS
26 

age treatment plant. They have gone forward with what they needed to do to get the sewage treatment plant back up, and now they 

are getting different information from the two entities. And they 

are afraid they are going to have to pass on the cost of all of this 

to the residents of the city. 

There are real-world limitations to what a city the size of 

Anamosa and its residents can afford. And somewhere along the 

lines, common sense needs to prevail. 

As I mentioned before, as for us, we are back in business, running 20 percent ahead of last year. We are strong and doing well. 

We are not seeking a handout or a bailout, but in our particular 

case, it is critical that we be able to find a way to merge the original mortgage with the mortgage to improve or rebuild into one. It 

is difficult to handle the two separate mortgages. 

I guess that is the end of my statement. Thank you very much. 

[The prepared statement of Don Bowers is included in the appendix at page 63.] 

Chairman BRALEY. Thank you. 

And before we go to our next witness, who will be introduced by 

his congressman, I just want to point out all of the folks from Iowa 

who are here today that I am extremely proud of the fact that this 

Committee would not function without the valuable daily assistance we get from our staff counsel. And the Small Business Committee is very fortunate that both the minority staff counsel, Mr. 

Pineles, and the majority staff counsel for the Democratic Party are 

both graduates of the University of Iowa College of Law, like myself. And we are very proud of that on the Committee. 

So, with that, I will yield to Congressman Loebsack to introduce 

the next witness. 

Mr. LOEBSACK. Thank you, Mr. Chairman. 

I am, in fact, very proud today to introduce Mike Monnahan. He 

is the President of the Blue Strawberry Coffee Company. Since the 

Blue Strawberry opened in 2003, it really has been a fixture in 

downtown Cedar Rapids. In fact, I spend a heck of a lot of time 

there myself, as Mike knows. 

It is a great place in the heart of downtown. It is great. Not only 

do they have wonderful paninis and other great food, but it is a 

really wonderful place to have informal meetings. And it is a great 

place to go at lunch just to see people and talk to people. It is an 

institution. 

Mike built the Blue Strawberry from the ground up. And in this 

sense, he is the quintessential small business owner. He put untold 

amounts of time and dedication of the business, even opening a location in the Cedar Rapids Airport. 

And one day when I was heading back to Washington, I stopped 

over at that particular location to get Mike’s cell phone number in 

the midst of all of this so that I could give them a call. And his 

employee probably wasn’t supposed to give me his cell phone number, but she did. And so I was able to check on Mike and see how 

he was doing and how the business was after the floods. 

Unfortunately, his downtown location was and is in the very 

heart of the Cedar Rapids business district, which was inundated 

by the floods this past June. I don’t have any photos of the downVerDate Aug 31 2005 14:25 Oct 27, 2008 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\44253.TXT RUSS
27 

town, but if you were even a casual observer at that time, Cedar 

Rapids was on CNN, MSNBC, FOX, all of those networks all of the 

time. So I am sure you have a lot of those images just sort of 

seared into your memory. 

The downtown area is still largely in the cleanup and assessment 

process, but I know that with small business owners such as Mike 

at the helm, Cedar Rapids downtown can and, in fact, will rebuild 

and thrive once again if given the proper resources and support. 

So, Mike, it really is an honor to have you before us today. And 

I really look forward to hearing from you. 

STATEMENT OF MIKE MONNAHAN, PRESIDENT, THE BLUE 

STRAWBERRY COFFEE COMPANY, CEDAR RAPIDS, IOWA 

Mr. MONNAHAN. Thank you. 

The Blue Strawberry Coffee Company was established in 2003 as 

what has been referred to as a ground-breaking establishment preceding the revitalization of downtown Cedar Rapids. Over the last 

five years, it has become an icon in the downtown district and a 

must-stop for visiting politicians, performers, and tourists alike. 

The local business community has embraced it and voted it the 

Corridor’s best coffee house for business meetings. As a result of 

the Blue Strawberry’s success, other establishments have ventured 

into the downtown district. 

On June 11th, 2008, the City of Cedar Rapids was devastated by 

an unprecedented flood, magnanimous in scope. I was cynical at 

first, assuming that the water would crest far short of 118 2nd 

Street and believed I would be back in business brewing coffee and 

making lattes within a few days. After all, we were not in the socalled 500-year floodplain. 

I soon realized that the situation was going to be much more serious than I had imagined. Now, more than three months later, we 

are still out of business and awaiting the renovation of the building 

we used to occupy. 

When I fully realized the extent of the damage and the amount 

of time and money it would take to rebuild, I began to weigh the 

options. Bankruptcy was an obvious choice. However, I ruled that 

out rather quickly given the fact that the Blue Strawberry had 

been a vital part of the downtown community and its presence was 

an important part of the rebuilding process. The business had been 

profitable, and I was not willing to throw five years of hard work 

down the drain. 

Consequently, I made the decision to look seriously at rebuilding 

the Blue Strawberry. In doing so, I had to look long and hard at 

the financial position of the company. 

Not only had I lost nearly all of the equipment, inventory, furniture and fixtures, and improvements associated with the flooded 

location, I also lost all the equipment and furniture from another 

recently closed shop that had been stored at the downtown site. I 

was now faced with two outstanding bank loans, no collateral, and 

no means to make payments on those loans. In addition, there were 

other outstanding payables to vendors. 

Because of this significant existing debt, I was reluctant to even 

attempt to borrow additional money. I was encouraged by my banker and others to at least apply for an SBA loan amid rumors of posVerDate Aug 31 2005 14:25 Oct 27, 2008 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\44253.TXT RUSS
28 

sible grants and/or forgivable loans for those who participated. 

With this in mind, I submitted my paperwork. 

