RESPONSIBLE CITY AGENCY: Community and Economic Development
KEYWORDS: Loan, credit, gap financing, business, relocation, expansion, retention, interest, assistance, financial, finance, economic, community.
1. General
1.1 Salt Lake City Corporation uses the Economic Development Loan Fund (“E.D. Loan Fund,” or “EDLF”, formerly known as Revolving Loan Fund) to increase employment opportunities, stimulate business development and expansion, encourage private investment, promote economic development, enhance neighborhood vitality and commercial enterprise in Salt Lake City (SLC), while maintaining the corpus of the EDLF in a sufficient manner to perpetuate the goals of the program (collectively “Goals”).
1.2 The Economic Development (E.D.) Division under the supervision of the Department of Community and Economic Development (CED) administers the Economic Development Loan Fund, develops and administers loan evaluation tools, and tracks the projects participating in the E.D. Loan Fund program.
1.3 The E.D. Loan Fund administrative rules and program guidelines shall be reviewed at least every six (6) months and reported to the CED Director and/or Review Committee by the E.D. Division, including an analysis of the ability to maintain the corpus of the fund at sustainable levels including reporting on the balance of outstanding loans, available balance, total assets, defaults and delinquencies, and projections of at risk loans and the overall sustainability of the fund and or/recommendations to changes to improve the sustainability of the fund, as well as the impact on neighborhoods and city objectives, and effectiveness of applications, calculators, or tools created to administer the Loan Fund. The E.D. Division shall also review and present one (1) such review to the Administration and City Council at least annually.
1.4 The processes and criteria governing the administration of the E.D. Loan Fund are primarily set forth by the City Council through legislative resolutions. If any conflict exists between these administrative rules and a current legislative resolution, then the legislative resolution will control.
1.5 Loan eligibility is set forth in the “Loan Criteria” passed by the City Council and more details can be found in the loan application and loan procedures. Generally, to obtain a loan through the E.D. Loan Fund, proposed loan projects must be financially viable and a legal and properly zoned use. Proceeds of the loan must be used for legitimate business uses, and the business must be within the corporate limits of Salt Lake City or to assist business relocation or expansion into the City. The applicant may be a for-profit business or a revenue producing venture of a non-profit organization. Non-profit applicants must use loan proceeds as part of a venture, program, or project that independent of charitable contributions to the non-profit creates sufficient cash flow from the venture so as to adequately cover EDLF debt.
1.6 Additional Loan Fund. The E.D. Division may determine that additional economic development finance options or loan products are prudent to further the goals and objectives of the City and/or the EDLF. In which case, the E.D. Director or Loan Committee may forward a recommendation to the Director of CED to seek the City Council’s approval to create a new loan category, use of funds, etc., in order to support the purpose of an additional loan or finance product. Such request may include but not be limited to additional loan funds, amending use of funds or loan criteria guidelines based on the nature of the risks and opportunities associated with the proposal; the request may be short-term in duration or phased out after a certain project period, or run long-term, concurrently, and complementary to the EDLF.
2. E.D. Loan Fund Committees
2.1 Loan Committee. The ED Loan Fund Loan Committee (the “Loan Committee” or “Committee”) is comprised of voting and non-voting members. A quorum of the Committee exists when a simple majority of the Committee’s voting members are present or vote. However, loan approvals or denials can only be made when a minimum super majority of seven (7) committee evaluations/scores are submitted (see dropping highest and lowest scores in Loan Evaluation herein). The Loan Committee shall approve or deny loans and determine loan amounts, write-off loans, determine exceptions to Administrative and program rules within the parameters of the loan criteria as approved by City Council, and approve forbearance and waive fees for more than one year.
A. Voting Members are appointed by the Mayor or designee and include the following or their equivalent and/or designated alternates, which may be appointed simultaneously to act as a voting member in case of an absence:
1. SLC CED Director of Finance
2. SLC Director of Economic Development
3. SLC employee, representative at-large
4. SLC representative from the Mayor’s or Council’s Office
5. SLC representative from the Division of Housing and Neighborhood Development (HAND)
6. Community representative from the SLC Business Advisory Board (BAB)
7. Community investment representative (non-City employee: mission-driven investor or lender, CRA manager, etc.)
8. Community business technical assistance (TA)/ entrepreneurship representative (non-City employee: business resource, counseling, college/university, educator, etc.)
