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Institute for Crisis, Disaster, and
Risk Management
Crisis and Emergency Management
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NOTICE: The ICDRM's monthly emergency managment forum, held at the GWU |
| February
2003
Volume 4 - Number 1 |
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Links:
Current events
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FEDERAL FUNDING FOR MITIGATION
U.S. SMALL BUSINESS ADMINISTRATION
The U.S. Small Business Administration (SBA) plays a major role in the wake of physical disasters. SBA's disaster loans are the primary form of Federal assistance for non-farm, private sector disaster losses. For this reason, the disaster loan program is the only form of SBA assistance not limited to small businesses. Disaster loans from SBA help homeowners, renters, businesses of all sizes and nonprofit organizations fund rebuilding. Providing disaster assistance in the form of loans rather than grants avoids creating an incentive for property owners to underinsure against risk. Disaster loans require borrowers to maintain appropriate hazard and flood insurance coverage, thereby reducing the need for future disaster assistance. The need for SBA disaster loans is quiet unpredictable; in the aftermath of the Northridge earthquake, SBA approved more than 125,000 loans for more than $4.1 billion in FY 1994. In 2002, SBA approved 21,829 loans for $1.338 billion. Since the inception of the program in 1953, SBA has approved over 1.5 million disaster loans for over $30.3 billion. For SBA disaster loans to be available, a declaration must be made. All declaration requests must come from the Governor or authorized representative. The Governor can ask for a Presidential disaster declaration or a Small Business Administration (SBA) Administrative declaration, depending upon the severity of the disaster. A Presidential declaration makes many Federal and State programs available, including SBA loans. An SBA declaration makes only SBA loans available. Once the declaration is made, 3 types of loans are available and two of which have a component that can be used for mitigation purpose. 1- HOME/PERSONAL PROPERTY DISASTER LOANS: Disaster loans given to homeowners and renters for restoring or replacing underinsured or uninsured disaster-damaged real and personal property. The regulation permits up to 20% of the primary loan limit ($200,000 to repair/replace real estate and $40,000 to repair/replace personal property), $48,000 for mitigation devices. 2- BUSINESS DISASTER LOANS: Disaster loans to repair or replace destroyed or damaged business facilities, inventory, machinery, equipment, etc. not covered by insurance. These loans are available to large and small businesses in declared counties. Loans also may be available only to small businesses for working capital to assist them during the disaster recovery period. The regulation permits here also up to 20% of loan limit ($1,500,000), $300,000 for mitigation devices. For both on these loans, the eligibility restrictions are: § Uninsured Losses. Only uninsured or otherwise uncompensated disaster losses are eligible. § Ineligible Property. Secondary homes, personal pleasure boats, airplanes, recreational vehicles and similar property are not eligible, unless used for business purposes. § Noncompliance. Applicants who have not complied with the terms of previous loans are not eligible. This includes prior borrowers who did not maintain required flood insurance. If we are to consider relocation as a mitigation mean; Use of SBA disaster loans for relocating is subject to limitations. Generally, victims may relocate where they need to do so for reasons beyond their control. If the victim is forced by state or local authorities to relocate, the amount of eligibility is the replacement cost of the property that must be abandoned. For the loan to include mitigation compound, the eligibility criteria are: 1- Protective devices or mitigation measures in place before the disaster are eligible. If not in place before the disaster, eligibility is based on the need for adding such a device or measure. Examples of these devices or measures include, but are not limited to: retaining walls, fences, seawalls or bulkheads, relocating utilities, and modifying structures. 2- Pre-existing Protective Devices or Measures. If the devices or measures existed prior to the disaster, the full cost to repair or restore to pre-disaster condition is eligible, except when the devices or measures were installed outside of a home or other building. 3- Code Requirements for Protective Devices or Mitigation Measures. If the devices or measures did not exist prior to the disaster, the full cost of a device or measure to meet code requirements is eligible. 4- Necessity of Protective Devices or Mitigation Measures to Make Disaster Repairs. If the devices or measures did not exist prior to the disaster, but are absolutely necessary to repair or restore the property, the full cost is eligible if: It is the only feasible or practical method of repairing or restoring disaster damage to land, land improvements, or structures; and it prevents immediate and continuing danger of serious damages to structures (not land and land improvements); and SBA receives written evidence from a professional third-party (such as an engineer's report) which clearly establishes the necessity for the device or measure (opinions from real estate agents, insurance adjusters and the like should not be considered); and Applicant documents the necessity in the LOR. 5- Post Disaster Mitigation Measures. The statute provides eligibility for the costs of these devices or measures subject to the following: § Measures designed only to protect Personal Property are not eligible. Eligibility is exclusive to the damaged property and does not transfer if the applicant relocates. § The maximum eligible cost is 20 percent of the loan amount, calculated before the increase for the cost of the protective device or mitigation measure. For this calculation, the loan amount is the amount loaned for physical damage. § The proposed device or measure must protect or mitigate against damage from the same type of occurrence as the declared disaster. § The applicant must choose the protective device or mitigation measure. SBA must not recommend any specific mitigation measure or comment on the relative merits of one measure as compared to another. LV must evaluate each request for need or appropriateness before you can take action. § Generally, applicants can request funds for mitigation at any time during the filing period, or if a loan is approved, through the time of full disbursement. After full disbursement, we will accept a request for additional funds for mitigation if SBA determines that the delay resulted from substantial causes essentially beyond the control of the applicant. § SBA must base the 20 percent limitation on the net approval amount for physical damage at the time of the approval of an additional amount for mitigation. § Alternate use of loan eligibility is permissible to cover mitigation measures. The 20 percent limit applies only to the amount added to the loan amount for physical damage, and not to the alternate use. As with all requests for alternate uses of eligibility, approval is contingent upon our conclusion that sufficient repairs can be made to make the damaged property reasonably usable and safeguard the Agency's collateral. § In cases of a condominium or similar association where the damage is to the real property of individual unit owners and to the common property owned by the association, the individual condominium unit owners may assign their mitigation eligibility to the condominium association. § Tenants who own leasehold improvements are eligible for mitigation. However, a lease requirement to repair the owner's real property does not convey mitigation eligibility to the tenant. For more information: § http://www.fema.gov/nfip § http://www.sba.gov/gopher/Disaster § http://www.sba.gov/sops/5030/sop50304d.pdf Apart from the mitigation loans under disaster assistance, the U.S SBA has also developed a disaster planning toolkit with preparedness considerations. It is thorough and worth to be looked at. (http://www.sba.gov/disaster/getready.html#facilities) |