The individual assigned to verify and asses the damage was in 

contact with me immediately and made his on-site visit shortly 

thereafter. I received word approximately two weeks later that my 

loan was denied. 

After a brief discussion, the loan officer re-evaluated the application and approved a loan for around $107,000 at 4 percent over a 

period of 19 years. This amount was about $50,000 less than what 

I had requested based on the damage assessor’s conclusions. 

Unfortunately, when the paperwork arrived, there was an error 

in the listing of officers of the company. I had noted the change on 

an addendum filed with the application, but it had been overlooked. As a result, the paperwork had to be resubmitted. 

I received my final loan package about two weeks ago. The 

amount of the loan was reduced to $102,000 because of a $20,000 

grant and forgivable loan I had received from the city’s recovery 

fund. 

Throughout the process, the individuals at the SBA that I dealt 

with at all levels were helpful and seemed eager to make things 

happen as quickly as possible. That is not the case with many 

other applicants that I have talked to. 

Some are still awaiting word on loans submitted in July. Others 

are puzzled as to why they have been turned down. And many who 

have been approved can’t understand why the SBA interest rates 

are higher than those available at local banks. 

The frustration level is high. I hear again and again that we 

don’t need more debt, we need grants and forgivable loans. People 

are upset with the lack of attention the disaster is receiving from 

the government. 

The situation is serious. As one businessman put it, ‘‘Just as a 

beach is many grains of sand, a local economy is many small businesses. Wash away the sand, and there is no beach.’’ I think the 

analogy is clear. 

Thank you. 

[The prepared statement of Mike Monnahan is included in the 

appendix at page 73.] 

Chairman BRALEY. Thank you, Mr. Monnahan. 

Our next witness is someone I first met on a junior high basketball court in North English, Iowa in 1970. He has done a great job 

as the Executive Director of Business and Community Services at 

the University of Northern Iowa. 

It is my pleasure to welcome Randy Pilkington to the Committee. 

His office has provided integrated approaches to meeting the needs 

of businesses, entrepreneurs, and communities throughout the 

State of Iowa in his special capacity assisting small businesses all 

over the state through the University of Northern Iowa. 

Welcome, Randy. 

29 

STATEMENT OF RANDY PILKINGTON, EXECUTIVE DIRECTOR, 

BUSINESS AND COMMUNITY SERVICES, THE UNIVERSITY OF 

NORTHERN IOWA 

Mr. PILKINGTON. Thank you, Chairman Braley and Ranking 

Member Davis, for inviting me here today to talk to you about 

some of the disaster recovery. 

My role at the University of Northern Iowa is in business and 

community services. That is an umbrella group for all of our economic development, small business assistance, and tech transfer 

programs. 

After the floods and the tornado in Parkersburg, we immediately 

started to work with some of our business and community services 

programs, dedicating literally hundreds, if not thousands, of hours 

over the summer, over the last four months. 

Through on-site meetings with businesses, through on-on-one 

counseling, and through at least 1,000 phone calls, we estimate 

that 1,200 small businesses were impacted just in our part of 

northeast Iowa. And that is just in the First District. Really, it’s 

one county around Blackhawk, so 1,200 small businesses that were 

impacted during that time. 

The focus of my presentation really relates to those companies, 

even though I think by the presentations today it is reflective of 

what happened throughout all of eastern Iowa. 

In the short-term recovery process, there were critical financial 

needs right away within the first 30 days after the floods receded. 

There were mortgage payments that were still due or at least payments that were still due. There was payroll to meet. There were 

utility bills that were still due for our small businesses. And I 

think you captured that. 

Some of the smallest companies probably suffered the most. And 

they had layoffs. They had delinquencies in their payments to their 

commercial loans. 

And keep in mind many of these individuals also suffered personally. They had floods or lost their home in a tornado. So the business people not only lost their businesses, but they were dealing 

with these disasters in their personal life as well. 

Longer-term, the reopening of many of those businesses is still 

in limbo. Unfortunately, many of our small businesses, especially 

those smallest businesses, are waiting for some type of word from 

the state or from Congress on what help can come because the help 

that has been offered so far is unacceptable to them and won’t put 

them back into business. 

Those businesses that went back into business right away had 

the wherewithal to do so because they had cash flow or they were 

larger or had assets. So they put together an alternative plan 

quickly, as Mr. Tully did, to find an alternative location to quickly 

get back into processing or get back into business of whatever their 

business might be. But, really, there were very few companies that 

did that. The smaller firms, those with fewer than ten employees, 

we estimate that 50 percent are still not back in business in our 

area alone. 

So what worked well? Well, first of all, there was very good coordination and communication between federal, state, and local 

leadership—that worked very well—good communication between 

30 

the SBA, our Small Business Development Centers, and our local 

economic developers. So that communication line was open and frequently happened. 

At the risk of sounding like I am tooting our own horn, we had 

a program that worked very well at the University of Northern 

Iowa called MyEntreNet. MyEntreNet is an entrepreneurship delivery system that puts entrepreneurs in touch with the information they need, the capital they need, and the resources they need 

in a quick basis. 

We touched about 700 out of those 1,200 businesses within the 

first 30 days after the disaster, learning more about what their 

needs were. Because of MyEntreNet, we were able to deal with 

these entrepreneurs faster and to find out what services and products really were working and what improvements were needed. 

We had a very good working experience with the SBA staff. The 

SBA staff were on the ground after the tornado and after the floods 

almost immediately working with businesses. Unfortunately, the 

products they had to offer were not what the businesses wanted. 

They found themselves standing in front of angry crowds of businesses, offering a debt tool, a debt structure, a loan, when, in fact, 

what these companies needed was something completely different. 

Therefore, it was quite the struggle. 

