HomeMy WebLinkAbout11/28/2022Staff:
Scott Andrews, Assistant City Manager
Mario Orosco, Budget Officer
Committee Members:
Councilmember, Andrae Gonzales –
Chair Councilmember, Ken Weir
Councilmember, Eric Arias
Special Meeting of the
Budget and Finance Committee
of the City Council – City of Bakersfield
Monday, November 28, 2022
12:00 p.m.
City Hall North, First Floor, Conference Room A
1600 Truxtun Avenue, Bakersfield CA 93301
A G E N D A
1.ROLL CALL
2.PUBLIC STATEMENTS
a.Agenda Item Public Statements
b.Non-Agenda Item Public Statements
3.ADOPTION OF THE MAY 23, 2022, AGENDA SUMMARY REPORT
4.NEW BUSINESS
a.Discussion and Committee Review of EOA Program – Saldana/Griego
b.Discussion and Committee Update on Section 108 Loan – Saldana/Eaton
5.COMMITTEE COMMENTS
6.ADJOURNMENT
Staff: Committee Members:
Christian Clegg, City Manager Councilmember, Andrae Gonzales – Chair
Mario Orosco, Budget Officer Councilmember, Kenneth Weir
Councilmember, Eric Arias
Regular Meeting of the
Budget and Finance Committee
of the City Council – City of Bakersfield
Monday, May 23, 2022
12:00 p.m.
City Hall North, First Floor, Conference Room A
1600 Truxtun Avenue, Bakersfield CA 93301
A G E N D A
The meeting was called to order at 12:02 p.m.
1. ROLL CALL
Committee members present: Councilmember Andrae Gonzales
Councilmember Ken Weir
Councilmember Eric Arias
Staff present:
Christian Clegg, City Manager
Josh Rudnick, Deputy City Attorney
Randy McKeegan, Finance Director
Mario Orosco, Budget Officer
Kevin Truelson, Assistant to the City Manager
Brianna Carrier, Assistant to the City Manager
Jena Covey, Risk Manager
Gary Hallen, Assistant City Manager
Anthony Valdez, Assistant to the City Manager
Additional Attendees:
Andrew Brown, Director, High Mark Capital
Rosalva Flores, Brown Armstrong CPA
Members of the Public
/s/ Christian Clegg
Budget & Finance Committee
May 23, 2022, Agenda Summary Report
Page 2
2. PUBLIC STATEMENTS
a. Agenda Item Public Statements – No public statements.
Non-Agenda Item Public Statements – No public statements.
3. ADOPTION OF THE FEBRUARY 28, 2022, AGENDA SUMMARY REPORT
The report was adopted as submitted.
4. NEW BUSINESS
a. Discussion and Committee Recommendations regarding Pension Section 115
Trust Update – McKeegan
Finance Director, Randy McKeegan, provided a general overview of the
upcoming presentations on the unfunded liabilities of the City, connected to
City pensions, new pension rate stabilization trust, and briefly touched on the
retiree medical trust fund. Finance Director, Randy McKeegan introduced
consultants from GovInvest and PARS who would provide presentations. Dan
Matusiewicz with GovInvest, would cover CalPERS costs and provide
background on the pension costing tool the City procured that allows more
accurate and up-to-date calculations, which in part can allow better
tracking of the funding plan of the new pension trust. Representatives from
Public Agency Retirement Services (PARS) would cover City retiree medical
trust and investment returns connected to the combined trust established.
Finance Director, McKeegan would later wrap up the discussion on options
that staff would like the committee to consider on strategies to fund the new
trust with the anticipation of overall City reserve policy preparation that will
be presented for approval next fiscal year.
Dan Matusiewicz, GovInvest presented to the committee on pension funding.
Committee Member, Ken Weir, asked why the information being provided
was based on 2021. Finance Director, McKeegan was able to provide
clarification.
Mitch Barker, Executive Vice President, PARS, provided an overview of their
role as the trust administrators for the section 115 pension. Mr. Barker
explained the team effort between PARS, US Bank, and High Mark Capital
Management.
Andrew Brown, Director, High Mark Capital Management provided an
overview of economic, and market forecast and performance.
Committee member, Weir asked whether, at some point in time, the
investment would be able to continuously pay for the insurance benefit and
how long would that be? Finance Director McKeegan, referred to the
actuary that projected funding through 2038 with a more recent actuary
report to come.
Budget & Finance Committee
May 23, 2022, Agenda Summary Report
Page 3
Finance Director, McKeegan wrapped up the presentation requesting
consideration of the proposed pension trust funding strategy to include:
• Annual contribution based on savings from advanced unfunded accrued
liability (UAL) payment
• Fixed Percentage of surplus fund balance calculated at year-end
• Annual contributions from $4 million (in FY 2021-22) to $10 million
All with the understanding that proposed contributions would be dependent
on the City’s needs for ongoing operations and related budgetary
commitments.
City Manager, Clegg provided the committee with further input on the
proposed strategies for discussion and consideration.
Committee members were all in favor of the first proposal of annual
contribution based on savings from UAL payment as well as the second
option of a fixed percentage or surplus fund balance calculated at year-
end.
Committee Member, Gonzales asked Finance Director, McKeegan, to
provide his input on the third option. Mr. McKeegan noted that although the
option was modeled it may not be as flexible as an adopted policy.
Committee member, Gonzales requested that option three be evaluated a
little more as a viable option. Committee member, Gonzales also suggested
that the City provide messaging to the public to better explain unfunded
liability.
Committee Member, Weir made a motion to bring forward the first option of
annual contribution based on savings from advanced UAL payment. The
motion was unanimously approved.
b. Discussion and Committee Recommendation regarding insurance Rates and
Self-Insurance Fund – Covey/McKeegan
Risk Manager, Jena Covey provided a brief overview of the self-insured fund
and introduced Conor Boughey with Alliant Insurance Services who
presented on Projection Insurance Costs and Market Conditions.
Mr. Boughey provided the committee with an overview of liability & property
market summaries and workers’ compensation, along with a summary of
costs.
Committee member, Weir made a motion to recommend insurance rates
and forward them to City Council for approval. The motion was unanimously
approved.
Budget & Finance Committee
May 23, 2022, Agenda Summary Report
Page 4
c. Discussion and Committee Recommendation regarding FY20-21 Annual Audit
Reports – McKeegan
Finance Director, McKeegan provided an overview of the FY20-21 Annual
Audit Reports provided by auditors Brown Armstrong. Rosalva Flores with
Brown Armstrong was introduced to assist with any committee member
questions.
Committee member, Weir made a motion to move FY20-21 Annual Audit
Reports forward to City Council for approval. The motion was unanimously
approved.
d. Discussion and Committee Recommendations regarding PSVS Policy
Ongoing Expenditures – Clegg
City Manager, Clegg provided a brief overview of the PSVS Policy Ongoing
Expenditures to ensure that we have one-time monies to complete large
capital projects as well as have a reserve for flexibility for immediate and
future needs. City Manager, Clegg requested a committee discussion on
which expenditures to include in the ongoing expenditure policy.
