HomeMy WebLinkAbout2020-05-05; City Council; ; Funding Allocation and Business Loan Program Recommendations for the Economic Recovery and Revitalization Initiative~ CITY COUNC IL
~ Staff Report
Meeting Date
To:
From:
Staff Contact:
May 5, 2020
Mayor and City Council
Scott Chadwick, City Manager
David Graham, Chief Innovation Officer
david.graham@carlsbadca.gov or 760-434-5992
Laura Rocha, Deputy City Manager
laura.rocha@carlsbadca.gov or 760-602-2415
CA Review CKM
Subject Funding Allocation and Business Loan Program Recommendations for the
Economic Recovery and Revitalization Initiative
Recommended Action
Adopt a resolution authorizing the city manager to do the following:
1. Allocate $5,000,000 from the economic uncertainty set-aside in the General Fund to the
Economic Recovery and Revitalization Initiative and establish the following funding
priorities:
a. $4,400,000 to the business loan program
b. $250,000 to the joint marketing strategy
c. $250,000 held as contingency or for future City Council decisions
d. $50,000 to partner on mediation and renegotiation services
e. $50,000 for city lessee relief
2. Establish a business loan program that is consistent with the parameters developed by
the Ad Hoc City Council Economic Revitalization Subcommittee
3. Negotiate with a third-party to administer the business loan program and return to the
City Council with a contract for approval if the cost exceeds $100,000 annually
Executive Summary
On April 21, 2020, the City Council approved the Economic Recovery and Revitalization Initiative
and directed staff to return with an allocation of $5,000,000 to fund it. The initiative included
several measures to support COVID-19 economic response, recovery and revitalization.
The Ad Hoc City Council Economic Revitalization Subcommittee recommends the following
funding priorities:
• $4,400,000 to the business loan program
• $250,000 to the joint marketing strategy
• $250,000 held as a contingency fund or for future City Council decisions
May 5, 2020 Item #8 Page 1 of 8
• $50,000 to partner on mediation and renegotiation services
• $50,000 for city lessee relief
This resolution will allocate $5,000,000 to economic recovery and revitalization. Staff will
update the City Council on expenditures related to these priorities during the regular COVID-19
City Council meeting updates.
The Ad Hoc City Council Economic Revitalization Subcommittee considered the parameters for
a loan program to support Carlsbad businesses. The subcommittee has agreed that the program
s~ould initially focus on small businesses, business should be in good financial standing with the
city and the program should be administered by an organization with lending experience.
The subcommittee considered various loan types and terms. There was support for a small
business microloan proposal and a small business recovery loan proposal. The subcommittee's
discussion left open the possibility of other loan proposals.
The small business microloan proposal could be for businesses with $2,000,000 or less in gross
revenue or 15 or fewer employees. Loan amounts could be between $5,000 to $10,000.
Payment terms and the interest rate could be scaled.
The small business recovery loan proposal could be for businesses with $3,000,000 in gross
revenue or 50 or fewer employees. Loan amounts could be between $10,000-$25,000. Payment
terms and interest rate could be scaled.
The subcommittee discussed the potential for larger loan amounts, the eligibility of larger
businesses and other eligibility characteristics. The subcommittee is seeking the full City
Council's input on the two small business proposals and potential discussion on additional loan
program options.
This resolution would authorize the creation of a business loan program, provide City Council
guidance for the program and authorize the city manager to negotiate with an outside
organization to administer the program.
Discussion
General funding categories
On April 29, 2020, the subcommittee held its fifth meeting. The subcommittee agreed on
general funding categories and initial amounts for the $5,000,000 allocation to the ERRI from
the city's economic uncertainty reserve funds.
