1200 West 7th Street Suite 500 Los Angeles California

A I

of the CITY OF LOS AN GELE S

DATE/ DEC 15 2011 - - -----l

1200 West 7th Street Suite 500 Los Ange les Californ ia 9001 7~2381

F2 13977 1665

Honorable Council of the City of Los Angeles John Ferraro Council Chamber 200 N. Spring St. Room 340, City Hall Los Angeles, CA 90012

COUNCIL TRANSMITTAL:

www.cra la.org

Council File No. ~4 54 Council District: 14 Contact Person: Jenny Scanlin

(213) 922-7825 Josh Rohmer (213) 922-7837 Dan Rios (213) 922-7854

Transmitted herewith, is a Board Memorandum adopted by the Agency Board on December 15, 2011, for City Council review and approval in accordance with the "Community Redevelopment Agency Oversight Ordinance" entitled:

VARIOUS ACTIONS RELATED TO: EASTSIDE REGION BUSINESS ASSISTANCE PROGRAM. Establish and implement a Business Assistance Program within the Adelante Eastside Redevelopment Project Area

RECOMMENDATION That the City Council approve(s) recommendation(s) on the attached Board Memorandum.

ENVIRONMENTAL REVIEW The Eastside Region Business Assistance Program is categorically exempt from the provisions of the California Environmental Quality Act ("CEQA"), pursuant to Section 15301 (a) of the CRA/LA CEQA Guidelines.

FISCAL IMPACT STATEMENT There is no fiscal impact to the City's General Fund, as a result of this action.

,•'

CRA LA BUILDING COMMUNITIES

Council Transmittal Page 2

cc: Sharon Gin, Office of the City Clerk (original & 3 copies on 3-hole punch) Lisa Johnson Smith, Office of the CAO lvania Sobalvarro, Office of the CLA Larry Frank, Office of the Mayor Steve Ongele, Office of the Mayor Noreen Vincent, Office of the City Attorney Councilmember Jose Huizar, CD14

Council Transmittal Page 3

bee: Nenita Tan, Office of the City Controller Records (2 copies) Catrina Archuleta David Riccitiello Jenny Scanlin Josh Rohmer Dan Rios

THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA

MEMORANDUM

DATE: DECEMBER 15, 2011 EA2770 EA2810

TO: CRA/LA BOARD OF COMMISSIONERS

FROM: CHRISTINE ESSEL, CHIEF EXECUTIVE OFFICER

JENNY SCANLIN, REGIONAL ADMINISTRATOR JOSH ROHMER, ACTING PROJECT MANAGER DAN RIOS, ASSISTANT PROJECT MANAGER

STAFf:

SUBJECT:

INVESTMENT COMMITTEE:

Eastside Region Business Assistance Program. Establish and implement a Business Assistance Program within the Adelante Eastside Redevelopment Project Area. EASTSIDE REGION (CD14)

Approved at Investment Committee on October 26, 2011

RECOMMENDATIONS

The CRAILA acknowledges and understands that the California Supreme Court in the case entitled California Redevelopment Association v. Matosantos stayed certain portions of California Assembly Bills x1-26 and x1-27. Given the Court's stay and the uncertain status of such legislation, although the CRA/LA is, and the City Council may be, approving certain recommendations and actions as described herein, to the extent that such actions are stayed then the CRAILA shall not execute agreements or take such actions, notwithstanding their approval hereof, until the Supreme Court has decided the case on the merits or the action is no longer stayed.

That the CRAILA Board of Commissioners take the following action:

1. Request that the City Council acknowledge and approve CRNLA's implementation of the proposed Project under the Cooperation Agreement for Payment of Costs Associated with Certain CRAILA funded Capital Improvements, Public Improvements and Affordable Housing Projects, dated as of March 10, 2011 between the CRAILA and the City of Los Angeles.

That the CRAILA Board of Commissioners, subject to City Council review and approval:

2. Establish and implement the Eastside Region Business Assistance Program {BAP), including the Administrative Guidelines, to provide conditional loans to commercial property owners and commercial tenants located in, or who plan to establish a business within the Adelante Eastside Redevelopment Project Area; and

3. Authorize the expenditure of up to $550,000 of FY2012 Adelante Eastside Bond Proceeds and Project Area Tax Increment funds in budget line item Economic Development for the establishment and implementation of the Eastside Region Business Assistance Program for utilization of funds as described in recommendations 4 and 5 below; and

Adelante Eastside Region uusiness Assistance Program 2

4. Authorize the CRA/LA Eastside Regional Administrator, or designee, to negotiate and execute all Eastside Region BAP documents, consistent with the Eastside Region BAP Administrative Guidelines for conditional loans to a Property Owner in the maximum amount of $249,000 and to a Tenant in the maximum amount of $75,000 of which up to $25,000 can be advanced to fund project feasibility assistance; and

5. Authorize the CRA/LA Eastside Regional Administrator or designee, to provide property owners up to $10,000 in grant proceeds for architectural/engineering fees associated with the rehabilitation of properties that may be eligible for cultural/historic designation within Targeted Incentive Zones; and

6. Authorize the CRA/LA Eastside Regional Administrator, or designee, to negotiate and execute all necessary agreements to subordinate the CRA/LA UCC-1 and related loan documents to subsequent lenders, if requested by the property owner subject to review and approval by the Eastside Regional Administrator, or designee.

SUMMARY

The recommended actions would authorize the Eastside Region to establish and implement the Business Assistance Program ("BAP"), patterned after the September 2011 Board Approved East/West Valley BAP, to fund commercial rehabilitation conditional loans up to $249,000 based on the Administrative Guidelines {"Guidelines") (Attachment A), as well as to negotiate terms, execute loan and program related documents including subordination of a BAP UCC-1 and/or related loan documents to subsequent lenders, if deemed necessary. The BAP will be made available throughout the Adelante Eastside Redevelopment Project Area of the Eastside Region ("Project Area") (see attachment 8-1) commencing with implementation of the program within two key Targeted Incentive Zones identified along the Cesar E. Chavez Avenue Historic District commercial corridor and the First Street Arts District Corridor in the community of Boyle Heights, for focused investment. Participants in the program will be required to engage their own architects, engineers, and building contractors for the actual improvements to property, all subject to review and approval by CRAJLA staff.

The proposed BAP will provide construction/rehabilitation loans to commercial tenants and property owners. The chart below provides a side by side loan comparison of the tenant and owner loan terms.

·. Tenant Loans Owner loans

Maximum Loan $75,000 $249,000 Amount (up to)

Interest Rate 0% 0%

Loan Term 5 years (a minimum of 3 years may be 10 years considered)

Loan Repayment Not required, unless Tenant is in default of Not required, unless Owner is in default of loan terms loan terms

Borrower Matching None required for Loans up to $50,000. A None required for Loans up to $100,000. A Funds Dollar-for-Dollar borrower Match is Dollar-for-Dollar borrower Match is required

required for Loan amounts between for Loan amounts between $100,000 and $50,000 and $75,000. $249,000.