And I know my focus is to be on SBA, but I just want to say a 

couple of sentences about FEMA. While the FEMA staff were good 

people, even in the first disaster in Parkersburg, within the first 

week, they were transferred out. They became a transient group of 

individuals working with these communities and businesses, led to 

miscommunication, misinformation, missed meetings, and ultimately were told to call the 800 number, very angry small businesses as we put this all together and look at the summary, quite 

a bit different in the attitude toward the SBA. They were very 

helpful. It was just the product that was not sufficient. 

In order to meet the needs locally, a Cedar Falls banker went 

ahead and created a 30-year term on a 2 and a half percent loan 

for $25,000, very patient capital. So here we had a private banker 

taking the risks that we really thought should have been taken by 

the SBA. 

So what is needed as we move forward? Well, first of all, 80 percent of the small businesses in our disaster-declared counties in 

Iowa have fewer than ten employees. And they muddied through 

the summer. And here are in summary the three things that they 

asked for. 

Number one is non-collateralized, forgivable capital. This doesn’t 

have to be a large amount of money, but they need it immediately. 

They need it right after the disaster occurs, in that $25,000 to 

$30,000 range. 

They need one-on-one time to talk to business professionals with 

that technical assistance that they need that can put them back in 

business and lead them to the resources they need. They get really 

tired of getting bounced from person to person. 

And they need acknowledgement that their small business is as 

valued as those larger companies, many of which have already received state or local incentives and are back in business. 

31 

Those are the three items if we summarize all the 700 businesses 

that we have talked to. That is a little simplified, but I think if you 

came up with that first one, with that forgivable, non-collateralized 

capital, you could keep a lot of these small businesses in business. 

Most of all, I think we need to change our focus and not expect 

all businesses to reopen. We cannot expect them all to reopen, but, 

at the same time, we ought to offer them an opportunity to reposition themselves in an entrepreneurial market and with economic 

assistance of some type. 

Thank you. 

[The prepared statement of Randy Pilkington is included in the 

appendix at page 75.] 

Chairman BRALEY. Thank you. 

Mr. Tully, I am going to start my questions with you. One of the 

things that we hear from a lot of people who were caught up in this 

disaster for the first time in their lives is that the initial response 

from FEMA, from SBA, and from other federal agencies created the 

appearance that there was a much greater understanding on the 

part of these federal agencies of the need to get out into the field, 

have resources available at the point of greatest impact and to 

start the processing of information that hopefully leads to eventual 

access to federal resources. 

But what my staff and I have heard repeatedly is after that initial honeymoon period, the feel-good period, that a lot of people felt 

like they were getting bogged down in the process, that the ability 

to communicate with the agency in question was sometimes compromised by a lack of access to online resources because they have 

been destroyed in the flood or the tornado or an inability to get 

through to the person who was having decision-making authority 

over their own particular application. 

I was hoping you could share with us from your perspective and 

from talking to other affected business owners in your community 

what you are hearing is the most needed type of assistance that 

is not currently being provided. 

Mr. TULLY. I think your observations are correct. There was an 

initial honeymoon. Their communication with the press was very 

good. We knew what we needed to do, having never gone through 

it before up front, which was really good. 

Once you get dealing with the SBA, things get a little slower. 

And by nature, maybe it has to get that way because you are dealing with a lot of technical financial information. And it takes time 

and effort to get all of that paperwork in order and understood. 

By and large, the number one need is cash. We have got a lot 

of pressing need for cash resources right today. And that is probably the most pressing need right out of the gate. 

Chairman BRALEY. Thank you. 

Mr. Wilke, we had an opportunity to discuss some of the struggles you were going through as you were coming to the decision in 

the immediate aftermath of the flooding about whether to go forward with your business. And I had had the exact same conversation with a grocery store owner in Greene, Iowa the day before I 

got to Elkader. 

32 

One of the things that I am interested in hearing from you is 

how do you juggle the incredible burden of dealing with the initial 

disaster response inside your store, the displacement of some of 

your employees and your own family members from the flooding 

event in the community, the lack of access for suppliers to get into 

your store when they don’t have any place to put their supplies 

once they get there, and creditors who are demanding payment for 

the goods and services you provide without any source of capital to 

reimburse them, and how that makes this process such a burden 

on individuals who are going through it at a time when it’s one of 

the biggest crises they have dealt with in their lives. 

Mr. WILKE. I think you just have to take one step at a time. You 

know, if you sat and thought about the whole thing all at once, you 

know, it would be a very unfortunate mental situation. 

But I think what we did is we just saw the immediacy of what 

had to get done. And for the volunteers that came in, the first days 

were actually the easiest days because it was real obvious what 

was muddy and what was wet and things like that, the things that 

had to get taken care of and get taken out. 

The deal about having to make a commitment, I personally 

would not go bankrupt. It would just be against my moral conviction to do that. I thought if I have gone in good faith to people, I 

owe them for what I am getting from them. And I think under the 

circumstances, they have to realize that maybe it would take me 

a little bit longer to pay for some of those things. 

I only had one supplier that I had had a verbal commitment from 

the president that they were going to not run some ACHs through 

and they ran through anyway. And I called them. You know, I 

called the banker that said, ‘‘Hey, this had happened. Was it supposed to?’’ And they took care of it. Between that supplier and the 

banker, they postponed overdrawing us. 

Those are things that, you know, come up. If you are working on 

one deal and here is the next one and here is the next one and 

right on down the line, I guess in my talk, that is why I had expressed that I really thought that there was going to be some assistance. 

You know, we heard all of these FEMA stories about the residences getting a water heater, getting a furnace, or getting this or 

getting that. I honestly thought there was going to be something 

to help us tide over some of this immediate cash flow disaster. 

I guess I was very disappointed for them to come and say, ‘‘Oh, 

you qualify for an eight percent loan.’’ No thank you. 