• $4,400,000 to the business loan program
• $250,000 to the joint marketing strategy
• $250,000 in contingency or to be used for future City Council decisions
• $50,000 to partner on mediation and renegotiation services
• $50,000 for city lessee relief
May 5, 2020 Item #8 Page 2 of 8
/
Staff will update the City Council on the spending in these categories during the regular COVID-
19 City Council Meeting updates.
Small Business Loan proposals
The subcommittee evaluated many business loan program eligibility criteria and design
characteristics. There was consensus on the following parameters:
• Small business should be the initial focus of the program
• Applicants must hold a valid business license as of March 1, 2020
• Applicants must be in good standing with the city
• Applicants who have applied for federal assistance are eligible but may not also apply to
the city for a loan to cover costs for which they have already received federal assistance
• Criteria should be developed to exclude national franchises and chain stores
• Small regional operators with a presence in Carlsbad can be eligible
• Loans should be for operational expenses such as rent, payroll, mortgage interest and
utilities
• The program should be administered by a third party with experience in lending
Two proposals were developed for City Council consideration.
Small business microloans
The first proposal is for small business microloans with the following characteristics:
• Businesses with gross revenue of $2 million or less would be eligible
• Businesses with 15 or fewer employees would be eligible
• Loan amounts would be between $5,000 and $10,000
• The first payment could be deferred for up to 90 days
• 0% interest if paid back within 6 months
• 1% interest if paid back within 12 months
• 2% interest if paid back within 18 months
• Loan funds could be used to pay rent, payroll, mortgage interest and utilities
There are about 2,700 non-residential businesses with gross revenue of $2 million or less. The
proposed loan amounts are like other microlending programs such as the Local Initiatives
Support Corporation and US Bank Foundation Business Improvement grants, Verizon Small
Business Recovery Fund and other microlending programs locally and around the nation. The
interest rate scaling includes no-interest, 1% interest such as the Paycheck Protection Program,
and 2% interest which is competitive with the Small Business Administration Economic Injury
Disaster Loan, or EIDL, rate of 3.75%
The subcommittee discussed dedicating $1.5 million to this proposal. That would result in
between 150 to 300 loan awards.
Small business recovery loans
The second proposal is for small business recovery loans with the following characteristics:
• Businesses with gross revenue of $3 million or less would be eligible
May 5, 2020 Item #8 Page 3 of 8
• Businesses with 50 or fewer employees would be eligible
• Loan amounts would be between $10,000 to $25,000
• The first payment could be deferred for up to 90 days
• 2% if paid back within 12 months
• 3% interest if paid back within 30 months
There are about 3,600 non-residential businesses in Carlsbad. The proposed loan amounts are
like other local COVID-19 disaster business loan programs and other small business loan
programs around the nation. The 2% interest rate is near the city's estimated rate of return on
its investment portfolio. The 3% interest rate is lower than the EIDL program.
The subcommittee discussed dedicating $2 million to this proposal. That would result in
between 80 to 200 loans.
Other proposals
In addition to the small business loan proposals, the subcommittee discussed the potential for
larger loan amounts, longer loan terms and various other criteria, as well as the potential to
leverage a city loan program with other lending programs, to increase the available resources
to Carlsbad businesses. These initial proposals for City Council discussion representthe
preliminary discussion at the City Council meeting on April 21, 2020, engagement with the
business community and the work of the subcommittee.
Loan program administration
The workload to administer a loan program is significant and requires expertise. It is difficult to
estimate the number of applications that would have to be processed. Depending on eligibility
and participation it could be in the range of 500 to 800 applications. The number of Paycheck ,
Protection Program awardees in Carlsbad could significantly affect this estimate. Given the
activity of other loan programs federally and regionally, it is reasonable to expect a spike in
applications at the opening of the program. In addition to application evaluation, there is
workload associated with managing and monitoring the loans. The initial estimates are that
there could be between 230 to 500 awardees. Those loans would need to be serviced for the
period that the loan is outstanding. Staff does not currently have capacity to manage this
volume of loans applications and the necessary servicing.
Expertise is required to properly manage a business loan program. There are organizations in
the region with expertise in small business and impact lending. The philanthropic organization
San Diego Foundation has partnered with the Local Initiatives Support Corporation, Mission
Driven Finance, Accion, California Southern and the Small Business Development Center for
these services. CDC Small Business Finance has made over $13 billion in loans to over 11,000
entrepreneurs. The Opportunity Fund is a nonprofit business lender that has a local presence in
San Diego and a strong track-record of microlending. Each of these has the necessary expertise
to manage a loan program but different characteristics that may align with the loan program
goals.
