HomeMy WebLinkAboutReso 94-018 - Amending agreement between the COR & the economic development corp for an economic development revolving loan fund program RESOLUTION NO. �O
A RESOLUTION OF THE CITY COUNCIL AMENDING THE AGREEMENT
BETWEEN THE CITY OF REDDING AND THE ECONOMIC DEVELOPMENT
CORPORATION FOR AN ECONOMIC DEVELOPMENT REVOLVING LOAN FUND
PROGRAM
WHEREAS,the City Council approved an Agreement dated June 1 , 1993, between the
City of Redding and the Economic Development Corporation, a California non-profit
corporation, for the administration of the Revolving Loan Fund for economic development for
a term of twelve (12) months from June 1 , 1993 through May 31, 1994; and
WHEREAS, the Economic Development Corporation has requested an amendment to
the Agreement; and
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WHEREAS, the City of Redding has concurred with this request;
NOW, THEREFORE, BE IT RESOLVED that the City Council hereby approves
Amendment No. 1 to the above-referenced Agreement dated June 1, 1993.
1 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 lst day of February
1994, and was duly adopted at said meeting by the following vote:
AYES: COUNCIL MEMBERS: Anderson, Dahl, Kehoe, �bss Arness
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None
ABSTAIN: COUNCIL MEMBERS: done
CARL AR ESS, Mayor
City of Redding
ATTEST:
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ONNIE STR HMAYER, y CVerk
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FORM APPROVED:
*RA -D'&A4LL A. HAY$, City Attorney d:\rpt\amendedc.cc
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AMENDMENT NO. 1 TO THE AGREEMENT
BETWEEN CITY OF REDDING AND ECONOMIC DEVELOPMENT CORPORATION
FOR AN ECONOMIC DEVELOPMENT REVOLVING LOAN FUND PROGRAM
THISAMENDMENT, made and entered into this day of ,
1994, by and between the City of Redding (hereinafter called "City") and the Economic
Development Corporation, a California non-profit corporation, (hereinafter called "EDC").
WHEREAS, the City and the EDC entered into an Agreement on June 1, 1993; and
WHEREAS, the City and the EDC wish to amend the Agreement, specifically Section
VI, Subsection B, Page 3, pertaining to the maximum loan amount;
NOW, THEREFORE, the City and the EDC agree to the following amendment to the
Agreement to read as follows:
In Section VI, Subsection B, Page 3, an additional paragraph shall be inserted as
follows:
"The maximum loan amount may only be increased above the established limits
upon review and approval by the City of Redding Loan Committee."
The above amendment does not change any other provision of the Agreement which
is incorporated herein by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date
and year above written.
CITY OF REDDING
BY:
CARL ARNESS, Mayor
ECONOMIC DEVELOPMENT CORPORATION
BY:
ATTEST:
CONNIE STROHMAYER, City Clerk
FORM APPROVED:
RANDALL A. HAYS, City Attorney
AGREEMENT BETWEEN CITY OF REDDING
AND ECONOMIC DEVELOPMENT CORPORATION
REVOLVING LOAN FUND PROGRAM
THIS AGREEMENT, made and entered into this L-rday of
'
19 , by and between the CITY OF REDDING, a municipal corporation ereinafter
called "CITY" and the ECONOMIC DEVELOPMENT CORPORATION, a California non-
profit corporation, hereinafter called "EDC."
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 EDC 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;
WhIEREAS, the Revolving Loan Fund has been established by CITY as an
important part of its economic development effort and has contributed a total of
$180,400 since 1988; and
WHEREAS, the CITY is providing $40,000 for FY 1992-93 and an additional
$46,500 for FY 1993-94 from the City CDBG program for this purpose;
WHEREAS, EDC has been designated by the State of California and the
County of Shasta as a nonprofit Economic Development Corporation, and by the
'i United States Small Business Administration to package SBA 503, 504, and 7A
loans;
WHEREAS, EDC has been providing financial counseling services and loan
packaging assistance in Shasta County 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:
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'D 3—2-�3 1 C-' 22c r. I_I 1 _ I_ICD I_I{_)
4GREEMENT/City of Redding & EDC 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 EDC 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 EDC 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. EDC shall show all program income generated using CDBG funds
as adjustments on their requests for funds submitted to CITY.
E. In the event that EDC 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.
VI. RECORDS.
A. EDC agrees to keep all necessary books and records including property,
personnel and financial records in connection with the services
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AGREEMENT/City of Redding & EDC Revolving loan Fund Program Page 5
E. In addition, in order to meet HUD requirements for benefit to
low/moderate income persons, EDC 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
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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.
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
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AGREEMENT/City of Redding & EDC Revolving Loan Fund Program Page 7
CITY shall hold EDC, 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.
EDC 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 EDC in any way relating to the subject of this
Agreement.
CITY shall indemnify EDC, 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.
EDC 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 COMPUANCES.
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EDC 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.
XI. COND/TIONS 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. EDC shall comply with the requirements of Title 24, Part 135,
Employment Opportunities for Businesses and Lower-Income Persons in
Connection with Assisted Project.
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AGREEMENT/City of Redding & EDC Revolving Loan Fund Program Page 9
J. EDC 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. EDC shall comply with the National Environmental Policy Act of 1969.
