Letter From Ground Zero

What a difference five blocks can make. The New York City neighborhood where I live, Tribeca, sits immediately north of the site of the former World Trade Center. A funky blend of rambling old loft buildings and modern apartment houses, this onetime artists' haven has over the years been invaded by expensive restaurants, art galleries, and European furniture stores.

After September 11, resilient local businesses joined together to create special weekend discount offers designed to lure the city's patriotic shoppers to Lower Manhattan. Local resident Robert De Niro encouraged his Hollywood friends to crowd our restaurants; in the spring, with American Express's help, he hosted a multimillion-dollar film festival that filled our streets with generous and fat-walleted citizens. Although business isn't uniformly back to where it was before September 11, suffice it to say I can no longer get into my favorite restaurants without a reservation.

But walk five blocks south, and it's a strikingly different story. Most of the pedestrians you encounter aren't shoppers; they're construction workers sporting luminous orange safety vests and hard hats plastered with American-flag decals. Try to cross a street, and you'll find yourself dodging a bulldozer or a police car. The air is thick with dust as workers dig up streets to lay a tangle of new electric, gas, telephone, and water lines.

Lower Manhattan is not entirely a commercial wasteland. Some office buildings are beginning to fill up again as large companies take advantage of millions of dollars in financial incentives for moving employees to the area. Critical subway stations have reopened. And there are, of course, thousands of people making pilgrimages to the World Trade Center site, some out of true deference to the tragic event, others seemingly in a mawkish display of tourist bravado.

But if you're a small business near Ground Zero, you have not enjoyed the community rejuvenation of Tribeca nor the adoption of the Hollywood set. And that's where the government comes in -- or, at least, that's where it was supposed to come in.

After September 11, President George W. Bush grandly announced his intention to spend $21 billion to restore New York City to its former glory. Of the $2.7 billion appropriated so far by Congress, $500 million was earmarked for small businesses, individuals, and nonprofit organizations that suffered economic losses from 9/11. But for a host of reasons, many of the small businesses that were most directly affected by the attack on the World Trade Center have received little or no financial aid.

Consider Mike Yagudayev, a Russian émigré turned American citizen who bought a hair salon just across from the site several years ago. Nine months after 9/11, he is still unable to reopen his salon, which is located on the ground floor of a building that has yet to be cleaned. Using a formula based on a percentage of last year's sales, the government has told Yagudayev that he is eligible for a grant of only $1,975. The initial payment was just $591; not until May did he receive the remaining $1,384. "My blood pressure goes up every time I talk about this," he says.

"Government agencies have decimated me much more than the terrorists did."

--Seth Pehr

Or how about Lisa Chapman, whose four-person design and marketing firm, ChapmanWorks, was situated in a glorious 21st-floor office overlooking the World Trade Center. The building caught fire that morning and still sits shrouded in tarpaulins and netting while the owner tries to decide whether to tear it down or restore it. In the days following the attack, Chapman moved her office to temporary quarters in Chelsea but has since returned downtown to share space with another displaced business. There she is trying to re-create from scratch the work her firm had previously done for such clients as Xerox, Canon, and Cushman & Wakefield. Though her firm enjoyed some $600,000 in billings in 2000, the government has determined that she should get just $10,000 to cover her losses. So far she has received only the first $2,500 of that amount. "The grant and loan programs have been woefully inadequate," she says.

Seth Pehr is a third-generation locksmith whose business was at Five World Trade Center, part of a collection of buildings so damaged that they were later pulled down. He lost his business in its entirety and was given only a total of 75 minutes in mid-October and the beginning of November to retrieve business records and personal items belonging to his father. To date Pehr has received a grand total of $4,100 from the government. He applied for unemployment insurance and was approved. But when it came time to renew his application, three months later, he was turned down. The reason: he admitted that he was not looking for a job because he was trying to restart his business. "Government agencies have decimated me much more than the terrorists did," says an angry and shaken Pehr.

Many of these small-business owners are angry not only about the amount of aid they have received but also about the government's almost Orwellian logic in determining how the money will be doled out.

Monica Anderson, co-owner of a commercial-film-production company called Black Watch Productions, learned that her company was ineligible for a so-called Small Firm Attraction and Retention Grant because her business was too small. Congress had mandated that the $80-million program focus on companies that have fewer than 200 employees but more than 10. That essentially ruled out large segments of Lower Manhattan's small-business population.

Leonard Altabet, an optician who has had a store in the neighborhood for 24 years, made the mistake of collecting disaster unemployment insurance for the five and a half weeks he was closed last fall. Now the state is taking him to court to get that money back on the grounds that he was a corporate officer of the company he owns and therefore was still working during that period. "It amounted to $1,800 at a time when life as I knew it had ended," says Altabet. "How sick is this? We all should be getting disaster unemployment insurance. All my employees got it, and if I went out of business, I would have gotten it."

