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CONSIDERATION OF THE ADOPTION OF A SMALL BUSINESS LOAN PROGRAM FOR BUSINESSES ON THIRD AVENUE
RESOLUTION NO. 2017-080 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA CREATING THE CHULA VISTA THIRD AVENUE SMALL BUSINESS REVOLVING LOAN FUND PROGRAM
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RECOMMENDED ACTION
Recommended Action
Council adopt the resolution.
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SUMMARY
The City of Chula Vista participated with the cities of San Diego and National City in the San Diego Regional Enterprise Zone (EZ) Program. The City of San Diego was the administrator for the program on behalf of all three cities. With the repeal and wind down of the program completed, the City of San Diego remitted a proportional share of the remaining program revenues to the partner agencies. On January 10, 2017 the City Council amended the Economic Development Department Budget by appropriating $200,000 from the EZ funds for business retention and attraction activities. Staff is recommending the establishment of the Third Avenue Small Business Loan Program utilizing these funds.
ENVIRONMENTAL REVIEW
Environmental Notice
Environmental Notice
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
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Environmental Determination
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION RECOMMENDATION
Not Applicable
DISCUSSION
The California Enterprise Zone program provided state sales and use tax credits, business expense deductions, and employee hiring tax credits to attract private sector investment to the enterprise zone. The City of San Diego was the program administrator for the EZ Program on behalf of the cities of Chula Vista, San Diego, and National City. Businesses seeking to utilize the employee hiring tax credit submitted a Hiring Credit Voucher Certificate application to the City of San Diego. If a business qualified for the tax credits, a voucher was issued to the business for each employee. The voucher was required for the business to utilize the tax credit. Each business was required to pay an application fee for the voucher which paid for the administration of the program.
Although State law terminated the Enterprise Zone program in 2013, the law also authorized local Enterprise Zone agencies to continue accepting applications for hiring credit voucher certifications during 2014. Due in large part to early termination of the State Enterprise Zone Program, and anticipation by regional businesses and the tax professional community of the approaching December 31, 2014 voucher issuance deadline, the City of San Diego received a very high volume of certification applications to process during the last 18 months of the program. As a result, the City San Diego ended the program with a fund balance of approximately $3,500,000. On January 13, 2016, the San Diego City Council approved disbursement of the funds to former EZ partner agencies in an amount equal to the percentage of Hiring Credit Voucher Certificate applications received from qualifying businesses in those jurisdictions. Based upon this formula, the City of San Diego remitted $486,991.16 to the City of Chula Vista.
On January 10, 2017, the City Council amended the Economic Development Department Budget by appropriating $200,000 from the EZ Program for business retention and attraction activities. More specifically, the Economic Development staff recommended utilizing the $200,000 to establish a revolving loan account to assist in attracting businesses on Third Avenue and to attract and retain businesses along Main Street. The City Council directed staff to return at a later date with details on the program.
Initially, staff looked at utilizing the available funding both on Third Avenue and along Main Street. Staff was working with businesses along Main Street to address storm water mitigation costs. After reaching out to other manufacturing businesses staff determined the storm water issues impacted only few businesses so a better use of the limited funding would be to focus on the Third Avenue area.
In working with TAVA representatives, business and property owners the consensus was to develop a program that would help attract new restaurants/entertainment tenants/owners. The biggest challenge facing a new or expanding restaurants/entertainment business is the cost for fire sprinklers, grease traps, sewer fees and tenant improvements including ADA improvements and cooking hoods. The Third Avenue Revolving Loan Program has been developed to assist property owners make these types of permanent improvements to their properties. These improvements will stay with the property which will serve to assist current businesses and be there to facilitate future business attraction should the existing tenant(s) leave. The program will not be utilized for tenant specific improvements like signage, awnings, windows and painting.
The Loan Program will be for a maximum of $40,000 at 2% interest for a period of 5 years. The loan will be made to the property owner and secured against the property. Payments will be made directly to the licensed contractor upon completion of the work. Staff initially anticipates making 5-6 loans, and make additional future loans as payments are made to the City.
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council and has found that Mayor Casillas Salas has real property holdings within 500 feet of the boundaries of the property which is the subject of this action. Consequently, pursuant to California Code of Regulations Title 2, sections 18700 and 18702.2(a)(11), this item presents a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.) for the above-identified member.
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. The Third Avenue Loan Program furthers the Economic Vitality initiative 2.1.2 to “foster opportunities for investment in Western Chula Vista” by removing impediments for development projects in the subject area, accelerating the completion of planned and future developments.
CURRENT YEAR FISCAL IMPACT
As stated above, on January 10, 2017, the City Council appropriated $200,000 to the Economic Development Budget from the unexpended EZ funds to be used for business retention and attraction activities. Therefore, there are no current year fiscal impacts.
ONGOING FISCAL IMPACT
The loan program will be for a maximum of $40,000, a five year term and a 2% interest rate. Staff time for the loan program will be covered in the department budget and any costs of the program will be recovered through the loan processing fee and the interest earned on the program. Therefore, there will be no ongoing fiscal impact due to the implementation of the loan program.
ATTACHMENTS
1. Letter of support
Staff Contact: Craig Ruiz, Senior Economic Development Specialist