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44–251 2008

DISASTER SAVINGS ACCOUNTS: 

PROTECTIONS FOR SMALL BUSINESSES 

DURING A DISASTER 

HEARING BEFORE THE 

SUBCOMMITTEE ON FINANCE AND TAX 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

SEPTEMBER 17, 2008 

Small Business Committee Document Number 110-112 

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 FINANCE AND TAX 

MELISSA BEAN, Illinois, Chairwoman 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

VERN BUCHANAN, Florida, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Bean, Hon. Melissa, Chairwoman .......................................................................... 1 

Buchanan, Hon. Vern .............................................................................................. 2 

WITNESSES 

Brown, Mr. Charles G., CEO Insignia Bank, Sarasota, FL ................................. 3 

Murphy, Ms. Cynthia, Pies & Plates Prepped & Ready, Punta Gorda, FL ........ 6 

Mize, Ms. Maryann, CCIM, Sr. Vice President, Charlotte State Bank, Port 

Charlotte, FL ........................................................................................................ 8 

Grayson, Ms. Kate, Owner, Steelgate, Inc., Bradenton, FL ................................. 10 

APPENDIX 

Prepared Statements: 

Bean, Hon. Melissa, Chairwoman .......................................................................... 18 

Buchanan, Hon. Vern .............................................................................................. 20 

Brown, Mr. Charles G., CEO Insignia Bank, Sarasota, FL ................................. 23 

Murphy, Ms. Cynthia, Pies & Plates Prepped & Ready, Punta Gorda, FL ........ 27 

Mize, Ms. Maryann, CCIM, Sr. Vice President, Charlotte State Bank, Port 

Charlotte, FL ........................................................................................................ 30 

Grayson, Ms. Kate, Owner, Steelgate, Inc., Bradenton, FL ................................. 37 

(III) 

(1) 

DISASTER SAVINGS ACCOUNTS: 

PROTECTIONS FOR SMALL BUSINESSES 

DURING A DISASTER 

Wednesday, September 17, 2008 

U.S. HOUSE OF REPRESENTATIVES, 

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. Melissa Bean [chairwoman of the Subcommittee] presiding. 

Present: Representatives Bean and Buchanan. 

Chairwoman BEAN. The recent onslaughts of hurricanes in the 

southeast, wildfires in California, and floods in the Midwest have 

served as stark reminders that natural disasters have the ability 

to devastate local economies. These catastrophes have wreaked significant fiscal havoc, particularly on America’s small businesses. 

For entrepreneurs with tight profit margins, natural disasters can 

have very serious financial consequences. 

Small businesses are the backbone of our economy, creating over 

60 percent of our nation’s jobs, and it’s important that they are 

able to stay afloat following a natural disaster. Yet, an estimated 

40 to 60 percent of small businesses fail to recover from natural 

disasters. Today’s hearing will examine one potential method of 

mitigating small business risk. 

The first 48 hours following a natural disaster are critical. They 

determine whether a small business will be able to mitigate losses, 

or be forced to close their doors. The SBA plays a critical role in 

this disaster recovery process. SBA’s disaster loan program, for example, provides low interest loans and working capital for businesses. This loan plan has been a lifeline for hundreds of thousands of entrepreneurs. By providing the resources necessary for 

both long and short-term repairs, SBA loans give small businesses 

the tools they need to get back up and running. 

As invaluable as SBA’s loans are, some feel that there are occasions when additional assistance is needed, and it would be helpful 

to have a supplement to SBA’s program. In today’s hearing, we’ll 

examine the role that Disaster Savings Accounts could play in providing such resources. 

Proponents contend that by encouraging small businesses to prepare for future emergencies, Disaster Savings Accounts are a viable 

means of bridging the gap between disaster and relief. According 

to advocates, Disaster Savings Accounts could cover both preVerDate Aug 31 2005 14:37 Oct 14, 2008 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\44251.TXT RUSS
2 

existing and future disaster-related expenses, as well as preventative measures, such as hurricane-resistant doors or windows. 

The SBA already provides entrepreneurs with a number of essential disaster resources. Today we will discuss whether or not those 

services should be augmented. And, if so, by what means. 

I’d like to thank our witnesses for coming here to share your personal experiences and perspective on these issues, look forward to 

your testimony. And now I’ll yield to Ranking Member Buchanan 

for his opening statement. 

[The prepared statement of Chairwoman Bean is included in the 

appendix at page 18.] 

Mr. BUCHANAN. Thank you, Madam Chair. Good afternoon. I 

want to thank our friends from southwest Florida. It’s a region of 

the country that we deal with these things every year. Growing up 

in Michigan, you never thought much about hurricanes and these 

other things, but you had tornadoes. But I appreciate you coming 

here and being here today. 

We want to take the time—I know you’ve been busy, appreciate 

you taking the time out of your busy schedules to come before this 

Subcommittee. I know all of you have traveled a long distance, so 

we’re grateful for that. 

I’d like to thank Chairwoman Bean for this opportunity for us to 

focus on some of these challenges small business face in the wake 

of natural disasters. 

At this very moment, the Gulf Coast region of our country’s 

cleanup following Hurricane Gustas and Ike, and the cost and torment of the damage inflicted has yet to be finally realized. 

Let’s not fool ourselves into thinking that to recover from these 

or other natural disasters will be easy, or that every business will 

escape foreclosure or failure. The hurricanes that have engulfed 

our nation will undoubtedly lead to a flood of applications of SBA 

disaster loans, but even this lifeline for many might be too little 

too late. 

Today we meet to discuss ways to bridge that gap, to hear the 

testimony of those who have actually endured the worst nature has 

to offer, and to add some of their own thoughts to this discussion. 

