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HomeMy WebLinkAbout1982-01-26; City Council; 6878; Commercial Rehabilitation Loan ProgramCll; OF CARLSBAD - AGEND:: BILL 0 2’ AB#- TITLE: MTG. 1 ./i16 /82 COMMERCIAL REHABILITATION LOAN PROGRAM DEPT. BLDG- . RECOMMENDED ACTION: City Council may authorize staff to deposit funds with a local lender and begin a Commercial Rehabilitation Loan Program. ITV1 EXPLANATION: On December 5, 1978, the City Council approved the appropriation of $33,000 of 5th Year Community Development Block Grant funds for a Commercial Rehabilitation Loan Program. On December 1, 1981, an additional $22,000 was approved. The program will provide low-interest loans to qualifying commercial applicants located in Census Tract 179.00. These monies may be used primarily for exterior facade construction and code corrections. The funds will be deposited with a local lender which will assist staff in loan qualification and processing. The $55,000 will be used to write-down the interest on the loans and represents a potential total of approximately $300,000 in improvement loans when leveraged by the lender. Staff has researched and designed a program, contacted local lenders and is now ready to start reviewing loan applications. FISCAL IMPACT: $55,000 of previous year Community Development Block Grant funds. No City General Fund impact. EXHIBITS: A- Commercial Rehabilitation Loan Program- Staff report dated l/14/82 B- Commercial Rehabilitation Program Handbook C- Supplemental Staff Report - Rehabilitation Program Lender Proposals STAFF REPORT C DATE: TO: VIA: FROM: January 14, 1982 Ron Beckman, As 'stant City Manager/Developmental Services 42 Marty Orenyak;' ilding Official cs, Chris Salomone, Administrative Assistant / SUBJECT: COMMERCIAL REHABILITATION PROGRAM PURPOSE: The purpose of a Commercial Rehabilitation Program is to encourage the improvement of existing commercial structures. The City does this by offering low-interest loans for this purpose. Owners and tenants of businesses in the target area may use this money to make their buildings more attractive and safe. Many cities have found that by providing this program they have been able to dress up and beautify their older commercial areas. (Target area, Census Tract 179.00) PROCESS: Owners and/or tenants of commercial structures in the target area can bring their projects to the City for consideration. The funds are primarily to be used for exterior improvements and code violations. A loan committee will make decisions as to the acceptability of applicants. A local lending agency will help the City in credit approval and research. The City will deposit funds with the lender for the purpose of making these loans. If a project is accepted and approved, the lender will make the loan to the applicant and the City's funds will be used to defray interest rates on the loan to an acceptable level. At this time 12% or 10% is the desired rate. The loan committee will periodically review and analyze the program and make adjustments as to the eligible improvements and the maximum amount per loan. Staff recommends that the loans be regulated to reach the maximum amount of applicants and have the widest impact on the area. Individual projects that the Committee deems of major importance to the area may be granted special consideration. COMMERCIAL REHABILITATION LOAN COMMITTEE: The Community Rehabilitation Loan Committee is the final review board for both Commercial and Residential Loan applicants. It shall consist of four members selected from the community and city government and staff. This committee shall review applications as presented by staff and rule as to their acceptability and disposition. EXHIBIT "A" Page 1 of 2 a . Beckman/1/14/82 Commercial Rehabilitat.71 Program The Loan Committee shall be comprised of: 1. A lending institution representative. 2. The City's Director of Finance or his designee. 3. The City's Building Department head or his designee. 4. The Chairman of the Housing and Redevelopment Advisory Committee. The function of the Loan Committee will be to approve/disapprove all loan applications follo\lrinp their credit approval/disapproval by the lender. The committee must review and make disposition of all cases submitted. FUNDING: The funding for the Commercial Rehabilitation Program comes from the Federal Community Redevelopment Block Grant allocation, $33,000 from the fifth year allocation and $22,000 from the seventh year. This $55,000 represents approximately $300,000 in improvements when leveraged through a lending institution. EXHIBIT “A” Page 2 Of 2 CS:al 3 Ma3ClfN fM G BUILDING DEPARTMENT DECEMBER 1981 TABLE OF CONTENTS I. II. III. IV. v VI. VII VIII INTRODUCTION ...................................................... 1 PROGRAM OBJECTIVES ................................................ 2 TYPE OF LOANS AVAILABLE ........................................... 2 ELIGIBILITY ....................................................... 3 Applicant Eligibility .......................................... 3 Eligible Improvements .......................................... 4 Ineligible Improvements ........................................ 5 APPLICATION AND PROCESSING ........................................ 6 Prequal ifications .............................................. 6 Property Inspection ............................................ 6 Bidding ........................................................ 7 Application and Financial Qualifications ....................... 7 Final Approval ................................................. 8 Inspection, Work Changes and Contract Compliance ............... 8 Fees and Expenses .............................................. 9 CONTRACTOR RESPONSIBILITIES ....................................... 9 Contractor License and Insurance ............................... 9 Building Permits and Fees ...................................... 