HomeMy WebLinkAboutAgenda Report - May 7, 2008 K-01AGENDA ITEM K�a I
CITY OF LODI
COUNCIL COMMiJNICATION
TM
AGENDA TITLE: Adopt Resolutionfor the Approval of the Loan Request of Walker -Roderick
Properties, LLC, Pat Walker and Jack Roderick, Guarantors, Through the
Community Development Block Grant (CDBG)funded Revolving Loan Fund
Program, as Recommended by the City Manager.
MEETING DATE: May 7,2008
PREPARED BY: Community Development Department
RECOMMENDED ACTION: That the City Council adopt a Resolution to approve the loan
request of Walker -Roderick Properties, LLC, Pat Walker and Jack
Roderick, Guarantors, through the CDBG-funded Revolving Loan
Fund (RLF) Program, as recommended by the City Manager.
BACKGROUND INFORMATION: In September of 2006, the City Council adopted Program Guidelines
for the Revolving Loan Fund Program, as an element of an
Economic DevelopmentJobs Program.
The purpose of this program is to provide appropriate financial assistance to businesses located in or
moving to Lodi, which in turn create full time jobs while increasing the overall economic base of the
community, Funding for this program was provided through an allocation of CDBG funds, initially from
the 2006-07 Program Year, from proposed allocations of CDBG funds in future Program years, and from
the repayment of principal and interest from existing loans. As a revolving loan program, any program
income from the repayment of loans made from these initial CDBG allocations, is intended to be
"recycled or loaned again through the same program, much like our CDBG and HOME -funded Housing
Assistance Programs have been operated.
There is no minimum or maximum RLF loan amount. Borrowers must, however create at least one full
time equivalent job for each $35,000, or fraction thereof, they receive in RLF assistance.
This is the first loan request to be processed through the RLF program. The details are as follows:
Mr. Roderick and Mr. Walker are partners in a venture called Walker -Roderick Properties, LLC (WRP),
specializing in real estate acquisition, rehabilitating and liquidation. One of their most recent projects is a
mixed-use property located at 207 — 211 E, Pine Street (See attached map and photos — Exhibit A). This
property consists of three residential buildings with seven rental units and one commercial building which
was recently an auto repair/smog shop. The residential units have recently been rehabilitated and are
fully rented out. The City Council may recall that Mr. Walker's and Mr. Roderick's rehabilitation of the
residential portion of this property was recently recognizedwith the Community I m provement Award.
APPROVED: �—
BIair$qz9.re,ity Manager
During the rehabilitation process, the applicants, through discussionswith neighborhood residents, came
to realize the demand for a Laundromat in the area. Further investigation and surveys verified the
demand. To accommodate this demand and pursue this opportunity, the applicants desire to install a
public coin-operated Laundromat located in the commercial building on the premises. Loan funds will be
used to purchase commercial Laundromat machines and pay city permit fees. This facility will initially
feature one employee as an attendant. The facility will be primarily self-service but additional income will
be from a "wash and fold" service for various local industries. Mr. Roderick and Mr. Walker will be
actively involved in the daily operations of the Laundromat for the first several months of operation.
Hours of operation will be from 6 A.M. to 10 P.M., seven days a week. The business projects to employ
a minimum of four full-time equivalent positionswithin 6 months of opening the facility.
Manaaement:
Mr. Walker attended Colorado State University where he majored in Landscape Architecture. He is
licensed in the state of California as a Landscape Contractor and started his own company in 1991.
From its inception, the company, Walker Landscape Construction, operated as a highly successful
business and provided employment to multiple individuals. He still maintains his license.
Mr. Roderick began his own company, California Steam Cleaners, at fifteen years of age. He obtained
as well as maintained hundreds of corporate, business and individual accounts, which encompassed
Sacramento, San Joaquin and Calaveras counties. The company employed several individuals and was
successful until it was retired in 2003.
Financial Characteristics:
Exhibit B shows the projected profit and loss statement for the Laundromat, prepared by the applicants.
