Rhode Island Officials Say Grants, Not Loans Needed for Floods

By | April 7, 2010

Several of Rhode Island’s elected officials said Monday they are pushing to secure federal grants instead of loans for hundreds of businesses trying to recover from the worst flooding in 200 years, although a week after flood waters first creeped through the state’s neighborhoods, they’re still not sure how to make it happen.

Rhode Island has been plagued for years with a stagnant economy, and for months has had one of the worst unemployment rates in the country _ 12.7 percent in February. Gov. Don Carcieri and other state officials have warned that the flooding could further hobble the state’s small businesses.

The recent flooding, which came on the heels of flooding in mid-March, prompted President Barack Obama to declare the entire state a federal disaster area, which allows people affected to apply for federal aid.

But only individuals who meet certain income and other requirements qualify for grants from the Federal Emergency Management Agency. Everyone else, including all businesses, qualify only for low-interest loans from the U.S. Small Business Administration, said Leo Skinner, a spokesman for FEMA.

That’s a problem for already-struggling businesses, officials said.

“If it’s a difference between a loan or a grant, that may very well, for small business, be the determining factor whether they reopen their doors or not,” U.S. Rep. Jim Langevin said Monday at a breakfast of the Rhode Island Chamber of Commerce.

Amy Kempe, a spokeswoman for Gov. Don Carcieri, said small businesses need grants, not loans.

“Our small business community is struggling as it is. They need direct assistance to get back on their feet. It’s going to be a long recovery,” she said.

U.S. Sen. Sheldon Whitehouse said his office was reaching out to draw on the expertise of senate offices from other states that had been hit in the past by flooding, and Sen. Jack Reed said his staff was researching what programs might be available to give grants to businesses affected by flooding.

Reed said one option being considered is sending Community Development Block Grants to cities and towns, which would then go to business owners.

“We’ve got a lot of ideas and we’re going to focus them,” Reed said.

More than 10,000 homeowners and about 1,500 businesses in Rhode Island applied for federal help as of Monday, Mark Hayward, district director of the Small Business Administration said, and more are expected. SBA loans of up to $2 million are available to affected businesses at an interest rate of 4 percent.

Jim Crosby, owner of The Gentleman Farmer restaurant in West Warwick, said a loan doesn’t make sense for him. His business opened in January 2009 and was hit twice last month.

First was in mid-March when flooding caused the sewer system to back up into his restaurant’s basement, costing him about $17,000 in repairs and business he lost after being closed for several days. Then last week, the second round of flooding put the basement _ where the banquet hall is located _ and the floor of the main dining room under water. A contractor told him it probably would cost $70,000 to $80,000 to repair the damage.

Crosby, whose condo across the street is now uninhabitable, said he only has a five-year lease at the building that houses his restaurant. He is wondering what he would do if a loan is his only option. What if he took out a 30-year loan and at the end of his lease, his landlord decides to rent to someone else, he wonders.

“I’m stuck with 25 more years of an SBA loan, and I’ve helped him rebuild his building,” Crosby said.

He said his other alternative is to move. It’s a decision he needs to make fast because every day that passes means lost business and, he fears, fewer customers once the doors open again.

“I’ve put blood, sweat and tears in this place for the last year. I would really hate to walk away. That would be a last resort,” he said. “You lose your customer base, you might as well close your doors. Time is of the essence.”

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Associated Press Writer Eric Tucker contributed to this report.

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