SR-410-001 (15)
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11- 7<
OCT 21'1..
C/ED:EDD:NG:mb
CouncIl MeetIng 10/23/84
Santa MonIca, CalIfornIa
TO:
Mayor and CIty CouncIl
FROM:
CIty Staff
SUBJECT: Recommendatlon to Approve Mall Improvement Loan Fund
Program DesIgn CrIterIa
INTRODUCTION
On June 26, 1984 I Ci ty Counc 11 approved a $ 300,000 loan to the
Thl~d Street Development CorporatIon (TSDC) to establlsh a Mall
Improvement Loan Fund (MILF) contIngent upon Councll approval of
the prog~am desIgn crIterIa.
ThIS report p"'esents the proposed
MILF program crIterIa and recommends CouncIl approval. Upon ap-
proval, the CIty WIll execute the MILF loan agreement and p"'omls-
sory note WIth the TSDC for operatIon of the program.
BACKGROUND
On June 27, 1984, the TSDC In conJunctIon WIth the CIty, Issued a
Request for Propos al s ( RFP) to fInane ial i nstl tut Ions for the
operatIon of the MILF.
Four banks responded:
Bank of AmerIca,
FIrst Interstate, Santa Monica Bank and Securi ty PacIfic. Each
of the four proposals was carefully revIewed by the TSDC and CIty
staff.
After deliberatIon a'1d further research I Santa MonIca
Bank was selected by the TSDC to operate the Program. The MILF
program descrIbed In thIS report i~cludes the program offered by
Santa MonIca Bank (Attachment 1). The TSDC and Santa MonIca Bank
are the partIes to the bank operatIng agreements. The Clty wIll
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II-A
I1CT 2 3 1984
retaIn oversIght responsIbIlIty under the terms of Its loan
agreement wIth the TSDC as approved by CouncIl on June 26th. The
loan agreement WIll bInd the TSDC to the MILF desIgn criterIa.
DISCUSSION
As IndIcated In the ThIrd Street Mall Work Program, the Mall's
appearance IS chaotIc wIth no unIfYIng elements to gIve the area
a unIque character. The Jumble of signs, haphazard advertIse-
ments and deteriorating facades make the area look more like an
agIng commerc lal strl p than an Inv 1 tIng pedestr I an retaIl area.
The effect has been a drastIc declIne in Mall patronage,
munIcIpal revenues and reduced bUSIness and employment
opportunItIes.
In an at tempt to counter these forces, the Mall Wor k Progr am
recommended a three pronged approach: the development of Mall
De SIgn GUIdelIne S to enabl e uni flcat Ion of slgnl flcant des 1 gn
elements j the establishment of a Mall Improvement Loan Fund to
provIde fInanCIal Incentives to Implement the DeSIgn GUIdelInes;
and the developme:1t of the Mall SpecIfIc Plan to coordInate the
future development of the area. To date, the DeSIgn GUIdelines
have been prepared and adopted by the Archltectural ReVIew Boardj
the Mall Spec I flC Pi an is underway by the TSDC; and a $300 ~ 000
loan has been made to the TSDC to establlsh the Mall Improveme:1t
Loan Fund.
Pursuant to the City CouncIl's dlrectlon~ CIty staff In conJunc-
tIon wlth the TSDC have prepared the attached Mall Improvement
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Loan Fund for Council "'ev lew and approval. The progr am IS In-
tended to improve the appearance of the Mall, and to aSSIst In
creatlng and retalTIlag Jobs for low and moderate Income resi-
den ts. The program is deSIgned to accompllsh thl s goal by uSlng
below market rate loans, technIcal aSSIstance and dIrect ma"'ket-
lng by the TSDC to gene"'ate partIcIpation In the program.
ElIgIbility requirements for participatIon in the MILF program
are defl:1ed In Attachment 2 and ensure that the development and
revltalIzation goals of the Clty are met. The two types of loans
to be offered through the MILF at thIS tIme are:
1. Facade Improvements: Facade improvements refer to lm-
provements to both the front and rear facades of a
bUIldIng. All Improvements must meet the standards set
by the Mall Deslgn GUIdelInes. Not less than 60% of the
MILF WIll be allocated for these improvements WhICh WIll
upgrade the image of the Mall and create a favorable
enVIronment for Investors, merchants, and users of the
Mall.
