HomeMy WebLinkAbout07-27-20 City Commission Packet Materials - C2. Sub-Recipient Agreement w Prospera for CDBG RLF and Coronavirus Small Business LRF
Commission Memorandum
REPORT TO: Honorable Mayor and City Commission
FROM: Brit Fontenot, Director of Economic Development
SUBJECT: Sub-Recipient Agreement with the Prospera Business Network for
Management of the City of Bozeman’s Community Development Block
Grant Revolving Loan Fund and Coronavirus Small Business Local Relief
Fund for a Five Year Term.
MEETING DATE: July 26, 2020
AGENDA ITEM TYPE: Consent
RECOMMENDATION: Authorize the City Manager to sign the Sub-Recipient Agreement with
the Prospera Business Network for Management of the City of Bozeman’s
Community Development Block Grant Revolving Loan Fund and
Coronavirus Small Business Local Relief Fund for a five year term.
BACKGROUND: On January 27, 2020, staff requested, and the Commission approved, a six
month extension to the Sub-Recipient Agreement between the City of Bozeman and the Prospera
Business Network for Management of the City of Bozeman’s Community Development Block Grant
Revolving Loan Fund, Amendment 1. The January, 2020 extension was the second of two extension
requests for this Sub-recipient agreement. The current extension expires on July 31, 2020. Prior to the
January, 2020 extension, staff requested, and the Commission authorized, a four month extension of the
original Sub-recipient agreement, Amendment 2. (Link to Attachments 1 and 2) At the time, staff was
not prepared to conduct a procurement process for these services. In the intervening ten months, staff
has followed the authorized Request for Qualifications process to which there were two respondents.
Based on the scoring of the review team, the Prospera Business Network was the most qualified
respondent.
With the assistance of the legal department, the Sub-recipient agreement was updated
to reflect appropriate changes in how the program is managed, including a new provision related to the
potential establishment of a Small Business Coronavirus Local Relief Fund proposed to Congress via the
Main Street Relief Act, also referred to as the Daines-Booker Bill. A description of the fund is found in
Section C. 7 of the proposed agreement (Attachments 3 and 4):
7
7. In the event a Coronavirus Small Business Local Relief Fund (COVID Relief Fund), is established by
the City of Bozeman, the City and the Sub-recipient may establish a separate policies and
procedures document and administrative fees for this COVID Relief Fund.
UNRESOLVED ISSUES: None at this time.
ALTERNATIVES: As proposed by the City Commission
FISCAL EFFECTS: The Sub-recipient Agreement outlines the management fee structure in Sections
C. 5 and 6:
5. As it pertains to the current Bozeman CDBG RLF fund, payment for the services rendered by Sub-
Recipient, the Sub-Recipient shall retain $34,000 as an annual management fee per year provided
there are active loans in the portfolio. The Sub-Recipient may retain and pay such compensation to
itself in installments, not more frequently than monthly. The Sub-Recipient’s expenses for attorney
fees and attorney costs related to collection efforts as described in subsection 6 of this section shall
be reimbursed from the fund in addition to the annual management fee.
6. Sub-Recipient is entitled to use RLF funds for any costs incurred by Sub-Recipient in connection with
the collection of delinquent or defaulted loans, including but not limited to any filing fees or legal
fees and costs. The Parties specifically agree and understand that any such use of RLF funds in this
manner by the Sub-Recipient is separate and distinct from the payment Sub-Recipient will be
receiving for its services; that is to say, costs and fees incurred in connection with the collection of
delinquent or defaulted loans will be paid by RLF Funds and not by the Sub-Recipient.
ATTACHMENTS:
1) Link to the September 9, 2019 City Commission Packet Material (Amendment 1);
2) Link to the January 27, 2020 City Commission Packet Material (Amendment 2);
3) Sub-Recipient Agreement with the Prospera Business Network for Management of the City of
Bozeman’s Community Development Block Grant Revolving Loan Fund and Coronavirus Small
Business Local Relief Fund for a five year term; and
4) Exhibit 1 to the Sub-Recipient Agreement, Policies and Procedures governing the management
of the Community Development Block Grant Revolving Loan Fund and Coronavirus Small Business
Local Relief Fund.
Report compiled on Wednesday, July 15, 2020.
8
Page 1 of 10
SUB-RECIPIENT AGREEMENT FOR COMMUNITY DEVELOPMENT BLOCK GRANT REVOLVING LOAN FUND AND CORONAVIRUS SMALL BUSINESS LOCAL RELIEF FUND July 2020
THIS AGREEMENT is entered into this ___ day of ________________ by the CITY OF BOZEMAN, MONTANA, whose address is 121 N Rouse, Bozeman MT 59715, herein referred to as the “City”, and the GALLATIN DEVELOPMENT CORPORATION, doing business as PROSPERA BUSINESS
NETWORK, whose address is 2015 Charlotte Street, Suite 1, Bozeman MT 59718, a nonprofit economic
development corporation, herein referred to as the “Sub-Recipient.” WITNESSETH THAT: WHEREAS, the City has applied to and has been approved by the Montana Department of Commerce (MTDOC) for the receipt of grant funds under the Montana Community Development Block Grant Economic Development (CDBG) Program; and WHEREAS, the City wishes to use present and future CDBG grants and loan fund revenue to further
develop the “Revolving Loan Fund” (RLF) which is designed to leverage private investment in new business for the purpose of generating economic activity, jobs, and COVID business recovery for the City of Bozeman; and WHEREAS, to maintain accountability, professional management and program performance, it is
deemed to be in the best interests of the City to extend an Agreement with the Sub-Recipient as hereinafter provided; and WHEREAS, in the event the City creates a Coronavirus Small Business Local Relief Fund (COVID
Relief Fund), the City desires to engage the Sub-Recipient to administer this fund; and
WHEREAS, pursuant to Resolution 3488 there exists a City of Bozeman Revolving Loan Fund Committee (the “RLF Committee”); to evaluate the feasibility and investment potential of proposed
economic development projects; and
WHEREAS, the parties to this Agreement understand that neither of them has in any way, expressly or impliedly, abrogated any of its individual powers, and further agree that this Agreement does not create any new organization or legal entity.
