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Home My WebLink About03/17/2003 B A K E R S F I E L D A~'~r~an-dy City ~Vl~'r~ger Harold Hanson Staff: Darnell W. Haynes Mark Salvaggio AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE MEETING Monday, March 17, 2003 · 4:00 p.m. City Manager's Conference Room - City Hall 1. ROLL CALL Called to Order at 4:08 p.m. Present: 'Councilmembers Mike Maggard, Chair; and Harold Hanson Absent: Councilmember Mark Salvaggio 2. ADOPT FEBRUARY 10, 2003 AGENDA SUMMARY REPORT Adopted as submitted. 3. PUBLIC STATEMENTS 4. NEW BUSINESS A. Staff report and Committee recommendation on Fiscal Year 2003-04 Community Development Block Grant (CDBG), Home Investment Partnerships (HOME), and Emergency Shelter Grant (ESG) Annual Spending Plan Community Development Coordinator George Gonzales stated the City's entitlement for FY 2003-04 was increased about $600,000 for Community Development Block Grant (CDBG); an increase in HOME Investment Partnership Program (HOME) monies; and a very small increase in the Emergency Shelter Program (ESG). The City receives annual entitlements in order to improve Iow-income neighborhoods. The City's entitlements for FY 2003-04 are: $4,003,000 CDBG funds; $1,786,088 for HOME; and $107,000 for ESG, for a total of $5,896,088 in funds available from HUD. AGENDA SUMMARY BUDGET AND FINANCE COMMITTEE MEETING Monday, March 17, 2003 Page - 2 - A Notice of Funding Availability was sent out to non-profits, agencies and City departments, so they could submit possible projects for FY 03-04 funding. Non- profits and agencies submitted 33 proposals totaling approximately $8 million. City departments submitted 21 projects totaling approximately $7.3 million. It is important to note staff has put forth projects to recommend for funding that are ready to start this year. In the past, monies have been put aside yearly toward large projec~s until there was enough funding to start the project. This is penalizing the City's drawdown rate from HUD. If a project is on the list for HUD funding and the project does not move forward this year, HUD will reduce the City's entitlement by that amount next year. George Gonzales gave an overview of the summary of proposed projects for the Action Plan for FY 2003-04. It is estimated program income (repayment of loans, etc.) will be $110,000 for CDBG and $210,000 for HOME. Staff recommended projects for the Action Plan totaling $6,216,088 consisting of the following funding: CDBG $4,113,000 (Entitlement of $4,003,000 + program income $110,000) HOME $1,996,088 (Entitlement of $1,786,088 + program income $210,000) ESG $ 107,000 (Entitlement- no program income) HUD requires a 30-day public notice be published to give the public the opportunity to comment on the proposed plan for the City's entitlement. Staff requested approval from the Committee to move forward with the public notice. With the Committee's approval, after the 30-day public notice, staff would like to forward the FY 2003-04 Action Plan to the City Council. The application must be to HUD by May 15, 2003. Stephanie Campbell spoke regarding CDBG funds going to fund non-profit projects · instead of toward projects that create jobs and also asked about getting access to funds for economic development in the Southeast. Donna Kunz responded to questions about CDBG funding for Mt. Elgon. Mt. Elgon withdrew their application because their project was not going to be ready for construction this year. Stephanie Campbell inquired about the Housing Authority's project on East California. Donna Kunz responded they need about $1.2 million for their project. They have submitted an application under the business loan program and $200,000 is currently committed to the project. Staff has been working with them to find another funding source. Vernon Strong spoke about funding for his project and his request for funding in the amount of $487,850. He questioned the paperwork needed. In order to access the City's loan assistance program he stated you need to complete an application including requested attachments: financial statement, balance sheet, AGENDA SUMMARY REPI~T BUDGET AND FINANCE COMMITTEE MEETING Monday, March 17, 2003 Page - 3 - income statement, profit and loss, pro forma, cash flow statement, additional two-years' income, a narrative supported by a pro forma on how the business assistance program funds will help the business, individual Federal Income Tax for three years, personal financial statement current at time of application date, and source of funds (bank, investment, personal including terms and conditions). As the City only funds ten to twenty percent of a project, a bank loan or money is needed to fund a large part of the project and it is hard to qualify for a bank loan. Donna Kunz explained the information being requested is much the same as for any loan. A copy of the HUD loan guidelines was provided. Projects are evaluated on equity of the real estate and the income it will generate (rents, etc.). The City looks for projects where the applicant has gone to a bank and the bank has approved their loan and the applicant then applies to the City for gap-financing to complete the funding for the project. The problem at this time is SB 975 requires prevailing wage to be paid on any project using government funds. This drives the total project cost up 30% to 40% percent and makes it difficult to qualify for a bank loan. The City is not the principal lender on projects; CDBG funds are used to augment funding for projects. Committee Member Hanson made a motion to approve staff moving forward with the 30 day public notice and then forwarding the FY 2003-04 CDBG, HOME, and ESG Action Plan to the City Council. The motion was unanimously approved (Committee Member Salvaggio absent). B. Review and Committee recommendation on Economic Development Loan Policy Guidelines Last year the City Council set aside approximately $740,000 of CDBG funds for the purpose of economic development activity--loans for businesses expanding or locating in the southeast. Councilmember Carson referred a request to the Budget and Finance Committee to review the loan policy guidelines used for the Economic Development Loan Program. There have been complaints that the current loan program makes it hard to qualify for loans and discourages applicants from applying. The current loan policy guidelines were approved by the Budget and Finance Committee on September 12, 2002. In response to the request, Economic Development Director Donna Kunz explained staff reviewed the policy and provided the following proposed changes for the Committee's review, which should make the loans available to more applicants: 1 ) Allow the loans to be forgiven after five years; 2) Lighten up the collateral and underwriting policies - allow collateral other than real estate; and 3) Allow more than 10% - 30% of public funds be available to the project. AGENDA SUMMARY REP~FF{T BUDGET AND FINANCE COMMITTEE MEETING Monday, March 17, 2003 Page - 4 - Donna Kunz explained all of the proposed changes are allowable under the current HUD guidelines.' HUD allows the local jurisdiction to establish its lending policy. Changing the guidelines may encourage more applicants to apply. Staff has received inquiries, but only one completed application for a commercial development on East California. The Committee had concerns changing the policy would create more complaints, because the suggested changes make the loan policy and approving loans subjective to staff's decisions in evaluating one project against another. The current loan policy treats every applicant the same with decisions on viable projects based on financial information. The Committee voted not to change the current loan policy (Committee Member Salvaggio absent). Committee Chair Maggard requested Donna Kunz to prepare a memo Councilmember Carson could use for reference when responding to complaints. It should capture the idea the stricter the policy the more evenly it is understood and the fairer it is. Also include the information that SB 975, which requires paying prevailing wage, is driving the cost of projects up 30% to 40% and that is the reason qualifying for the loans is difficult. Also provide information where applicants for loans can go to get help in preparing their application paperwork, as staff must remain somewhat neutral. 5. COMMI'R'EE COMMENTS 6. ADJOURNMENT The meeting adjourned at 5:09 p.m. Attendance: City Attorney Bart Thiltgen; Assistant City Manager John W. Stinson; Assistant to the City Manager Darnell Haynes; Economic Development Director Donna Kunz, ED/CD Business Manager Rhonda Barnhard; and Community Development Coordinator George Gonzales. Others: James Childs; Vernon Strong; and Stephanie Campbell, Cornerstone. cc: Honorable Mayor and City Council S:\Damell\03Budget and Finance~bf03rnar17surnmary