HomeMy WebLinkAboutReso 93-213 - Approve agreement between the COR & Economic Development Corp providing Addt'l funding for Econ Dev Revolving Loan Fund RESOLUTION NO. (73--.2/2
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 SAME
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
.i $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:
i
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 lst day of June 1993, and was duly adopted at
said meeting by the following vote:
AYES: COUNCIL MEMBERS: Anderson, Kehoe, Moss and Arness
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: Dahl
ABSTAIN: COUNCIL MEMBERS: None
A'o j
CARL ARNESS, Mayor
City of Redding
ATTEST:
CONNIE STRO MAYER Cit ler
FORM APPROVED:
�J
RA ALL A. HAY§, CiX Attorney DARESITDC.RLF
AGREEMENT BETWEEN CITY OF REDDING
AND ECONOMIC DEVELOPMENT CORPORATION
REVOLVING LOAN FUND PROGRAM
THIS AGREEMENT, made and entered into this day of ,
19 , by and between the CITY OF REDDING, a municipal corporation, hereinafter
called "CITY" and the ECONOMIC DEVELOPMENT CORPORATION, a California non-
profit corporation, hereinafter called "EDC."
WITNESSETH:
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;
I
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
$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
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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AGREEMENT/City of Redding & EDC Revolving Loan Fund Program Page 2
/. PROVISIONS AND SERV/CES.
EDC will render services as set forth in attached Exhibit "A," as represented
in the application dated March 20, 1992, and which is hereby incorporated
by reference as if set forth in full.
//. TERM/TERM/NA TION.
The term of this Agreement shall be for the 12-month period beginning June
1 , 1993 and ending May 31 , 1994. In the event EDC 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 EDC. EDC may terminate Agreement at any time subject to
EDC first complying with any and all of its provisions to that point and upon
EDC serving thirty (30) days written notice to CITY of intent to terminate
services.
///. USE OF FUNDS.
Use of CITY's funds allocated hereunder to EDC shall be subject to the
following terms and conditions:
A. Any funds paid to EDC 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. EDC 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 EDC
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.
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AGREEMENT/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
AGREEMENT/City of Redding & EDC Revolving Loan Fund Program Page 4
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 EDC in relation to contract services.
B. EDC 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 EDC 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
EDC. However, recognizing that EDC may from time to time have
records of recipients which are highly personal and confidential in
nature, CITY, in its dealings with EDC 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 EDC.
D. Specifically, EDC 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.
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.
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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
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
AGREEMENT/City of Redding & EDC Revolving Loan Fund Program Page 6
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//. FINANCIAL MANAGEMENT.
EDC 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.
EDC 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.
V///. HOLD HARMLESS CLAUSE.
In providing its services, EDC will act as an independent contractor and no
officer or employee of EDC will be deemed a CITY officer or employee for
any purpose. EDC 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 EDC in any way relating to the subject matter of this
Agreement.
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 COMPLIANCES.
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. 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. 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 8
C. EDC 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, EDC further agrees to execute
Exhibit "C," Anti-Lobbying Certification, attached hereto.
D. EDC 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
applications 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. EDC 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.
I. EDC 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.
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 REDDING
By
CARL ARNESS, Mayor
ECONOMIC DEVELOPMENT CORPORATION
By
ATTEST:
CONNIE STROHMAYER, City Clerk
FORM APPROVED:
RANDALL A. HAYS, City Attorney
D:\D1\EDCRLF.AGR
1
EXHIBIT "A"
SCOPE OF SERVICES
A. EDC 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. EDC agrees to promote and assist the growth and development of small business
concerns in Redding under the CITY's Revolving Loan Fund Program. EDC shall
provide financial analysis, loan packaging and related advisory services as a
means of assisting the CITY's Revolving Loan Fund.
C. EDC shall maintain staffing arrangements necessary to competently administer
the RLF.
D. EDC shall work with clients to develop feasible financial loan packages.
E. EDC shall provide financial analysis of loan applications to determine the
borrower's eligibility for the loan and ability to repay the loan.
F. EDC shall analyze the loan packages according to the Revolving Loan Fund
Guidelines established by the CITY.
G. EDC shall submit requests to the CITY for environmental determinations and
review of HUD "necessary" and "appropriate" determinations.
H. EDC shall submit loan packages to the EDC Loan Committee with
recommendations of loan approval and terms or disapproval, and to appropriate
governmental agencies and/or private lending institutions for loan approval. EDC
shall ensure that loan packages are complete and accurate prior to submission to
potential lenders.
I. EDC shall continue working with clients and potential lenders until the loan is
approved and disbursed or declined or withdrawn.