Adelante Eastside Region L...osiness Assistance Program 3

Advance of Funds 1 00% of feasibility assistance funding up 100% of feasibility assistance funding up to to $25, 000; must be re·paid if project not $25,000; must be repaid if project not built built

Debt Forgiveness Equal to term of loan; not less than 20% Equal to Term of Loan; not more than 10% per year (up to 33.33%) per year

CRAJLA Document Conditional Loan; Feasibility Assistance Conditional loan; Feasibility Assistance Type Agreement; Property Maintenance Agreement; Property Maintenance

Agreement; unsecured non-recourse Agreement; unsecured non-recourse Promissory Note Promissory Note

SecurityfProperty Unsecured non-recourse Promissory Note UCC-1 for loans equal to or greater than lien $100,000; Unsecured non-recourse

Promissory Note

Loan Default Borrower faits to comply with CRAJLA Borrower fails to comply with CRAJLA policies associated with the BAP, BAP policies associated with the BAP, BAP Loan Documents, or borrower relocates loan Documents, or borrower relocates out out of the City of Los Angeles. of the City of los Angeles.

Job Creation/ Requirement to create/retain one Living Requirement to create/retain one living Retention Wage job per $35,000 in CRAILA Wage job per $35,000 in CRA/LA

investment investment

Loan Compliance Submission of annual Certificates of Submission of annual Certificates of Compliance during loan term; and annual Compliance during loan term; and annual CRAJLA inspection CRAJLA inspection

Loan Fees None. loan set·up fee and credit report None. Loan set-up fee and credit report costs of approximately $175 per loan will costs of approximately $175 per Loan will be part of the loan amount be part of the loan amount

Grant N/A Up to $10,000 grant for architectural/engineering fees associated with cultural/historic designated properties

PREVIOUS ACTIONS

Initial action.

DISCUSSION AND BACKGROUND

The intent of the BAP is to implement a responsive business and job attraction and retention program focused on key economic sectors of the Adelante Eastside Redevelopment Project Area. The SAP was developed in response to the current economic conditions in the Eastside Region, including aging business facades, exteriors and interiors; turnover by commercial tenants; increased competition among commercial businesses; longer lease-up time; an increase in commercial vacancies and reduced rents; and a declining interest in locating businesses in the Project Area. The BAP is designed to efficiently provide needed funding to commercial businesses to retain, attract and grow key economic sector businesses in the core commercial and industrial areas of the Project Area.

The two primary objectives of the BAP are economic revitalization of the commercial business sector and job creation/job retention of Living Wage jobs. Toward achieving these objectives, the goals of the SAP are to:

Adelante Eastside Region L. .... 6iness Assistance Program 4

"' Support the economic revitalization of commercial businesses, including retail, health care and social assistance, entertainment/arts, medical and others, through construction loans to improve the interior and exterior of businesses.

* Focus investment on targeted commercial corridors to alleviate blighted conditions, and increase business competitiveness.

* Support the "greening" of commercial businesses with a focus on sustainable building practices, green technology and systems, and other methods of energy and resource savings.

• Address the key challenges facing small to medium sized businesses; access to capital and feasibility assistance required for rehabilitation and expansion.

"' Retain commercial businesses considering leaving the Project Area and/or City of Los Angeles.

• Create an incentive (forgivable debt) to improve the physical business to improve productivity, remove blight, and help businesses compete to attract and retain tenants.

• Create a program that is compatible with other CRA/LA programs and other financing tools.

• Support rehabilitation of historic structures within the City's most intact historic commercial districts located in Boyle Heights.

Program Uses

A. Use of Adelante Eastside Business Assistance Pro_9ram Loan Proceeds:

1. Interior Construction/Rehabilitation: tenant improvements, heating/cooling systems, or increasing square footage for selected properties in targeted areas.

2. Exterior Construction/Rehabilitation: add or rehabilitate exterior fac;ades, in conjunction with other work such as security enhancements, signage, architectural features, or increasing square footage for selected properties in targeted areas.

3. Feasibility Assistance: As part of a BAP loan for construction/rehabilitation costs, up to $25,000 of project feasibility assistance may be in included in the BAP loan comprised of technical assistance and/or fees including but not limited to business or environmental sustainability evaluation/consultation, and project facilitation including but not limited to architectural, engineering, design, construction management, plan check, and/or permit fees and processing assistance, to the extent authorized by the Community Redevelopment law.

B. DWP Facade lighting Funds:

In conjunction with the Adelante Eastside SAP, participants may also be eligible for los Angeles department of Water and Power ("DWP"} Fa<_;ade lighting Funds 1 to pay for exterior energy efficient lighting. Participants are eligible to receive up to $15,000 in DWP funding to support the design and construction of energy efficient building fagade

1 Under the Cooperation Agreement between the CRAILA and DWP, approved by the CRAILA Board on February 17, 2011, DWP will provide CRAILA up to $500,000 per year for use on Commercial Incentive and Fac;:ade projects to promote the Energy Efficiency of the exterior lighting of businesses participating in commercial rehabilitation of properties. CRAILA must apply for these grants to OWP for each individual project funded. Upon approval of the grant application by OWP, CRNLA will advance the funds to the eligible project in the form of additional Conditional Grant funds and get reimbursed by DWP once the projeCt is completed and a Notice of Completion is filed.

Adelante Eastside Region Business Assistance Program 5

lighting. The goal is to promote the energy efficiency of the exterior lighting of businesses participating in exterior commercial rehabilitation of properties. The maximum conditional loan amounts will increase by the amount of the DWP grants when a recipient has used the maximum allowable conditional loan allocated to their project. Funds for the additional conditional loans will come from the Adelante Eastside BAP funds and once reimbursed by DWP will be re-deposited into the BAP fund.

C. t!istoric Propertx:, Grant Funds:

Grants up to $10,000 will be made available to property owners for costs associated with architectural and engineering design services associated with the rehabilitation of properties that are eligible for cultural/historic designation within Targeted Incentive Zones that have been identified in the Eastside Historic Resource Survey or similar historic survey.

Eligibility Requirements

First priority shall be given to property owners and tenant participants from within the Targeted Incentive Zones and core sector businesses in the Project Area, as detailed below and shown on Attachment B-2. New Targeted Incentive Zones may be created, and existing Zones adjusted or removed, from time to time in consultation with the Council District 14 office. Core sector businesses are defined as the following commercial business types: retail and other commercial services, health care and social assistance, entertainment/arts2

, and medical. The currently identified Targeted Incentive Zones include:

• Cesar E. Chavez Avenue between Warren Street and Evergreen Avenue. This targeted incentive zone aligns with a robust streetscape and public improvements initiative designed to support businesses along the historic Chavez Avenue commercial corridor by repairing broken and deteriorating sidewalks and enhancing access to and use of alternative modes of pedestrian travel to the new Metro Gold line station along First Street. Partially funded by a $2.8 million dollar Metro Call for Projects grant award, enhancements will include new sidewalks, curb extensions, pedestrian lighting, new trees, landscaping, historic district ID signage, and enhanced pedestrian crossings.

