HomeMy WebLinkAboutReso 91-090 - Approve the agreement between the COR & Economic Dev Corp providing additional funding for the Economic Dev Revolving Loan Fund1
I
i
j RESOLUTION NO. q/- 90
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 AUTHORIZING THE MAYOR TO SIGN SAME
WHEREAS, the City of Redding has established a Revolving Loan Fund for
Economic Development; and
WHEREAS, during the period from 1988 through 1990, the City assigned
$98,000 in Community Development Block Grant Funds to be used for this purpose;
and
WHEREAS, the additional CDBG funds in the amount of $40,700 have been
i set aside in the 1990-91 fiscal year to be used for this purpose.
1{. 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
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 5th day
of March, 1991, and was duly adopted at said meeting by the following vote:
AYES: COUNCIL MEMBERS: Arness, Dahl , Fulton, Moss & Buffum
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None
ABSTAIN: COUNCIL MEMBERS: None
NANC F ayor
ATTEST: Ci f Redding
ETHEL NICHOLS, City Clerk
1
FORM APPROVED:
i
i
DALL A. HAY ty Attorney
c
I
t
I
i
1 -
i
AGREEMENT BETWEEN CITY OF REDDING
AND'ECONOMIC DEVELOPMENT CORPORATION
REVOLVING LOAN FUND PROGRAM
I� THIS AGREEMENT, made and entered into this day of ,
d
19_, by and between the CITY OF REDDING, a municipal corporation, herein-
after 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
i
appropriate provider of Revolving Loan Funds for the purpose of economic
development by creating or retaining jobs for low-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 by providing $40,700 from
the City Community Development Block Grant 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
U. S. Small Business Administration to package SBA 503, 504, and 7A loans;
d 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 Community
Development Block Grant (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:
1. SCOPE OF SERVICES
I
- 1 -
A. EDC shall provide services in the implementation of the CITY's
Revolving Loan Fund for the primary benefit of low-income residents as
requested by and under the supervision of the Housing Administrator or
designee, and in compliance with the Economic Development Revolving Loan Fund
Operating Procedures attached hereto as "Exhibit A."
B. EDC agrees to promote and assist the growth and development of
i 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.
i
C. EDC shall work with clients to develop feasible financial loan
i
packages.
i
i D. EDC shall provide financial analysis of loan applicants to
1 determine the borrower's eligibility for the loan and ability to repay the
I loan.
E. EDC shall analyze the loan packages according to the Revolving
Loan Fund Guidelines established by the CITY.
F. EDC shall submit loan packages to the EDC Loan Committee with
recommendations of loan approval and terms or disapproval, and to appropriate
I governmental agencies and/or private lending institutions for loan approval.
g
EDC shall ensure that loan packages are complete and accurate prior to sub-
mission to potential lenders.
G. EDC shall continue working with clients and potential lenders
until the loan is approved and disbursed or declined or withdrawn.
H. EDC shall establish and maintain working relationships with
lenders, both governmental and private, and with area accountants, brokers and
I
realtors. In addition, EDC shall work closely with CITY staff in marketing
i and implementing CITY's Revolving Loan Fund.
I. 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 fob creation/retention requirements. After the 24-month
- 2 -
1
I ,
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.
J. 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:
i a. Be made available to low/moderate income persons; or
1
b. Be held by low/moderate income persons. (Low/moderate
I
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
I
2. That the project is in a Redevelopment Area and will aid
in the prevention or elimination of slums and blight.
d K. EDC shall determine those participants who are eligible for
i
services, the extent of such services and the amount, if any, of Revolving
Loan Funds to be expended for such services.
L. EDC agrees that no less than four new full-time permanent jobs
shall be created or retained and filled by qualifying low- or moderate-income
persons during the course of this Agreement. Part-time jobs shall be accepted
on the condition that adequate assurances are provided to insure that these
positions will become full-time within a 24-month period. Seasonal jobs shall
d
not be acceptable.
For the purposes of this Agreement, the term "full-time permanent
i
job" shall mean a position that is expected to continue for two years or more
and consist of a minimum of 35 work hours per week.
