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HomeMy WebLinkAboutReso 94-201 - Executing agreement between the COR & Superior Calif Economic Dev revolving Loan Fund RESOLUTION NO. T41— 2-4 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING EXECUTING AN AGREEMENT BETWEEN THE CITY OF REDDING (CITY) AND THE SUPERIOR CALIFORNIA ECONOMIC DEVELOPMENT DISTRICT (SCEDD) FOR THE ECONOMIC DEVELOPMENT REVOLVING LOAN FUND, AND AUTHORIZING THE MAYOR TO SIGN SAME WHEREAS, the CITY has entered into a grant agreement with the Department of Housing and Urban Development (HUD) to carry out the Community Development Block Grant (CDBG) program within CITY; and WHEREAS, the City Council has determined that it is in the best interest of CITY, to provide certain economic development services in connection therewith; and WHEREAS, the CITY was notified by the previous service provider, Economic Development Corporation (EDC), that restructuring of the organization was taking place and that administration of the RLF program was to be terminated effective June 30, 1994. WHEREAS, the City Council has determined that the SCEDD is the appropriate provider of Revolving Loan Funds for the purpose of economic development by creating or retaining jobs for low/moderate-income residents of the City of Redding; WHEREAS, the CITY is extending operation and administration of the Economic Development Revolving Loan Program through SCEDD for a term of (12) months from July 15, 1994 through July 14, 1995; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Redding as follows: 1. The Mayor of the City of Redding is hereby authorized and directed to sign all necessary documents on behalf of the City of Redding, and the City Clerk is hereby authorized and directed to attest the signature of the Mayor and to impress the official seal of the City of Redding on the aforesaid documents. 2. A true copy of the Agreement referred to herein is attached hereto and made a part hereof. I HEREBY CERTIFY that the foregoing resolution was introduced and read at a regular meeting of the City Council of the City of Redding on the 5th day of July 1994, and was _duly adopted at said meeting by the following vote: AYES: COUNCIL MEMBERS: P. Anderson, Kehoe, McGeorge, Murray and R. Anderson NOES: COUNCIL MEMBERS: None ABSENT: COUNCIL MEMBERS: None ABSTAIN: COUNCIL MEMBERS: None OBE C. ANDERSON, Mayor City of Redding ATTEST: ONNIE STRO MAYER, C erk FORM APPROVED: �J RA ALL A. HAYS, Cit Attorney D:M\SCDC.RES AGREEMENT BETWEEN CITY OF REDDING AND SUPERIOR CALIFORNIA ECONOMIC DEVELOPMENT DISTRICT REVOLVING LOAN FUND PROGRAM THISAGREEMENT, made and entered into this day of , 19_, by and between the CITY OF REDDING, a municipal corporation, hereinafter called "CITY" and the SUPERIOR CALIFORNIA ECONOMIC DEVELOPMENT DISTRICT, a California non- profit corporation, hereinafter called "SCEDD." WITNESSETH.- WHEREAS, ITNESSETH:WHEREAS, the CITY has entered into a grant agreement with the Department of Housing and Urban Development (HUD) to carry out the Community Development Block Grant (CDBG) program within CITY; and WHEREAS, the City Council has determined that it is in the best interest of CITY, to provide certain economic development services in connection therewith; and WHEREAS, the City Council has determined that the SCEDD is the appro- priate provider of Revolving Loan Funds for the purpose of economic development by creating or retaining jobs for low/moderate-income residents of the City of Redding; WHEREAS, the Revolving Loan Fund has been established by CITY as an important part of its economic development effort and has contributed a total of $266,900 since 1988; and WHEREAS, the CITY is extending operation and administration of the Economic Development Revolving Loan Program through SCEDD; WHEREAS, SCEDD has been designated by the State of California and the County of Shasta as a nonprofit Economic Development Corporation, and by the National Economic Council as a certified lender for packaging SBA 503, 7A, and other various loans; WHEREAS, SCEDD has been providing financial counseling services and loan packaging assistance in Shasta, Trinity, Modoc and Siskiyou counties since 1964, and is capable of providing the hereinafter stated services as required for the implementation of the CITY's Revolving Loan Fund through the utilization of CDBG funds. NOW, THEREFORE, in consideration of the recitals and the mutual obligations of the parties as herein expressed, the parties hereto agree as follows: AGREEMENT/City of Redding & SCEDD for the Revolving Loan Fund Program Page 2 L PROVISIONS AND SERV/CES. SCEDD will render services as set forth in attached Exhibit "A," as represented in the application dated June 14, 1994, and which is hereby incorporated by reference as if set forth in full. A TERM/TERM/NA TION. The term of this Agreement shall be for the 12-month period beginning July 15, 1994 and ending July 14, 1995. In the event SCEDD violates the provisions of this Agreement for any reason other than the occurrence of circumstances over which it can exercise no effective control and such violation shall not be cured or remedied within thirty (30) days after notice thereof by CITY, in addition to any other remedies provided for herein, CITY shall have the right to terminate this Agreement by written notice duly serviced upon SCEDD. SCEDD may terminate Agreement at any time subject to SCEDD first complying with any and all of its provisions to that point and upon SCEDD serving thirty (30) days written notice to CITY of intent to terminate services. lU. USE OF FUNDS. Use of CITY's