2. InterIor Capital Improvements: CapItal Improvements
refer to permanent interIor Improvements for moderniza-
tIon, rennovatlon, fIxtures, code improvements, or
1 easehol d Improvements (e. g., lighting I pain tlng , car-
pets). Interior Improvement loans WIll be structured to
contrIbute to the upgrading of the Mall.
Another Important tool necessary for the Mall's reVitalizatIon IS
the provISlon of workIng capital and eqUipment loan aSSIstance to
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Mall merchants. Such loans can aSSIst, for example, In maIntaIn-
Ing ne 19hborhood serv ing buslnes se s or In at tr actl ng merchants
WhICh otherWIse maIntaIn or expand the bUSiness and product mIX
currently avaIlable on the Mall. The development of such a loan
program, however, requIres a knowledge of ex Isting bUSInesses,
market condItions and demand factors. This informatIon WIll not
be avaIlable until the market study reqUIred as part of the Mall
SpecIfIc Plan IS completed In early 1985. At that tIme, staff
will return to CIty CouncIl WIth a specIfIc program recommenda-
tIon regardlng the Incluslon of a worklng capItal and eqUIpment
loan component with the MILF.
The TSDC WIll operate the MILF through I ts Loan and Investment
CommIttee. The Committee WIll reVIew all applicatIons for
eligIbIlIty and subsequently process all elIgIble applIcations as
either dIrect or Interest reductIon loan requests. Direct loans
WIll be made by the TSDC USIng the lendIng crIteria descrIbed In
Attachment 2, and WIll be processed by Santa MonIca Bank. Inter-
est reductIon loans ''''111 be made by Santa MonIca Bank USIng Its
standard commercIal lending crl teria and the TSDC WIll "Wil te
down" the Interest rate. The TSDC WIll manage Its loan portfolIO
In a dIlIgent manner necessary to ensure payback to the City pur-
suant to the terms of Its loan agreement. The TSDC Loan and In-
vestment CommIttee IS comprIsed of four DI"'ectors; approval or
denial of a loan WIll requIre the consensus of three of the four
Committee members. The four Directors and their backgrounds are
described below:
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Edythe Chute: Se~llor Loan Officer at Union Bank in North
Hall ywood . Ms. Chute spec lall zes In commerc 1 al lend Ing and
was the DIrector primarily responsible for aSsIsting in
drafting the attached program criteria.
Hermez Moreno: Private Atto!"ney. Mr. Moreno specializes In
business, corporate and real estate law. He IS a member of
the Mexican American Bar Association and IS an AdVisory Board
Member of Centro Legal de Santa Monica, Inc.
Vito Cetta: Retired Architect. Mr. Cetta was a local archi-
tect and small businessperson whose offices were located on
the Mall. He IS experIenced In both residential and commer-
cIal development proJects.
Maria Archaederra: ExectIve DIrector of Westside Independent
Services to the Elderly. Ms. Archaederra IS familiar WI th
senIor CItizens Issues and 15 a good representative of the
reSident community. Her offIce IS located on the Mall.
BUDGET/FISCAL IMPACT
Funds have been approved by CouncIl for the MILF In the form of a
$150JOOO loan to the TSDC With CDBG funds and a $150,000 match-
Ing loan from the Gener al Fund. The terms of the loan and loan
agreement between the TSDC and the CIty were approved by CouncIl
on June 26, 1984. The terms of the loan are as follows: term-
15 years; interest 10% per annum (sImple Interest) j repayment -
pr'ElClpal IS to be deferred for the term of the loan, Interest
payments begin in the SIxth year; securIty - promissory note and
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loan agreement. The recomme~ded action In this report creates no
addItIonal fIscal Impact to the CItyls FY84-85 budget.
RECOMMENDATON
It is respectfully recommended that CounCIl approve the MILF pro-
gram and authorize the CIty Manager to negotIate and execute
necessary documents to Implement the program consIstent WIth the
attached crIterIa.
Prepared by: Nancy GutIerrez, Downtown Project Manager
EconomIc Development DIvisIon
CommunIty and EconomIc Development Department
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Attachment 1
Santa Monica Bank
&chard E Lawrenct
Ex'cutn-e VICe PresIdent
September 6, 1984
Mr. Ernest A. Kaplan, Interim Chair
Third Street Development Corporation
City of Santa Monica
Post Offlce Box 2200
Santa Monica, Callfornia 90401-2200
Dear Mr. Kaplan:
As a follow-up to our letter of July 12, 1984, and our subsequent
meeting wlth members of your Board, some speciflc points of our
proposal should be expanded upon. As we indicated, Santa Monlca
Bank would provide total prlncipal funding on the following basls:
a. Loans must meet credit quallficatlons of the Thlrd
Street Development Corporation and Santa Monica Bank.
