HomeMy WebLinkAboutResolution No. 07-R38RESOLUTION NO. 07-R38
RESOLUTION OF THE REDEVELOPMENT AGENCY BOARD OF THE CITY OF AZUSA
ADOPTING THE CREATION OF A DOWN PAYMENT ASSISTANCE PROGRAM FOR
INDIVIDUALS FROM LOW -AND MODERATE -INCOME HOUSEHOLDS AND PROJECTED
USE OF REDEVELOPMENT AGENCY 20% LOW/MOD HOUSING SET ASIDE FUNDS FOR
FISCAL YEAR 2007-08
WHEREAS, the Redevelopment Agency Board of the City of Azusa is collecting tax
increment funds and funding a 20% Low/Mod Housing Set Aside Fund; and
WHEREAS, City staff has proposed to program 20% Low/Mod Housing Set Aside Funds of
$655,000 into a new Project titled Down Payment Assistance Program; and
WHEREAS, the proposed program represents a substantial change to the statement of
community development objectives and projected use of funds for the Community Development
Block Grant program for fiscal year 2007-08; and
NOW, THEREFORE, BE IT RESOLVED, that the Redevelopment Agency Board of the City of
Azusa does hereby take the following actions:
SECTION 1. Approve the new program entitled Down Payment Assistance Program and
the Down Payment Assistance Program Guidelines; and
SECTION 2. Approve programming $655,000 of available 20% Low/Mod Housing Set
Aside Funds into the new project titled Down Payment Assistance Program; and
SECTION 3. Authorize the City Manager or authorized designee to execute any and all
necessary contracts and agreements with approved lenders and with each approved recipient/
subrecipient of the program, together with any minor changes therein which may be approved by
the City Manager and, as necessary, the City Attorney.
SECTION 5. The City Clerk shall certify the adoption of this resolution.
PASSED AND APPROVED this 15'h day of October, 2007.
J6seph R. Rocha, Chairman
1 HEREBY CERTIFY that the foregoing Resolution No. 07-1138, was duly passed, approved,
and adopted by the Agency Board of the City of Azusa, at a regular meeting of said Agency Board
held on the 15`h day of October, 2007, by the following vote of the Agency Board:
AYES:
BOARDMEMBERS: GONZALES, CARRILLO, MACIAS, HANKS, ROCHA
NOES:
BOARDMEMBERS: NONE
ABSTAIN:
BOARDMEMBERS: NONE
ABSENT: BOARDMEMBERS: NONE
Vera Mendoza, City Clerk
• CITY OF AZUSA •
ECONOMIC DEVELOPMENT LOAN PROGRAM (EDLP) GUIDELINES
10/15/2007
M011110131
The purpose of the Economic Development Loan Program (EDLP) is to create and retain jobs for
low and moderate income individuals by encouraging the development of new businesses and the
retention of existing businesses within the EDLP Downtown Azusa Target Area. The focus of the
program will be to encourage new retail, quality sit-down restaurant, and entertainment businesses to
locate in the Downtown area. The program is funded through the Community Development Block
Grant (CDBG) program and all applicants must comply with applicable US Department of Housing
and Urban Development (HUD), County of Los Angeles, and EDLP regulations.
IL PROGRAM DESCRIPTION
A. Downtown Azusa Target Area:
EDLP loans will be made available to eligible businesses within the Downtown Azusa Target Area
which is defined as the area bounded by:
- Ninth Street on the north;
- San Gabriel Avenue on the west;
- Third Second Street on the south; and
- Soldano Avenue on the' east.
B. Eligible Types of Businesses
EDLP loan funds can be utilized to provide forgivable loans to support the establishment and
retention of the following types of businesses located in the Target Area:
1. Retail businesses that generate sales taxes to the City of Azusa
2. Full Service Sit -Down Restaurants
3. Entertainment -related establishments such as theatres
Add.
4. Fast-food Restaurants with Patio Dining
C. Eligible Use of Loan Proceeds:
1. Purchase of business equipment, furniture, and fixtures
2. Interior and/or exterior leasehold improvements J
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3. Building renovation and construction
4. Working capital
III. HOW THE LOAN PROGRAM WORKS
An applicant business is eligible to receive only one loan in any five-year period. For every $35,000
requested in financial assistance (up to a maximum of $105,000 for any one business), an eligible
business must create or retain one permanent 40 -hour per week employee position filled by an
individual from a low -to -moderate income household for a period of three years (see Table below).
In order to consider jobs retained, the business must provide evidence or analysis of relevant
financial records that indicate that permanent jobs would be lost without financial assistance. Part
time positions may be aggregated to reach the 40 -hour per week target as long as they are permanent
jobs, not temporary jobs. A temporary job is one that does not exceed 90 working days. To qualify,
the person(s) hired must be from a household classified as low -to -moderate income according to the
Federal and Los Angeles County income guidelines.
The job start date will be an agreed upon date between the City and the applicant business which
triggers the three year period of required compliance under the loan program as it relates to the
provision of one full-time permanent job filled by an individual from a low -to -moderate income
household.