M. EDC agrees to match $40,700 in CDBG funds with at least an equal
amount of funds from other resources for this purpose within the City limits.
N. 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
- 3 -
a
that they are actively pursuing that goal.
O. EDC agrees that if for any reason the funds covered under this
Agreement are no longer used for the established purpose, that all payments
i
from the CITY contribution to the revolving loan fund will be returned to the
i
I CITY's Community Development Block Grant Program.
P. The representative of CITY shall have the right to review and
i
j monitor services performed pursuant to this Agreement. CITY, the Department
I
i
of Housing and Urban Development, the Comptroller General of the United
I
i
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.
I
d
Q. Any services not listed herein but represented in the applica-
tion dated February 12, 1990 are hereby incorporated by reference as if set
i
forth in full.
i
2. TERM/TERMINATION. The term of this Agreement shall be for the 12-
month period beginning December 1, 1990 and ending November 31, 1991. 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)
jdays after notice thereof by CITY, in addition to any other remedies provided
I 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.
3. USE OF FUNDS. Use of CITY's funds allocated hereunder to EDC shall
i
be subject to the following terms and conditions:
A. Any funds paid to EDC shall be used solely for the purposes set
forth under Scope of Services.
j 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
- 4 -
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.
I 4. PAYMENT.
A. Upon execution of this Agreement, payment will be disbursed to
i
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.
I
,1
S. 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
I
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.
unds;3. Payments of principal and interest on loans made using
CDBG funds;
I
1 4. Interest earned on CDBG funds held in a revolving fund
I� account;
1
S. Interest earned on program income pending disposition of
I
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 the Scope of Services section of this Agreement.
D. Program income earned shall be substantially disbursed to the
i
- 5 -
approved activities prior to requesting disbursement of additional funds from
CITY. EDC shall show all program income generated using CDBG funds as adjust-
ments on their requests for funds submitted to CITY.
E. In the event that EDC is unable to expend all program income in
I
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.
6. RECORDS.
A. EDC agrees to keep all necessary books and records including
i
property, personnel and financial records in connection with the services
I
performed under this Agreement in accordance with CITY Finance Director and in
compliance with requirements of Office of Management and Budget Circular A-110
i
and A-122.
i
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.
j However, recognizing that EDC may from time to time have records of recipients
1
which are highly personal and confidential in nature, CITY, in its dealings
i
I with EDC will at all times maintain said confidentiality and will not require
J public record to be made or provided that will serve to violate the confiden-
tiality requirements of EDC.
D. Specifically, EDC shall maintain the following program informa-
tion:
1. Evidence of marketing efforts (e.g. , brochures, meeting
notices, etc. ) .
- 6 -
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.
E. In addition, in order to meet HUD requirements for benefit to
low/moderate income persons, EDC shall obtain and maintain the following for
i
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.
1 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
- 7 -
i
0 �.
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 avail-
able to low- and moderate-income persons. For jobs
made available, a description of how first considera-
tion was given to such persons for those jobs shall
also be included in the record.
7. FINANCIAL MANAGEMENT. EDC shall maintain a financial management
system which provides for:
a. Records that identify adequately the source and application of
I
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
'7 Agreement.
C. Comparison of actual outlays with budgeted amounts for CDBG
funds.
j d. Accounting records that are supported by source documentation.
I
i
e. A systematic method to assure timely and appropriate resolution
I
of audit findings and recommendations.
8. 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
1 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.
I
t CITY shall hold EDC, its officers, boards and commissions, and
I
8 - .
i
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
i
any act or omission of CITY in any way relating to the subject of this
1
Agreement.
I
9. INSURANCE PROVISIONS. EDC shall obtain commercial general liability
insurance naming the City, its officers, agents and employees as additional
insureds in the amount of $500,000 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.
10. 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.
11. CONDITIONS OF AGREEMENT.
I
A. CITY shall retain ultimate control over matters involving the
1 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,
I
1 Employment Opportunities for Businesses and Lower-Income Persons in Connection
I
iwith Assisted Project.
