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HomeMy WebLinkAboutResolution 2852 Establishing Guidelines for Community Dev. Block Grant Loan Fund ~ ~,,~ ~, r' '.''l~, ~_, ~ l' -...-. > .. ~ I COMMISSION RESOLUTION NO. 2852 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA, ESTABLISHING GUIDELINES FOR THE COMMUNITY DEVELOPMENT BLOCK GRANT REVOLVING LOAN FUND. WHEREAS, the City of Bozeman has received four economic. development grants, totalling $725,000, from the Community Development Block Grant pro- gram administered by the State of Montana Department of Commerce to fund specific loan requests; and WHEREAS, the City of Bozeman is now beginning to receive payments on these loans, with said payments going into the Community Development Block Grant Revolving Loan Fund; and WHEREAS, the Community Development Block Grant program requires the I City of Bozeman to establish guidelines, acceptable to the State of Montana " Department of Commerce, before the City can utilize the money in the Com- munity Development Block Grant Revolving Loan Fund; and WHEREAS, the City Commission of the City of Bozeman did, on the 21 st ~ day of October 1991, conduct a public hearing on the draft guidelines for these funds; and -', WHEREAS, the City Commission of the City of Bozeman did, on the 25th . , ,. day of November 1991, vote to adopt those draft guidelines with some amend- · ments in response to public testimony received; and . .. .... .~" WHEREAS, the State of Montana Department of Commerce has reviewed .. these guidelines and finds them acceptable. NOW THEREFORE, BE IT RESOLVED by the City Commission of the City of Bozeman, Montana, that the guidelines for the Community Development Block Grant Revolving Loan Fund, attached hereto as Exhibit "A", and by this ref- erence made a part hereof, are hereby adopted. PASSED AND ADOPTED by the City Commission of the City of Bozeman, this 9th day of December 1991. ~r~ ~ Y SW N Mayor Pro mpore ATTEST: . .. (~J D~ " R IN L. ~ULLlVAN . .' Clerk of the Commission D AS TO FORM: ""..~'ll',~, I ~ J .. . CITY OF BOZEMAN ECONOMIC DEVELOPMENT REVOLVING LOAN FUND GUIDELINES 1. INTRODUCTION The City of Bozeman has received several grants from the Montana Community Development Block Grant Program. The first Grant received was a $500,000 Multi Purpose Grant (for housing and public f ac i 1 it i es ) , the proceeds of which are placed in a Revolving Loan Fund and are governed by City Commission Resolution No. 2823 which commits the program income to housing and neighborhood revitalization for the benefit of low and moderate income persons. These funds are maintained completely separately, and are not included in the Economic Development Revolving Loan Fund. The City has been successful in its quest for four Economic Development Grants, ann with those funds awarded the following loans: .SCHNEE' S ~BQQ.I WORKS :. July 1987 - $150.000 to be repaid over a term of 20 years wlth interest at five percent, with principal and interest deferred through December 31 , 1989. Payments on principal balance of $500 per month beginning January 1990 for 12 months. The $144,000 principal balance shall begin accruing interest on January 1 , 1991 at t,he rate of 5%, and payments of $950.34 will then be amortized over a 20 year period. LLLJ,,)GHTWAVE C OR P.QB~61.tQtI_~, August 1988 - $300,000 to be repaid over a term of 8 years, with principal and interest deferred through March 31 , 1991 . Commencing April 1 , 1991 , the principal balance of $300,000 shall be amortized over an 8 year period at the rate of 5%, payable in quarterly installments of $11,432.37, with the first payment becoming due on July 1 , 1991 . 1 ..,:-:,~~,___"o, .~ .:.:......" ~:IC':~=-,~1.~.,........'I'~":r:..~~~~~.......~ ., ,c~~~,-, ~..... _ __, ~ '1'~:!'!t.~'1"I!'I:II1rr.",~,~~,."":nr~1."~1I'~t....<n::'l"~"I";lI':;r'lI~-r..;'I"<":O'f"tlo~~.,~Ill..~':;"V;l'l::",='~:r.:lr.:,1TJ.;o;r ..~:. "~_ ~ ... 'I. .~.., .~._~. .~&'" _... .J.... -.. ."....