NOW, THEREFORE, in consideration of the mutual covenants and conditions set out in this Agreement, the parties agree that the foregoing statements of fact are true and correct and further agree as follows:
A. SPECIAL PROVISIONS. The City agrees, under the terms and conditions of this Agreement, to
sub-grant to the Sub-Recipient the CDBG and/or, at the City’s discretion, COVID Relief Fund as a grant for gap financing and technical assistance to eligible borrowers and does hereby transfer, assign and
9
Page 2 of 10
convey to Sub-Recipient all of the City’s interest in and to its existing RLF loan portfolio. The “CDBG
and/or COVID Relief loan funds”, as applicable, will be referenced here as the “Bozeman RLF Program” B. INDEPENDENT CONTRACTOR.
It is understood by the parties hereto that the Sub-Recipient is an independent contractor and that neither
its principals nor its employees, if any, are employees of the City for purposes of tax, retirement system, or social security (FICA) withholding. It is further understood that pursuant to section 39-71-401, MCA, the Sub-Recipient has obtained, and will maintain at its expense for the duration of this Contract, coverage in a workers' compensation plan for its principals and employees for the services to be performed
hereunder.
C. SCOPE OF SERVICES. The Sub-Recipient will perform the following services: 1. The Sub-Recipient will be responsible for all facets of the Bozeman RLF Program as described in the Policies and Procedures (Exhibit A) for the project(s), a copy of which the City has delivered or will
deliver to Sub-Recipient prior to execution of this Agreement. The Sub-Recipient will also be responsible for all aspects of the Revolving Loan Fund program, including the following: (a) Develop, apply and enforce written Policies and Procedures as they relate to the Bozeman RLF Program and/or administering the RLF program under the local CDBG grant program,
including the creation and operation of an RLF Loan Committee to review and act upon loan requests. (b) Application process through approval: a. Assist prospective borrowers in completing loan application materials;
b. Conduct UCC lien searches, if applicable and pertinent to the proposed loan collateral c. Provide a project analyses to the RLF Loan Committee; d. Coordinate monthly RLF Loan Committee meetings; and e. Present proposed projects to RLF Loan Committee for loan approval or denial. Decisions as to loan approval or denial are the sole responsibility of the RLF Loan
Committee, and the City shall have no authority or ability to intervene in the loan approval or denial process. (c) Loan Closing and Documentation: a. Completion of loan documentation using loan documentation software;
b. Loan closing, to be conducted by a title company or by Sub-Recipient; c. Funds disbursement and payment processing, utilizing the GMS Loan Accounting software; and d. Collection and retention, for Sub-Recipient’s use, of loan fees and charges, as provided in Sub-Recipient’s Policies and Procedures.
(d) Loan Servicing Oversight: a. Gather and analyze monthly or quarterly financial reports from borrowers as required by the applicable loan agreement; b. Track and monitor status of borrower insurance policies;
c. Track and monitor UCC financing statement filings and renewals; and d. Provide monthly loan updates to RLF Loan Committee.
10
Page 3 of 10
(e) Process monthly loan payments a. Track, receive, process and account for all monthly loan payments b. Track late payments – mailing late notices and calling delinquent borrowers, as needed
c. Work with delinquent borrowers to cure defaults and, where appropriate, develop a
work-out plan, subject to approval of the RLF Loan Committee. (f) Monitor and process all forfeitures of loan collateral and use commercially reasonable efforts to collect delinquent and defaulted loans, including the filing of creditor’s claims in
bankruptcy, where applicable, subject to the approval of the RLF Loan Committee.
2. The Sub-Recipient shall maintain eligibility as a Community-Based Development Organization pursuant to Title 24, Part 504, CFR, and shall ensure all activities conducted pursuant to this Agreement comply with all federal and state regulations regarding community development block
grants.
3. During the term of this Agreement, the Sub-Recipient will maintain reasonable records of its performance under this Agreement in a manner consistent with generally accepted accounting principles. The Sub-Recipient will provide the City (or its authorized representatives) access to these
records at any time during normal business hours. Upon written request of the City, the Sub-Recipient
will submit to the City, in the format prescribed by the City, semi-annual status reports on its performance under this Agreement. 4. Except as set forth in Section (4) below, the Sub-Recipient will retain, administer, manage, record,
and account to the City for all RLF loan fund revenue received subsequent to the date of this
Agreement, including principal and interest received from borrowers. Sub-Recipient will use such revenue to enhance the RLF program for the benefit of all eligible borrowers located within the City of Bozeman.
5. As it pertains to the current Bozeman CDBG RLF fund, payment for the services rendered by Sub-
Recipient, the Sub-Recipient shall retain $34,000 as an annual management fee per year provided there are active loans in the portfolio. The Sub-Recipient may retain and pay such compensation to itself in installments, not more frequently than monthly. The Sub-Recipient’s expenses for attorney fees and attorney costs related to collection efforts as described in subsection 6 of this section shall be
reimbursed from the fund in addition to the annual management fee.