funds allocated hereunder to SCEDD shall be subject to the following terms and conditions: A. Any funds paid to SCEDD shall be used solely for the purposes set forth in Exhibit "A." B. Funds paid hereunder shall be expended solely for the benefit of City of Redding businesses. All businesses assisted shall be located within the Redding City limits and priority on new jobs shall be given to City residents. C. SCEDD shall render services utilizing funds paid by the CITY hereunder only to recipients meeting appropriate eligibility criteria under the Revolving Loan Fund Guidelines as approved by the CITY. /V. PA YMENT. A. Upon execution of this Agreement, payment will be disbursed to SCEDD upon receipt of invoices documenting reimbursable expenses. B. Unless otherwise approved, funds paid hereunder shall be deposited in a Redding bank with fiscal control as approved by City Finance Director. • AGREEMENT/City of Redding & SCEDD for the Revolving Loan Fund Program Page 3 V. PROGRAM INCOME. A. Funds provided under this Agreement shall be returned to the Revolving Loan Program Fund as they are repaid and recycled to other projects meeting the Loan Guidelines of the program. B. "Program Income" means amounts received by SCEDD generated from the use of funds under the terms of this Agreement. It includes, but is not limited to the following: 1 . Proceeds from the disposition by sale or long-term lease of real property purchased with CDBG funds; 2. Income from the temporary use, lease, or sale of properties acquired or developed with CDBG funds; 3. Payments of principal and interest on loans made using CDBG funds; 4. Interest earned on CDBG funds held in a revolving fund account; 5. Interest earned on program income pending disposition of such income; and 6. Fees charged to clients in conjunction with the provisions of services and/or financing assisted with CDBG funds. C. Program income may be retained by SCEDD and used for those activities as set out in Exhibit "A." D. Program income earned shall be substantially disbursed to the approved activities prior to requesting disbursement of additional funds from CITY. SCEDD shall show all program income generated using CDBG funds as adjustments on their requests for funds submitted to CITY. E. In the event that SCEDD is unable to expend all program income in the current year, it will be considered as carryover funds available for successive CDBG grant years. If the Agreement is terminated those funds shall revert to CITY. AGREEMENT/City of Redding & SCEDD for the Revolving Loan Fund Program Page 4 Vl. RECORDS. A. SCEDD agrees to keep all necessary books and records including property, personnel and financial records in connection with the services performed under this Agreement in accordance with CITY Finance Director and in compliance with requirements of Office of Management and Budget Circular A-133, A-122, and A-110. Submittal of an independent audit in accordance with OMB Circular A-133 and A-122 shall also be required of SCEDD in relation to contract services. B. SCEDD agrees to maintain and preserve such records during the period from the start of Agreement performance until three (3) years from the submission of the final report or until the CDBG audit hereinafter referred to is conducted and SCEDD receives CITY notification that said audit has been accepted by HUD, whichever is later. Provided, however, that records which are the subject of audit findings shall be retained over three (3) years after such findings have been resolved. C. The Secretary of HUD, the Comptroller General of the United States, CITY or any of their duly authorized representatives shall have access to and right to examine such records related to this Agreement during said period at any reasonable time during normal and usual business hours of SCEDD. However, recognizing that SCEDD may from time to time have records of recipients which are highly personal and confidential in nature, CITY, in its dealings with SCEDD will at all times maintain said confidentiality and will not require public record to be made or provided that will serve to violate the confidentiality requirements of SCEDD. D. Specifically, SCEDD shall maintain the following program information: 1 . Evidence of marketing efforts (e.g., brochures, meeting notices, etc.). 2. Loan applications and disposition of application (e.g., denied, withdrawn, approved). 3. A log of all activity on all loan packages, and advisory services, including work performed, hours, and persons working on project. 4. Client files of all businesses assisted. AGREEMENT/City of Redding & SCEDD for the Revolving Loan Fund Program Page 5 5. Verification that the business could not obtain other financing, and that without Revolving Loan Fund assistance the project could not take place. 