- 9 -
1
7
C. EDC shall comply with the requirements and standards of OMB
Circular No. A-122 and A-110, 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 "B" 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.
IJ
I F. No member, officer or employee of the City of Redding, or its
N 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 func-
tions or responsibilities with respect to the program during his tenure or for
one year thereafter shall have any interest, direct or indirect, in any
1 contract or subcontract, or the proceeds thereof, for work to be performed in
i
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
i required under this Agreement, Title I of the Housing and Community Develop-
ment Act of 1974 or HUD regulations with respect thereto; provided, however,
J 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.
,I 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
1 percent or more of the costs of such project are paid with Community Develop-
ment Block Grant funds.
i
I. EDC shall pay individuals employed in jobs financed in whole or
J
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
I
- 10 -
1
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. EDC shall not discriminate against any person on the grounds of
i race, color, national origin, age, sex or religion, or against an otherwise
iqualified 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
ATTEST:
By
ETHEL A. NICHOLS, City Clerk NANCY BUFFUM, Mayor
FORM APPROVED: ECONOMIC DEVELOPMENT CORPORATION
By
RANDALL A. HAYS, City Attorney
1
- 11 -
EXHIBIT "A"
ECONOMIC DEVELOPMENT
REVOLVING LOAN FUND
OPERATING PROCEDURES
TABLE OF CONTENTS
I. INTRODUCTION
II. ELIGIBLE APPLICANTS
III. ELIGIBLE ACTIVITIES
i
IV. INELIGIBLE LOAN ACTIVITIES
V. TARGET AREAS
VI. TYPES OF FINANCIAL ASSISTANCE
1
A. Jobs Generated/Retained
B. Maximum Loan Amount
C. Private Financial Commitments
D. Loan Terms
E. Interest Rate
F. Security
G. Timely Completion
I H. Recapture of Funds
I. Compliance with City and Federal Conditions/Regulations
J. Interest Supplements and Loan Guarantees
VII. LOAN APPLICATION AND APPROVAL PROCESS
j VIII. SELECTION PROCESS AND CRITERIA
IX. ADMINISTRATION/LOAN APPROVAL
X. DELINQUENT LOAN/LOAN DEFAULT PROCEDURES
XI. SALE OR TRANSFER OF BUSINESS; ASSUMPTION OF RLF LOANS
I
i
I. 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,
1 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 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.
II. ELIGIBLE APPLICANTS
i
Funds will be made available on a competitive basis to assist new and
existing manufacturing or assembling businesses located in the City of
Redding and as a sole proprietorship, partnership or for-profit
corporation with a proposed project in the City of Redding.
III. ELIGIBLE ACTIVITIES
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;
- Parking facilities;
i
- Relocation;
- Project "soft costs" (i.e. , reasonable engineering and architectural
costs) ;
- Working capital (In tandem with a bank loan - no singular working
capital loans, and 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, and 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;
J
I -
- 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.
! 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.
VI. TYPES OF FINANCIAL ASSISTANCE
All RLF projects must comply with the following financing standards and
policies;
A. Jobs Generated/Retained
I
i 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
Except under special circumstances determined by the Economic
Development Corporation Loan Committee (EDCLC) , an RLF loan or other
financing will not exceed 25% of the entire project cost.
C. Private Financial Commitments ("But For" Condition)
Firm private financial commitments must be submitted to the EDCLC
before preliminary approval and legally binding commitments must be
secured prior to any final RLF loan approval. Applicants must
jprovide, 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.
I
i 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.
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.
1
1
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 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 seven (7)
'i 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 seven (7) years. The actual term is negotiable;
the deal must justify the maximum term.
I
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 set at the time the loan is made and will generally
range near the current money center commercial bank prime rate as
reported in the Western edition of the "Wall Street Journal."
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.
I
F. Security
The EDCLC shall obtain sufficient and adequate collateral to secure
I 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
1 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.
I
' 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
i 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
1
I
a
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.
