A federal loan program heavily criticized for its lack of oversight generated nearly $18.5 million in loans for local business people, many of whom didn't realize the money was meant for businesses affected by terrorist attacks.
Many owners of those businesses said that despite the criticism, the loans created jobs and did a lot of good.
Shelby and Randie Collier, owners of the Beyond Bread cafes, received a $408,600 loan that helped them build a new location at 3026 N. Campbell Ave.
"These funds generated a tremendous number of jobs," Collier said, estimating the store created 25 new jobs. "We couldn't have gotten started without that program."
Congress created the Supplemental Terrorist Activity Relief, or STAR, program Jan. 10, 2002, as a one-year program intended to provide relief to "small businesses adversely affected" by the Sept. 11, 2001, terrorist attacks.
People are also reading…
Distinct from the disaster loans also administered by the Small Business Administration, the STAR funds were a class of 7(a) loans, a category intended to provide working capital to businesses for normal operating expenses. The difference was that STAR loans were offered at a reduced fee to lenders — 0.25 percent of the outstanding balance, as opposed to the 2 percent and above charged on regular 7(a) loans.
Missing from the bill, however, was an explanation of what "adversely affected" meant or what the geographic scope of the loans was. That responsibility was delegated to the SBA, which told lenders an eligible small business was any that "suffered economic harm or disruption of its business operations as a direct or indirect result of the terrorist attacks."
Of the 8,200 companies the SBA cited as recipients, 49 were in the Tucson area.
After the SBA released the names of the companies last year, U.S. Sen. Olympia Snowe, R-Maine, chairwoman of the Senate Committee on Small Business and Entrepreneurship, called for an investigation.
The bill "was not passed to grant low-interest loans to liquor stores, donut shops, dog boutiques and perfume shops located hundreds and thousands of miles away from Ground Zero," Snowe said in a press release.
"Inadequate controls"
On Dec. 23, the Office of the Inspector General of the Small Business Administration released a report on the program. It concluded the SBA "did not implement adequate internal controls and oversight of the STAR loan program to ensure that only eligible borrowers obtained STAR loans."
The report labeled as inadequate the justifications used by lenders to approve STAR loans.
Unlike the disaster loan program, STAR loans did not require small businesses to submit extensive proof detailing how they were affected by 9/11. Lenders were only required to provide a narrative of how they reached their decision.
Though there is still some back-and-forth between the lenders and the SBA as to who was responsible, the businesses that received the loans — most of them unwittingly — have been excused.
"No business that got a STAR loan did anything wrong," said SBA spokesman Raul Cisneros. "The 'how' that somebody was impacted was broad. Congress wanted it to be broad because there were so many ways that a business could be affected."
While the loan's loosely defined objectives meant inclusiveness to some, to others they were preposterous.
"Something like 9/11 had a ripple effect across the whole economy," said Chris Edwards, an economist at the Cato Institute in Washington, D.C. "With this sort of SBA loan, it's a very gray area. Who should get these loans and shouldn't?"
Local companies unaware
Out of the 49 local companies named in the SBA's list, 18 responded to calls made by the Arizona Daily Star.
One owner — David Starbuck, of Starbuck Textile Design, 2201 N. North Oracle Road — said the records were erroneous because his business wasn't adversely affected after Sept. 11.
Of the remaining 17, only one owner was aware she had been approved for a STAR loan.
Billy Comeaux Trucking at 12390 E. Snyder Road received two loans totaling $810,000, according to SBA records. The loans were used to buy and refinance a fleet of trucks and dump trucks, said co-owner Ruth Anne Comeaux.
"We were very much impacted by 9/11 because of what happened with over-the-road trucking and the industry, so it was very applicable in our case," she said.
In the case of Beyond Bread, the drop in tourism negatively affected sales, Shelby Collier said.
Though unaware he had received a STAR loan, Collier disagreed with critics. For a business owner, the concern is whether the loan is approved or not, he said.
"When any business is looking for money and they go to a bank, the lender is going to work any kind of program they can to help them," Collier said.
"It's news to me"
After more than a year spent planning and raising funds, Karen Dinius and her two daughters were negotiating a lease for their new business, Salon de Futur, when the attacks put their plans in perspective.
Looking back, "we weren't necessarily thinking about opening the business at the time that we did," Dinius said. "But the children could not stand the thought of me flying anymore."
