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Crescent City Councilors already authorized staff to pursue federal grant dollars to help small businesses, staff are now seeking additional money to create a loan program that can help larger enterprises both inside and outside city limits.

Up to $500,000 in Community Development Block Grant dollars is available for a business loan program, Finance Director Linda Leaver told Councilors on Monday.

Citing an amended Notice of Funding Availability, or NOFA, through the California Department of Housing and Community Development, which allocates CDBG dollars, Leaver recommended the city pursue the full $500,000.

Councilors on Monday authorized City Manager Eric Wier to accept a $9,000 California Endowment Grant, which will pay for the services of Claggett Wolfe Associates to complete the CDBG application. The Council approved a professional services agreement with Claggett Wolfe, which run the loan program if the city is successful, and a memorandum of understanding with Del Norte County since businesses outside city limits can participate in the program.

“City staff began working with county staff to figure out how a business loan program might work,” Leaver told Councilors. “We would apply for the maximum funding. The program will be offered to businesses in the city and county and it is not limited to microenterprises. It is available to larger businesses as well.”

After the state released a notice of funding availability for 2019-2020 CDBG dollars last autumn, the Council held two public workshops in November, a public hearing in March and in May authorized staff to submit applications for grants to benefit the North Coast Rape Crisis Team, the Community Food Council’s Pacific Pantry and the third phase of a storm drain improvement project.

City staff also submitted a CDBG application for a microenterprise program, which would loan up to $5,000 for small businesses to purchase goods and services and expressed interest in moving ahead with a forgivable loan program for businesses in the city and county regardless of size.

However, since a change to the state’s notice of funding availability was expected, Councilors asked Leaver to wait before moving ahead with the application for the loan program aimed at businesses regardless of size. .

On Monday, Leaver reported back to the Council that the new NOFA reduced the CDBG cap for the business loan program from $750,000 to $500,000. Under the new NOFA, instead of being ranked against other applications, grant applications will be reviewed on a first-come first-served basis. Eligible applications will be awarded until grant money is depleted or Sept. 15, 2020, according to Leaver’s staff report.

The new NOFA also reduced the microenterprise funding availability from $500,000 to $250,000, Leaver said. According to her, Chuck Wolfe, of Claggett Wolfe, indicated that the microenterprise program can still work despite the reduced funding.

“In the microenterprise (program) the intent is for those loans to be forgivable,” she said. “In the (business loan) program, HCD has not said whether or not it’s allowed to be forgivable. They’re still working out some of the details.”

For business loan program, Leaver said Department of Housing and Community Development regulations stipulate that a loan amount would be based on how many full time jobs, or full time-equivalent jobs, a business can generate and retain. It would be capped at $35,000 per full time-equivalent job, which is about 2,080 working hours per year for one person and 1,000 hours a year for two people, she said.

Under Housing and Community Development regulations, at least 51 percent of the jobs a business creates and retains must be filled with people who are low- to moderate-income, Leaver said. Those loan dollars can be used to purchase furniture and rehabilitate a property.

Leaver recommended hiring Claggett Wolfe, which will also oversee the city’s microenterprise program if its earlier grant is successful.

“As the loans are repaid it becomes what’s called a revolving loan fund,” Leaver said. “As we receive payments back, we can use the money to make additional loans to additional businesses.”

Leaver said she is still working on finding two consultants in addition to Chuck Wolfe of Claggett Wolfe, who will guide businesses through the loan application process and ensure they are compliant after they receive a loan. The second consultant will be a third-party independent consultant, that will underwrite the loan and ensure everything is in compliance with HCD guidelines and is fair, she said.

“If the city gets the award, gets the grant, there will be a time period associated with that, typically around two (or) two-and-a-half years,” Leaver said. “During that time, if there’s a default, then Claggett Wolfe Associates would be responsible for that. Once the grant period is over, that would revert to city staff.”

It was Crescent City Mayor Blake Inscore who brought up the question of responsibility should a loan recipient default. He said he wanted to make sure that the city didn’t start something that will cost it money down the road. Inscore asked Leaver if the city would be able to use any money it receives in loan payments to defray administrative costs.

Leaver said that about 7 percent of those dollars could be used for administrative costs.

Following its May 18 meeting, the City Council submitted applications for $500,000 in 2019-2020 CDBG dollars for the Pacific Pantry and $150,000 for the North Coast Rape Crisis Team. The North Coast Rape Crisis Team provides emergency shelter, food, clothing, a cell phone and transportation assistance for survivors of domestic violence, sexual abuse and human trafficking.

Councilors at that May 18 meeting, authorized staff to seek up to $900,000 in 2017 CDBG dollars which, if awarded, will expand a project to widen storm drain capacity on Front Street between B and G streets and on C Street.

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