5. COMMITTEE COMMENTS
No committee comments
6. ADJOURNMENT
Meeting adjourned at 2:09 p.m.
EOA Implementation Guidelines (10-20-2022) Page 1
Contents
Section 1: Introduction ............................................................................................................... 2
1.1 Financial Incentives ........................................................................................................... 2
Section 2: EOA Program Criteria ............................................................................................... 3
2.1 California Prevailing Wage ................................................................................................ 4
2.2 Eligible Types of Improvements/Costs ............................................................................... 5
2.2.1 Exterior Façade Improvements .................................................................................. 5
2.2.2 Site/Property Enhancements ...................................................................................... 5
2.2.3 Rehabilitation/Tenant Improvements .......................................................................... 6
2.2.4 Business Relocation/Expansion ................................................................................. 6
2.2.5 Development Assistance ............................................................................................ 6
2.3 Ineligible Projects .............................................................................................................. 7
2.4 Funding Availability ............................................................................................................ 7
2.5 Grant Award ...................................................................................................................... 8
2.6 Disbursement of Funds ...................................................................................................... 9
2.7 Reporting Requirements .................................................................................................... 9
2.7.1 Job Creation ............................................................................................................... 9
2.7.2 Progress Report ........................................................................................................10
2.7.3 Final Report ..............................................................................................................10
Section 3: Application Process ..................................................................................................11
Attachments:
EOA Incentive Program Application
EOA Grant Agreement
California Prevailing Wage Awarding Bodies FAQ
EOA Implementation Guidelines (10-20-2022) Page 2
Section 1: Introduction
City of Bakersfield’s Economic Opportunity Area (EOA) Plan supports business growth,
development, entrepreneurship and innovation. The EOA is a locally initiated program that uses
tax increment financing and local sales tax revenue to promote economic growth within specific
geographic areas of Bakersfield. When the private market does not provide sufficient capital and
economic development activities to a specific area, public actions may be necessary to stimulate
growth. Tax increment financing serves as a mechanism to develop and encourage business
growth and provide other economic development opportunities.
These guidelines cover in detail how the EOA Plan is implemented with the use of public incentive
tools to facilitate increased private sector investment. The financial incentives, such as grants and
development assistance, will be available for a business to reduce their cost of opening within an
EOA or cost of locating or expanding in an EOA area.
The EOA Plan is in line with City goals by funding economic development activities and
improvements with the long‐term objectives of improving the physical appearance of the EOA
areas, encouraging new business and the retention/expansion of existing businesses, create jobs,
increasing property values, create tenant stability and lease rates for the property, increasing
revenues for businesses and attracting investment to expand tax base.
1.1 Financial Incentives
The City of Bakersfield Economic Opportunity Area Program offers business assistance that
allows property and business owners to make various property improvements as well as other
finance assistance in specific geographic regions of the City. A property must be within the
borders of an EOA area to be eligible for funding assistance (see attached Map). The EOA areas
include the following:
● Downtown
● Municipal Airport Industrial Area
● 58/Mt. Vernon Industrial Area
● 34th St. Corridor
● East Hills
● Baker St. Corridor/Old Town Kern
● Southeast
The EOA Incentive Program creates opportunities to:
1. Improve the appearance of the City’s neighborhood commercial areas by encouraging
upgrade of dilapidated commercial buildings.
2. Encourage small businesses to lease vacant commercial properties by lowering the capital
outlay required for tenant improvements.
3. Eliminate or reduce the cost of development fees and the costs of capital and public
improvement projects to help attract, retain, and promote expansion of commercial, retail,
office, and restaurants.
1.1.1 Site Improvement/Rehabilitation Grant
The site improvement and rehabilitation grants are an endeavor to leverage public funds to
enhance the physical appearance and economic vitality of businesses in the EOA areas. The
grants provide financial assistance for Facade Improvements (exterior building improvements);
Site Enhancements (non-structural improvements); and Tenant Improvements (interior
improvements). Priority is given to existing vacant or underutilized structures to create new uses
or to revitalize previous uses. The total cost of the improvement work must be more than five
EOA Implementation Guidelines (10-20-2022) Page 3
thousand dollars ($5,000). Activities under this grant may be subject to California prevailing
wages, see section 2.1.
1.1.2 Business Relocation/Expansion Grants
The City’s offers relocation and expansion grants to relocate to the EOA. The applicant must
either take ownership of the new location or enter at minimum a three-year lease. Assistance also
includes a rent reimbursement to assist businesses during the critical first year of operation at the
new location. The total costs must be more than five thousand dollars ($5,000). Note: this is an
incentive that is separate from the requirements of the Uniform Relocation Assistance and Real
Properties Acquisition Policies Act or the California Relocation Act. The grant amount depends
on the job creation as shown below:
Grant Amount New Full-time Jobs
$5,000 1
$5,000 to $15,000 2
$15,000 to $25,000 3
$25,000 to $35,000 4
$35,000 to $45,000 5
$45,000 to $55,000 6
1.1.3 Development Assistance
This incentive reimburses development fees for a business that relocates to an EOA area,
expands within, or changes the use of the existing building. Fee categories that may qualify
include transportation impact fee, building permit fee, water and sewer connection fee, and
planning/land use fee. With this development assistance grant the City may also reimburse the
costs of capital and public improvement projects. The purpose is to provide financial assistance
to new or expansion of existing businesses in an EOA area that may require new impact fees to
be paid due to a change of use or the new development or expansion is required to make public
infrastructure improvements while developing new commercial or mixed-use projects.
1.1.4 TIF Financing
Guidelines for TIF Financing are still in development and will be included in a later draft of EOA
Program Guidelines.
Section 2: EOA Program Criteria
Recipient of grant funds are required to enter into a grant agreement with the City of Bakersfield,
which provides for terms and covenants. The program has a limited budget for each grant year.
Once funding is exhausted, no other grant applications will be considered in that fiscal year.
Properties that have never received a grant in the past are given first priority for funding. To be
eligible for a grant you must be:
• Existing legal businesses located or will be located within the City of Bakersfield.
• Business can be a for-profit or non-profit tax-exempt entities (pending City Council
approval).
• Owners or long-term tenants of commercial or industrial zoned property located within one
of the EOA areas.
• Business owners who are tenants of a building (minimum three-year lease) must provide
written consent from the building owner for all proposed improvements. In addition, the
grant application must be signed by the property owner.
EOA Implementation Guidelines (10-20-2022) Page 4
• A business that has received a grant within the past five years from the grant agreement
date is not eligible for funding, with the exception of grants that address an urgent need
impacting the operation of a business. Such exception shall reviewed and approved by
the ECD Director or designee.
• Improvements that were completed prior to execution of a grant agreement are ineligible
for funding.
• Applicants must have no active investigations or pending violations of City codes or
criminal investigations.
• New construction projects and buildings occupied by the following types of businesses are
ineligible for funding: gun stores, pawn shops, check cashing businesses, liquor stores,
Adult Entertainment Businesses (as defined by Section Chapter 5.06 of the City Municipal
Code), cigarette stores, video game and gambling establishments.