6. Statistical information on program beneficiaries as required by HUD and CITY. E. In addition, in order to meet HUD requirements for benefit to low/moderate income persons, SCEDD shall obtain and maintain the following for each loan package: 1 . For businesses which will create new jobs: a. A copy of a written Agreement containing: (1) A commitment by the business that it will make at least 60% of the jobs available to low- and moderate- income persons and will provide training for any of those jobs requiring special skills or education; (2) A listing by job title of the permanent jobs to be created indicating which jobs will be available to low- and moderate-income persons, which jobs are part- time, and which jobs require special skills or education; and (3) A description of actions to be taken by the grantee and business to ensure that low- and moderate-income persons receive first consideration for those jobs; and b. A listing by job title of the permanent jobs filled, which jobs were available to low- and moderate-income persons, and a description of how first consideration was given to such persons for those jobs. 2. For businesses which will retain existing jobs: a. Evidence that in the absence of CDBG assistance jobs will be lost; and b. A listing by job title of permanent jobs retained, indicating which of those jobs are part time and (where it is known) which are held by low- and moderate-income persons at the time the CDBG assistance is provided. AGREEMENT/City of Redding & SCEDD for the Revolving Loan Fund Program Page 6 C. Where applicable, identification of any of the retained jobs (other than those known to be held by low- and moderate- income persons) which are projected to become available to low- and moderate-income persons through job turnover within two years of the time CDBG assistance is provided. Information upon which the job turnover projections were based shall also be included in the records; and d. For each retained job claimed to be held by a low- and moderate-income person, information on the size and annual income of the person's immediate family; and e. For jobs claimed to be available to low- and moderate-income persons based on job turnover, the information set forth above; and f. Where jobs were claimed to be available to low- and moderate-income persons through turnover, a listing of each job which has turned over to date, indicating which of those jobs were either taken by, or available to low- and moderate- income persons. For jobs made available, a description of how first consideration was given to such persons for those jobs shall also be included in the record. V/l. FINANCIAL MANAGEMENT. SCEDD shall maintain a financial management system which provides for: a. Records that identify adequately the source and application of funds for Revolving Loan Fund activities. b. Effective control over and accountability for all funds and other assets. SCEDD shall adequately safeguard all such funds and assets and shall assure that they are used solely for authorized purposes under this Agreement. C. Comparison of actual outlays with budgeted amounts for CDBG funds. d. Accounting records that are supported by source documentation. e. A systematic method to assure timely and appropriate resolution of audit findings and recommendations. AGREEMENT/City of Redding & SCEDD for the Revolving Loan Fund Program Page 7 Vill. HOLD HARMLESS CLAUSE. In providing its services, SCEDD will act as an independent contractor and no officer or employee of SCEDD will be deemed a CITY officer or employee for any purpose. SCEDD shall hold the CITY, its officers, boards and commissions, and members thereof, its employees and agents harmless of and free from any and all liabilities which might arise out of or are related to the acts or omissions of the SCEDD in any way relating to the subject matter of this Agreement. CITY shall hold SCEDD, its officers, boards and commissions, and members thereof, its employees or agents, harmless of and free from any and all liabilities which arise out of or are related to the acts or omissions of the CITY in any way relating to the subject matter of this Agreement. SCEDD shall indemnify CITY, its officers, boards and commissions, and all members thereof, its employees and agents, from any judgment rendered against them or any sums paid out in settlement, or otherwise, arising out of any act or omission of SCEDD in any way relating to the subject of this Agreement. CITY shall indemnify SCEDD, its officers, boards and commissions, and all members thereof, its employees and agents, from any judgment rendered against them or any sums paid out in settlement, or otherwise arising out of any act or omission of CITY in any way relating to the subject of this Agreement. IX. INSURANCE PROVISIONS. SCEDD shall obtain commercial general liability insurance naming the City, its officers, agents and employees as additional insureds in the amount of $1,000,000 combined single limits. A policy of workers compensation insurance meeting California statutory requirements shall be obtained. A certificate of insurance evidencing such comprehensive general liability insurance and workers compensation insurance shall be furnished to the City guaranteeing City 10 days notice of cancellation or reduction in coverage in a form approved by the City Risk Manager. X. LEGAL COMPLIANCES. SCEDD shall at all times during the term of this Agreement comply with all legal requirements, including any applicable Federal, State or City regulations, and shall secure at its full cost and expense any and all permits, applications or other requirements in connection therewith. AGREEMENT/City of Redding & SCEDD for the Revolving Loan Fund Program Page 8 Xl. CONDITIONS OF AGREEMENT. A. CITY shall retain ultimate control over matters involving the exercise of judgement and discretion in carrying out the intended program provided for by CDBG funds. B. SCEDD shall comply with the requirements of Title 24, Part 135, Employment Opportunities for Businesses and Lower-Income Persons in Connection with Assisted Project. C. SCEDD shall comply with the requirements and standards of OMB Circular No. A-122 and A-133, including all stated restrictions on the use of appropriated funds for lobbying purposes in connection with a specific contract, grant, or loan. To this effect, SCEDD further agrees to execute Exhibit "C," Anti-Lobbying