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 the
above Financial Standards and Policies.
VII. LOAN APPLICATION AND APPROVAL PROCESS
i
All applications for RLF will be made through the Economic Development
Corporation. 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;
i
l 2. Staff discusses RLF purpose, procedures, and requirements with
applicant;
i
3. Staff 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/send out application form and operating procedures to
j applicant.
C. Applicant returns completed application form, including proof of
private financing commitments and application fee.
D. EDC staff will review 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 (staff recommendations) . EDC staff will
submit request to City for an environmental determination.
Environmental clearance must be obtained before loan approval. The
staff 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.
i
F. EDCLC recommends approval, the EDC prepares the loan documents and
requests funds from the City.
G. EDC disperses funds and deposits loan payments.
i
I
1
H. The EDC monitors the loan and the business activity of the borrower,
including number of jobs created and who is filling them, and other
required data, and provides loan servicing and counseling.
After EDCLC approval, the business recommended for funding will be
I 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
'I properly signed and duly authorized as a loan agreement between the
business and the EDC.
VIII. SELECTION PROCESS AND CRITERIA
To insure the selection of the best possible applications and the maximum
utilization of available funds, the EDC shall advertise the program for
thirty days by a display ad and notices to client groups. For the first
sixty days EDC will accept applications on a competitive basis. Loans
which are awarded may include special conditions. Project implementation
will only proceed after the EDC has signed and executed agreements with
the selected applicants. At the end of the first sixty days,
applications will be accepted and considered based on money available,
applicant performance, etc.
Initial Eligibility Determination
In order to receive further consideration, each applicant will first be
reviewed by the EDC staff to determine if they meet the following minimum
project criteria described in the Financial Standards and Policies
section of these procedures:
1. Project location within City of Redding;
2. Eligible applicants and activities;
i
j 3. Private or other financial equity commitments as determined by
EDCLC;
i
i 4. Applicant's cash or equity injection (10 percent - except for SBA
504 Program Companion Loans) ;
5. Primary benefit to low- and moderate-income people or aid in
prevention or elimination of slums or blight;
6. Jobs generated/retained per public (RLF) loan dollars (one loan =
$10,000 approximately) ;
7. Maximum Loan Amount generally $50,000 as a companion loan, and
$25,000 as a single stand-alone loan;
8. Type of financial assistance requested;
9. Compliance with Federal and City regulations, requirements and
conditions.
Once it has been determined that the application meets the eligibility
requirements, the application will then be evaluated based on
administrative criteria to be established.
IX. ADMINISTRATIVE APPROVAL
The EDC shall administer the RLF Program for the City of Redding. Loan
I
i
I
applications will be reviewed and recommended for funding by the EDCLC.
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 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
1 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, in which to
deposit all payments made on outstanding RLF loans. EDC will
utilize these recaptured RLF funds to finance future loan awards.
I
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 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.
2. Any costs incurred over and above those collected under Section
IXC1 may be charged as an eligible cost to the Agreement for
Industrial Promotion executed annually between the City of
,1
Redding and EDC.
3. Any charges made shall not exceed the actual cost of providing
this service.
Administrative charges for loan servicing which is defined as that
1 activity related to the collection of loan payments shall be
reimbursed to EDC in the following manner:
i1. CDBG funds generated by program income from the Revolving Loan
Fund.
2. Any charges made shall not exceed the actual cost of providing
this service.
I
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.
1 3. EDC shall collect a late charge 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 th delinquency,
the loan shall be declared to be in default. The case shall be
referred to the EDCLC 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.
XI. 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, provisions, 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
1 requested by EDC.
2. EDC shall approve or deny Borrower's request to sell or
1 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 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.
t
i
i
\CD\EDC.CD
I
i
i
I
I
I
I
I
1
1
• •
i
• EXHIBIT "B"
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 instruc-
tions.
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 coopera-
tive agreements) and that all subrecipients shall certify and disclose
accordingly.
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.
I
DATE: SIGNATURE:
I
I
i
\CD\ALC.EXH
i
I�
I