Income data is conservative per the applicant's estimation. Profitability of this venture is enhanced as the
rent is low and taxes and other overhead expense are covered from the positive cash flow produced by
the residential portion of the property. Repayment is detailed here with monthly principal only payments.
The terms of the City's pre -approval indicates there is no interest due if the loan is repaid within two
years. These projections indicate the business will be able to repay the RLF with a comfortable margin
after the first several months of operations.
Sources and Use of Funds:
Source1"
Improvements completed $ 39,000
Borrower $117,000 Equip/Permits $140,000
SLE $140.000 Improvementsto be completed $ 78.000
Total $257,000 Total $257,000
Funding obtained by WRP for property rehabilitation included funds for Laundromat improvements
completed to date. Funds remaining from the same source are available to complete the improvements.
However, WRP does not have sufficient funding to pay for the laundry equipment and the related city
permit fees. Funds provided by the RLF will "fill the gap" in financing required for the completion of this
project.
Collateral:
Collateral will consist of a priority lien on all business assets of the laundry facility. Assets consist
primarily of the laundry equipment purchased with loan proceeds with a value of approximately $80,000.
Additional collateral will consist of a third priority deed of trust on the subject property. An appraisal
dated October 10, 2007 indicates a value of $1,080,000. Existing liens of $650,000 result in equity of
approximately $430,000.
Loan Advisory committee
The Program Guidelines adopted by the Council in 2006, called for the creation of a Loan Advisory
Committee (LAC), made up of 3-5 local business and banking professionals selected by the City
Manager. The LAC is responsible for reviewing loan applications forwarded to them by the Loan
Program Operator, which is currently the County RLF Program Office. The LAC considers the
recommended loan structure including terms and conditions, and forwards their recommendation to the
City Manager.
A Loan Advisory Committee made up of Linda Ogata — Pacific State Bank, Keith Land — Farmers &
Merchants Bank, and Kevin Van Steenberge — Lodi Iron Works, did convene on April 25, 2008 to review
this loan application and subsequently made the following recommendations to the City Manager with a
unanimous vote:
1. Approve the loan request to Walker -Roderick Properties, LLC, Patrick A. Walker and Jack
E. Roderick, Guarantors, in the amount of One -Hundred and Forty Thousand Dollars
($140,000). This recommendation shall not be considered by anyone as a loan
commitment until all documents have been fully executed.
2. Approve this loan at 1 % above the prime rate as quoted in the Wall Street Journal, on the
day the Lodi City Council approves the loan, or the date of the note, whichever is more.
Borrower must pay a 1 % loan fee.
3. Approve repayment to begin not less than fifteen (15) or more than forty-five (45) days
from the date of the note. Repaymentwill initially be twenty-four (24) monthly payments of
principal only, followed by thirty-six (36) monthly payments of principal and interest,
subject to the execution of all documentation and collateralization as determined by staff.
Interest during the first twenty-four (24) months will accrue but will be deferred and
forgivable if the entire loan amount is repaid within the first twenty-four (24) month period.
If the full loan amount is not repaid within that first twenty-four (24) month period, the
deferred interest shall be paid within thirty (30) days of the due date of the first principal
and interest payment; and
4. Authorize and direct staff and designated agencies to prepare and execute the loan
documents and perform other procedures necessary to accomplish the intent of the City
Council for the completion of this project.
FISCAL IMPACT: The committal of funds will have no impact on the City General Fund. The
funds provided to the applicant are obtained from the City's CDBG
Revolving Loan Fund accounts. Repayments of the loan would revolve
back into the City's CDBG Revolving Loan Fund accounts for CDBG-
eligible projects in the future.
FUNDING AVAILABLE: 2006107 CDBG Program allocation of $150,000.
