Statements on Introduced Bills and Joint Resolutions S961

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Ms. MURKOWSKI:

S. 961. A bill to expand the scope of the HUBzone program to include difficult development areas; to the Committee on Small Business and Entrepreneurship.

Ms. MURKOWSKI. Mr. President, I rise today to introduce legislation to correct an inequity in the HUBzone contracting program administered by the Small Business Administration, SBA. This bill amends the criteria by which areas are designated as HUBzone under the Small Business Act by adding a new category designated as "Difficult Development Areas." These "Difficult Development Areas" are already recognized by the Internal Revenue Service and the Department of Housing and Urban Development. For reasons I will explain, the businesses and people in the community of Ketchikan, AK have been wrongly denied participation in the HUBzone program. This bill will take care of that problem.

The current HUBzone qualifications have two tiers. The first is that the county in which a business seeking to participate in the program must not be located in a Metropolitan Statistical Area, MSA. The second level has three separate criteria. If an area meets any one of the second level criteria, it qualifies as a HUBzone area. One of the criteria simply relates to whether a business is located in an Indian Reservation. The other two are correlated to the characteristics of the resident population.

The first of the characteristic is that the area is not located in a metropolitan statistical area at the time of the most recent census. the second criterion is that the unemployment rate in the area is not less than 140 percent of the statewide average unemployment. In the case of Ketchikan, the community is not located in a metropolitan statistical area. In February of this year the Alaska statewide unemployment rate was 7.1 percent almost 2 percent higher than the national average. But Ketchian's preliminary unemployment rate for February is 11 percent and the reviewed rate for January was 11.9 percent. The Ketchikan figure currently exceeds the requirement. In June of 2002 the rate was 8.6 percent in the Ketchikan Gateway Borough in comparison to 7.4 percent statewide at that same time. But because of the timing of the compiling of the information by the Census Bureau, Ketchikan has been denied participation in the program although it routinely exceeds the statewide rate. The anomaly is that for a few short months in the summer Ketchikan does not exceed 140 percent of the statewide average due to the influx of workers from the area related to the tourism industry.

The SBA has the best intentions and understands the problems. However, the SBA has stated to me that nothing short of a legislative change can fix the problem. Part of the problem as I understand it is that the SBA's current use of the median income and unemployment rate criteria makes the assumption that the populations are relatively immobile. Further, the SBA criterion assumes that the area in question has a fully developed labor market. The criteria assume a community model more closely aligned to the traditional urban areas.

In Alaska, our largest community, Anchorage is rightfully not considered a HUBzone area. But the SBA's criteria based on the use of the Census Bureau statistics fails to accurately reflect the true unemployment and labor market in one place in particular in Alaska—Ketchikan. The program now uses a Qualified Census Tract.

Ketchikan is a small coastal community that was highly dependent on the timber industry which has been shut down as a result of changes in Federal policies and activities of the U.S. Forest Service. As a result, the population has become highly dependent on the tourism industry. Further, the labor pool is highly transient and leaves to collect unemployment after the summer tourist season is over.

The Census Bureau data taken when the summer population is higher and more fully employed does not reflect the reality of the area. As a result the Ketchikan Gateway Borough is not considered a HUBzone. There is a dry-dock and ship repair facility located in Ketchikan that could provide year round employment. But it cannot compete for government vessel repair contracts offered by the U.S. Coast Guard and the NOAA that have been set aside for HUBzone. These vessels operate in Alaska and could be better repaired near where they operate. Now they must leave the State and perhaps be out of service longer.

The bill adds a fourth area to qualify as a HUBzone. The Deptartment of Housing and Urban Development already has a program that recognizes not only the Qualified Census Tracts but also denotes a "Non-metropolitan Difficult Development Area." The amendment simply adds this Difficult Development Area. Many of these areas already qualify as HUBzones under the prior three criteria. I have asked the SBA to advise me how much this would expand their program but in reality I expect the addition to be only a minor expansion of the HUBzone program. However small the change is, the change will be significant to the people and businesses located in Ketchikan, AK.