Palm Springs Quake Victims Sweat Out U.S. Loan Decision

A week after the July 8 earthquake centered 12 miles northwest of Palm Springs, Riverside County authorities announced, with more than a trace of unhappiness, that the damage from the 5.9 temblor was not quite sufficient to qualify the victims for federal disaster relief.

According to the authorities’ original understanding, federal rules required that a total of 25 homes or businesses each suffer at least 40% uninsured damage before anyone could receive low-interest loans from the U.S. Small Business Administration. By their calculation, only 18 homes and two businesses had received that much damage.

The next day, the county’s biggest daily newspaper, the Riverside Press-Enterprise, editorialized: “There doesn’t seem to be anything to blame for this state of affairs but the earthquake, and not much to do about it but wonder at an act of God that looks for all the world like an actuary’s practical joke.”

But government rules are so complex, and the means of calculation of qualifying damage so complicated, that it turns out that there may be hope of the 4% or 8% loans for Palm Springs quake victims after all.

Elaborate Report

An SBA assessment team is in Riverside County this week reviewing the situation. The county has prepared an elaborate quake damage report listing virtually every place that suffered damage. The report of $8,034,762 in damage, however, includes $4.5 million in damage to an Edison Co. substation, which county authorities were told was fully insured.

The SBA deputy area director, George Kemp, said in Sacramento last week that “it’s going to be fairly close” as to whether Palm Springs-area victims will qualify for the loans. If they do, they will be given 60 days to apply.

Kemp said the interest rate charged and the duration of the loans would depend on each victim’s financial wherewithal, his capacity to repay and so forth. He said a loan could still be withheld if it was determined that a victim would be unable to repay it, even on the most advantageous terms.

The Riverside County experience demonstrates that it does not have to be a dramatic disaster to warrant official designation, as far as the U.S. government is concerned. In the 1984-85 fiscal year, according to a Washington SBA spokesman, 134 disasters were certified nationwide, leading to $187.7 million in loans to victims. In the first eight months of the 1985-86 fiscal year, 75 disasters qualified for $355.5 million in such loans.

Less Demanding

What Riverside County authorities discovered when they got down to the nitty-gritty and consulted in detail with the SBA was that the 25-building, 40%-damage threshold can be reached in another way that appears less demanding.

The loophole is that if a building is rented, the renter’s personal property can be used to meet the standard, even if the building itself has not suffered 40% damage.

For example, if a renter has $5,000 worth of furnishings and other personal property, and at least $2,000 of that is a loss, the site will qualify as one of the 25 buildings, even if the structure itself is relatively undamaged.

Since some of the dwellings suffering damage in the Palm Springs quake were rented mobile homes, it appears conceivable to county disaster coordinators that a number of sites may qualify in this way.

Second Homes

On the other hand, under the rules, dwellings used as second homes by weekenders from Los Angeles and other places cannot be used to qualify, regardless of the extent of damage. However, the particular area outside Palm Springs where the quake was centered is an extremely windy area that is not the site of many of this type of homes.

David Driscoll, deputy chief of the Riverside County Fire Department and the man in charge of compiling the county’s damage report, said he is quite hopeful that the Palm Springs-area residents will qualify for the loans, even though the damage report indicates that most of the structures sustained less than maximum damage.

Driscoll said he had been told that the SBA examiners can exercise discretion.

“If it’s two or three percentage points below the required damage, they might still rule it in,” he remarked.

However, in Sacramento, the SBA’s Kemp said that while “we have some flexibility . . . we’ve got minimum criteria that have to be met.”

Federal Loans

Meanwhile, in San Diego County, a spokeswoman at the disaster office there said local authorities had been advised that at $203,000, there was not enough damage in the 5.3 July 13 earthquake off Oceanside to qualify victims for the federal loans, unless some way is found to attach the quake to the Palm Springs temblor for qualification purposes. The spokesman said qualification is regarded as unlikely.

The Chalfant Valley area outside Bishop, site of the most powerful of the recent temblors at 6.1, probably saw enough mobile homes wrecked to qualify, officials there have said.