Report to the Chairman, Committee on

Small Business, House of

Representatives

United States General Accounting Office

GAO

November 2002 SEPTEMBER 11

Small Business

Assistance Provided in

Lower Manhattan in

Response to the

Terrorist Attacks

GAO-03-88
To assist in New York City's recovery from the September 11, 2001, terrorist

attacks, Congress appropriated $3.5 billion in Community Development

Block Grant funding of which Congress earmarked at least $500 million to be

used to compensate small businesses, nonprofit organizations, and

individuals for their economic losses. One year after the attacks, these

funds, administered in part by New York State’s Empire State Development

Corporation (Empire State), have provided $266 million to about 9,000 small

businesses, many with fewer than 10 employees (see fig. below). Such

assistance has included grants to compensate businesses for part of their

economic losses—for both physical and economic injuries—and payments

to attract and retain small businesses in efforts to revitalize the affected

areas. Hundreds of millions of dollars remain available through these and

other programs to assist an estimated 18,000 affected businesses. Empire

State has employed mailings, visits, walk-in centers, and mass media to

inform businesses of assistance programs.

Other efforts by the Small Business Administration, New York City and

State, banks, and nonprofit organizations have provided critical assistance to

address the immediate and additional unmet needs of small businesses.

Percentage of Small Business Recovery Grant Recipients, as of

September 11, 2002, by Number of Employees

Source: GAO analysis of Empire State database.

SEPTEMBER 11

Small Business Assistance Provided in

Lower Manhattan in Response to the

Terrorist Attacks

www.gao.gov/cgi-bin/getrpt?GAO-03-88

To view the full report, including the scope

and methodology, click on the link above.

For more information, contact William O.

Jenkins, Jr. (202-512-8678) or

jenkinswo@gao.gov.

Highlights of GAO-03-88, a report to the

Committee on Small Business, House of

Representatives.

November 2002

The attacks on the World Trade

Center had a substantially negative

impact on the New York City

economy, severely affecting

businesses. In the aftermath of the

attacks, Congress, among other

things, appropriated emergency

supplemental funds to several

federal agencies to aid and rebuild

the affected areas. The Chairman

of the House Committee on Small

Business asked GAO to describe

the assistance provided to small

businesses that is funded from

emergency supplemental

appropriations of federal

Community Development Block

Grant funds and other sources.
Page i GAO-03-88 September 11

Letter 1

Results in Brief 2

Background 3

Empire State Uses CDBG Funding to Provide Various Types of

Assistance to Small Businesses 6

SBA, New York City and State, Banks, and Nonprofit Organizations

Have Also Assisted Small Businesses 16

Agency Comments 24

Appendix I Scope and Methodology 26

Appendix II Map of Lower Manhattan with Highlighted Empire

State Program Areas 29

Tables

Table 1: Information on Empire State Small Business Assistance

Programs Using CDBG Funding as of September 11, 2002 7

Table 2: SBA Loans to Businesses in Lower Manhattan, as of

September 11, 2002 18

Table 3: Major Nongovernmental Business Assistance Programs, as

of September 11, 2002 24

Figures

Figure 1: Types of Businesses Receiving Business Recovery Grants 8

Figure 2: Percentage of Business Recovery Grant Recipients, by

Number of Employees 10

Figure 3: Annual Gross Revenues of Businesses Receiving Business

Recovery Grants 11

Contents
Page ii GAO-03-88 September 11

Abbreviations

BRG Business Recovery Grant

CDBG Community Development Block Grant

EIDL Economic Injury Disaster Loans

HUD Department of Housing and Urban Development

LMDC Lower Manhattan Development Corporation

SBA Small Business Administration

SBDC Small Business Development Center

SFARG Small Firm Attraction and Retention Grant

STAR Supplemental Terrorism Activity Relief
Page 1 GAO-03-88 September 11

November 1, 2002

The Honorable Donald A. Manzullo

Chairman, Committee on Small Business

House of Representatives

Dear Mr. Chairman:

The September 11, 2001, terrorist attacks on the World Trade Center had a

substantially negative impact on the New York City economy, strongly

affecting businesses, both large and small and as disparate as financial

services firms, travel agencies, and retail stores. Some businesses were

destroyed, some displaced, and still others could not operate because of

street closures and the lack of utilities. Many small businesses still face a

diminished client base and uncertainty about the future redevelopment of

the World Trade Center site.

In the aftermath of the attacks, Congress appropriated emergency

supplemental funds to various agencies to aid and rebuild the affected

areas. In particular, Congress made $3.5 billion in Department of Housing

and Urban Development’s Community Development Block Grant (CDBG)

funds available to the Empire State Development Corporation (Empire

State) and its subsidiary, the Lower Manhattan Development Corporation.

Congress earmarked at least $500 million of that total to compensate small

businesses, nonprofits, and individuals located in lower Manhattan for

their economic losses.

This report responds to your request that we describe the types and

amounts of assistance provided to small businesses from (1) the CDBG

supplemental funding and (2) other sources of funds that have been made

available to rebuild or sustain small businesses in lower Manhattan.

To address these objectives, we met with officials and obtained data from

federal, state, city, and nonprofit organizations on the assistance that they

provided to small businesses in the aftermath of the terrorist attacks. We

also met with lower Manhattan small business advocacy groups, whose

directors were often small business owners, and attended meetings in

which members spoke about the impact of the terrorist attacks on their

businesses. In addition, we visited city and state business recovery centers

and a Small Business Development Center and attended a chamber of

commerce networking event in lower Manhattan. See appendix I for a

detailed description of our scope and methodology.

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-03-88 September 11

We conducted our work between April and September, 2002, in

Washington, D.C., and New York, New York, in accordance with generally

accepted government auditing standards.

Empire State, a New York State entity, designated by the Governor, has

taken the lead in providing business assistance using CDBG funds,

allocating $506 million for small business assistance. As of September 11,

2002, Empire State had disbursed $266 million in grants to lower

Manhattan businesses through its small business assistance programs.1

Empire State’s Business Recovery Grant Program began providing

assistance in mid-February 2002 and has provided grants to 8,783

businesses to help compensate them for their economic losses. About 75

percent of these businesses had fewer than 10 employees. In addition,

through its Small Firm Attraction and Retention Grant Program, Empire

State has provided grants to 246 businesses that have demonstrated their

commitment to remain in lower Manhattan by signing long-term leases.

Small businesses can receive assistance from both of these programs, as

well as other Empire State programs, as long as the specific eligibility

criteria are met for each program. Empire State also recently increased the

amount of compensation that is available to eligible businesses—both

businesses that already have received grants and new applicants—from its

Business Recovery Grant Program; the expected additional grants are not

yet fully reflected in Empire State’s disbursements. In addition, Empire

State is starting programs that provide funds to nonprofit organizations

and other entities, which in turn will provide technical assistance and lowinterest loans to small businesses. Apart from grant administration,

Empire State continues outreach to make more businesses aware of

available assistance. Moreover, the Lower Manhattan Development

Corporation plans to provide $200 million from its CDBG funds to Empire

State for small business assistance programs.

The CDBG assistance is part of a larger network of assistance that other

government, nonprofit, and private organizations are providing to small

businesses in lower Manhattan. New York City and State offered grant

assistance to small businesses within the first few months after the

terrorist attacks, disbursing $24 million to 4,722 businesses, and continue

to subsidize a program offering bridge loans to businesses through

 1

Not-for-profit organizations are also eligible under the programs and are included in the

“business” statistics.