Certification, attached hereto. D. SCEDD will comply with the requirements of Section 504 of the Rehabilitation Act of 1973 as amended by 29 USC 794. E. No member of or Delegate to the Congress of the United States, 'and no Resident Commissioner shall be admitted to any share or part of this Agreement or to any benefit to arise from the same. F. No member, officer or employee of the City of Redding, or its designees or agents, no members of the governing body of the City of Redding, and no other public official of the City of Redding who exercises any functions or responsibilities with respect to the program during his tenure or for one year thereafter shall have any interest, direct or indirect, in any contract or subcontract, or the proceeds thereof, for work to be performed in connection with the program assisted under this Agreement. G. The assistance provided under this Agreement shall not be used in the payment of any bonus or commission for the purpose of obtaining HUD approval of the application for such assistance, or HUD approval of applica- tions for additional assistance, or any other approval or concurrence of HUD required under this Agreement, Title I of the Housing and Community Development Act of 1974 or HUD regulations with respect thereto; provided, however, that reasonable fees or bona fide technical, consultant, managerial or other such services other than actual solicitation, are not hereby prohibited if otherwise eligible as program costs. H. SCEDD shall comply with the prevailing wage provisions of the Davis - Bacon Act on any project costing in excess of $2,000.00 when 25 percent or more of the costs of such project are paid with Community Development Block Grant funds. AGREEMENT/City of Redding & SCEDD for the Revolving Loan Fund Program Page 9 I. SCEDD shall pay individuals employed in jobs financed in whole or in part with CDBG funds not less than the prevailing rates of pay for such jobs. This provision does not apply to an employee or employees in any program category who are being paid in whole, or in part with CDBG funds unless 25 percent or more of the total wages paid to all employees in that category are paid from CDBG funds. J. SCEDD shall not discriminate against any person on the grounds of race, color, national origin, age, sex or religion, or against an otherwise qualified handicapped individual. K. SCEDD shall comply with the National Environmental Policy Act of 1969. L. It is the responsibility of SCEDD to comply with all requirements outlined in this Agreement. Should a default occur, no additional funds will be allocated to the Revolving Loan Fund until such time as all obligations outlined in this Agreement are satisfied. CITY OF REDDING By ROBERT C. ANDERSON, Mayor SUPERIOR CALIFORNIA ECONOMIC DEVELOPMENT DISTRICT By ATTEST: CONNIE STROHMAYER, City Clerk FORM APPROVED: RANDALL A. HAYS, City Attorney D:\D1\SCEDDRLF.AGR EXHIBIT "A" SCOPE OF SERVICES A. SCEDD shall provide :services in the implementation of the CITY's Revolving Loan Fund for the primary benefit of low/moderate-income residents as requested by and under the supervision of the Director of Planning and Community Development or designee, and in compliance with the Economic Development Revolving Loan Fund Operating Procedures attached hereto as "Exhibit B." B. SCEDD agrees to promote and assist the growth and development of small business concerns in Redding under the CITY's Revolving Loan Fund Program. SCEDD shall provide financial analysis, loan packaging and related advisory services as a means of assisting the CITY's Revolving Loan Fund. C. SCEDD shall maintain staffing arrangements necessary to competently administer the RLF. D. SCEDD shall work with clients to develop feasible financial loan packages. E. SCEDD shall provide financial analysis of loan applications to determine the borrower's eligibility for the loan and ability to repay the loan. F. SCEDD shall analyze the loan packages according to the Revolving Loan Fund Guidelines established by the CITY. G. SCEDD shall submit requests to the CITY for environmental determinations and review of HUD "necessary" and "appropriate" determinations. H. SCEDD shall submit loan packages to the SCEDD Loan Committee with recommenda- tions of loan approval and terms or disapproval, and to appropriate governmental agencies and/or private lending institutions for loan approval. SCEDD shall ensure that loan packages are complete and accurate prior to submission to potential lenders. I. SCEDD shall continue working with clients and potential lenders until the loan is approved and disbursed or declined or withdrawn. J. SCEDD shall establish and maintain working relationships with lenders, both governmental and private, and with area accountants, brokers and realtors. In addition, SCEDD shall work closely with CITY staff in marketing and implementing CITY's Revolving Loan Fund. K. SCEDD shall maintain contact with businesses assisted under the CITY's Revolving Loan Fund for a period of 24 months after signing the loan, and report all such information regarding each business as required by CITY and HUD. After the 24- month period, SCEDD shall conduct a job audit to insure compliance with job creation/retention requirements. After the 24-month period, SCEDD shall submit quarterly reports on the status of the loan portfolio within ten working days of the end of each calendar year quarter for the life of the loan. EXHIBIT "A" Scope of Services Page 2 L. SCEDD must certify for each loan application that assistance will be either: 1 . Of primary benefit to low- and moderate-income