• If a contractor is used, the applicant must provide a copy of the applicant’s contract with
each contractor performing grant-funded work. The applicant must verify that the
contractor(s) retains a valid California Contractor’s license.
• Contractors must comply with the California Labor Code, including but not limited to
requirements regarding hours of labor, nondiscrimination, payroll records, apprentices,
worker’s compensation, and prevailing wages, when required.
• The quality of work must meet design plans and specifications as approved by the
Planning and Building Divisions.
• All improvements shall conform to the City of Bakersfield Building Codes, Zoning
Ordinance, Site Plan Review, and applicable Design Guidelines.
• Construction of grant funded improvements must be completed within 6 months of
execution of the grant agreement. If the project is not complete or all of the funds are not
utilized by the deadline, then all remaining funds may be retained by the City and
reprogramed for other projects. Delays due to conditions beyond the control of the grant
recipient may qualify for an extension, which may be granted or denied at the discretion
of the Economic and Community Development (ECD) Director. To obtain an extension,
grant recipients must submit a written request to the Economic and Community
Development Department at least 30 days prior to expiration of the grant. The Director is
authorized, but not obligated, to grant a maximum of two extensions of up to 90 days each.
Further requests for extension are subject to approval by the City Council.
2.1 California Prevailing Wage
All improvements and rehabilitation completed through the EOA Programs are considered “public
works projects” per Section 1720 of the California Labor Code. Generally, any public works project
involving construction, alteration, demolition, installation maintenance, or repair work done under
contract and paid for in whole or in part with public funds (i.e. local tax revenue), is subject to
prevailing wage. However, public works projects for new construction, alteration, installation,
demolition or repair projects, prevailing wages are not required to be paid for projects of $25,000
or less, or $15,000 or less when the project is for maintenance work. Projects of $30,000 or more
must meet Department of Industrial Relation’s (DIR’s) apprenticeship requirements. All estimates
and payments for construction and installation of improvements shall include prevailing wages
and shall otherwise comply with the provisions of Sections 1773.8, 1775, 1776, 1777.5, 1777.6
and 1813 of the California Labor Code and all other applicable laws and regulations with respect
to prevailing wages. Participants in the program are responsible for ensuring that the
improvements are following the Prevailing Wage Law and understand that the law applies to the
entirety of the project, not just the portion funded through the EOA program.
EOA Implementation Guidelines (10-20-2022) Page 5
Per State law, all private entities using public funds are considered an “awarding body” on a public
works project for purposes of registration with the DIR. An awarding body is the entity that awards
a contract for public works and is sometimes known as the project owner and must comply with
all regulations.
By executing the grant agreement, applicants are certifying that the project will be registered with
the Department of Industrial Relations. The registration website and PWC-100 form can be
accessed by visiting https://www.dir.ca.gov/pwc100ext/LoginPage.aspx. For questions regarding
the registration process please contact the Department of Industrial Relations at (415) 703-4774.
2.2 Eligible Types of Improvements/Costs
Grant proceeds are to be used for the eligible activities described below. All improvements shall
conform to City Building Codes, Zoning Ordinance, and applicable Design Guidelines. The project
must include one exterior improvement that is visible to the public and improves the property.
2.2.1 Exterior Façade Improvements
The grant is geared to make building improvements ranging from minor repairs and painting to
complete façade renovation. All exterior improvements, made possible by the receipt of grant
funds, shall remain with the property in which the improvements were originally constructed.
Grantee may request permission from the ECD Director to remove or relocate the exterior
improvements. The Director, at the Director’s discretion, whose approval shall not be
unreasonably withheld, conditioned, or delayed, may, in writing, accept or reject the request.
Eligible façade improvements include:
• Exterior Painting:
only as part of a
greater
rehabilitation
project
• Windows: new
windows, repair of
frames, sills, glazing,
and replacement of
glass
• Walls: Repair and
rebuilding of exterior
walls
• Doors: Installation of
new entry doors that
meet ADA
accessibility
requirements
installation, repair
and replacement of
exit doors and
hardware
• Re-roofing and repair
(not to exceed 50%
of total project cost)
• Repair, replacement
or addition of exterior
shutters and awnings
• New exterior stairs,
porches, railings and
exit facilities
• Lighting: installation,
repair and
replacement of
lighting mounted on a
building that
illuminates the
façade or signage
• Signs: repair and
replacement of
signs attached to
buildings
• Siding: Repair or
replacement of
exterior siding,
including new
façade elements,
restoration of
original
architectural
features, and other
improvements
• Mandatory Title 24
upgrades
2.2.2 Site/Property Enhancements
The grant is for making property site enhancements to improve aspects to a property not-related
to the structure that add curb appeal and value to the property. All site improvements, made
possible by the receipt of grant funds, shall remain with the property in which the improvements
EOA Implementation Guidelines (10-20-2022) Page 6
were originally constructed. Grantee may request permission from the Economic Development
Director to remove or relocate the site improvements. The Director, at the Director’s discretion,
whose approval shall not be unreasonably withheld, conditioned, or delayed, may, in writing,
accept or reject the request. Eligible site improvements include:
• Construction of
outdoor dining or
gathering spaces
• Installation of new
signs not attached to
a structure
• Walkways:
sidewalks, pavers,
plazas, or other
improvements for
pedestrian use
• Painting on installed
site improvements
• Lighting not attached
to a structure
• Fencing as allowed
per City Code
• Parking lot
reconstruction
• Permanent
landscaping
• Shade structures
• Outdoor furniture
2.2.3 Rehabilitation/Tenant Improvements
The grant is for “high-visibility interior improvements” defined as improvements that are
associated with areas visible from the exterior of the building and/or are areas normally occupied
by customers (i.e. dining room, lobbies, sales floors, etc.). Tenant improvements are not required
to remain with the property. Eligible tenant improvements include:
• Repairs and remodeling to bring
an existing building/business into
code compliance for:
• electrical systems
• plumbing systems
• accessibility
• fire and other life safety issues
• Painting associated with interior
remodeling
• Purchase of equipment, furniture
and fixtures
• Elevators: repair or installation
• Interior remodeling of walls and
other physical interior structures
2.2.4 Business Relocation/Expansion
The grant helps with the initial costs associated with relocating, opening a new or expanding a
business in an EOA area. Eligible activities include:
• Property acquisition costs
• Real estate fees
• Rent/lease reimbursement (1st year only)
• New business permit fee
• Moving costs
• New furniture/equipment (no installation costs)
2.2.5 Development Assistance
The grant is to assist with the development costs associated with a new business location or
expansion project. Eligible activities include:
Development Fees Public Infrastructure Improvements
• Building permit fee • Sewer, water or storm drains
• Water connection fee
• Transportation impact fee
• Street improvements: crosswalks, bike
lanes, striping, medians, traffic signals
• Sewer connection fee • Sidewalks
EOA Implementation Guidelines (10-20-2022) Page 7
• Planning/land use fee • Streetlights
• Landscaping (frontage)
2.2.6 Business District Private Security
This grant is to assist with private security services procured by recognized business district
associations or organizations. Associations are eligible for a one-time grant to fund private
security for a period not to exceed six (6) months. Grants under this category may be renewed
for one additional (6) month period. Grants may not exceed $50,000 per application. Business
associations will be required to provide signed agreement with licensed security firm outlining the
staffing, hours, and other pertinent information to demonstrate service area. Applicants should
confer with the Department prior to selection of security firm to ensure that the firm is acceptable
to the Bakersfield Police Department. A map of the security service area will also be required.