Results in Brief
Page 3 GAO-03-88 September 11

participating banks and community-based lenders.2 CDBG funds will be

used to reimburse a portion of these costs; however, neither the city nor

the state has made a claim for reimbursement. In addition, the Small

Business Administration (SBA) began making loans to eligible small

businesses within days of the terrorist attacks. As of September 11, 2002,

SBA had approved 2,486 loans totaling $201 million for businesses in lower

Manhattan, of which it had disbursed $154 million. Several banks also have

offered short-term, low-interest loans to small businesses to tide them

over until other resources became available. Moreover, several nonprofit

organizations, often funded by donations and charitable groups, are

providing assistance. The September 11th Fund has committed $50 million

in business assistance. Although the nonprofits’ programs have not

reached as many businesses or provided as much funding as the Empire

State programs, they have filled a need by providing early assistance and

have targeted hard-to-reach groups and businesses. For example, one

organization operates in the Chinese community and targets industry

groups, such as garment businesses and limousine drivers. In addition to

financial assistance, some of the nonprofit organizations offer businesses

extensive technical assistance, including future business planning and help

with completing financial documents.

We provided HUD, SBA, and Empire State with an opportunity to review

this report. They provided comments that were technical in nature, which

we have addressed in the report where appropriate.

Using CDBG funds to respond to disasters is not unprecedented; however,

the dollar amounts allocated for such purposes in the wake of the terrorist

attacks on New York City are the largest ever made through the program.

In the months following September 11, 2001, $3.5 billion in emergency

supplemental CDBG funding was made available for New York City—more

than the total CDBG funds provided nationwide for all major disasters in

the last 10 years.3

 Congress appropriated $40 billion to the President for

emergency expenses (Emergency Response Fund) to respond to the

terrorist attacks of September 11.4

 Emergency response funds available for

 2

A bridge loan is a short-term loan that is intended to provide financing until a more

permanent arrangement is made.

3

These funds were appropriated on a no-year basis and remain available until expended.

4

The 2001 Emergency Supplemental Appropriations Act for Recovery From and Response

to Terrorist Attacks on the United States, Pub. L. 107-38, 115 Stat. 220 (2001).

Background
Page 4 GAO-03-88 September 11

transfer to the Department of Housing and Urban Development (HUD)

could be used for CDBG programs, as authorized by title I of the Housing

and Community Development Act of 1974, as amended.5

 Specifically, on

November 1, 2001, the Office of Management and Budget designated $700

million for CDBG funding for New York City out of the Emergency

Response Fund that Congress had appropriated. On January 10, 2002,

Congress appropriated an additional $2 billion for CDBG funding,

earmarking at least $500 million to compensate small businesses,

nonprofit organizations, and individuals for their economic losses.6

 Finally,

on August 2, 2002, Congress appropriated an additional $783 million for

CDBG funding.7

Although the CDBG program’s primary purpose is community

development, not disaster assistance, supplemental CDBG appropriations

have been made to provide recovery assistance from past natural

disasters, usually severe hurricanes, earthquakes, or floods. As in the

aftermath of natural disasters, HUD waived many requirements—such as

assisting persons of low and moderate income—of the general CDBG

program.8

 HUD is one of many federal agencies that offer disaster

 5

Section 434 of the Departments of Veterans Affairs and Housing and Urban Development,

and Independent Agencies Appropriations Act, 2002 (HUD 2002 Appropriations), Pub. L.

107-73, 115 Stat. 651, (2001).

6

The Department of Defense and Emergency Supplemental Appropriations for Recovery

From and Response to Terrorist Attacks on the United States Act, 2002 (Emergency

Supplemental Act, 2002), Pub. L. 107-117, 115 Stat. 2336 (2002), provided $2 billion for

emergency response to the September 11 attacks for CDBG (Community Development

Fund). The act also required that of the total amount made available in the Community

Development Fund, no less than $500 million shall be made available for individuals,

nonprofits, or small businesses located on or south of West 14th Street (west of its

intersection with 5th Avenue) or on or south of East 14th Street (east of its intersection

with 5th Avenue), with a limit of $500,000 per small business for economic loss.

7

The 2002 Supplemental Appropriations Act for Further Recovery From and Response to

Terrorist Attacks on the United States, Pub. L. 107-206, appropriated an additional $783

million for the Community Development Fund for emergency expenses to respond to the

September 11 attacks.

8

Section 434 of HUD 2002 Appropriations authorized the Secretary of HUD to waive or

specify alternative requirements for any provision of any statute or regulation the Secretary

administers in connection with the obligation by the Secretary or the use by the recipient of

these funds or guarantees (except those related to fair housing, nondiscrimination, labor

standards, and the environment).
Page 5 GAO-03-88 September 11

assistance, and HUD requires that its funds not be used to duplicate

benefits provided by other federal agencies, such as SBA.9

Empire State10 is the New York State entity designated by the Governor to

administer the first CDBG appropriation of $700 million. Created in 1968,

Empire State is a corporate governmental agency of the state of New York

and is currently engaged in housing and economic development and

special projects throughout the state. To carry out large-scale economic

development activities, Empire State has created various consolidated

subsidiaries. In November 2001, the Empire State board of directors

authorized the creation of the Lower Manhattan Development Corporation

(LMDC) to assist in the economic recovery and revitalization of lower

Manhattan, with special emphasis on the redevelopment of the areas

damaged by the terrorist attacks. LMDC functions as a joint city-state

development corporation with a 16-member board of directors that is

appointed by the Governor and the Mayor. For the amounts appropriated

by Congress in the 2002 Emergency Supplemental and the 2002

Supplemental previously noted, which totaled $2.8 billion, LMDC was

designated in the legislation as the entity to develop programs and

distribute assistance.

In its January 30, 2002, action plan, Empire State estimated that almost

18,000 businesses in New York City, representing approximately 563,000

employees, were disrupted or forced to relocate as a result of the terrorist

attacks. Empire State estimated that businesses with 200 employees or

fewer accounted for 99 percent of all affected businesses and about 50

percent of all affected employees.11 As lead agency in administering

federal assistance to New York City businesses, Empire State is carrying

out the action plan, which HUD approved, for providing $700 million in

business assistance, with $506 million allocated for small business

programs. Additionally, LMDC has a HUD-approved action plan for

 9

SBA officials stated that they are providing disaster loan data to HUD so they can

determine if any of their grants (issued subsequently to SBA disaster loans) through their

grantee were made for duplicative purposes.

10Empire State Development Corporation has been adopted as the business name of the

New York State Urban Development Corporation.

11Throughout this report, we use the term “small business” as defined by the particular

assistance provider and program. For example, Empire State has defined small businesses

as those with fewer than 500 employees for its Business Recovery Grant Program and 200

or fewer employees for its Small Firm Attraction and Retention Grant Program. Other

agencies and programs have different eligibility standards.
Page 6 GAO-03-88 September 11

spending $306 million, primarily to provide residential retention and

attraction grants to individuals. LMDC also has made a proposed action

plan available for public comment that it will submit to HUD, which would

provide $350 million to Empire State for use in its business assistance

programs—$200 million of which would be used for its small business

programs. LMDC currently has issued no formal plans for spending the

remaining, approximately $2 billion in CDBG funding.

In addition to the assistance provided by government and private

organizations, qualifying small businesses can receive federal tax benefits

that have been made available for those affected by the terrorist attacks.

The tax benefits include expanded work opportunity tax credits and

special allowances for certain business property. Businesses also may

benefit from real estate tax abatement, commercial rent tax exemptions or

reductions, and energy discounts. These types of assistance are not

discussed in this report.

