[Federal Register Volume 64, Number 171 (Friday, September 3, 1999)]
[Rules and Regulations]
[Pages 48275-48277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23051]
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SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121 and 123
Pre-Disaster Mitigation Loans
AGENCY: Small Business Administration (SBA).
ACTION: Final rule.
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SUMMARY: With this rule, SBA amends its disaster loan program
regulations to implement a pilot program authorized by Congress in
1999. The authorization covers five fiscal years (from 2000 to 2004)
and will allow SBA to make low interest, fixed rate loans to small
businesses to use mitigation measures in support of Project Impact, a
formal mitigation program established by the Federal Emergency
Management Agency (FEMA).
DATES: This rule is effective October 1, 1999.
FOR FURTHER INFORMATION CONTACT: Bernard Kulik, Associate
Administrator, Office of Disaster Assistance, 202-205-6734.
SUPPLEMENTARY INFORMATION: SBA amends part 123 of its regulations
regarding disaster loans, based upon a proposed rule which was
published on July 7, 1999 (64 FR 36617). Comments were due by August 6,
1999.
The final rule allows small businesses to obtain low interest,
fixed rate loans for mitigation measures in support of Project Impact.
In response to the problems of increasing costs and personal
devastation caused by disasters, Congress authorized a pilot program
for 5 fiscal years from 2000 through 2004. The Administration launched
an effort to substitute preparedness for the current reliance on
response and recovery in emergency management.
SBA supports this effort and wants to offer pre-disaster mitigation
loans to assist with disaster preparedness. This final rule will allow
SBA to provide such loans to small businesses within Project Impact
communities identified by FEMA. Currently, SBA disaster loans may be
used only to repair or replace what was destroyed or damaged by
disaster and to provide an additional 20 percent for mitigation
measures after a disaster. To promote preparedness, this final rule
will amend SBA's regulations to provide pre-disaster mitigation loans
for small businesses. Such pre-disaster mitigation loans will allow
small businesses to install mitigation devices that may prevent future
damage.
SBA received several comments on the proposed rule. One comment
requested that SBA modify its definition of mitigation in Sec. 123.107
to include ``any action taken to reduce or eliminate the long-term risk
to human life and property from natural hazards'' as defined by the
Federal Emergency Management Agency in 44 CFR 206.401. SBA did not
adopt this suggestion due to the difference in statutory language which
authorizes the assistance provided by SBA and FEMA. However, SBA has
included some of the mitigation examples suggested by the commenter in
Sec. 123.107. SBA also clarifies in Sec. 123.107 that Sec. 123.400
through Sec. 123.407 address pre-disaster mitigation, while the last
two sentences of Sec. 123.107 address the amount of money that can be
borrowed for mitigation after a disaster.
Another comment suggested that SBA establish a date for when size
status is determined. SBA has adopted the suggestion in Sec. 123.402,
requiring that the applicant be a small business as of the date SBA
accepts the application for processing. To clarify the conditions for
eligibility, SBA moved portions of Sec. 123.403 and Sec. 123.406 in the
proposed rule to Sec. 123.402 in the final rule so that eligibility
conditions are all in one section.
One of the conditions for eligibility is that a business, together
with its affiliates, must be small as defined in part 121 of this
Chapter. Section 121.302 sets forth criteria for when size status is
determined for each of SBA's loan programs. Since the Pre-disaster
Mitigation Loan Program will be a new pilot, Sec. 121.302 does not
include it. Although SBA did not propose to amend this section, it is
necessary to amend Sec. 121.302(c) to designate a date for determining
size status for this pilot program.
One comment proposed that SBA include homeowners. SBA did not adopt
this suggestion because the authorizing legislation for this pilot
program limits the assistance to small businesses.
Another comment suggested that SBA require that a small business
must have been in the Project Impact community for at least one year,
under the same ownership, at the location where mitigation was proposed
prior to submitting a loan application. SBA has not adopted this
suggestion because it would unnecessarily limit assistance under the
pilot.
One comment suggested that SBA begin funding all approved loans on
December 31, in the order that the applications were initially
received. SBA did not adopt this suggestion because SBA is uncertain of
the demand and does not want to limit the time period for approving and
funding loans. SBA revised the text of Sec. 123.404 to clarify that a
business may borrow up to $50,000 per year, and that approved loans
will be funded in the order that SBA accepted the applications for
processing. SBA also clarifies that it will consider projects that cost
more than $50,000 per year if the business can identify sources that
will fund the amount above $50,000.