persons, which for purposes of this Agreement means that at least 60% of the jobs affected (i.e., created or retained) meet the following requirements: a. Be made available to low/moderate income persons; or b. Be held by low/moderate income persons. (Low/moderate income persons are those whose total household income prior to being hired do not exceed 80% of the Median Area Income as annually established and updated by HUD and provided by the CITY to SCEDD; or 2. That the project is in a Redevelopment Area and will aid in the prevention or elimination of slums and blight. M. SCEDD shall determine those participants who are eligible for services, the extent of such services and the amount, if any, of Revolving Loan Funds to be expended for such services. N. SCEDD agrees to establish a goal to obligate 75% of funds available within the next twelve months, and to maintain this percentage level at all times thereafter, except when the fund falls below $15,000. O. SCEDD agrees to establish a goal of funding a minimum of 67% of loans packaged. P. SCEDD agrees to establish a goal to obtain private local loan commitments for the purpose of supporting the goals of the Revolving Loan Fund Program in the amount of $150,000 over the next two years and be able to show that they are actively pursuing that goal. Q. SCEDD agrees to establish an accounting procedure to ensure program principal will not be encroached upon by program administrative costs. R. SCEDD agrees that if for any reason the funds covered under this Agreement are no longer used for the established purpose, that all payments from the CITY contribution to the revolving loan fund will be returned to the CITY's Community Development Block Grant Program. S. The representative of CITY shall have the right to review and monitor services performed pursuant to this Agreement. CITY, the Department of Housing and Urban Development, the Comptroller General of the United States, or any of their duly authorized representatives shall have the right to inspect and/or audit any books, documents, papers and records of SCEDD which are directly pertinent to the services performed under this Agreement. EXHIBIT "B" ECONOMIC DEVELOPMENT REVOLVING LOAN FUND OPERATING PROCEDURES TABLE OF CONTENTS PAGE I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. ELIGIBLE APPLICANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 III. ELIGIBLE ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 IV. INELIGIBLE LOAN ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 V. TARGET AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 VI. TYPES OF FINANCIAL ASSISTANCE . . . . . . .. . . . . . . . . . . . . . . . . . 3 A. Jobs Generated/Retained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 B. Maximum Loan Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 C. Private Financial Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 3 D. Loan Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 E. Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 F. Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 G. Timely Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 H. Recapture of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 I. Compliance with City and Federal Conditions/Regulations . . . . . . . 5 J. Interest Supplements and Loan Guarantees . . . . . . . . . . . . . . . . . 6 VII. LOAN APPLICATION AND APPROVAL PROCESS . . . . . . . . . . . . . . . 6 VIII. ADMINISTRATION/LOAN APPROVAL . . . . . . . . . . . . . . . . . . . . . . . 7 IX. DELINQUENT LOAN/LOAN DEFAULT PROCEDURES . . . . . . . . . . . . . 9 X. SALE OR TRANSFER OF BUSINESS; ASSUMPTION OF RLF LOANS . . 10 ECONOMIC DEVELOPMENT REVOLVING LOAN FUND/ OPERATING PROCEDURES L INTRODUCTION The City of Redding has established an Economic Development Revolving Loan Fund (RLF) as part of its Community Development Block Grant (CDBG) Program to expand economic opportunities benefitting principally persons of low- and moderate-income in accordance with regulations in Title I of the Housing and Community Development Act of 1974, as amended (24 CFR, Part 570)• Loan funds are available for various economic development activities undertaken by private businesses which create or retain jobs accessible to low- and moderate-income people, expand the City's tax base and leverage public and private investments. The RLF shall be administered by the Superior California Economic Development District (SCEDD). The RLF will provide public loans in conjunction with private investments for the development and expansion of businesses. The program is intended to provide assistance to projects whose needs are not currently being met by existing federal and other programs. //. ELIGIBLE APPLICANTS Funds will be made available on a competitive basis to assist new and existing manufacturing or assembling businesses located in the City of Redding as a sole proprietorship, partnership or for-profit corporation with a proposed project in the City of Redding. Target Industries, as identified by the Coopers and Lybrand study dated April 1991, will be given priority. ///. EL/G/BLE ACT/V/TIES Eligible activities for funding under the RLF Program include all normal project development costs, including but not limited to: - Land and building acquisition; - Off-site improvements; - Building construction/renovation/expansion; - Capital equipment; - Interim financing; Economic Development Revolving Loan Fund/ Operating Procedures Page 2 - Clearance, demolition and site preparation; - Parking facilities; - Relocation; - Project "soft costs" (i.e., reasonable engineering