From an allocation of $506 million, Empire State developed various

programs to assist small businesses. Empire State’s Business Recovery

Grant (BRG) Program provides grants to businesses to compensate them

for economic loss, and its Small Firm Attraction and Retention Grant

(SFARG) Program provides incentives to remain in or relocate to lower

Manhattan. Empire State is implementing additional programs to provide

technical assistance and loans and also expects to reimburse other city

and state programs for their expenditures. Additionally, Empire State has

made and continues to make many efforts to reach out to affected

businesses. Table 1 contains information on the funding provided and

disbursed as of September 11, 2002, for each of the Empire State small

business assistance programs.

Empire State Uses

CDBG Funding to

Provide Various Types

of Assistance to Small

Businesses
Page 7 GAO-03-88 September 11

Table 1: Information on Empire State Small Business Assistance Programs Using

CDBG Funding as of September 11, 2002

Dollars in millions

Program

Total dollars

allocated to

program

Total dollars

disbursed to

businesses

Total number of

businesses

assisted

Business Recovery

Grant $331 $254 8,783

Small Firm Attraction

and Retention Grant 105 12 246

Business Recovery

Loan Fund 50

a a

Technical Assistance 5 0.2 b

Bridge Loan 15 c c

a

This program has not yet begun to disburse funds or provide assistance.

b

This program does not provide direct financial assistance to businesses, but provides grants to

nonprofit organizations to provide technical assistance to businesses.

c

Although no CDBG funds have been disbursed for this program, $6.3 million in other city and state

funds have been provided in loan loss reserves to private banks and nonprofit lenders that have

provided $31.5 million in loans to 950 businesses. Empire State plans to reimburse city and state

disbursements with CDBG funds in the future.

Sources: Empire State and GAO analysis of the Empire State Disaster Recovery Database.

In addition to the small business programs, Empire State officials said that

retention assistance for larger businesses is particularly important to the

future of the lower Manhattan economy. To a great extent, larger

businesses and their employees provide small businesses in lower

Manhattan with a client base. Small businesses in turn provide larger

businesses and their employees with services ranging from business

consulting, accounting, and office supplies to personal services, such as

dry cleaning, dining establishments, and newsstands. Empire State has

allocated $5 million for a recovery grant program for larger businesses

with more than 500 employees nationwide, but with fewer than 200

employees in lower Manhattan, from which it has disbursed $3.1 million to

assist 18 businesses. Empire State also has allocated $170 million for a

larger firm business attraction and retention program, and LMDC is

seeking approval to provide Empire State with additional funds, of which

$150 million would go toward this program, bringing the total program

allocation to $320 million. As of September 11, 2002, no disbursement of

funds had been made from this program. According to Empire State, it had

made offers to 102 businesses of which 50 had accepted offers totaling

$140 million—a process that requires a much longer time frame than does

the SFARG Program.
Page 8 GAO-03-88 September 11

The BRG Program for small businesses offers grants to compensate for

economic losses. The BRG Program is Empire State’s most far-reaching

business assistance program. The first BRGs were provided in midFebruary 2002. As of September 11, 2002, 8,783 businesses had received

BRG grants totaling $254 million. The median grant amount was $9,261.

Businesses with fewer than 50 employees accounted for 95 percent of the

businesses receiving BRGs and received $200 million, or 79 percent of the

total amount of BRGs disbursed. All types of businesses are eligible for

BRGs, and assisted businesses can be categorized into various sectors, as

shown in figure 1. The largest number of businesses assisted falls into

three sectors: professional and technical services; finance, which also

includes insurance; and retail trade.

Figure 1: Types of Businesses Receiving Business Recovery Grants

Source: GAO analysis of Empire State database information on 8,783 BRG recipients.

To be eligible for a BRG, businesses must have had fewer than 500

employees worldwide; have been located on or south of 14th Street in

Business Recovery Grants

Compensate for Economic

Loss

Finance and insurance

Retail trade

Other

Accommodation

and food service

Wholesale trade

Manufacturing

Health care

assistance

and social

Information

Real estate

Arts, entertainment,

and recreation

Admin and

support services

and technical

services

Professional

BRG recipients

Sector

0

500

1,000

1,500

2,000

2,500

2,115

1,507

1,203

975

711

517

410 358

265 262 255 205
Page 9 GAO-03-88 September 11

Manhattan on September 11, 2001; and have suffered uncompensated

economic losses related to the attacks. The program identifies four

geographic areas, or zones, upon which it then bases the number of days

of revenue for which it will compensate. In the BRG computation, the

number of days of revenue increases the closer the zone is to the World

Trade Center site. See appendix II for a map that identifies these

geographic areas. Revenue periods range from 3 to 25 days, and maximum

grant amounts range from $50,000 to $300,000, not to exceed a business’

economic loss after adjusting for insurance and other compensation.12 In

addition to other eligibility requirements, businesses must still be

operating in the city or agree to resume operations in the city within 1 year

of the receipt of grant funds as well as agree to retain a substantial portion

of their business operations in the city for at least 3 years. The program

will accept applications through December 31, 2002.

The size of businesses assisted varies as measured by the number of

employees and annual revenues. Businesses with fewer than 10 employees

accounted for about 75 percent of the businesses assisted (see fig. 2).

Recipients of BRG assistance who had revenues of less than $1 million

accounted for 5,785 businesses, or about 67 percent of the businesses

assisted (see fig. 3).

 12Prior to August 28, 2002, the number of days of revenue included in the grant

determination was 2 to 10, depending on the zone in which a business was located.

According to Empire State officials, this change was made when Empire State reassessed

the amount of funding available and the needs of businesses, particularly those that were

located in or near the World Trade Center site.
Page 10 GAO-03-88 September 11

Figure 2: Percentage of Business Recovery Grant Recipients, by Number of

Employees

Source: GAO analysis of Empire State database information on 8,783 BRG recipients.

0.9%

200 or more employees

1.7%

100 to 199 employees

•

2.8%

50 to 99 employees

20%• 10 to 49 employees

74.6%

•

Fewer than 10 employees
Page 11 GAO-03-88 September 11

Figure 3: Annual Gross Revenues of Businesses Receiving Business Recovery

Grants

Source: GAO analysis of Empire State database information on 8,662 BRG recipients.

The BRG Program has provided assistance to thousands of businesses;

however, it has awarded only about one-half of the number of grants it

originally estimated and has not covered a substantial portion of the

uncompensated economic losses reported by businesses. Although Empire

State estimated that it would make 19,600 grant awards, on the basis of the

number of small businesses believed to be located in the eligible area, as

of September 11, 2002, it had provided 9,373 grants.13 Empire State is

making additional outreach efforts and hopes to increase the number of

businesses assisted. Analysis of the economic losses reported by

businesses shows that at the median of businesses receiving a BRG, the

 13These grants were made to 8,783 businesses. Some businesses received multiple grants

because of appeal decisions or supplemental grant awards.

Number of recipients

0

500

1,000

1,500

2,000

Gross revenue category

Less than

$100,000

$100,000 -

$249,999

$250,000 -

$499,999

$500,000 -

$999,999

$1,000,000 -

$1,999,999

$2,000,000 -

$4,999,999

$5,000,000 -

$9,999,999

$10,000,000

and over

1,349

1,549

1,451 1,436

1,177

967

394

339
Page 12 GAO-03-88 September 11

BRG covered about 17 percent of a business’ losses that were not covered

by insurance and other city and state grants.14 Empire State recently

changed the BRG computation, both retroactively and prospectively, to

increase the number of business day revenues considered in determining

the grant amount, particularly for those businesses that were in or near the

World Trade Center. This change will result in increased payments to

some businesses and thereby reduce the amount of their uncompensated

economic losses.

