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COMMITTEE ON SMALL BUSINESS

JOE L. EVINS, Tennessee, Chairman TOM STEED, Oklahoma

SILVIO O. CONTE, Massachusetts JOHN D. DINGELL, Michigan

J. WILLIAM STANTON, Ohio NEAL SMITH, Iowa

JOSEPH M. McDADE, Pennsylvania JAMES C. CORMAN, California

JOHN Y. McCOLLISTER, Nebraska JOSEPH P. ADDABBO, New York

WM. S. BROOMFIELD, Michigan WILLIAM L. HUNGATE, Missouri

TIM LEE CARTER, Kentucky FERNAND J. ST GERMAIN, Rhode Island HAMILTON FISH, JR., New York CHARLES J. CARNEY, Ohio

M. CALDWELL BUTLER, Virginia BOB BERGLAND, Minnesota

WILLIAM S. COHEN, Maine HENRY B. GONZALEZ, Texas

MILLICENT FENWICK, New Jersey JAMES M. HANLEY, New York

THOMAS N. KINDNESS, Ohio GUS YATRON, Pennsylvania

WILLIAM F. GOODLING, Pennsylvania
JOHN BRECKINRIDGE, Kentucky
JOHN J. LAFALCE, New York
JOHN KREBS, California
BERKLEY BEDELL, Iowa
FREDERICK W. RICHMOND, New York
MARTIN A. RUSSO, Illinois
ALVIN BALDUS, Wisconsin
RICHARD NOLAN, Minnesota
HERMAN BADILLO, New York
JACK HIGHTOWER, Texas
THOMAS J. DOWNEY, New York
FLOYD J. FITHIAN, Indiana

HENRY A. ROBINSON, General Counsel
JUSTINUS GOULD, Deputy General Counsel

Lois LIBERTY, Printing Editor

MYRTLE RUTH FOUTCH, Clerk
JAMES R. PHALEN, Minority Counsel

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SUBCOMMITTEE ON SBA AND SBIC LEGISLATION

NEAL SMITH, Iowa, Chairman BOB BERGLAND, Minnesota

J. WILLIAM STANTON, Ohio HENI B. GONZALEZ, Texas

MILLICENT FENWICK, New Jersey JAMES C. CORMAN, California

WILLIAM F. GOODLING, Pennsylvania JAMES M. HANLEY, New York GUS YATRON, Pennsylvania JOHN BRECKINRIDGE, Kentucky WILLIAM L. HUNGATE, Missouri

THOMAS G. POWERS, Subcommittee Counsel

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71

93

ilearings held on-

May 20, 1975.

June 16, 1975

July 14, 1975.

July 15, 1975.

July 18, 1975

Opening statement of —

Conte, Hon. Silvio 0., a Representative in Congress from the State

of Massachusetts.

Smith, Hon. Neal, a Representative in Congress from the State of

Iowa, and chairman of the Subcommittee on Small Business Admin-

istration and Small Business Investment Company Legislation ---

Testimony of--

Adams, John B., director, Environmental and Consumer Affairs,

National Milk Producers Federation, accompanied by Lynn E.

Stalbaum, legislative representative-

Agee, James L., Assistant Administrator for Water and Hazardous

Materials, Environmental Protection Agency; accompanied by

Paul A. Brands, Deputy Assistant Administrator for planning and

evaluation.

Aldrich, Robert Hart, L. F. Rothschild & Co., accompanied by Neil A.

Eisner

Burton, Hon. John L., a Representative in Congress from the State

of California -

Gelfand, Norman, chairperson, Illinois Industrial Pollution Control

Financing Authority -

Kleppe, Hon. Thomas S., Administrator, Small Business Administra-

tion, accompanied by Greg Austin, general counsel.

Love, Tom, president, Musket Oil Co., and president, National Oil

Jobbers Council, accompanied by Robert Bassman, counsel -
McFall, Hon. John J., a Representative in Congress from the State

of California.-
Mazotti, Arnold F., senior research officer, Bank of America National

Trust & Savings Association, San Francisco, Calif., accompanied by

Robert H. Aldrich, L. F. Rothschild & Co., New York, NY -
Powell, Robert S., Jr., executive director, Economic Development

Authority, State of New Jersey ---

Unruh, Hon. Jesse, treasurer, State of California-

Correspondence and material submitted for the record-

Agee, James L., Assistant Administrator for Water and Hazardous

materials, Environmental Protection Agency:

Correspondence concerning pollution control loans.

Excerpts from the economic impact of the Federal environmental

program.

Aldrich, Robert Hart, L.F. Rothschild & Co.: Prepared statement.--

Bardin, Commissioner David J., New Jersey Department of Envi-

ronmental Protection: Prepared statement..

Brands, Paul A., deputy assistant administrator for planning and

evaluation: Macroeconomic impacts of Federal pollution control

programs

Burton, Hon. John L., a Representative in Congress from the State of

California: Prepared statement.--
Clausen, Hon. Don H., a Representative in Congress from the State

of California: Prepared statement-
Eisner, Neil A., L. F. Rothschiled & Co.:

Pollution-control revenue bonds and the tax-exempt bond market,

prepared by Merrill Ring, vice president, Bank of America -
Prepared statement..
Suggested amendments to H.R. 78..

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9

311
327

55

100

76
87
80

522

Correspondence and material submitted for the record_Continued

Fenwick, Hon. Millicent, a Representative in Congress from the State

of New Jersey: May 28, 1975, letter from Robert S. Powell, Jr.,

executive director, New Jersey Economic Development Authority -
Gelfand, Norman, chairperson, Illinois Industrial Pollution Control

Financing Authority: Prepared statement with attachments---

Kleppe, Hon. Thomas S., Administrator, Small Business Administra-

tion: Prepared statement..