From my personal experience, both as a small business owner in 

this area, and as a representative of thousands of Florida’s small 

business entrepreneurs that have been devastated by Charley, I believe one of the most practical solutions would be to enable small 

business owners to plan ahead by investing in a Disaster Savings 

Account. 

I envision these accounts as a rainy day fund administered by 

the state of the Federal Charter Banks with tax deferred and interest deferred accruals similar to that of health savings account, the 

529 qualified education savings account, or 401(k). So when disaster strikes the money will be there for you, not waiting, not wondering, not worrying, because many times people get in and never 

make it out of the business. 

The estimate that I read is 40 to 60 percent of businesses fail 

after a disaster, so it’s a big thing. That’s what we were talking 

about today at lunch, is if you didn’t have the support, you 

wouldn’t even be here today. That is completely unacceptable. 

3 

Today we can take an important step in empowering small businesses to meet the challenges of the unexpected with confidence. 

The establishment of a Disaster Savings Account seems to be a 

common sense mechanism that has numerous advantages, and 

very few distractions. It’s one of those things that when you hear 

about this, you think about why not, why didn’t we do it sooner? 

I do want to just say personally, myself having businesses in that 

area, as you know more than anybody, because a lot of you worked 

in the Charlotte County area, I was on vacation actually outside of 

Washington traveling, and I remember that storm Charley coming 

up in our region. It was a Category 2, I remember, on the Weather 

Channel. It went to a Category 4 like that. And then it was supposed to go into Tampa, north of Sarasota-Bradenton, and it came 

right into Charlotte Harbor, where nobody was really as prepared 

as they needed to be. So these things—and growing up in Michigan, I always thought to myself it hits the shores, but as many of 

you know, it went all the way up through Arcadia and up to Orlando. It went all the way across the state, so they have a big impact. 

So, again, I just want to thank you for the opportunity to come 

and visit today, and I, Madam Chair, yield back. 

[The prepared statement of Mr. Buchanan is included in the appendix at page 20.] 

Chairwoman BEAN. Well, I think we’re now going to move to testimony from our witnesses. Each of you will have five minutes to 

deliver prepared statements. The timer begins when the green light 

is illuminated, and when one minute of time remains, the light will 

turn yellow, and then the red light will come on when your time 

is up. And I’ll yield back to Mr. Buchanan to introduce and recognize our witnesses. 

Mr. BUCHANAN. Thanks. Charlie Brown comes to us from Sarasota Florida. He’s also for quite a while in Charlotte County, so he 

knows that area very well, as well. You’re south, maybe, what, 50 

miles south of Sarasota or so. But he serves as Chairman and CEO 

of Insignia Bank. Mr. Brown’s previously served as Chairman of 

Tier II Banks for the Florida Bankers Association. He’s been Chairman of the Florida Bankers Education Foundation. He’s a frequent 

speaker on the topic of disaster recovery plans, and we appreciate 

the opportunity for you to be here today. And I’m excited about 

having two banks, because I think community banks could have 

the biggest impact, positive impact to help small business get back 

on your feet. I know that’s been the way you’ve led in terms of your 

banks over the years. So thank you, Mr. Brown, for being here 

today. 

STATEMENT OF CHARLES G. BROWN, CHAIRMAN AND CEO OF 

INSIGNIA BANK, SARASOTA, FLORIDA 

Mr. BROWN. First of all, I want to applaud the Committee. I 

think as Chairwoman Bean mentioned in her opening statement, 

in these very unusual economic times, but also in unusual times 

as it pertains to natural disasters, this ought to be something that 

ought to be first and foremost on our mind. 

Secondly, from a tax incentive standpoint, I’m a big believer in 

using tax incentives to create positive behavior. And especially as 

4 

it pertains to things like savings accounts. There’s a tremendous 

multiplier effect that takes place when that money is re-loaned into 

the community. It’s just a positive thing for economic stimulus, not 

to mention in this case, it would be a fantastic safety net. 

Small businesses, I know I’m preaching to the choir here, but I’m 

just a big fan. I think we all know when we walk into a small business, you see the passion in the eyes of the small business owner, 

typically resulting in a very positive customer service experience. 

And when I ask-I have a habit as a banker asking the other customers in that room what do you think about this business? Why 

do you come here? And it always has something to do with the 

owner being very involved. 

With that HSA, or with the DSA product in mind, though, I 

think the devil is going to be in the details. And, again, this is part 

of the process to find out what the initial reaction might be from 

the business community. 

I still believe as a banker our number one challenge with small 

businesses is funding. You can call it capital, depending on what 

form it takes, or debt. We all know a lot of businesses use home 

equity loans to the extent they were still available, and credit 

cards, but one of the things that I’ve experienced in the past has 

been profitability models that will, I guess, entice lenders, whether 

they be banks or private lenders, to lend to small businesses, and 

to assist them in situations like this. So, as an aside, I just encourage the Committee to consider things like tax incentives for lenders 

to small businesses. 

We were a large SBA lender, one of the largest in the state back 

in the early ‘90s. And back then, we were discussing this today, the 

funding just flowed very freely by using the SBA program, but 

there was a tax of source that was put in place to share in some 

of that revenue. And, sure enough, we closed up all of our loan production offices and pulled out of the program. In fact, Mrs. Mize, 

who is testifying today, was my successor in that program, did a 

great job of running it. So, as with anything, I’d encourage you to 

look at what the profitability would be to the small business, but 

also to those that might be providing the service. 

With something like a DSA, anything that we put in place is 

going to have to be regulated and monitored. We know that. That 

is a fact of life. The one issue in the package that I received from 

the Committee that did a wonderful job, by the way, of outlining 

what you had in mind here, that concerned me was the reference 

to HSA, Health Savings Accounts. 