With new criteria for increased payments and additional applications

expected, Empire State is estimating that the total allocation for the BRG

Program will be $481 million. Empire State also is expected to use CDBG

funds to reimburse city and state programs that provided grants to small

businesses soon after the September 11 attacks. The city and state

programs have disbursed $24 million in assistance; however, as of

September 11, 2002, neither had filed for reimbursement. As previously

noted, LMDC is currently seeking approval to provide Empire State with

additional CDBG funds, of which $150 million would go toward the BRG

Program, bringing the total program allocation from $331 million to $481

million. Empire State and LMDC plan to meet the federal legislative

requirement that $500 million in CDBG assistance be used to compensate

small businesses, nonprofits, and individuals located in lower Manhattan

almost exclusively through the BRG Program. The remaining expenditures

will come from part of LMDC assistance to individuals through its housing

assistance program.15

 14This means that BRGs covered less than 17 percent of uncompensated losses for

businesses below the median, and that BRGs covered more than 17 percent of

uncompensated losses for those businesses above the median. An additional analysis of the

extent to which BRGs covered total estimated losses shows that at the median, BRGs

covered an estimated 15 percent of total estimated losses, without accounting for other

compensation.

15In addition to the housing assistance that LMDC provides to those persons who make a

commitment to remain in lower Manhattan, it offers a $1,000 grant per household to those

persons who have continued to live in the area since September 11, 2001.
Page 13 GAO-03-88 September 11

The SFARG Program offers grants to qualifying businesses (i.e., businesses

with no more than 200 employees that are located or planning to locate in

the general area south of Canal Street) that sign a new lease or renew an

existing lease for a minimum of 5 years.16 For existing businesses to be

eligible, their current lease must expire no later than December 31, 2004,

except for businesses located in an area designated as the “October 23rd

Zone.”17 The program offers grants on the basis of the number of

employees in the business. Grant payments are made in two installments,

the first at the time of application approval and the second 18 months after

the application date. Total payments are $3,500 per employee, except for

businesses that were in the “Restricted Zone” and remained downtown, for

whom total payments are $5,000 per employee.18 The program will accept

applications through December 31, 2004.19

The first SFARG assistance was provided on June 13, 2002. As of

September 11, 2002, Empire State disbursed $12 million to 246 businesses

in initial installment payments. The median grant amount was $27,500. The

SFARG Program initially was limited to businesses with a minimum of 10

and no more than 200 employees. In response to public reaction, the

program was amended to expand eligibility to all businesses with no more

than 200 employees, with no lower limit. The program also has been

criticized for excluding businesses that were located in the eligible area as

of September 11, 2001, but that had long-term leases that did not expire by

December 31, 2004. Business advocates argue that those businesses also

had a demonstrated commitment to the area, which should make them

eligible and not place them at a disadvantage relative to new businesses

 16The exact area description for the eligible area is “that area within the Borough of

Manhattan bounded on the north by the centerline of Canal Street, from the Hudson River

to Rutgers Street, then southeast along the centerline of Rutgers Street and continuing

along the centerline of Rutgers Slip to the East River.” In addition, businesses that were in

an area defined as the “Restricted Zone” may obtain a grant of $3,500 per employee, if they

relocate outside of the general eligibility area on or prior to December 31, 2002, but still

remain in the city.

17An area designated by the Mayor’s Office of Emergency Management wherein pedestrian

and vehicular traffic was restricted during September 27 through October 23, 2001. A

company located in this zone must sign a new lease; renew an existing lease; or reaffirm an

existing lease, which must expire on or after September 11, 2006.

18An area designated by the Mayor’s Office of Emergency Management, wherein pedestrian

and vehicular traffic was restricted during September 19 through September 26, 2001 (see

app. II).

19Except for those applicants who enter into new leases between September 1, 2004, and

December 31, 2004, who will have until April 2005 to submit a completed application.

Small Firm Attraction and

Retention Grants Are

Meant to Help Businesses

Move to or Remain in

Lower Manhattan
Page 14 GAO-03-88 September 11

coming to the area. Empire State officials told us that SFARG was

designed to provide incentives to businesses at risk of leaving, not for

those that already had long-term commitments in the area. Additional

criticism has been made that SFARG took too long to put the program in

place and that relatively few businesses have received any benefits. LMDC

is currently seeking approval to provide Empire State with additional

CDBG funds, of which $50 million would go toward the SFARG Program,

bringing the total program allocation from $105 million to $155 million.

The Business Recovery Loan Program will provide funding to communitybased lending organizations, which in turn will provide low-cost working

capital loans to businesses that were adversely affected by the terrorist

attacks and to businesses that have subsequently located or will locate

new operations in lower Manhattan.20 The program is intended to enhance

access to capital to businesses, particularly to those that do not meet SBA

credit or eligibility criteria for disaster loans. Loans are available to

businesses (1) located on or south of 14th Street in Manhattan as of

September 11, 2001; (2) located in the five boroughs of New York City, but

outside of lower Manhattan, that were adversely affected because at least

10 percent of their revenues were derived from sales or services to other

businesses located on or south of 14th Street in Manhattan; or (3) newly

located on or south of 14th Street in Manhattan since September 11, 2001.

As of September 11, 2002, Empire State had selected 10 organizations to

participate in the Business Recovery Loan Program. State officials had not

disbursed any funds from the program and were in the process of

contracting with the lending organizations. Under the program, lending

organizations can make loans up to $250,000 per business. Repayments of

principal by the borrowers of eligible loans may be retained by the lending

organization as capital for making additional small business loans in the

lender’s target area. A business advocacy group has criticized Empire

State for taking too long to put the program in place.

The Technical Assistance Program provides grants to community-based

organizations and other service providers to allow them to provide

additional assistance to businesses affected by the World Trade Center

 20Funds may be used for payroll; rent; utilities; inventory; and, in certain circumstances,

refinancing existing debt.

Business Recovery Loan

Program Will Increase

Access to Capital

Technical Assistance

Program Funds Legal,

Planning, and Other Aid
Page 15 GAO-03-88 September 11

disaster. The program allocation is $5 million, with a maximum grant of

$250,000 per organization. Technical service providers are to assist small

businesses with strategic planning; finance, insurance, and legal issues;

and basic business management and to help businesses identify and access

disaster funds available from CDBG-funded state programs and other city,

state, and federal government agencies. The service providers may also

assist with marketing, member development, and attraction efforts. To

qualify for technical assistance, businesses must have fewer than 200

employees, have been affected by the disaster, and currently be located

south of 14th Street in lower Manhattan.

As of September 11, 2002, Empire State had selected 23 community-based

and other service providers for the program and had provided a total of

$224,000 to 4 of the organizations—some of which already offered

technical assistance as part of their ongoing assistance programs.

Although such organizations already have offered services to some

businesses and over a year has elapsed since the attacks, a state official

said that there is still a need for additional services and that more and

better information currently exists to help make business decisions than in

the period immediately after September 11, 2001. Empire State officials

also hope that businesses that obtain technical assistance will apply for

financial assistance, if they have not done so already.

The Empire State action plan allocates $15 million to provide loan loss

reserve subsidies to lenders making bridge loans to affected businesses.

Empire State is a partner in the World Trade Center Disaster Recovery

Bridge Loan Program, a joint city-state program that began in October

2001. Through this program, the city and state provide loan loss reserve

subsidies to participating lenders, which make bridge loans to businesses

awaiting SBA loan approvals.

Eligible businesses are New York City-based, commercial, industrial, and

retail enterprises and not-for-profits that were affected by September 11

and that are applying for SBA disaster loans. Participating banks and

community-based lenders make the bridge loans to provide interim capital

to businesses. If the SBA loan is approved, the business pays off the bridge

loan with the SBA loan proceeds. If the borrower does not qualify for an

SBA loan, the lender may restructure the bridge loans as term loans. In the

original Bridge Loan Program, New York City and State shared equally in

providing participating lenders with a 20 percent loan loss reserve subsidy

for approved bridge loans. Empire State will use CDBG funds to reimburse

the city and state for their loss reserve expenditures at a later date.