May 5, 2020 Item #8 Page 4 of 8
Based upon City Council direction on the design of the business loan program, staff will
negotiate with a third-party organization to administer the program and will return if the cost
of administration exceeds $100,000 annually.
Fiscal Analysis
Consistent with direction given by the City Council on April 21, 2020 staff is requesting
$5,000,000 from the city's economic uncertainty reserve funds in the General Fund be allocated
to implement the Economic Recovery and Revitalization Initiative.
Next Steps
Staff will negotiate with an organization in the region with expertise in administering small
business grants and loans. If the cost of the outside work exceeds $100,000, staff will return to
City Council on May 12, 2020 or May 19, 2020, for consideration of the contract. City staff will
update the City Council on all of the Economic Recovery and Revitalization Initiative efforts
during the regular agenda item providing the City Council with the city's COVID-19 response
update.
Environmental Evaluation (CEQA)
Pursuant to Public Resources Code Section 21065, this action does not constitute a "project"
within the meaning of the California Environmental Quality Act in that it has no potential to
cause either a direct physical change in the environment, or a reasonably foreseeable indirect
physical change in the environment, and therefore does not require environmental review.
Exhibits
1. City Council resolution
May 5, 2020 Item #8 Page 5 of 8
RESOLUTION NO. 2020-079
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, ALLOCATING $5,000,000 TO THE ECONOMIC RESPONSE AND
RECOVERY INITIATIVE AND ESTABLISHING A BUSINESS LOAN PROGRAM
WHEREAS, on February 14, 2020, the San Diego County Health Officer declared a Local Health
Emergency as a result of the spread of COVID-19; and
WHEREAS, on March 4, 2020, the State of California declared a State of Emergency as a result
of the spread of COVID-19; and
WHEREAS, the Health Officer of the County of San Diego has issued an order requiring people
to remain in their homes or place of residence, except for employees or customers traveling to and
from essential businesses or activities; and
WHEREAS, the current Order of the Health Officer and Emergency Regulations became effective
at 12:00am on Friday May 1, 2020; and
WHEREAS, the current Order of the Health Officer and Emergency Regulations states that all
businesses not meeting the definition of essential businesses are considered "non-essential
businesses" and shall be and remain closed for the duration of the Order; and
WHEREAS, 3.7 million workers have filed for unemployment in the past seven weeks; and
WHEREAS, the City Council approved the Economic Recovery and Revitalization Initiative (ERRI)
on April 21, 2020; and
WHEREAS, the ERRI includes direction to present an allocation of $5,000,000 from the city's set-
aside for economic uncertainty in the General Fund to the City Council on May 5, 2020; and
WHEREAS, the ERRI includes direction to present recommendations for the establishment of a
business loan program to the City Council on May 5, 2020; and
WHEREAS, the Ad Hoc City Council Economic Revitalization Subcommittee has developed
recommendations for prioritization of $5,000,000 to implement the ERRI and a business loan
program in response to COVID-19.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1. That the above recitations are true and correct.
2. That the deputy city manager, administrative services is authorized to appropriate five
million dollars ($5,000,000) from the city's economic uncertainty set-aside in the
May 5, 2020 Item #8 Page 6 of 8
General Fund to cover the cost of expenditures related to the EERI including the
following priorities:
a. $4,400,000 to the business loan program;
b. $250,000 to the joint marketing strategy;
c. $250,000 to be held as contingency or for future City Council decisions;
d. $50,000 to partner on mediation and renegotiation services; and
e. $50,000 for city lessee relief.