I would implore the Committee not to follow the structure of 

HSAs. If you dig into HSAs a little bit further, you’re going to find 

that the regulatory burden that had been placed on the banks, and 

I realize there was also a statement in the package that said it 

would not be on the banking industry, rather, the small business 

owner. But the HSA regulatory burden has literally shut down 

many community banks from even getting into the programs. And 

I think if you were to go do some research in that area, you’d find 

that across the board. 

Again, it’s back to that profit motive. When they looked at what 

the penetration rate of that product might be, versus the reguVerDate Aug 31 2005 14:37 Oct 14, 2008 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\44251.TXT RUSS
5 

latory, I guess, burden that comes with it, it just didn’t make sense 

any more. 

One other aspect I’ll mention, and I would encourage you to get 

a banking regulatory official in here, because if you will, especially 

in these times right now, imagine an account that has been earmarked for disaster. A disaster, we’ll go ahead and use hurricanes 

because that’s what we’re talking about, comes through town. The 

entire group of funding would then be used immediately from the 

banking system. And my concern there is, and I’m not quite sure 

what the answer to it is, that it might be considered something a 

little bit different than your typical deposit. So I think it would be 

very important for the banking industry to weigh in on that. 

The other aspect is this; if 35 percent of the businesses are using 

business interruption insurance, we need to make sure that this 

product would penetrate at a much higher level. So I would encourage focus groups and surveys to business owners laying this plan 

out, and finding out from them how much of them would actually 

use it. 

So, in addition to that, promoting the program, and maybe even 

the name of the program might be something that would be under 

consideration. I understand DSA, HSA works in Washington to get 

bills approved, but it may not be as favorable when it comes to 

marketing, as I found products with the word ‘‘disaster’’ in them 

don’t typically do as well. 

So what do I think the solution is? These are some of the challenges. I believe one of the solutions is the Bridge Loan Program 

that I saw work exceptionally well in Florida immediately after the 

hurricane. And the reason it worked well was it was a local program, using local resources through the EDC and local bankers. 

I would encourage the Committee to take a look at that program 

as a beta, if you will, on something that could be rolled up to a federal level. And if you look at the math and the economics that come 

along with that program, I think you might find that the funding 

requirement is very minimal, if anything, after all the numbers 

have been run. 

So I know I’ve taken my time, but I’d be more than happy to help 

with this process in the future. As a small bank with less than 40 

employees, I have great passion for my business, for small business, and most importantly, for our country. So thank you very 

much. 

[The prepared statement of Mr. Brown is included in the appendix at page 23.] 

Mr. BUCHANAN. Thank you, Mr. Brown. 

Ms. Murphy, I’m excited that you’re here, because you represent 

really small business of America. I know when my experience with 

the Sarasota Chamber in our area, we had 2,400 businesses, a lot 

of them, 90 percent were 50 employees or less. 

But Ms. Murphy is an owner of a unique gourmet store in Punta 

Gorda, Florida called Pies & Plates. Cindee has a Bachelor’s degree 

from the University of Florida in Public Relations, and a Marketing 

Minor, a law degree from the University of Florida. Before opening 

her business, Cindee practiced law for 12 years, was board certified 

in two different specialities. Appreciate you coming in and giving 

6 

your real world experience about really what happens when you 

get hit by a storm like Charley. 

STATEMENT OF CYNTHIA MURPHY, OWNER OF THE BUSINESS 

′′PIES & PLATES′′, PUNTA GORDA FLORIDA; 

Ms. MURPHY. Thank you. It’s been a rough week for much of the 

U.S., the last couple of weeks, I guess, with Hurricane Fay, Hannah, and Ike, or Gustav, Hannah, and Ike, four hurricanes hitting 

the U.S., and also heading at some point in time for the State of 

Florida, not all of them hitting directly, some of them skirting by. 

But, Madam Chairwoman, and Members of the Committee, 

thank you for inviting me to speak here today. My name is Cindee 

Murphy. My husband, Dennis, and I own a retail store and restaurant in Punta Gorda called Pies & Plates. 

On August 13th, 2004, Hurricane Charley devastated our community, and seriously damaged our home and business. Hurricane 

Charley caught us by surprise, as you mentioned. We expected it 

to pass miles off shore. It was going to be a Category 2. We were 

expecting just windy, rainy weather that day. And, of course, it 

turned into a Category 4 and slammed right into us head-on, devastating our community. Over the next six weeks, Florida would 

suffer direct hits from Hurricanes Frances, Ivan, and Jean, four 

major hurricanes in a row. Damages from the 2004 storms exceeded, I think, $42 billion. I’m 

not 100 percent that’s the accurate figure, but it’s close to that. 

And since then, Florida has been ravaged by hurricanes Dennis, 

Wilma, and Fay. 

I have to tell you that we were one of the lucky ones. We had 

windstorm insurance. There were a lot of businesses who didn’t. 

And we were treated pretty fairly by our insurance company, even 

though it took 90 days before we received our first check, and took 

many more months to fully settle our claim. Except for the nearly 

$15,000 in deductibles, we were pretty much made whole. 

What I did not have that I desperately needed immediately after 

the storm was readily available cash. My business was young. We’d 

only been open for 16 months, and we had invested most of our 

savings into it. I had not set up a line of credit at the bank yet, 

because I hadn’t needed one. 

My business was damaged, our home was damaged, my mother’s 

home was totally destroyed. I had homeless employees that needed 

assistance from us. Bills kept arriving in the mailbox even though 

there was no income flowing into the business. But the Good Lord 

was looking out for us. About four days after Charley hit, two 

women from Sun Trust Bank walked into my business and asked 

me if I wanted to apply for a Florida Small Business Emergency 

Bridge Loan. 

They right then and there sat down with the application, helped 

me apply, and with just in the matter of maybe 48 hours or so I 

had a check for $25,000 in my hand. It was incredible. It was far 

from what I needed, but it was a good start. 

