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Home My WebLink AboutR29-Economic Development Agency ., ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO FROM: Gary Van Osdel Executive Director SUBJECT: CONSIDER REQUEST FROM "TOTALLY KIDS" FOR A $1.5 MILLION LOAN GUARANTEE FOR EXPANSION OF ITS PEDIATRIC SUBACUTE FACILITY n. RIC" 'I\L , 1....-\ DATE: March 22, 2004 SvnoDsls of Previous Commisslon/COUDciVCommlttee Action(s): On March 16, 2004, Redevelopment Committee Members Longville and McGinnis unanimously voted to recommend that the request from Totally Kids for a $1.5 million loan guarantee be forwarded to the Common Council/Community Development Commission for discussion, consideration and possible action. Recommended Motion(s): MOTION: (Mavor and Common Council) THAT UPON RECEIPT OF COUNTY ECD LOAN DOCUMENTS AND A FORMAL REQUEST FOR A $1.5 MILLION LOAN GUARANTEE FOR THE TOTALLY KIDS, INC., PROJECT, APPROPRIATE STAFF BE DIRECTED TO PREPARE THE REQUISITE GUARANTEE DOCUMENT(S) FOR SUBSEQUENT CONSIDERATION AND APPROVAL BY THE MAYOR AND COMMON COUNCIL. -------------------------------------- Contact Person(s): Tim Cook Phone: (909) 384-5133 Third Project Area(s) IVDA Ward(s): Supporting Data Attached: Ii'l Staff Report 0 Resolution(s) 0 Agreement(s)/Contract(s) 0 Map(s) 0 Letters $1,500,000 FUNDING REQUIREMENTS Amount: Guarantee Source: CDBG Funds SIGNATURE: None Commission/Council Notes: COMMISSION MEETING AGENDA Meeting Date: 04/05/2004 Agenda Item Number: RJ.q P;\Agendllll\Comm Dcv Commission\CDC 2004\04-04-05 Tolally Kids Loan.doc ECONOMIC DEVELOPMENT AGENCY STAFF REPORT Consider Request From "Totallv Kids" for a 51.5 Million Loan Guarantee for Expansion onts Pediatric Subacute Facilitv BACKGROUND: The principals of Mountain View Child Care, Inc., dba Totally Kids, have operated 64 facilities for developmentally disabled children and adults in Southern California since the early 1970's. Most of the facilities have been sold off, thereby enabling them to concentrate on programs for medically fragile children at their campus located on south Mountain View Avenue in the City of San Bernardino where they have been in operation for 32 years. Their Pediatric Subacute facility has received broad national and international recognition as a model for efficient caring and effective healthcare for medically fragile and technology-dependent children. Now, Totally Kids desires to expand their existing facilities in order to broaden their service capabilities to the growing population of medically fragile children. The proposed expansion, including land, construction and equipment is estimated to cost approximately $10,S03,000. The intent is to expand the existing medical treatment center from 50 beds to SO beds and to construct an SO-unit Pediatric Day Care Health Center (the "Project"). The Project, when completed, will employ approximately 420 persons. Totally Kids proposes to finance the Project using a combination of an owner's contribution of approximately $747,000, bank financing of $7,556,000, a loan of $2,500,000 from the County Economic and Community Development Department (the "ECD") and an IVDA loan gnarantee of $1,000,000. On January 2S, 2004, the IVDA approved their loan guarantee of $1 million in concept, subject to the following conditions: I. Totally Kids must obtain a real estate loan in the minimum amount of $6,500,000. 2. Totally Kids must obtain a loan in the amount of $1,056,000 from another lender to cover a projected operations deficit during the fill-up period. 3. Totally Kids must obtain a loan from the ECD in the minimum amount of $2,500,000. 4. Personal Guarantees, acceptable to IVDA Counsel, jointly and severally guaranteeing the $1,000,000 back to the IVDA. 5. Delivery to the IVDA of certified copies of the City's Conditions of Approval and all development permits for the Project, together with copies of any State, County and City licenses required for operations. P:\Agendas\Comm Dcv Commisllion\CDC 2004\04-04-05 Totally Kids Lot.n.doc COMMISSION MEETING AGENDA Meeting Date: 04/05/2004 Agenda Item Number: ~ Economic Development Agency Staff Report Totally Kids Loan Guarantee Page 2 Apparently the ECD has been directed to make the $2.5 million loan to Totally Kids for the Project contingent upon the City or Redevelopment Agency guaranteeing such a loan. Thus, Mayor Valles has requested that the Council/Commission consider providing the requested assistance for the Project. At the time of the Redevelopment Committee Meeting on March 16,2004, Agency staff was unable to provide sufficient information to enable the Committee to make an informed decision. On that date, neither the terms and conditions of the primary loan or the ECD loan were available for consideration and staff was unable to provide any information on the proposed work program and schedule, the financial strength and viability of Totally Kids and its principals, and any proposed security for a City/Agency loan guarantee. The Redevelopment Committee did leam from a representative of Totally Kids, who attended the meeting, that Valley Bank will most likely be the principal lender and that the IVDA guarantee will be used in part to guarantee the ECD loan. CURRENT ISSUE: Based on the Agency's current budget, as well as projected revenues and expenditures for the next five years, the Agency would not be able to evidence a legitimate ability to back-up a loan guarantee in the foreseeable future, regardless of amount. Thus, within any loan guarantee agreement involving the Agency, the County would be required to acknowledge the Agency's inability to make good on its guarantee. Likewise, in light of the City's budget woes, a City loan guarantee using general fund monies would not be prudent at this time. Therefore, in the event the Council elects to recommend a City/Agency involvement in the Project, the Council may wish to consider pledging CDBG funds to back-up its share ($1.5 million) of the overall guarantee of the ECD loan and require personal guarantees from the principals of Totally Kids acceptable to the City Attorney, jointly and severally guaranteeing the $1.5 million back to the City. Under this scenario, Staff would recommend that in the event of a defined default on the ECD loan, the City's CDBG backed guarantee be paid out over six years at $250,000 per year without interest, beginning in the first full CDBG Program Year following the date ofthe defined default. ENVIRONMENTAL IMPACT: The act of providing a loan guarantee is exempt under CEQA. FISCAL IMPACT: In the event the City guaranteed the ECD loan with CDBG funds and Totally Kids failed to repay the ECD loan, then the City would be called upon to fund the loan guarantee, at that time incurring a cost of up to $1,500,000 payable in 6 consecutive fiscal years. COMMISSION MEETING AGENDA Meeting Date: 04/05/2004 Agenda Item Number: ~ P:\Aj;endas\Comm Dev Commission\CDC 2004\04-04-05 Totally Kids Loan.doc . , . Economic Development Agency Staff Report Totally Kids Loan Guarantee Page 3 RECOMMENDATION: That the Mayor and Common Council adopt the form Motion. P:\Agendas\Comm Dev Commission\CDC 2004\04-04-05 TotaUy Kids Loan.doc:: COMMISSION MEETING AGENDA Meeting Date: 04/05/2004 Agenda Item Number: ~