3. That the city manager establish a business loan program consistent with City Council
approved parameters including:
a. A focus on small businesses;
b. Requiring applicants to have a valid City of Carlsbad business license as of
March 1, 2020;
c. Requiring applicants to be in good standing with the city;
d. Prohibiting the award of a loan to a business for expenses that were funded by
any federal, state, or local agency;
e. Excluding national franchises and chains with criteria; and
f. Including smaller regional businesses with a physical presence in Carlsbad; and
g. Allowing loans for operational expenses such as rent, payroll, mortgage interest
and utilities; and
h. Small business microloans of $5,000-$10,000 for businesses with gross revenue
of $2,000,000 or less, or 15 employees or less and terms of 0% interest if paid
back within six-months, 1% if paid back within twelve-months, and 2% if paid
back within eighteen-months; and
i. Small business recovery loans of $10,000-$25,000 for businesses with gross
revenue of $3,000,000 or less and fewer than 50 employees and terms of 2%
interest if paid back within twelve-months and 3% if paid back within thirty-
months; and
j. Allowing for the deferral of the first payment on the loan to be deferred up to
90 days and the deferral of up to 180 days at the discretion of city staff based
upon demonstrated evidence of hardship; and
May 5, 2020 Item #8 Page 7 of 8
4. That the city manager negotiate with a third-party to administer to administer the
business loan program and return to City Council with a contract for approval if it
exceeds $100,000 annually.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 5th day of May, 2020, by the following vote, to wit:
AYES:
NAYS:
ABSENT:
Hall, Blackburn, Bhat-Patel, Schumacher.
None.
None.
MATT HALL, Mayor
,ti11a_tC~ Cb:L ~
B°ARBARA ENGLESON, City Cl
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May 5, 2020 Item #8 Page 8 of 8
Tammy Cloud-McMinn
From:
Sent:
To:
Bret Schanzenbach
Tuesday, May 5, 2020 9:14 AM
City Clerk
All Receive -Agenda Item #
For the Information of the:
_,J:~l):..COUNCIL
Dat '2!:2_cA vcc ,,,,,--
CM VACM DCM {3r
Subject: FW: Agenda Item #8: Funding Allocation and Business Loan Program Recommendations
for the Economic Recovery and Revitalization Initiative.
Please read my comments into the record for Agenda Item #8: Funding Allocation and Business Loan Program
Recommendations for the Economic Recovery and Revitalization Initiative.
Dear City Council, this is ~ret Schanzenbach, CEO of the Carlsbad Chamber of Commerce. I am writing today to support
the Staff and Ad Hoc Committee's proposal for the Economic Recovery and Revitalization Initiative. We appreciate the
collaborative process that staff took to develop the plan. In short, we all wish we could assist every business in need, but
we can't. This plan thoughtfully seeks to help those that have the highest chance of falling through the cracks with the
other safety net programs put into place by the state and federal governments. With that, we fully support the proposal
brought forward today and ask for your support.
Sincerely,
~
CARLSBAD
CHAMBER OF COMMERCE
BretJ.Schanzenbach
President & CEO I Carlsbad Chamber of Commerce
5934 Priestly Dr.
Carlsbad, CA 92008
carls bad .org
Carlsbad Chamber of Commerce Restricted or Confidential. This message may contain confidential and/or privileged information. If you are not the addressee or authorized to
receive this for the addressee, you must not use, copy, disclose, or take any action based on this message or any information herein. If you have received this message in error,
please advise the sender immediately by reply e-mail and delete this message. Thank you for your cooperation.
CAUTION: Do not open attachments or click on links unless you recognize the sender and know the content
is safe.
1
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, CA 92008
May 4, 2020
All Receive -Agenda Item # 3
For the Information of the:
CITY COUNCIL /
Date5/5_~CC 7 CM ✓ACM -DCM (3) _
Please read into the public record attached to agenda number 8.
Dear Mayor & Councilmembers:
400 Carlsbad Village Drive .
Carlsbad, CA 92008
VisitCarlsbad.com
I want to thank you for developing the small business loan program. As the Destination
Marketing Organization for the city of Carlsbad, we know that the different businesses here are
essential to the success of our tourism marketing efforts and play a huge part in why visitors
choose Carlsbad as their preferred destination for trips and vacations. Making sure these
entities are able to survive the current economic climate will go a long way to the recovery of
our community and the travel and tourism industry as a whole and we applaud you for your
efforts to keep these businesses thriving.
