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90-80 WHITE - CITV CLERK � PINK - FINANCE GITY OF SAINT PAUL Council � CANARV - DEPARTMEN7 Flle NO. ✓ BLUE -MAVOR � ' � Co ncil Re l i n g , , Presented By o Committee: Date Out of Commi.ttee By Date CHILD CARE PILOT PROGRAM WHEREAS, the City Council passed Ordinance 4�88-1652 on October 5, 1988 and called for the City to make child care more affordable to low-income residents; to increase child care options now in short supply such as: infant-sick-extended hours, to expand its efforts to assist new and existing child care providers with funding for renovation needed to meet licensing requirements; and to award start-up and improvement funds to centers which are already accredited or agree to accreditation; and WHEREAS, the City's Department of Planning and Economic Development has developed certain Child Care Financing Pilot Program Guidelines to address these concerns (which guideli.nes are attached) ; and WHEREAS, the Council adopted in the 1990 budget $200,000 of UDAG Revolving Loan Funds to be used to finance this Pilot Program in CDBG eligible areas; and in the remainder of the City $200,000 of General Fund's P.I.A. (Public Improvement Aid) be used to finance this program; and WHEREAS, the Neighborhood Development and Housing Divisions of PED are qualified to administer the Pilot Program acting in their capacity as Housing and Redevelopment Authority and as City staff; and WHEREAS, the Housing and Redevelopment Authority Board of Commissions has heretofore approved the Pilot PXogram Guidelines; NOW THEREFORE BE IT RESOLVED, that the attached document entitled "Child Care Facility/ Rehabilitation Progr�m Guidelines" be approved. COUNCILMEIV Requested by Department of: Yeas Di.IUOrid Nays Goswitz _� [n Favor e Long ' � � ��laccai�:e ; Against B Rettman �hune ' Adopted�by5�uncil: Dalke �A� � 8 19� Form Appro City Att ney � Certified Passe ncil S�cr ary BY By A►pproved by � v, r: Date , `�A� � � ��90 Appro y Mayor for Sub ' si �!o Council / ,/� / —- .--, gY �'-�Qf�'%uei-�� PUBUSHED J A N 2 7 1990 ,� - ' ��y��o DEPARTM[NT/OFFICElCOUNqL DATE INITIATED PED-Neighborhood evelopment 12-21-89 GREEN S NO. s 9 CONTACT PERSON 8 PlqNE DEPARTMENT DIRECTOR �ATE Gre Davidson X3216 � � [4�TM�uNC�� _ g NV�R� �CITY ATTORNEY n CITV CLEiiK MU8T�ON COUNpL AOENOA 8Y(D T� IIOUTItiO �BUDOET DIRECTOR �FIN.6 MOT.SERVICES DIR. . MAV�i(�i A8818TAN � TOTAL A�OF 81QNATURE PA ES (CUP ALL LOCATIONS FOR 81GNATURE� ACTWN REOUE8TED: Approve Guidelines _ for the Chi1d Care Financing Pilot Program. �co�Na,noNS:�ov�e tN« c� c�ur� REPOF�r oPT10NAL _PLANNINO COMMISSION _pVll SERVI�COMMI8810N �� PMpNE NO. _q8 COMMITI"EE _a..�,� _ ��N,�: 28 —���,� j98g BUPPORTS WHK�1 COUNqI 08JECTNE ��O�s,O �� iNm�nao Paoe�M.issue.oPPOnru lwho,wnse,w�+.wn.rs,vinnq: There is a need fo more affordable child care especially for "special needs" . Ordinance #88-1652 passed 10 5-88 called for the City to assist via a financing program. The problems are: - Insufficient sup ly of quality child care, especially in "special needs", and in very low and high inc areas. - Low cost financi is needed due to tight cash flows of child care operations and difficulties prov'ders have in obtaining low cost financing from regulated lenders. (Continued on attached sheet) ADVANTAfiE81F APPROVED: Will help ameliorat some of the problems listed above at minimal cost to the City as PED plans to use a non- rofit to administer the day to day processing, guidance and coordinatio of the applicants. PED will assume all oversight, responsibilities, and will be represente on the Loan Review oard that approves loans. This program will : - provide more oppo tunities for affordable child care, while addressing critical supply issues of child care. - help improve hous ng conditions. - create and retain jobs. o�uvu�raoes��a�oveo: None RE��IVED t,ouncu kesearcn Center JANd51�90 utc.2� »a9 CITY CLERK DISADVMITIIGES IF NOT APPFiOYED: - Insufficient affor able child care supply will continue, especially in "special needs" areas. - Insufficient affor able financing options for child care