For business that are not fully operational, a six month waiting period may be granted to allow
the business to complete all required tenant improvements and or modifications required to
secure a Certificate of Occupancy from the Building Division.
The business is responsible for providing a quarterly report to the City which documents the job
created/retained, the individual(s) filling the position, hours worked per week, and hourly rate of each
employee(s) associated with the loan program.
Failure to maintain the low -to -moderate income position for the required three-year period will result
in the business defaulting on that portion of the loan outstanding while not maintaining the low-to-
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Number of Full -Time
Employees
Required # of New or
Required to be Hired or
Retained
Loan Amount
Retained
Hires that Must be L/M
$35,000
1
1
$35,001 to $70,000
2
2
$70,001 to $105,000
3
3
The job start date will be an agreed upon date between the City and the applicant business which
triggers the three year period of required compliance under the loan program as it relates to the
provision of one full-time permanent job filled by an individual from a low -to -moderate income
household.
For business that are not fully operational, a six month waiting period may be granted to allow
the business to complete all required tenant improvements and or modifications required to
secure a Certificate of Occupancy from the Building Division.
The business is responsible for providing a quarterly report to the City which documents the job
created/retained, the individual(s) filling the position, hours worked per week, and hourly rate of each
employee(s) associated with the loan program.
Failure to maintain the low -to -moderate income position for the required three-year period will result
in the business defaulting on that portion of the loan outstanding while not maintaining the low-to-
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• CITY OF AZUSA •
ECONOMIC DEVELOPMENT LOAN PROGRAM (EDLP) GUIDELINES
10/15/2007
moderate income position. If the job creation/retention requirements are not met in any six-month
period, the agreement will be terminated and the balance of the loan will be called as due.
IV. FINANCING POLICIES
A. Loan Amounts
Loan amounts for any single eligible business will range from $35,000 to $105,000, pending funding
availability.
B. Interest Rate
Interest rate will generally be set at 5 Percent.
C. Term
The loan will be structured as a three-year loan. The loan will be forgiven if the applicant complies
with the requirement to hire individuals from low -to -moderate income households for a period of
three years. If the applicant fails to operate the business during any 6 month period, the outstanding
balance of the loan will become immediately due and payable.
D. Underwriting
HUD underwriting guidelines will be followed to ensure:
That project costs are reasonable;
2. That all sources of financing are committed;
3. That the project is financially feasible;
4. That federal funds are not substituted for non -Federal financial support;
5. That the return on the owner's equity investment will not be unreasonably high; and
6. Federal funds are disbursed on a pro -rata basis with any other funds.
E. Collateral
Full collateral is not a requirement for financial assistance. However, the City of Azusa will
generally secure each loan to the maximum extent possible. The City will take security interest in
available assets, including personal guarantees of all individuals with a substantial interest, corporate
guarantees, as well as assignment of leases or insurance as deemed appropriate. Working capital
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ECONOMIC DEVELOPMENT LOAN PROGRAM (EDLP) GUIDELINES
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loans may be secured by liens on receivables, inventory, fixed assets and/or other available assets of
the borrowers as well as personal guarantees of the principals of the business.
F. Loan Fee
The loan fee shall be a $500 processing fee, payable at the time the loan application is made to the
City.
G. Cessation of Business/Operations
If the applicant/borrower should cease business at the site during the term of the loan, the borrower
shall repay its obligations to the City as provided in the Note which shall be executed when the Loan
Agreement is signed. The term "cease business" shall mean when the site is no longer used as the
principal place of business for the borrower's business. The borrower shall give City written notice
not less than thirty (30) days prior to cessation of business. If the borrower should cease business at
the site, the borrower shall pay to the City, in cash, within fifteen (15) days of the participant's
receipt of written notification from the City of the balance due on the Note.
H. Financial Information Required
All borrowers will be required as a covenant in the Loan Agreement to provide ongoing financial
information as follows:
1. Fiscal Year -End balance sheet and income statements within ninety (90) days of each
year end;
2. More frequent statements such as Accounts Receivable Aging, work in progress
reports or any other documents requested by the Loan Committee or City to assist the
borrower and City in the monitoring of the credit; and
3. Payroll reports showing employee status, on a quarterly basis.
V. LOAN APPLICATION/APPROVAL PROCESS
A. Application Required
The business applicant will be required to submit the EDLP loan application, together with all
required financial and business information. This may include: .
1. Description of operations, type of business, present/future facilities, principals,
business profile (history and forecast), and employment created or retained (current
and/or projected)
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2. Financial data: Current personal financial statements of principals; the last three
years business financial statement and tax returns for established operations including
balance sheets, income statements, and interim business financial statements (less
than 90 days old)
3. Project data: Amount of loan requested and description of all project costs: e.g.
purchase price of the land and building, cost of renovation by contractors, cost of
equipment, working capital needs. For projects requiring working capital, an
operating pro forma of the business shall also be provided.
4. Comprehensive business plan in a form consistent with that identified in the Small
Business Administration Business Plan Outline.
5. Statement of relevant management experience in same line of business
6. Financial projections for the next three (3) years, including month -to month
projections for the first two years.
