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COUNCIL ACTION CORRESPONDENCE
To
Kenneth J. Henderson, Director
Community Development
Subject Cap ita 1 i z a t ion 0 f Sma 11
Business Loan Program
Date January 12,1987
Meeting Date J an u a r y 12, 1 9 8 7
Agenda Item No. 1
Action
The matter relative to the allocation of l%IDB funds on a fifty-fifty
basis, was continued to January 19, 1987, at which time a date and
time will be set for a joint meeting between the Economic Development
Council Executive Board, Mayor and Common Council and Ken Henderson,
Director of Community Development, in order to resolve the issue of
the allocation.
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City Administrator
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,.gftAUNA CLARK
City Clerk
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Cl'lI , OF SAN BERNARD._~O - REQUL.JT FOR COUNCIL AC..ON
From: KENNETH J. HENDERSON, DIRECTOR
Subject: CAPITALIZATION OF SMALL BUSINESS LOAN
PROGRAM
Dept: COMMUNITY DEVELOPMENT
Date: JANUARY 8, 1987
Synopsis of Previous Council action:
On November 3, 1986, the Mayor and Common Council approved in concept the transfer
of the San Bernardino Economic Development Council Small Business Loan Program to
to the City.
On December 8, 1986, the Mayor and Common Council approved the transfer of the
SBEDC Small Business Loan Program to the City and established the City of San
Bernardino Small Business Revolving Loan Program with appropriate guidelines and
standardized loan agreement.
On January 5, 1987, the Mayor and Common Council considered capitalization of the
City Small Business Loan Program and continued the matter to January 19, 1987.
Recommended motion:
Move to approve allocation of a fifty-fifty (SO/50) basis approximately $726,413,
in one percent (1%) IDB funds to the City of San Bernardino Community Development
Department and the San Bernardino Economic Development Council, and, further that
the City Attorney's Office be directed to prepare a resolution allocating future
fund proceeds to City Community Development Department.
ture
Contact person:
Kf'n Hf'ndf'n:::on
Phone:
5065
Supporting data attached:
Staff Report
Ward:
1-7
FUNDING REOUIREMENTS:
Amount: Approx. $363,206
Source: (ACCT. NO.)
(ACCT. DESCRIPTION)
IDB ONE PERCENT FEE
Finance:
Council No:,s:
1/1?/R7 Council Mtg.
't&._""-="
Aaenda I tem No.~
CI'-~-~ OF SAN BERNARD,. '0 - REQU( T FOR COUNCIL ACl -~N
STAFF REPORT
On January 5, 1987, the Mayor and Common Council considered appropriat-
ing anticipated one percent (1%) lOB fee revenues to the City Community
Development Department and to the San Bernardino Economic Development
Council (SBEDC) on a fifty-fifty (50/50) basis and authorizing the City
Attorney to prepare a resolution allocating future fund proceeds to the
City. The matter was continued to January 19, 1987 with staff re-
quested to provide an administrative budget, including appropriate
staffing, the estimated number of loans to be made, and program income
from current outstanding loans assumed from SBEDC.
\vith respect to income received from current outstanding loans, the
following summarizes the loans and lease/purchase agreements assumed by
the City:
Business Loan Amount/Interest ~ Mo. Pymt. Term
Buttercup Bakery $ 70,000/10.5% LD/Amortized $ 920.83 7 years
Option House** $246,000/ inc 1. in Lease/Purch. $ 684.00 -------
lease
Don's Drug Store Lease w/purch. option Lease $1,500.00 10 years
Cajun's Seafood $ 20,000/8 % Amortized $ 191.13 15 years (5 yr CD)
Foothill/Meridian PI. $ 60,000/7% Amortized $ 465.18 20 years (15 yr CD
Heritage House $ 75,000/10% Quarterly Int. $1,875.00 Due 5/17/87
Parking Lot Pymt. Only
La Esperanza* $326,000/10% Amortized $1,700.00 15 years
Julia's Enterprises $ 30,000/8% Amortized $ 363.98 10 years (5 yr CD)
Community Financial $ 60,000/10% Amortized $1,274.82 5 years
Services*
Progressive Mortgage $ 27,314/7% Deferred $ 245.51 15 years
Operation Second $200,000/12% Amortized $4,500.00 2 years
Chance*
*La Esperanza and Operation Second Chance are technically in default. Operation Second
Chance is going through bankruptcy pro~eedings.