I don’t know what we would have done without those funds. I’m 

not even sure that our business would have survived if we’d to wait 

on insurance proceeds and conventional loans. The funds enabled 

us to reopen the restaurant part of our business, not the retail 

7 

part, but the restaurant part in just 18 days. Coffee therapy was 

badly needed in Punta Gorda, and we became a gathering spot for 

people seeking emotional support in our community. 

The importance of restoring small businesses like mine quickly 

after a disaster can’t be overstated. Small businesses are the life 

blood of the community. Not only do we provide needed goods and 

services, but we also provide employment, and help retain residents in the community. Hurricane Katrina has shown us that 

when residents are forced to leave a community, recovery is very 

slow. 

So I’m here to tell you that I think Disaster Savings Accounts 

are a good idea. The concern that I have is that in today’s economy, 

small businesses like mine can’t afford to set aside money for a 

rainy day. Our purse strings are stretched to the limit. For many 

small business, it’s already raining. Until we finish weathering this 

financial storm, it may be hard for businesses to set aside funds 

for a disaster that may or may not happen. 

That doesn’t mean you shouldn’t pursue this legislation. Sunnier 

times are ahead of us, our economy will recover. My only request, 

as a small business owner, is that you make this legislation userfriendly. Allow me to pay for the installation and removal of storm 

shutters, even if the storm threatens, and then quietly passes us 

by. Don’t make the use of the funds contingent upon a national or 

state disaster declaration. Allow me to use the funds to replace 

food damaged by hurricane outages, to purchase generators and 

gasoline to run them. Allow me to use my savings account to hire 

a public adjuster or attorney to negotiate my insurance claim. Let 

me buy portable hard drives, or pay for off-site digital storage that 

I can protect my business and financial records. Keep it simple and 

reasonable. 

A good rule of thumb, in my opinion, would be that if it’s an expenditure that I would not have made at that time but for the disaster, or the threat of the disaster, the expenditure should be allowed. 

Finally, don’t make the amount that I can set aside so small that 

it’s not worth bothering with, and don’t make it difficult for me to 

prove my expenses, or require me to complete an onerous amount 

of paperwork. Remember, I’m a small business. I do my own books. 

The IRS scares me. Keep it simple. 

Thank you for conducting this hearing and listening to the voice 

of a small business owner. I’d be happy to answer questions. 

[The prepared statement of Ms. Murphy is included in the appendix at p. 27.] 

Mr. BUCHANAN. Thank you. I think the IRS scares all of us. 

Ms. Mize, we’ve got a unique opportunity, we were talking at 

lunch, is that you had the opportunity to work with so many businesses after Charley, so I’m interested in what you’ve got to say. 

It was interesting today at lunch. But I wanted to mention Ms. 

Mize is from Punta Gorda. She’s Senior Vice President and Senior 

Credit Officer for Charlotte State Bank, was right in the middle of 

Charley right after that. She graduated from Florida Southern College, and LSU graduate in banking. She’s been an active participant in the community, many community organizations, such as 

Special Olympics in Charlotte County, the Technical Center, and 

8 

served as past President of the Charlotte Chamber of Commerce. 

Thanks for being here, and I look forward to your testimony. 

STATEMENT OF MARYANN MIZE, SENIOR VICE PRESIDENT 

AND SENIOR CREDIT OFFICER FOR CHARLOTTE STATE 

BANK, FLORIDA 

Ms. MIZE. Thank you. It’s a pleasure. 

Dear Members of the Committee, I’m deeply honored to be here 

to speak on the topic of Disaster Savings Account. This is an especially appropriate discussion in light of the riveting images of Hurricane Ike slamming into Texas over the past weekend. 

With that destruction of Hurricane Ike, I am reminded of our 

own 2004 Hurricane Charley coming through our community with 

a Category 4. It cut a 10-mile swath of destruction through our 

community. There were over 16,000 homes in its path, and blue 

tarps were everywhere, and 13,000 residential roofs needed replacing. 

The backdrop of my remarks will be based on the experience in 

the aftermath of that catastrophic event personally. My remarks 

will also have the imprint of my active role in three facets of our 

business community; number one, commercial real estate lender. 

I’ve been with a local hometown community bank for 19 years. 

Number two, Chamber of Commerce involvement as the President 

of our Charlotte County Chamber of Commerce in the immediate 

aftermath of the hurricane. And, by the way, I applaud Mr. Buchanan for his efforts with Chambers of Commerce, and the role 

that they play, important role they play in our business community. And, thirdly, the CCIM designation. I’m a commercial real estate practitioner that has that designation, so you will see the imprint, commercial real estate lender, Chamber, and CCIM designation in my remarks and feedback. 

Disaster Savings Accounts are innovative and a good idea. And 

I offer the following enhancements for the Committee’s consideration. And it’s just two points; it’s, number one, size limitations. 

The current size limitation at $15,000 simply seems too low, and 

it may not be a relevant safety net for the challenges faced by 

many individuals and businesses. 

Another important point about limits, is how to ascertain the balance limits: consider taking into consideration insurance 

deductibles, percentage of gross sales, or income. These avenues 

might provide a better benchmark, and provide a more relevant 

safety net. 

How about bench marking annual increases to the limit, and the 

annual deposits? Right now it’s a static limit. Consider bench 

marking annual increases to both the dollar limit and the annual 

contributions based on the CPI. This will help insure that the program keeps place with inflation. 

The second point is broadening the program. In addition to small 

businesses, include individuals, and small real estate investors in 

commercial real estate. The success of a small business works hand 

and glove with the owners as individuals, and the landlords of 

their business. 

