In Philadelphia - a city recuperating from a severe budget crisis - officials talk a lot about economic development. But the city's poorer neighborhoods complain that too much public aid goes to Center City businesses and other well-off areas, while struggling communities get little assistance. Officials have admitted that certain programs, such as Urban Development Action Grants, were funneled downtown to ensure its economic health.
But they countered that other government assistance, such as loans backed by the U.S. Small Business Administration, did not work that way. An October 1995 analysis by the Philadelphia Daily News showed that's not true. The two-part series showed how the agency did a poor job of getting money into the city and, when it did, the support went more to neighborhoods that are already better-off. The stories mined the SBA's national database for 7a loans.
That is the SBA's key program for helping small businesses. The name refers to the section of law that created the program. The program is supposed to encourage bank lending to companies that would otherwise not qualify. It is designed to work this way: A company is seeking a bank loan, but the bank is reluctant. Maybe the company owners have little credit history to help the bank make a decision. Perhaps the deal is a bit chancy.
But if the company qualifies, it could get the federal government to guarantee a big chunk of the loan. The bank is happy because it gets to do the deal with less risk. The company is pleased because it gets the cash. The SBA is content because it helps a small business. There are rules. However, in the decentralized federal agency, a clear picture emerged: Some district offices and banks were better at churning out loans than others.
Philadelphia was among those cities with a smaller piece of the pie. The data was a key part of the story. Obtained under the Freedom of Information Act, the nine-track tapes showed where the money was going. The database was a little dirty; developing look-up tables for cities and ZIP codes helped alleviate problems caused by sloppy data entry. After that, the numbers showed that, despite being the nation's fifth-largest city, it ranked 17th when it came to getting SBA aid.
In addition, when agency officials countered that they were improving, a year-by-year breakdown showed that, while Philadelphia's numbers were a bit higher as time went on, its relative position fell because other places were doing even better. I spoke to those in places getting more money. They described how they worked the system to do more deals. Those methods underscored the problems back in Philadelphia.
When it came to particular loans, the database was handy for seeking paper records. I submitted an FOIA request to the SBA district office, attaching a spreadsheet that listed the names, addresses and loan dates. The district office complied with documents that showed much more than what is in the database - including details like the equipment or land used as collateral. This was also a great way to check the data's integrity.
I linked the SBA data with U.S. Census Bureau poverty and population tables to see whether SBA officials were right that the money was evenly distributed among rich and poor neighborhoods. Using SPSS, I ran a series of independent t-tests and analysis of variance, and found a significant gap. All this led to much better interviews. One City Hall official pointed out that, adding insult to injury, Philadelphia was also the biggest city without its district office located within its borders.
A check of SBA district offices, published on the agency's web site, showed that was true. I tracked down the Reagan administration official who moved the office out to the suburbs. He conceded that the long commute, among other reasons, caused him to pull out.