Chairman BRALEY. One of the things I mentioned in my opening 

statement was the fact that Congressman King and I had introduced the Small Business Owner Disaster Relief Act to amend the 

Stafford Act to address that shortage of cash in the form that we 

already make available to other people that are affected by disasters but currently don’t provide to small business owners. 

The purpose of this bill is to say, taking the same amount of limits that currently apply to small business disaster loans, making 

available an amount of cash to qualified applicants who can use it 

for the type of needs that you. And Mr. Tully, Mr. Bowers, Mr. 

Monnahan have been talking about how do you think that would 

affect business owners in the same position you found yourself in 

33 

having to make a decision about going forward with your business 

or shutting it down? 

Mr. WILKE. It would definitely be a help. I mean, it just absolutely would because you have got the situation where you have 

structured your debt based on what your sales are going to be. 

And, all of a sudden, one day you have got no sales. You have 

still got your payroll expenses. You have got to pay for this product 

that has now gone out in the dumpsters, you know. 

And somehow you have got to make a decision right away, ‘‘Am 

I going to be able to make a go of this business and make a living 

for my family doing it or are we going to have to cut our losses and 

leave?’’ 

And it would be one thing that would help you make a decision 

that, ‘‘Yes, I am going to keep doing this and earn my chance to 

pay taxes or am I going to be a financial burden to the system because, you know, ’Okay. No. I think I will take food stamps instead’?’’ 

Chairman BRALEY. Thank you. 

Mr. Bowers, a lot of people probably don’t have a real understanding of what communities in Iowa are like and how they depend upon local small businesses as the lifeblood to provide them 

with essential goods and services, but you own a convenience store. 

And for some communities in my district, the convenience store is 

the only place where a resident can buy any type of groceries, the 

only place where they can buy gasoline to fuel their vehicles. 

And, in fact, a good example of that is New Hartford, Iowa, 

which not only was hit with the tornado, the most powerful tornado 

in the United States this year, but less than ten days after the tornado went through, the entire town had to be evacuated because 

of flooding. And there were stories of homeowners and business 

owners who had their businesses destroyed, moved into town, and 

then had it flooded out. 

So one of the things I would like you to share with the panel is 

how critical providing immediate disaster response is not just to 

the business owner but to the people in that community, many of 

whom are making decisions on whether they are going to stay in 

a community and rebuild or move away to some other community 

and how essential that is to the tax base of those devastated communities and to school enrollment and so many things that add to 

the quality of life of a city like Anamosa. 

Mr. BOWERS. Well, as I mentioned in my speech or presentation, 

just the number of volunteers that come forward. And, as he mentioned as well, Mr. Wilke, those early days trying to decide what 

you are going to do, most of us kind of get into an automatic mode 

and you just start doing it without a lot of thought about how it 

is going to work, how you are going to pay for it. You just start 

cleaning and start the process. And all of the volunteers come forward and do all of this. 

The volunteers for the most part assume that you are getting aid 

somewhere. They assume that the government is going to come in 

and help. Over and over again I had the questions about ‘‘So if 

FEMA helping you take care of this? What is FEMA doing?’’ 

‘‘Well, FEMA isn’t really designed for businesses.’’ 

‘‘So where are you getting money? Is SBA helping?’’ 

34 

‘‘Well, at this point we really don’t know how it is all going to 

work out. A lot of questions remain. You don’t want to jump 

through hoops too soon because what is going to come later. Is 

there going to be—there are just so many unknowns.’’ And that is 

what would help a business, is clearing those things up in the early 

stages so you know what is going to be available, what do you have 

to do, how much is it going to be, what can happen to make it 

work. 

The community, the people in the community I don’t know, really, how they would respond if I closed my doors now after they 

spent six weeks working there. 

The reason my sales are back up to what they are is because the 

only other convenience store in town is a KC’s. And here you don’t 

know what they are, but they are a local Iowa-based convenience 

store chain, I think around 1,200 stores. In small town Iowa, a lot 

of people want to do business with the local. 

This store has been there three generations. And although we 

are not the owner for three generations, just a year and a half or 

so, they want to see us succeed. And that is where the help comes 

from. You develop relationships. We are the only convenience store 

around that has tables off in an area for people to come in and 

have coffee. 

It is the local coffee clubbers that I give the cup of coffee to for 

a quarter. You know, kind of begrudgingly, if they are getting that 

quarter coffee, that really saved us. It kept us from spending a 

quarter of a million dollars, which there is no way we could have 

done that. 

I guess in the very early days, you are thinking a quarter of a 

million dollars and how is this going to work. But, again, you just 

go through it. And everybody comes alongside you from the community. 

I want to emphasize that I don’t think Anamosa is unique to 

that. I think in Cedar Rapids or any other city, you have your 

unique customers surrounding that store. In a small business, the 

small business owner develops those relationships. I don’t know if 

that is so much the case in the bigger chains, but in the small business owner, where you are the owner/operator, you develop those 

relationships with those locals and you become a part of their everyday life. 

You know their kids. You know what is going on in their life. 

They know what is going on in your life. And that is really what 

community is. And that is what needs to be saved. 

What happens in those early days I think is crucial in helping 

make a determination. In our case, it was primarily we put a couple of major suppliers with their agreement, ACH accounts. They 

agreed to not do anything for a while. That allowed us the cash to 

keep moving forward to get things done that needed to be done. 

But how much easier would it have been had we had some assurances along the line from SBDC consultants that can be there to 

help when you need it. 

I guess that is kind of where we are now. We are at the point 

now we have got to figure out how to pay for all of this. We have 

got to figure out how to put it all together financially. 