**Option House is not current with its payments and Community Financial Services had
six (6) monthly payments deferred from November 1, 1986 to April 1, 1987.
When all of the above is taken into account, only $3,441.12 in payments
is received on a monthly basis plus quarterly interest payments of
$1,875.00 on the Heritage House Parking Lot. Actual monthly program
income should be $11,845.450.
At the January 5, 1987 Council meeting there was a brief discussion
regarding staffing of the economic development loan program function.
Up l1ntil the current fiscal year, the City's CDBG grant averaged about
$2.2 million per year. Authorized administrative staff was sixteen
(16) full-time equivalents (FTE's) for fiscal year 1978/1979 and
75.0264
1/8/87
fifteen (15) FTE's for fiscal years 1979/1980, 1980/1981, and
1981/1982. with the merger of Community Development with the Re-
development Agency in November, 1981, the staffing level was gradually
reduced to nine (9) authorized positions primarily to reduce the size
of the administrative budget and provide more funding for community
projects.
Late last year the Mayor and Common Council authorized the separation
of the Community Development Division from the Redevelopment Agency and
its incorporation into the City Administrator's Office. When Community
Development was part of the Redevelopment Agency, only one (1) clerical
position was necessary, inasmuch as the Agency had a front office
receptionist. With the separation, only one (1) clerical position
(secretary) is assigned to the Department. An additional clerical
position is needed whether or not funding is actually provided to
Community Development to implement the economic development program.
During the above referenced Council meeting, staff was requested to
justify additional staffing requests, provide an administrative budget
and estimate the number of loans to be made with the IDB fee proceeds.
Currently, staff administers all of the CDBG projects approved by the
Mayor and Common Council, three (3) separate loan programs, the
Neighborhood Rehabilitation Program (NRP), Rental Rehabilitation
Program (RRP) and Section 312 program, respectively, and the mortgage
revenue bond and various housing programs. Presently, there is one (1)
Rehabilitation Coordinator who oversees the administration of the three
(3) loan programs described above with assistance from one (1) loan
office and two inspectors.
Based upon the number and type of loan programs currently administered
by the Department, I feel we cannot assume additional functions and
loan programs without the proper funding and staffing. As such, the
following represents the administrative budget necessary to implement
the economic development program:
Sal2-~.l~~
Loan Officer (Range 1111 A/B)-$26,482 at 100% of time:
Sr. Steno Clerk (Range 1071 A/B)-$16,150 at 25% of time:
$ 26,482
$ 4,037
Fringe Benefits
Loan Officer/lOO% of time:
Sr. Steno Clerk/25% of time:
$ 7,415
$ 1,130
Harketing
Advertising:
Brochures:
$ 3,000
$ 1,500
$ 2,000
Travel, Conferences/Seminars:
Rent
116 square feet at $1.25:
$ 1,740
Loans:
$315,902
1/8/87
$363,206
The average loan is estimated to be $30,000 with a program-mandated
maximum of $50,000. As such staff feels 10.5 loans can be made with
the initial capitalization of $363,206. Currently on file are the
following applications:
American Medical Devices:
Cajun Seafood:
RW Enterprises:
Sam Johnson:
Ed Reincke:
$250,000
$ 25,000 (approximately)
$ 50,000
$ 80,000
$150,000 (approximately)
$555,000
With an initial capitalization of $363,206 and revenues from future
mortgage, commercial and industrial bonds, the economic development
program could commence on a relatively firm financial foundation.
Staff recommends adoption of the form motion.
~~~
Kenneth J. Henderson, Director
Community Development Corporation
KJH/lab
file: sblpstaffreport
1/8/87