Bridge Loan Allocation

Will Contribute to City and

State Efforts
Page 16 GAO-03-88 September 11

Participating lenders have disbursed $31.5 million in bridge loans to 950

businesses as of September 11, 2002. The total city-state loan loss reserve

payments total $6.3 million. The Bridge Loan Program is open until

January 31, 2003, corresponding to the SBA Disaster Loan Program’s

ending date.

Empire State and LMDC are not alone in their efforts to provide assistance

to small businesses in lower Manhattan. There are many other

organizations from all levels of government and the private and nonprofit

sectors that have come forward to offer loans, grants, and technical

assistance to small businesses affected by the disaster. Often these

organizations were providing assistance within weeks or months of

September 11, well before the Empire State programs became available.

SBA disaster assistance is the other major source of federal assistance to

businesses in New York. SBA began making loans within days after the

terrorist attacks and has since made thousands of loans to businesses

throughout the region. New York City and State offered cash grants to

businesses within the first few months after the terrorist attacks as well as

bridge loans to businesses through participating lenders. Some banks have

also provided additional assistance and short-term loans to affected

businesses. Finally, many nonprofit organizations, often funded by

donations and charitable groups, have made loans and grants and offered

other aid to hundreds of small businesses. Although these programs have

not reached as many businesses or provided as much funding as the

Empire State programs, they have filled a need by providing early

assistance and targeting hard-to-reach groups and businesses. Some of

these organizations, as well as business advocacy groups, also have played

an important role in facilitating the flow of information among businesses

and representing the interests of small businesses recovering from the

disaster.

SBA, New York City

and State, Banks, and

Nonprofit

Organizations Have

Also Assisted Small

Businesses
Page 17 GAO-03-88 September 11

In the aftermath of September 11, SBA declaration number 3364, “New

York City Explosions and Fires,” entitled business owners, nonprofit

organizations, homeowners, and renters in New York City and the

surrounding region to apply for SBA physical disaster loans and economic

injury disaster loans (EIDL).21 Congress made special appropriations of

$175 million to SBA for disaster assistance to respond to the terrorist

attacks. SBA can use the appropriations to provide approximately $651

million in loans, while allowing $40 million for program administration.

The appropriations are being used to cover the “subsidy rate” of the loans,

which represent the costs to the government for the loans.22 From its first

loan on September 15, 2001, through September 11, 2002, SBA provided

4,381 loans totaling $346 million within the broadly defined disaster area;

of this $346 million, businesses in lower Manhattan received $154 million.23

SBA’s deadline for filing applications has been extended several times and

is now January 31, 2003.

Physical disaster loans go to eligible business owners (for any size

business), nonprofit organizations, homeowners, and renters. Business

loan terms are for a maximum of 30 years at a 4 percent interest rate when

no credit is available elsewhere.24 The loans can be used to repair or

replace disaster-damaged property, including real estate, machinery and

 21Under another declaration creating an expanded EIDL, number 9TNY, SBA made all New

York businesses eligible for assistance; however, the expanded EIDL could not be funded

out of supplemental appropriations. In addition, SBA was authorized $75 million for a new

Supplemental Terrorism Activity Relief (STAR) Program, which provided $4.5 billion in

additional funding for 7(a) loans for businesses anywhere in the United States that can

show direct or indirect adverse impact as a result of September 11. The 7(a) Loan Guaranty

Program operates through private-sector lenders providing loans that are, in turn,

guaranteed by SBA. We have not included either SBA’s expanded EIDL or the STAR

Program in our review, since we are focusing on lower Manhattan. Also, businesses in

lower Manhattan would be unlikely to use STAR, since its terms are not as favorable as

those offered through the disaster assistance loan under the explosions and fires

declaration.

22SBA budgeted $6 million for physical loans, which at a subsidy rate of 14.67 percent,

allows for $41 million in loans. SBA budgeted $129 million for EIDLs, which at a subsidy

rate of 21.16 percent, allows for $610 million in loans.

23For this disaster declaration, the eligible area included 15 New York counties for either

physical or economic injury claims. Additional eligibility areas for economic injury claims

include: 6 additional counties in New York, 6 counties in New Jersey, 2 counties in

Connecticut, 2 counties in Pennsylvania, and 1 county in Massachusetts. Nonprofit

organizations are also eligible for loans and are included in our “business” statistics.

24When credit is available elsewhere, the maximum business loan term is 3 years at an 8

percent interest rate.

SBA Disaster Assistance

Aids Businesses,

Nonprofits, Homeowners,

and Renters
Page 18 GAO-03-88 September 11

equipment, inventory, and supplies. SBA also gives EIDLs to eligible small

businesses and nonprofits. SBA determines what constitutes a “small”

business on the basis of the type of business and its revenue or number of

employees.25 EIDL loans can be used for working capital, including making

payments on short- or long-term notes or accounts payable. The loans

carry a 4 percent interest rate but are only available to applicants with no

credit available elsewhere. Loan amounts for both physical disaster and

EIDL loans have been raised to $10 million and nonprofits have been made

eligible for this disaster only. Collateral is required for physical loans over

$10,000 and for EIDL loans over $5,000. SBA also requires that applicants

have a reasonable ability to repay the loan and any other obligations from

expected earnings. Table 2 shows SBA assistance to businesses in lower

Manhattan, as of September 11, 2002.26

Table 2: SBA Loans to Businesses in Lower Manhattan, as of September 11, 2002

Dollars in millions

Program

Number of

approved business

loans

Total amount of

loan approvals

Total amount of

loan

disbursements

Physical Disaster

Loan 503 $32 $16

Economic Injury

Disaster Loan 1,983 168 139

Total 2,486 $201 $154

Note: Program amounts may not sum to totals due to rounding.

Source: SBA.

Business advocacy groups have criticized SBA for requiring collateral,

particularly personal residences, for business loans and for denying too

many loans. According to SBA data, denials and withdrawals have

accounted for 54 percent of all business application dispositions.27 The

primary reasons for denial were “no repayment ability” and “unsatisfactory

 25Although many exceptions exist, SBA has established two widely used size standards–500

employees for most manufacturing and mining industries and $6 million in average annual

receipts for most nonmanufacturing industries.

26This area was defined using zip codes, encompasses an area identified by the U.S.

Department of Labor’s Bureau of Labor Statistics as being lower Manhattan, and is roughly

similar to the eligibility area used in the state’s Business Recovery Grant Program.

27Without including application withdrawals, of those applications processed to a decision

to either approve or deny, 44 percent of business applications were denied.
Page 19 GAO-03-88 September 11

credit.” The primary reasons identified for withdrawals were “no IRS

record found” and “failure to furnish additional information.” SBA has also

received criticism for not providing loans in a timely manner. According to

SBA data, the average elapsed time from the receipt of a completed

business loan application to disbursement issued is 38 days.28 Although

additional funding remains available for disaster loans, the number of

applications has dwindled in recent months. SBA officials said that some

recent applications are for businesses that already have received loans but

are seeking additional loans.

SBA’s outreach efforts have included opening multiple locations to

distribute and explain applications and door-to-door outreach to affected

businesses. At one time, SBA worked from 20 different locations

throughout Manhattan at which business owners could get SBA disaster

applications and information, including 1 location in Chinatown with

multilingual personnel. SBA currently makes loan applications and

information available at 2 locations and over the telephone and Internet.

SBA’s Service Corps of Retired Executives Program also has provided

business counseling to affected owners.