6. Sub-Recipient is entitled to use RLF funds for any costs incurred by Sub-Recipient in connection with the collection of delinquent or defaulted loans, including but not limited to any filing fees or legal fees and costs. The Parties specifically agree and understand that any such use of RLF funds in this manner
by the Sub-Recipient is separate and distinct from the payment Sub-Recipient will be receiving for its
services; that is to say, costs and fees incurred in connection with the collection of delinquent or defaulted loans will be paid by RLF Funds and not by the Sub-Recipient. 7. In the event a Coronavirus Small Business Local Relief Fund (COVID Relief Fund), is established
by the City of Bozeman, the City and the Sub-recipient may establish a separate policies and
procedures document and administrative fees for this COVID Relief Fund.
11
Page 4 of 10
D. EFFECTIVE DATE AND TIME OF PERFORMANCE. This Agreement supersedes all previous agreements, whether written or oral, between the City and the Sub-Recipient dealing with the City of Bozeman RLF program. The term of this Agreement shall be sixty (60) months, commencing on the date of execution by the parties. This Agreement will terminate upon expiration of its initial term, unless extended in writing by mutual agreement of the parties, or if either party fails to meet the conditions of
this Agreement or if an Event of Default occurs, after notice and opportunity to cure as provided in Section N below. E. CONFLICT OF INTEREST. The Sub-Recipient covenants that it presently has no interest and
will not acquire any interest, direct or indirect, in the CDBG project that would conflict in any manner or
degree with the performance of its services hereunder. The Sub-Recipient further covenants that, in performing this Agreement, it will employ no person who has any such interest. F. CIVIL RIGHTS ACT OF 1964. The Sub-Recipient will abide by the provisions of the Civil Rights
Act of 1964, which states that under Title VI, no person may, on the grounds of race, color, or national
origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance. G. SECTION 109 OF THE HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1974.
The Sub-Recipient will comply with the following provision:
No person in the United States may on the grounds of race, color, national origin, or sex be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity funded in whole or in part with the funds made available under this title. Any prohibition
against discrimination on the basis of age under the Age Discrimination Act of 1975 or with respect
to an otherwise qualified handicapped individual as provided in Section 504 of the Rehabilitation Act of 1973 will also apply to any such program or activity. H. NONDISCRIMINATION AND EQUAL PAY. In addition to the requirements of subsections F
and G, above, the Sub-Recipient agrees that all hiring by it of persons performing this Agreement shall be
on the basis of merit and qualifications. The Sub-Recipient will have a policy to provide equal employment opportunity in accordance with all applicable state and federal anti-discrimination laws, regulations, and contracts. The Sub-Recipient will not refuse employment to a person, bar a person from employment, or discriminate against a person in compensation or in a term, condition, or privilege of employment because
of race, color, religion, creed, political ideas, sex, age, marital status, national origin, actual or perceived
sexual orientation, gender identity, physical or mental disability, except when the reasonable demands of the position require an age, physical or mental disability, marital status or sex distinction. The Sub-Recipient shall be subject to and comply with Title VI of the Civil Rights Act of 1964; Section 140, Title 2, United States Code, and all regulations promulgated thereunder.
Sub-Recipient represents it is, and for the term of this Agreement will be, in compliance with the
requirements of the Equal Pay Act of 1963 and Section 39-3-104, MCA (the Montana Equal Pay Act).
Sub-Recipient must report to the City any violations of the Montana Equal Pay Act that Sub-Recipient
has been found guilty of within 60 days of such finding for violations occurring during the term of this
Agreement.
12
Page 5 of 10
Sub-Recipient shall require these nondiscrimination terms of its subcontractors providing services
under this Agreement.
I. REPORTS AND INFORMATION. The Sub-Recipient will maintain accounts and records, including personnel, property and financial records, adequate to identify and account for all costs
pertaining to this Agreement and such other records as may be deemed necessary by the City to assure
proper accounting for all project funds. These records will be made available for audit purposes to the City or its authorized representative, and will be retained for three years after receipt of final payment for the services rendered under this Agreement unless permission to destroy them is granted by the City.
J. ADMINISTRATION 1. For purposes of implementing this Agreement, the City must appoint a local government project representative that will work with the Sub-Recipient. The parties will meet as necessary to provide for the efficient and smooth implementation of this Agreement and the activities contained herein.
2. The parties agree the RLF Committee will have final decision making authority regarding the loaning of RLF funds and shall follow guidelines set forth in Commission Resolution No. 3488 except that this Agreement supersedes the requirements of Commission Resolution 3488 only in so far as it relates to any provision in Resolution 3488 in conflict with this Agreement.
3. To ensure the composition of the RLF Committee complies with applicable federal regulations, the Committee shall consist of seven members, two of which shall be appointed by the City Commission, with the remaining five to be appointed by the Sub-Recipient.
4. The Sub-Recipient must contract with an independent accounting firm to conduct an annual audit sufficient to obtain an unqualified opinion of the RLF loan fund and program as conducted by Sub-Recipient under this Agreement.
K. TERMINATION - DISPOSITION OF REAL PROPERTY OR EQUIPMENT
ACQUIRED. Upon the expiration or termination of this Agreement, the Sub-Recipient will transfer to the City the then-existing RLF loan portfolio and all related loan records, together with the then-existing balance in the Sub-Recipient’s RLF loan fund, less any unpaid portion of Sub-Recipient’s compensation under this Agreement to the date of expiration or termination.