• First Street Arts District corridor between Boyle Avenue and Soto Street. This targeted incentive zone represents the site of considerable recent public investment including the recently opened Metro Gold Line light rail system and is the location of a fledgling arts district undergoing major study and design for public improvements under Metro's Eastside Access Project, all designed to enhance the existing community of arts-related uses and economic development opportunities in Boyle Heights.

BAP participants may be existing commercial businesses or those who plan to establish a business within the Project Area with at least three years of positive business operations, or be a commercial property owner within the project area. Existing businesses will be evaluated and underwritten based on the following criteria, and as outlined in the Administrative Guidelines:

• Business's existing operations and performance. o Business's ability to achieve and sustain job creation or retention goals.

2 Entertainment/Arts uses include but are not limited to the following: live theaters, and other businesses working directly and indirectly with music, electronic game development, internet, software, creative arts, set design and other media.


• Business's ability to complete proposed construction/rehabilitation. • Business's cash/equity contribution (if applicable) to the construction/rehabilitation. • Business's ability to support additional debt. • Business's creditworthiness, including borrowing entity and all principals. • Located within the Targeted Incentive Zones.

The BAP may from time to time be utilized in other areas of the Project Area for focused investment.

Job Creation and Job Retention

The proposed SAP requires job creation or retention of one job per $35,000 in CRNLA investment. The BAP will utilize the CRNLA standard definitions for "Job Creation" and "Job Retention". Required jobs must be maintained for a period of not less than two years. Because of the jobs focus of the BAP, staff will prioritize requests for participation in the Eastside Region BAP based on the number of and wage levels of jobs created or retained, among other criteria. Job creation/retention shall be monitored and reported via a project Certificate of Compliance and submission schedule as stipulated in the Loan Agreement.

Applicable Policies

BAP loans will be required to comply with the following CRA/LA policies:

• Prevailing Wage Policy (all construction/rehabilitation) • Living Wage Policy • Policy on Contractor Responsibility; Contractor Responsibility Program; and Rules

Governing Procedures for Appeal of a Determination of Non-Responsibility • Service Worker (Contractor) Retention Policy e Equal Benefits Policy • Equal Opportunity/Affirmative Action Policy

Compliance/Monitoring

SAP participants are required to maintain their property in good condition, including the BAP funded improvements. In addition, BAP loans will be deemed repaid at the end of the loan term, subject to the annual submission of a satisfactory Certificate of Compliance. The first submission must be completed within 30 days of the first anniversary date of issuance of the Certificate of Completion, and thereafter annually along with annual CRNLA property inspections to confirm the business is being well managed and operated, and all funded improvements are well maintained. A Certificate of Compliance shall detail the general maintenance and management requirements of the business and improvements, as well as job creation or retention requirements. The Eastside Region staff will monitor, receive and process these compliance documents, and then submit them to CRA/LA Asset Management for evidence of debt repayment.

Outreach

The proposed Eastside Region SAP draws upon extensive community and citizen participation and represents needs and priorities identified by community stakeholders who have participated in block-by-block analyses of conditions along the two targeted incentive zones. As part of the intake and review process, staff intends to facilitate project feasibility assistance to property


owners and tenants through intake and review, underwriting, loan closing, loan funding, and construction bids, and construction completion, The Eastside Region will take a multi-faceted approach to outreach to the business community, including informational meetings held in the community, presentation at business and stakeholder groups, a BAP link with all information and documents on the Eastside Region website, and staff readily available to answer questions. Promotional and marketing materials will include a new Eastside Region Business Assistance Program Brochure.

It is anticipated that the BAP may be utilized in conjunction with the complementary CRA/LA Industrial Incentive Program ("liP") adopted November 2010, a CRA/LA program that offers industrial and manufacturing businesses forgivable grants and loans to fund the purchase of capital equipment or machinery, energy audits, and feasibility assistance for the development, financing, entitlement and implementation of the loan or grant, up to $250,000 in conditional loans. The liP is focused on promoting urban manufacturing, job creation and "greening" of industrial properties through the financing of equipment and support services toward construction/rehabilitation projects; the BAP is building-focused with interior and exterior construction/rehabilitation and does not permit the purchase of capital equipment or studies and technical assistance leading to the purchase and installation of equipment. Both programs require job creation equal to one job per $35,000 in CRA/LA investment, and maintenance of those jobs for a two-year period.

SUSTAINABLE DESIGN/BUILDING

All BAP participants will be encouraged to include sustainable design and building components in their construction/rehabilitation scope of work, including but not limited to energy sustainable products, drought tolerant landscaping, low flow water devices, low energy lighting, and green building products and avail themselves to business or environmental sustainability evaluation/consultation under the CRA/LA Healthy Neighborhoods Policy.

SOURCE OF FUNDS

Adelante Eastside Bond Proceeds and Project Area Tax Increment funds.

PROGRAM AND BUDGET IMPACT

The recommended actions are consistent with the FY2011-12 Budget and Work Program relating to the Adelante Eastside Project Area. Funds are available within budget line item Economic Development Opportunities to fund the. recommended actions. Following the recommended actions sufficient funds will remain in the Project Area to pay identified share of the required Voluntary Alternative Redevelopment Program (VARP) transfers to the City for remittance to the County Auditor-Controller. There is no impact on the City's General Fund as a result of this action.

ENVIRONMENTAL REVIEW

The Eastside Region Business Assistance Program is categorically exempt from the provisions of the California Environmental Quality Act ("CEQA"), pursuant to Section 15301 (a) of the CRA/LA CEQA Guidelines.

,,


Christine Essel Chief Executive Officer

By:

~ 1DaVid Riccitiello Deputy Chief Executive Officer

There is no conflict of interest known to me, which exists with regard to any CRAILA officer or employee concerning this action.

ATTACHMENTS

Attachment A - Administrative Guidelines Attachments B-1, 8-2- Program Maps for Targeted Incentive Zones

CRA/LA Adelante Eastside Region Business Assistance Program

Administrative Guidelines

A. Overview

Attachment A I

The Eastside Region of the Community Redevelopment Agency of the City of los Angeles

("CRA/LA") is offering the Business Assistance Program ("BAP") to promote economic revitalization

and job creation and retention. The BAP provides forgivable construction/rehabilitation loans to

commercial property owners up to $249,000 and to commercial tenants up to $75,000, for interior

and exterior construction/rehabilitation improvements and may include feasibility assistance

("BAP Loan"). As borrowers provide the required deliverables, as outlined in the BAP Loan

Agreement, the CRA/LA will deem a portion of the BAP Loan repaid. Commercia! businesses

include but are not limited to retail and other commercial services, health care and social

assistance, entertainment/arts, and medical.