b. The maximum loan to any business entity, owner or
tenant, would be $30,000.
c. The interest rate would be fixed at the current
prime rate of interest at the time of fundlng.
d. Terms would be as follows:
Maximum Loan Purpose Term
$ 10,000 Worklng Capital 6 months
$ 25,000 (*) Capital Improvements 10 years maXlmum
$ 25,000 (*) Facade Improvements 10 years maXlmum
(*) Term not to exceed term of the property lease.
e. Arrangements can be made for the Thlrd Street Develop-
ment Corporation to buy down the rate to a lower rate
of interest.
...
1251 Fourth Slrur, PO 80)0. 550. 5anra M6I'J1ca, Cakftrflla 90406 (213) 394-9611
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Mr. Ernest A. Kaplan
September 6, 1984
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f. Santa Monica Bank will be responsible for servic1ng
ftnd collection, and will assume any losses on these
loans.
g.
No loan charges would be made except for
of pocket expenses for appraisals, title
recordings, etc., if real estate related
made.
actual out
pOlicies,
loans are
Loans which do not meet the qualifications of Santa Monica Bank1s
credit standards and are subsequently made by TSDC, may be placed
with Santa Monica Bank on a collection basis. In this case we
will act as agent for the Tsnc and will prov1de normal collect1on
activit1es for 90 days of del1nquency. In addition, if a Notice
of Default 1S required, Santa Monica Bank w1ll file same and
charge the Tsnc for out of pocket expenses 1ncurred in the collec-
tion effort. For this service an annual charge of 1% of the un-
pa1d balance will be made at the beginning of the loan and on
each annual review date. -Subsequent to the 90 day collect~on
effort, the accounts-would be returned to the Tsnc. ~ThlS arrange-
ment 1S subJect to approval by bank counsel as to Santa Monica
Bank acting as agent when loans are made directly by the Third
Street Development Corporation.
I hope this Jetter clarifies the orig1nal proposal and if there
are any further questions. please do not hesitate to contact me
or Mike Walling, Senior VLce Presldent.
Sincerely,
R. E. Lawrence
REL:as
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PROGRAM PARAMETERS
MALL IMPROVEMENT LOAN FUND
Table of Contents
PAGE
PURPOSE
2
TYPES OF LOANS
2
1. Facade Improvements
2. InterIor Capital Improvements
ELIGIBILITY REQUIREMENTS AND PRIORITY
3
1. Property ElIgIbIlIty
2. ApplIcant ElIgIbIlIty
3. ActIVIty EligIbIlIty
a. Facade Improvements
b. InterIor CapItal Improvements
4. prIorIty
TYPES OF ASSISTANCE OFFERED
10
1. DIrect Loans
2. Interest ReductIon Loans
3. Technical ASSIstance
4. PortfolIo Management
LOAN TERMS
11
1. prInCIpal Amount: MaXImum and MInImum
2. Interest Rate
3. Repayment Terms
4. AcceleratIon Requirements
5. Repayment Schedule
6. Loan SecurIty
7. Dlsbursement RequIrements
8. CompetItIve Bld RequIrements
9. AddItIonal UnderwrItIng RequIrements
ROLES AND RELATIONSHIPS
17
1. TSDC
2. Santa MonIca Bank
3. CIty of Santa Monica
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Mall Improvement Loan Fund
Program Parameters
PURPOSE
The phys~cal deterloratlon of the Thlrd Street Mall has resulted
In a declIne in Vlsltor patronage and retall sales and a reduc-
tlon In buslness and employment opportunltles. Shoppers are
reluctant to frequent the area In large part because the shoppIng
enVlronment IS not percelved as pleasant, InvItIng or safe. The
maln purpose of the Mall Improvement Loan Fund (MILF) IS to as-
SlSt In creating a revItalIzed enVlronment favorable to shoppers,
Investors, merchants and property owners. In addl tlon, the MILF
IS to aSSIst In malntalning vltal business serVlces on the Mall
and creatIng or retalnlng jobs for low to moderate Income reSI-
dents. The program recognIzes that the particIpatIon of the prl-
vate sector In the use of these funds IS the best approach toward
maxImizIng the Impact of the program and In solvIng the problems
plaguIng the Mall today. Wherever posslble, the program recog-
nIzes the need for prIvate Investment to be present before these
funds can be used.