2.3 Ineligible Projects
It is not the purpose of the program to finance ongoing improvements which could be
considered part of a building’s routine maintenance; each eligible improvement shall be funded
only once by the program. Other ineligible expenses include:
• Administrative, accounting, and legal
costs
• Extermination of insects, rodents,
vermin, and other pests
• Title reports and escrow fees
• Refinancing existing debt
• Working capital for businesses
• Environmental assessments
• Operational costs
• Nonvisible mechanical equipment
screening
• Temporary, portable, or non-permanent
improvements
• Routine maintenance and repair
• Purchase of tools
2.4 Funding Availability
Funding for EOA Program is appropriated by the Bakersfield City Council as part of its annual
budget process. There is no guarantee of the amount of funds that will be appropriated each year.
Funds for the Program are available on a first come, first served basis. If funds are exhausted at
the time of application submittal, staff will retain the application. If additional funds become
available, staff will contact applicants in the order applications were received.
For any request for a disbursement of City funds related to this plan that exceeds $25,000
(cumulative for each project), will be brought to the City Council for review and action. For
requests of $25,000 or less, the proposal will be reviewed and acted upon administratively based
on consistency with stated priorities for the EOA area.
Applications are limited to a total request not to exceed $99,999. Major projects over this amount
may be considered on a case-by-case basis depending on availability of funds. State law requires
a ten (10) day or a thirty (30) day public notice depending on the project and review of any project
assistance over $100,000.
The City of Bakersfield reserves the right to cancel or modify this Program at any time prior to
grant approval, without notice. Continuation of the Program is subject to sufficient funding as
appropriated by the Bakersfield City Council.
EOA Implementation Guidelines (10-20-2022) Page 8
2.5 Grant Award
Applications will be evaluated as they are received on a case-by-case basis. Economic and
Community Development Staff will make funding recommendations, within the criteria defined
below, to the ECD Director who will make final award decisions based upon his/her judgment of
the overall quality of proposed projects and their consistency with the goals and objectives of the
EOA Incentive Program. The ECD Director reserves the right to some flexibility in making specific
funding decisions, if those decisions best serve the interest of the EOA Incentive Program and
the program recipients. After receiving the Director’s approval of funding recommendations, all
applicants will receive written notification of the grant selection process results.
Evaluation Criteria
Applications that meet more of the following program objectives will be given highest priority:
• The improvements increasing property value and enhancing aesthetics;
• Creating jobs;
• Develops infrastructure for community/economic development;
• Attracts other funds and resources to the community;
• Promotes business development in the community;
• Generating increases in local sales tax or property tax;
• Help restore the tax base and addresses a blighting influence of deteriorating property
conditions;
• Is harmonious with the surrounding properties and uses;
• Will diversify and supplement the existing business mix within the EOA area;
• Achieves the goals of adopted city plans or subsequent visioning plans; and
• The business offer goods and services deemed desirable and appropriate within the EOA
area.
Following notification of project selection, a grant agreement (“Agreement”) is prepared for each
funded project. Notification of project selection does not imply approval of all activities or specific
costs proposed. Grants will be awarded only in amounts appropriate to the scope of the identified
project and the proposed project activities.
The Agreement, once negotiated, is the legal document which governs the administration of the
grant and includes:
• The amount of Grant funds provided, as well as the amount and source of other funds
committed to the project;
• A detailed project description outlining the scope of work to be completed;
• A detailed budget for implementation of project activities;
• The schedule for implementation of project activities; and
• The general and special terms and conditions associated with the grant.
To be eligible for reimbursement, a Grant Agreement must be executed before work is begun.
The Grant Agreement sets the terms and conditions of the grant funding.
Applications will be reviewed by staff for compliance with all program guidelines, which include
compliance with the EOA Program Criteria and Economic Opportunity Area Plan.
If the application does not meet program guidelines, correspondence will be sent to the applicant
indicating what items need to be addressed prior to the application being compliant.
EOA Implementation Guidelines (10-20-2022) Page 9
To ensure efficient use of program funds, when the proposed activity is construction related,
applications must be submitted with at least three construction bids.
If an application meets the program guidelines and sufficient funding is available for the proposed
project, the completed application and a recommendation for grant award will be made to the
Economic & Community Development Director.
The City Council shall authorize execution of any grant agreement above $25,000 based on EOA
Plan.
An applicant may not be eligible for a grant if he, she, or the company applying for the funds has
a delinquent bills or outstanding lien issued by the City.
2.6 Disbursement of Funds
After the agreement has been executed and all necessary permits have been issued, work may
proceed. Any changes to the activities funded by the grant must be approved by the City in
writing.
Applicants do not have to be in complete code compliance at the time of application for the
program, but must be compliant on the building, site or public improvements before
reimbursement can be made to the business.
These grants are paid on a reimbursement basis. First, applicants must approve the work and
pay the contractor. Then the applicant shall submit documentation of the applicant’s approval
and payment of the contractor to the City in a reimbursement request. The ECD Director may
authorize an advance of funds not to exceed ten-percent of the grant award upon demonstration
of financial hardship.
Disbursement of grant proceeds to approved applicants will be in a reimbursement payment
issued after City deems the project complete, and upon the submission of receipts/proof of
payment and subject to approval by City staff.
After completion of project under the Site Improvement/Rehabilitation and Development
Assistance Grants, copies of all bids, contracts, invoices, recipes, and lien waivers from sub-
contractors and suppliers must be submitted to the City. City staff will inspect the work for
compliance with City codes and conformance with the design plans approved for the project. The
Business Relocation/Expansion grant requires a receipt or proof that eligible cost was paid. The
City shall make payment to the applicant after the City has confirmed that any such project costs
were so incurred and qualify as an eligible project cost.
Upon receipt of evidence documenting actual project costs, the City shall have 30 days to review.
Within 30 days, and after all requirements set forth above are met, the City shall issue a check
for reimbursement of costs incurred, of the amount awarded by the City Council as set forth in the
grant Agreement.
2.7 Reporting Requirements
2.7.1 Job Creation
In meeting job creation requirements, under the Business Relocation/Expansion Grant, with each
$5,000 in funds requested, documentation shall include EDD Form DE-9 (Quarterly Contribution
Return and Report of Wages) with social security number redacted. The grant requires the
EOA Implementation Guidelines (10-20-2022) Page 10
creation of at least one (1) new full-time job for a $5,000 grant and at least one (1) new full-time
job created for each $10,000 after the initial one.