Visit Carlsbad is prepared to pivot and push all efforts into the recovery messaging for the city
and individual businesses as soon as we can welcome people back. The local markets will be key
and the first to resume travel and targeting the surrounding communities and key drive
markets will impact travel here the quickest. We have developed messaging, advertising assets
and more for the eventual return of guests to our city for both leisure and group markets and
the chance to collaborate with the city, the Carlsbad Chamber and the Carlsbad Village
Association will go a long way to ensure the success of all of our recovery efforts.
It will take time for tourism and travel to get back to where it was, but with all of us in this
together, we can ensure consistent messaging that will resonate with the consumer and let
them know this fantastic and magical destination is not only here, but ready to welcome them
back with open arms.
Sincerely,
ti!Jh-_
Mark Rudyk
Interim Executive Director
Visit Carlsbad
Tammy Cloud-McMinn
From:
Sent:
To:
Subject:.
Importance:
Sheila Cobian
Tuesday, May 5, 2020 11 :42 AM
Tammy Cloud-McMinn
FW: Economic Revitalization Plan
High
One more for distribution today ...
From: Priya Bhat-Patel
Sent: Tuesday, May 05, 2020 11:36 AM
All Receive -Agenda Item#§.
For the Information of the:
CITY COUNCIL
Date ~/5 CA V---cc ,,.-
CM _£ACM ~CM (3) ~
· To: Sheila Cobian <Sheila.Cobian@carlsbadca.gov>; Barbara Engleson <barbara.engleson@carlsbadca.gov>
Cc: Craig Lindholm <Craig.Lindholm@carlsbadca.gov>; Andrea Dykes <Andrea.Dykes@carlsbadca.gov>
Subject: Fwd: Economic Revitalization Plan
Hi Sheila and Barbara,
Happy Tuesday! Hope you both are doing well. I just got off the phone with Craig and we both agreed that these
recommendations Craig sent in should be circulated to the rest of Council and should be included as part of the record
for item #8. Please let us know if you have any questions.
Thanks,
Priya Bhat-Patel .
Council Member, District 3
City of Carlsbad
1200 Carlsbad Village Dr.
Carlsbad, CA 92008
www.carlsbadca.gov
760-434-2830 (o) I 760-473-8726 (c)
priya.bhat-patel@carlsbadca.gov
Begin forwarded message:
From: Craig Lindholm <Craig.Lindholm@CarlsbadCA.gov>
Date: May 4, 2020 at 8:07:19 AM PDT ,
To: Matthew Hall <Matt.Hall@carlsbadca.gov>, Priya Bhat-Patel <Priya .Bhat-Patel@CarlsbadCA.gov>,
Laura Rocha <Laura.Rocha@carlsbadca.gov>, Celia Brewer <Celia.Brewer@carlsbadca.gov>, David
Graham <David.Graham@carlsbadca.gov>
Subject: Economic Revitalization Plan
Good morning to the Ad Hoc City Council Economic Revitalization Subcommittee. As an elected
official serving as Treasurer for the City of Carlsbad I want to share my input with you on several
key points.
1
I am a fiduciary in my elected office as Treasurer. The residents of Carlsbad have entrusted me to carry
out my duties and responsibilities with the public funds under my oversight. As such, any economic
revitalization plan that transfers resources to the private sector that does not reflect the opportunity
cost ofthat capital is inappropriate. I believe that all loans that are processed under the the economic
revitalization program should carry an interest rate reflecting the prior 6 month rate of return on our
pooled investment account. This interest rate would be extremely competitive to borrowers when
compared to any other potential lending sources. The Small Business Administration EIDL and PPP
· programs are hugely oversubscribed and processing limitations make these a non-option for many small
businesses. lri other words, it is too late for many businesses-they will be permanently closed before
assistance arrives.
The additional funding terms and guidelines as proposed by staff seem reasonable. I am confident that
our Elected Officials and city Staff will come to a consensus that reflects input from all sources. I
encourage the Subcommittee to focus on the objective of sustaining employment opportunities within
our community. When we experience an "opening up" as it relates to business activity we need our
workforce. Last but not least, speed is of the essence. Time is not our friend.
