ACTION REQUESTED:
Title
Communication from the City Manager with a Request to Approve Updated Guidelines for the City's REVOLVING LOAN FUND.
Body
BACKGROUND: The City's Revolving Loan Fund (RLF) Program is guided and administered through a RLF Plan that is approved by the City Council and the Economic Development Administration. Below is a summary of the program and proposed changes.
The purpose of the City's RLF Program is to preserve and create jobs by making capital more accessible. The role or the RLF Program is to provide "gap financing," in the form of debt, on projects determined to be financially viable through a due diligence process known as loan underwriting. Gap financing is intended to provide funds is cases where there is a lack of equity or debt financing from other sources. Below is a financial overview, an operational overview, and proposed changes to the RLF Plan.
RLF PROGRAM - FINANCIAL OVERVIEW
The City's RLF Program was initially capitalized in 1988 with $769,232 - $500,000 from the EDA and $269,232 in matching funds from the City. As of September 2015 the capital base has grown to $1.2 million through interest revenue ($864,129.18) minus losses ($427.145.67).
In total, the RLF Program has loaned over $3.8 million to 43 different projects in the industrial, commercial, and service industries and has assisted with the creation/attraction of 1,947 jobs. City loans of $3.8 million were leveraged with $45.5 million of other funds and has resulted in an overall investment of $49.3 million. The six loans written off represent a loan default rate of 14% in projects and 11% in value.
On average a RLF loan project represents an investment of $1.15 million, 45 jobs, and a City loan of $86,000. For every $1.00 loaned by the City an additional $12 was leveraged.
As of November 30, 2015, $983,032.09 was available for new loans, and a principal balance of $224.498.98 was dispersed over six loans. A loan commitment of...
Click here for full text