JJosph W*d
munity Improve anager
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Exhibit A — Photos
Residential Units
Proposed Laundromat
int of Rehabilitated Residential
and
Commercial Buildings
Side/Rear of
Front Residential Building
EXHIBIT B
Profit and Loss Projection (12 Months)
Pine Street Laundry
Fiscal Year Begins jan
rX.X. X.h F F
tiCC� 2O /.evX.. F� mQ /t _JCS /e, �JJiJ X-
1- /4' �el
Revenue Sales
extractors and dryers
5,300
100.0
5,700
100.0
6,100
80.3
6,800
72.0
8,100All1.1
9,100
71.4
10,500
68.6
13,000
71.4
10,500
66.9
8,100
64.3
8,000
60.2
99,800
71.8
linen contracts
0.0
0.0
1,200
15.8
2,100
22.2
2,20021.52,700
21.2
3,800
24.8
4,000
22.0
4,000
25.5
4,000
31.7
5,000
37.6
31,600
22.7
drop offwash and fold
0.0
0.0
300
3.9
550
5.8
7507.4
950
7.5
1,000
6.5
1,200
6.6
1,200
7.6
500
4.0
300
2.3
7,650
5.5
Category 4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Category 5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Category 6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Category 7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Total Revenue (Sales)
5,300
100.0
5,700
100.0
7,600
100.0
9,450
100.0
11,050100.0
12,750
100.0
15,300
100.0
18,200
100.0
15,700
100.0
12,600
100.01
13,3001
100.01
139,050
100.0
Cost of Sales
Category 1 brochures and
business cards
0.0
0.0
1,100
18.0
300
4.4
200
2.5
200
2.3
100
1.1
100
1.0
50
0.4
100
1.0
100
1.2
0.0
2,250
2.3
Category 2
-
-
0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Category 3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Category 4
-
-
-
-
-
-
-
-
-
-
0
-
Category 5
0
Category 6
0
Category 7
0
Total Cost of Sales I
1 01
0.01
01
0.01
1,1001
14.51
3001
3.21
2001
1.81
2001
1.71
1001
0.81
1001
0.71
501
0.31
1001
0.61
1001
0.81
01
0.01
2,250
1.6
Gross Profit 1
1 5,3001
100.01
5,7001
100.01
6,5001
85.51
9,1501
96.81
10,8501
98.21
11,9001
98.31
12,6501
99.21
15,2001
99.31
18,1501
99.71
15,6001
99.41
12,5001
99.21
13,3001
100.01
136,8001
98.4
Expenses
Salary expenses
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Payroll expenses
1,500
28.3
1,500
26.3
1,500
19.7
1,500
15.9
3,000
27.1
3,000
24.8
3,000
23.5
3,000
19.6
3,000
16.5
3,000
19.1
3,000
23.8
3,000
22.6
30,000
21.6
Outside services
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Supplies (office and
operating)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Repairs and
maintenance
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Advertising
1,300
24.5
600
10.5
1,200
15.8
600
6.3
600
5.4
400
3.3
200
1.6
800
5.2
100
0.5
100
0.6
0
0.0
0
0.0
5,900
4.2
Car, delivery and travel
0.0
0.0
300
3.9
400
4.2
400
3.6
600
5.0
650
5.1
750
4.9
800
4.4
800
5.1
800
6.3
1,000
7.5
6,500
4.7
Accounting and legal
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Rent
250
4.7
250
4.4
250
3.3
250
2.6
250
2.3
250
2.1
250
2.0
250
1.6
250
1.4
250
1.6
250
2.0
250
1.9
3,000
2.2
Telephone
14
0.3
14
0.2
14
0.2
14
0.1
120
1.1
160
1.3
180
1.4
220
1.4
220
1.2
220
1.4
220
1.7
250
1.9
1,646
1.2
Utilities
450
8.5
450
7.9
475
6.3
900
9.5
1,100
10.0
1,400
11.6
1,500
11.8
1,800
11.8
2,000
11.0
2,000
12.7
1,800
14.3
900
6.8
14,775
10.6
Insurance
170
3.2
170
3.0
170
2.2
170
1.8
170
1.5
170
1.4
170
1.3
170
1.1
170
0.9
170
1.1
170
1.3
170
1.3
2,040
1.5
Taxes (real estate, etc.)