Additionally, grants up to $10,000 will be made available to property owners for costs associated

with architectural and engineering design services associated with the rehabilitation of properties

that are eligible for cultural/historic designation within Targeted Incentive Zones (later defined)

that have been identified in the Eastside Historic Resource Survey or similar historic survey ("BAP

Grant").

The following provides for the administrative guidelines for the BAP. In addition to these

administrative guidelines, the complete BAP documents include underwriting guidelines, standard

application forms, standard loan agreements, feasibility assistance agreements, compliance

documents, Targeted Incentive Zone maps, and the BAP Board Memorandum (together the

"Program Documents"). If a grant is awarded, a standard grant agreement will also be included in

the Program Documents.

B. Objectives

The two primary objectives of the BAP are economic revitalization of the commercial business

sector and job creation/job retention of Living Wage1 jobs. Toward achieving these objectives, the

goals of the BAP are to:

1 CRA/LA's current standard definition of Living Wage jobs are those full time equivalent jobs paying a minimum of $11.55 per hour (or $10.30 per hour plus $1.25 per hour in benefits) (2010-2011 rate), as adjusted annually. The Living Wage is defined in the City of Los Angeles Living Wage Ordinance, Article 10.37.2 (a).

* Support the economic revitalization of commercial businesses, including retail trade, health care and social assistance, entertainment/arts, medical and others, through construction loans to improve the interior and exterior of businesses.

e Focus investment on targeted commercial corridors to alleviate blighted conditions, and increase business competitiveness.

• Support the "greening" of commercia! businesses with a focus on sustainable building practices, green technology and systems, and other methods of energy and resource savings.

• Address the key challenges facing small to medium businesses; access to capital and feasibility assistance required for rehabilitation and expansion.

e Retain commercial businesses considering leaving the Project Area and/or City of Los Angeles.

~~t Create an incentive (forgivable debt) to improve the physical business to improve productivity, remove blight, and help businesses compete to attract and retain tenants.

• Create a program that is compatible with other CRA/LA programs and other financing tools.

• Support rehabilitation of historic structures within the City's most intact historic commercial districts located in Boyle Heights.

Note: it is not a goal of the BAP to cause the relocation of a commercial business (owner or tenant)

from one city to the City of Los Angeles, but rather to attract businesses already considering a

move or expansion, and to support, retain and expand existing businesses already in the City of Los

Angeles.

There are three eligible uses for a BAP Loan, including interior and exterior construction/

rehabilitation, and feasibility assistance.

1. Interior Construction/Rehabilitation: tenant improvements, heating/cooling systems, or

increasing square footage for selected properties in targeted areas. At least 50% of loan

proceeds must be spent on exterior facade improvement unless deemed unnecessary by

the project area planner.

2. Exterior Construction/Rehabilitation: add or rehabilitate exterior fat;:ades, in conjunction

with other work such as security enhancements, signage, architectural features, or

increasing square footage for selected properties in targeted areas. Use of redevelopment

loan proceeds for new construction projects are limited to not more than 25% of total

project cost.

Eastside Region BAP Administrative Guidelines

Dec. 2011

Page 2

3. Feasibility Assistance*: As part of a BAP loan for construction or rehabilitation costs, up

to $25,000 of feasibility assistance may be in included in the BAP Loan and comprised of

technical assistance and/or fees including but not limited to business or environmental

sustainability evaluation/consultation, and project facilitation including but not limited to

architectural, engineering, design, construction management, plan check, and/or permit

fees and permit processing assistance. Borrowers shall hire their own consultants and

contractors.

The feasibility assistance portion of the BAP Loan may include a 100% advance of loan

proceeds, so that the borrower can hire the necessary consultant or specialist to begin the

design, entitlement, evaluation, study or other assistance, as detailed in the project's Scope

of Development (an attachment to the Loan Agreement).

Borrowers will be required to re-pay 100% of the feasibility assistance portion of a BAP

Loan should the project not commence construction within the 90-days of the CRA/LA

issuance of a Notice to Proceed.

4. Feasibility Assistance for Historic Buildings*: Property owner borrowers may be eligible

for up to an additional $10,000 in the form of a BAP Grant for architectural/engineering

fees exclusively associated with the rehabilitation of properties that may be eligible for

cultural/historic designation within Targeted Incentive Zones. The feasibility assistance

portion of the BAP Grant may include a 100% advance of grant proceeds so that the

borrower can hire the necessary consultant or specialist to begin the design, entitlement,

evaluation, study or other assistance, as detailed in the project's Scope of Development (an

attachment to the Loan Agreement).

Borrowers will be required to re-pay 100% of the feasibility assistance portion of a BAP

Grant should the project not commence construction within the 90-days of the CRA/LA

issuance of a Notice to Proceed.

*NOTE: BAP participants are encouraged to include sustainable building materials, fixtures and

other features in their construction/rehabilitation work. The CRA/LA will consider this criterion in

their evaluation of all proposals.


Dec. 2011

Page 3

A. General Eligibility Requirements. Businesses that request a BAP Loan or BAP Grant

must meet the following general eligibility requirements:

1. Type of Business. First priority shall be given to property owners and tenant participants

from within the Targeted Incentive Zones and core sector businesses in the Project Area, as detailed below and shown on Attachment B-2. New Targeted Incentive Zones may be created, and existing Zones adjusted or removed, from time to time in consultation with the Council District 14 office. Core sector businesses are defined as the following commercial business types: retail and other commercial services, health care and social assistance, entertainmentlarts2

, and medical. The currently identified Targeted Incentive Zones include:

a. Cesar E. Chavez Avenue between Warren Street and Evergreen Avenue. This targeted

incentive zone includes a robust streetscape and public improvements initiative designed

to support businesses along the historic Chavez Avenue commercial corridor by repairing

broken and deteriorating sidewalks and enhancing access to and use of alternative modes

of pedestrian travel to the new Metro Gold line station along First Street. Partially funded

by a $2.8 million dollar Metro Call for Projects grant award, enhancements will include new

sidewalks, curb extensions, pedestrian lighting, new trees, landscaping, historic district 10

signage, and enhanced pedestrian crossings.

b. First Street Arts District between Boyle Avenue and Soto Street. This targeted incentive

zone represents the site of considerable recent public investment including the recently

opened Metro Gold Line light rail system and is the location of a fledgling new arts district

undergoing major study and design for public improvements under Metro's Eastside Access

Project designed to enhance the existing community of arts-related uses and economic

development opportunities in Boyle Heights.