will _r�emain. - An opportunity to ncourage people to seek licensing/accreditation and thus improve "quality" child ca e may be missed. - An opportunity to reate/retain jobs will be missed. - An opportunity to ncourage people to make home impravements v�ill be gone. - An opportunity to oordinate a program and tap into a non-prof�it's related programs w m . TOTAL AMOUNT OF TRAN�ACTION COST/i�YENUE BUOGETED(CIRCLE QNE) YEd NO Public Improvement Ai , $200,000,#09050 and UDAG Revolving Loan Fund, $200,000. #36802 FUNDMIO SOURCE ACTtVITY NUMBER FlNANGAL INFOFiAAAT10N:(EXPLAIN) �I rr t . _ . s NOTE: COMPLETE DIRECTIONS ARE INCLUDED IN THE OREEN 3HEET INSTRUCTIONAL MANUAL AVAILABLE IN T�iE PURCHASINO OFFlCE(PHONE NO.298�4225). ROUTIN(i ORDER: 6elow are proferrsd routinps for the five most froquent types of documents: CONTRACTS (assumsa authorized OOUNCIL RE30LUTION (Amend, Bdgts./ budget exists) Accept.Qrenta) 1. Outside Agency 1. Depertment Director 2. Initiating DepartmeM 2. Bud�et Director 3. City Attomey 3. City Altomey 4. Mayor 4. MayorMssisteM S. Flnance&Mgmt 3vca. Director 5. dty Council 6. Flnance Accrounting 6. Chief/�uxouMant, Fln�Mgmt Svcs. ADMINISTRATIVE ORDER R�) . COUNCIL RESOLUTION (��)�� 1. Activ Man r 1. Initiatin�DepeRmsnt Dfrector 2. DepaRmeM�Mant 2• �Y�Y 3. Dspartment Oirector 3. MayorMalatant 4. Budget Diroctor 4. dty(;oUnCil 5. City Clerk 8. Chief Accountant, Fin&Mgmt 3vca. ADMINISTFlATIVE ORDERS (all ottrors) 1. Initiating DspertmeM 2. Gty Attorney 3. Mayor/AaiataM 4. City Clerk TOTAL NUMBER OF SICiNATURE PACiES Indicate the N of papsa on wh�h signaturos ars required and pepsrclip each of thes�� ACTION REGIUESTED D�Nbe what tha projecUnqu�sseks b�ocompifsh in Mthsr chronolopi- cal wder.or orde�of importu�a�whblw�rer b most epprop�fat�br ths lasue. Do not write oomplsts ssMeno�s.Bapin s�ch kem in your Ifet withh a verb. REOOMMENDATIONS Completa ff ths fssus in que�on has bssn p�eMed bsforo any body, public or priveta. SUPPORTS WHICH OOUNqL OBJECTIVE4 Indkxte whfch Council obj�cUve(s)you�projsot/request supports by li�inp ths ksy word(s)(HOUSINO, RECREATION, NEKiHBORHOODS, ECONOMIC DEVELOPMENT, BUDQET,SEWER SEPARATION).(SEE COIiAPL�TE UST IN•IN3TRUCTIONAL MANUAL.) COUNCIL COMMITTEE/RE3EARCH REPORT-OPTIONAI.AS RE(�UE8TED BY COUNCIL INITIATIN(3 PROBLEM, 13$UE,OPPORTUNITY Explel�the situation or oondkbns tlu�t cre�tsd a r�sed tor your proJect or requeat. ADVANTACiES IF APPROVED Indicate whethsr thfs is simpy an�nnual budpst procedure required by law/ d�uter or whethor thero aro�c fn whfch tM Ciry of Saint Paul and its citizens will benelit irom this pr�t/sctbn. DISADVANTAOES IF APPiiOVED What neyative eflecta or major chenges to axfsting or paat proce�ea might this projecVroqt�sst produ�if it is puesd(s.g.,trafffc delays, noise, tax increases or a�ssrtbnb)?To Whom?Whsn9 For how long4 DISADVANTA(iES IF NOT APPROVED What vriN be the negatfvs consequsnces if tM promiaed action is not eppro�vsd?Inability to deliver aeryice?CoMinued high treiflc, noi�, accidsnt rete?Loss of revsnus? FIN/WCIAL IMPACT Although you must tailor the information you provids here to the issue you are addreasfny, fn gsnsral you must answer two queationa: How much is it going to c�st?Who is going to psy? . ��D`�o , ; Child Care Facility/Rehabilitation Financing Program Guidelines December 27, 1989 This pilot program will provide financing to rehabilitate structures for in-home child care facilities and child care centers within the City of Saint Paul. This program is designed to encourage improvement of structures that are physically deteriorating, underused, economically inefficient, and in need 1 of rehabilitation by bringing such structures into condition to be used as child care facilities and to generate revenue for payment of the rehabilitation loans through operation of child care facilities. PED staff are recommending that the program be conducted in three six month phases, with evaluation and a written review presented to the HRA occurring after each phase. Fundi�g levels. are recommended as follows: Pt�ase I $135,000 Phase II 135,000 Phase III 130.000 $400,000 - for 18 months The program will be evaluated every six months to determine if the demand for the program exceeds the monies available, to assess the credit quality based upon the experience in delinquency and losses to assess the effectiveness of this mechanism for accomplishing structural rehabilitation; and make guideline changes as deemed necessary by the Loan Review Board. If the demand for Phase 1 I or II warrants, waiting lists will be developed. When and if the waiting list indicates requests for 508 of the funds available for the next phase, it will start immediately. Program Guidelines 1. �urpose and Eligibility: This program is to provide low cost financing to new and existing child care providers within the City of Saint Paul. It will improve the quality of the houszng supply within the city, help eliminate blight, and improve the fire, health and safety conditions of buildings and residences. It is available to any individual, for-profit, or non-profit entity, willing to sign a statement to the effect that they are or will become a licensed, and accredited, child care provider within 180 days of receipt of funds, and comply with all necessary fire and safety inspection requirements. 2. The applicant may be: individual owners, partnerships, corporations, non-profits, tenant operators or contract for deed purchasers. An applicant must have the ability to repay the loan and be an acceptable credit risk as determined by the Loan Review Board (see #20) or Administrator (see #18) . 2 . � � � � �o--�a 3. Loan amount: minimum of $1,000, maximum of $10,000. 4. The interest r�te is 38 annual interes� on all City funds. 5. The term of the loan can be set by the Loan Review Board between 1 and 5 years. Providers serving the "special needs" situations may have a term up to 20 years. 6. �'or "special needs ,po�ulations" such as in low-income and/or minority neighborhoods, and for providers of extended hour care, sick care, or for service to the physically or mentally challenged, loans will be amortized over 20 years at 38 with a minimum monthly payment of $20.00. As long as they remain serving the special needs, this term hnlds. If, at some point in the future, they decide to provide regular, non-specialized child care, from that point on their loan would be amortized over the n�xt 5 years. In the event they cease providing child care, the loan balance is payable within 90 days of notification to PED, licensors, or the administrator that the provider has left the child care business. 3 7. Income Eligibility and Matching RecLuirements Applicants will also be screened for compliance with HUD-CDBG Eligibility Criteria to determine if CDBG dollars will be used. If the applicant qualifies under CDBG criteria, CDBG dollars will be used first. The following criteria shall apply for u'se of CDBG funds: A. In-Home Facilities - The household income of the provider must meet the low/moderate income guidelines as per Appendix A. B. Centers that are non-profits are not required to have the private match. Centers that are for-profit and serve 518 low income, or special needs situations, are not required to have the private match. Other for-profit centers will need to have the private match. If possible, a Center must first meet at least one of the following federally defined eligibility criteria: 4 . � � Gc9o-�° 1. P�rojects which serve a maiority of low and moderate income people. In order for a business to qualify under this criteria, the Center will have to provide a service that is used by a ma�ority of low or ' moderate income people. In addition, staff or the Administrator will have to determine who the customers are and whether they qualify as low or moderate income. In some instances� in order to avoid as much sub�ective speculation as , possible, Staff may require the identification of the business service area and compare that with the map of eligible low/moderate census tracts (see Appendix B) . 