To illustrate these points, I offer just one of many examples of 

the complexities in the post-hurricane recovery environment, and 

9 

to support those recommendations. Let me tell you the story of Jeff 

Fehr. Jeff Fehr is a respected local appraiser, owns his own building where his business is located. He’s also the owner of a small 

commercial strip center, and he leases that space to small businesses. The hurricane impacted every facet of his life. His home 

was uninhabitable, his building where his business was located 

was uninhabitable, and the commercial strip center was also destroyed. 

I’ll never forget the first business day after the hurricane, Jeff 

stopped into the bank to see how we were doing. And after some 

nice pleasantries, we asked how he was doing, and then we learned 

the sad truth regarding the scope of his devastating losses. Despite 

this, Jeff remained focused and outlined his plan to immediately 

rebuild. And that’s exactly what he did, and he did it because he 

had access to capital, he had set aside reserves. 

When I asked Jeff what he thought about DSAs, his immediate 

response was, ‘‘I will be an early adopter, and I will encourage others to do likewise.’’ 

Jeff’s story illustrates the importance of including individuals 

and commercial real estate investors in the program. Please, number one, don’t forget, human capital is the most important asset of 

a business. Employees need to have their basic needs met before 

they can be productive. They also need to recognize the importance 

of saving for a disaster, or that rainy day, as Mr. Buchanan mentioned. 

Don’t forget our small commercial real estate investors. Many 

small businesses are located in leased space. Access to capital for 

these investors, their DSAs would speed the recovery of their buildings, and de facto will help small businesses recover. 

Conclusion. In conclusion, thank you for the honor of letting me 

share my thoughts. I applaud this Committee for their innovative 

concept. I support Disaster Savings Accounts. A frequently heard 

quip in Florida to remind citizens to make the right decision in preparing for a storm is, ‘‘Be smart. Be safe’’, and to that I add save. 

Having funds set aside for a disaster is critical to individuals and 

businesses, and Disaster Savings Account is a great way to accomplish that goal. Thank you very much. 

[The prepared statement of Ms. Mize is included in the appendix 

at p. 30.] 

Mr. BUCHANAN. Thank you. 

We have another young lady that’s a successful business. Ms. 

Grayson is from Bradenton, Florida north of Charlotte. She founded her own company in 1994. Kate has been a consultant in the 

pharmaceutical and biotechnological industry, specializing in 

project management, process re-engineering and systems auditing. 

In response to the needs of her clients and the industry she supports, Kate launched Steelgate, a cryogenic firm in 2001. Kate’s 

previous experience including systems operations management, 

management consulting. And I appreciate you coming today. And 

you had mentioned if a storm hit and you lost your electricity, 

you’d be out of business, and the importance of having something 

as a backup, so I look forward to your testimony. Thank you. 

Thanks for coming. 

10 

STATEMENT OF KATE GRAYSON, PRESIDENT AND CEO OF 

STEELGATE, INC., LONG ISLAND, NEW YORK. 

Ms. GRAYSON. Good afternoon. My name is Kate Grayson. I am 

President and CEO of Steelgate, Inc., a cryogenic specimen repository storing frozen specimens, such as blood, on behalf of clients 

engaged in biomedical research. I founded Steelgate in 2002 in 

Long Island, New York. And in 2004, we relocated my corporate 

headquarters to Bradenton, Florida. 

I am honored to sit before this distinguished panel today as a 

representative of Florida’s Manatee County small businesses, and 

appreciate the opportunity to share my insights regarding the proposed Disaster Savings Account. 

Given the sensitive nature of my business, and the need to maintain uninterrupted power for specimen preservation, disaster preparedness is a subject with which I have extensive experience. 

Steelgate was built upon a foundation of system redundancy that 

is only one part of a dynamic multi-layered business continuity 

plan. This plan is routinely tested and enhanced, and also subject 

to a thorough audit by each client looking to store specimens with 

Steelgate. Such rigorous preparation is what enabled Steelgate to 

face down the infamous power outage of 2003 that struck the 

Northeast, Midwest, and parts of Canada, as well as the overactive 

2004 hurricane season in Florida that some of my colleagues here 

have discussed. 

But Steelgate is not alone in having to anticipate threats. Every 

year thousands of businesses throughout the United States face a 

whole host of natural disasters that include tornadoes, earthquakes, floods, forest fires, mud slides, and every summer for those 

of us who live and work in Florida, hurricanes. 

However, developing and implementing a disaster plan represents a financial investment that too often for a small business 

can be a burdensome expense that they choose not to incur. The 

irony being that it might be the one investment that could help insure business continuity should a disaster strike. And it always 

strikes, as we have seen, from this very active hurricane season. 

Despite ongoing efforts to assess the impacts from Hurricanes 

Gustav, Hannah, and Ike, the 2008 hurricane season only just hit 

its peak on September 10th, with 74 more days remaining. However, if history is any indication, hundreds of small businesses will 

have suffered devastating losses from which they may never recover. Such losses affect not only the business owners, but extend 

to its employees, clients, vendors, not to mention the lost tax revenues that underwrite state, local, and federal programs. 

Therefore, I, along with other small businesses applaud this 

Committee’s proactive efforts to launch a program to help mitigate 

the devastating effects of post-disaster business interruption and 

closure. A Disaster Savings Account could be the one incentive that 

motivates small businesses to consider disaster planning. 

I know that as a self-funded small business, the potential for a 

tax deferred or tax-free plan to further enhance my company’s disaster planning would be very enticing. It aligns with the entrepreneurial spirit, and get it done attitude embodied by so many small 

business owners, and could also relieve the government of having 

to provide greater resources for a post-disaster bailout. 

11 

To succeed, the guidelines or regulations of the Disaster Savings 

Account need to be written in a concise and easily understood way, 

further encouraging the widest possible adoption. As a small business owner wearing many hats every day, the plan must avoid 

being overly complex, and offer clear benefits. It should not require 

a specialist to interpret, nor require an excessive amount of a business owner’s time to implement. Additional benefits may derive 

from insurance company’s offering discounted premiums for businesses with Disaster Savings Accounts. 