Sincerely,
Craig J. Lindholm
City Treasurer
1635 Faraday Avenue
Carlsbad, CA 92008-7314
www.carlsbadca.gov
P: 760-602-2473 F: 760-602-8555
E: craig.lindholm@carlsbadca.gov
2
Tammy Cloud-McMinn
From: Christine Davis
Tuesday, May 5, 2020 12:47 PM
All Receive -Agenda Item #f?
Sent: For the Information of the:
To:
Cc:
City Clerk
Scott Chadwick; David Graham
cy;L COUNCIL
Date 5. CA ~c Y
Subject: Agenda Item #8 -May 5, 2020 Council Meeting
Please read into the record attached to Agenda Item #8
Dear Mayor and City Council:
CM ~CM vDCM(3) v
On behalf of the small businesses in Carlsbad Village, the Carlsbad Village Association
Board of Directors and staff would like to say thank you for establishing the Economic
Recovery and Revitalization initiative and encourage you to adopt the resolution to fund the
Business Loan Program recommendations as outlined by city staff. It has been an honor to
work with city staff and my business colleagues on this loc;m program, in an advisory
capacity, to support the many businesses in our downtown. As more businesses begin to
open, as early as the end ofthis week, this financial assistance will help aid in a much faster
recovery.
It is my understanding that this business loan program will be administered by a third-party
with an established infrastructure that will enable them to operate as efficiently as possible.
As you know, the lack of proper infrastructure during previous funding programs such as
the EIDL and PPP initially caused quite a bit of frustration for business owners. That is why
a simplified application process along with a quick funding mechanism is a must. I do
believe that both of these are high priority requirements for the Ad Hoc Committee
members and council.
I was very encouraged this morning listening to the County Board of Supervisors meeting
where they unanimously supported a plan to safely reopen San Diego County businesses.
They feel, wholeheartedly, that our businesses are more than capable of doing so. With the
City of Carlsbad supporting its small businesses in the Village through its Business Loan
Program, while helping them open their doors, I am hopeful that we can get our economy
back in action sooner rather than later.
Thank you for all you are doing in this regard.
Sincerely,
CHRISTINE DAVIS I Executive Director
Carlsbad Village Association
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1
David Graham, Chief Innovation Officer
Laura Rocha, Deputy City Manager
May 5, 2020
Funding Allocation and Business
Loan Program Recommendations for
the Economic Recovery and
Revitalization Initiative
Recommendations
Adopt a resolution authorizing the city manager to do the following:
1.Allocate $5,000,000 from the economic uncertainty set-aside in the General Fund to the Economic Recovery and Revitalization Initiative and establish the following funding priorities:
a.$4,4000,000 to the business loan program
b.$250,000 to the joint marketing strategy
c.$250,000 held as contingency or for future City Council decisions
d.$50,000 to partner on mediation and renegotiation services
e.$50,000 for city lessee relief
Recommendations
Adopt a resolution authorizing the city manager to do the
following:
2.Establish a business loan program that is consistent with
the parameters developed by the Ad Hoc City Council
Economic Revitalization Subcommittee
3.Negotiate with a third-party to administer the business
loan program and return to the City Council with a
contract for approval if the cost exceeds $100,000
annually
History
April 7 Ad Hoc City Council Economic Revitalization Subcommittee approved
April 9 First subcommittee meeting
April 10 Ready Carlsbad Business Alliance
April 15 Joint webinar + live polling
April 15 Second subcommittee meeting
April 20 Third subcommittee meeting
April 21 City Council approves the Economic Recovery and Revitalization Initiative
April 27 Fourth subcommittee meeting
April 29 Fifth subcommittee meeting
April 30 Joint webinar + live polling
May 5 City Council consideration of funding for the ERRI and business loan proposals
Proposed Funding Priorities
Business Loan Program
•88% $4,400,000
Contingency or Future Council Decisions
•5% $250,000
Joint Marketing Strategy
•5% $250,000
Mediation and Renegotiation Services
•1% $50,000
City Lessee Relief
•1% $50,000
Federal Assistance
Paycheck Protection Program (PPP)
•1% Forgivable loan for payroll, rent, mortgage interest
and utilities up to 2.5x monthly payroll
•75% have applied
SBA Economic Injury and Disaster Loan (EIDL)
•EIDL –3.75% low-cost loan up to $10m
•77% have applied
These programs represent greatest business impact
Economic Uncertainty
•Closures of all non-essential businesses
•Will change with the Governor’s anticipated order
•WARN notices over 5,052 in layoffs
•Food, beverage, hospitality and retail
•Sports + Innovation, manufacturing, technology
•Public benefit of a business loan program
–Continued employment
–Ongoing services
–Supports the tax base
Business Loan Program
Sources
•Subcommittee members
•Business organizations like Chamber and CVA
•Business community
•Staff
•Research on efforts around California
City Cap Investment Max Loan Terms Terms
County of SD 50 EE $5 million $20,000 2% or less 30 months
Escondido N/A N/A N/A N/A N/A
Encinitas N/A N/A N/A N/A N/A
Poway 50 EE $2 million $50,000 2% 30 mos.3% 3 yrs.
