Chatsworth Firm Gets Biggest U.S. Quake Loan : Business: SBA is expected to approve $10-million credit to damaged medical manufacturer that threatened to leave the Valley.
A Chatsworth manufacturer hit hard by the Jan. 17 earthquake is expected to receive a multimillion-dollar loan this week from the Small Business Administration that would be by far the largest loan made by the SBA following the devastating temblor.
Dan Sandel, owner of Devon Industries Inc., said he was told Monday by an SBA official that the agency would approve a low-interest loan of about $10 million. The approval came during Sandel’s visit with the Valley Industry & Commerce Assn., which is here on its annual trip to the nation’s capital.
The company, which manufacturers disposable surgical supplies, employed 375 people at three Chatsworth buildings. The loan would go to rebuild the largest plant, replace destroyed machines and upgrade operations.
For Sandel, the substantial loan may have meant the difference between rebuilding in Chatsworth and leaving California. He did not have earthquake insurance when the quake collapsed a concrete rooftop parking lot onto his 65,000-square-foot production facility. Fourteen injection molding machines, each costing about $200,000, were damaged beyond repair.
Without the loan, Sandel, who has another plant in Ohio, said he would have left California and what he regards as its inhospitable business climate. Instead, he said he plans to modernize the new plant and fill it with state-of-the-art equipment. He said other companies are taking this approach.
“What the SBA did for me is like a Marshall Plan,” said Sandel, whose company had more than $60 million in sales in 1993. “Los Angeles can upgrade its manufacturing capacity just like Europe did after World War II.”
The quake knocked out more than just one of Sandel’s plants. The self-made, Israeli-born entrepreneur had started a program to employ and house homeless people that was believed to be the first welfare program in the nation run by a businessman. He said he hopes to renew the effort after Devon returns to health.
Sandel was one of several VICA board members who expressed gratitude for the Clinton Administration’s rapid and massive relief and reconstruction assistance following the quake, which wreaked its most severe havoc in the San Fernando Valley and surrounding communities. Sandel called it “an absolutely outstanding job.”
During the first of three days of meetings here with Administration officials, lawmakers and lobbyists, the 38-member delegation was briefed by John Emerson, an assistant to the President and coordinator of the Administration’s earthquake recovery effort. Emerson is an ex-chief deputy to Los Angeles City Atty. James Hahn and is well known to several VICA members.
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Emerson, who had made four trips to Southern California in the past 12 days, ticked off various initiatives undertaken by the Administration to assist the quake- and recession-battered region. Most prominent was as much as $10.3 billion in federal aid, which he referred to as the disaster’s silver lining.
“This infusion of capital and the impact of creating jobs in Southern California has perhaps spurred what I think we would all categorize as a very fragile but very real recovery,” Emerson said.
As befits Clinton’s ex-California campaign manager, Emerson reflected the Administration’s sensitivity to the state’s political importance. He said the quake relief effort “proves that government--well-directed by people who care--can work effectively and efficiently.” And he repeatedly touted bipartisan cooperation by Clinton and Los Angeles Mayor Richard Riordan.
Notably absent from Emerson’s honor roll was Gov. Pete Wilson. The Republican, who is seeking reelection this year, recently angered Clinton aides by announcing the reopening of the Santa Monica Freeway--rebuilt entirely with federal funds--without including them.
One of the steps taken by the Administration to speed recovery from the quake was spurred, in part, by the efforts of VICA and the example of Devon Industries. SBA regulations had limited disaster loans to businesses with fewer than 1,000 workers to $1.5 million.
Pointing to Devon as symptomatic of companies that had significant regional economic impact, VICA was one of several business groups that lobbied SBA Administrator Erskine Bowles to lower the threshold to qualify as “a major source of employment.” The group has 350 member companies representing about 150,000 employees.
In response, he reduced it to 250 last month--making Devon and hundreds of other smaller and mid-size firms potentially eligible for much larger loans.
“Devon was mentioned at that time as one of the cases that deserved the major source of employment treatment,” Bernard Kulik, the SBA assistant administrator for disaster assistance, confirmed. “VICA was one of the groups involved.”
Sandal said he’s been told the loan would be repayable at 4% interest annually over 30 years. Kulik must still approve these terms.
Sandel, a naturalized American, said he also plans to revive his ambitious effort to repay society for his success by hiring homeless to work in his factory and giving them a virtually free apartment nearby for up to nine months. He said eight individuals were in the program when the quake hit. He discontinued the program when he temporarily had to lay off 106 workers.
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In a related development, attorney Benjamin Reznik of Encino, VICA’s earthquake recovery task force chairman, said that a coalition of Valley business groups will receive $250,000 from the U.S. Economic Development Agency to devise the Valley’s first economic development plan.
Reznik said he expects the Los Angeles City Council, through which the development agency’s money is disbursed, to approve the funds soon.
“We’re going to come up with a real plan that we can implement” to counter the loss of aerospace jobs due to post-Cold War defense cuts, Reznik said. He said the San Fernando Valley Regional Economic Council would try to complete the plan in six to nine months.
VICA, whose large Washington contingent includes City Councilwoman Laura Chick, enjoyed increased access to Clinton Administration officials last year. This year it is shooting higher: The group has tentatively scheduled a White House meeting Wednesday with the President, vice president and Cabinet secretaries. Organizers said they remained uncertain who would host them at this final event of their fifth visit.
But they took their case directly to Emerson on Monday.
Noting the scheduled White House visit, attorney David Fleming, a former VICA chairman, said: “Some of us would like to thank the President personally, if at all possible.”
“Who are you guys meeting with?” Emerson replied.
Not missing a beat, Nicholas Liakas, chief executive of Digital Imaging of Southern California, quipped: “The President.”