Another commenter asked that SBA clarify in Sec. 123.401 whether
residential rental properties were eligible. The section has been
changed to make it clear that SBA will accept applications from owners
of commercial real estate (property primarily leased to business for
commercial use). Owners of property held and leased primarily for
residential use will not be eligible.
One commenter was concerned that SBA's verification of a project
might subject SBA to potential liability if a mitigation project failed
to perform as expected. In response to this suggestion, SBA revised
Sec. 123.401 to make it clear that SBA only verifies that the cost
estimate is reasonable to accomplish the stated desired mitigation
result, and that SBA does not guarantee that the mitigation measure
will prevent damages from future disasters.
Also, SBA amended Sec. 123.406 to clarify how and when it will
provide notice of the availability of pre-disaster mitigation loans.
Finally, SBA simplified language in subparagraph (c) of that section
and Sec. 123.407 regarding application processing, loan funding, and
the process for reconsideration or appeal.
Compliance With Executive Orders 12612, 12988, and 12866, the
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
SBA certifies that this final rule is not a significant rule within
the meaning of
[[Page 48276]]
Executive Order 12866, since it is not likely to have an annual
economic effect of $100 million or more, result in a major increase in
costs or prices, or have a significant adverse effect on competition or
the U.S. economy.
SBA certifies that this final rule will not have a significant
economic impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612.
SBA certifies that this final rule does not impose any additional
reporting or recordkeeping requirements under the Paperwork Reduction
Act, 44 U.S.C., chapter 35.
For purposes of Executive Order 12612, SBA certifies that this
final rule has no federalism implications warranting preparation of a
Federalism Assessment.
For purposes of Executive Order 12988, SBA certifies that this
final rule is drafted, to the extent practicable, to accord with the
standards set forth in section 3 of that Order.
List of Subjects
13 CFR Part 121
Government procurement, Government property, Grant programs--
business, Loan programs--business, Small business.
13 CFR Part 123
Disaster assistance, Loan programs--business, Reporting and
recordkeeping requirements, Small businesses.
For the reasons stated in the preamble, SBA amends 13 CFR parts 121
and 123 as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
1. The authority citation for part 121 continues to read as
follows:
Authority: Pub. L. 105-135 Sec. 601 et. seq., 111 Stat. 2592; 15
U.S.C. 632(a), 634(b)(6), 637(a), and 644(c); and Pub. L. 102-486,
106 Stat. 2776, 3133.
2. Revise Sec. 121.302 to add a sentence at the end of paragraph
(c) to read as follows:
Sec. 121.302 When does SBA determine the size status of an applicant?
* * * * *
(c) * * * For pre-disaster mitigation loans, size status is
determined as of the date SBA accepts the application for processing.
* * * * *
PART 123--DISASTER LOAN PROGRAM
1. The authority citation for part 123 continues to read as
follows:
Authority: 15 U.S.C. 634(b)(6), 636(b), 636(c) and 636(f); Pub.
L. 102-395, 106 Stat. 1828, 1864; and Pub. L. 103-75, 107 Stat. 739.
2. In Sec. 123.107, revise the second sentence and add a sentence
at the end to read as follows:
Sec. 123.107 What is mitigation?
* * * Examples include elevation of flood prone structures,
retaining walls, sea walls, grading and contouring land, relocating
utilities, and retrofitting and strengthening structures to protect
against high winds, earthquake, flood, wildfire, or other natural
hazards. * * * Sections 123.400 through 123.407 address pre-disaster
mitigation.
3. Add an undesignated centerheading and Secs. 123.400 through
123.407 to read as follows:
Pre-disaster Mitigation Loans
Sec.
123.400 What is a pre-disaster mitigation loan?
123.401 What types of mitigating measures are eligible for a pre-
disaster mitigation loan?
123.402 What businesses are eligible to apply for pre-disaster
mitigation loans?
123.403 When would my business not be eligible to apply for a pre-
disaster mitigation loan?
123.404 How much can my business borrow with a pre-disaster
mitigation loan?
123.405 What is the interest rate on a pre-disaster mitigation
loan?
123.406 How do I apply for a pre-disaster mitigation loan and which
loans will be funded?
123.407 What happens if SBA denies or withdraws my pre-disaster
mitigation loan application?
Pre-disaster Mitigation Loans
Sec. 123.400 What is a pre-disaster mitigation loan?
Congress has authorized a pilot program for 5 fiscal years from
2000 through 2004 for SBA to make low interest, fixed rate loans to
small businesses to use mitigation measures in support of Project
Impact, a formal mitigation program established by the Federal
Emergency Management Agency (FEMA).