It is clear that establishing a Disaster Savings Account could 

offer wide-ranging benefits to all those who are affected when disaster strikes. 

I’m appreciative of the time you have given me today, and will, 

as a courtesy to this Committee’s time, conclude my testimony. I 

would, however, make myself available for further questions, either 

here or at another date. Thank you very much. 

[The prepared statement of Ms. Grayson is included in the appendix at page 37.] 

Mr. BUCHANAN. Thank you. I yield back, Madam Chair. 

Chairwoman BEAN. Thank you for your testimony. I have a couple of questions, and then I’ll come back to you. 

First, I wanted to talk to Mr. Brown. You talked about the SBA 

loan programs that you participated in. And then when the fees 

went up, you essentially closed down the shop, and stopped making 

those available, which is unfortunate. The Committee on a bipartisan basis has been very supportive of trying to reduce the fees on 

both borrowers and lenders to encourage building those programs, 

and making capital more available, because at this time, economically following the credit crunch, the greater necessity to make capital available for our businesses. So I was glad to hear your testimony on that. 

But I think it’s also interesting that you’re here to move beyond 

that, and say that even though SBA has had disaster assistance 

loans available since 1953, that we should be considering moving 

further and extending other options. So I appreciate your comments on that. And I also liked your caution about regulatory burden associated with the HSAs, so that’s very helpful testimony. 

I also wanted to comment to Ms. Murphy, to hear the positive 

story that you were able to share about how a local bank came in 

and brought to your attention what available resources that you 

were able to utilize, and potentially keep your business alive today 

to tell us about it. 

Sadly, this Committee heard testimony following Katrina from a 

number of multi-generational businesses who’ve been around for a 

long time in New Orleans, and their experience was entirely different than that, and they didn’t have access to SBA programs. 

And we heard a lot about FEMA fallout, and where the agency had 

fallen short, but we really didn’t hear in the media what we heard 

in testimony in this Committee about how they weren’t returned 

calls to businesses who were seeking loans, because as you indicated, their businesses were literally under water, not just financially. And their employees were out of homes, so I was glad to 

hear that we have made some progress, and that the response time 

12 

was quicker, and there were available resources for you to assist 

what you’re doing. 

Really, I didn’t have a specific question. I just wanted to tell you 

that your testimony is very helpful to us, and I’ll yield to Ranking 

Member Buchanan. 

Mr. BUCHANAN. Thank you, Madam Chair. 

You had mentioned about tax incentives for banks maybe to give 

these, it keeps the cost for the government maybe down, but you 

said a lot more money would probably flow out if there were some 

incentives, especially in times like this where capital is tight, and 

we’ve got all these national disasters. 

I think about the disaster we’ve got kind of in New York and the 

country financially, and then what happened in Houston last week, 

so both of these are very real. But I just, if you could comment a 

little bit more on what your thought is on that. Mr. Brown. 

Mr. BROWN. Sure. The parallel I was driving to the SBA program 

that Chairwoman Bean had just referenced, was the fact that the 

SBA program in the early ‘90s was driven by the margin of profit. 

And that’s just a fact of the program. 

If you correlate that to tax incentives, and some of the tools that 

were available back then are no longer available, but if you were 

to correlate that to tax incentives, think, if you will, municipal 

bonds. When a municipality is issuing a bond, the investor in that 

bond is able to garner that income, or that interest income tax free, 

so this is now a tax-adjusted yield, if you will. 

If we are looking for a way to increase capital flow to small businesses, I think one of the ways you might be able to do it, and it 

might be a total or partial tax incentive to whoever the lender 

might be, to increase the yield on that instrument. So if I were 

lending to Cindee Murphy’s business at 6 percent, but part of that, 

or all of that interest income to the bank was tax-free, you would 

end up with a 10 percent yield on it. 

Now, lending to small businesses takes an enormous amount of overhead. The truth is, it takes as much time to make a $50,000 

loan as it does a $500,000 loan, and we’re all in the business of 

managing fixed overhead. So if all of a sudden you can take a business that once yielded 6 percent to the lender, and now it’s going 

to yield 10 percent, a couple of things are going to happen. 

First of all, you’re going to see lenders flooding into the small 

business market, especially to get away from some of the commercial real estate market that we’re all aware of right now. The second thing going to happen is good old-fashioned competition, and 

that 6 percent rate that Cindee now gets, it will go down, 5-1/2, 5, 

because the competition will start to chip away at it. 

I think that would be an amazing tool for us to consider in some 

form. And, again, I certainly don’t know what all the math, and 

what all the implications would be, but I think you have a department for that here in the Office of Management Budget. 

Mr. BUCHANAN. Well, part of my thought on that was just simply, is to have the incentives for businesses that are struck by disaster, or banks, not necessarily all over the country. It might not 

be a bad idea, because there’s no liquidity now in the country for 

a lot of small business, especially as it relates to a disaster area 

like what happened there. 

13 

What’s your thinking of what, I guess, two things. One is SBA, 

we talked about a little bit what Florida did. They had the quick 

$25,000, you got in 48 hours. Just as bankers, I guess, either of 

you, were you able to access, were small businesses able to access 

any SBA money? Or, if they could, how long would it take? Because, obviously, you can’t six months to get the money. What was 

your experience? 

Mr. BROWN. Well, the story that Cindee Murphy just shared was 

actually the Bridge Loan Program that she was referencing, not 

the SBA program. 

Mr. BUCHANAN. But I’m talking about the SBA program. 