2. Creditworthiness. The business and principa!(s) must meet minimum credit

requirements, including positive business operation indicators; lease(s) in good standing (if

applicable); acceptable credit for borrower entity and principal(s}; minimum of three years of

positive cash flow; have all required business licenses; and cash reserves or credit lines equal to six

(6) months of cash for business operations expenses, as detailed in Section IV.

3. Location within a Project Area. Businesses seeking to participate in the BAP must

be located in or move into the Eastside Region's Adelante Eastside Redevelopment Project Area,

2 Entertainment/Arts uses include but are not limited to the following: live theaters, and other businesses working directly and indirectly with music, electronic game development, internet, software, creative arts, set design and other media.


Dec. 2011

Page 4

however, priority will be given to applications stemming from within the BAP's Targeted Incentive

Zones (see Attachment A).

4. Construction/Rehabilitation. CRA/LA funding for the BAP must be associated with

the construction or rehabilitation of the business's physical property. Construction/rehabilitation

may consist of installation, modification or repair of either the interior or exterior of a property,

including landscaping {and may include multiple suites for larger properties).

5. Ongoing Concern. The BAP requires a business be in existence or plan to establish

a business within the Project Area and who has had active, positive business operations for a

minimum of three (3) years. Start-up businesses are not eligible to participate in the BAP;

however, the BAP may assist a property owner with improvements designed to help attract or

retain a start up business or arts/cultural/entertainment related entity.

6. Project Impact. Priority given for expansion or location of a designated core sector

business, promotion of quality urban design, enhance commercial activity and pedestrian activity,

and/or meeting an underserved need.

7. Demonstration of Need. Participant must demonstrate a need for financial

investment to support their business performance goals and/or locate in a Project Area.

Additionally, participant must provide a financial summary of business operations utilizing the BAP

funding (sources and uses).

8. Project Readiness. BAP participants must have a detailed scope of development,

preliminary design features, and evidence of other funding in place.

9. Viability/Track Record. BAP participants must be an existing and operational

business for a minimum of three (3) years of positive financial performance.

10. Proof of Insurance and Payment of Property Taxes (at time of application).

B. Program Exclusions. The following types of businesses are not eligible to

participate in the BAP: age-restricted businesses; auto wrecking; auto salvage; and any Illegal or

unpermitted uses.


Dec. 2011

Page 5

The primary objectives of the BAP are to create economic revitalization through financing business

construction for improvements, and job creation/retention of Living Wage jobs. Unlike a

traditional small business loan, the underwriting for this program is not focused on repayment of

loan proceeds, but rather on ensuring that the funded business will be able to improve its physical

business in order to increase productivity, sales and competitiveness (amongst other similar

businesses and to attract tenants); will be able to support and sustain projected growth; and most

importantly, to create and retain Living Wage jobs supported through the program.

A. Underwriting Criteria. The BAP underwriting analysis has seven main criteria,

including:

• Business's existing operations and performance.

~» Business's ability to achieve and sustain job creation or retention goals.

e Business's ability to complete proposed construction/rehabilitation.

• Business's cash/equity contribution {if applicable) to the construction/rehabilitation.

liD Business's ability to support additional debt.

e Business's creditworthiness, including borrowing entity and all principals.

e Located within the Targeted Incentive Zones.

B. BAP Loan Underwriting. The underwriting review and analysis for all BAP Loans

and BAP Grants (if applicable) shall include a thorough review and analysis of the following

information from the borrower's BAP Application Credit Package:

e Cover letter from applicant discussing all of the following:

m Description of business to be assisted, including type of business, number of

employees, ownership structure of business, term of business operations, financial

health of business, history of business, and description of current/future tenant(s),

if any. 111 Specific request for CRA/LA financial assistance and how funding will be used.

Ill Amount of borrower matching funds, if any, and how funding will be used.

Ill Summary of business financial operations.

e Construction Bid. Borrower must submit at least one (1) construction bid, preferably with

labor cost quoted at prevailing wages. If the labor cost is not quoted at prevailing wages,

the CRA/LA will assume a 30% premium to be added to the labor cost, for purposes of

project evaluation.

e Complete financial and credit package, including: 111 CRA/LA credit request forms for business entity and all principals/partners/owners


Dec. 2011

Page 6

111 Year to date financial statement for business "' Three prior years of audited financial statements (personal financial statements

may be required for some businesses). 1f financial statements are not audited, the business shall also provide three years of business tax returns, ail schedules (Form 1040 Schedule C for individuals, Form 1065 for partnerships, and Form 1120 Cor S for corporations).

'" Two Years of financial projections • Written explanation of any negative credit, declining revenue or adverse business

issues 1111 Current staff list including position, length of employment for each employee, and

hourly wage " Project Budget, including proposed sources and uses 111 Evidence of liquid assets sufficient to fund the borrower matching funds

requirement

• Business plan that details the following: overview of business goals and objectives; ownership and management team; growth and operations over the past three years; project budget for CRA/LA BAP loan and BAP Grant {if applicable) and any borrower matching funds {including sources and uses); copy of lease agreement and/or site for expansion; summary of ongoing contracts or contracts anticipated or pending, including projected revenue from contracts and term; revised staff list including and designating ali created or retained living Wage jobs; and schedule of debts (if not reflected in financial statements}. If the business is also the property owner or in escrow to purchase, include a copy of Grant Deed and/or purchase and sale agreement. If the business is a tenant that has not moved into the space, a copy of the executed lease is required; in some cases, an executed letter of lntent may be accepted in lieu.

• Business license. A copy of your valid business license issued by the City of Los Angeles and proof of most recent payment.

e Tenant Business License(s). A copy of each tenant's valid Business license issued by the City of los Angeles and proof of most recent payment, if applicable.

111 Copy of lease agreement for existing property and/or for site expansion. If a commercial property owner, copies of all tenant leases.

111 liability Insurance Policy. A copy of the declaration page of liability insurance policies for the property. Include Agent's name and telephone number if not shown.

• Property Tax Bill. A copy of the most recent property tax bill, and proof of payment.

• Partnership Agreement. If the property is owned by a partnership, a copy of the signed Partnership Agreement and amendments, if any, indicating that the signatory is authorized to act on behalf of the partnership.

e Certificate of Occupancy. A copy of the building's Certificate of Occupancy.

• Other borrower/Property/Credit information, as requested by the CRA/lA.


Dec. 2011

Page 7

A. Maximum Funding Amount

The BAP will offer up to $75,000 per tenant, and up to $249,000 per owner. Funding may be used

for Eligible Uses (see above). The BAP shall have the flexibility to provide more than one BAP loan

to a tenant and owner that meet Eastside Region goals and objectives, and at the sole discretion of

the CRA/lA. In addition, BAP participants may qualify for the DWP Building Fat;ade Lighting

Program, which provides up to $15,000 per commercial rehabilitation loan for use toward energy

efficient lighting designs, products and construction/installation and a $10,000 BAP Grant for

architectural/engineering costs associate with the rehabilitation of properties that may be eligible

for cultural/historic designation within a Targeted Incentive Zone.