Love, Tom, president, Musket Oil Co., and president, National Oil

Jobbers Council: Appendixes A and B accompanying testimony --
Mazotti, Arnold F., senior research officer, Bank of America National

Trust & Savings Association, San Francisco, Calif.: Various charts
and tables relative to the hearings --
Patman, Hon. Wright, a Representative in Congress from the State

of Texas: Prepared statement-
Powell, Robert S., Jr., executive director, Economic Development

Authority, State of New Jersey: Table— New Jersey manufacturing

firms by employment-size class, 1973 and other attachments...
Roe, Hon. Robert A., a Representative in Congress from the State of

New Jersey: Prepared statement-
Smith, Hon. Neal, a Representative in Congress from the State of

Iowa, and chairman of the Subcommittee on Small Business Admin-
istration and Small Business Investment Company Legislation:
June 16, 1975, telegram from Jesse Unruh, treasurer, State of
California; Randolph Collier, member, California State Senate;

and John Knox, member, California State Assembly, to Congress-

man John J. McFall.

Unruh, Hon. Jesse, treasurer, State of California: Pollution control

financing in California..

APPENDIXES

SBA ASSISTANCE FOR AGRICULTURAL CONCERNS

AND TO MEET POLLUTION STANDARDS

TUESDAY, MAY 20, 1975

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON SMALL BUSINESS
ADMINISTRATION AND SMALL BUSINESS INVESTMENT

COMPANY LEGISLATION OF THE
COMMITTEE ON SMALL BUSINESS,

Washington, D.C. The subcommittee met, pursuant to notice, at 10 a.m., in room 2359, Rayburn House Office Building, Hon. Neal Smith (chairman of the subcommittee) presiding.

OPENING STATEMENT OF CHAIRMAN SMITH

Mr. SMITH. The subcommittee will come to order.

This morning's hearing represents the beginning of an extensive study and investigation of small business problems which are being conducted for the first time by a small business subcommittee with jurisdiction to consider and report legislation. As part of this broad overview of small business problems, we will be looking at the effectiveness of small business legislation, primarily that contained in the Small Business Act.

The first bill to be considered and reported by this subcommittee, and subsequently by the full Small Business Committee, was one to authorize the granting of relief to small businesses involved in fixedprice contracts with the Federal Government, who suffered substantial economic loss due to inflation.

This legislation was unanimously reported by the subcommittee and subsequently accepted by the entire House of Representatives which, on April 22, 1975, passed H.R. 5541 by a vote of 402 to 0.

Other legislation pending before the subcommittee which we intend to examine and consider during the next several months concerns small business loans to comply with pollution control standards, loans to agribusiness, and protection against manipulation in livestock marketing.

Also, we will be examining SBA programs and restrictions such as loan ceilings and limitations, disaster loans, displaced business loans, the effectiveness of SBA certification of competency of small business contractors, the effectiveness of SBA assistance reaching the "mom and pop” operations, and a host of others.

I am hopeful that we can, and will, consider these matters as completely and effectively as the emergency relief bill passed by the House, and that we can achieve the same legislative results.

This morning's hearings are primarily concerned with problems of small businesses which are required to make substantial investments in equipment to meet water and air pollution standards mandated by Federal, State, and local governments. These standards must be met by a vast array of businesses ranging from farmers and ranchers to heavy industry.

The Small Business Act, as implemented by SBA regulations, provides specific assistance under two programs. Section 7(b)(5) authorizes loans to meet requirements imposed by State or Federal laws such as the Clean Air Act. Section 7(g) authorizes loans to meet water pollution control requirements mandated by the Federal Water Pollution Control Act.

It has been estimated that the cost to small business of meeting these pollution requirements will be in the range of $7 to $10 billion over the next 10 years. It has also been estimated that big business will need some $20 billion to meet these requirements, and thus, it is highly unlikely that the private sector will, under the existing circumstances, choose to also provide the capital needed by small business.

We have received information that the SBA, under current SBA programs, is not supplying the needed capital. These specific loans for water and air pollution equipment could be funded by SBA as a part of the nonphysical disaster loan program which also encompasses other loan programs such as product disaster loans, strategic arms limitation loans, and energy loans. The minor role to date of these pollution loans is shown by the fact that during fiscal year 1975, SBA programed only $110 million to cover the entire nonphysical disaster loan program, and to date, this fiscal year, has made only 12 loans for water pollution equipment totaling $5.4 million.

This morning we are pleased to receive testimony about the needs of small business, and the effectiveness of existing programs in this area, and on proposals as to how the Federal Government may provide needed assistance in order to permit these concerns to comply with the required pollution standards.

Our first witness will be Hon. John J. McFall. Mr. McFall is very familiar with problems facing small business in meeting pollution requirements, and has introduced legislation to provide additional Federal assistance.

We are very, very happy to have Mr. McFall here. He has long been interested in small business problems.

Before calling upon Mr. McFall, we will call upon the ranking minority member, Mr. Conte.

OPENING STATEMENT OF HON. SILVIO O. CONTE

Mr. CONTE. I want to commend you, Mr. Chairman, for calling these hearings. I am pleased to be able to participate in the hearings. As a longtime advocate of both the small business community and a cleaner environment, I wholeheartedly endorse and support the efforts of this subcommittee to find a way to help our hard-pressed small firms to carry their share of the burden of cleaning up the air and water.

The Congress mandated that the cleanup take place as rapidly as possible. Unfortunately, the combination of inflation and recession has made the cost of a cleanup much greater and much more difficult to bear than was originally anticipated.

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