Governors Allowed to Seek HUBZone Designation for Certain Rural Areas

On Nov 21, 2019

A direct final rule issued by the U.S. Small Business Administration will now allow governors to petition the federal agency to designate Historically Underutilized Business Zone (HUBZone) status to certain rural and suburban areas.

These areas are determined by the Census Bureau and defined as those with a population of 50,000 or less and for which the average unemployment rate is at least 120% of the average unemployment rate.  The newly issued rule  was published in the Federal Register and will be effective January 1, 2020, unless significant adverse comment is received by December 16, 2019.

“This expansion of HUBZone areas will provide a valuable resource to small businesses in underserved communities to foster economic development and job creation – creating a pathway to the middle class for the residents of distressed areas,” said Acting SBA Administrator Chris Pilkerton.

According to SBA Regional Administrator Steve Bulger, who oversees the federal agency’s operation in New Jersey, New York, Puerto Rico and the U.S. Virgin Islands, The National Defense Authorization Act, enacted by Congress on December 12, 2017 and signed into law by President Donald Trump, authorized changes to the Small Business Act to include “Governor-designated covered areas” under the HUBZone program.

Under the new rule, a state governor may submit one petition per year for a covered area or areas.

In reviewing a request for designation included in the petition, the SBA Administrator may consider:

• The potential for job creation and investment in the covered area;
• The demonstrated interest of small businesses in the covered area to be designated as a Governor-designated covered area;
• How state and local government officials have incorporated the covered area into an economic development strategy; and
• If the covered area was a HUBZone before becoming the subject of the petition, the impact on the covered area if the Administrator did not approve the petition.

“This new rule will better assist and provide more small businesses in high-unemployment and low income communities an economic boost from the HUBZone federal contracting program,” said Bulger. “With our nation in the midst of its longest economic expansion, President Trump and the SBA are committed to continuing fostering economic growth through job growth, capital investment and economic development.”

SBA New Jersey District Director Al Titone said, “SBA also anticipates that included within the covered areas that a governor may seek to be designated as a qualified HUBZone area are Opportunity Zones, authorized by Section 13823 of the Tax Cuts and Jobs Act of 2017, Public Law 115-97, that do not otherwise qualify as HUBZones.

“In 2018, New Jersey small businesses received $2.1 billion in federal contracts,” said Titone. “However, only 0.69 percent of that total or $65 million was generated through the HUBZone program,” he added.  “We see the new rule as a way of bolstering the program in parts of New Jersey, which could lead to more small business owners qualifying and  benefiting from contracting opportunities in areas  of the state that  aren’t currently classified as HUBZones.”

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