All the bureaucratic nonsense might have been tolerable, owners say, if the city had been able to restore their businesses' services. But for months these entrepreneurs have struggled to reestablish their companies in an environment almost unimaginably inhospitable. Many were without electricity or phone service for weeks. They could get in and out of the area only with the utmost difficulty. In order to get their mail -- often full of critical information about their accounts -- they had to stand in line for hours at a post office several miles away, on 33rd Street. Worst of all, their local customer base, particularly vital to retail businesses, was shy by the 100,000 or so people whose companies or homes had been dislocated by the disaster. In December, when Pasquale "Pat" di Tillio reopened his Majestic Pizza on a block cordoned off at both ends by police barricades, his new target market was rescuers and his main customer was the Salvation Army -- a far cry from the brisk traffic he had enjoyed before. "How many people want to show a photo I.D. for a slice of pizza?" he asks plaintively.

What about insurance? Many business owners had some; a few had business-interruption policies. But even among the insured, many have been paid only a small fraction of what they think they are owed; others have not yet received anything, despite having filed their claims months ago. Dealing with insurance companies is like applying for government grant and loan programs in that it entails endless amounts of paperwork. Owners have spent hours and days filling out forms and trying to track down documentation to support their claims. For those whose offices or stores were completely destroyed by the Twin Towers' collapse, the task is nearly impossible; many didn't have duplicate financial records or backup computer disks in a separate, safe location. Pehr had to try to reconstruct from memory his inventory of thousands of keys. Without records to prove their claims, company owners find themselves arguing with the insurance companies about the true value of what was lost. Chapman estimates that she lost more than $1 million in physical and intellectual property alone. Her insurance company has offered her $25,000 for business interruption. "I don't get the feeling I can have a high-level discussion about intellectual property with my adjuster," she says, sighing in resignation.

But perhaps the worst part of the whole ordeal, many business owners say, has been the continual questioning of their motives by those who sit on the other side of the desk, processing their claims and applications. Several report being treated as if they're asking for an undeserved handout or trying to cheat the system. "I've never had to give so much documentation in my life," an exasperated Steve Golish told two investigators from the General Accounting Office who were attending a public meeting to listen to complaints. Golish is a financial executive whose company was on the 87th floor of One World Trade Center. "They doubted I was there," he said. "They questioned the photo on my Web site that showed me in front of the World Trade Center. You have no idea how humiliating this whole process has been. Day in, day out, you get insulted."

Why isn't more government assistance reaching this group? Part of the problem lies in the way the programs were conceived. When Congress enacted legislation to help New York, its emphasis was on economic recovery -- on moving forward, not on covering losses. As a result, the law offers generous subsidies to companies that lease space downtown or hire new employees there; it also provides for accelerated depreciation schedules and higher tax deductions for companies that move into the area or expand operations that were already there. But if a business stays in the same place and isn't expanding, assistance is limited. "This was set up principally as a rebuilding and revitalization effort, as opposed to a compensation effort," says Carl Weisbrod, president of the Alliance for Downtown New York, a business-advocacy group. "Clearly, there wasn't enough money to fully satisfy the damages that occurred."

To be fair, many small businesses have received some financial aid. The Department of Housing and Urban Development (HUD), working through city and state agencies, had distributed $203 million to 7,172 small businesses in Lower Manhattan as of late June. And 29% of those companies are in the Ground Zero area. But Jeannine Chanes, a lawyer at Fried & Epstein who is advising a group of area businesses that have banded together to seek more help, believes that most of that money must have ended up with larger companies. About half of the 300 companies in the group she works with, called From the Ground Up, have not received any financial assistance at all. The other half, she says, have received about $4 million in grants, a pittance relative to their losses. "Those who need it the most have received the least," says Chanes.

The major grant program that small businesses near Ground Zero are eligible for is the WTC Business Recovery Grant Program. Essentially, all businesses south of 14th Street are entitled to receive some portion of their 2000 revenues, either 2% to 4% of sales or 2 to 10 days' worth of revenues. The closer the business was to Ground Zero, the higher the percentage of sales or the number of days it can claim. On the surface, the formula sounds fair. But consider a business that is located near 14th Street, many blocks away from Ground Zero, that was closed for only 5 days and received a grant equal to 2 days' sales. That company fared far better in comparison to its losses than a business located closer to Ground Zero that was closed for seven months but received funding equal to just 10 days' sales. The group From the Ground Up has calculated that businesses that are located immediately south of 14th Street received government aid equal to 67% of their losses, while companies below Canal Street had just 6.5% of their losses covered. And the percentage grows smaller every day that their stores remain closed, because the losses continue to mount.

Small companies could also apply for the Small Firm Attraction and Retention Grant program, which, as Monica Anderson can attest, was useless to many of the mom-and-pop stores near Ground Zero. After months of listening to complaints about the program's 10-employee minimum, HUD finally agreed to lower the minimum to one employee. But by late June, nine months after the disaster, the agency's decision was still pending final approval. That kind of delay serves only to intensify the bitterness many small companies feel toward the government. With every additional month that they're forced to wait for help, more face the prospect of closing down permanently.