2.7.2 Progress Report
Construction of grant funded improvements must be completed within 6 months of execution of
the grant agreement. If the applicant intends to ask for a grant extension, Applicants are required
to submit a six (6) month progress report if the improvement is not completed within the initial six
(6) months after application funding. The progress report must include a narrative of the progress
made and work yet to be completed and an updated timeline and completion date. To obtain an
extension, grant recipients must submit a written request to the Economic and Community
Development Department at least 30 days prior to expiration of the grant. The Economic
Development Director is authorized, but not obligated, to grant a maximum of two extensions of
up to 90 days each. Further requests for extension are subject to approval by the City Council.
2.7.3 Final Report
A final report must be submitted to Economic and Community Development Department within
30 days of the project’s completion. This report must include a project narrative, before and after
pictures of the project, detailed account of expenditures (including receipts, contracts, invoices,
etc.), jobs created or a description of other program objectives met by the project. Failure to
submit the required Final Report may disqualify the grant recipient from receiving future funding
from the City of Bakersfield.
EOA Implementation Guidelines (10-20-2022) Page 11
Section 3: Application Process
Consultation
•Contact the Economic and Community Development Department to discuss your project (661)
326-3765.
•Contact Building (661) 326-3720 or Planning (661) 326-3733 regarding your building or site improvement project.
Application
•Fill out the EOA Program Grant Application form and provide information per the program guidelines.
•ECD Staff will review for completeness within fourteen (14) business days.
•If the application is not complete, it will be returned to Applicant.
Processing
(under $25,000)
•Once an application is deemed complete, staff will prepare analysis and recommendation for consideration by the ECD Director for projects less than $25,000 within fourteen (14) business days. Upon approval, ECD staff shall prepare agreement and provide to Applicant within fourteen (14) business days.
Processing
(over $25,000)
•Once an application is deemed complete, staff will prepare administrative report and agreement (for
projects over $25,000) for consideration at a scheduled City Council meeting that occurs within
thirty (30) days of the date the application is deemed complete.
Project
Construction
•Construction of the project must be completed within 6 months of execution of the Grant
Agreement.
Request Funds
•As work is completed, submit request(s) for reimbursement with Progress or Final Report to the
Economic and Community Development Department.
•To be eligible for reimbursement all receipts must be submitted with proof of payment (i.e.
receipts).
Payment
•You will receive a check in the mail thirty (30) days from a complete and valid reimbursement
request.
EOA Implementation Guidelines (8-17-2022) Page 12
Form of EOA Program Grant Application
Please fill out this application completely and submit to:
City of Bakersfield, Economic and Community Development Department
1600 Truxtun Avenue, Bakersfield, Ca 93301
For questions, please contact the Economic and Community Development Department at:
Phone: (661) 326-3765 Email: edcd@bakersfieldcity.us
APPLICANT INFORMATION
Name: Business Title:
Circle All That Apply: Property Owner Business Owner/Tenant
Business Name:
Property Address:
Mailing Address:
Assessor’s Parcel Number(s):
Daytime Phone Number:
Email:
Business License #
Total Number of Businesses in Building:
Name(s) of Other Businesses:
PROPERTY OWNER INFORMATION (complete if tenant is applicant)
Property Owner Name:
Property Owner Mailing Address:
Property Owner Daytime Phone Number:
Property Owner Email:
PROJECT INFORMATION
Total Grant Amount Requested: $________________________
Type of Grant (please all that apply):
Site Improvement: Facade Site Enhancement Tenant Improvement
New/Expansion Business: Relocation Rent/Lease Reimbursement
Development Assistance: Development Fee Public Improvement
Total Site/Building Improvement Project Cost: $___________________________
Cost of Monthly Rent or Lease $
Total Development Fee(s) Cost $ Type of Fee(s):
Total Public Improvement Cost $
EOA Implementation Guidelines (8-17-2022) Page 13
DESCRIPTION OF ELIGIBLE COSTS
General Description of Activities to be funded by this Grant (Attach separate pages as necessary):
How will your project add value to the area and provide economic benefit to the City of
Bakersfield?
List of Specific Activities Cost ($)
Project Start Date: _________________________________
Project Completion Date: _____________________________
Application Attachments:
• Deed, lease, or easement showing that you have an enforceable right to use the parcel of
land or facility.
• Site plan and/or design drawings.
PROGRAM QUESTIONS
Years in business:
Business NAICS Code: ________________ Number of Employees: __________________
Total Gross Annual Sales/Revenue: $____________________ Year:_________________
For my business the EOA Incentive Program is unnecessary
somewhat helpful
very helpful
critical
EOA Implementation Guidelines (8-17-2022) Page 14
CERTIFICATION
I, ______________________ certify that ______________________________ (business name)
is not subject to any active investigations for violations of City of Bakersfield codes including but
not limited to Planning, Building and Fire codes, or any other City code, ordinance or regulation.
I have read, received a copy and understand the Program Guidelines and accept them. I certify
that I am qualified and will abide by such conditions set forth in this application and all reasonable
conditions which may be issued by the City of Bakersfield in the implementation of this project.
By signing below, I also certify that I am authorized to submit this application for an EOA Program
Grant on behalf of the aforementioned business.
Business Owner(s) Signature: ______________________________ Date: ________________
_________________________________________ Date: _____________________
I, __________________________ (print building owner name) Owner of the property located at
____________________________________________(business address), Bakersfield, CA
have reviewed and approved the proposed improvement project requested for funding in this
application. As the legal owner of the above property, I hereby grant authorization to complete
the improvements/rehabilitation indicated on this application.
Property Owner(s) Signature: _______________________________ Date: ________________
___________________________________________ Date: ____________________
EOA Implementation Guidelines (8-17-2022) Page 15
AGREEMENT NO. ___________________
ECONOMIC OPPORTUNITY AREA PLAN
BUSINESS INCENTIVES GRANT AGREEMENT
THIS AGREEMENT is made on _____________________, by and between the CITY OF
BAKERSFIELD, a California charter city and municipal corporation ("CITY") and
__________________________, a California Corporation (“APPLICANT”) herein.
R E C I T A L S
WHEREAS, the City Council adopted the Economic Opportunity Area Plan (the
“EOA Plan”) on July 17, 2019; and
WHEREAS, the EOA Plan calls for the CITY to support new and existing
development, infrastructure improvements, and offer financial incentives; and
WHEREAS, the City Council adopted the Metropolitan Bakersfield General Plan
(the “General Plan”) on December 11, 2002; and
WHEREAS, the General Plan also calls for “incentives to upgrade deteriorating
residential, commercial and industrial uses when the property owner or resident cannot
afford improvements” per Land Use Policy No. 84; and
WHEREAS, the CITY administers the EOA Incentive Program, which provides grants
and assistance to business and property owners to help grow and expand their business
and renovate their buildings and property within certain areas; and
WHEREAS, the CITY intends to use EOA Tax Increment Financing and Public Safety
and Vital Services measure funds to reimburse costs of improvements, development or
business site improvements, building rehabilitation, business relocation and/or expansion
costs and development assistance for fees and public improvements to the owner of the
business or property located with an EOA; and
WHEREAS, the APPLICANT will operate at (Address)
as_____________________________(“Business Name”); Parcel Number__________________,
(herein called “Property”); and
WHEREAS, the APPLICANT is the owner of real property or business within the
_______________EOA and/or authorized to perform the
proposed__________________________, which are attached hereto and incorporated by
reference herein as Exhibit A to this Agreement; and
WHEREAS, APPLICANT has requested assistance for
__________________________________________________________________________________;
and
EOA Implementation Guidelines (8-17-2022) Page 16
WHEREAS, CITY will assist the APPLICANT by making grant funding available for the
costs associated with __________________________________________________________.