The program parameters descrIbed hereIn have been prepared to
ensure that loan funds resul t In Improvements WhIch physIcally
upgrade the Mall and are vislble to patrons. Loans wlll be made
for the followlng purposes only:
1.
Facade Improvements:
Facade Improvements refer to Im-
provements to both the front and rear facades of a
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bUIlding IncludIng storefronts wIthIn a publIC passage-
way.
All Improvements must meet the standards set by
the Mall DeSIgn GUIdelInes. Not less than SIxty percent
(60%) of the MILF WIll be allocated for these Improve-
ments WhIch WIll aSSIst in upgradIng the Image of the
Mall, maIntainIng hIstorIcally and archItecturally SIg-
nIfIcant bUIldIngs, and creatIng a favorable enVIronment
for Investors, merchants, and users of the Mall.
2.
InterIor CapItal Improvements:
InterIor capital Im-
provements refe~ to permanent InterIor Improvements such
as for modernIzatIon, rennovatlon, fIxtures, code Iffi-
provements, or leasehold Improvements (e.g., lIghtIng,
paInting, carpets).
Interior capItal Improvement loans
must fund Improvements WhIch contrIbute to the VIsual
upgrading of the Mall.
Both types of loans defIned above must be made In complIance WIth
the reqUIrements set forth In thIS document. The appl icatlons
WIll be revIewed by the ThIrd Street Development CorporatIon
(TSDC) for compliance WIth the follOWIng elIgIbIlIty requlre-
ments: property elIgIbllty; applIcant elIgIbIlIty and actIVIty
eligIbIlity.
If elIgIble, applIcants WIll work WIth the TSDC and
Santa MonIca Bank to determIne the type of aSSIstance needed and
the approprIate loan terms.
ELIGIBILITY REQUIREMENTS AND PRIORITY
1.
Property EII9iblllty.
the property must be:
In order to be conSIdered for a loan,
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a. a commercIal, commerc Ial/off Ice or commerc Ial/
resIdentIal property located wIthIn the ThIrd Street
Mall ProJect Area (see map).
b. In need of rehabIlitatIon or physIcal improvement, or In
need of complIance wIth the Mall DesIgn GUIdelInes In an
amount not less than $1,000;
c. physIcally and fInancIally feasIble of rehabilItatIon
and improvement; and
d. brought Into complIance wIth applIcable bUIldIng codes.
2. ApplIcant EII9IbIlity.
the ApplIcant must:
In order to be consIdered for a loan,
d. be an IndIvIdual or a famIly WhICh IS eIther the owner
of the property to be rehabIlItated or Improved, or the
purchaser of such property under a recorded land sales
contract; or
b. be a corporatIon, partnershIp or cooperatIve WhIch IS
eIther the owner of the property to be rehabIlItated or
improved or the purchaser of such property under a re-
corded land sales contract; or
c. be a leaseholder to the property to be rehabIlItated or
improved WIth a legally bIndIng lease at least SIX
months longer than the term of the loan. A leaseholder
must receIve wrItten authorIzatIon from the owner of the
property to carry out physIcal Improvements unless per-
mItted In the terms of the lease.
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d. demonstrate both the wIllIngness and adequate potentIal
financIal capacity to repay the loan amount In accor-
dance wIth the terms and condItIons specified In the
promIssory note or other loan securIty Instrument. No
loan wIll be approved if the applicant's record shows a
dIsregard for former oblIgatIons.
e. demonstrate that the bUSIness, property or leasehold has
been IdentIfIed by the Mall SpecIfIc Plan as an ap-
proprIate use for the subJect locatIon. Until the adop-
tIon of the Mall SpecIfIc Plan, the TSDC WIll determIne
elIgIble uses.
f. be the owner of a bUSIness, or the owner of property
leased to a bUSIness WhICh meets the U. S. Department of
Commerce, Small BUSIness AdminIstratIon (SBA), 503 Loan
Program deflnItIon of a small bUSIness. The Small BUSI-
ness AdmInIstratIon crIteria reqUIres that:
1. the bUSIness must be a for-profIt corporatIon,
partnershIp, sole proprietorshIp, not-for-profIt
corporatIon, collectIve or cooperatIve; and
2. the bUSIness not exceed SBA net worth and average
net profIt after tax reqUIrements whIch are based
upon Standard Industrial Code clasSIfIcatIons for
each type of bUSIness.
g. submit a check to the TSDC In the amount of $150.00 as
part of the applicatIon process to cover potentIal out
of pocket costs for process i ng the loan applIcatIon.