And then there's the Small Business Administration. Or rather, there isn't the Small Business Administration. Yes, the SBA is making emergency loans. But who gets them? As Herbert Austin, acting director of the SBA's New York district office, explains it, the agency must protect taxpayers' money and therefore lends only to those companies it feels have a fighting chance of paying the loans back. "On a personal level, we worry about adding more debts to companies that are hurting so much already," says Austin. "We were ill prepared for this. If we were prepared, maybe we would have had grant programs in place."

Some companies have been approved for loans, despite the fact that most businesses in the area are hurting for customers. But even those that are approved face another problem. The SBA feels that if it is taking the risk of making a 4%, 30-year business loan with no payments required during the first two years, it's entirely reasonable to look for some collateral, usually a home. That may work for people affected by a flood in North Carolina, but many people in New York City don't own their own homes. Austin says that a lack of collateral will not automatically disqualify a borrower. But Chapman, who is a single parent with two children, says she was turned down by the SBA for just that reason, as were a number of other small-business owners in the area.

Those who do own homes, like Yagudayev and Pehr, are loath to put them at risk, particularly if they have already paid off their mortgages. If the loan amount is large enough, some may find the risk worth taking. But for others it's a terrifying decision. Ask di Tillio from Majestic Pizza whether he's going to take the $100,000 SBA loan he has been offered and he becomes very somber. He points to the black skyscraper across the street. "That's half full," he says. The one next door has fewer than one-third of its floors occupied. Even though he's now staying open Saturdays and Sundays to try to raise his income, his business is still running at about 45% of what it used to be. "I'm a little scared to take the loan," he says. "God forbid if I can't make a business of this."

Complicating matters further are two requirements that seem right out of Catch 22. One of the provisos stipulates that any money a business receives from its insurance company or as a grant must be turned over immediately to the SBA to pay down the loan. So there's no way companies can assemble survival packages from multiple sources. The second proviso says that insurance money and grants are considered taxable business income. So just as your SBA loan is being reduced, you may have to come up with money to pay taxes on what you've received from other sources. "The SBA isn't geared up, in terms of their legislative mandate or their way of life, to support this kind of disaster," says the Alliance's Weisbrod.

So what's a small business that is badly hobbled by 9/11 to do? Surprisingly, few owners are ready to throw in the towel. Some are hanging on because they're determined to participate in the rebuilding process. Others are fighting because they simply can't accept that they've been cast aside so thoughtlessly. Duane Anzalone used to own a restaurant called St. Charlie's just south of the World Trade Center. He'd started working there as a food runner 20 years earlier, finally purchasing the restaurant from the owner three years ago with a partner. In the days immediately after the towers collapsed, his restaurant was used freely by rescue workers. Photographs of the restaurant taken several weeks later showed a place that had been utterly trashed by looters. Despite articles in the New York Times and elsewhere highlighting his plight, Anzalone has never been offered any compensation by the city, by the Federal Emergency Management Agency, or by relief agencies. The only grant he received from the government to cover his economic losses came to $43,000.

As Anzalone shows me around his former establishment, he fights to keep his composure. Yet he wants to reopen another restaurant in the same neighborhood. He still has many loyal customers, he says, and this is what he knows how to do best. More than that, he says, he feels an obligation to his children. "I hate to have my kids watch me not go to work. My son has seen me get pushed around. It makes me feel like I'm a coward and like I can't stand up for myself. I'd like to be able to stand up, just for them."

When Anzalone does reopen -- and I believe he will -- he's already got one new customer.

Sarah Bartlett is a freelance writer and journalism professor who has lived in Tribeca, just north of the World Trade Center site, for more than 20 years.

How to Help

Want to offer assistance to small-business owners in the Ground Zero area? Here are some organizations to contact:

From the Ground Up
28 Vesey St., #2402, New York, NY 10007
A nonprofit advocacy group focused on reforming the way that financial assistance is distributed to small businesses. It has just set up a foundation to distribute donations directly to its members (www.ftgufoundation.org).

P.O. Box 9686, Uniondale, NY 11555
A national nonprofit with a Lower Manhattan initiative that provides financial and technical assistance to small businesses there. Contributions to the Seedco WTC Small Business Fund are tax deductible. Checks can be written to Seedco WTC Small Business Fund. Contributions also can be made on-line.

Contact Priscilla Alejandro at 212-618-5767
A clearinghouse created in conjunction with the New York City Economic Development Corp. that allows companies or individuals to "adopt" one or more businesses directly affected by 9/11. The entire program is on-line, and the terms and the extent of the adoption are left up to the sponsors and adoptees.

Please E-mail your comments to editors@inc.com.