B. Job Creation/Retention

CRA/LA's BAP has a goal of its funding being a catalyst for job creation and retention. Each BAP

applicant must identify the specific number of jobs they will create or retain as part of the BAP

Loan funding and their business plan. In general, the CRA/LA's job creation/retention is based on

one job per $35,000 in CRA/lA investment as noted below.

C. Compliance and Monitoring of Job Creation and Retention

The CRA/LA shall require that all BAP participants submit annual CRA/LA Certificate of Compliance

detailing job creation or retention information, amongst other required information. In addition,

the CRA/lA shall conduct an annual on-site inspection of the business, confirming existence of the

created or retained jobs, that all BAP improvements are well maintained, and compliance with ail

requirements of the BAP loan documents. The first submission must be completed within 30 days

of the first anniversary date of issuance of the Certificate of Completion.

The Eastside BAP shall use the CRA/LA standard definitions for Job Creation and Job Retention. In

short, Job Creation is defined as a new/start-up business, or an existing business that is expanding,

rehabilitating, or re-tooling, that results in the hire of new workers ln the project area. Job

Retention may be briefly defined as pre-existing jobs at a business in the project area that is

considering an expansion, rehabilitation, re-tooling, or other project that is unfeasible without

CRA/LA assistance, or a business that is looking to relocate outside the project area, but can be

incentivized to remain in the project are through CRA/lA assistance.


Dec. 2011

Page 8

,,

D. Targeted Industry Sectors

The BAP may target (but not be limited to) core industry sectors of the Project Area that have the

greatest need for economic revitalization, potential for growth, creation of higher paying jobs, and

are willing/able to improve existing commercial/retail processes and incorporate sustainable

practices. The CRA/lA has identified the following core sectors with the greatest need for

economic revitalization within the targeted incentive zones along Cesar E. Chavez Avenue and the

First Street Arts District:

@ Com merciai/Retail @ Entertainment/ Arts .. Social Assistance .. Medical

Based on changing economic conditions and other factors, the CRA/lA reserves the right to modify

or change the list of core sectors and/or a Targeted Incentive Zone, at its sole discretion.

E. Payment of Prevailing Wages on All Construction Work.

All construction work funded in part of whole by BAP loan proceeds triggers the payment of

Prevailing Wages on the entire construction job (not just the portion funded by the CRA/lA}.

Prevailing Wage compliance and use is detailed in the BAP Loan documents.

Borrowers are reminded that:

e Borrowers must obtain and submit a m1mmum of two (s) bids from bonded and licensed contractors that shall pay prevailing wages and comply with all CRA/LA Prevailing Wage reporting and compliance requirements and Local Hire Guidelines, if applicable. Owner shall submit contractor bids to CRA/LA for review. The Participant selects the contractor, which need not be the lowest bidder. Borrower executes the construction contract with the contractor, the contractor is required to complete

CRA/LA Prevailing Wage training, and upon completion to the CRA/LA's satisfaction, CRA/LA issues a "Notice to Proceed".

~'~~ Owners are strongly encouraged to register with a Work Source Center to recruit

applicants for employment. Please contact the CRA/LA for a complete list of Work Source Centers.


Dec. 2011

Page 9

,,

• Borrowers must work closely with CRA/lA Wage Compliance staff in obtaining the advertising for and awarding of construction bid(s), wage compliance during the construction period, and all requirements of the CRA/lA Prevailing Wage Policy (which may be found at: httR://www.crala.net/internet-site[Policies/index.cfm and dick on "Prevailing Wage Policy".

• BAP Participants are encouraged to seek professional tax advice regarding potential tax consequences resulting from participation in this program.

F. Funding Structure

The BAP funding will be provided as follows:

• Construction and rehabilitation costs will be paid by reimbursement to participant upon receipt and approval of documentation of purchase or direct payment to vendor with all appropriate invoices at the sole discretion of the CRA/lA. Feasibility Assistance costs may be paid by an advance of up to 100% of the total cost of this category, or $25,000, upon execution of BAP Loan Agreement and contract with consultant or other service provider. Borrowers may be eligible for up to an additional $10,000 BAP Grant for architectural/engineering fees exclusively associated with the rehabilitation of properties that may be eligible for cultural/historic designation within targeted incentive zones. In all cases, borrowers will be required to re-pay 100% of the feasibility assistance portion of a BAP loan and BAP Grant should the project not commence construction within the 90-days of the CRA/lA issuance of a Notice to Proceed.

~ All BAP payment requests are to be processed as detailed in the CRA/lA BAP Fund Disbursement Request Form.

A. Program Fees

There are no fees for participation in the BAP program. Loan set-up fee and credit report costs of

approximately $175 per BAP Loan will be part of the SAP Loan amount.


Dec. 2011

Page 10

.,

B. loan Terms

The following chart summarizes the general BAP loan terms:

: .. .·. ·:······ .... ·· .. : Jenantloans . .···. ·· .· .. ownerLoans····· :

. ·: :.· :: .. ·:···:. .<:· .. :·:·:

Maximum loan $75,000 $249,000

Amount (up to)

Interest Rate 0% 0%

loan Term 5 years (a minimum of 3 years 10 years

may be considered)

loan Repayment Not required, unless Tenant is Not required, unless Owner is

in default of Loan terms. in default of Loan terms.

Borrower Matching None required for Loans up to None required for Loans up to

Funds $50,000. A Dollar-for-Dollar $100,000. A Dollar-for-Dollar

borrower Match is required borrower Match is required for

for Loan amounts between loan amounts between

$50,000 and $75,000. $100,000 and $249,000.

Advance of Funds 100% of feasibility assistance 100% of feasibility assistance

costs up to $25,000; must be costs up to $25,000; must be

re-paid if project not built re-paid if project not built

Debt Forgiveness Equal to term of loan; not less Equal to term of Loan; not

than 20% per year (up to more than 10% per year.

