HomeMy WebLinkAboutReso.1988-384 - Approving the agreement between the city of redding and the economic development corporation for revolving loan fund RESOLUTION NO. $S'.W
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING APPROVING THE
AGREEMENT BETWEEN THE CITY OF REDDING AND THE ECONOMIC DEVELOPMENT
CORPORATION FOR A REVOLVING LOAN FUND, AND AUTHORIZING THE MAYOR TO SIGN
SAME.
BE IT RESOLVED by the City Council of the City of Redding as follows:
1. The City Councilof the City of Redding hereby approves the Agree-
ment between the City of Redding and the Economic Development Corporation providing
for a Revolving Loan Fund.
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, when appropriate, upon receipt of documents fully executed by
Economic Development Corporation.
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 1st day
of November , 1988, and was duly adopted at said meeting by the following
vote:
AYES: COUNCIL MEMBERS: Buffum, Carter, Dahl , Fulton, & Johannessen
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None
ABSTAIN: COUNCIL MEMBERS: None
K r,UROE ,JOHANNESSEN, Mayor
City of Redding
ATTEST:
ETH (il.f City Clerk
FORM APPROVED:
4 �• (N
• Ar DAL A. HAYS, Cit /Attorney
110
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, 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 . -
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 $48,000 in the
Final Statement of Community Development Objectives 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; and
by the U. S. Economic Development Administration as staff to the Superior
California Development Council to administer a $1.5 million Revolving Loan
Fund;
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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' rrecitals`r'and the mutual
obligations of. the parties as herein expressed, the parties hereto agree as
follows:
'cSCOPE OF SERVICES ;
=' AEDChall 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 withthe Economic 'Development Revolving Loan Fund
Operating Procedures attached hereto as "Exhibit A."
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
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advisory services as a means of assisting the CITY's Revolving Loan Fund. -,-
C. EDC shall work with clients to develop feasible financial loan
packages.
D. EDC shall provide financial analysis of loan applicants to
determine the borrower's eligibility for the loan and ability to repay the
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
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governmental agencies and/or private lending institutions for loan approval.
EDC shall ensure that loan? packages:rare complete"sand 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
realtors. In addition, EDC shall work closely with CITY staff inmarketing
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 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.
J. EDC must certify for each loan application that assistance will
be:
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
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2. That the project is in a Redevelopment Area and will aid
in the prevention or elimination of slums and blight.
K. 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.
L. EDC agrees that no less than six 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
not be acceptable.
For the purposes of this Agreement, the term "full-time permanent
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 $48,000 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 Y'
that they are actively pursuing that goal.
0. 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.
P. 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
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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.
Q. Any services not listed herein but represented in the applica-
tion dated February 3, 1988 are hereby incorporated by reference as if set
forth in full.
2. TERM/TERMINATION. The term of this Agreement shall be for the
12-month period beginning October 1, 1988 and ending September 30, 1989. 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 byCITY, in addition to anyother remedies
Y 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.
3. 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 under Scope of Services.
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.
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4. PAYMENT. •
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.
5. PROGRAM INCOME„,,
A. "'Funds provided 'under this Agreements-shall be returned to the
Revolving Loan Program Fund :as >they -are repaid andd 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 isnot
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; -F
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 the Scope of Services section of this Agreement.
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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 adjust-
s ments 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.
6. RECORDS.
A. EDC agrees to keep all necessary books and records including
property, personnel and financial records in connection with the services
performed under this Agreement in accordance with CITY Finance Director and in
compliance with requirements of Office of Management and Budget Circular A-110
and A-122.
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
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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 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. ) .
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 maintainthe 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
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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
and moderate-income persons,),.wh.ich. are projected
to become available to low- and moderate-income
persons throughjob turnover within two years of the
time CDBG assistance is provided. Information upon
- which the..job turnover projectionswerebased 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
I ;
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
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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.
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
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.
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 =r
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
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any act or omission of CITY in any way relating to the subject of this
Agreement.
9. INSURANCE PROVISIONS. EDC shall obtain comprehensive 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 require-
ments shall be obtained. A certificate of insurance evidencing such compre-
hensive 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 and all
xp any permits, applications or other requirements in connection
therewith.
11. 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.
C. EDC shall comply with the requirements and standards of OMB
Circular No. A-122 and A-110.
D. 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.
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E. 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 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
contract or. subcontract, ,or:Pthe-•proceeds,,thereof; for work -to- be performed in
connection:-with.-:the program assisted under this Agreement.
F. The assistance provided under this Agreement shall not be used
in the payment of any .bonus :or commission. for:.the purpose:...of:-obtaining 'HUD
approvalof -the- application for' such 'assistance; or HUD approval of applica-
tions for additional assistance, or any. other' approval or concurrence of HUD
required under this Agreement, Title of the Housing and' Community' Develop-
ment 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.
