V. SMALL BUSINESS LOANS

DESCRIPTION OF PROGRAM

The Small Business Administration may make loans to small businesses either directly or in cooperation with private financial institutions, and may also make loans to private and public development companies who in turn make loans to small businesses. Among other things, these loans may finance construction of commercial and industrial facilities. Small businesses which have been displaced by federally aided urban renewal, highway, and other construction programs, or which have been damaged or destroyed by storms, floods, or other major disaster, are eligible for especially favorable loans to help them reestablish themselves. In addition, disaster loans can be made to individuals and nonprofit organizations to help repair or rebuild homes and other damaged facilities. The loans to development companies are authorized by the Small Business Investment Act of 1958, as amended, while the other loans are authorized by the Small Business Act of 1953, as amended (15 U.S.C.A. 636). Total loans made directly or indirectly in fiscal year 1963 amounted to more than $434 million.

COORDINATION WITHIN THE FEDERAL GOVERNMENT

There is a Loan Policy Board chaired by the Administrator of SBA and consisting, in addition, of the Secretaries of Treasury and Commerce. "The Loan Policy Board shall establish general policies (particularly with reference to the public interest involved in the granting and denial of applications for financial assistance by the Administration and with reference to the coordination of the functions of the Administration with other activities and policies of the Government), which shall govern the granting and denial of applications for financial assistance by the Administration." 52

There is general policy coordination with the Area Redevelopment Administration in the Department of Commerce, but no ARA planning requirements are imposed on the SBA program. Loans made to businesses by ARA are processed by SBA to determine the financial prospects.

EFFECTS ON THE ORGANIZATION OF GOVERNMENTS IN AREAS RECEIVING AID

Types of units affected.-SBA deals directly with the individual business (or disaster victim) in almost all cases. However, in some cases when a private financial institution also participates in the loan, the applicant applies for his loan through the private institution.53 If the loan is to a private development company, the company must

62 Small Business Act of 1953, as amended, sec. 4 (d).

U.S. Small Business Administration, "SBA Business Loans for Small Firms" (Washington: U.S. Government Printing Office, 1962), pp. 11, 12.

be incorporated under State law and must have authority to promote and assist the growth and development of small business concerns in the areas covered by its operations. Private development companies must be licensed by SBA in order to be eligible for assistance.54 By definition of terms in section 103 (6), the State and local development companies referred to under title V of the Small Business Investment Act must simply have authority to promote and assist the growth and development of small business concerns in the areas covered by their operations.

Area of jurisdiction.-Private small business investment companies must have their areas of operation approved by SBA.5 Governmental development companies are not bound by this requirement (title V), but in all cases are organized to operate in limited local areas or a single State.

Public development companies can be as large as desirable and the funds loaned to them by SBA are not limited, but SBA funds channeled through them are usable only for aiding small businesses and the aid to any one business is strictly limited. Private development companies can be as large as desirable, but SBA loans to any one such company cannot exceed $4 million.57

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Cooperation between jurisdictions.-The strict financial limits on SBA loans to individual small businesses can be raised somewhat when they pool their capital in a corporation capitalized by them for the purposes of obtaining, for the use of such businesses, raw materials, equipment, inventories, supplies or the benefits of research and development, or for establishing facilities for such purpose.5

EFFECTS ON STATE AND LOCAL GOVERNMENTAL PLANNING PROCESSES

There are no planning requirements in the SBA program. State and local plans for economic development and comprehensive urban development are not reviewed for adequacy by SBA. A small business being financed by SBA funds coming through a State or local development company must be approved by that company, but the only Federal requirements controlling the development company's approval are financial ones.

EVALUATION OF ORGANIZATION AND PLANNING REQUIREMENTS

The only State and local governmental units involved in Federal requirements are public development companies and they are completely optional. The program of loans to private businesses can proceed without the Federal Government requiring any State or local governmental participation. Even in ARA areas where the same general type of assistance to industry by ARA is predicated on an overall economic development program, SBA is free to make its loans without regard to such a program.

Such public development companies as do become involved in the SBA program are likely to be special purpose organizations with

very little, if any, formal relationship to general purpose governments which exercise control over urban development.

The SBA program does not recognize the urban development goals of local governments. Providing favorable financing for small businesses, in order to encourage competition, appears to be the program's only goal.

Consideration might be given to providing that projects aided under the SBA program be consistent with existing urban development plans and with ARA's overall economic development programs.

DOCUMENTATION

U.S. Small Business Administration, "SBA Disaster Loans: For Businesses, for Homes." Washington: U.S. Government Printing Office, 1960 (supplement as of October 1962 attached).