L. INDEMNIFICATION. The Sub-Recipient agrees to waive any and all claims and recourse against the City, its officers, agents, and employees, including the right of contribution of loss or damage to person or property arising from, growing out of, or in any way connected with or incidental to the Sub-Recipient’s performance of this Agreement. The Sub-Recipient shall indemnify, defend and hold
harmless the City (including the City’s officers, , employees, agents and representatives) against any claims and/or liabilities of any nature, including reasonable attorneys’ fees, arising out of the performance of this Agreement. . M. TERMINATION OF AGREEMENT.
13
Page 6 of 10
1. Termination for Sub-Recipient’s Fault:
a. If Sub-Recipient refuses or fails to timely do the work, or any part thereof, or fails to
perform any of its obligations under this Agreement, or otherwise breaches any terms or
conditions of this Agreement, the City may, by written notice, terminate this Agreement
and the Sub-Recipient’s right to proceed with all or any part of the work (“Termination
Notice Due to Contractor’s Fault”). The City may then take over the work and complete
it, either with its own resources or by entering into another agreement with any other third
party.
b. In the event of a termination pursuant to this subsection, Sub-Recipient shall be entitled to
payment only for those services Sub-Recipient actually rendered.
c. Any termination provided for by this subsection shall be in addition to any other remedies
to which the City may be entitled under the law or at equity.
d. In the event of termination under this subsection, Sub-Recipient shall, under no
circumstances, be entitled to claim or recover consequential, special, punitive, lost business
opportunity, lost productivity, field office overhead, general conditions costs, or lost profits
damages of any nature arising, or claimed to have arisen, as a result of the termination.
2. Termination for City’s Convenience:
a. Should conditions arise which, in the sole opinion and discretion of the City, make it
advisable to the City to cease performance under this Agreement, the City may terminate
this Agreement by written notice to Sub-Recipient (“Notice of Termination for City’s
Convenience”). The termination shall be effective in the manner specified in the Notice of
Termination for City’s Convenience and shall be without prejudice to any claims that the
City may otherwise have against Sub-Recipient.
b. Upon receipt of the Notice of Termination for City’s Convenience, unless otherwise
directed in the Notice, the Sub-Recipient shall immediately cease performance under this
Agreement and make every reasonable effort to refrain from continuing work, incurring
additional expenses or costs under this Agreement. Sub-Recipient shall do only such work
as may be necessary to preserve, protect, and maintain work already completed or
immediately in progress.
c. In the event of a termination pursuant to this subsection, Sub-Recipient is entitled to
payment only for those services Sub-Recipient actually rendered on or before the receipt
of the Notice of Termination for City’s Convenience.
14
Page 7 of 10
d. The compensation described in section M.2(c) is the sole compensation due to Sub-
Recipient for its performance of this Agreement. Sub-Recipient shall, under no
circumstances, be entitled to claim or recover consequential, special, punitive, lost business
opportunity, lost productivity, field office overhead, general conditions costs, or lost profits
damages of any nature arising, or claimed to have arisen, as a result of the termination.
N. CONSTRUCTION AND VENUE This Agreement will be construed under and governed by the laws of the State of Montana. The City and the Sub-Recipient agree that performance of this Agreement is in the County of Gallatin, State of
Montana, and that in the event of litigation concerning it, venue is in the District Court of the Judicial
District in and for the City of Bozeman, Montana. This Agreement has been approved by City Commission and by Sub-recipient’s Board of Directors, each of which has authorized the undersigned persons to execute this Agreement on its behalf.
O. ATTORNEY’S FEES. In the event that either party incurs legal expenses, including the costs, expenses, salary and fees of the in-house counsel, to include City Attorney, to enforce the terms and conditions of this Agreement, the prevailing party is entitled to recover reasonable attorney's fees and other costs and expenses, whether the same are incurred with or without suit, including fees on appeal.
P. PUBLIC MEETINGS AND ACCESS TO PUBLIC RECORDS. The Sub-Recipient’s RLF Loan Committee shall comply with the open meeting requirements of Montana law, including those set forth in Title 7, Chapter 1, Part 41, MCA and Title 2, Chapter 3, MCA. To help ensure compliance, the Sub-Recipient shall provide RLF Committee meeting agendas and all written information to be provided to
the RLF Committee to the City Clerk’s office no later than 72 working hours prior to meeting for notice
on the City’s official posting board and any other sites deemed reasonable by the Clerk’s office. In addition, meeting minutes will be kept by the Sub-Recipient and provided to the City Clerk’s office no later than 45 days after the meeting. These minutes shall be posted and made available to the public by the City Clerk’s office except for those minutes taken during a closed meeting in accordance with 7-1-
4144, MCA. Minutes taken during a closed meeting shall also be provided to the City Clerk’s office but
shall be handled in accordance with the City Clerk’s regular executive session protocol and kept private in a secured cabinet. In accordance with 7-1-4144, MCA and subject to any applicable legal obligation to protect and preserve
individual confidential or private information, upon reasonable request and at reasonable times during
normal business hours, Sub-Recipient shall make such RLF loan documents and records available for inspection and copying by members of the public. Sub-Recipient may charge for such copying in accordance with the policies of the city, which Sub-Recipient hereby adopts for such purposes.