35 

It is a big deal in a small community. It really is. I mean, the 

people of Anamosa, this is big news. Cedar Rapids TV station met 

us at the airport, 5:00 a.m. yesterday morning and did their live 

remote there for the 5:00 news, did a segment for later in the day, 

followed us, videotaping our bag as we are heading down to get on 

the airplane. It is a big deal to the smaller communities. 

Chairman BRALEY. Well, it sounds from all of your testimony like 

there is an enormous multiplier effect because so many of these 

core anchor businesses in a small community are viewed as hope 

by the people who are going through their own crises in their personal lives when they lose their home and they wonder whether 

they are going to stay in a community. 

But if they see that convenience store or that grocery store or 

that bank reopen and say, ‘‘We are staying here for the long haul,’’ 

then that money that gets to them and provides that hope early on 

in a disaster helps rebuild the spirit of a community and in some 

cases may determine whether a community thrives or does. 

Mr. Monnahan, you have had the experience, I am sure, that not 

only are you dealing with your own business struggles from the 

devastating flooding in Cedar Rapids, but your client base in the 

downtown area includes many other small businesses, people who 

work and live in the downtown area. 

So I imagine you hear a lot from people in addition to just the 

specific needs of your own business in responding to this disaster. 

And if you could share with us how that has affected some of the 

business decisions you have made and how that interacts with the 

funding issues we have been talking about with SBA? 

Mr. MONNAHAN. Sure. Well, I have talked with the people that 

are involved in the reconstruction effort in the building. They have 

volunteered to me that hands-down, the first question that they are 

asked when they are approached by anybody on the street is, ‘‘Is 

the Blue Strawberry coming back?’’ And that speaks volumes. 

And recently a lot of the larger companies have moved into the 

second floor and above offices in the downtown area. And I just 

spoke with some last week, and they are lost. There are no services 

downtown right now. So it is almost like a morgue down there at 

times. And it used to be such a vibrant environment and atmosphere. 

You try not to let the emotions and the ego enter into your business decision to go back into business, but obviously there is a lot 

of pride in what everyone here has done as a small business person 

and the end result. It does play into your decision. And when you 

have all of these professional people and businesses in your downtown location really encouraging you to come back, it makes a difference. 

And the financial thing, I have at this point put my SBA loan 

on hold. I have decided not to take on additional debt. I am going 

to reopen, but it is going to be in a different form with additional 

investors unless something comes along in the line of the forgivable 

loan or grant. 

Chairman BRALEY. Thank you. 

Mr. Pilkington, one of the things you mentioned in terms of your 

recommendations was the need for non-collateralized, forgivable 

capital. I assume that that is similar to what we are talking about 

36 

with the disaster assistance bill that I mentioned earlier in my testimony. 

Mr. PILKINGTON. Yes. Congressman Braley, I commend you and 

Congressman King because you are right on with what is needed 

for these small businesses. If you can buy time for these small 

businesses with that $28,000, you are giving them some means to 

move ahead and have some hope of reopening. 

One thing we haven’t really talked about—and I don’t know how 

you work this in, but there are a lot of small businesses that are 

suffering that didn’t go through the flood. But they are suffering 

because so much of the other businesses in the community have 

been damaged. So the ripple of this is much more than just the 

numbers we have kind of told you, 1,200 here, 1,300 here. It is 

much more substantial than that. 

And so we need to get these small businesses back and operating. And the forgivable loan, the grant, whatever we want to call 

it, is critical. We don’t want to call it a grant because then it is 

probably taxable. But if it is a forgivable loan, it is a little better 

for their structure. 

Chairman BRALEY. Somewhat about what we are talking about 

doing with Wall Street this week. 

Mr. PILKINGTON. Yes, yes. 

Chairman BRALEY. I think there are a lot of us in this room who 

think that the people on Main Street deserve just as much attention. The collateral and combined impact of the small businesses in 

this state and this country who were impacted by a variety of disasters has an enormous ripple throughout our economy. And I 

think that it is time that we start looking at some of the critical 

needs that come up over and over every time there is a disaster 

of this magnitude because this isn’t the first time we have heard 

about the need for available cash. 

And, with that, I will turn it over to the Ranking Member. 

Mr. DAVIS. Thank you, Mr. Chairman. Thanks, everyone, for 

their testimony. I know you have been through some amazing 

things this year. Thank you for your fortitude to continue on, to 

continue down the line that the Chairman was just talking about. 

If you look at the things we are talking about on Capitol Hill this 

week, some of those are somewhat manmade. The things that you 

went through this year are natural disasters and no fault of your 

own. And we understand that. 

I have been a small business owner myself for about 20 years. 

So I know what it is and the impact that it has on the local community. 

You have made decisions in your own businesses over time. I 

know there is a place for government to come in and help. But I 

am just going to ask all of you, did you have flood insurance in 

your business? And did flood insurance work in your businesses? 

We will just go down the line. 

Mr. TULLY. Yes. We did have flood insurance, and it did work 

well for us. 

Mr. DAVIS. What role did it play? And did it come in more quickly than the SBA? And what role did SBA then take on to help fill 

the gap that the flood insurance didn’t cover? Help me understand 

that. We will just talk that through as we go down the line. 

37 

Mr. TULLY. Yes. The flood insurance, we actually were paid, if I 

remember right, about a month after the flood. Our flood insurance 

made a payment to us. 

And then, of course, the SBA loan documents are derived so that 

any proceeds you get from insurance are deducted from the loan 

amount. So you have to wait and make a lot of decisions because 

you don’t know what a decision today with the SBA is going to affect tomorrow. So that is kind of a complication. 

Mr. DAVIS. Okay. 