and architectural costs); - Working capital (In tandem with a bank loan, no singular working capital loans will be made; working capital loans will generally be limited to 30 percent of the total Loan Fund portfolio); - Venture capital; - SBA 504 Program Companion Loan (Provides long term, fixed rate financing for land and building acquisition, construction and equipment; requires a minimum 50% private loan and 10% equity.) The RLF may be used to provide up to 5% of the required equity. IV. INELIGIBLE LOAN ACTIVITIES The following activities/borrowers will not be eligible for an RLF loan: - Non-profit organizations; - Speculative building and renovation; - Land banking; - Loans for the sole purpose of investing in high interest accounts or other investments not related to direct job creation/retention. - Substitution of HUD monies for private financing. - Use of HUD monies for refinance of existing debt. V. TARGET AREA The RLF may be used throughout the City of Redding providing that it is demonstrated that the funded activities principally benefit low- and moderate- income persons and/or aid in the elimination of slums and blighted areas. Economic Development Revolving Loan Fund/ Operating Procedures Page 3 Vl. TYPES OFFINANCIAL ASS/STANCE All RLF projects must comply with the following financing standards and policies as specified by the HUD "necessary" and "appropriate" guidelines. A. Jobs Generated/Retained A major goal of this program is to create new jobs and to retain existing jobs. It is expected that one new job will be created or one existing job retained for every $10,000 in RLF funding provided. These jobs should principally benefit low- and moderate-income people. B. Maximum Loan Amount The maximum loan amount is $50,000 as a companion loan, $25,000 as a single stand alone loan. The minimum loan amount is $10,000. C. Private Financial Commitments ("But For" Condition) Firm private financial commitments must be submitted to the Superior California Economic Development District Loan Committee (SCEDDLC) before preliminary approval. Legally binding private financial commitments must be secured prior to any final RLF loan approval. Applicants must provide, at a minimum, 10 percent cash or equity injection for the project, except in the case of SBA 504 Program Companion Loans. Other private financial commitments may be in the form of loans from financial institutions, the SBA, investors or other sources. RLF participation can be subordinated. Private lender commitments may be qualified only on the condition of SCEDDLC approval of funds and/or the award of other funds to be linked to the RLF loan. Any RLF loan made prior to full commitment of private funds will be subject to that commitment. Applicants must demonstrate that an RLF loan would provide "gap" or "last resort" financing. A project will not be awarded RLF funding unless the primary lender can affirm that "but for the RLF loan, the project would not be implemented as defined." There are several typical kinds of "but for" statements and situations which apply to projects. Economic Development Revolving Loan Fund/ Operating Procedures Page 4 1 . Projects whose risk would and can prevent the full participation and/or investment by the private sector. 2. New business - these projects would involve entrepreneurs engaged in new businesses, but because of a lack of a "track record" would prohibit private sector financing without public leveraging. 3. Other situations in which the primary lender can affirm that "but for" public leveraging of the financial package, the project would not be feasible. D. Loan Terms 1 . Loans for building construction/renovation/expansion/demolition, improvements and land and building acquisition may have terms of up to a maximum of seven (7) years. The actual term is negotiable; the deal must justify the maximum term. 2. Loans for capital equipment may have terms of up to a maximum of seven (7) years. The actual term is negotiable; the deal must justify the maximum term. . 3. Loans for interim financing, project "soft costs" may have terms of up to a maximum of seven (7) years. The actual term is negotiable; the deal must justify the maximum term. 4. The term for working capital loans shall not exceed five (5) years. 5. In no case will the loan term exceed the economic life of the asset to be financed or the term of the lease. E. Interest Rate The RLF is intended to be a flexible financing tool. The interest rate will be determined as per HUD guidelines, based on projected return on investment (ROI) and tailored for the specific need of the project. Interest rates shall reflect the amounts of risk and pledged security as determined and evaluated by the SCEDDLC. Under the appropriate circumstances, loans may be made which permit "interest only" payments for a short period of time at the front end of a loan period. Economic Development Revolving Loan Fund/ Operating Procedures Page 5 F. Security The SCEDDLC shall obtain sufficient and adequate collateral to secure all RLF loans. It will usually be in the form of liens on the assets financed, including fixed assets such as machinery and real estate, accounts receivable, inventory and lease agreements. Liens upon other non-project assets of the borrower may also be used to secure the loan. It will also be the general policy of the SCEDDLC to require personal guarantees by the principal borrowers as deemed appropriate in the circumstances. Personal guarantees will normally be required of all persons/entities holding a 20% or more interest in the borrower. Collateral taken should be of such