Funded in part by SBA and the state of New York, the New York Small

Business Development Centers (SBDC) have seen increased demand at

regional locations in their roles of providing business counseling and

management assistance to small businesses since September 11, 2001.29

SBA has trained SBDC personnel to help business owners complete

disaster loan applications; in turn, SBDC personnel have helped more than

500 business owners apply for SBA disaster loans. The SBDC program has

also established its own loan fund through private donations and provided

$5,000, 3-year loans at a 3 percent interest rate to 170 businesses, for a

total disbursement of $850,000. Although the loan program is now closed,

having expended all of its funds, SBDC officials are looking to obtain

additional funding to reopen the program in the near future. SBDC

 28SBA business loan processing time averaged 12 days from acceptance of an application to

a determination to approve or deny a loan request. Business loans averaged 18 days from

application to SBA’s issuance of closing documents, after which time the applicant is

responsible for contacting SBA to set up a closing date.

29A national program sponsored and administered by SBA, SBDC participants are generally

universities and community colleges and networks of service delivery centers that are

established to provide management and technical assistance to small businesses.

Small Business

Development Centers

Provide Technical

Assistance and Financial

Planning Advice
Page 20 GAO-03-88 September 11

officials also anticipate obtaining state funding to establish another loan

program to provide additional assistance to affected small businesses.

Both the city and state of New York established assistance programs

within months of the World Trade Center attacks.30 Specifically, the city

established the New York City Lower Manhattan Business Retention Grant

Program to provide cash grants to nonretail businesses. This program

began on November 14, 2001, and provided cash grants totaling $10 million

to 1,674 nonretail businesses, including manufacturers and professional

service firms. The program stopped accepting applications on March 31,

2002. To qualify, businesses had to be located south of Houston Street and

employ 50 or fewer workers; they also had to apply for a loan from SBA or

an approved lender. A business could receive up to $2,500 upon

completing a loan application and up to a $7,500 cash grant (for a

maximum of $10,000) upon approval of the loan, depending on the size of

the requested loan. Moreover, businesses that were located in the World

Trade Center were eligible for the full $10,000 without having to apply to

SBA.

The state established the World Trade Center Retail Recovery Grant

Program to provide cash grants to retail businesses. This program began

on November 5, 2001, and provided 3,048 retail businesses in lower

Manhattan with cash grants totaling $13.7 million. Eligible businesses

included retail and personal service firms, with fewer than 500 employees,

located south of Houston Street. The program offered businesses

compensation equal to 3 days of lost revenue, capped at $10,000, and

required that businesses continue to operate in New York City. The state

closed the program to new applications on December 31, 2001, after which

Empire State began offering grants through the CDBG-funded Business

Recovery Grant Program. Under the Empire State BRG Program, if a

business had previously received a Retail Recovery Grant, the BRG grant

amount was reduced by that amount.

While the city and state grant programs are now closed to new

applications, a joint city-state bridge loan program—the World Trade

Center Disaster Recovery Bridge Loan Program—that works in

 30The Empire State action plan identifies each of these programs as providing assistance

that may be reimbursed with CDBG funds; however, as of September 11, 2002, neither the

city nor the state had requested reimbursement for this assistance.

City and State Programs

Also Give Grants to Small

Businesses
Page 21 GAO-03-88 September 11

cooperation with banks is still available, as previously described in this

report. This program has participating banks and community-based

lenders provide low-cost bridge loans to small businesses and nonprofits.

The city and state each provided banks with 10 percent of the approved

loan amount as a loan loss reserve. The first program loans were made on

October 5, 2001. Subsequently, Empire State allocated $15 million from its

CDBG funds to provide loan loss reserve subsidies and expects to

reimburse the city and state for their prior and continuing expenditures.

In addition to the grant programs, within days of the September 11 attacks,

both the city and state established emergency walk-in centers that assisted

small businesses. A toll-free hotline also was established to direct callers

to emergency services. Business location services were provided as well

as comprehensive on-line and hard-copy directories of emergency and

business services available from governmental and nongovernmental

sources. Outreach has included radio and print advertisements, direct

mail, direct telephone calls, informational workshops, and an “Adopt a

Company” Program.

In addition to their participation in the Bridge Loan Program, some banks

in New York offered additional assistance to small businesses, although

there are no comprehensive data on the amount of total assistance they

provided. Some banks offered short-term loan programs for businesses

affected by the disaster. Loan terms were usually short, extending up to 5

years, with an interest rate at or below prime. However, banks did

maintain existing credit standards; consequently, some banks had a high

denial rate. For example, one bank denied over 80 percent of the

applications that it received.

After the September 11 terrorist attacks, several nonprofit organizations

that traditionally assisted small businesses and had an interest in the

business environment of lower Manhattan saw an immediate need that

they could fill. Many nonprofits created programs for affected small

businesses within weeks of the disaster and raised funds from banks,

foundations, and other private contributors. As more disaster-related

funding has become available, the nonprofits have been able or are

seeking to supplement their original funds to expand or continue

programs. The September 11th Fund, an organization dedicated to

providing emergency and long-term assistance to the victims of September

11, became a major funding source for the nonprofits. The fund set aside

$50 million to help small businesses and provided significant funding to

Banks Aided Small

Businesses

Nonprofit Organizations

Stepped in Quickly after

September 11 and

Continue Offering Services

to Small Businesses
Page 22 GAO-03-88 September 11

many of the organizations mentioned below. Additionally, some of the

nonprofits discussed below and others have participated in the city and

state’s Bridge Loan Program, have been selected to receive funding from

Empire State to provide technical assistance, and/or have been selected to

receive some of the $50 million of loan capital that Empire State will be

awarding.

Nonprofits have been able to offer different and sometimes more personal

services than those provided through the larger federal programs. For

instance, Accion New York (Accion), a small business mircrolender, offers

a package of loans, small grants, and personal technical assistance through

its newly created “American Dream Fund.” These services include help in

completing forms and creating needed financial documents. The New York

City Partnership provides businesses with recoverable grants and

intensive technical assistance, such as a mentor to help with future

business planning. The partnership also created a goods and services

clearinghouse for businesses affected by the disaster. Another nonprofit,

Seedco, offers not only loans and grants, but also wage subsidies to enable

small businesses to meet payroll and retain workers who might otherwise

be laid off. For each business, Seedco will subsidize 50 percent of the

salary of up to 10 employees who make $12 an hour or less.

Often, nonprofit programs will specifically target types of businesses that

are either overlooked or ineligible for federal programs or other nonprofit

assistance. Renaissance Development Corporation (Renaissance), which

has been working in Chinatown since 1973, markets its programs to

affected businesses, such as the garment industry and limousine drivers.

Accion targets businesses that have been turned down for SBA loans;

specifically, Accion established a working relationship with SBA in which

SBA refers these businesses to Accion. Accion also was located at a

business recovery center, where clients had access not only to Accion but

also to Empire State and SBA programs. The partnership’s program

specifically chose to target retail businesses with 50 or more employees, in

part, because Seedco’s program covers those with fewer than 50

employees. Many of the nonprofits have far more flexible lending criteria

than either SBA or the banks, thereby allowing them to make loans the

others have eschewed. Unlike SBA, Renaissance does not require

collateral or tax receipts, instead it relies on store receipts, site visits,

lottery sales, and personal knowledge of a business to determine business

viability. Table 3 shows major nongovernmental assistance as of

September 11, 2002.
Page 23 GAO-03-88 September 11

The nonprofits noted above and other groups also have played an

important role in advocating for the interests of small businesses. For

example, newly founded business advocacy groups, such as From the

Ground Up and the World Trade Center Tenants Association, have lobbied

Empire State, city and federal officials, and others to change programs to

benefit small businesses. Some of these groups also have helped facilitate

the flow of information among businesses and organizations, either

formally or informally. The Manhattan Chamber of Commerce, for

instance, has held networking events in lower Manhattan to bring various

resources to one place. Seedco has published a widely used directory of

resources available to help small businesses.
Page 24 GAO-03-88 September 11

Table 3: Major Nongovernmental Business Assistance Programs, as of September 11, 2002

Nongovernmental business assistance programs, as of September 11, 2002

Organization/Type

of assistance

Date began

offering assistance Targeted businesses

Number of

Programs

Total amount

provided Terms/Miscellaneous

Accion/World Vision

Loan October 10, 2001 Affected small business

south of 14th Street (or has

50 percent of its business

there); especially those not

eligible for SBA programs.