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ThIS charge less the actual expenses WIll be refunded to
the appl icant upon approval or denIal of the loan. In
the event the applIcant chooses not to proceed after
approval, the reImbursement WIll be forfeIted.
h. agree to not dIscrimInate on the baSIS of race, creed,
color, national orIgIn, sex, sexual preference, physical
handIcap or age In hIrIng or otherWIse conductIng
bUSIness.
2.
~ctlVlty ElIgIbilIty.
In order to be considered for a loan,
the ApplIcant must apply and meet the crIterIa for the fol-
lOWIng types of loans:
a. Facade Improvement Loans
l. Improvements to the front or rear facade of a
bUIlding must be In complIance WIth the Mall DeSIgn
GUIdelInes.
PrelImInary
plans,
specifIcatIons,
renderIngs and cost estImates of the proposed Im-
provement must be submItted as part of the applIca-
tIon package.
2. Loans for secur I ty measures, energy conservatIon,
COde-related improvements, or slgnage WIll be gran-
ted only when they are a part of a broader phYSIcal
Improvement to the bUIldIng.
3.
All
Improvements
must
meet
applIcable
code
reqUIrements.
4. Other costs which may be fInanced WIth a facade
Improvement loan Include:
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a. loan costs Incurred by the borrower In the
process of obtaInIng a loan.
Such InCIdental
costs may be deducted from the proceeds of the
loan at the loan closIng and Include the costs
of any requ Ired tl tIe report, loan or Ig 1 na-
tIon, loan recordIng, appraisal, lot book or
credIt check, or reconveyance fee;
b. reasonable costs of necessary archItectural
and/or engIneerIng serVIces In any case where
the applIcant employs a prIvate fIrm to pre-
pare plans and/or speCIfIcatIons for the Im-
provement work; and
c. government fees.
5. Upon deplet 1 on of other sources of fund 1 ng, Com-
munIty Development Block Grant (CDBG) funds wIll be
used to fund or subsidize facade Improvement loans.
In thIS event, the borrower must create, or retaIn
employment for a mInImum of 6 months or prOVIde
paId traInIng opportunItIes for low to moderate
Income persons as defIned by the U. S. Department
of HOUSIng and Urban Development, In a ratIO of one
thIrty hour per week pOSItIon per $15,000 In CDBG
funds.
The TSDC WIll notify applIcants of the use
of CDBG funds prIor to the submiSSIon of an
applIcatIon.
b. InterIor CapItal Improvement Loans
1. Loans wi 11 be granted for Inter 1 or Improvements
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such as modernizatIon, rennovatlon or restoration
of property, fIxtures, and leaseho Id Improvements
(e.g., lightIng, paIntIng, carpets).
2. Improvements must be generally VISIble from the
ground floor and contrIbute to the physical upgrad-
ing of the bUSIness.
Preliminary plans, speclflca-
tlons and cost estimates of the proposed Improve-
ments must be submitted as part of the application
package.
3. I nter I or capi tal Improvement loans will be 1 ssued
only If the exterior facade of the bUIlding 15
maIntained In a manner conSIstent WIth Mall DeSIgn
GUIdelines. ApplIcants whose bUIldIngs suffer from
deferred maIntenance or are not in complIance WIth
the Mall DeSIgn GUidelines WIll be reqUIred to In-
vest the minImum dollar amount necessary to meet
the Mall DeSIgn GUIdelInes.
However, an applIcant
may request a waiver from the TSDC of thIS condl-
tlon l.f the applIcant can demonstrate that com-
plIance Wl. th th 1 S condl t Ion would create an undue
hardShIp.
4. Any codes or ordInances pertaining to Improvements
or the installation and operatIon of eqUipment must
be met.
5. Other costs whIch may be fInanced with an InterIor
capItal Improvement loan are:
a. loan costs Incurred by the borrower In the
process of obtaInIng a loan.
Such InCIdental
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costs may be deducted from the proceeds of the
loan at the loan settlement and Include the
costs of any requ Ired tI tle report, or Ig Ina-
tIon fee, loan recordIng, appraIsal, lot book
or credIt check or reconveyance fee;
b. reasonable costs of necessary archItectural
and/or engIneering serVIces In any case where
the applIcant employs a prIvate fIrm to pre-
pare plans or speCIfIcatIons for the Improve-
ment work; and
c. government fees.