7. Project description including a source and uses of funds statement.
8. Satisfactory credit history.
9. The source of repayment and the form of collateral.
10. The amount required
11. The amount that the borrower will invest or has invested.
B. Loan Selection Criteria
1. Applicant must have a satisfactory credit history. (No bankruptcies within 6 years,
repossessions (case by case basis) or federal or state tax liens (case by case basis).
2. Management experience in the same type of business.
3. Demonstrated probability of repayment. Personal and corporate guarantees may be
required.
4. Reasonable projected debt service coverage.
5. Reasonable loan to value of business/assets
6. Positive net worth.
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ECONOMIC DEVELOPMENT LOAN PROGRAM (EDLP) GUIDELINES
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C. Loan Review Committee
The Loan Review Committee (LRC) will review all loan proposals. The LRC will consist of the
Assistant City Manager, Economic and Community Development Director and the Chief Financial
Officer and/or their designees. The LRC will meet on an as -needed basis. The LRC will make its
recommendation to the City Manager.
D. City Council Action
Following review and recommendation by the City Manager, the City Council will approve or deny
the loan application at a public meeting. The decision of the City Council is final.
E. Application Period
Applications will be accepted on a continuous basis when funds are available. Applications will be
on a first -come -first-served basis. An applicant business is eligible to receive only one loan in any
five-year period. Applications will only be processed as funds are available.
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• CITY OF AZUSA •
ECONOMIC DEVELOPMENT LOAN PROGRAM (EDLP) GUIDELINES
APPENDIX "A"
RECORDS TO BE MAINTAINED AND INCOME
DOCUMENTATION REQUIREMENTS
I. Records to be Maintained
The following outlines the records that must be kept for a minimum of three years after the date of
compliance with job creation or retention requirements:
A. General
When assistance is provided for the purpose of creating or retaining jobs, there must be a written
agreement in which the business agrees to keep or create a specific number of jobs and identifies
each such job by type and whether the job will be full- or part-time. The agreement must also specify
the actions the business will take to ensure that at least 51% of the jobs created or retained will
benefit L/M income persons. The records also must document which jobs were actually created and
retained, whether each such job was held by, taken by, or made available to a L/M income person,
and the full-time equivalency (FTE) status of each job.
B. Job Creation
Held by:
With respect to jobs which will be held by L/M income persons, the records must show:
• A listing byjob title of the specific jobs to be created,
• A listing by job title of the jobs filled,
• The name and income status of the person who filled each position, and
• The FTE status of the jobs.
C. Job Retention
Where L/M income benefit is based on job retention, the files must include the following
documentation.
Otherwise lost:
• The specific evidence that in the absence of financial CDBG assistance, the jobs would be lost.
Held by:
• A listing by job title of permanent jobs retained, those jobs known to be held by L/M income
persons at the time CDBG assistance was provided, and the FTE status of each such job; and
• Information on the family size and annual income of each such L/M income person.
Turnover jobs:
• Identification of any of the retained jobs (other than those known to be held by L/M income
persons) projected to become available to L/M income persons through turnover within three
years of the time CDBG assistance was provided;
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• CITY OF AZUSA •
ECONOMIC DEVELOPMENT LOAN PROGRAM (EDLP) GUIDELINES
APPENDIX "A"
• The basis upon which the job was determined to be likely to turn over within three years
following the CDBG assistance;
• The date the job actually turned over;
• The name and income status of the. person who filled the vacancy;
• If the person who took the job was not L/M income but the job was made available to L/M
income persons, records equivalent to those described above to substantiate the "available to"
claim; and
• Information on the family size and annual income of each such LIM income person hired.
If. Income Documentation Requirements
Documentation that a particular applicant/employee family income was L/M income may include
any of the following:
Evidence that the employee/applicant was a referral from a state, county, or local employment
agency or other entity that has agreed to refer individuals whom they have determined to be L/M
income based on HUD's criteria. These entities must maintain records showing the basis upon
which they determined that the person was L/M income, which they agree to make available for
grantee or Federal inspection; or
A written certification signed and dated by the employee/applicant indicating his/her family size
and total income as necessary to determine whether the person is a member of a L/M income
family at the time the certification is made. The certification may either show the actual size and
income of the family or contain a statement that the annualized family income is below the
Section 8 low-income limit for the applicable family size. The form must include a statement that
the person making the certification is aware that the information being provided is subject to
verification by the local or Federal government; or
Evidence that the employee/applicant has qualified
income qualification criteria at least as restrictive as
from Public Housing or the Welfare Agency); or
Evidence that the person is homeless.
for assistance under another program with
those used by this program (e.g., referrals
The test for determining whether an employee or applicant is L/M income for the purposes of this
subcategory must be made based on the person's income status at the time the CDBG assistance is
provided. One of the most important aspects of this is that the income the person would make from
the assisted job under consideration is not included in the calculation. For created jobs, the benefit is
intended for persons who are L/M income prior to being hired. For retained jobs, the family must be
L/M income at the time the job is retained. Thus, a high -paying unskilled job might count as a
created job but might not be counted for retention except for turnover purposes.
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