227 $2,765,423 Up to $30,000; 5

percent, 5-year term.

World Vision provides

a grant for 10 to 30

percent of the value of

the loan.

Grant October 10, 2001 Same as above. 227 480,000 Same as above.

Downtown Alliance/Seedco

Loan October 23, 2001 Retail and manufacturing

businesses with fewer than

50 employees south of

Canal Street.

195 6,400,000 Up to $100,000 for

loans and $25,000 for

grants; 2 percent, 3-

year term; 50 percent

wage subsidy for

businesses with up to

10 employees that

earn less than $12 an

hour.

Grant October 23, 2001 Same as above. 488 4,600,000 Same as above.

Wage subsidy October 23, 2001 Same as above. 238 1,300,000 Same as above.

New York City Partnership

Recoverable grant November 15, 2001 Businesses south of

Chambers Street with 4 to

99 employees; retail with

50 to 100 employees.

51 7,670,000 $25,000 to $250,000;

0 percent interest.

Renaissance

Loan October 4, 2001 Chinatown businesses with

fewer than 25 employees;

garment factories with

fewer than 50 employees.

134 1,998,000 Up to $35,000; 2

percent, 3-year term.

Grant October 4, 2001 Same as above. 60 123,458 Same as above.

Wage subsidy October 4, 2001 Same as above. 34 456,500 Same as above.

Note: The nonprofits received loan loss reserve subsidies from the city and state’s Bridge Loan

Program for some of the reported loans.

Sources: Accion, Seedco, New York City Partnership, and Renaissance.

We provided HUD, SBA, and Empire State with an opportunity to review

this report. They provided comments that were technical in nature, which

we have addressed in this report where appropriate.

Agency Comments
Page 25 GAO-03-88 September 11

We are sending copies of this report to the Ranking Minority Member of

the House Committee on Small Business, the Chairman and Ranking

Minority Member of the Senate Committee on Small Business, other

appropriate congressional committees, the Secretary of Housing and

Urban Development, and the Administrator of the Small Business

Administration. We will also make copies available to others on request. In

addition, this report will be available at no charge on the GAO Web site at

http://www.gao.gov.

If you have any questions about this report, please contact Nancy

Simmons or me at (202) 512-8678. Key contributors to this report were

Catherine Hurley, Mark McArdle, Dan Meyer, and Barbara Roesmann.

Sincerely yours,

William O. Jenkins, Jr.

Director, Financial Markets and

 Community Investment
Appendix I: Scope and Methodology

Page 26 GAO-03-88 September 11

To obtain information on the assistance provided to small businesses from

Community Development Block Grant (CDBG) supplemental funding, we

interviewed officials from the Department of Housing and Urban

Development (HUD), New York State’s Empire State Development

Corporation (Empire State), and the Lower Manhattan Development

Corporation (LMDC). For our analysis, we obtained detailed program

information and data on the various programs that HUD, Empire State,

and LMDC have created to assist businesses after September 11, including

an Empire State database of grant recipients. This database is the same

one used by the HUD Office of Inspector General to monitor expenditures

in New York. We ascertained how information for this database was

collected and maintained to determine its reliability, and we found the

information to be reliable for our purposes.

To obtain information on other sources of funds available to rebuild and

sustain business in lower Manhattan, we interviewed officials from the

following: the Small Business Administration (SBA), the New York City

Economic Development Corporation, the New York Small Business

Development Center (SBDC), FleetBoston and the Bank of New York, and

nonprofit organizations that provided financial assistance. We selected the

nonprofit organizations by reviewing various media and Internet sources

on the rebuilding effort in New York as well as through referrals from

other organizations concerned with economic renewal in lower

Manhattan. We met with officials from the following nonprofit and other

organizations that offer financial assistance toward the rebuilding and

economic renewal efforts:

• Accion New York,

• Downtown Alliance,

• New York City Partnership,

• Renaissance Development Corporation,

• SeedCo, and

• the September 11th Fund.

We also met with business advocacy groups, whose directors are often

small business owners, to obtain their views on the assistance that Empire

State, SBA, and others provided. These groups included the following:

• From the Ground Up,

• Manhattan Chamber of Commerce,

• Tribeca Organization,

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 27 GAO-03-88 September 11

• Wall Street Rising, and

• the World Trade Center Tenants Association.

We obtained the Empire State disaster recovery database, which captured

data on program activity through September 11, 2002. We used these data

to calculate descriptive statistics on the numbers of businesses, dollar

amounts, and other characteristics of the Business Recovery Grant (BRG)

Program, the Small Firm Attraction and Retention Grant (SFARG)

Program, and the large business recovery grant program. We used median

instead of mean values because the median values were more

representative of the “typical” grant.1

 In addition, we analyzed the database

to determine other characteristics of BRG recipients, including annual

gross revenues, number of employees, type of business on the basis of the

North American Industry Classification System code given, and the extent

to which BRGs covered businesses’ reported losses. We limited our

analysis to disbursed grants. When multiple grants went to the same

business as the result of an appeal or from an award for a supplemental

grant, we summarized the data by business, not by grant. Since the BRG

Program includes nonprofits in addition to small businesses, we included

nonprofits in our analysis, although entities that identify themselves as

nonprofits accounted for less than 3 percent of the total receiving grants.

Other conditions or limitations are described in the explanations of

specific analyses that follow.

For our analysis of business employee size, we used the total number of

employees of the business; when the business had other business

affiliations, we used the total number of employees worldwide. The BRG

Program uses the total number of employees worldwide to determine if a

business qualifies as a small business. In our analysis of revenues of BRG

recipients, we used the gross revenue amount reported at the business

location. This gross revenue amount is the figure used in computing the

grant amount. The database did not have total business gross revenues

that included affiliated businesses. We included both businesses that

received one grant and businesses that received multiple grants, when the

database included the same gross revenue figure for each of the multiple

grants. Also, Empire State informed us that the gross revenue entries

include projected annual revenues for some new businesses that did not

have a year of revenue data, as well as annual expenses, in lieu of revenue,

 1

A median value is a measure of central tendency and does not over represent the influence

of a small number of cases with very large values, as does a mean.
Appendix I: Scope and Methodology

Page 28 GAO-03-88 September 11

for some businesses that do not generate revenues and for nonprofits. For

our analysis of type of business, we used the business classification code

from the database and grouped the results by the first two letters of the

code, which designate the general industry type. Where the groups

represented less than 3 percent of all businesses, we grouped them in the

“other” category.