Mr. WILKE. We did not have any flood insurance. When we asked 

about it years ago, they said that we were not in the floodplain. At 

the time I was only hearing bad comments about it. You know, it 

was people thought that they had been paying this premium along 

and they had a problem. And when they end up getting their settlement, their settlement wasn’t anything what they were expecting it to be. 

I know from the current flood, I heard the story from a business 

in Elkader that they had flood insurance. They had to get it because of their loan at the bank. And when they went to get the 

amount, they were only getting paid for the physical damage to the 

building. Well, the problem that they had was most of their value 

was in their inventory and in their tools and different things they 

had. 

So they were in a world of hurt thinking that they were going 

to get some money back to compensate for trying to get them back 

in business. And all they were going to pay for was sheetrock. 

Mr. DAVIS. Following down that line, is there something that 

needs to be done to fix that program to make that better so it covers reinventories? 

Mr. WILKE. What I ended up this time after the flood, I did get 

some insurance. We have our local insurance agent, you know, 

brought choices to me. And we went over what the different possibilities were. And I made sure after hearing that guy’s story that 

my policy includes a certain dollar amount for content and a certain amount for the business. 

The problem is that it won’t be enough for me to go back into 

business. It would be enough to help to dampen the damage, but 

I can’t take that payment and be up in business again. And if you 

went to a value that high, they have to split it down. They can only 

go up to a certain dollar amount or you have got to get an additional policy. So then you are paying on two different policies. 

And I just said, ‘‘Okay. I will just go the maximum that I can 

for the one policy. And I will have to be my self-insurance again.’’ 

And that is really going to be a problem this time because before 

I owned everything. 

Everything that went out into the dumpsters and everything, 

that was something I have already paid for. Okay? Now I have got 

a loan to put that stuff back in. So if I have got to pay on the loan 

and then I have to pay to try and do it again—that is why I started 

my talk with saying please fix our bypass, you know, because, boy, 

if we had it again, it is going to be a lot worse in Elkader the second time than it was this time because with that flood wall gone 

and a lot of those historic buildings at risk and the chance of it 

38 

happening again, it is not a good deal. You know, we are going to 

need some help in that. 

Mr. DAVIS. Is FEMA working on that for you? I know you have 

got some great members of Congress, and they will be working 

with you. But has FEMA talked about fixing— 

Mr. WILKE. I haven’t been in the committees when they have 

talked about it, but I am sure that there are enough people in 

Elkader that want it said. And I know they had a lot of people on 

Main Street wanting me to mention it when I came. You know, you 

know, just try and make it on the front burner a little bit because 

it is not a deal that we can wait two, three years. It is something 

that we need to have help soon. 

Mr. DAVIS. And it would save taxpayers dollars in the future if 

they fix it before the next flood. And you have got some great members who will take care of this. 

Let’s go on down the line. 

Mr. BOWERS. No, I did not have flood insurance. I did check into 

it in April, when the water levels were high up there at that time 

as well. It wasn’t near flood stages for us, but it was high. 

I was told by the insurance agent that we use that they basically 

divide it up in A, B, and C levels. And my store is in C level, which 

is the same thing as all the rest of Anamosa. And for me to add 

it to my insurance was almost $1,000 a month. 

Now, why would I add something at $1,000 a month that all of 

Anamosa is in the same class as me? So it is never going to happen. A month and a half later, there they were. 

Mr. DAVIS. Thank you. 

Mr. MONNAHAN. I did not have flood insurance. And I have 

talked to maybe one person in Cedar Rapids that did have it, one 

business person that did have flood. I don’t think anybody did. And 

we were in the 500-year floodplain. So there was really no incentive to pay that extra premium for insurance. It was never mentioned, in fact. 

Mr. DAVIS. Do you think that is something that the community 

is taking a look at now, the business owners that you know? Do 

you think it is on people’s minds now, maybe we are going to need 

to go back and take a look at that as an option? 

Mr. MONNAHAN. Definitely. 

Mr. DAVIS. Mr. Pilkington, if I could ask you a few questions? 

What type of technical assistance did the business community services outreach program provide the small businesses after the flood? 

Mr. PILKINGTON. They did through the MyEntreNet, which is 

part in person and part technology. They did daily webinars. So the 

webinars would be at noon every day. There would be a different 

topic from working with SBA to what do you do with damaged inventory to those topics that small business wanted. And then they 

started them at night as well. They hosted a series of meetings. 

And then they just did the one-on-one counseling with them. 

So that was the type of assistance to reach as many of those individuals as we could. And we also connected other service providers. 

We had someone from every SBDC office in the State of Iowa come 

to our area in Parkersburg and New Hartford first because that 

was before all of the floods happened. And we had somebody from 

the entire state. 

39 

We rallied as many resources as we could into our part of the 

state, which were no cost to the small business person. We kind of 

led that effort. 

Mr. DAVIS. Is MyEntreNet unique to your area? Is it— 

Mr. PILKINGTON. Yes. MyEntreNet was a program that was created because we found we couldn’t serve remote rural areas the 

same way we serve a Cedar Rapids, a Waterloo, or a Des Moines. 

And we needed to be able to reach out to those rural communities 

and provide them the same level of business counseling guidance 

and also to help create a supportive structure for entrepreneurship. 

And MyEntreNet does that. It creates a system in a community. 

Elkader has that type of system, where they have a supportive 

structure for entrepreneurs. They match them with the capital. 

They also put them together with the resources they need. And 

then it is a networking. So that it is entrepreneurs working with 

entrepreneurs. 

So it is much more than just an online program. It is the combination of a complete structure. If you think of it, it is a connector. 

It connects the entrepreneur to what they need or to the expertise 

or to the type of capital they need. 

Mr. DAVIS. I would think you didn’t develop that for a disaster. 

Mr. PILKINGTON. No. We developed that in 2003 just because of 

remote rural areas not being served. 