U.S. Small Business Administration, "SBA Business Loans for Small Firms." Washington: U.S. Government Printing Office, 1962.

U.S. Small Business Administration, "Prescription for Progress: A Develop ment Loan Program To Help Your Community." Washington: U.S. Government Printing Office, February 1963.

W. AIRPORTS

DESCRIPTION OF PROGRAM

The Federal Airport Act (49 U.S.C. 1101-1119) authorizes the Federal Aviation Agency to administer a grant-in-aid program to assist public agencies in the establishment and improvement of public airports. This program is generally referred to as the Federal aid airport program. Federal grants under the program are on a matching basis with the Federal Government generally providing 50 percent of the cost of the airport development (and in no case greater than 75 percent) and the local public agency the remaining 50 percent. Eligible airport development includes not only construction work but also removal, relocation, and marking of airport hazards and land acquisition. Federal funds appropriated for airport aid in fiscal year 1963 were $75 million.

COORDINATION WITHIN THE FEDERAL GOVERNMENT

In recent months FAA has had numerous contacts with constituent agencies of HHFA for the purpose of coordinating their respective programs. Cooperative agreements now exist for coordination with the FHA mortgage insurance program and the urban planning assistance program of the Urban Renewal Administration. Similar program cooperation arrangements are being considered with the program of advances for public works planning and public facility loans programs of the Community Facilities Administration, the open space program of the Urban Renewal Administration and the mass transportation demonstration grant program and the mass transportation loan program of the Office of the Administrator, HHFA. FAA also has working relationships with the Bureau of Public Roads in highway-airport construction where zoning, obstructions, and highway development near airports are concerned. FAA is also exploring the idea of developing small airports adjacent to highways in areas where an aviation demand is indicated, A CAB-FAA memorandum has established a procedure for joint consideration of locations for regional airports through a joint CAB-FAA committee. Problems concerning military and civil aviation are coordinated through the joint FAA-Department of Defense airports panel.

Section 3(a) of the Federal Airport Act requires that the views of the Civil Aeronautics Board and the Federal Communications Commission be given consideration by FAA in preparing the national airport plan each year. This coordination is for purposes of promoting safety in air traffic control, minimizing hazards caused by construction and operation of radio stations, and providing adequate facilities for the anticipated amounts and types of aviation activity.

Section 3(b) requires consultation with the Air Force and Navy Departments "to the end that the airport development included

in [the national airport] plan may be as useful for national defense as is feasible."

Section 3(c) requires annual consultations with "the Secretary of the Interior with respect to the need for development of airports in, or in close proximity to, national parks, national monuments, and national recreation areas."

EFFECTS ON THE ORGANIZATION OF GOVERNMENTS IN AREAS RECEIVING AID

Types of units affected.-Financial assistance under the program is limited to public agencies such as States, counties, municipalities and other political subdivisions. Federal agencies are also eligible to apply for grants under certain limited circumstances. The public agency applying for a Federal grant under this program is called a sponsor. Local public agencies may request aid directly from the FAA unless otherwise provided by State law. About half of the States require that the Federal funds be channeled to the local public agency through the State aviation agency.

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Each fiscal year 75 percent of the Federal funds appropriated by the Congress are apportioned among the several States on the basis of a population and area formula. Each amount so apportioned to a State is available for obligation for projects within such State for 2 As soon as the funds have been apportioned among the States, the FAA informs the executive head of each State, and any public agency requesting such information as to the amount apportioned for each State.60

Twenty-five percent of the amount authorized by the Congress for the fiscal year constitutes a discretionary fund which is available for approved projects in the several States regardless of the locations of such projects. This discretionary fund is also used for approved projects in national parks, national forests, national monuments, and national recreation areas, sponsored by the United States or an agency thereof.

Area of jurisdiction.-The geographic area of jurisdiction of the sponsor is established by considerations outside the Federal aid airport program. This area may coincide with or overlap the jurisdictions of other local units of government.

Cooperation between jurisdictions.-Two or more eligible public agencies may jointly sponsor a regional airport and request financial assistance under the Federal aid airport program in its development by filing a single application. Both CAB and FAA endorse this regional airport concept. The regional concept is based upon two or more public agencies within a reasonable distance of each other consolidating their aviation activity at one airport. The purpose of the concept is to provide a greater variety of scheduled airline service at a single point, distribution of airport maintenance costs between public agencies, the consolidation of approach navigational aids to serve the airport, and a less complicated air traffic system within the airspace shared by each public agency.

Sponsor eligibility criteria are established by sec. 9 (a), (b), and (c) of the Federal Airport Act of 1946, as amended. Federal Airport Act of 1946, as amended, sec. 6(a).

Ibid., sec. 9(a).