Mr. BROWN. Right. The SBA took quite a while to be able to put 

those funds in place. And, again, I think the difference between the 

two programs is that the Bridge Loan Program is locally run 

through EDC, using local lenders. Where if the SBA has to bring 

in contractual employees to try to now operate in a completely foreign environment. So, again, back to my suggestion; if there is a 

way, whether it be through the SBA, or through some other entity, 

to mimic, or to emulate the Bridge Loan Program at an SBA level, 

I think you will have a home run. 

And, again, I don’t know that the other states have such a thing, 

but I know the one in the State of Florida worked amazingly well. 

Mr. BUCHANAN. Do you know what the repayment back was to 

the State of Florida? 

Ms. MIZE. I have it. 

Mr. BROWN. Maryann does. 

Ms. MIZE. Yes, I have those statistics. For Hurricane Charley, we 

checked with the State of Florida, and the repayment was approximately 96 percent recovery of all those funds that were lent. In 

Charlotte County, $4 million was lent, and 96 percent of it was returned. 

Getting back to Mr. Brown’s comment, that’s a pretty good repayment, and those funds were back to help another community that 

would be stricken with a catastrophe. 

Mr. BUCHANAN. When they put the funds out, what did they pay, 

what was the interest on the loan? 

Ms. MIZE. Zero. 

Mr. BUCHANAN. Zero? 

Ms. MIZE. Zero percent for the first six months. It was a very effective tool. The delivery system was our small community banks 

with the EDC, setting up a little nucleus kind of like a SWAT 

team, where we would actually—there was no phones, imagine no 

phones, no electricity. How do we find the other lenders in the community? We knocked on their door, we know where they lived. And 

so we got feet on the street delivering the information to business 

owners like Cindee Murphy so that they could have immediate access to capital. Within 48 hours of application, we were meeting as 

a team in the dark with no electricity, with no air conditioning in 

that heat, and delivering checks, approving loans, and delivering 

checks to small businesses. 

Mr. BROWN. You had banks fighting over wanting to be involved 

in this, because they wanted to do something for the community. 

And I can guarantee you were getting some of the best lenders’ 

14 

minds around that table in the dark, so it was quite a positive experience. 

Mr. BUCHANAN. What happens after the six months, interest only 

for six months, and then what happens the next six months? 

Ms. MURPHY. Well, that was one of the things that was good 

about it. I mean, the two ladies who came and explained the whole 

program to me were very emphatic about this being a short-term 

solution, and then I would need to take further steps, because after 

six months, I think the interest rate went up to about 12 percent. 

And if you still had that loan after a year, it would be 18 percent. 

And, of course, then they made themselves available in case we 

needed to apply for SBA loans, or conventional loans. And really, 

I paid mine back before I got to the point where we were reaching 

the six month point, but I suspect that if I had not, that they would 

have been in contact with me again, reminding me that I needed 

to take action on that. And that’s part of it being sort of handled 

on a localized level. 

Mr. BUCHANAN. Ms. Murphy, what do you think, if you wouldn’t 

have got the $25,000, what would have happened? 

Ms. MURPHY. Well, I’m not sure that we would have stayed in 

business. It took so long for us to get our insurance money, and the 

funds that we did have, we had only been opened for business for 

16 months when the storm hit. And a lot of our savings had been 

tied up in the business. We had so many other competing needs 

among family members and things, it was really hard to take 

money that we needed to live and protect our family, and pile it 

back into the business. So, for us, it was critical, and it was critical 

to be able to open really, really quickly, because it developed a synergy that kept us going, and kind of moved us forward. 

We needed a fairly significant amount; that $25,000 was absolutely a minimum of what we needed to sort of kick-start our business, so that we could then be ready when season hits, and prepared to continue our business. 

Mr. BUCHANAN. And you mentioned the insurance business. 

What was your experience about getting money when you filed 

your claim from the insurance company? How long did it take? 

Ms. MURPHY. Well, I think I was really one of the lucky ones, 

compared to others in the community, because we did have a check 

within 90 days. It took probably another four or five months after 

that. As a result of Hurricane Charley, there were so many businesses and individuals who were not getting claims quickly, I think 

that new legislation was passed at that time that now makes it so 

that the insurance company has to respond within, I don’t know if 

it’s a 60-day or 90-day period, so that’s been put in place. At that 

time, that was not there, and there were some businesses and individuals who were going a year, 18 months before they were getting 

any satisfaction from insurance companies. 

But it takes a while to process a claim, and in the event of a hurricane, my insurance adjuster showed up at my door with a stack 

of photocopies of the front of 200 policies. He was brought in from 

another state. I think he was from Missouri. That’s all he was provided with from the company, was just that page one had my address and my policy limits, and had to process 200 claims. 

15 

It was overwhelming to them, and a lot of the ability to get funds 

back quickly depended on the ability of the business owner to recover records. And that was difficult for a lot of Charlotte County 

businesses, because they didn’t expect the storm to hit. They 

weren’t as prepared as they should have been. So it does take a 

while. 

Mr. BUCHANAN. Ms. Mize, I was going to ask you, following Hurricane Charley, in your estimate, how long did it take the community or businesses to get back to some sense of normalcy? What 

was the experience in the community? How long did—and some 

businesses probably never came back. But the businesses that did, 

was it a week, a month, six weeks, six months? How long was it? 

I’m sure it was a little different, because you dealt with, my understanding, a lot of businesses in that community right after that. 

Ms. MIZE. Yes, we did. There were 700 commercial buildings in 

the path of the hurricane. Of those 700 commercial buildings, 12 

percent of them were destroyed, 77 were damaged, so the recovery 

is going to be directly in relationship to whether or not they had 

a building to be in, or whether they could find another building in 

order to relocate and re-establish. So based upon that, I would say 

that Cindee was actually probably one of the more exceptional folks 

in terms of her ability to get back up and running within 18 days. 

What we were told was there’s three parts to a disaster. First it’s 

relief, then it’s recovery, and then it’s rebuild. And right now, we’re 

in year four of a five-year plan. 