Mr. DAVIS. Is that something you are willing to share or have 

thought about sharing with the rest of America? It sounds like it 

worked beautifully. 

Mr. PILKINGTON. We just presented at the American Small Business Development Council, National Small Business Development 

Council. I believe it was two weeks ago in Chicago at their national 

conference. So that has been spread around the country. It is in 14 

counties formally in Iowa. 

And with the disasters, we think the next thing that should happen is there are 35 counties in the State of Iowa that have businesses. At least 80 percent of their businesses are less than 10 employees. We should get MyEntreNet into those counties as quickly 

as we can. 

Mr. DAVIS. How do we do that? 

Mr. PILKINGTON. Just need some resources. Because it is so efficient, we would put these into pods of six so a pod of six counties 

would get one staff person. And they would manage six counties 

and run a MyEntreNet system. So you could do this with three, 

four, five people with what we have right now and really have an 

effective system to meet the needs of many entrepreneurs around 

the state. 

Mr. DAVIS. How did that program work with SBA and FEMA 

and other government agencies? Were you able to pull them in and 

make them part of the program? 

Mr. PILKINGTON. SBA was very cooperative. They learned right 

away what the resource was. They were very good collaborators. 

They tried hard. They were good people. The problem was, once 

again, it was their product. And the staff members who were on 

the ground didn’t have much choice in offering any other alternative products. 

Mr. DAVIS. Was the university affected by the floods 

40 

Mr. PILKINGTON. Not our university. The University of Iowa was 

severely impacted by the floods. We were quite fortunate. 

Mr. DAVIS. You were far enough away that— 

Mr. PILKINGTON. We were high enough ground. We are the highest point in Blackhawk County. 

Mr. DAVIS. Okay. One thing I have heard through all of the testimony is you needed the cash and you needed it quickly. One of the 

things that was included in the farm bill was $25,000. And that 

was in the recent changes. 

The disaster loan program provides businesses with an opportunity to quickly obtain an immediate loan of 25,000. Would that 

have helped many of the small businesses affected by your area if 

it had been available? It wasn’t available during the floods, but it 

happened fairly quickly after that. It would have been helpful. 

Mr. WILKE. Yes. 

Mr. PILKINGTON. Definitely. 

Mr. DAVIS. That is something that hopefully will be available for 

you next time. 

Thank you. And I yield back. 

Chairman BRALEY. Thank you. 

At this time I would recognize Congressman Loebsack. 

Mr. LOEBSACK. Thank you, Mr. Chairman. Thanks again for 

doing this. It has been very helpful for me to listen to these stories. 

Of course, I have been listening to a lot of stories since June, as 

you might imagine, in the Second District of Iowa, Mike’s, and 

many others. 

I am just going to say thank you and ask if you want to say anything more, but before I do that, I just want to mention, Mr. 

Pilkington, I really appreciate those three points that you made. It 

kind of for me does summarize all of the things that I have been 

hearing from so many business owners, small business owners, you 

know, since the flooding began. So I really appreciate the way that 

you put it into those three points, the non-collateralized, forgivable 

capital, technical assistance. 

I think that one-on-one idea is probably great for homeowners, 

too, obviously, who get passed around from one person to the—it 

is not that the individuals doing those jobs aren’t doing great jobs, 

but the individual who gets passed around really needs, I think, 

that one-on-one assistance. It is difficult to do that. There is no 

doubt about it. It takes a lot of resources, but I think it is important. 

And then just acknowledging that these businesses are valuable 

and that the owners are valuable, as Congressman Braley said, you 

know, in so many of these small towns, especially the convenience 

stores, I mean, they are the only store in town, the only game in 

town, if you will, in that sense. 

And we live in Mt. Vernon. And Gary’s is the grocery store there. 

And it is absolutely fantastic that it is there and it serves the community. 

And, of course, the other point that you made, Mr. Pilkington, 

about other businesses, some businesses have actually thrived, as 

we know, in the rebuilding process, right? Some workers have 

thrived, the building construction trades, for example, because 

their labor, their services are in high demand right now. But many, 

41 

of course, many businesses have not because in some places, there 

has almost been a recession, if you will, as a result of the floods. 

And so I think we have to really keep in mind those other businesses that have suffered beyond those that were directly affected 

by the flooding. 

I admire what you folks on the panel have done. I don’t know 

that I could have done the same thing had I been struck by such 

a disaster. The worst thing that happened to us is that we had 

basement flooding related to groundwater, and I had to rip up two 

carpets from the basement and take them out to the curb. And that 

is nothing compared to what people in these towns went through 

themselves. But I am happy to be a proud original co-sponsor of the 

Braley-King bill, too. I think it is a great idea to try to deal with 

some of these problems. 

I want to thank also the Chamber in Cedar Rapids for doing 

what they are doing to help people like Mike with that 20,000 or 

so dollars. A lot of the folks in these communities have stepped forward, but, as I keep saying, for all the things that we are doing 

for ourselves, we continue to need help from the federal government. And that is why we are doing this today. 

So I just want to open up. I know that Congressman Braley and 

Congressman Davis have a lot of expertise in this area, and they 

have asked great questions. But, no offense to my colleagues, but 

sometimes we on these panels don’t ask all of the questions that 

need to be asked. Therefore, you don’t have an opportunity to say 

what you might want to say. 

So is there anything else that you want to say that hasn’t been 

elicited by questions? Yes, sir? 

Mr. PILKINGTON. Just one thing, really two. First of all, it is not 

over. We have gone through the shock, and we have gone through 

the short term. But I am very concerned about long-term recovery. 

We have a lot of small businesses that are struggling and are trying very hard to make it. So we can’t turn our back on them. They 

need continued assistance. The long-term recovery is really the key. 

