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HomeMy WebLinkAboutResolution - 2002-R0124 - Policy Change Approval - Micro-Enterprise Loan Program - 03/28/2002Resolution No 2002-RO124 March 28,2002 Item No. 32 RESOLUTION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the City Council of the City of Lubbock hereby approves of the recommendations made by the Community Development Services Board regarding policy changes for the Economic Development Program and the Micro -Enterprise Loan Program, and associated documents, which Recommendations shall be spread upon the minutes of the Council and as spread upon the minutes of this Council shall constitute and be a part of this Resolution as is fully copied herein in detail. Passed by the City Council this 28th day of Marsh , 2002. WINDY SITT AYO ATTEST: Rebecca Garza, City Secretary APPROVED AS TO CONTENT: APPROVED AS TO FORM: March 18, 2002 man - 02.doc Resolution No. 2002—R 0124 COMMUNITY DEVELOPMENT DEPARTMENT ECONOMIC DEVELOPMENT LOAN POLICY REVISIONS Currently CD's policy for the Economic Development loan calls for 100 % payback with interest, the creation of 1 job (for a low -to -moderate income person) for every $35,000 of CD funds used and monitoring of the business for compliance. Given the current banking rates, and the inconveniences of the paperwork and monitoring, this has not been a program that businesses are choosing to utilize. With this in mind, staff is recommending the following changes to the policy in order to improve this program. Policy Revisions. 1. Retain the job creation for low -to -moderate persons at the 1 permanent full time job per $35,000 used. Add an incentive for additional job creation. For each additional job created within the first three years, $20,000 of the principle will be forgiven. This will have a minimum of paying back at least 25% of the loan. The business will continue payments as set according to the contract but will have a reduction in the principle resulting in paying off the loan earlier. In special circumstances loan terms may be renegotiated by staff with approval ed of the ED sub -committee. 2. - Interest rates will be changed to reflect the department's other large loan programs to 3%. This puts the ED loans and housing loans at the same rate. 3. Loans may be to business or non -profits as long as they meet the other criteria and job creation requirements. Staff believes that with these changes, the goal of job creation for low -to -moderate income citizens can be achieved. Staff also believes that it is necessary to deal with the area of collections and eventual charge-off of existing Micro loans. Loans will be considered for charge-off if one of the following situations becomes applicable. Staff will submit each pending charge-off to the CDSB's Economic Development Sub -committee for approval. The Sub -committee would also be asked to review any possible settlements offered to a borrower. For example, a settlement would be when a borrower offers an amount less than the loan's payoff to settle the debt. d Steelman Economic Dev policy revisions Policy Revisions: 1. A loan amount will be considered for charge-off when an unforeseen or unavoidable situation has forced the closure of the business. This would include but is not limited to: • Death of the owner or partner (if business is set up as a partnership) • Extended illness of owner or partner (if business is set up as a partnership) • Natural disaster that destroys the inventory and/or location of the business (i.e. flood, tornado, fire, etc.) 2. Staff has exhausted all available avenues of collecting the outstanding debt These changes would allow staff to keep a more accurate gauge of collections and the overall success of the program.