L. It is the responsibility of EDC 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 DING
C
By
CARL ARNESS, Mayor
ECONOMIC DEVELOPMENT CORPORATION
By
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ATTEST:
--ONNIE STR HMAYER, COlerk
:ORM APPROVED:
3A DALL A. HA S, y Attorney
D:\Dl\EDCRLF-AGR
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EXHIBIT "A" - Scope of Services Page 2
_. EDC 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 EDC; or
2. That the project is in a Redevelopment Area and will aid in the prevention
or elimination of slums and blight.
0. EDC 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.
V. EDC 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.
I EDC agrees to establish a goal of funding a minimum of 67% of loans packaged.
'. EDC 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.
1. EDC agrees to establish an accounting procedure to ensure program principal will
not be encroached upon by program administrative costs.
1. EDC 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.
i. 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 EDC which are directly pertinent to the
services performed under this Agreement.
TABLE OF CONTENTS
PA GE
I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. ELIGIBLE APPLICANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
111. 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
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Economic Development Revolving Loan Fund/Operating Procedures Page 2
- 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.
/V. INELIGIBLE LOAN ACTIVITIES
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The following activities/borrowers will not be eligible for an RLF loan:
- Non-profit organizations;
- Speculative building and renovation;
- Land banking;
j - Loans for the sole purpose of investing in high interest accounts or
other investments not related to direct job creation/retention.
i - 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.
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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
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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.
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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 EDCLC. 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.
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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
EDCLC on a case-by-case basis, generally in accordance with this
Exhibit.
VII. LOAN APPLICATION ANO APPROVAL PROCESS
All applications for RLF will be made through the EDC. This office will
provide application forms, screen applicants, will analyze the applications
using RLF standards and will present all loans to the EDCLC for approval or
rejection. The following are the general processing steps:
A. Initial Applicant Contact.
1 . Applicant makes inquiry;
2. EDC discusses RLF purpose, procedures, and requirements with
applicant;
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3. EDC may also refer applicants to other sources of public and
private capital and, if necessary, direct a client to small business
assistance programs.
B. EDC 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.
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D. EDC 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 (EDC recommendations). EDC 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 EDC report is then presented to
the EDCLC.
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E. The EDCLC considers the application and votes to award or deny the
loan application, and any imposed conditions. Applicant will be
notified by the EDC.
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Economic Development Revolving Loan Fund/Operating Procedures Page 8
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 EDCLC 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 EDC 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 EDC will issue
payment warrants and establish the borrower's payment schedule.
Loan servicing and counseling will be conducted by EDC.
EDC will maintain an account, clearly separate from other accounts
EDC 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. EDC 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 EDC 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.
4. Any charges made shall not exceed the actual cost of providing
the service.
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:conomic Development Revolving Loan Fund/Operating Procedures Page 10
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 EDC 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 BUSINESS; ASSUMPTION OF RLF LOANS
If all or any part of said business or an interest therein is sold or transferred
by Borrower without EDC's prior written consent, EDC may, at EDC's
option, declare the Loan and all indebtedness of Borrower to EDC
immediately due and payable regardless of any provision or term to the
contrary contained in any promissory note securing same. EDC shall have
waived such option if, prior to the sale or transfer, EDC and the person(s)
to whom the business is to be sold or transferred reach agreement in
writing. If EDC 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 EDC, EDC 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 EDC 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 EDC's consent.
A. Procedure for RLF Loan Assumptions are:
1 . Written request to sell or transfer business submitted to EDC 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 EDC such financial information
concerning the proposed successor as shall be requested by EDC.
2. EDC shall approve or deny Borrower's request to sell or transfer
said business in writing within 30 days of receipt of written
request.
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RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
APPROVING THE AGREEMENT BETWEEN THE CITY OF REDDING AND THE
ECONOMIC DEVELOPMENT CORPORATION PROVIDING ADDITIONAL
FUNDING FOR THE ECONOMIC DEVELOPMENT REVOLVING LOAN FUND,
AND ADOPTING CHANGES TO THE REVOLVING LOAN FUND OPERATING
PROCEDURES, AND AUTHORIZING THE MAYOR TO SIGN SAMI's
WHEREAS, the City Council of the City of Redding has established a Revolving Loan Fund for
Economic Development; and
WHEREAS, during the period from 1988 through 1992, the City of Redding (City) assigned $180,400
in Community Development Block Grant (CDBG) funds to be used for this purpose; and
WHEREAS, the additional CDBG funds in the amount of $40,000 in the 1992-93 fiscal year and
$46,500 in the 1993-94 fiscal year have been set aside to be used for this purpose; and
WHEREAS, the City of Redding and the Economic Development Corporation desire to make changes in
the Revolving Loan Fund Operating Procedures.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Redding as follows:
1. The Agreement between the City of Redding and the Economic Development Corporation providing
additional funding to the Revolving Loan Fund and adopting changes to the Revolving Loan Fund Operating
Procedures is hereby approved.
2. 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.
3. 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 day of 1993, and was duly adopted at
said meeting by the following vote:
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AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
CARL ARNESS, Mayor
City of Redding
ATTEST:
CONNIE STROHMAYER, City Clerk
FORM APPROVED:
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RANDALL A. HAYS, City Attorney o.ut�si�c.rttF