Mr. BUCHANAN. So you guys are still working on it. What do you 

find from small businesses is their biggest concern, or their number 

one issue in terms of working with banks to get back on their feet? 

Ms. MIZE. I think access to capital is a real serious issue. And 

I’m going to defer also to the other banker on our panel here, Mr. 

Brown. Access to capital is critical for the small business, and for 

the individuals, because of all the myriad of demands on that limited capital in a disaster. You’re trying to put your house back in 

order, you’re trying to put your business back in order. Access to 

capital. 

Those folks that had liquidity did the best. What do you think? 

Mr. BROWN. Absolutely, I would agree. 

Mr. BUCHANAN. That’s why we’re looking at one possibility, is to 

have—I know that small businesses are being taxed, and don’t 

have any excess capital, a lot of them are not even able to pay their 

bills. But the thought is, is that as these things get turned around 

back on their feet, maybe they’d have a fund where they could 

draw down, but have something set aside. Because I’ve always 

heard, and people told me like 30 years ago, always try to have 

one-year’s living expenses. Now, that doesn’t happen with a lot of 

people, but have some kind of reserve set aside. If we could do that 

on a tax deferred or something, would give some opportunity. 

Kate, I just wanted to ask you, your business is obviously a little 

different, unique than a lot of businesses in our area. How does 

this—what’s your thoughts on how this would affect you if you had 

a direct hit in a hurricane, that type of thing? 

Ms. GRAYSON. Well, hopefully, with all our preparedness, and our 

testing, and our enhancements that we do on a regular basis, we 

won’t be that much affected. But I see it also affecting the vendors 

16 

that support me, the smaller businesses that are not in the business of doing disaster preparedness, and detailed plans, and testing 

the plans. 

I have a number of local vendors that I use, everything from my 

air conditioner vendor, to my freezer maintenance, my generator 

maintenance. The list is very long, and I use all local small businesses to support me. Where we would run fine; however, the services that I depend on, the local vendors would be—I’d be creative 

to find alternate solutions. So this, I think, could encourage them 

to just think of the recovery disaster plan, and take more time to 

put money aside where they might not have. 

As part of my plan, I have to take that into consideration, and 

make sure I do have additional working capital. It could help me 

with adding better, or doing different planning if I had additional 

tax-free funds available to me. So I think in two parts it could help. 

Mr. BUCHANAN. Is there anything else based on what you’ve 

heard today that we could make it better? What do you think about 

this? I’m open to any idea, but I like kind of what the state is 

doing, what the state did. It seemed like it was a very successful 

program. Maybe there’s a lot of partnerships federal and state has, 

and maybe that also can be a partnership. And maybe instead of 

$25,000, you said proportionality, maybe if a business has got 83 

employees, it’s different than having eight, that maybe they can get 

up to 250, or something like that, because they need more capital. 

But my thought is, is that, Charlie, do you have 

Mr. BROWN. I did have a thought on that for you. The SBA has 

done a good job of what is considered a small business by industry. 

You can start there, because that’s based on sales, typically. 

The other thing that you can do when you devise these limits is 

there’s a margin of profit, the RMA, Robert Morris & Associates 

tracks by industry. And you just made me think about it, when you 

talked about a year’s worth of reserve. You might target by industry 90-days worth of operating expenses. And you might end up 

with something where this type of business would be eligible for 

that much in dollar, for a different dollar amount across the business. Mathematically, you could work your way back into this very 

easily, using data that’s already available. 

Mr. BUCHANAN. Yes. 

Ms. GRAYSON. I was just going to add to that, that I think it is 

very important to assess the need, and how you’ll measure that is 

key because my business and how I operate, and the amount of 

funds I would need to get going, I mean, to replace a generator, or 

to carry certain operating costs, would be significantly larger than 

a smaller restaurant, or something like that. And if you went, I 

think, by industry, or somehow to measure, I think that’s very important in the analysis. And also keeping it simple, that some of 

the panel members has made. If it takes too much to put in place, 

I’m not going to have the time to do it, unless it’s a good benefit. 

Mr. BUCHANAN. Just on my behalf, I just want to thank all of 

you for coming in. It’s important. I know that as we look towards 

what’s happened in New York and our country and the financial 

crisis, I mean, we’re talking about it’s like a dumbbell, a barbell, 

one side we’ve got a lot of big businesses under a lot of pressure, 

but our small businesses that make up a lot of the job creation, and 

17 

really our vitality in this country, and I think the future, the way 

we compete with China and India, we’ve got to find a way with 

these big storms. I mean, going into Houston, God only knows. I 

mean, our community is a little bit smaller, but you look at a metro 

area, New Orleans, and Houston. We’ve got to figure out a way to 

get these people back on their feet. 

So, again, I appreciate. I like the idea, the government got paid 

96 percent back or whatever that percentage was. And I know the 

Chairwoman, we both want to find a way to help businesses get 

back on their feet, help them recover quicker. And I think the federal government has definitely a role to play. And the sooner we 

can get you back to work, and start generating money, then we get 

more receipts up here, so it’s a good thing. It’s a win-win for everybody. 

But, again, I want to thank you, especially being from our area, 

our district, for coming in, and appreciate your discussion. And I 

know you’ve taken time out of your schedule. So thanks, and we’ll 

look forward to visiting with you a little more in the future. 

Thanks. 

Chairwoman BEAN. I want to thank you, as well, for not only 

sharing your perspective, but speaking on behalf of all the small 

businesses out there who could experience the same type of challenges you faced. 

I ask unanimous consent that members will have five days to 

submit statements and supporting materials for the record. Without objection, so ordered. This hearing is now adjourned. 

[Whereupon, at 2:57 p.m., the Committee was adjourned.] 

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