Sandford “Sandy” Blitz, New England administrator for the U.S. Small Business Administration based in Boston, wants business owners to know that the federal economic stimulus package offers more than rebates to individual taxpayers. He spoke earlier this month to Providence Business News about two features of the program – accelerated depreciation and increased expense allowance – that he said business owners, big and small, are eligible for. He also disputed reports of a credit crunch in New England.
PBN: How does the federal economic stimulus package help business?
BLITZ: In my travels around New England, I found that no one seemed to know that in the economic stimulus package are included some benefits for businesses. Accelerated depreciation … allows for a 50-percent bonus depreciation for capital asset purchases that are made this calendar year. So if a business person was thinking about buying a piece of equipment, and they’re feeling the economy is not doing too well right now and maybe they’d better hold off until next year, come Jan. 1, they’re not going to be able to get the benefit.
The way this benefit works is that, if a company buys a piece of equipment that costs $100,000 and that equipment has a normal asset life of 10 years, normally they would be able to only depreciate that equipment for $10,000 each of the next 10 years. The economic stimulus package allows for 50 percent, plus the normal first-year write-off for depreciation, so for a $100,000 piece of equipment, they’ll be able to depreciate $60,000 off that purchase. It’s a one-shot deal that ends Dec. 31, 2008. The SBA has just put on its Web site something that business people can look at themselves – we even have a depreciation calculator on the Web site – at www.sba.gov/stimulus.
The other part of the economic stimulus benefit is the expensing. Under normal circumstances, the IRS allows you to expense capital assets up to $128,000. So, say you purchased equipment for $400,000 in the year. In the stimulus package, they’re going to allow you to expense $250,000 the first year instead of $128,000, so it’s almost a doubling of equipment/capital asset expensing.
These are the two major items available for businesses in this calendar year. Obviously, this can really do well for an individual company that makes a purchase. In addition, whoever they bought from, they’re going to have go out and buy materials to manufacture the equipment, so they’re going to be able to get a write-off with this accelerated depreciation and/or expensing, and so on and so on. So, [the impact] will go throughout the entire economy because each company is buying from somebody else, who’s buying from somebody else. If these businesses were aware of this, it would do exactly what the Congress and the president want it to do, and that is to stimulate the entire economy.
PBN: Steven Preston, former administrator of the SBA in Washington, became head of the U.S. Department of Housing and Urban Development (HUD) in April. Do you know the acting administrator, and who will take Preston’s place?
BLITZ: The acting administrator is our deputy administrator, Jovita Carranza. The president has nominated Santanu “Sandy” K. Baruah [to replace Preston permanently]. Right now, Baruah is the assistant secretary for economic development at the U.S. Department of Commerce. He has to be confirmed by the Senate, and I don’t think hearings have even been scheduled yet. I know Baruah personally from my previous positions. I used to work at the Economic Development Administration [where Baruah was chief of staff]. He’s from Oregon, but he’s been in Washington for some time now.
PBN: Is there a credit crunch in New England?
BLITZ: We [recently] met with a group of bankers in [Gov. Donald L. Carcieri’s] office. They asked the bankers: “Well, what’s the story?’’ because everybody was talking about a credit crunch.
We went around the room and the banks said we have plenty of money and we’re willing to make deals and we’re competing with each other to get those deals. I’ve been to similar forums like that here in Boston and also in Connecticut. The top-echelon managers at SBA have been meeting with bankers across the country since February to get a feel from them directly about what they feel about this so-called credit crunch.
And what it is, you have the subprime mortgage trouble that caused all this problem, basically in the housing market. But in the commercial area where we operate, I found in New England the same kind of story being told that’s going on in Rhode Island, and that is that the banks have money, they’re willing to lend, there’s no credit crunch in New England.
There’s maybe four or five major banks in New England, and some of those banks – not all of them – got caught up in that subprime mortgage problem. But the rest of banks in New England are smaller, they’re second-tier or third-tier or what we call “community banks,” and they weren’t involved in the subprime mortgage trouble. So, they weren’t hit by it and they have the money available, and they’re willing to make loans to companies that are viable and can pay back the loan.
What we’re finding is a reluctance on the part of borrowers. One other point I should make on behalf of the banks, they have not raised their criteria for making loans. What’s happening is, because of what people are hearing in the news about how terrible things are, there’s a reluctance on the part of borrowers to borrow additional money at this time. So that’s why there’s been a drop-off of SBA loan guarantees from last year to this year. •
interview: Sandford “Sandy” Blitz
POSITION: Regional administrator, New England, U.S. Small Business Administration (SBA).
BACKGROUND: A former economic development representative for the U.S. Department of Commerce’s Economic Development Administration, Blitz was responsible for overseeing programs to foster business growth throughout New England. He became head of the New England office of the SBA in October 2007.
EDUCATION: B.A. in business administration from the Bernard M. Baruch School of Public and Business Administration at the City College of New York in 1963; M.A. in public administration from the University of Maine in 1982.
FIRST JOB: Blitz’s first job was one he created himself. Coin-operated, commercial laundries were introduced when he was 12. He lived in New York City then and most customers came from tenements. He stationed himself inside the laundry and carried the clothes for tenement residents when requested.
RESIDENCE: Hudson, Maine
AGE: 71
