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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?