~ ... , ." LATTICE MATERIALS CORPORATION: March 1990 - $180,000 to be repaid over a term of 10 years. Interest will be deferred unt i 1 August 1, 1991 . Quarterly principal payments of $1,000 each shall be made commencing on September 1 , 1990. Commencing August 1 , 1991 , the principal balance of $176,000 sha 11 be amortized over a 9 year period of time at 6.25 percent interest, with monthly payments of $2134.84 to begin on September 1 , 1991 . CVR OAK DESIGNS: March 1990 - $95,000 to be repaid over a term of 10 years at 8% interest. Payments of interest shall be made on a month 1 y basis commencing on July 1 , 1990. Payments of principal and interest on the note will commence on January 1 , 1991 . The interest rate shall be reduced 1/8% for each LMI job created, with 16 jobs anticipated, for an anticipated interest rate of 6% at close out of the grant. Monthly payments of $1,048.57 began on January 1 , 1991 . Payments from these grants, as well as any future economic development grants from the Montana Community Development Block Grant Program, wi 11 be deposited into an interest-bearing Economic Development Revolving Loan Fund. Interest earnings and lncome genArated from future investments will be reinvested ;nto the Fund. These funds will be loaned to local businesses for the purpose of furthering economic development in the Bozeman jurisdictional area. Loans that assist for-profit entities must be determined to be " necessary and appropriate" as defined 1 n , and determined by following the procedures contained in the current Montana CDBG Application Guidelines and current HUD policy. The City shall retain records to document compliance with this requirement including the financial analysis conducted to determine whether the financial assistance to the for-profit business was " necessary and appropriate " 2 , , By Resolution of the City Commission, an Economic Development Loan Review Committee will be formed to evaluate the feasibility and investment potential of proposed economic development projects. Committee members will include: A. Director of Planning or designee; 8. Director of Operations or designee; C. A representative of the Gallatin Development Corporation; D. A representative of a local commercial lender organization; E. A representative of H.R.D.C.; and F. A representative of the Capital Opportunities Board of Directors. G. A principle owner/partner of a business which has previously received an economic development loan from the City or County. The members wi 11 be appointed by the City Commission and will serve two-year terms, with the initial terms rotated to ensure an adequate carry-over of members. Members may serve more than one two-year term, if re-appointed by the City Commission. The Committee will serve in an advisory role in recommending attract'ive economic development investment projects to the Bozeman City Commission. The City Attorney shall serve as legal counsel to the Committee. The City shall, at a minimum, maintain the following records regarding the Revolving Loan Fund: -- sources of program income, including interest earned; -- a schedule of anticipated program income receipts (e.g. a loan amortization schedule for each outstanding loan) ; -- designated person(s) or entity(ies) responsible for tracking loan payments and servicing the loan ( s) ; -- policies and procedures for determining how the program income funds will be expended and for what activities; -- names of the person(s) or board(s) responsible for implementing the program income plan and for ensuring compliance with applicable requirements; 3 , .... ~..,.- n.n n~~._. _ .._ .. _ _..,._M,.~,,"W~". '"..._ .n..' ...,_.__..,__.,~ .~.. ...' "~....,~.,.w,,......,...... - "..~."-~" ',.:;,- , . . -- dates and amounts of program income deposits and disbursements; and -- the activities funded with program income. II. ADMINISTRATION The Economic Development Revolving Loan Fund will be administered by the Bozeman City-County Planning Office, or by a consultant or contractor working under the supervision of the City- County Planning Office. A maximum of seven percent of the fund balance may be used for administrative costs, including, but not limited to: A. Personal Services (salaries, benefits. etc. ) B. Office Costs (supplies, postage, telephone, printing) C. Consulting D. Legal assistance E. Financial planning and loan packaglng technical assistance F. Travel and Training G. Project Monitoring All costs sha 11 be itemized, including time, and only the documented costs will be eligible as administrative costs. All program income received by the City after closeout of a CDBG Economic Development project is subject to the provisions of Title I (a 11 CDBG requirements that applied during the project) unt i 1 all CDBG grants received by the City are closed out by the Department of Commerce. Annual reports explaining the activities of the fund sha 11 be made to the Montana Department of Commerce, Business Development Division. III. ELIGIBLE ACTIVITI~9- Priority wi 11 be given to projects which wi 11 have the greatest potential for creating or retaining long-term employment opportunities with the City's jurisdictional area for low and 4 ... "., .