0.0
0.01
0.0
0.0
0.01
0.01
0.01
0.0
0.0
0.01
0.01
0.0
0
0.0
Interest
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Depreciation
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
laundry chemicals
0.0
0.0
80
1.1
120
1.3
300
2.7
425
3.5
500
3.9
600
3.9
700
3.8
900
5.7
425
3.4
425
3.2
4,475
3.2
Other expenses (specify)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Other expenses (specify)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Misc. (unspecified)
1
0.0
1
0.0
1
0.0
1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0.0
Total Expenses
3,684
69.5
2,9841
52.41
3,9891
52.51
3,9541
41.81
5,9401
53.8
6,405
52.91
6,450
50.6
7,5901
49.6
7,240
39.8
7,440
47.4
6,665
52.91
5,995
45.1
68,3361
49.1
Net Profit
1,616
30.5
2,716
47.6
2,511
33.0
5,196
55.0
4,910
44.4
5,495
45.4
6,200
48.6
7,610
49.7
10,910
59.9
8,160
52.0
5,835
46.3
7,305
54.9
68,464
49.2
RLF Principal Pmt.
1,994
2,004
2,015
2,025
2,037
2,046
2,057
2,067
2,078
2,089
2,100
2,111
Coverage
0.811
1
1.36
1.25
2.571
2.411
1
2.69
1
3.01
3.681
5.251
3.91
1
2.78
1
3.46
Surplus
-3781
301
712
1
496
3,1711
2,8731
1
3,449
1
4,143
5,5431
8,8321
6,071
1
3,735
1
5,194
RESOLUTION NO. 2008-80
A RESOLUTION OF THE LODI CITY COUNCIL ACCEPTING THE CITY
MANAGER'S RECOMMENDATIONTO APPROVE THE LOAN REQUEST OF
WALKER-RODERICK PROPERTIES, LLC, PATRICKA. WALKER AND JACK E.
RODERICK, GUARANTORS, THROUGH THE COMMUNITY DEVELOPMENT
BLOCK GRANT FUNDED REVOLVING LOAN FUND PROGRAM
WHEREAS, the purpose of the Revolving Loan Fund Program is to provide appropriate
financial assistance to businesses located in or moving to Lodi, which in turn create full-time jobs
while increasing the overall economic base of the community.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lodi, as follows:
The City Manager is hereby authorized and directed to execute, on behalf of the City
of Lodi, a Community Development Block Grant based loan through the Revolving
Loan Fund Program to Walker -Roderick Properties, LLC, Patrick A. Walker and Jack
E. Roderick, Guarantors, in the amount of One -Hundred and Forty Thousand Dollars
($140,000);
2. Approve this loan at 1 % above the prime rate as quoted in the Wall Street Journal,
on the day the Lodi City Council approves the loan, or the date of the note,
whichever is more. Borrower must pay a 1 % loan fee;
3. Approve repayment to begin not less than fifteen (15) or more than forty-five (45)
days from the date of the note. Repayment will initially be twenty-four (24) monthly
payments of principal only, followed by thirty-six (36) monthly payments of principal
and interest, subject to the execution of all documentation and collateralization as
determined by staff. Interest during the first twenty-four (24) months will accrue but
will be deferred and forgivable if the entire loan amount is repaid within the first
twenty-four (24) month period. If the full loan amount is not repaid within that first
twenty-four (24) month period, the deferred interest shall be paid within thirty (30)
days of the due date of the first principal and interest payment; and
4. Authorize and direct staff and designated agencies to prepare and execute the loan
documents and perform other procedures necessary to accomplish the intent of the
City Council for the completion of this project.