nature that it is readily marketable, not single purpose. If existing (not being purchased), an independent appraisal shall be obtained. G. Timely Completion All projects must be completed in a timely fashion, two years or less, with the total resources (both public and private) which are committed. RLF funds are a one-time only funding source. Additional RLF funds will be not awarded over the amount originally approved. H. Recapture of Funds RLF projects are to provide for the recapture of RLF loans. Loan contracts are to include provisions for the repayment of principal and interest and/or provide for an equity participation on behalf of the SCEDDLC. Recaptured RLF funds will be returned to the RLF for future loan awards. I. Compliance with City, State and Federal Conditions Each applicant must demonstrate an acceptance of and willingness to follow all applicable City, State and Federal regulations, including but not limited to: - Competitive bid procedures; - Davis/Bacon prevailing wage requirements; - Relocation regulations; - Affirmative Action; - National Environmental Protection Act (NEPA); - Provisions of benefits to low- and moderate-income persons; - Historical preservation requirements. 0 • Economic Development Revolving Loan Fund/ Operating Procedures Page 6 J. Interest Supplements and Loan Guarantee Interest supplements and loan guarantees will be handled by the SCEDDLC on a case-by-case basis, generally in accordance with this Exhibit. Vll. LOAN APPLICATION AND APPROVAL PROCESS All applications for RLF will be made through the SCEDD. This office will provide application forms, screen applicants, will analyze the applications using RLF standards and will present all loans to the SCEDDLC for approval or rejection. The following are the general processing steps: A. Initial Applicant Contact. 1 . Applicant makes inquiry; 2. SCEDD discusses RLF purpose, procedures, and requirements with applicant; 3. SCEDD may also refer applicants to other sources of public and private capital and, if necessary, direct a client to small business assistance programs. B. SCEDD provides/sends out application form and operating procedures to applicant. C. Applicant returns completed application form, including proof of private financing commitments and application fee. D. SCEDD reviews the application to insure that it is complete and to determine initial eligibility, will check credit and other references, undertake credit analysis, rate the applications and prepare a loan report (SCEDD recommendations). SCEDD will submit request to City for an environmental determination and review of HUD "necessary" and "appropriate" determination. Environmental clearance must be obtained before loan approval. The SCEDD report is then presented to the SCEDDLC. E. The SCEDDLC considers the application and votes to award or deny the loan application, and any imposed conditions. Applicant will be notified by the SCEDD. Economic Development Revolving Loan Fund/ Operating Procedures Page 7 F. IF SCEDDLC recommends approval, the SCEDD prepares the loan documents and requests funds from the City. After SCEDDLC approval, the business recommended for funding will be notified and may be required to negotiate provisions, terms and conditions for the loans. A funding recommendation may be withdrawn if a reasonable and appropriate contract cannot be negotiated within a period of two months. Finalized copies of the contract will be processed by SCEDD and properly signed and duly authorized as a loan agreement between the business and the SCEDD. G. SCEDD disperses funds and deposits loan payments. H. SCEDD monitors the loan and the business activity of the borrower, including number of jobs created and who is filling them, other required data, and provides loan servicing and counseling. V/l/. ADMINISTRATIVE APPROVAL The SCEDD shall administer the RLF Program for the City of Redding. Loan applications will be reviewed and recommended for funding by the SCEDDLC. The SCEDD is the appointed agent for the City of Redding in the preparation of loan documentation. All loan documents will be in the name of the SCEDD as lender but it is understood that the SCEDD is acting on behalf of the City and that all loan proceeds and documents are the property of the City of Redding. A. Loan Review Committee The SCEDDLC will be composed of members who are knowledgeable in areas of commercial and industrial real estate development, commercial mortgage lending, public development, financing small business develop- ment and the needs of the low- and moderate-income persons in the City of Redding. The SCEDDLC and the chairperson shall be appointed by the SCEDD. Economic Development Revolving Loan Fund/ Operating Procedures Page 8 The SCEDDLC will review the loan applications and staff reports to determine eligibility, evaluate the economic feasibility, assess credit risks, and approve or disapprove all loan amounts and interest rates. This determination will be based on the economic and financial feasibility of the borrower and the loan package, and the achievement of the public policy goals established for this program. B. Loan Approval Authority The SCEDDLC shall have the final approval power for all loans. C. Loan Servicing and Disbursements Following loan approval, all loan proceeds will be processed through the SCEDD office. The City Finance Department will arrange disbursement when all environmental and other clearances are received and all contracts are signed and executed, and certified for compliance by the City of Redding Department of Planning and Community Development. Upon receipt of funds from the City, the SCEDD will issue payment warrants and establish the borrower's payment schedule. Loan servicing and counseling will be conducted by SCEDD. SCEDD will maintain an account, clearly separate from other accounts SCEDD may hold, at a banking institution of its choice located within the City of Redding, in which to deposit all payments made on outstanding RLF loans. SCEDD will utilize these recaptured RLF funds to finance future loan awards. D. Administrative Costs Administrative charges for loan origination and any other administrative costs related to this program up to the point through loan settlement shall be reimbursed to SCEDD in the following manner: 1 . A $250 application fee may be charged to the borrower. 