Oceanside Retail & rest.$1.2 million $5,000 0% 6 mos.N/A
Oceanside Retail & rest.“”$10,000 1.5% 6 mos.2.5% 1 yr.
Oceanside Retail & rest.“”$20,000 2.5% 6 mos.3.25% 2 yrs.
San Marcos $3 million $10,000 0% 6 mos.N/A
San Marcos “”$25,000 1.5% 6 mos.2.5% 1yr
San Marcos 10+ EE “”$50,000 2.5% 6 mos.3.5% 4 yr
Solana Beach N/A N/A N/A N/A N/A
Vista N/A N/A N/A N/A N/A
Business Loan Program
Subcommittee discussion
•Consensus requirements
•Council discussion on proposals
Business Loan Program
Eligibility
•Must demonstrate economic impact due to COVID-19
•Small business should be initial focus
•Valid business license as of March 1, 2020
•In good standing with the city
–Current with all city fees except deferred utility fees
–No outstanding litigation
•Award to PPP and EIDL recipients but not to cover costs covered
by the federal programs
•Award to those who do not receive PPP or EIDL
Business Loan Program
Small Business Microloans
•Gross revenue: $2m or less in gross revenue (2,700 businesses)
•Employees: Or 15 or fewer employees
•Loan amount: $5,000-$10,000
•Interest and Terms:
–Defer first payment for 90 days
–0% Payback within 6 months
–1% Payback within 12 months (same as PPP)
–2% Payback within 18 months
•Funding: $1.5m initially (150 -300 loans)
•Eligible Expenses: Rent, Payroll, Mortgage Interest, Utilities
Business Loan Program
Small Business Recovery Loans
•Gross revenue: $3m or less in gross revenue (3,600 businesses)
•Employees: 50 or fewer employees
•Loan amount: $10,000-$25,000
•Interest and Terms:
–Defer first payment for 90 days
–2% Payback within 12 months
–3% Payback within 30 months
•Funding: $2m initially (80 –200 loans)
•Eligible Expenses: Rent, Payroll, Mortgage Interest, Utilities
City Cap Investment Max Loan Terms Terms
Carlsbad $2m GR $1.5 million $10,000 0% 6 mos.2% 18 mos.
Carlsbad $3m GR $2 million $25,000 2% 1 yr.3% 2 yrs.
Escondido N/A N/A N/A N/A N/A
Encinitas N/A N/A N/A N/A N/A
Poway 50 EE $2 million $50,000 2% 30 mos.3% 3 yrs.
Oceanside Retail & rest.$1.2 million $5,000 0% 6 mos.N/A
Oceanside Retail & rest.“”$10,000 1.5% 6 mos.2.5% 1 yr.
Oceanside Retail & rest.“”$20,000 2.5% 6 mos.3.25% 2 yrs.