6. Upon depletion of other sources of fundIng, Com-
munity Development Block Grant (COBG) funds wIll be
used to fund or SUbSIdIze InterIor capItal Improve-
ment loans.
In thIS event, the borrower must cre-
ate, or retaIn employment for a mInImum of 6 months
or prOVIde paId traInIng opportunItIes for low to
moderate Income persons as defIned by the U. S.
Department of HOUSIng and Urban Development in a
ratio of one thlI~ty hour per week pOSI tion per
$15,000 In COBG funds. The TSDC wIll notIfy applI-
cants of the use of COBG funds prIor to the submls-
slon of the applIcation.
c. PrIorIty - In reVIeWIng loan applIcatIons, prIorIty will
be gIven to:
1. bUSInesses or propertIes WhIch front on to the
ThIrd Street Mall;
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2. bUIldIngs WhICh have been IdentIfied In the Mall
DesIgn GUIdelInes as hIsto~ically or archItectural-
ly sIgnIfIcant;
3. requests WhICh reqUIre the least amount of interest
reduction or direct loan assIstance; and
4. VItal busIness serVIces IdentIfIed by the Mall
SpeCIfIc Plan.
TYPES OF ASSISTANCE OFFERED
1. DIrect Loans
The TSDC may make loans dIrectly to the applIcant USIng the
lendIng crIteria desc~lbed hereIn and authorIze Santa Mania
Bank to process and maintain the loan.
2. Interest ReductIon
Santa MonIca Bank, under contract wIth the TSDC, may make a
loan USIng Its standard commerCIal lendIng crIterIa WIth the
TSDC "wrItIng downtl the Interest rate. "WrItIng down" the
Interest rate IS defIned as the TSDC paYIng the bank a lump-
sum payment equal to the present value of the dIfference
between the bank's rate and the deSIred SUbSIdIzed rate. In
the event of full prepayment, a pro rata portIon of the sub-
SIdy IS refundable to the TSDC from the bank.
3. Technical Assistance
The TSDC WIll provi de techn lcal, fi nanc 1 al and management
assistance to applIcants.
4. PortfolIO Management
The TSDC Will review each applicatIon for complIance WIth the
elIgIbIlIty standards descrIbed above. ElIgIble applIcatIons
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WIll be forwarded to Santa MonIca Bank or processed as dIrect
loans by the TSDC.
The TSDC wIll manage Its loan portfolIo
In a dIligent manner necessary to provIde reasonable assuran-
ces of repayment to the Cl ty pursuant to the terms of Its
loan agreement.
LOAN TERMS
1. PrIncIpal Amount
a. Facade Improvement Loans
1.
01 rect loan from TSDC:
$1,0'0'0'.
MaXImum $25,0'0'0'; MInImum
2. Interest reductIon loan through Santa MonIca Bank:
MaXImum $25,0'0'0'; MInImum $1,0'0'0'.
b. Interior CapItal Improvement Loans
1.
Di rec t loan from TSDC:
$5, liHH3.
MaXImum $25,00'0; MInImum
2. Interest reductIon loan through Santa MonIca Bank:
MaXImum $25,0'0'0'; MInImum $1,0'0'0'.
c. The total maXImum aggregate amount to anyone borrower
shall be lImIted to:
1. $30',0'0'0' for a dIrect loan from the TSDC.
2. $30',0'0'0' for an Interest reduction loan through San-
ta MonIca Bank.
d. No one appl ican t may reee 1 ve more than two loans from
the MILF untIl at least one loan has been fully repaId.
2. Interest Rate
a. Dl reet loan from TSDC: Not less than 50'% of then pre-
vaIlIng prIme rate, fIxed at the tIme of loan approval.
b. Interest reductIon loan through Santa MonIca Bank: Not
less than 50% of the then prevaIlIng pr ime rate, fIxed
at the time of loan approval.
_-_11 -
3. MaXImum Term for Repayment
a. Facade Improvement Loans
1.
DIrect loan from TSDC:
years.
10 years, amortIzed over 15
2. Interest reductIon loan through Santa MonIca Bank:
10 years, amortized over 15 years.
3. A mInimum term may be establIshed for a loan based
on other crIterIa such as term of lease or abIlIty
to pay on a shorter term.
b. InterIor CapItal Improvement Loans
1. DIrect loan from TSDC: 10 years, amortIzed over 15
years.
2. Interest reductIon loan through Santa MonIca Bank:
10 years, amortIzed over 15 years.
3. A mInImum term may be establIshed for a loan based
on other criterIa such as term of lease or abIlIty
to pay on a shorter term.