2. A two percent maximum loan fee charged to the borrower. This amount may be added to the principal of the loan and amortized over the life of the loan. 3. Administrative costs, screening, analysis and processing will be an allowable expense against program interest only. Economic Development Revolving Loan Fund/ Operating Procedures Page 9 4. Any charges made shall not exceed the actual cost of providing the service. Administrative charges associated with loan servicing, which is defined as that activity related to the collection of loan payments, shall be reimbursed to SCEDD in the following manner: 1 . CDBG funds generated by program interest only from the Revolving Loan Fund. 2. Any charges made shall not exceed the actual cost of providing this service. No administrative charges, loan origination charges, or loan servicing charges shall be collected from the program principal including principal collected from repayment of RLF loans. Costs incurred for RLF promotion and administration including loan servicing, can be charged to program interest only. All requests for reimbursement shall clearly identify the loan for which costs were incurred. The total cost of administration is not to exceed an average of $3,300 per loan funded. lX. DELINQUENT LOAN/LOAN DEFAULT PROCEDURES A. Delinquent Loans In the event loan payments are more than 15 days late, a loan shall be declared delinquent. Actions to be taken are; 1 . The SCEDD shall contact the borrower to determine the cause of the loan delinquency. 2. The SCEDD shall assist the borrower with technical and management assistance, and shall refer the borrower to other appropriate sources of technical and management assistance. 3. SCEDD shall collect a late charge of five percent of the regularly scheduled payment on any payment that is not paid within 10 days of the date that it is due. Such unpaid installment shall bear interest from the date of its maturity until paid at the rate established for other SCEDD loan programs. Economic Development Revolving Loan Fund/ Operating Procedures Page 10 B. Loans in Default In the event payments are more than 60 days delinquent and the borrower is not cooperating with the SCEDD to correct the delinquency, the loan shall be declared to be in default. The case shall be referred to the City Attorney for review and to recommend appropriate action. Actions to be taken are: 1 . The loan may be referred to a collection agency. 2. The SCEDD may take legal action against the borrower to enforce guarantees and security as approved by the City Attorney. Reasonable legal fees and collection processing costs will be an allowed administrative charge, if appropriate. X. SALE OR TRANSFER OF BUS/NESS; ASSUMPTION OF RLF LOANS If all or any part of said business or an interest therein is sold or transferred by Borrower without SCEDD's prior written consent, SCEDD may, at SCEDD's option, declare the Loan and all indebtedness of Borrower to SCEDD immediately due and payable regardless of any provision or term to the contrary contained in any promissory note securing same. SCEDD shall have waived such option if, prior to the sale or transfer, SCEDD and the person(s) to whom the business is to be sold or transferred reach agreement in writing. If SCEDD has waived the option and if the Borrower's successor in interest has executed a written assumption agreement, with terms, provisions, and conditions accepted in writing by SCEDD, SCEDD shall release Borrower from all obligations under this Term Loan Agreement and the promissory note. The loan note and agreement shall include a provision that SCEDD shall have a right to declare a balance of the loan and any other indebtedness of borrower immediately due and payable in the event of any sale or transfer without SCEDD's consent. A. Procedure for RLF Loan Assumptions are: 1 . Written request to sell or transfer business submitted to SCEDD by Borrower. Such request shall include the name/address of Borrower's successor in interest and all terms, provision and conditions pertinent to sale or transfer of said business. Such a request shall also include an agreement by the borrower and its proposed successor to provide to SCEDD such financial information concerning the proposed successor as shall be requested by SCEDD. s • Economic Development Revolving Loan Fund/ Operating Procedures Page 11 2. SCEDD shall approve or deny Borrower's request to sell or transfer said business in writing within 30 days of receipt of written request. 3. Borrower's successor in interest shall execute a written assumption agreement and submit same to SCEDD. 4. SCEDD shall accept in writing the Borrower's successor in interest assumption agreement. 5. SCEDD shall release Borrower from all obligations of the term loan agreement and the promissory note upon full payment of the obligation by Borrower.