And the second part is to consider more of a case management 

approach. Rather than getting a different person at SBA or FEMA, 

if we could have a more of a case management approach? You 

wouldn’t see a different banker every time you went in. And I think 

we need to take a look at the way that assistance is provided. 

Mr. LOEBSACK. Thank you. Any others who would like to say 

anything? 

Mr. WILKE. I think I would just dovetail a little bit of what you 

said because he had mentioned that their business was up. Since 

the flood, we have not had one week that we have been up. And 

I do wonder what it is going to be like coming into the holiday season when you have got that many homes down there that don’t 

have windows and doors. 

We could potentially have it worse. I mean, we have sat here and 

say, yes, it was a mess to clean up from the flood, but if we have 

a few homes down here that people want to live there and then it’s 

right next door to someplace that looks really tacky, you know, that 

is not going to be a draw for our community. 

42 

Our community is a very historic place. It has got a lot of places 

on a national register. And it has been a great destination for 

campers. We have got two good campgrounds. 

And the people that I have talked to virtually unanimously want 

to restore it to the way Elkader was. You know, get it back up and 

going the way that it was. And we do need some economic stimulus 

to get that jump-start going. 

You know, use the paddles on us a little bit right away because 

we want to keep beating. You know, it is not that we want to stay 

on life support. Okay? But we need a little shot right away, you 

know, to get it going. 

Mr. LOEBSACK. Can I ask a question about Elkader because you 

have a connection? Is it to Morocco or Algeria? 

Mr. WILKE. Algerians. 

Mr. LOEBSACK. Elkader. 

Mr. WILKE. Yes. And they came through with some— 

Mr. LOEBSACK. That is what I was going to ask because— 

Mr. WILKE. Yes. They did. 

Mr. LOEBSACK. —obviously the National Czech and Slovak Museum in Cedar Rapids is going to benefit from some assistance 

from the Czech Republic. Okay. Good. I am glad to hear that. 

Mr. WILKE. Yes. Yes, they did. It is from the president of the 

country. 

Mr. LOEBSACK. It is a beautiful town. I have been there many 

times. 

Mr. WILKE. A certain dollar amount is split up between the businesses and certain amount to split up between the homeowners. It 

was nice. I mean, it wasn’t a lot, but it was a nice, very nice, gesture, very appreciated. 

Mr. LOEBSACK. That is great. I am all in favor of getting assistance wherever we can get it. And so I know it is wonderful. Thank 

you. 

Well, thank you, Mr. Chair. I will yield back. Thank you. 

Chairman BRALEY. I think that last comment really drives home 

the fundamental point that I saw everywhere I went in my district 

and I am sure Congressman Loebsack, too. And that is that we are 

all in this together. And it is not just people in Iowa who are in 

this together. It is people in Iowa and Tennessee and Houston and 

Florida and California. 

And the best way I think for me to close this hearing is to share 

a story that happened to me. And, to put this in context, we had 

the most powerful tornado in the United States this year hit my 

district that hit the communities of Parkersburg, New Hartford, 

Dunkerton, and Hazelton. Less than ten days later, we had epic 

flooding on every inland river in our state. 

As I was flying back to Washington, at the beginning of the 

flooding event, I flew over on my way from Waterloo to Minneapolis 

the Town of New Hartford, which had been devastated by the tornado and was completely under water. And I knew I was going to 

be coming back right away. 

I spent two nights sandbagging on the Cedar River. And I was 

in a neighborhood over on the east side of Waterloo along Lafayette 

Street—Randy, you know right where this is—with my city council 

member. And we finished sandbagging in one area. And we were 

43 

told we had to get down to another area two blocks away. And to 

get there, we had to walk through waist-deep water. And it was 

getting dark out. 

So we walked down there. And I started handing sandbags to a 

14-year-old boy, who was putting them around the base of his 

grandmother’s home. We got done sandbagging her house, and we 

walked out into the streetlight. It was dark now. And he looked up 

at me, and he said, ‘‘Are you Bruce Braley?’’ 

And I said, ‘‘Yes.’’ 

He said, ‘‘You are my congressman?’’ 

I said, ‘‘Yes.’’ 

He ran off, and he brought over two of his friends because he 

could not believe he was out sandbagging with his congressman. 

And that to me was all the motivation I needed to come back to 

Washington and keep telling this story over and over and over because people aren’t looking for a handout with no strings attached. 

They are looking for a temporary hand up to keep their business 

open, their home open. And one of the biggest problems we saw 

was people who were so desperate to get back into their homes that 

it was sometimes creating a safety risk for the people trying to deal 

with the immediate aftermath. 

I think the testimony we have heard today has been a great illustration of why small businesses do provide the backbone of our 

economy. And that is why we can see a ripple effect throughout 

these communities when we take the time to help them in their 

time of need. 

So I want to thank the Ranking Member for his insightful comments. I want to thank my colleague from Iowa Congressman 

Loebsack and the great work that the staff did today to prepare for 

the hearing. 

And I also want to make sure that as we move forward, people 

don’t forget the stories that we heard today because we seem to 

have a mentality in this country that the disaster of the day is all 

we see on television. And once the flooding recedes and the torn 

buildings are removed, everybody forgets about what is happening. 

But to all of you, every day this is part of your lives. And we 

want to make sure we are doing everything we can to respond to 

your needs. So thank you all for coming. 

I ask unanimous consent that members have five legislative days 

to enter statements into the record. Without objection, so ordered. 

I want to thank the witnesses again for taking time from your 

lives when you are dealing with the aftermath of all of these problems and coming to share your stories. 

And, with that, our hearing is now adjourned. 

[Whereupon, at 5:06 p.m., the foregoing matter was concluded.] 

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