90-80 WHITE - CITV CLERK �
PINK - FINANCE GITY OF SAINT PAUL Council �
CANARV - DEPARTMEN7 Flle NO. ✓
BLUE -MAVOR � '
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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, $200,000. #36802
FUNDMIO SOURCE ACTtVITY NUMBER
FlNANGAL INFOFiAAAT10N:(EXPLAIN)
�I rr
t
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NOTE: COMPLETE DIRECTIONS ARE INCLUDED IN THE OREEN 3HEET INSTRUCTIONAL
MANUAL AVAILABLE IN T�iE PURCHASINO OFFlCE(PHONE NO.298�4225).
ROUTIN(i ORDER:
6elow are proferrsd routinps for the five most froquent types of documents:
CONTRACTS (assumsa authorized OOUNCIL RE30LUTION (Amend, Bdgts./
budget exists) Accept.Qrenta)
1. Outside Agency 1. Depertment Director
2. Initiating DepartmeM 2. Bud�et Director
3. City Attomey 3. City Altomey
4. Mayor 4. MayorMssisteM
S. Flnance&Mgmt 3vca. Director 5. dty Council
6. Flnance Accrounting 6. Chief/�uxouMant, Fln�Mgmt Svcs.
ADMINISTRATIVE ORDER R�) . COUNCIL RESOLUTION (��)��
1. Activ Man r 1. Initiatin�DepeRmsnt Dfrector
2. DepaRmeM�Mant 2• �Y�Y
3. Dspartment Oirector 3. MayorMalatant
4. Budget Diroctor 4. dty(;oUnCil
5. City Clerk
8. Chief Accountant, Fin&Mgmt 3vca.
ADMINISTFlATIVE ORDERS (all ottrors)
1. Initiating DspertmeM
2. Gty Attorney
3. Mayor/AaiataM
4. City Clerk
TOTAL NUMBER OF SICiNATURE PACiES
Indicate the N of papsa on wh�h signaturos ars required and pepsrclip
each of thes��
ACTION REGIUESTED
D�Nbe what tha projecUnqu�sseks b�ocompifsh in Mthsr chronolopi-
cal wder.or orde�of importu�a�whblw�rer b most epprop�fat�br ths
lasue. Do not write oomplsts ssMeno�s.Bapin s�ch kem in your Ifet withh
a verb.
REOOMMENDATIONS
Completa ff ths fssus in que�on has bssn p�eMed bsforo any body, public
or priveta.
SUPPORTS WHICH OOUNqL OBJECTIVE4
Indkxte whfch Council obj�cUve(s)you�projsot/request supports by li�inp
ths ksy word(s)(HOUSINO, RECREATION, NEKiHBORHOODS, ECONOMIC DEVELOPMENT,
BUDQET,SEWER SEPARATION).(SEE COIiAPL�TE UST IN•IN3TRUCTIONAL MANUAL.)
COUNCIL COMMITTEE/RE3EARCH REPORT-OPTIONAI.AS RE(�UE8TED BY COUNCIL
INITIATIN(3 PROBLEM, 13$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?
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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
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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) .
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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.
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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:
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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
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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
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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. ,
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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.
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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) .
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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.
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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) .
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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.
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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
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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.
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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.
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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.