9. Community banker (non-City employee, business lending background)
Note: appointment of members should be considered based on:
Background in economic or community development
Financial analysis experience (through education or job)
Experience as entrepreneur or private business operator
Familiarity with the policies and goals of Salt Lake City
B. Non-Voting Members. Non-voting members may contribute to Committee discussions, but they shall have no voting power and may not cast a vote in connection with any matter that comes before the Committee for decision. The following City employees are non-voting members of the Committee:
1. Economic Development Manager/Loan Administrator
2. Senior City Attorney
3. Small Business Manager or E.D. Facilitator
4. Loan Fund Loan Officer/Analyst
C. Meetings. The Loan Committee shall set a calendar of scheduled meetings for each calendar or fiscal year. The Chair may call for special committee meetings, modify scheduled meeting times, or cancel scheduled meetings if no loans are ready to be presented by providing reasonable notice to affected parties and committee members, and may allow any committee meeting or votes to be conducted electronically.
2.2 Chair, Officers, and Loan Fund Administrator. The Mayor or designee shall appoint a Chair to call for and conduct Loan Committee meetings and assist the loan fund administrator with loan presentations and summaries including to the Review Committee and other duties as assigned by the Director of CED or E.D. The Loan Fund Administrator shall be an employee of E.D. Division with duties assigned by the Director of E.D. and carry out other reasonable duties as requested by the Loan or Review Committees subject to Director of E.D.’s supervisory approval. The Mayor or designee may appoint any other officer such as Vice-Chair, Treasurer, Secretary, etc.
2.3 Review Committee. The CED Director may form a Review Committee. If formed, the duties and procedures of the Review Committee are set forth below. Upon approval or denial of all loans, the Loan Committee will deliver to the Review Committee a summary of the Loan Committee’s decision to approve or deny a loan, along with a summary of the loan application. The Review Committee’s primary function is to approve loans that were denied by the Loan Committee, or reject or modify loans approved by the Loan Committee, including waiving collateral or personal guarantee requirements. Such approval or denial must take place within five (5) business days of the loan summary being presented to the Review Committee and must be approved by a majority of the Review Committee. If no action is taken by the Review Committee within said five (5) business days, the action taken by the Loan Committee shall become effective. Voting members of the Review Committee, if formed, shall consist of the SLC Directors of: 1. Community and Economic Development (CED), 2. Redevelopment Agency (RDA), and 3. Housing and Neighborhood Development (HAND), or their deputies. The Director of CED shall appoint the Chair, or appoint him or herself as Chair. Non-voting/ex-officio members shall include CED Finance Director, ED Director, and Loan Fund Administrator.
2.4 Appointment and Removal. All appointments to the Loan Committee shall be made by the Mayor or designee (e.g. CED Director) upon nominations by the non-voting members of the Review Committee. All non-SLC employee appointees to the Committee shall serve for a maximum of five (5) years. All committee appointees may be removed by the Mayor or designee, with or without cause, at any time.
3. Loan Application Process.
3.1 Application Fee/Preliminary Screening. Prospective loan recipients may submit a loan application for a particular loan project to the Division of Economic Development. E.D. staff will develop a loan application and preliminary screening process to determine loan criteria eligibility including insurance and appropriate licensing/zoning requirements. After the preliminary screening process is completed, borrowers continuing to a full application shall be required to pay a non-refundable application fee. The amount of the application fee is determined by the E.D Division and subject to City consolidated fee schedule procedures (preferred as a fixed fee--not subject to annual increase). A current (within 90 days of application) credit report with score will also be checked for each personal guarantor prior to submitting a loan summary to the Loan Committee.