J. EDC shall establish and maintain working relationships with lenders, both
governmental and private, and with area accountants, brokers and realtors. In
addition, EDC shall work closely with CITY staff in marketing and implementing
CITY's Revolving Loan Fund.
K. EDC 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, EDC shall conduct a job audit to insure compliance with job
creation/retention requirements. After the 24-month period, EDC 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. 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.
M. 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.
N. 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.
0. EDC agrees to establish a goal of funding a minimum of 67% of loans packaged.
P. 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.
Q. EDC agrees to establish an accounting procedure to ensure program principal will
not be encroached upon by program administrative costs.
R. 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.
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 EDC which are directly pertinent to the
services performed under this Agreement.
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EXHIBIT "B"
ECONOMIC DEVELOPMENT REVOLVING LOAN FUND
OPERATING PROCEDURES
TABLE OF CONTENTS
PA GE
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 Page 1
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 econo-
mic 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 Economic Development Corporation (EDC).
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.
//. EL/G/BLE APPL ICA NTS
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;
- Clearance, demolition and site preparation;
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
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
V/. 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
Economic Development Corporation Loan Committee (EDCLC) 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
EDCLC 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 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.
Economic Development Revolving Loan Fund/Operating Procedures Page 5
F. Security
The EDCLC 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 EDCLC 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
EDCLC. 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.
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.
V//. LOAN APPL ICA TION AND 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;
Pp q Y.
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.
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.
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.
Economic Development Revolving Loan Fund/Operating Procedures Page 7
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F. IF EDCLC recommends approval, the EDC prepares the loan documents
and requests funds from the City.
After EDCLC 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 EDC and properly
signed and duly authorized as a loan agreement between the business
and the EDC.
G. EDC disperses funds and deposits loan payments.
H. EDC 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///. ADMINISTRATIVE APPROVAL
The EDC shall administer the RLF Program for the City of Redding. Loan
applications will be reviewed and recommended for funding by the EDCLC.
The EDC 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 EDC
as lender but it is understood that the EDC 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 EDCLC 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 development and the needs of the low- and moderate-income
persons in the City of Redding. The EDCLC and the chairperson shall
be appointed by the EDC.
The EDCLC 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
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.
Economic Development Revolving Loan Fund/Operating Procedures Page 9
Administrative charges associated with loan servicing, which is defined
as that activity related to the collection of loan payments, shall be
reimbursed to EDC 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.
/X. 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 EDC shall contact the borrower to determine the cause of the
loan delinquency.
2. The EDC shall assist the borrower with technical and management
assistance, and shall refer the borrower to other appropriate
sources of technical and management assistance.
3. EDC 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 EDC loan programs.
B. Loans in Default
In the event payments are more than 60 days delinquent and the
borrower is not cooperating with the EDC to correct the delinquency,
Economic 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 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 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.
Economic Development Revolving Loan Fund/Operating Procedures Page 11
3. Borrower's successor in interest shall execute a written
assumption agreement and submit same to EDC.
4. EDC shall accept in writing the Borrower's successor in interest
assumption agreement.
5. EDC shall release Borrower from all obligations of the term loan
agreement and the promissory note upon full payment of the
obligation by Borrower.
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EXHIBIT "C"
ANTI-LOBBYING CERTIFICATION
The undersigned certifies, to the best of his or her knowledge and belief, that:
1 . No Federal appropriated funds have been paid or will be paid, by or on behalf of
the undersigned, to any person for influencing or attempting to influence an
officer or employee of any agency, a Member of Congress, an officer or
employee of Congress, or an employee of a Member of Congress in connection
with the awarding of any Federal contract, the making of any Federal grant, the
making of any Federal loan, the entering into of any cooperative agreement, and
the extension, continuation, renewal, amendment, or modification of any
Federal contract, grant, loan, or cooperative agreement.
2. If any funds other than Federal appropriated funds have been paid or will be
paid to any person for influencing or attempting to influence an officer or
employee of any agency, a Member of Congress, an officer or employee of
Congress, or an employee of a Member of Congress in connection with this
Federal contract, grant, loan, or cooperative agreement, the undersigned shall
complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying,"
in accordance with its instructions.
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3. The undersigned shall require that the language of this certification be included
in the award documents for all subawards at all tiers (including subcontracts,
subgrants, and contracts under grants, loans, and cooperative agreements) and
that all subrecipients shall certify and disclose accordingly.
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This certification is a material representation of fact upon which reliance was placed
when this transaction was made or entered into. Submission of this certification is a
prerequisite for making or entering into this transaction imposed by section 1352, title
31, U.S. Code. Any person who fails to file the required certification shall be subject
to a civil penalty of not less than $10,000 and not more than $100,000 for each such
failure.
DATE: SIGNATURE:
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