NOW, THEREFORE, incorporating the foregoing recitals herein, CITY and APPLICANT
mutually agree as follows:
1. Amount of Grant. The amount of money to be granted is not to exceed
____________________________________________________________DOLLARS
(______________) (“GRANT”).
2. Disbursement of Funds. APPLICANT has applied for a GRANT to fund the cost of
improvements on the property as described in Exhibit A. The CITY has reviewed
the application, the location of the Property, any permits and approvals, and has
approved the Grant Application.
3. Job Creation. The GRANT (if a Business Relocation/Expansion Grant) requires the
creation of at least one (1) new full-time job for a $5,000 grant and at least one (1)
new full-time job created for each $10,000 after the initial one. The APPLICANT
shall submit to the CITY documentation for each required employment position,
within 30 days of project completion and opening business operations. If the
APPLICANT does not submit the required proof of employment to the City, the
Applicant shall immediately repay the Grant funds to the City.
4. Property Ownership/Right to Undertake Work. APPLICANT represents that it is the
Owner of the Property or holds Tenancy in the Property that entitles it to undertake
physical improvements to the Property, and if a Tenant, has provided APPLICANT’s
Authorization for said improvement.
5. Contractor. The Parties agree the APPLICANT had sole responsibility for choosing
and hiring the contractor, and the acceptance of the materials used, and the
work performed, was APPLICANT’s responsibility, and the CITY was not a party to
any agreement with the vendor or contractor and did not guarantee the quality
of workmanship of the property improvements, nor have any liability whatsoever
therefor. At such time, as the work was performed, the Contractor had a valid
City of Bakersfield Business License.
6. Payment Process. Payment shall be made to APPLICANT by the CITY for the actual
amount up to the GRANT amount, as work is completed, after the APPLICANT has
provided the CITY with written proof of expenditure of the APPLICANT’S share of
the project costs. Prior to the release of any disbursement, the CITY must receive
from the APPLICANT copies of proof of payment for the amount to be reimbursed.
A copy of the final invoice for the work completed and proof of payment to the
contractor.
This agreement shall not be construed or deemed to be a Contract for the benefit
of any third party or parties, and no third party shall have any claim or right of
action hereunder for any cause whatsoever.
EOA Implementation Guidelines (8-17-2022) Page 17
7. Contract with Contractor. APPLICANT shall provide CITY with a copy of
APPLICANT’S contract with each Contractor performing work approved for this
program. Contractor shall have a valid State of California Contractor’s License
and be registered with the California Department of Industrial Relations (DIR), if
applicable. Permits must be obtained from the City of Bakersfield, including, but
not limited to, the Building Department, Planning Department and/or Public Works
Department for all work requiring permits.
8. Labor Code/Prevailing Wage. Prevailing wages must be paid to all workers
employed on public works projects, as defined by California Labor Code. For new
construction, alteration, installation, or demolition or repair projects, prevailing
wages are not required to be paid for projects of $25,000 or less, or $15,000 or less
when the project is for maintenance work. APPLICANT acknowledges and agrees
any improvements to be constructed with the proceeds of the GRANT is a public
works project and constitute construction, alteration, demolition, installation, or
repair work done under contract and paid for in whole or in part out of public
funds under California Labor Code Section 1720(b)(4) or 1720(b)(5). APPLICANT
shall comply with all requirements of the Department of Industrial Relations in
accordance with the California Labor Code, and all other applicable federal,
state and local laws and regulations pertaining to labor standards and payment
of prevailing wages (collectively, "Prevailing Wage Laws"). APPLICANT shall (i)
require its contractors and subcontractors to be registered with the DIR and to
submit certified copies of payroll records to APPLICANT; (ii) maintain complete
copies of such certified payroll records; and (iii) make such records available to
CITY and its designees for inspection and copying during regular business hours at
1600 Truxtun Avenue, Bakersfield, California, or at another location within Kern
County, as mutually agreed; and (IV) register the contract for the project with the
DIR using the PWC-100 form. Completed PWC-100 forms submitted to the
Department of Industrial Relations are attached as Exhibit B to this Agreement.
8.1 Indemnity. APPLICANT shall defend, indemnify and hold harmless the CITY
and its officers, employees, volunteers, agents and representatives from
and against any and all present and future claims, arising out of or in any
way connected with APPLICANT's obligation to comply with all Prevailing
Wage Laws, including all claims that may be made by contractors,
subcontractors or other third-party claimants pursuant to Labor Code
Sections 1726 and 1781, as amended. This obligation to indemnify the City
of Bakersfield and its officers, employees, volunteers, agents and
representatives shall survive termination of this CONTRACT.
8.2 Hold harmless. APPLICANT hereby waives, releases and discharges forever
the CITY and its employees, officers, volunteers, agents and
representatives, from any and all present and future claims arising out of
or in any way connected with APPLICANT's obligation to comply with all
Prevailing Wage Laws in connection with the work of APPLICANT
Improvements.
EOA Implementation Guidelines (8-17-2022) Page 18
9. Plans. Plans and Specifications are hereby incorporated into this agreement as
Exhibit A. Work eligible for the reimbursement is limited to the work described in
Exhibit A which have been approved by CITY. APPLICANT agrees to notify CITY of
any changes or revisions of the Plans and Specifications. Changes include but are
not limited to changes in design, color(s), materials, and scope of work. The
APPLICANT shall provide CITY with such notice immediately and shall allow CITY
seven (7) working days to review such revisions. Within seven working days the CITY
will notify the APPLICANT if the CITY accepts the proposed changes. Upon
acceptance by all parties, such changes shall be approved in writing.
10. APPLICANT’s Failure to Comply. The agreement may be canceled, or a breach
may be found to exist if APPLICANT does not comply with the provisions of this
agreement, with all Bakersfield Municipal Code provisions, or with the other
applicable rules and regulations. CITY may withhold payment until compliance is
obtained. In the event of a cancellation, the CITY shall not be responsible for any
reimbursement or payment to APPLICANT, Contractor or Sub-Contractor.
11. Indemnification. APPLICANT shall take all responsibility for the work and shall bear
all losses and damages directly or indirectly resulting to him/her, to CITY and its
officials, officers, agents, and employees, or to third parties resulting from the
performance or character of the work described in this agreement. APPLICANT
shall assume the defense of and shall indemnify and hold harmless CITY and its
officials, officers, employees, and agents from and against any or all loss, liability,
expenses, claims, costs, suits, and damages of every kind, nature and description,
including attorneys’ fees and costs, directly or indirectly arising from the
performance of the work. This obligation to indemnify the CITY and its officers,
employees, volunteers, agents and representatives shall survive termination of this
agreement.