3.2 Loan Evaluation. If a loan application meets the criteria set forth in the loan application and preliminary screening process, the loan application will be submitted to the Loan Committee for consideration. E.D. staff will create a loan evaluation matrix to be used by the Loan Committee to approve or deny each loan application. The loan evaluation matrix may include formulas, matrixes, or calculators for evaluating credit score, collateral, interest rate, and any other quantifiable metric. As soon as reasonably practicable, each voting member of the Loan Committee should submit a loan evaluation score that awards points in specific categories based on the loan evaluation matrix. Upon receipt of loan evaluation matrices from a quorum of Loan Committee members, the E.D. Division will present the score range or preliminary average to the Committee. As a general rule, the Committee shall meet or the Chair shall then call for a meeting in which the applicants make a presentation to and answer questions in person from the Loan Committee, which shall then make a final (or updated) evaluation of whether the loan application should be approved or denied upon receipt of at least seven (7) final evaluations of Committee members. Scores from the loan evaluation matrix calculations of the committee members will be averaged together after dropping the highest and lowest scores. If the resulting average total score is at or above the threshold level established by the Committee, then the loan application at issue shall be approved. A loan application with an average total score that is less than the threshold level shall be denied. Within two (2) business days of approval or denial of a loan by the Loan Committee, the E.D. Division staff will forward a summary of the loan application and the reasons for approval or denial to the Review Committee (see Review Committee duties herein).
3.3 Loan Terms. Within the parameters of the loan criteria adopted by the City Council and Administrative Rules, the Loan Committee shall determine the term, amortization, type of collateral, and loan amount to be approved. The Loan Committee may make exceptions to the reduced interest rate calculation plus or minus 1.5% percentage points of the total adjusted rate as long as such stays within the maximum and minimum rates. The Loan committee can make adjustments to collateral calculations for exceptional circumstances or values up to plus or minus 20% of the calculation made by using the collateral calculator. Real estate that is used as collateral must have a title insurance policy issued to the City with the expense for such paid by the Borrower.
3.4 Microloans. The E.D. Division may process and submit loans under $25,000 (“Microloans”) to the Loan Committee Chair and Vice Chair for possible evaluation, approval, denial, or modification, without necessarily presenting the microloan to the Loan Committee. The Chair and Vice-Chair acting unanimously may approve up to 10 Microloans per fiscal year without Loan Committee action. If Chair and Vice Chair are unable to act unanimously or if more than 10 Microloans per year complete the loan application process, such Microloans shall be presented to the Loan Committee for evaluation. Regardless, the Chair and Vice Chair acting unanimously may present any Microloan to the Loan Committee for evaluation. All other loan criteria and requirements apply to Microloans including loan application, collateral, and being subject to Review Committee approval, etc. A microloan applicant or City staff may request a waiver from administratively adopted EDLF loan criteria. Upon receipt of a microloan application with a waiver request, the Loan Committee Chair may submit such waiver request to the Mayor or Mayor’s designee for consideration. The waiver request to the Mayor or Mayor’s designee shall include a short written statement explaining the specific criteria sought to be waived, and the justification for such waiver. A request for a waiver under this section may not include loan criteria adopted by the City Council.
3.5 Documentation. All loan documentation shall be administered by E.D. Division with approval from the City Attorney’s office. All loan documents shall be signed by the Director of CED or designee as allowed by City policy including limits on real estate and spending or signature authority limits.
3.6 Loan Finalization. Upon the approval of a loan application, the appropriate staff members from the E.D. Division will work with the loan applicants to finalize the loan documents and issue the loan.
3.7 Ongoing Loan Administration. After a loan is issued for a particular loan project, staff members from the E.D. Division will be responsible for monitoring the status of the loan and for taking any necessary administrative actions in connection with such loan including waiver of late fees and substitution of comparably valued collateral. Loan Administrator or ED Director may forebear payments or waive late fees up to 6 months; CED Director up to 1 year; and the Loan Committee may forebear or waive for more than 1 year, and makes the determination to write-off loans.
CURRENT REFERENCES: Resolution No. 6 of 2014.
PRE-2014 REFERENCES: Resolution No. 33 of 2010.
City policy 6.01.100, 6.01.200
Administrative Rule – Economic Development Revolving Loan Fund (1995).
Effective Date Signed by Mayor: November 25, 2014