9 Federal Compliances For Federally Assisted Contracts...............1 0 COMPLAINTS AND DISPUTES ........................................... 11 AMENDMENT ......................................................... 11 IX COMMUNITY REHABILITATION LOAN COMMITTEE . . . . . . . . ..*....s..*....*.... 12 I. INTRODUCTION TO THE COMMERCIAL REHABILITATION LOAN PROGRAM The Commercial Rehabilitation Loan Program provides below market interest rate loans to businesses in the Village Area (Census Tract 179.00) to improve commercial property. The loan program is administered by the City's Community Development staff (Building Department) and funded through the Federal Community Development Block Grant Program. The City's responsibilities in administering the Commercial Rehabilitation Loan Program are as follows: 1. Approval of program, program changes and amendments. 2. Recommendations for program revisions or the development of new programs. 3. Establish procedures and policies for program implementation. 4. Approve all loan applications and authorize disbursement of funds. 5. Make determination concerning the assignment of defaulted loans. 6. Keep financial records concerning loan program expenditures. 7. Obtain additional funding for the Commercial Rehabilitation Loan Program or related programs from the City as may be necessary. 8. Enter into contracts and agreements for the implementation of the loan program and related activities. The City of Carlsbad has authorized the use of Community Development Block Grant (CDBG) funds for the initiation of the Commercial Rehabilitation Loan Program (CRLP). These funds, along with any interest earned and principal repayments received, may only be used to make commercial rehabilitation loans pursuant to program guidelines. The City, through the Community Development Department (Building Department), also provides staff support to assist in the loan processing and program administration. Under agreement with the City, the Bank of America, Carlsbad main office, will be the principal loan processing agent and the depository for all loan funds. The Bank will process all loan applications submitted and make recommendations for approval. The Bank will also handle all loan fund transfers and disbursements and provide appropriate accounting records to the City. II. PROGRAM OBJECTIVES A. To encourage the revitalization and beautification of the Village (Downtown) Area. B. To remove unhealthy and dangerous conditions. C. To preserve basically sound structures. D. To encourage residents to shop in the downtown area by creating a more attractive environment. E. To leverage Community Development Block Grant funds by encouraging private investment and lender participation. F. To encourage the participation of local residents and business persons in the planning and implementation of revitalization activities. G. To provide a revolving loan fund for continuous reinvestment. III.'.TYPE OF'LOANS'AVAILABLE The Commercial Rehabilitation Loan' Program provides loans to eligible businesses at 12% simple interest per annum. The maximum term for these loans is ten years. Loans may be made to property owners or tenants. If the applicant is a tenant, the lease or rental agreement must extend at least six months beyond the term of the loan. There is no maximum loan limit? Loans are only limited by the applicant's financial capacity to repay and by the availability of loan subsidy funds. *NOTE: The Loan Committee will have complete discretionary control over loan amounts. It may be necessary to establish a loan ceiling in order to have maximum impact in the Target Area. 2 In order to reduce the effective interest rate to 12X, the Community Development Block Grant funds will be used to subsidize the interest rate or to collateralize loans. Under the interest rate subsidy method, the City will repay to the Bank the difference between the contractural interest rate charged by the Bank and the rate charged to the Borrower (12%). Under the collateralized loan method, the City will deposit a percentage of the principal of the loan in a non-interest bearing account as partial security for the loan. These funds are repaid to the City proportionately as the loan principal is repaid. The bank will recommend to the City which method to use based upon the amount of loan and term. The choice of loan subsidy method has no effect upon the loan terms to the borrower. IV. ELIGIBILITY Applicant Eligibility In order to be eligible for a Commercial Rehabilitation Loan, the property must be located with the Census Tract 179.00 boundaries. A boundary map of this area is included. Both owners and tenants may apply for loans. Tenants must have a lease or rental agreement extending at least six months beyond the requested term of the loan. Loans may be made for renovation of single buildings or groups of buildings under single ownership or lease including chain stores and neighborhood shopping centers. There are no income restrictions for applicants. However, applicants must show sufficient financial capability to repay the requested loan pursuant to normal bank underwriting standards. h Eligible Improvements The following standards must be met before loan funds may be applied towards any other improvements: 1. Properties must meet or be improved to meet minimum City health and safety standards for existing commercial structures. 