~,..." ,. ,. ... --- -- ... --"'.". ". ",""., ....r .~."" _ _.~'..'"_._ ...~. ,. ., ..r~.., ",,,...,. , .,:.i:.~ . . , moderate income persons. A minimum of 51 percent of the jobs to be directly created or retained through the creation of the project must be held by or wi 1 1 be filled with low and moderate income persons, with low and moderate income levels established as set forth in the most current State COBG guidelines. The cost per job to be created or retained for low and moderate income persons must not exceed $20,000 per job. Typical eligible activities include: land acquisition; public facilities and other improvements, such as water and sewer lines, and access roads, specific to the project; loans for acquisition, construction, rehabilitation, expansion, or installation of commercial and industrial buildings, facilities, equipment, or working capital; and employee training. The funds also may be used as a match to other funding sources, as long as they are contingent upon approval of the other funding source, i . e. CapitAl Opportunities Program. .IV. ELIGIBLE APPLICANTS Eligible applicants are businesses located within the Bozeman City-County Master Plan Area. Applicants who do not meet eligibility criteria for the City Revolving Loan Fund wi 11 be referred to appropriate financing sources. v. APPLICATION PROCEDURES All applicants are encouraged to discuss their project with the Economic Development Loan Review Committee prior to submittal of an application. The applicant shall provide al, information as requested in the application form, which includes a business plan, 5 '-~'-' '"..~.""..... ~ . ..... _on ',..... .".1 '~ .~....... ~,'~.,~,... ..,. ,':",' ~':'."''''~ ..'.... ,..-...... ',~_..._......\"'..........."""~""'~'I-"~;....'~..,~'_ ,-".~.r-:'-._~'.--r...,..,...........,..~:.,:.".'~~~'l'.'....'_'~..~,~,."'.,...<" """"'_ . . . financial information, hiring and training information, and the source, use, and terms of all funds. VI. LOAN TERMS The maximum loan amount granted to any one project from the City's Revolving Loan Fund will be $100,000.00. The Revolving Loan Fund amount must be matched on a 1 : 1 basis from another source, i . e. , private funds, bank loan, SBA, other grants, etc. The term, interest rate, and repayment of the loan sha 11 be determined after review of the application and shall be based on the project needs. In no case wi 11 the minimum allowable interest rate be less than 5%. All loans must be secured with fixed assets, personal guarantees, or any other reasonable source of available collateral. VII. APPLICATION REVIEW These Revolving LO::lrl Funds will be open for application on a six month schedule. Applications will be reviewed by the Economic Development Loan Review Committee within 30 days of the receipt of a complete application (See Append i x) . Within 15 days of completing its review of the applications, the Committee will t.hen provide a written report of their recommendation for determining pr'oject eligibility to the Bozeman City Commission. If the recommendation is supportive of a loan, the Committee will suggest the term and interest rate of the loan. The report wi 11 be made at a regular meeting of the City Commission, with a notice of the City's scheduled review of the application published in a newspaper of general circulation in the Bozeman area not less than seven ( 7 ) 6 ~"",_"'.,~~~.__.,_.r . .' ,.,' ,.~ ........,.., ".. ,..,-,.., -". '. , . . . days prior to the regular meeting. Howeve r , confidential information such as financial data, wi" not be made available for public review. In order to insure a fair and competitive system of reviewing and recommending projects, the Committee sha 1 1 develop an application scoring system similar to that used by the Montana Department of Commerce in their CDBG application process. The process sha 1 1 include a sepcified point system which awards applications points on the following review criteria. Those applications which exceed the criteria wi" be offered a higher number of points. Applications will be reviewed on the following criteria: -- The business's need for assistance and the feasibility of the project, as determined by the Business Plan -- The demand for the type of services/products offered -- Business management experience -- The Company's growth potential and resultant community impact -- Commitment to hiring, training, and retaining low and moderate income persons -- Commitment to provide a combination of wages and benefits to low and moderate income hires, that assures a standard of living above poverty level and access to health benefits -- The cost per job created or retained for low and moderate lncome persons The Bozeman City Commission will make the final determination on all applications. 