Sec. 123.401 What types of mitigating measures are eligible for a pre-
disaster mitigation loan?
Mitigation means specific measures taken by you to protect your
real property or leasehold improvements from future disasters in
Project Impact communities. If you are a landlord, the measures must be
for protection of property leased primarily for commercial rather than
residential purposes, to be determined on a comparative square footage
basis. Additionally, SBA will consider providing a pre-disaster
mitigation loan for relocation if your commercial real property is
located in a SFHA (Special Flood Hazard Area) and you relocate outside
the SFHA but remain in the same Project Impact community. If the
mitigation measures protect against a flood hazard, the applicant small
business must be located in an existing structure in a SFHA. The local
Project Impact coordinator will confirm that your proposed project is
in accordance with specific Project Impact priorities and goals of that
community. SBA will verify that the cost estimate is reasonable to
accomplish each project to determine if the project is likely to
accomplish the stated desired mitigation results. SBA verification and
subsequent loan approval are not a guarantee that the project will
prevent damages in future disasters.
Sec. 123.402 What businesses are eligible to apply for pre-disaster
mitigation loans?
Each State, the District of Columbia, Puerto Rico, and the Virgin
Islands have at least one FEMA Project Impact community. Only those
small businesses located in Project Impact communities are eligible to
apply for a pre-disaster mitigation loan. Your small business may be a
sole proprietorship, partnership, corporation, limited liability
company, or other legal entity recognized under State law. Your small
business must have been in existence for at least one year prior to
submitting an application for this loan. Your business (together with
its affiliates) must be small (as defined in part 121 of this chapter)
as of the date SBA accepts the application for processing, and SBA must
also determine that the business, its affiliates and its owners do not
have the financial resources to fund the mitigation measures without
undue hardship.
Sec. 123.403 When would my business not be eligible to apply for a
pre-disaster mitigation loan?
Your business is not eligible for a pre-disaster mitigation loan if
it, together with its affiliates, fits into any of the categories in
Secs. 123.101, 123.201, and 123.301.
Sec. 123.404 How much can my business borrow with a pre-disaster
mitigation loan?
Each borrower, together with its affiliates, may borrow up to
$50,000 per year. SBA will fund approved loans in the order in which
SBA accepted the application for processing. SBA will consider
mitigation measures that cost more than $50,000 per year if the
[[Page 48277]]
business can identify sources that will fund the cost above $50,000.
Sec. 123.405 What is the interest rate on a pre-disaster mitigation
loan?
Your pre-disaster mitigation loan will have an interest rate of 4
percent per annum or less.
Sec. 123.406 How do I apply for a pre-disaster mitigation loan and
which loans will be funded?
(a) At the beginning of each fiscal year commencing October 1st
1999, SBA will publish a declaration in the Federal Register announcing
the availability of pre-disaster mitigation loans. The declaration will
designate at least a 30 day application filing period in the first six
months of the fiscal year, the application filing deadline, and the
locations for obtaining and filing loan applications. Additional
application periods may be announced each year depending on the
availability of funds. In addition to the Federal Register, SBA will
use FEMA and the local media to inform potential loan applicants where
to obtain loan applications. SBA will not accept any applications after
the announced deadline unless SBA reopens the application filing
period.
(b) Complete an SBA pre-disaster mitigation loan application
package which includes a written statement from the local Project
Impact coordinator that the project is in accordance with the specific
priorities and goals of the local community. The application must be
filed during the announced filing period.
(c) An SBA Disaster Area Office will notify the Office of Disaster
Assistance (ODA) when it has accepted a complete application for
processing. The Area Office will approve, decline, or withdraw (stop
processing) the application if the applicant does not give SBA required
information. The Area Office will notify ODA of its decision. ODA will
then direct the Area Office to make the loan based on availability of
loan funds and the date SBA accepted the complete application package.
Sec. 123.407 What happens if SBA denies or withdraws my pre-disaster
mitigation loan application?
(a) If SBA denies your loan application, SBA will notify you in
writing and give you the specific reasons for the denial. If you
disagree with SBA's decision, you may respond under Sec. 123.13. If SBA
approves your application after reconsideration or appeal, SBA will use
the date the Area Office received the request for reconsideration or
appeal to determine the order of funding.
(b) If SBA withdraws your loan application and you later submit the
missing information, and SBA approves the loan, SBA will use the date
it reaccepts the application to determine the order of funding.
Dated: August 27, 1999.
Aida Alvarez,
Administrator.
[FR Doc. 99-23051 Filed 9-2-99; 8:45 am]
BILLING CODE 8025-01-P