4. AcceleratIon ReqUIrements
a. Santa MonIca Bank WIll set its own acceleratIon requIre-
ments for the Interest reduction loans In addItIon to
those establIshed by the TSDC.
b. The TSDC may reqUIre that the outstandIng balance of the
prInCIpal loan amount and the unpaId interest due on
such balance, are ImmedIately due and payable under the
follOWIng condItIons:
1. In the event of sale or transfer of the property;
(If the transfer occurs WIthIn 12 months of the
executIon of the loan, the borrower shall pay to
the TSDC an addl tIonal $5,000 prepayment penal ty.
The borrower may be excused from payment of saId
penalty If It is demonstrated that the transfer was
- 12 -
not for speculatIve reasons and beyond the control
of the borrower. In the event of death of the ap-
plicant, the prepayment penalty shall be waived);
2. in the event the borrower defaul ts in meeting any
of the terms and condItIons of the loan;
3. In the event the borrower subleases or cancels a
lease WIthout the prIor wrItten approval of the
TSDC.
5. Repayment Schedule
a. Santa MonI ca Bank wIll set 1 ts own repayment schedule
for the Interest reductIon loans.
b. Under the terms of a dIrect loan from the TSDC, the bor-
rower may repay any part of the outstandIng balance of
the loan WIthout IncurrIng a prepayment penalty; SUbJect
to complIance with condItIons 4 b. (1-3).
c. The startIng date for repayment of a dIrect loan from
the TSDC IS as follows:
1. If loan closIng IS completed on or before the 15th
of the month, the fIrst monthly payment is due on
the fIrst day of the succeedIng month.
2. If loan closing IS completed after the 15th of the
month, the fIrst monthly payment IS due the fIrst
day of the second succeeding month.
3. The fIrst monthly payment WIll reflect an approprI-
ate adJustment for Interest due on the full amount
of the loan. Usually th 1 5 will be a downward ad-
Justment If the loan settlement IS completed before
_-__1)_- _
the 15th, and an upward adJustment If completed
after the 15th of the month.
6. Loan SecurIty
a. Santa MonIca Bank wIll set Its own securIty requIrements
for the Interest reductIon loans.
b. TSDC dIrect loans shall meet the followIng securIty
requIrements:
1. Collateral requIrements may Include real property,
ass Ignmen t of leases, leaseho ld lInprovemen ts, and
personal guarantees.
2. The borrower must maIntaIn the property In sound
conditIon durIng the term of the loan.
3. The borrower must obtain and maIntaIn fire and
casualty Insurance durIng the term of the loan.
4. The borrower shall not amend lease terms, borrow
additional funds, or create or allow to eXIst a
lIen agaInst any property or lease beIng used as
securIty for the loan wIthout prIor written approv-
al of the TSDC.
5. The TSDC may subordInate loans under condItIons
such as multI-bank particIpation or prevIous debt.
7. DIsbursement RequIrements
a. The borrower shall agree to permIt the TSDC or Its as-
sIgnee, to act as escrow agent of the loan proceeds and
to d I sbur se the funds In the manner set forth in the
loan agreement. The TSDC may release funds as work IS
completed In conformance with loan terms, approved plans
- 14 -
and specIfIcatIons. The borrower shall permIt the TSDC
to Inspect the Improvement work and all contracts,
materIals, equIpment, payrolls and condItIons of employ-
ment pertaInIng to the work.
b. The borrower shall agree to use the proceeds of the loan
to pay only for those actIvitIes for WhICh the loan was
approved.
8. CompetitIve BIds for Construction Work
a. Procurement must be competItIve on each proposed proJ-
ect. The applIcant must choose the contrdctor/supplIer
but the TSDC shall retaIn fInal approval.
b. A contract may not be awarded to a contractor who has
been dIsqualIfIed by the U. S. Department of HousIng and
Urban Development and IS on the Department's dIsbarred
contractors lIst.
9. AddItIonal UnderwrItIng RequIrements
a. Santa MonIca Bank wIll use Its general standard commer-
cIal lendIng criterIa on any applIcatIon for an Interest
reductIon loans.
b. ApplIcations for TSDC dIrect loans WIll be revIewed as
to the elIgibIlIty as stated hereIn and as to the applI-
cant's busIness hIstory, management expertise, fInancial
condItIon trade standIng, and other criterIa as may be
establIshed by the TSDC.
c. A cash flow analysIs wIll be required of all bUSInesses
applYIng for a MILF loan. The purpose of the analysIs
- 15 -
IS to proJect the factors affectIng the future of the
busIness and Its abIlIty to meet its future oblIgatIons.
d. ApplIcants WIll be requIred to submIt the follOWIng
documents which comprIse the applIcatIon package:
l. The standard Santa Monica Bank applIcatIon form.