To determine whether a meeting or part of a meeting may be closed to the public and to determine whether
information contained in RLF loan documents is protected by law from disclosure, the Sub-Recipient must consult with and seek the advice of the City Attorney at no cost to Sub-Recipient. The advice and consultation shall be on behalf of the RLF Committee and not Gallatin Development Corporation.
15
Page 8 of 10
Q. ELIGIBILITY. The Sub-Recipient certifies that the Sub-Recipient and the Sub-recipient's
principals are not debarred, suspended, voluntarily excluded, or otherwise ineligible for participation in federally assisted contracts under Executive Order 12549, "Debarment and Suspension". (24 CFR 24.505)
R. REPRESENTATIVES AND NOTICES.
1. City’s Representative: The City’s Representative for the purpose of this Agreement shall be
_________________ or such other individual as City shall designate in writing. Whenever
approval or authorization from or communication or submission to City is required by this
Agreement, such communication or submission shall be directed to the City’s Representative and
approvals or authorizations shall be issued only by such Representative; provided, however, that
in exigent circumstances when City’s Representative is not available, Contractor may direct its
communication or submission to other designated City personnel or agents as designated by the
City in writing and may receive approvals or authorization from such persons.
2. Sub-Recipient’s Representative: The Sub-Recipient’s Representative for the purpose of this
Agreement shall be _____________________ or such other individual as Sub-Recipient shall
designate in writing. Whenever direction to or communication with Sub-Recipient is required by
this Agreement, such direction or communication shall be directed to Sub-
Recipient’s Representative; provided, however, that in exigent circumstances when Sub-
Recipient’s Representative is not available, City may direct its direction or communication to other
designated Sub-Recipient personnel or agents.
3. Sub-Recipient’s All notices required by this Agreement shall be in writing and shall be
provided to the Representatives named in this Section. Notices shall be deemed given when
delivered, if delivered by courier to Party’s address shown above during normal business hours of
the recipient; or when sent, if sent by email or fax (with a successful transmission report) to the
email address or fax number provided by the Party’s Representative; or on the fifth business day
following mailing, if mailed by ordinary mail to the address shown above, postage prepaid.
S. DISPUTE RESOLUTION.
1. Any claim, controversy, or dispute between the parties, their agents, employees, or representatives
shall be resolved first by negotiation between senior-level personnel from each party duly
authorized to execute settlement agreements. Upon mutual agreement of the parties, the parties
may invite an independent, disinterested mediator to assist in the negotiated settlement discussions.
2. If the parties are unable to resolve the dispute within thirty (30) days from the date the dispute was
first raised, then such dispute may only be resolved in a court of competent jurisdiction in
compliance with the Applicable Law provisions of this Agreement.
T. ADDITIONAL PROVISIONS.
16
Page 9 of 10
1. Survival: Contractor’s indemnification shall survive the termination or expiration of this
Agreement for the maximum period allowed under applicable law.
2. Headings: The headings used in this Agreement are for convenience only and are not be
construed as a part of the Agreement or as a limitation on the scope of the particular paragraphs to
which they refer.
3. Severability: If any portion of this Agreement is held to be void or unenforceable, the balance
thereof shall continue in effect.
4. Binding Effect: This Agreement is binding upon and inures to the benefit of the heirs, legal
representatives, successors, and assigns of the parties.
5. No Third-Party Beneficiary: This Agreement is for the exclusive benefit of the parties, does not
constitute a third-party beneficiary agreement, and may not be relied upon or enforced by a third
party.
6. Counterparts: This Agreement may be executed in counterparts, which together constitute one
instrument.
7. Integration: This Agreement and all Exhibits attached hereto constitute the entire agreement of
the parties. Covenants or representations not contained herein or made a part thereof by reference,
are not binding upon the parties. There are no understandings between the parties other than as
set forth in this Agreement. All communications, either verbal or written, made prior to the date
of this Agreement are hereby abrogated and withdrawn unless specifically made a part of this
Agreement by reference.
8. Consent to Electronic Signatures: The Parties have consented to execute this Agreement
electronically in conformance with the Montana Uniform Electronic Transactions Act, Title 30,
Chapter 18, Part 1, MCA.
17
Page 10 of 10
IN WITNESS WHEREOF, the parties hereto have executed this Sub-Recipient Agreement on the
_______ day of _____________________2020. SUB-RECIPIENT: CITY:
Paul Reichert Date Date Executive Director
Gallatin Development Corporation, City of Bozeman DBA Prospera Business Network Attest: Attest:
Date Date
City Clerk
Bert Bartle Board of Directors City of Bozeman Gallatin Development Corporation, DBA “Prospera Business Network
Approved as to Form: _________________________________________
Greg Sullivan Date
Bozeman City Attorney
18
1
CITY OF BOZEMAN REVOLVING LOAN FUND
POLICIES AND PROCEDURES
SUB-RECIPIENT AGREEMENT
If a third party has been granted a contract to manage the City of Bozeman’s Community
Development Block Grant Revolving Loan Fund, the contracted third party has the responsibility
for “administering all facets of the City of Bozeman Revolving Loan Fund (RLF)” through a sub-
recipient agreement (the Agreement) with the City of Bozeman. The Agreement includes the
development, application and enforcement of written Policies and Procedures for the RLF and
the creation and operation of an RLF Loan Committee to review and act upon loan requests.
These Policies and Procedures have been written in accordance with the Sub-Recipient
Agreement to ensure the effective management of the City of Bozeman Revolving Loan Fund by
a contracted third-party.