12. Schedule. APPLICANT agrees to complete work described in the attached Plans
and Specifications within SIX (6) months from the effective date of this agreement.
13. Nondiscrimination. There shall be no discrimination against or segregation of any
person or group of persons on account of race, color, creed, religion, sex, sexual
orientation, marital status, national origin, ancestry or disability in the performance
of this agreement or use of the Property.
14. Amendments. Any amendments to this agreement shall be made in writing and
signed by both parties to this agreement.
15. Applicable Law and Attorney’s Fees. If any action at law or in equity is brought to
enforce or interpret the provisions of this agreement, the rules, regulations, statutes
and laws of the State of California will control. The prevailing party shall be entitled
to reasonable attorney's fees in addition to any other relief to which said party
may be entitled.
16. Release of Liens. The Parties Agree that the APPLICANT was responsible for
obtaining the release of any Mechanics Liens or other liens placed upon
EOA Implementation Guidelines (8-17-2022) Page 19
APPLICANT’s property by any contractor or subcontractor hired under this
program.
17. Maintenance. APPLICANT agrees and covenants that, after the CITY issues its
Certificate of Completion, APPLICANT shall be responsible for maintenance of all
improvements that may exist at the Property from time to time, including without
limitation buildings, parking lots, lighting, signs, and walls in first-class condition and
repair, and shall keep the Property free from any accumulation of debris or waste
materials. APPLICANT shall also maintain all landscaping required pursuant to
Property’s approved landscaping plan, if any, in a healthy condition, including
replacement of any dead or diseased plants with plants of a maturity similar to
those being replaced. APPLICANT hereby waives any notice, public hearing, and
other requirements of the public nuisance laws and ordinances of the City that
would otherwise apply.
18. Notice. Any notice, demand, request, consent, approval, or communication
either party desires or is required to give to the other party or any other person shall
be in writing and either served personally or sent by pre-paid, first-class mail to the
address set forth below. Either party may change its address by notifying the other
party of the change of address in writing. Notice shall be deemed communicated
seventy-two (72) hours from the time of mailing if mailed as provided in this Section.
To City: City of Bakersfield, Economic and Community Development Department,
1600 Truxtun Avenue, Bakersfield, California, 93301
To Owner: ________________________________________________________________
19. Integrated Agreement. This Agreement contains all of the agreements of the
parties and cannot be amended or modified except by written agreement.
20. Severability. In the event that any one or more of the phrases, sentences, clauses,
paragraphs, or sections contained in this Agreement shall be declared invalid or
unenforceable by valid judgment or decree of a court of competent jurisdiction,
such invalidity or unenforceability shall not affect any of the remaining phrases,
sentences, clauses, paragraphs, or sections of this Agreement, which shall be
interpreted to carry out the intent of the parties hereunder.
21. Authority. The persons executing this Agreement on behalf of the parties hereto
warrant that they are duly authorized to execute this Agreement on behalf of said
parties and that by so executing this Agreement the parties hereto are formally
bound to the provisions of this Agreement. APPLICANT certifies that the above
statements are true and accurate to the best of Applicant’s belief. Failure to meet
any of the terms of this Agreement shall result in the forfeiture of any Grant funds
from the City for this program.
22. Enforcement of Agreement. APPLICANT shall be required proof of ownership or
provide a binding one-year lease for the property starting after Occupancy and
Opening of the Building for Business as certified by the City through review and
EOA Implementation Guidelines (8-17-2022) Page 20
issuance of a Business License. Should tenant not remain in the building for a one-
year period, during which they are open for business, funds will be re-paid to the
City.
23. Termination. Should the APPLICANT engage in any illegal activities the Agreement
shall be terminated through immediate Notice as indicated above.
24. Reporting. APPLICANTs are required to submit a six (6) month progress report if the
improvement is not completed within the initial six (6) months after application
funding. The progress report must include a narrative of the progress made and
work yet to be completed and an updated timeline and completion date.
A final report must be submitted to Economic and Community Development
Department within 30 days of the project. This report must include a project
narrative, before and after pictures of the project, detailed account of
expenditures (including receipts, contracts, invoices, etc.), jobs created or a
description of other program objectives met by the project. Failure to submit the
required Final Report may disqualify the grant recipient from receiving future
funding from the City of Bakersfield.
[Signatures on following page]
EOA Implementation Guidelines (8-17-2022) Page 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
"CITY"
CITY OF BAKERSFIELD
By:________________________________
KAREN GOH
Mayor
APPROVED AS TO FORM:
VIRGINIA GENNARO
City Attorney
By:___________________________
JOSHUA H. RUDNICK
Deputy City Attorney II
APPROVED AS TO CONTENT:
ECONOMIC AND COMMUNITY
DEVELOPMENT DEPARTMENT
By:_______________________________
PAUL M. SALDAÑA
Economic and Community
Development Director
COUNTERSIGNED:
By:_______________________________
RANDY MCKEEGAN
Finance Director
“APPLICANT”
By:_______________________________
Print Name:___________________________
Title:_________________________________
JHR:ag
S:\DevelopServicesDpt\Agrs\21-22\EOAImplemGuidelines&Bus.Incent.Grant.Agr.docx
EOA Implementation Guidelines Page 22
EXHIBIT A
[PROJECT DESCRIPTION, PLANS, SPECIFICATIONS, ELIGIBLE COSTS]
Project Description:
List Plans/Specifications (attach site plans, elevations, drawings, etc.):
Eligible Costs:
Activity Cost ($)
Total:
EOA Implementation Guidelines Page 23
EXHIBIT B
Completed Dept. of Industrial Relations forms (PWC-100)
Registration Form is online at: https://www.dir.ca.gov/pwc100ext/LoginPage.aspx
EOA Implementation Guidelines Page 24
California Prevailing Wage Awarding Bodies FAQ
What is an awarding body?
An awarding body is the entity that awards a contract for public works and is sometimes known
as the project owner. The awarding body can be any kind of public agency (state, county, city,
school board, water district, etc.) or a private entity using public funds (Labor Code, section
1722).
Do all trades need to be identified on the PWC-100 at the time projects are registered?
Awarding bodies should list information for all trades identified when they register projects
(using the PWC-100 form). Awarding bodies are not required to provide information that is not
available at the time of project registration.
What happens if an awarding body does not register a project within 30 days of awarding
the contract for a public works project?
Failure to provide timely notice can jeopardize an awarding body's ability to obtain state funding
for a project. It can also compromise important objectives of the public works laws. An official
who intentionally ignores this requirement may be subject to criminal prosecution.
What if an awarding body has a single small job for $250 or a series of jobs with the
same contractor/vendor that total over $1,000?
Prevailing wage requirements apply to public works projects over $1,000. The law does not
permit jobs to be parceled in order to avoid the $1,000 threshold. If the awarding body knows
that total yearly project costs or projects awarded to the same vendor will exceed $1,000, that
vendor must be registered with the DIR as a public works contractor, and the contract for those
projects should be registered using the PWC-100 form.