Since opening, Dinius has hired three additional stylists to bring her staff total to eight.
"I just went for everything else that I thought I could go for," she said, referring to the loans set aside for woman- and minority-owned firms, and those located in low-income areas. "If they put me into that category (of a STAR loan recipient), then it's news to me."
● The U.S. Small Business Administration's Supplemental Terrorist Activity Relief (STAR) program provided loans to these Tucson-area businesses between Jan. 10, 2002, and Jan. 10, 2003.
Business Amount of loan
Ace Hardware, 2221 N. Country Club Road $510,000
American Turbo Systems Inc., 4210 N. Sullinger Ave. $560,000
Arizona Hunters Guide Book $12,500
Arizona Truck Outfitters, 625 N. Stone Ave. $1,000,000
Beyond Bread Inc., 6260 E. Speedway $408,600
Big O Tires Inc., 6627 N. Thornydale Road $831,000
Billy Comeaux Trucking Inc., 12390 E. Snyder Road $810,0003
Bruce Franke Enterprises LLC, 7628 N. La Cholla Blvd. $385,000
Café Pacific, 3607 N. Campbell Ave. $25,000
Cowpony Bar & Grill, 6510 E. Tanque Verde Road $786,000
Days Inn Tucson, 222 S. Freeway Road $1,139,000
Desert Aircraft, 1815 S. Research Loop $630,000
Desert Earth and Wood LLC, 1027 E. 19th St. $40,000
Desert Metal Works, 2465 N. Huachuca Drive $1,309,000
Desert Streams & Waterfalls Inc., 3775 N. Houghton Road $212,000
Diversified Equities & Development Inc. , 10961 E. Monument Estates Circle $10,000
El Mezon del Cobre Inc., 2960 N. First Ave. $1,200,000
Electronic City Inc., 1300 S. Park Ave. $850,000
F&F Grocery Store Inc., 3114 S. 12th Ave. $25,000
Four 'R' Properties LLC, 6412 E. Sun Circle $259,000
Gaslight Theater, 7010 E. Broadway $304,000
Jim's Auto Body & Collision 1, 1668 S. Research Loop $690,000
Jim's Market, 805 E. 36th St. $60,000
Karyn Garvin & Associates Inc., 5007 E. 29th St. $70,000
Kirsh Manufacturing Inc., 801 E. 46th St. $266,000
L.A. Weight Loss Center 2 $225,000
La Fuente Restaurant, 1749 N. Oracle Road $230,000
Metro Car Wash & Detail, 3050 N. Oracle Road $909,000
Mineral Seal Corp., 7941 E. Lakeside Parkway $10,000
Native Tele-Data Solutions Inc., 4443 N. Flowing Wells Road $426,000
P&P Builders, 3552 S. Chesin Drive $10,300
Practice Management Services, 5625 E. Grant Road $205,000
Precise Hearing Aid Co. 1, 888 S. Craycroft Road $40,000
Business Amount of loan
Pro-Tile PT Builders Inc. $50,000
RET Monitoring Inc., 4542 W. Cerritos Drive $150,000
RG Rossetti Company, 3330 N. Gregory Drive $35,000
Salon de Futur, 1217 W. Irvington Road, Suite 121 $55,000
Sport Clips 1, 5420 E. Broadway, Suite 252 $128,500
Starbuck Textile Design, 2201 N. Oracle Road $443,000
Sun Busters Inc., 3407 E. Benson Highway $229,400
Sun Lighting Inc., 4545 E. Broadway $200,0003
The Range Market LLC, 11200 S. Sierrita Mountain Road $325,000
U.S. Press & Graphics Inc., 1601 S. Pantano Road, Suite 101 $194,100
Ultra Clean Auto Wash, 6611 N. Thornydale Road $1,042,000
Wellness Health Center, 3956 E. Pima St. $363,6003
World Education Network Inc., 2402 W. Silverbell Tree Drive $642,0004
Wyatt's Exxon & Automotive Center, 1306 W. Grant Road $135,000
Footnotes
1 — Since 2002, businesses have changed company ownership and names.
2 — Company address was not provided. Ownership of both local centers has changed since 2002.
3 — Represents the sum of two STAR loans.
4 — Company has changed name and address since loan was granted.
Source: Associated Press list provided by the U.S. Small Business Administration.