ADMINISTRATION
The Bozeman RLF shall be administered by a Loan Officer/Loan Fund Manager and an
appointed seven member RLF Loan Committee.
Loan Officer/Loan Fund Manager
The Loan Officer/Loan Fund Manager shall be an employee of the Sub-Recipient and appointed
by the Chief Executive Officer of Prospera Business Network. The Loan Officer/Loan Fund
Manager shall provide the day-to-day management of the Bozeman RLF, including:
Promoting the RLF to prospective borrowers,
Assisting prospective borrowers with the application process,
Presenting proposed projects to the Committee,
Completing loan documentation and loan closing,
Servicing the loan portfolio,
Processing monthly loan payments,
Communicating with the Committee, and
Coordinating Committee meetings.
The Loan Officer/Loan Fund Manager shall have no lending decision authority to approve or
modify the terms of loans.
RLF Loan Committee
19
2
The RLF Loan Committee is comprised of seven members, each voluntarily appointed to serve
an un-paid two-year term. Three members of the RLF Loan Committee shall be appointed by
the Board of Directors of Prospera Business Network, three members of the RLF Loan
Committee shall be appointed by the Bozeman City Commission, and one member of the RLF
Loan Committee shall be jointly appointed by the Board of Directors of Prospera Business
Network and the Bozeman City Commission. RLF Loan Committee members may serve more
than one two-year term, if re-appointed by the appointing entity.
The members of the RLF Loan Committee shall disclose in writing any personal or financial
interest they may have in any loan application. If a conflict of interest is believed to exist, the
RLF Loan Committee member is required to identify the conflict and to excuse him or herself
from any RLF Loan Committee action involving the issue that created the conflict.
LOAN PORTFOLIO
Selection Criteria
The Bozeman RLF will provide financing only for projects that are located within the city limit
boundary of the City of Bozeman. All borrowers must agree to remain within the Bozeman city
limits for the life of the loan. Each loan agreement will state this requirement.
Eligible Activities
The goal of the Bozeman RLF is the creation of quality jobs in the City of Bozeman. Priority will
be given to businesses engaged in basic economic activities with more than half of their gross
revenues coming from outside Gallatin County. Quality jobs are defined as those where “the
combination of wages, benefits and workplace environment contribute, to meet or exceed the
City of Bozeman’s Living Wage Ordinance.” In addition, the cost per job created or retained
with RLF funds must not exceed $20,000 per job.
Eligible uses of Bozeman RLF loan funds include: land purchase; construction, rehabilitation,
expansion, or installation of commercial and industrial buildings or facilities; purchase of
machinery or equipment; 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.
20
3
LOAN APPLICATION REQUIREMENTS
No applications will be processed or presented to the RLF Loan Committee until a complete
loan application has been received and reviewed by the Loan Officer/Loan Fund Manager. A
completed loan application will include the following:
Loan Application Form (signed and dated)
Written Business Plan
Explanation of Need for Loan
Employment Projections
Source and Use of Funds Statement
Personal Financial Statement (signed and dated)
Personal Federal Income Tax Returns (last 3 years)
Authorization to Release Information (signed and dated)
Business Financial Statements: Income Statement (last 3 years)
Business Financial Statements: Balance Sheet (last 30 days)
Business Federal Income Tax Returns (last 3 years)
Projected Cash Flow Statement (3 years)
Resumes of Key Personnel
Additional Loan Documents
Vehicle Title(s)
Guarantors Loan Application
Lease Agreement(s)
Buy/Sell Agreement(s)
Inventory List if flooring is involved (list the amount owed on each item).
Copies of Valid Bids for Construction Projects.
Written Cost Estimates for Machinery, Equipment, Furnishings & Fixtures Purchases
Commitment Letter from Bank or Other Lender
Corporate Documents (By-Laws, Articles of Incorporation, Certificate of Existence)
Business Licenses
Bonding Information
Verification of Hazard Insurance
Verification of Life Insurance
Environmental Issues
Each project will be screened relative to environmental impact concerns. An Environmental
Review Form will be executed and signed by the Borrower, which will include a screening for
possible hazardous or toxic contamination, a “true-to-the-best-of-my-knowledge” statement, a
21
4
100-year flood plain and wetland determination, and an indemnifying/hold harmless
agreement for the City of Bozeman and Prospera Business Network.
The Loan Officer will complete an environmental impact review and finding prior to submitting
the loan request to the RLF Loan Committee. Outstanding environmental issues must be
resolved before any loan funds are advanced, unless the project itself involves mitigation. If
necessary, a complete environmental assessment will be prepared by staff and a record of the
assessment will be kept in the project file.
If necessary, staff will require a Phase One Environmental Review be prepared by an
independent, certified engineer. The cost of the Phase One will be the responsibility of the
Borrower. A permanent record will be kept and maintained in the project file, including
pictures, letters from past property owners, and documentation of other relevant
determinations.
Where and when available, the Borrower may be required to purchase one or more title
insurance endorsements to mitigate environmental risk to the City of Bozeman and Prospera
Business Network.
Non-Discrimination Policy
The City of Bozeman Revolving Loan Fund is subject, without limitation, to all federal, state, and
local government laws, ordinances, and policies prohibiting discrimination on the basis of race,
color, national origin, religion, sex, sexual orientation, marital status, age or disability.
Equal Credit Opportunity Act
The City of Bozeman Revolving Loan Fund will comply with the Equal Credit Opportunity Act.