What is the process for projects funded through Proposition 84? Is the contracting
agency required to register (i.e., fill out the PWC-100 form), and will the contractors and
subcontractors be required to submit/upload certified payroll records to the Labor
Commissioner?
Awarding bodies must provide project information to DIR using the PWC-100 form on all public
works projects regardless of the funding source, including projects funded by Proposition 84.
Certified payroll records are required for Proposition 84 projects, and awarding bodies are still
required to have a DIR-approved Labor Compliance Program (LCP) for those projects.
Contractors on these Proposition 84 projects must submit certified payroll records to both the
DIR and the LCP.
MEMORANDUM
DATE: November 17, 2022
TO: Budget & Finance Committee
FROM: Paul M. Saldana, Economic and Community Development Director
BY: Misty Eaton, Community Development Principal Planner
SUBJECT: Community Development Block Grant Section 108 Loan Program
Overview
The Section 108 Loan Guarantee Program (Section 108) provides communities with a
source of low-cost, long-term financing for economic and community development
projects. Section 108 financing provides an avenue for communities to undertake larger,
more costly projects, where they may have limited resources to invest in upfront.
Section 108 can fund economic development, housing, public facilities, infrastructure,
and other physical development projects. This flexibility of uses makes it one of the most
potent and important public investment tools that HUD offers to states and local
governments.
Section 108 assistance can be deployed in two ways:
• Directly by the community or its governmental or non-profit partner to carry out an
eligible project, or
• Indirectly with a community or its partner re-lending (or, in limited circumstances,
granting) the funds to a developer or business to undertake an eligible project
The program is authorized under Section 108 of the Housing and Community
Development Act of 1974 as the loan guarantee component of the Community
Development Block Grant (CDBG) Program. The specific regulations governing the
Section 108 Program may be found at 24 CFR 570, Subpart M, Loan Guarantees.
The program's flexible repayment terms also make it ideal for layering with other sources
of community and economic development financing including, but not limited to, New
Markets Tax Credits (NMTC), Low Income Housing Tax Credits (LIHTC), and Opportunity
Zone equity investments.
In 2003, the city entered into agreements for two such Section 108 loans for the $4.1M
Aquatic Center, Pool Rehabilitations and Southeast Training Facility Project, and the
$800,000 Southeast Streetscape and Street Improvements Project. Since that time, the
City of Bakersfield has made annual principal and interest payments from its CDBG
annual allocation. There is a current balance of $62,708 which is due to be paid on
August 1st, 2023.
Eligibility
To determine Section 108 Loan eligibility, the CDBG rules and requirements are consistent
with the standard CDBG program. Requirements include but are not limited to the
following:
• Proposed project(s) must meet one of CDBG’s three National Objectives:
o Principally (70%) benefit low- and moderate-income persons
o Aid in the elimination or prevention of slums or blight, or
o Meet urgent needs of the community
• Activities must be consistent with ConPlan objectives.
Loan Amount
Entitlement public entities. An entitlement public entity may apply for up to five times its
latest approved CDBG entitlement amount, minus any outstanding Section 108
commitments and/or principal balances on Section 108 loans.
Loan Process
The Section 108 loan guarantee process is a two-part process, including an application
phase and a funding phase.
Application Phase: An eligible Community develops and submits an application for a
project and the local HUD field office and Section 108 Office at HUD Headquarters
concurrently review the application and make a recommendation to the Deputy
Assistant Secretary for Grant Programs. Prior to submission of the application eligible
communities are required to comply with their local citizen participation plan.
Funding Phase: The Community (or its designated public entity) and the Section 108
Office, as well as its Program Counsel, prepare the financing documents necessary to for
the project (or the first project under a loan fund) to be guaranteed by HUD. HUD also
reviews any documents that are relevant to its security interest in the guaranteed loan at
this time. The Community then submits its signed loan documents and its first request for
funds to be advanced. Once HUD signs the loan documents and attaches its guarantee,
it sends these documents to its Fiscal Agent, which arranges for the advanced funds to
be wired to the Community. From this point forward,
the Community can begin to access funds on a weekly basis for the project and will start
reporting in HUD’s Integrated Disbursement and Information System (IDIS).
Underwriting
Borrowers must evaluate the suitability of using public funds in a specific way for a specific
project. The process ensures that public funds are not substituting for other financing
sources and that the project is not being overly subsidized. The objectives of the
underwriting guidelines are to ensure:
• Project costs are reasonable (Uniform Administrative Requirements)
• All financing is committed
• The 108 funds are essential to the project
• The project is financially feasible
• Return on equity is reasonable
• CDBG funds are disbursed on a pro rata basis – not before other financing sources.
• Section 108 and the Consolidated Planning Process
Loan Term and Rates
The maximum repayment period for a Section 108 loan is 20 years. HUD has the ability to
structure the principal amortization to match the needs of the project and borrower
including periods of interest-only payments.
The principal security for the loan guarantee is a pledge by the applicant public entity of
its current and future CDBG funds. Additional security may be required to assure
repayment of the guaranteed obligations. The additional security requirements are
determined on a case by case basis but could include assets financed by the
guaranteed loan. In addition to the required pledge of CDBG funds, collateral for Section
108 financing must be described. Most loans are secured by a combination of additional
collateral, including:
• Liens on real property, machinery, equipment, inventory and accounts receivable
• Revenue from other sources, including parking, special taxing districts, or loan
portfolios
• Personal guarantees from 3rd party borrower
Repayment structures may vary depending on the individual project and borrower. The
interest rates for Section 108 interim loans are based on the three-month Treasury Auction
Bill Rate. Interest rates for loans funded by a public offering are fixed and are based on
U.S. Treasury borrowing rates.
Although borrowers use CDBG grant funds as collateral for Section 108 guaranteed loans,
they do not necessarily use the grant funds to pay off the loans. CDBG program activities
related to Section 108 loan repayment represented 1.9% of overall program expenditures
in FY2020. In many cases, borrowers use Section 108 project revenues or other local
resources to pay these costs.
Loan Guarantee Fee
The annual loan guarantee fee covers the long-term cost to the Federal Government of
a Section 108 loan guarantee. The fee charged to Section 108 borrowers will be a
percentage of the Section 108 loan amount. The fee may be paid with (CDBG) funds,
Section 108 Loan Guarantee proceeds or other funds. The fee is paid upon disbursement
of the loan proceeds. Fees that are paid with CDBG funds must be identified in the
Consolidated Plan as part of project costs.
• FY 2023 Fee is .94% of the Principal Amount of the loan disbursed for eligible use(s)
Program Considerations
What you should consider before launching a loan fund with Section 108:
1. Does using Section 108 guaranteed financing make sense for this
program/project?
2. Do we or our partners have the capacity, experience, and tools (loan
processing/underwriting) in place to administer the program successfully?
3. Community Strategy—What are the community’s needs?
4. Organizational Arrangements—Who is responsible?
5. Approach to Using 108—At what scale? Project Specific or Loan Fund to offer
multiple projects?
6. Marketing and Outreach—What’s the strategy?
7. Selection and Evaluation—What’s the process?
8. Fund Management—What’s the plan? (short-term and long-term) How are you
going to ensure compliance?