2. A current Personal FInancIal Statement.
3. A general BUSIness InformatIon Form provIded by the
TSDC WhICh provIdes InformatIon on ownershIp, SIze
(# of employees), method of collaterizatIon, and
type of bUSIness and marketIng informatIon.
4. A bUSIness fInanCIal statement and/or tax returns
for the last three years.
5. A narrative descrIptIon of the proposed project
Including method of meetIng applIcable employment
reqUIrement such as preference for CIty reSIdents.
6. AvaIlable cost estimates, plans, speCIfIcatIons and
renderIngs.
7. Any addItIonal fInancial Information that may be
necessary for the TSDC or Santa MonIca Bank to ade-
quately reVIew a loan applIcatIon.
ROLES AND RELATIONSHIPS
1. The TSDC WIll be responSIble for the follOWIng:
a. T8DC staff WIll market the MILF, dIstrIbute Information,
answer
questIons,
and
screen
applicatIons
for
elIgibilIty.
b. Under the Interest ReductIon Program, the TSDC Loan and
- 16 -
Investment
CommIttee
and
staff
WIll
perform
the
fOllowIng services:
1. Screen and refer applIcants to Santa MonIca Bank
and
furnIsh a
certIfIcate
of
elIgIbIlIty,
a
completed bank loan applIcatIon, and a statement of
the rehabIlItatIon or other work to be performed.
2. DetermI ne subs Idy level and amount of payment to
Santa MonIca Bank.
3. Approve work and authorize dIsbursement.
4. MonItor work to be performed pursuant to the terms
of the loan agreement and these program design
crIterIa.
c. Under the DIrect Loan Program, the TSDC Loan and
Investment
CommIttee
and
staff
WIll
perform
the
following serVIces:
1. Review applIcatIons, apply lendIng criteria, and
approve or deny loans.
ApplIcants whose loans are
denIed the Loan and Investment CommIttee may appeal
the deCISIon In wrItIng to the entire Board. The
deCISIon of the TSDC Board shall be fInal.
2. FurnIsh a statement to the Bank IndIcatIng the loan
amount, term, Interest rate, speCIal conditIons
(e.g., collateral reqUIrements), and any other loan
documents WhICh the borrower IS required to SIgn.
3. MonItor work to be performed pursuant to the terms
of the loan agreement and these program deSIgn
criterIa and authorIze dIsbursements.
d.
The TSDC
Loan and
Investment CommIttee
shall
be
- 17 -
comprIsed of four TSDC Board of DIrectors.
Approval or
denIal of a loan wIll reqUIre the consensus of three
committee members.
It wIll per lodlcally report to the
Board on the status of the MILF and present statistical
information on the number and types of bUSinesses
assisted and reJected; amount of loans and repayments;
delInquenCies and "bad loans".
e. The TSDC will make annual mId-year reports to the CIty
on the status and performance of the MILF.
f. No one who is currently a member of the l'SDC Board of
Directors, an employee of the TSDC or CIty of Santa
MonIca, or a member of any CIty Board, CommIssion or
Council may be conSidered for aSSIstance under thIS
program.
2. Santa Monica Bank WIll be responSIble for the following:
a. Under the Interest ReductIon Program the Bank WIll
perform the followIng serVIces:
1.
Process
credit
applicatIon
In
accordance WIth
normal procedures and approve or deny the loan;
2.
Service the loan:
document, underwrIte, collect,
and service;
3.
Refund
the
pro-rata
portion
of
the
interest
reductIon payment to the TSDC In the event of
repayment or default; and
4. Make perIodiC reports to the TSDC on the status of
the loans made under thIS program.
b. Onder the Direct Loan Program the Bank WIll perform the
- 18 -
mIlf2
fOlloWIng serVIces:
1. Prepare loan documents based on Information
furn I shed by the TSDC, obta in tl tle eVIdence, if
necessary, execute the loan documents, dIsburse
loan proceeds and service the loan as requested by
the TSDCi
2. ASSI st the TSDC In prepar lng the necessary
documents to secure the loan; and
3. Make perIodIC reports to the TSDC on the status of
the loans made under thIS program.
- 19 -
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