2. Proiects which create or retain jobs for low and moderate income persons 3. Proiects which serve to eliminate slums or blight. - Staff will only seek to qualify an applicant under the slum/blight objective if it is not possible to make a determination on low/moderate income 5 benefit. This would be done in cases where the customers haven't been determined and/or a developer is the recipient of the rehabilitation assistance. In order for a project to qualify under the slum/blight objective, the project would have to be located in an area that is designated a slum or blighted area according to state and/or local law. C. If the applicant does not meet the CDBG criteria in 7a or 7b, the Administrator and Loan Review Board will seek to qualify the applicant for use of non-CDBG Program funds. 1. Non-CDBG criteria are: a.) applicants will comply with Items #1 through 6, with priority given to providers of Special Needs as outlined in #6. b.) If household incomes of the providers are less than the Income Provisions set by HUD, loans need not be matched. If household 6 . � ��a-�� incomes are greater, loans must be matched 2:1 public to private. Private match may be in the form of bank financing, cash, sweat equity (valued at $10 per hour) , or � contributed equipment. 8. An applicant's property must conform to use under the City's 2oning Ordinance. 9. . Failure to abide by the City of St. Paul or CDBG/HLTD prOcedures, laws, and approved plans, including Davis Bacon can result in calling off the loan at HRA's request. If a private match is involved, they must honor this request in an efficient, timely manner. 10. An application fee of $25 is required. It will be refunded if the loan is denied. 11 Eligible Improvements a) Any deficiencies listed in an inspection report, b) any incipient violations, c) removal of architectural barriers, d) improvements to entrances, doors, windows, roofing, e) improvements to enhance the liveablity of the property, f) improvements to energy efficiency, g) professional fees and permits. , 7 12. Ineligible Costs a) Refinancing existing debts b) Non-fixed improvements c) Working capital d) Sweat Equity--payment for the applicant's own labor and performance for construction or improvements e) Improvements Completed Prior to Loan Closing f) Training and accreditation, nor non-fixed equipment. g) Non-fixed equipment 13. Loan Security: Loans will be secured in a variety of ways. Personal guarantees and second and third mortgages will be used on the larger loans. All loans greater than $5,000 will be secured by mortgages. On Contract for Deeds all reasonable efforts will be made to have the Vendor join in on the mortgage only, via a Vendor's partial subordination. Guarantors and co-signers will also be considered. Landlords of buildings will have to sign a consent form allowing improvements and may also need to sign as co-signers on loans taken out by tenants. Case by case decisions will be made by the Loan Review Board, or when the Loan Administrator has such authority. 8 . , G'c�a'�o 14. Inspections: All first time provider applicants will be inspected by the Fire Department and other appropriate licensing agencies prior to applying for the credit application. This should insure that all improvements needed to meet licensing requirements will be known and planned for financially. (See Appendixes C & D for inspection reports.) 15. Specifications Review: Rehabilitation specifications may be developed by the applicant arith consultation by the inspectors as needed. Plans may be submitted to the administrator� reviewed and approved by the appropriate PED rehabilitation specialist as appropriate 16. Cessation of Operations: Child care providers who cease operations, or fail to become licensed and/or accredited, will be required to repay the balance of the loan within 90 days of notification (to PED, licensors, or the administrator) . 9 17. Accreditation Trainine: Loan recipients who are not currently involved in ongoing training/certification will be required to attend 12 hours of child care business courses. Such courses are offered by Resources for Child Caring, Wilder Child Care Services and Technical Institutes. Applicants must show evidence of past or present classes, that pertain to business and tax management issues. 