Dated: May 7,2008
I hereby certify that Resolution No. 2008-80 was passed and adopted by the City Council of
the City of Lodi in a regular meeting held May 7, 2008, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN
COUNCIL MEMBERS — Hansen, Johnson, Katzakian, and Mayor Mounce
COUNCIL MEMBERS — Hitchcock
COUNCIL MEMBERS — None
COUNCIL MEMBERS — None
Z05H �
L
City Clerk
Revolving Loan Fund
Prog.ram
May 7, 2008
Presented by
Community Development Department
RLF Program Development
February 28, 2006 - Shirtsleeve Presentation
. Introduction to CDBG-funding for Economic
Development
March 1, 2006 - Council Action
. $150,000 CDBG Allocation for Economic Development
Jobs Program
July 18, 2006 - Shirtsleeve Presentation
• Use of
RLF
Program
for Economic Development
• How a
RLF
Program
would work
RLF Program Elements
CDBG funding
. Economic Development
. Job Creation
Revolving Loan Format
. 1-2 loans per year
. Provide additional CDBG allocations as necessary
. Build up balance of funds through program income
RLF Program Elements
No minimum/maximum loan amount
Job Creation criteria
■ 1 LMI job for each $35,000
Loan Terms
. 3-7 years
Interest Rate
. Near Market Rate
Collateral
. 100%
. No unsecured loans
RLF Program Elements
Eligible Uses
. Infrastructure and off-site improvements.
. Land costs, including engineering, legal, and related
costs.
. Impact/Mitigation fees.
. Building construction costs, and other related costs.
It is important to note that the use of loan funds may
trigger Prevailing Wage requirements.
Our preference is not to fund construction costs.
Review of RLF Process
Loan Application Review
. In -House, Qualitative Review
. City Manager's Office & Community Development
Program Operator Review
. SJ County RLF Program
. Quantitative Review
. Underwriting process
■ Credit Memo — Recommendation to Loan Advisory
Committee
Review of RLF Process
Loan Advisory Committee
. Panel of 3-5 local banking &business professionals
Selected from a pool of professionals recommended to the
City Manager by the City Council
. Loan Advisory Committee makes recommendation to
City Manager
Set terms and conditions
City Manager Review
. Final recommendation on approval or denial to City
Council
Review of RLF Process
Loan Documents & Closing
■ F&M Bank
Prepares loan documents
LaserPro
. Loan Closing
City Staff &Program Operator oversight
Review of RLF Process
Loan Servicing — Monitoring
■ Program Operator — SJ County RLF Program
Oversight and involvement by City Staff
. Payment processing
. Reporting and Monitoring
City Staff to assist with eligibility and income
verification for job creation requirement
• Collection of delinquent accounts
Current Loan Request
Walker -Roderick Properties
. Pat Walker & Jack Roderick
207 — 211 E. Pine — Mixed -Use Property
. 207 E Pine — Recently rehabilitated residential
Recent Community Improvement Award recipient.
. 211 E Pine — Commercial structure
Proposed Laundromat.
Seeking RLF Loan for development of that use.
Current Loan Request
Coin-operated Laundromat
. Initially Self -Serve
. Expand to "wash and fold" service within a few
months.
Proposed use of funds:
■ Purchase commercial machines.
■ Pay permit and impact fees to City.
■ Purchase other required small equipment and
supplies.
Current Loan Request
Sufficient Management/Business
Experience
. Directly related to this type of business.
Financial Characteristics
■ Conservative estimates/projections.
. Enhanced profitability.
. Able to repay loan with comfortable margin.
Current Loan Request
Sources and Use of Funds
■ Source:
Borrower
RLF Loan
Total
. Use
Completed Improvements
Equipment/Permits
Improvements to be completed
Total
$117,000
$140,000
$257,000
$ 39,000
$140,000
78,000
$257,000
Current Loan Request
Collateral
. All business assets $80,000
. Third Deed of Trust $60, 000
Qualifying Job Creation
. Minimum of four (4) full-time equivalent
positions within 6 months.
Local residents from within the Target Income
Group (TIG)
Current Loan Request
Terms of Loan
■ Amount: $140,000
■ Rate: Prime + 1
■ Borrower Fee: 1%
. Term: 60 monthly payments
Interest Free for 24 months if loan paid in full.
Accrued interest due within 30 days if loan not
paid off within first 24 months.
Current Loan Request
Loan Advisory Committee
• Unanimous recommendation of approval to
City Manager.
Recommended Action
. Adopt Resolution as recommended by City
Manager to approve the loan request
Under the terms and conditions stated in the
Resolution and outlined in this presentation.