2. The exterior appearance of the building must conform or be improved to conform to Redevelopment standards for the central business district as recommended in the Design Manual. All properties for which loan applications are filed will be inspected by City staff to determine compliance with these standards. Generally, the following improvements will be eligible under the Commercial Rehabilitation Loan Program: Interior Improvements - Repairs or improvements to walls, floors, ceilings, stairs, entrance ways, windows and permanent fixtures. - Repairs, upgrading, replacement or installation of plumbing (including restroom facilities), electric services, gas services, air conditioning and heating equipment. - Room addition or expansions. - Painting. - Installation of energy conservation equipment that is permanently affixed to the building. - Structural repairs necessary to remove dangerous conditions. - Architectural and related fees. Exterior Improvements - Painting, decorative facade treatment, signs fascia, canopies, awnings, and landscaping. - Repair or replacement of entrance ways, windows and roofs, 4 8 - Site improvements to improve access, parking, screening, landscaping, safety and general appearance including trash disposal equipment. - Installation of energy conservation equipment which is permanently affixed to the building. - Structural repairs necessary to remove dangerous conditions. - Demolition of extraneous structures. - Building expansion. - Architectural and related fees. New Construction Loans may be made for the construction of new commercial facilities under the following circumstances: - to improve or replace severely blighted or economically obsolete structures. - to provide infill commercial development on vacant land sliver parcels in the downtown area. Such loans may be made at the discretion of the City in consideration of the positive impact of proposed development upon neighboring rehabilitation efforts, the amount of private capital to be invested and the availability of loan funds. Ineligible Improvements Loan funds may'not be used for the following activities: - Purchase or repair of personal property. - Purchase or repair of business equipment, machinery, displays or fixtures. - Purchase of inventory or supplies. 5 V. APPLICATION AND PROCESSING Application forms and information Community Development staff, 3096 may be obtained from the City of Carlsbad Harding Street. Community Development staff will be available to answer questions and assist applicants in completing forms. The following procedures will be followed in processing loan applications. Prequalifications Potential applicants will be directed to the Community Development staff (Building Department) where they will be interviewed,by staff to determine initial eligibility. Factors considered will be: - location of business - scope of work and approximate cost - ownership or tenancy status - number of outstanding liens on property or business If more than one outstanding lien exists, Bank staff be consulted before further processing. If the applicant appears to be eligible, an appointment for property inspection will be set up. A waiting list for inspection will be established in chronological order, except where an emergency situation exists. Emergency cases will take immediate priority where it is determined that the health and safety or occupants, neighbors and the general public is threatened. Property Inspection The subject property will be inspected by City staff to determine what improvements / a -. are necessary to meet City uniform building codes and design standards established for this project. Applicants will be notified of any additional improvements necessary to meet these standards. Bidding Applicants are required to get at least two bids for proposed improvements in excess of $2,000 unless they plan to do the work themselves or act as their own general contractor. The two-bid requirement may also be waived for extenuating circumstances such as non-availability of specialized contractors or failure of contractors to submit bids. A contractor selected by the applicant must be licensed and insured in accordance with City standards. The low bidder need not be selected. However, if a large discrepancy exists between the contractor selected and the other bidders, the City may require reduction in the loan request. Application and Financial Qualifications The applicant willsubmit the following to the Bank - -;T-:. ‘;.: L:%;:: - Loan application form j .: Commercial Loan forms to be provided by the City). - Financial statements for the past two years including profit and loss statements. - Copies of proof of ownership or rental agreement (copy to City), All plans for improvements to the exterior of the property will be given to City staff for review. Staff will determine whether submission to the Design Review ff _- Board is necessary. The applicant should submit plans as soon as possible for review. Final loan approval will be conditioned upon design review and approval. Final Approval Based upon the recommendation from staff and the Bank of America, the City loan committee will approve or deny the loan application. If the loan is approved, it will be conditioned upon the foilowing: The bank will be notified of loan approval and asked not to release funds until the above conditions are met. Once this information has been received, staff will - Design Review approval - agreement signed by Contractor to abide by contract compliance requirements - owner participation agreement for work in excess of $IO,OOO. notify the bank to release funds. Inspection, Work Changes and Contract Compliance City Building Department and Community Development staff will make periodic inspections of work in progress to insure compliance with City regulations and contract provisions. Staff must be notified of any significant changes in the scope of work and determine whether such changes are in compliance with loan agreements. If changes are not considered to be in compliance, staff may recommend that the Bank be requested to discontinue disbursement of loan funds. Community Development staff will also perform such functions as required by federal contract compliance regulations and will keep a photgraphic record of 8 improvements including "before, I' "under construction" and "after" photo, Fees and Expenses The following are applicable