7 "--7'" ~,...~~--. ......n._. n~~~._',""""'C-~~__'~ ,,~,..,__.,,~_.... _.. , . .,---,~ .~.~.. "~._,.~-,, "., ~'.,'" ~...'-~' .. - .. .-- ~ . . . . . If there is not an adequate balance in the fund to finance an application, the Commission may.conditionally commit the available funds to a project, as we 11 as enough future funds to adequately support the project. YJII. A DOp'T I Q1il.AMEN DM Et-l..J_.9F -THESE GUIDELJN~B These Guidelines have been reviewed at a public meeting of the Bozeman City Commission and have been adopted by Commission Resolution No. dated . The Guidelines may be amended after review at a regular meeting by a majority vote of the Bozeman City Commission, a notice of which sha 11 be published in a newspaper of general circulation in the Bozeman area, not less than seven days prior to the meeting. 8 ,., '~"...r','.'~ '.'," ., ,..",J . . ...-.. .,_,.,,'_.~_~,_"_,'..."';'.' ,,_',....:..+I.'~..,.._h~"'_."'" .~,.... c'.,.._ ,..~..,__, ".L,,~,___,","~=""'....:.ak.."':"......_.::.l:..,,"..'. ,,". ", ---- -, - . . - . . APPENDIX CITY OF BOZEMAN ECONOMIC DEVELOPMENT REVOLVING LOAN FUND APPLICATION FORM NAME OF APPLICANT: NAME OF BUSINESS: ADDRESS: CONTACT PERSON: TELEPHONE NO: A. GENERAL BUSINESS I~fQR~~TJON 1 . Type of business/business description: 2. Number of years in business 3. Form of Business Organization: Sole Proprietorship Partnership CorQnration Other Names of Proprietor/Partners/Officers: 5. Number of current employees: Full Time Employees Part Time Employees ~_.____J~XPLAN_~-IION OF NE.~P FQR LOAN 1 . Provide a complete Business Plan, which includes business description and products/services offered; discussion of present or proposed market, including future projections, with explanation of how the information was developed (market surveys, etc) . Document all identified potential markets with contracts, letters, etc. 2. Provide a complete budget of project, including the source. use, terms and payback of all funds for the entire project; 9 .. -- ~ '''0'' ,. ,.... . .....,_,.,0,'; ....,_____.....~._.n .~ . .~. - ~. - -..,-- -- , I r lit ~ -- ~ 3. Provide the following Financial Exhibits for the last three years: -, - Balance Sheet _ Profit and Loss Statement - Cash Flow Statement _ Reconciliation of Net Worth _ Aging of Accounts Receivable and Payable The above documents must be compiled or reviewed by an independent CPA, with full disclosure notes. All financial information must be signed by a responsible officer of the business. 4. Provide the following earnings projections for 3 years: - Balance Sheet - Profit and Loss Statement - Cash Flow Statement There must be no time period gaps between the historical statements and the projected statements. The financial statements must not' be dated more than 90 days pr i or to the date of app 1 i cat ion. Earnings projections must include a projected monthly cash flow analysis for at least one year and until the break even point is p roj ected to be reached. Bus i nesses that exper i ence regu 1 ar or occasional cycl ical variations in cash flow, 'must provide a narrative explanation of the reason(s) for the occurrence of the cycles and the effects, if any, on the businesses' ability to meet its debt obligations. 5. Provide descr~ptions of ~ll existing and projected debts and lenders, annual debt service amount, and any related loan requirements. 6. Provide information on working capital needs and verify through cash flow projections, explaining changes in inventory an receivables. 7. Provide current personal balance sheets for each individual with 10% or more ownership in the project, as well as a release from principal owners of the business allowing a personal credit history check by the City as part of the application reVlew. C. HIRING AND TRAINING Pl~NIINFORMATION. The City of Bozeman, Human Resource Development Council, and the Bozeman Branch of the Montana Job 5e rv ice will coord i nate the development and implementation of Hiring and Training Plans for businesses seeking Economic Development assistance from the City of Bozeman. It is required that businesses agree to comply with and follow their final Hiring and Training Plan. 10 ------.... ,_....... .... ... ..'.. '. ,." ,,"'-:',,-,...'