G. 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 Develop- -�
ment Block Grant funds. -
• H. 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.
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I. EDC shall not discriminate against any person on .the-groundsof
race,; :color, national origin, age, sex or religion, or against an otherwise
qualified handicapped-individual. . . . •
J. . EDC. shall comply with the National Environmental Policy Act of
.
'is-.the:Tesponsibility 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
outlinednthis^Agreement are::satisfied.. :: r ;:,
CITY OF REDDING
ATTEST.:. .
. By
ETHEL A. NICHOLS, City Clerk K. MAURICE JOHANNESSEN, Mayor
FORM APPROVED: ECONOMIC DEVELOPMENT CORPORATION
iBy
* 4 �'DALL A.. HAYS, Ci y A orney Chairman of the Board
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EXHIBIT "A"
ECONOMIC DEVELOPMENT
REVOLVING LOAN FUND
OPERATING PROCEDURES
TABLE OF CONTENTS
I. INTRODUCTION
II. ELIGIBLE APPLICANTS
III. ELIGIBLE ACTIVITIES
IV. INELIGIBLE LOAN ACTIVITIES
V. TARGET AREAS
VI. TYPES OF FINANCIAL ASSISTANCE
VII. FINANCIAL STANDARDS AND POLICIES
A. Jobs Generated/Retained
B. Maximum Loan Amount
C. Private Financial Commitments
D. Loan Terms
E. Interest Rate
F. Security
G. Timely Completion
H. Recapture of Funds
I. Compliance with City and Federal Conditions/Regulations
J. Loan Origination Fee
K. Interest Supplements and Loan Guarantees
VIII. LOAN APPLICATION AND APPROVAL PROCESS
IX. SELECTION PROCESS AND CRITERIA
X. ADMINISTRATION/LOAN APPROVAL
XI. DELINQUENT LOAN/LOAN DEFAULT PROCEDURES
XII. SALE OR TRANSFER OF BUSINESS; ASSUMPTION OF RLF LOANS
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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, 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 invest-
ments 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
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 an inducement to encourage firms to locate in the City.
Applicants may be 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;
- 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);
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- 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.
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IV. INELIGIBLE LOAN ACTIVITIES
The following; activities/borrowers will not be eligible for an RLF
loan:
- Non-profit organizations;
- Speculative building and renovation;
- Land banking;
- - Loans for the sole purpose of investing in high interest accounts
or other;.investments not- related to direct job creation/retention.
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
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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 $7,500 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
provide, at a minimum, 10 percent cash or equity injection for the
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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
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
w not be,.implemented as defined." There are.:-several '.typical , kinds
iof."but• for"..s:tatements and'situations'which apply to,projects:
1. Projects whose risk would and can prevent the full
.1:; 17'2.. ",;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 :financingwithout
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.
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D. r.. 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
g justify the maximum term.
2. Loans for capital equipment may have terms of up to seven
; (7) years. The actual term is negotiable; the deal must
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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.
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 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.
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 not be 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;
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- 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.
VIII. LOAN APPLICATION AND APPROVAL PROCESS
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;
2. Staff discusses RLF purpose, procedures, and
requirements with applicant;
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/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 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 recom-
mendations) . 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.
F. EDCLC recommends approval, the EDC prepares the loan
documents and requests funds from the City.
G. EDC disperses funds and deposits loan payments.
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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 recommendedfor 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.
•
•
IX. SELECTION PROCESS .AND CRITERIA, ..
To insure :the..selection. of the bestpossible applications and . the
• maximum..:utilization..of available funds,.the_.EDC shall advertise the
program for :thirty days by:a d'isplay:. 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 signedo .,-and,:. executed ;agreements with the selected
1 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;
3. Private or other financial equity commitments as determined
by EDCLC;
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 = $7,500 approximately);
7. Maximum Loan Amount generally $50,000 as a companion loan,
and $25,000 as a single stand-alone loan;
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•
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.
X. 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.
A. Loan Review Committee • = .
The-,EDCLC .will;:be composed .of. seven 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
Following . loan • approval all loanproceeds will be processed
through. the EDC office. The City Finance Department will arrange
disbursement when all environmental and other clearancesare
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.
XI. 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:
•
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1. The EDC shall contact the borrower to determine the cause of
theloan delinquency.
2. The EDC shall assist the borrower with technical and manage-
ment assistance,• and shall refer the borrower to other
appropriate sources of technical and management assistance.
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 the delin-
quency, 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.
XII. 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 requested by EDC.
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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.
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.
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