Politics & Government

Loans put stimulus to work, 1 or 2 jobs at a time

Dan Skelley voices a piano Thursday in his University Place showroom. After two banks turned Skelley down for a $20,000 loan to become a distributor for a Chinese piano company, a Small Business Administration loan backed by federal stimulus dollars helped him get his new business started.
Dan Skelley voices a piano Thursday in his University Place showroom. After two banks turned Skelley down for a $20,000 loan to become a distributor for a Chinese piano company, a Small Business Administration loan backed by federal stimulus dollars helped him get his new business started. The Olympian

WASHINGTON - After 32 years tuning, repairing and selling pianos, Dan Skelley wanted to branch out. All he needed was $20,000 to become a Washington state distributor for a Chinese piano company, one of the largest such manufacturers in the world.

But as the worst economic downturn since the Great Depression deepened and credit dried up, two banks balked at lending him the money. Finally, a third bank helped him secure a Small Business Administration loan backed by funding from the $862 billion stimulus bill approved by Congress and signed by President Barack Obama in 2009.

Skelley’s story is far from unique as small- and medium-size business owners across the state have used stimulus funds to renovate, expand and even open businesses at a time when other credit has been hard to come by. Recipients include an Italian restaurant and a chiropractic clinic in Bellingham, a hydroponic gardening store in the Olympia area, and a pizza parlor and a hair salon in the Tri-Cities.

Though most of the attention has focused on major infrastructure projects and everything from schools to health care and green energy projects, Skelley and tens of thousands like him are mostly overlooked as they use economic recovery funding to create or save one or two jobs at a time.

Skelley doesn’t have a staff at his low-profile store in a business park in University Place. But he hires piano movers and tuners as he markets Ritmuller Pianos, built in the world’s largest piano factory in Guangzhou, China, using a German design, German components and wood from North America.

“I’m a little guy, but I’m like everyone else,” Skelley said. “I want to make money. It’s a good opportunity.”

Sam Tino received a $34,500 SBA stimulus loan to remodel two 1950s-era bathrooms in his Mambo Italiano Cafe in Bellingham. It took several carpenters and a tile layer nearly a month to finish the job.

“They were glad to get the work,” Tino said.

New Edge Inc., an innovation strategy company in Richland that works with Fortune 500 companies, used more than $700,000 in SBA stimulus support to purchase the building it was in. The company ended up saving money and has added several people to its 20-person staff.

“I love new roads, but putting money into them is a one-time thing,” said Pam Henderson, the company’s co-CEO.

STATE GETS BILLIONS

Washington state governments, nonprofits and businesses are expected to eventually receive $6.6 billion in federal stimulus funding by way of grants, loans and contracts, and about one-third of that has already been spent, said Arun Raha, who, as executive director of the Washington Office of the Economic and Revenue Forecast Council, tracks economic trends in the state.

Nearly one-third, about $2 billion, of the stimulus funding the state will receive is targeted for cleaning up the Hanford Nuclear Reservation, where the waste from years of plutonium production is stored.

Through June, the spending had created or saved an estimated 14,000 jobs in Washington state, Raha said, adding that it could increase to an estimated 70,000 to 75,000 jobs by the time the money runs out. The state’s unemployment rate has edged down from 9.4 percent in the first quarter of this year to 8.9 percent, he said.

“Without the stimulus it would have been higher,” Raha said.

With the political season heating up, stimulus funding has become a hot topic. Republicans criticize it as a waste of money that substantially added to the federal debt. Democrats said the funding was the only way to get the economy moving again after a crash they blame on Republican policies.

It might be years, if ever, before economists decide how effective the stimulus spending was.

Raha’s post is nonpartisan. He declines to get dragged into the political fray. But he said “the fact stimulus is needed in a recession is not in dispute. The type of stimulus can be in dispute.”

The debate is over whether efforts to stimulate the economy should involve direct spending or tax cuts, he said.

In the short term, Raha said, stimulus funding needs to continue, but the in midterm, four or five years out, Congress needs to develop a “credible” deficit reduction program.

As for SBA loans, Raha said they were “very important. What’s holding back job creation is credit availability.

“Every little bit helps.”

GIVING CREDIT

The stimulus funding has allowed SBA to make 69,700 loans worth $29.4 billion, said Mike Stamler, a SBA spokesman.

The agency’s weekly average lending has increased 90 percent since Congress approved the stimulus funding.

“While commercial lending trailed off, we were one of the few sources of credit for small businesses,” Stamler said.

A veteran of the Persian Gulf War, Tony Kantas said he and his partner would never have been able to open Northwest Hydroponics in Olympia without a $49,000 SBA loan.

“I didn’t even know it was stimulus money,” he said. “But it is definitely a good thing.”

Along with the SBA loans, some of the stimulus funding has helped companies indirectly. Pexco operates a plastic extrusion plant in Tacoma, making things such as plastic posts that help channel traffic. In the summer, the Tacoma plant with 120 to 125 employees was running four shifts a day, 24 hours a day. By November, the company had cut its work force by 15 percent and was running three shifts only four days a week, said Peter Speer, the Tacoma plant’s vice president for sales.

But as the stimulus funding for highway projects began to kick in, Pexco’s plant began to hum. By March of this year the company was operating five days a week, and in April they started hiring.

“We were cranking,” Speer said. “There is no question that for companies like ours the stimulus has been a boost.”

Les Blumenthal: 202-383-0008 lblumenthal@mcclatchydc.com

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