We made two calculations of the extent to which BRGs compensated for

business losses. The business loss data are self-reported and unaudited by

Empire State. In the first calculation, we determined to what extent BRGs

covered the uncompensated loss incurred by each business. The

uncompensated loss was determined by using the business “net loss”

database entry, which reflected remaining losses after adjusting for

insurance proceeds and the city’s Lower Manhattan Business Retention

Grants; we further reduced this amount by the amount of the state Retail

Recovery Grant. The BRG amount was then divided by the uncompensated

loss figure to obtain the percentage of uncompensated loss covered by

BRGs for each business. Where businesses had received multiple grants

and the net loss figures were the same for each grant, we totaled the

disbursed grant amounts and divided the total by the uncompensated loss

amount. In the second calculation, we determined to what extent BRGs

covered the total loss incurred by each business. We divided the BRG

amount by the total business loss to obtain the percentage of the total loss

covered by BRGs for each business. Where businesses had received

multiple grants and the total loss figures were the same for each grant, we

totaled the disbursed grant amounts and divided it by the total loss

amount. To more accurately characterize the loss and compensation

experience of small businesses in lower Manhattan for this report, we

considered the entire distribution of the above statistics over all

businesses to identify any uneven distribution around the median, or 50

percentile, which was the most common single summary measure we

chose to report.

We conducted our review between April and September, 2002 in

Washington, D.C., and New York, New York, in accordance with generally

accepted government auditing standards.
Appendix II: Map of Lower Manhattan with

Highlighted Empire State Program Areas

Page 29 GAO-03-88 September 11

Source: Empire State.

Appendix II: Map of Lower Manhattan with

Highlighted Empire State Program Areas

(250080)

Fdr Dr

West St

1st Ave

Broadway

2nd Ave

Grand St

3rd Ave

Hudson St

5th Ave

Canal St

E 10th St

E 14th St

Ave C

E 12th St

Bowery

E 4th St

I 78

Mott St

E 6th St

Madison St

Lafayette St

E 13th St

8

7th Ave

E 7th St

Ave B

Spring St

Henry St

Washington St

W 21st St

E 3rd St

Ave D

Ave A

W 18th St

E 11th St

W 16th St

Bleecker St

E 23rd St

W 15th St

Mercer St

W Broadway

W 14th St

Church St

St

Varick St

W 12th St

Allen St

W 11th St

Broome St

W 10th St

E 25th St

Clinton St

Mulberry St

Worth St

Centre St

Delancey St

E 20th St

W 4th St

E 18th St

E 19th St

E 17th St

E 26th St

Forsyth St

E Broadway

E 22nd St

Prince St

Manhattan Bridge

Pa

Pitt St

E 1st St St

Essex St

Ludlow St

Perry St

York St

Elizabeth St

E 24th St

Eldridge

St

Gold St

Fulton St

Park Row

Bank St

Chrystie St

Orchard St

W Houston St

Sullivan St

Crosby St

7th Ave S

Warren St

Pine St

Murray St

Brooklyn Bridge

Jane St

Wall St

Watts St

Pearl St

Chambers St

Thompson St

Reade St

Liberty St

John St

Vesey St

Charles St

William St

W 13th St

E 2nd 

G

St

reene St

W 3rd St

Ridge St

Barrow St

Plymouth St

King St

White St

Leonard St

Walker St

Wooster St

Nassau St

Christopher St

Suffolk St

Norfolk St

Maiden Ln

Broad St

Morton St

Duane St

Laight St

Horatio St

4th Ave

Division St

Delancey St S

E 5th St

E 21st St

Adams St

E 8th St

E 9th St

Ann St

Irving Pl

Bedford St

Baxter St

Beach St

Park Pl

Trinity Pl

Hester St

Barclay St

Vestry St

University Pl

Prospect St

Pike St

Saint Marks Pl

N Moore St

New St

Beaver St

s St

Front St

River Ter

Baruch Dr

Grove St

Gansevoort St

an St

Charlton St

Mac Dougal St

Market St

Cadman Plz W

Catherine St

South St

Water St

Vandam St

Bond St

Greenwich Ave E Houston St Clarkson St

Brooklyn Battery Tu

nnel

Attorney St

Columbia St

Rut

gers St

W 8th St

W 9th St

E 15th St

Willett St

Battery Pl

Hudson Ave Jackson St

State St

Astor Pl

Hubert St

Franklin St

Bayard St

South End Ave

Bethune St

Williamsburg Bridge

Park Pl W

olumbia Hts

Cooper Sq

Harrison St

St

Howard St

Peter Cooper Rd

Cherry St

Bridge St

Vine St

Spruce St

Platt St

Lispenard St

Lewis St

Beekman St

Dominick St

Marshall St

Frankfort St

Whitehall St

Dover St

Main St

Leroy St

Albany St

Pell St

Peck Slip

E 16th St

Cortlandt Aly

Desbrosses St

W Washington Pl

Szold Pl

Union Sq W

Dey St

Washington Sq S

Washington Sq N

Jones St

James St

Baruch Pl

Ramp

Oliver St

Cedar St

Ave Of The Finest

Stone St

Washington Pl

Cornelia St

Mangin St

Stuyvesant St

Rector Pl

Union Sq E

Old Slip

Carlisle St

E 4th Walk

Cardinal Hayes Pl

Shinbone Aly

Sheriff St

Asser Levy Pl

Stuyvesant Loop N

Stuyvesant Loop S

Stanton St Greenwi

ch St

Stuyvesant Oval

Park St

Pike Slip

Minetta St

E 5th Walk

Saint Johns Ln

Cortlandt St

Wanamaker Pl

Hamill Pl

Stuyvesant Walk

Abraham Pl

Market Slip

Washington Mews

Little St

Rivington St

Gramercy Park S

Patchin Pl

Morris St

Waverly Pl

Anchorage Pl

E 20th St

E 5th St

E 9th St

Beekman St

E 11th St

Water St

Pike St

Front St

West St

Rivington St

9th Ave

E 13th St

Hester St

E 16th St

St

Broadw

Cedar St

Franklin St

Jay St

E 8th St

E 9th St

E 15th St

E 28th St

E 16th St

New St

W 13th St

Water St Bridge St

E 5th St

Stanton St

Washington St

E 16th St

W 4th St

Attorney St

Canal St

E 21st St

Front St

Fdr Dr

Water St

Ramp

West St

South St

Cherry St

Houston St. - Canal St.

14th St. - Houston St.

South of Canal St.

Restricted Zone

Houston St. - Canal St.

14th St. - Houston St.

South of Canal St.

Restricted Zone
The General Accounting Office, the investigative arm of Congress, exists to

support Congress in meeting its constitutional responsibilities and to help

improve the performance and accountability of the federal government for the

American people. GAO examines the use of public funds; evaluates federal

programs and policies; and provides analyses, recommendations, and other

assistance to help Congress make informed oversight, policy, and funding

decisions. GAO’s commitment to good government is reflected in its core values

of accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no cost is

through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and fulltext files of current reports and testimony and an expanding archive of older

products. The Web site features a search engine to help you locate documents

using key words and phrases. You can print these documents in their entirety,

including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and

correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site

daily. The list contains links to the full-text document files. To have GAO e-mail

this list to you every afternoon, go to www.gao.gov and select “Subscribe to daily

E-mail alert for newly released products” under the GAO Reports heading.

The first copy of each printed report is free. Additional copies are $2 each. A

check or money order should be made out to the Superintendent of Documents.

GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a

single address are discounted 25 percent. Orders should be sent to:

U.S. General Accounting Office

441 G Street NW, Room LM

Washington, D.C. 20548

To order by Phone: Voice: (202) 512-6000

TDD: (202) 512-2537

Fax: (202) 512-6061

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800

U.S. General Accounting Office, 441 G Street NW, Room 7149

Washington, D.C. 20548

GAO’s Mission

Obtaining Copies of

GAO Reports and

Testimony

Order by Mail or Phone

To Report Fraud,

Waste, and Abuse in

Federal Programs

Public Affairs