18. Administrator's Role: A third party Administrator will be contracted with to administer the program. They will develop and evaluate a child care questionnaire. They will guide the applicants through the application process up to the time when the Loan Review Board meets. 19. Loan Servicing, C�o npanv_: A loan servicing company will be. contracted with to: 1) prepare loan payment books� 2) receive, process payments, and remit payments back to the City, and 3) provide delinquency lists and any other reports as deemed necessary. 10 . . �9a -�� 20. Loan Review Board: A Loan Review Board will be formed to help the administrator and to select and/or deny some loan applications. Members of this panel will include a banker, a child care provider, and representatives from the Administrator, PED, and the City's Child Care Coordinator (or designee) . t 21. Coordination with Other Programs Both the third party Administrator and the Program Manager (PED) will be trained and become aware of and possibly make referrals to other programs, such as Housing Rehab and Job Training Partnership Act funds which can be used to cover various costs the applicant �s requesting, thus eliminating duplication of program usage. 11 Application Process 1. The administrator will handle both the credit application as well as the child care questionnaire. The questionnaire will evaluate the provider's'knowledge regarding child development, curriculum contents, nutrition, handling difficulties associated with child care, etc. 2. The applicant will return both the questionnaire and credit application to the Administrator. The Administrator will be given suthority to approve the application if the monthly debt payments to net-income ratio is less than 208, and the credit bureau report shows no problems. Other loans will be referred to the Loan Review Board. 3. The borrower wiYl sign a note, a loan agreement, mortgage and other appropriate documents. The Administrator will explain repayment procedures. 4. If the client is hiring a contractor to do improvements, (s)he must receive 3 bids for the proposed work if the cost is greater 12 �� �-�� � than $2,000 and accept the lowest bid. If the work is to be done by the applicant, written estimates and price lists will be submitted. All appropriate work will be done under permits which . will be posted. All contractors are to be licensed and bonded in the City of Saint Paul. Loan Portfolio Servicing 1. At the time of initial licensing, inspectors will verify that the stated improvements have been made and will send their veritication to the PED staff administrator. If at that time the improvements have not been made, the loan will be payable on �demand, or foreclosure proceedings will begin. 2. Once the loan has been closed, the administrator will contact the loan servicing company. The loan servicer will receive the payments and remit the net payments to a fund within the City of Saint Paul. They will also prepare delinquency reports. Once a loan has been delinquent 90 days or more, collection and foreclosing procedures will begin. 13 ) Estimated Bud,ctet 1. Marketing and administration costs: $ 15,000 2. Computer and modem hookup to credit bureau 5,500* 3. Annual phone line into PED's modem 400 Totals $ 20,900 Program funds: S379.100** Allocation over 18 months: $400,000 * One Time Costs ** A loan closing fee of approximately $150 per loan will be paid from program funds to the third-party agency for their time spent on screening, interviews, site visits, client assessment, referrals, credit applications and closings. 14 � � . �' 9G,�� -�. Initiating Problem, Issue, Opportunity (Who, What, When, Where, Why) : Con't. - Few incentives exist to encourage people to enter child care. - Existing child care could be of a higher quality if more providers sought accreditation which this program encourages. - Turnover of child care providers is high due mostly to low wages. This program helps lower operating costs which could help raise net profits, thus encouraging people to remain in child care.