processing fees: Bank of America No fee for normal processing. However, fees will be charged for any special reports which may be necessary. Building Permits Standard fees. VI. CONTRACTOR RESPONSIBILITIES Business owners or contractors receiving loans funded through the Commercial Rehabilitation Loan Program must comply with the following regulations: Contractor License and Insurance All contractors, including owners acting as contractors, must comply with all normal City regulations concerning licensing and insurance, Building Permits and Fees Building permits must be obtained and fees paid pursuant to normal City procedures . for all work undertaken under the Commercial Rehabilitation Loan Program. Federal Compliances for Federally Assisted Contracts All contractors and subcontractors receiving contracts in excess of $2,000 which are paid for in total or in part by federal funds must comply with the following: 1. Section 3: All contractors, whenever feasible, will comply with the provisions of Section 3 of the Housing and Urban Development Act of 1968 concerning the hiring and training of low-income residents of Carlsbad. 2. Equal Opportunity Clause: all contractors must comply. 3. Federal Labor Standards provisions including the Davis-Bacon Act and Anti-Kickback Act: all contractors must comply. All contractors and subcontractors receiving contracts in excess of $10,000 must also comply with the following regulations: 1. Standard Federal Equal Employment Opportunity Construction Contract Specifications (EO 11246). 2. Female and Minority Participation Goals. All contractors with contracts over $2,000 will be required to submit weekly payroll sheets. Contractors with contracts over $10,000 will also be required to submit monthly Employment Utilization Plans. Staff will assist contractors in complying with these regulations, providing forms and information. Records will be maintained on file for a minimum of three years. Staff will also conduct employee interviews, inspect job sites and compile reports as may be necessary to assure compliance with these provisions. 10 VII COMPLAINTS AND DISPUTES City staff will attempt to resolve all complaints and disputes arising from this program. If staff cannot resolve a complaint or dispute, a hearing will be held, At the hearing, all affected parties will have the opportunity to present relevant information. Following the hearing, the City will make a final determin- ation for resolution of the problem and notify all those affected in writing. If the affected parties are not satisfied by the City's resolution, they may pursue normal legal recourses. VIII. AMENDMENT The Commercial Rehabilitation Loan Program may be amended from time to time by majority vote of the City Council. 11 IX. COMMUNITY REHABILITATION LOAN COMMITTEE The Community Rehabilitation Loan Committee is the final review board for 1 oan applicants. It shall consist of four members selected from the Community and City government and staff. This Committee shall review applications as presented by staff and rule as to their acceptability and disposition. The Loan Committee shall be comprised of: 1. A lending institution representative. 2. The City's Director of Finance or his designee. 3. The City's Building Department head or his designee. 4. The Chairman of the Housing and Redevelopment Advisory Committee. The function of the Loan Committee will be to approve/disapprove all loan applications following their credit approval/disapproval by the lender. The Committee must review and make disposition of all cases involving, but not limited to, the following: 1. 2. Requests for grants; Hardship cases where hazardous conditions exist and the participant cannot afford any loan, or a loan large enough to correct the unsafe and/or unsanitary conditions; 3. Approval of deferred payment option, subsidized or partial payment option, etc.; 4. 5. Situations where participant should be relocated (hazardous conditions, structures too far gone to salvage, etc.); Disagreements between Housing Rehabilitation Coordinator and participant regarding what repairs must be made first to correct unsafe and/or unsanitary conditions; 6. Request to deviate from the interest rate schedule; 7. Participants whose loan applications have been denied by the bank; 8. Self-help repair projects; 9. Final approval of successful bidder; 10. Absentee owner application. 12 - d - - MEMORANDUM DATE: January 20, 1982 TO: CrTY MAN!fff!3 FROM: BUILDING OFFICIAL SUBJECT: SUPPLEMENTAL STAFF REPORT - REHABILITATION PROGRAM LENDER PROPOSALS In designing and preparing for the City's Rehabilitation Programs, staff has solicited four proposals to operate the programs. The following lenders have submitted proposals: Bank of America Cracker National Bank La Jolla Bank Security Pacific Bank These proposals would allow the City to leverage their CDBG monies and would facilitate in qualification and credit approval of applicants. The proposals are now several months old and would have to be updated and reviewed in light of the current market creditors. If the City Council approves the Rehabilitation Programs, the Director of Building would work with the City Attorney's office to negotiate a workable contract with a lender. Staff would then return to the City Council for approval of this contract. COMMUNITY REHABILITATION LOAN COMMITTEE The Community Rehabilitation Loan Committee is the final review board for loan applicants. It shall consist of four members selected from the Community and City government and staff. This committee shall review applications as presented by staff and rule as to their acceptability and disposition. The Loan Committee shall be comprised of: 1. A lending institution representative. 2. The City's Director of Finance or his designee. 3. The City's Building Department head or his designee. 4. The Chairman of the Housing and Redevelopment Advisory Committee.