The Act prohibits discrimination against any applicant with respect to any aspect of a credit
transaction on the basis of race, color, marital status, sex, religion, national origin, age, receipt
of income from any public assistance program, or the fact that the applicant has, in good faith,
exercised a right under the Consumer Credit Protection Act or under state law. An indication of
gender may be required of the applicant for statistical purposes only.
INITIAL SCREENING
Completed loan applications will be reviewed and presented to the RLF Loan Committee within
thirty days of receipt by Prospera Business Network. Due diligence and underwriting will not
commence until a completed loan application is received. Each loan application must be
supported by the following due diligence/verifications to be completed within 30 days of
receipt of the completed application:
22
5
Title reports and lien searches for all proposed collateral including UCC collateral
Verification of legal entity’s status
Verification of deposits reported on financial statements
Verification of loans with lending institutions
Borrowers with significant accounts payables and receivables must provide aging
reports
Applications that do not pass this preliminary due diligence phase will be declined.
Secondary due diligence will involve verification of borrower projections, investigation of
market, collateral values, and underlying contracts. Each application will require a different
scope of investigation. However the primary focus of investigation will be on factors that
impact the borrower’s projected cash flow.
All loan files will be maintained in a consistent manner.
COLLATERAL REQUIREMENTS
The RLF Loan Committee will consider the merits and potential economic benefits of each
request. When appropriate, liens, assignments, and personal guarantees will be secured in
accordance with the following principles:
(a) To encourage the participation of other lenders, Prospera Business Network’s lien
position may be subordinated to liens securing other loans made in connection with the
project.
(b) Collateral for working capital loans will normally be liens on inventories, receivables,
fixed assets or other available assets of the borrower.
(c) Security in the form of assignment of patents, licenses, and other assets with a
realizable value may also be required.
(d) Life and/or disability insurance will be required on each owner or key person(s) of the
business or corporation with 20% or more ownership. Such policies will have Prospera
Business Network listed as collateral assignee.
(e) Hazard or liability insurance will be required on all businesses and policies will have
Prospera Business Network listed as loss payee.
(f) Liens on personal or other non-business assets, co-signers, personal guarantees, or
other forms of additional security may be required when the RLF Loan Committee
determines that sufficient collateral is not available for the loan. Personal guarantees
23
6
will be required for any person owning twenty percent of a corporation and who will be
listed as a borrower.
If the collateral for the loan is jointly owned, both the parties must execute the loan agreement
and loan closing documents.
LOAN OFFICER REPORT/ANALYSIS
The Loan Officer’s Report to the RLF Loan Committee will be the end result of the Loan Officer’s
due diligence and application review process. The intent is to complete a thorough and
accurate summary of the loan applicant for consideration by the RLF Loan Committee. The Loan
Officer identifies, quantifies, and assesses the strengths and weaknesses of the applicant.
Through the process, the Loan Officer provides a basis to either manage the risks present in the
loan applicant and recommend approval of the loan or acknowledge the risk cannot be
managed and recommend denial to the RLF Loan Committee.
The Loan Officer’s Report must present sufficient detail, supported by credible financial
summaries and analysis, so that the RLF Loan Committee can make a reasoned judgment and
make a final decision on the application based upon the substance of the Loan Officer Report
without having to review the entire loan application package.
The Report is not based solely on risk analysis, but on risk management as well. The following
information will be addressed in the Loan Officer Report:
Applicant information
Describe eligibility issues of the loan request
Employment benefits
Loan request
Analysis of management ability
Financial analysis of business
Balance sheet analysis
Income statement analysis
Cash flow analysis
Analysis of owner's personal living needs
Collateral analysis
Summary and recommendation
LOAN DECISION
Approval Recommendation
24
7
The loan structuring process should clearly match the loan term and structure to the
individual’s ability to service the debt.
The RLF Loan Committee may forgive or postpone loan payments due to special circumstances
or unanticipated difficulties. When considering requests for postponement of payment
obligations, the RLF Loan Committee will evaluate each individual request on its merit alone
and will base its decision on a thorough analysis of the business financial statements, especially
historical and projected cash flow.
In order to be considered for a deferral, the borrower must submit a written request, along
with copies of their most current financial statements to the Loan Officer. In addition, the
borrower must bring any delinquent loans current before the deferral will be considered. Any
deviation of this policy must be approved by the RLF Loan Committee.
Written notification of the approval and any changes to the proposed loan terms and
conditions will be provided to the applicant and detailed in a commitment letter. The Borrower
will be required to acknowledge terms and conditions outlined in the commitment letter.
Denial
To comply with the Equal Credit Opportunity Act, Prospera Business Network will adhere to the
following procedures:
a. If a loan application is screened out or if it is withdrawn by the applicant before
consideration by the RLF Loan Committee, the entire application and supporting
documents, with a letter explaining why the loan application cannot be considered, will
be returned to the applicant. A copy of the application and supporting documents may
be retained by Prospera Business Network.
b. If a loan application is reviewed and declined by the RLF Loan Committee, the
application and supporting documents will not be returned to the applicant.
c. A formal letter for all declined loan applications must be signed by the Loan Officer and
sent to the applicant. The reasons for the denial must be specified.
d. In addition, the Loan Officer must explain the standard reasons in terms the applicant
can understand so he/she will know what needs to be overcome for any
reconsideration. Otherwise, under provisions of the Freedom of Information Act, the
applicant may be entitled to a copy of the entire loan report.
e. Reconsideration rights must be stated.
Standard reasons for decline are as follows (typically will have 2-3 reasons):
1. Collateral, considered along with other factors, is not deemed sufficient to protect the
interest of Prospera Business Network.