San Marcos $3 million $10,000 0% 6 mos.N/A
San Marcos “”$25,000 1.5% 6 mos.2.5% 1yr
San Marcos 10+ EE “”$50,000 2.5% 6 mos.3.5% 4 yr
Vista N/A N/A N/A N/A N/A
Business Loan Program
Ongoing Engagement and Program Evaluation
•Supported by the Carlsbad Chamber of Commerce
•Supported by the Carlsbad Village Association
•Continued engagement with the business community
•Evaluate application activity
•Evaluate opportunities to leverage and deploy remaining
funds
Business Loan Program
Administration
•Estimated activity
–230 to 500 awardees
–Total number of applications could be as high as 500-800
•Success of federal programs will affect activity
•Should be administered by an organization with lending expertise
–CDC Small Business Finance
–Opportunity Fund
–San Diego Foundation consortium
Next Steps
•Establish a business loan program based upon direction
from the City Council
•Evaluate and select a business loan program administrator
by May 15
•Return to City Council if the cost exceeds $100,000
•Continue program evaluation and engagement
•Provide information during regular COVID-19 updates at
City Council Meetings
•Allocate uncommitted funds proportionally
Recommendations
Adopt a resolution authorizing the city manager to do the following:
1.Allocate $5,000,000 from the economic uncertainty set-aside the General Fund to the Economic Recovery and Revitalization Initiative and establish the following funding priorities:
a.$4,4000,000 to the business loan program
b.$250,000 to the joint marketing strategy
c.$250,000 held as contingency or for future City Council decisions
d.$50,000 to partner on mediation and renegotiation services
e.$50,000 for city lessee relief
Recommendations
Adopt a resolution authorizing the city manager to do the
following:
2.Establish a business loan program that is consistent with
the parameters developed by the Ad Hoc City Council
Economic Revitalization Subcommittee
3.Negotiate with a third-party to administer the business
loan program and return to the City Council with a
contract for approval if the cost exceeds $100,000
annually
Recommendations
City Council additional direction:
•Include small business microloans within the business loan
program consistent with staff presentation and City Council
direction
•Include small business recovery loans within the business
loan program consistent with staff presentation and City
Council direction
•Deferral of the first payment up to 180 days at staff
discretion based upon information justifying an extension
Thank You
City Portfolio Rate of Return
Our average annual interest rates have been:
•Over the last 6 months:2.22%
•Over the last 12 months:2.12%
•Over the last 3 years:1.85%
•Over the last 5 years:1.58%
Current rate of return 1.83%
Business Loan Program
Residential Business License Data
•2,500 residential business licenses
•341 STVRs
•16 Non Profits
•169 Development Contractor
•–Construction and other trades
•309 Flat Fee Professional
•–Accounting, Consulting, Finance, Insurance, Real Estate and
Legal Services, Physical Therapy and similar services.
Recommendations
City Council additional direction:
•Include small business microloans within the business loan program consistent with staff presentation and City Council direction
•Include small business recovery loans within the business loan program consistent with staff presentation and City Council direction
•Deferral of the first payment and the start of the loan-term
may be extended at staff discretion upon sufficient evidence of a business being closed due to COVID-19 but not to exceed a total of 180 days
Business Loan Program
Categories
•118 Administrative and General Consulting Services
•98 All Other Business Support Services
•83 All Other Special Trade Contractors
•88 Commercial And Institutional Building Construction
•343 lessors of Other Real Estate Property
•78 Lessors of Residential Buildings and Dwellings
•96 Marketing Consulting Services
•47 Office of Real Estate Agents and Brokers
•309 Other Direct Selling Establishments
Recommendations
City Council additional direction:
•Fund the business loan program with the remaining funds
prioritized for contingency or future City Council decisions if
not expended within 60 days
Recommendations
City Council additional direction:
•Fund any approved loan types proportional to the volume of
applications with any funds prioritized for the business loan
program if not otherwise committed within 60 days
Recommendations
City Council additional direction:
Thank You
Business Loan ProgramEligibility as Small Business
•Non-residential business license holders
–$2m or less in gross revenue 2,700
–$3m or less in gross revenue 3,600
–15 employees or less 3,300
–25 employees or less 3,600
–50 employees or less all but 281 businesses