33.33%)

CRA/LA Document Conditional loan; Feasibility Conditional loan; Feasibility

Type Assistance Agreement; Assistance Agreement;

Property Maintenance Property Maintenance

Agreement; unsecured non- Agreement; unsecured non-

recourse Promissory Note recourse Promissory Note

Security/Property Unsecured non-recourse UCC-1 for Loans equal to or

lien* Promissory Note greater than $100,000;

Unsecured non-recourse

Promissory Note


Dec. 2011

Page 11

loan Default Borrower fails to comply with Borrower fails to comply with

CRA/LA policies associated CRA/LA policies associated with

with the BAP, BAP Loan the BAP, BAP loan

Documents**, or borrower Documents**, or borrower

relocates out of the City of Los relocates out of the City of los

Angeles Angeles

Job Requirement to create/retain Requirement to create/retain

Creation/Retention one Living Wage job per one Living Wage job per

$35,000 in CRA/LA investment $35,000 in CRA/LA investment

Loan Compliance Submission of annual Submission of annual

Certificates of Compliance Certificates of Compliance

during BAP Loan term; and during BAP Loan term; and

annual CRA/LA inspection annual CRA/LA inspection

loan Fees None. loan set-up fee and None. Loan set-up fee and

credit report costs of credit report costs of

approximately $175 per BAP approximately $175 per BAP

loan will be part of the BAP Loan will be part of the Loan

Loan amount amount

Grant None Up to $10,000 Grant for

architectural/engineering fees

associated with cultural/historic

designated properties

*The use of a recorded instrument, such as a UCC-1 or other, will be considered as the reviewing all

fa;:;:ade and commercial rehabilitation programs throughout the CRA/LA in order to establish greater

standardization and consistency across programs.

**BAP loan Documents shall mean collectively the following: Commercial Rehabilitation Loan,

Feasibility Assistance Agreement, UCC-1 filing, Property Maintenance Agreement, and Promissory

Note and all other documents required to be executed by the borrower and/or CRA/LA ln

connection with the transaction, including a BAP Grant, if applicable.

c. Default

CRA/LA shall give borrower 30 calendar days written notice of an Event of Default. In the case of a

default, the staff will work with the participant to identify and solve any barriers to meeting the

requirements of the BAP loan Documents. Borrower may use this cure period to remedy the

default to the satisfaction of the CRA/LA. After the cure period expires and if the default remains


Dec 2011

Page 12

,,

uncured, the CRA/lA shall have the right to terminate the loan/Grant Agreement and call any

outstanding amount of the CRA/lA loan/Grant due.

If a participant receiving a BAP Loan does not follow through with its general obligations under the

BAP loan Documents, the CRA/lA shall "Bar" that participant from future funding opportunities

with the CRA/LA.

D. Security/Collateral Requirements

All BAP Loans shall be evidenced by an unsecured non-recourse Promissory Note. If the borrower

has provided personal financial statements as a means to qualify for the BAP, and/or if the owners

of the participating business regularly guarantee the business' debts, the BAP Loan may be

secured by a personal guaranty by the owner(s), along with a spousal consent, if applicable. The

use of a recorded instrument, such as a UCC-1 or other, for BAP Loans over $100,000 will be

considered in reviewing all fa~ade and commercial rehabilitation programs throughout the CRA/LA

in order to establish greater standardization and consistency across programs.

E. Insurance Requirements

1. Borrower shall submit to the CRA/LA certificates verifying insurance coverage of

Commercial General liability Insurance (Bodily Injury and Property Damage) in an amount of not

less than $1,000,000 per occurrence with a $2,000,000 aggregate combined single limit. Such

verification of coverage shall be provided prior to the commencement of work under a BAP loan

and BAP Grant (if applicable). The certificate must be followed within sixty (60) days by an

endorsement to the insurance policy. Such policy shall require thirty (30) days notice to the

CRA/LA in writing prior to cancellation, termination or expiration of any kind. All Commercial

General Liability insurance policies shall name the Community Redevelopment Agency of the City

of Los Angeles and the City of los Angeles as additional insured.

Additional Insurance Requirements:

e Loss Payee Endorsement. All Property Insurance policies for any BAP Loan that

exceeds $75,000 or more for a single address must include a loss payee

endorsement to the benefit of The Community Redevelopment Agency of the City

of Los Angeles.

o Additional Insured. All Commercial General liability insurance policies shall name

The Community Redevelopment Agency of the City of los Angeles and the City of

los Angeles as additional insured.


Dec. 2011

Page 13

• Workers Compensation Coverage. Required of all BAP loans and BAP Grants (if applicable). If a tenant or owner does not have any employees, Tenant or Owner may submit a letter from them, on their letterhead, indicating so. Such letters should be sent to the following:

CRA/lA

Risk Management Department

1200 W. 7th Street, 5th Floor

los Angeles, CA 90017

RE: CRA/LA loan # ____ _

Attn: Diane Wren, Risk Manager

2. Borrower shall submit to the CRA/LA appropriate certificates of Property insurance

in an amount not less than the full insurable value ofthe Premises with extended coverage against

the perils of fire, lightning, vandalism, malicious mischief, riot and civil commotion, and such other

perils ordinarily included in extended property coverage insurance policies. A Builders Risk

endorsement may apply if new construction is included in the Project.

• loss Payee Endorsement. All Property Insurance policies for any BAP loan that exceeds $75,000 or more for a single address must include a loss payee endorsement to the benefit of The Community Redevelopment Agency of the City of los Angeles.

The following basic requirements apply to all BAP participants.

e Ongoing maintenance of property, and CRA/LA BAP funded improvements.

$ Compliance with all CRA/LA policies and requirements, as applicable, including but not limited to:

• Prevailing Wage Policy

~~~> Living Wage Equal Opportunity Requirements

e Contractor Responsibility Program

~~> Equal Benefits Ordinance

• Service Worker Retention Policy

'* Standard Terms and Conditions

e Insurance Requirements


Dec. 2011

Page 14

This section is to highlight specific activities that are not eligible for funding under the program, or

items that are specifically restricted in the program.

e BAP funding must be in conjunction with the construction or rehabilitation of a commercial business;

o BAP funding is not to promote "poaching" of businesses from one city to Los Angeles, but rather is targeted to businesses actively seeking expansion and relocation opportunities.

This section is a brief overview of the intake, underwriting, closing and funding processes '

recommended for implementation ofthe BAP program. In this section, the participating business

is referred to as the "Participant."

A. Phase 1: Intake and Review

The BAP intake process will be conducted by CRA/LA staff, and shall include a preliminary review

and evaluation, pitch meeting with staff, transaction underwriting, closing and BAP Loan funding.

Due to the anticipated volume of BAP applications, staff shall evaluate prospective applicants and

BAP Loans and BAP Grant (if applicable), using criteria that includes, but not limited to:

• BAP applicant and Business Meet All Standard BAP Criteria (see above)

• Business located in Targeted Incentive Zone priority area

11111 Job Creation/Retention- number of jobs to be created or retained, wage levels, quality of job type, if applicable

• Age of Business

• Economic Impact to Community/Community Benefits

llll Business Relocation/Core Business

e Proposal Utilizes "Green" Practices

Intake:

1. Call the CRA/lA to Discuss BAP Request. Participant contacts the appropriate

Project Manager or Associate Special Projects Officer to discuss a proposal for CRA/lA

assistance (see contact list below).


Dec. 2011

Page 15

www.crala.org/eastsidebaR

Jacqueline Escobedo, Associate Special Projects Officer

213-9 22-7809

[email protected]

Mr. Josh Rohmer, Project Manager

213-922-7837

jroh [email protected]

2. Submit and Complete BAP Application and CRA/LA Underwriting Process.

Submit complete application package to Jacqueline Escobedo (go to

www.crala.org/eastsidebap [click on BAP link] and click on "BAP Owner Application").

)» CRA/LA staff will complete underwriting and analysis, including: applicant proposal; financial condition of business and principal(s); ·financial requirement in proposed request; insurance coverage review; proposed community benefits; and Owner compliance with all CRA/LA requirements.

)» Draft documents completed and reviewed/approved by borrower.

3. Closing, Execution of Documents, Pre-Construction Process and Funding:

)» Loan documents are executed and file transferred to CRA/LA staff person for construction period management.

)» CRA/LA staff will coordinate a meeting with the borrower, Construction Supervisor/Manager and other staff persons to fully understand the business operations, meet the staff and discuss the proposed construction/rehabilitation.

> Participants and their contractor{s) must attend a pre-construction, (facades, and tenant improvements) with CRA/LA Wage Compliance staff. The Owner shall hire their own contractors(s); however, the contractor is required to pay prevailing wages for all work funded by the BAP loan and BAP Grant (if applicable}. The Owner and contractor(s) are required to work with CRA/LA Wage Compliance Department staff during construction period.

);> Construction period commences.

CRA/LA funding will be done on a direct payment basis, meaning the borrower will submit

an invoice with all contractor lien releases, the CRA/LA will pay the borrower, and the

borrower will immediately pay the contractor. Feasibility assistance funding costs wlll be


Dec. 2011

Page 16

credited as part of the BAP loan amount, except for BAP Grant proceeds awarded to

property owners for eligible projects to rehabilitate cultural/historic designated properties.

For properties determined to be eligible for designation as cultural/historic recognition,

property owner borrowers may qualify for and be reimbursed an additional $10,000 in

Grant proceeds for architectural and/or engineering fees.

The CRA/lA, at its sole discretion, may change the funding process to require the borrower seek reimbursement for paid costs. Borrower submits a reimbursement request to identified CRA/LA staff, as outlined in the BAP Loan or BAP Grant documents.

Review:

BAP applicant submits a complete BAP Application package to staff. Applications will be reviewed

for completeness. Incomplete applications will be retained anq a letter sent to the participant

with a list of missing documents or information.

B. Phase II: Underwriting

The BAP application will be reviewed and underwritten by CRA/LA staff who will complete underwriting and analysis, including: Participant proposal; financial condition of business and principal(s); financial requirement (or gap) in proposed request; insurance coverage review; proposed community benefits; and Owner compliance with all CRA/LA requirements.

Once BAP transaction has been successfully approved for underwriting and all terms are agreed upon by the borrower, CRA/lA staff shall obtain a CRA/LA Loan Number from Asset Management and draft BAP Loan and BAP Grant (if applicable) documents for borrower review, comment, and execution as necessary.

C. Phase Ill: loan Closing

Upon borrower concurrence of BAP Loan Documents, CRA/LA shall prepare final BAP Loan documents for borrower to sign, after which CRA/LA shall execute all documents. Upon successful execution of all BAP Loan documents, CRA/LA staff shall submit the loan package to CRA/LA Asset Management for BAP Loan set up.

Borrowers shall comply with all BAP Terms and Conditions:

e Compliance with all applicable CRA/lA policies (go to www.crala.org/eastsidebap and dick on "BAP Policies".


Dec. 2011

Page 17

s Owner retains and manages construction services {at Prevailing Wage rates as determined by the State of California) for all construction, rehabilitation, and tenant improvements, if applicable. (See Exhibit C: How to Get a Licensed Contractor)

• Pay all necessary City construction permit fees and other approval fees associated with any construction project.

e Owner agrees to a 10-year BAP loan term and tenants agree to a 5-year BAP Loan term; in some cases tenants may receive a 3-year BAP Loan term. The Loan Agreement requires borrowers to maintain all CRA/LA invested improvements (partially or fully funded by the CRA/LA), or other area of CRA/LA investment, for the BAP loan term.

e Evidence of property lease terms, if applicable.

• Agree to sign a Promissory Note.

e Agree to remain in compliance and submit an Annual Certificate of Compliance.

• Agree to annual inspections of business, including ail CRA/lA investments.

D. Phase IV: loan Funding

Upon BAP Loan set up by Asset Management (approximately two weeks after file submissiont the

BAP loan shall be available for disbursement of BAP loan proceeds. Any BAP loan advances shall

be processed upon BAP loan dosing. CRA/lA staff shall notify borrower of the BAP Loan's status

of "closed and ready for funding".

E. Construction Bids, Construction

BAP borrowers and their contractor(s) must attend a pre-construction meeting to review State mandated Prevailing Wage requirements (for all construction, facades, and tenant improvements) with CRA/lA Wage Compliance staff. The borrower shall hire their own contractor(s); however, the contractor is required to pay prevailing wages for all work funded by the BAP loan. The Owner and contractor(s) are required to work with CRA/LA Wage Compliance Department staff during the bid process and construction period.

Completing the Improvements. For projects that require tenant or building improvements, and/or

construction, Participant shall:

• Submit a detailed scope of work.

111 Solicit a minimum of two, preferably three, bids from bonded and licensed contractors that shall pay prevailing wages and comply with all CRA/lA Prevailing Wage reporting and compliance requirements and Local Hire Guidelines, if applicable. Owner shall submit contractor bids to CRA/LA for review. The Participant selects the contractor,


Dec. 2011

Page 18

which need not be the lowest bidder. Owner executes the contract and CRA/LA issues a "Notice to Proceed".

e Owners are strongly encouraged to register with a Work Source Center to recruit

applicants for employment. Please contact the CRA/LA for a complete list of Work Source Centers.

e Verify the good standing of the contractor(s) license(s). Contractor License information can be accessed through the California State License Board- www.cslb.ca.gov.

" Provide CRA/LA with documentation to verify the status of the contractor(s) insurance, including workers compensation.

e Provide CRA/LA with appropriate evidence of liability, hazard and workers compensation insurance. Insurance shall be kept in effect during entire term of Loan Agreement.

e Commence construction within 90 days after receiving the CRA/LA's Notice to Proceed. If after 90 days the agreed upon work to be performed has not commenced, the Participant shall forfeit their right to participate in the BAP program and any and all agreements with the CRA/LA shall be null and void.

e Owner shall complete the approved Scope of Work within the agreed upon timeline, and shall conform to all applicable federal, state, and local laws and ordinances.

• CRA/LA reserves the right to modify, change, or close the BAP program at any time, at its sole discretion.

• Targeted Incentive Zone Map is attached • The BAP program information and documents will be maintained in the Eastside Region

website, located at: www.crala.org/eastsidebap


Dec. 2011

Page 19

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