25
8
2. For loan purposes, after taking into consideration prior liens and other credit factors,
the net value of the collateral offered as security is not sufficient to protect the interest
of Prospera Business Network.
3. Lack of reasonable assurance of ability to repay loan (and other obligations) from
earnings.
4. Lack of reasonable assurance the business can be operated at a rate of profit sufficient
to repay the loan and other obligations from earnings.
5 Disproportion of (loan requested) debts to (tangible) net worth before and after the
loan.
6. Inadequate working capital after loan.
7. The result of granting the financial assistance requested would be to replenish funds
distributed to the owner, partners, or shareholders.
8. Gross disproportion between owner's actual investment and the loan requested.
9. Lack of reasonable assurance the applicant will comply with the terms of the loan
agreement.
10. Unsatisfactory experience on existing loan.
11. Not eligible because of policy reasons.
Reconsideration after Denial
The letter which advises the applicant of the decline of the original application must advise the
applicant of the right to reconsideration and the procedure for requesting one. An applicant or
borrower may request reconsideration within sixty (60) days of formal denial.
To prevail, the applicant must demonstrate that it has overcome all legitimate reasons for denial.
Beyond sixty days after denial, a new application is required.
The applicant must supply the following for reconsideration of its request:
(1) The request must be in writing.
(2) All necessary information must be up to date, including a current financial statement
that is less than ninety (90) days old.
(3) State all reasons why the decline should be reconsidered.
RLF Loan Committee will always take first action on all loan application re-considerations. The Loan
Officer Report will give sufficient detail to summarize any changes from the original declined loan
consideration.
LOAN CLOSING
A loan closing will be scheduled with the borrower after final approval by the RLF Loan Committee
and after all contingencies have been satisfied. Original vehicle title(s) and verification of both
26
9
hazard and life insurance must be received prior to loan closing. Corporations must provide a
corporate resolution authorizing the corporation to borrow loan funds and designating specific
officers as signatories. Each borrower shall be provided with a copy of loan closing documents at or
prior to closing.
LOAN SERVICING
Payments
Borrowers will make payments to Prospera Business Network in accordance with the loan
agreement and promissory note executed at loan closing.
Prospera Business Network will track each loan payment, showing the break-down between
principal and interest.
Monitoring
The following items will be specifically monitored by Prospera Business Network staff:
1) Financial Statements and Federal Income Tax Returns will be collected in accordance
with the loan agreement.
2) Life Insurance will be required and verification that the policy is assigned to the Gallatin
Development Corporation, dba Prospera Business Network will be checked based on the
payment schedule (i.e. the borrower is making scheduled premium payments.)
3) Hazard insurance will be required and verification that the Gallatin Development
Corporation, dba Prospera Business Network listed as Loss Payee and additional insured
on the policy. The information will be checked based on the payment schedule.
4) When vehicles have been taken as collateral, the Borrower must maintain full coverage
with collision on the vehicle(s). The Gallatin Development Corporation, dba Prospera
Business Network will be listed as Loss Payee. The information will be checked based on
the payment schedule.
5) If the borrower has employees, proof of worker’s compensation must be provided.
6) UCC filing must be filed with the Montana Secretary of State’s office and a continuation
statement filed prior to the fifth year anniversary of the initial filing.
7) Some loans will have other renewal items. These items will be monitored as well and
continuations filed when necessary.
Annual Site Visits
Prospera Business Network staff will conduct annual site visits at each Borrower’s place of business
as a review of the loan status and update on the business operation. During the site visit, Prospera
27
10
staff will update the Borrower’s employment numbers, inspect collateral, and answer questions the
Borrower may have concerning their loan with Prospera Business Network. In addition, the above
information may be verified periodically throughout the year.
Loan Workouts and/or Restructuring
The Loan Officer will work with the Borrower to develop an acceptable workout plan or loan
restructuring.
The Loan Officer will evaluate the following to determine the restructuring benefit to the business:
Cash flow available for debt service
Aging of account payable
Aging of account receivable
Existing debt service
Historical and current trend of sales and expenses
The tentative workout plan must be presented to the RLF Loan Committee for approval. Once the
workout plan or restructuring has been approved by the RLF Loan Committee, a Change in Terms
document must be executed. The City and Prospera recognize that in some instances a borrower
may not be able to develop an acceptable workout plan.
Foreclosure Policies
In most instances a straight foreclosure will be viewed as the last option. There are, however,
instances when foreclosure is the best option and the only remedy to a deteriorating situation.
Foreclosure may only take place upon the decision of the RLF Loan Committee and the Board of
Directors of Prospera Business Network.
All foreclosure proceedings and actions should be done in such a way as to provide maximum
protection for the loan portfolio, its participating lenders, if any, and for the interest of all affected
parties, including the low and moderate income customers of the Borrower.
Collateral liquidations must attempt to cover the cost of the outstanding loan principal, any
accrued interest owed to Prospera Business Network, and the transaction costs of the liquidation
efforts (e.g. legal, marketing, staff time).
In the event that the foreclosure proceeds do not cover the outstanding loan amounts due and
the cost of the collection, the proceeds will be disbursed as follows:
(a) Collection costs for all parties
(b) Loan amounts due in lien priority
Loan Write-offs
28
11
The Loan Officer will make recommendations to the RLF Loan Committee for loan write-offs.
The RLF Loan Committee will then make recommendations to the Board of Directors of
Prospera Business Network for final approval.
29