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COLORADO
September 30, 1997
The Honorable George E. Baxter, Chairperson
Weld County Board of Commissioners
P.O. Box 758
Greeley, Colorado 80632
Re: Weld/Larimer Revolving Loan Fund, CDBG Contract #94-963
Dear Commissioner Baxter:
Office of Business Development
1625 Broadway, Suite 1710
Denver, Colorado 80202
(303) 892-3840
(303) 892-3848 fax
1-800-659-2656 TDD
Roy R. Romer
Governor
On June 31 and August 1, 1997, Karen Thorson, of the Office of Business Development
(OBD) CDBG staff met with Jodi Hartmann, Responsible Administrator of the Weld/Larimer
Revolving Loan Fund (RLF), and Don Warden, Weld County Administrator, in order to
monitor the activities of the RLF with regard to the above referenced contract with the
State of Colorado. This letter will report on the items reviewed during the monitoring visit.
The Revolving Loan Fund has done an exemplary job documenting the borrowers' costs
and establishing that all CDBG dollars funded for working capital were expended within
appropriate time frames and for eligible costs. RLF staff has demonstrated continued
improvement through individual training opportunities and has regularly participated in all
training sessions offered by OBD.
During the review, several items were noted which require minor corrective action or which
require the submittal of additional documentation to assure compliance with program
requirements. Below is a summary of areas which were reviewed during the visit and the
responses or actions required (in bold print), if any, to achieve contract and program
compliance.
APPLICATION CERTIFICATIONS AND PROJECT START-UP
All documentation regarding the application process was available for review by the
general public. The files were orderly and readily available. The Community Development
Plans were complete and contained all required information. (Note: The Plans contained
limited information regarding the special needs of minorities and women; however, this
*97
972315
The Honorable George E. Baxter
September 30, 1997
Page 2
information is not a requirement.) No business tenants or residents were displaced as a
result of the CDBG funding.
Contract Special Conditions
The CDBG budget line items in the Scope of Services section of the contract provide that
$25,000 of the total award was designated to be expended for administration and
$707,000 for business assistance.
The original contract and subsequent amendments have limited the amount of
miscellaneous income that may be utilized for administrative purposes to sixteen percent
(16%) of the sum of [the CDBG award plus program income earned during the term of the
contract]. As of the date of the monitoring visit the RLF has not exceeded this limitation.
Prior to project closeout, the RLF must submit a Final Financial Report which
documents the total expenditure of program income during the term of the contract.
Since the time of the monitoring visit, the RLF has provided a Final Financial Report
which has been accepted by OBD.
The RLF's quarterly financial and employment reports indicate that the RLF has exceeded
the requirement of $1,182,500 in private leveraging for business assistance. The required
$35,000 local match for administrative costs has also been met. These amounts were
verified through a review of the RLF's files.
In addition to leveraging, the contract requires that 61 jobs (reduced to 42.5 during the
contract term by statewide contract amendment) be created or retained with 22.5 positions
or fifty one percent (51%) of all positions to be held by low -to -moderate income persons.
As of the date of the monitoring visit a total of 56.5 positions had been created or retained
with 73% held by low -to -moderate income persons. Prior to project closeout, the RLF
must submit a Final Employment Report which will be reviewed for final compliance
with the contract. Since the time of the monitoring visit, the RLF has provided a
Final Employment Report which has been accepted by OBD.
Excessive Force
The RLF Administrator has obtained departmental policies for the use of excessive force
in the event of a non-violent civil rights demonstration from both of the counties in the
service area.
972315
The Honorable George E. Baxter
September 30, 1997
Page 3
ELIGIBILITY OF ACTIVITIES
During this monitoring visit OBD staff reviewed two of five loan files (River Road Book &
Brew and Piedmont Farms, Inc.). During an earlier technical assistance visit two files were
reviewed (Hy -Q Enterprises and Wayside Inn). All reviewed projects were found to be
eligible.
NATIONAL OBJECTIVES
Federal regulations require that each assisted business meet its individual job
creation/retention commitment prior to close out of the project. As of the date of the
monitoring visit all projects have met their job creation/retention commitments.
LIMITED REVIEW -- FINANCIAL MANAGEMENT
The review of the financial records and reports indicated that all Quarterly Financial Status
and Employment reports have been submitted for OBD review.
LIMITED REVIEW -- ENVIRONMENTAL REVIEW
All required environmental review information was found to be complete and in compliance
with the guidance found in the Guidebook for Direct Economic Development Projects.
Each individual loan file contained complete information regarding the business site.
It was noted during the review of the individual project files that the RLF does not
consistently conduct the environmental review prior to the issuance of the award letter or
include the completion of a satisfactory environmental review as a condition in the award
letter sent to the borrower. In the future, the RLF shall ensure that a its award letters
include a statement documenting the completion of a satisfactory environmental
review. (It is a federal requirement that an environmental review be completed prior
to the commitment of any CDBG funds.) Since the time of the monitoring visit, the
RLF has provided a copy of the revised award letter which satisfies this condition.
LIMITED REVIEW -- CIVIL RIGHTS
The RLF does not keep an application log as required in the Guidebook for Direct
Economic Development Projects. Although the information can be retrieved through a
review of the files, HUD requires that grantees/subgrantees maintain a record of all
applicants as well as beneficiaries of CDBG projects.
972315
The Honorable George E. Baxter
September 30, 1997
Page 4
The RLF shall certify that in the future it will maintain an Application Log in the
format as provided as Exhibit V -E in the Guidebook. Since the time of the
monitoring visit, the RLF has certified that it will make use of the Application Log
in the future. The RLF also provided a reconstructed Application Log for the current
contract period.
Weld County and the RLF have fulfilled their obligations in meeting all requirements for
Section 3 reporting and the implementation of Section 504 requirements.
With regard to affirmatively furthering fair housing, Weld County has demonstrated
measures to serve the housing needs of low -to -moderate income residents in the
communities (documentation in Weld County and OBD files).
REAL PROPERTY ACQUISITION AND RELOCATION
There were no projects reviewed that required the acquisition of real property, one -for -one
replacement, or the relocation of any tenant or resident.
ECONOMIC DEVELOPMENT PROJECTS
The loan project files are consistently complete and organized. All funds have generally
been utilized for the purposes and under the terms and conditions as approved in writing
by OBD. Comments specific to individual projects:
River Road Book & Brew
The loan file was complete and included copies of all application, committee and OBD
review, and closing documents. Although there is a copy of the current Property Insurance
Binder, the RLF and/or EDAP are not listed as a loss payee. Recent financial statements
indicate that the borrower is not meeting its sales projections. The RLF Administrator is
keeping in close contact with the borrower and the and Loan Committee has agreed to
accept deferred principal payments and to require interest only payments until December
31, 1997 to allow the borrower time to make corrections in the business plan to adjust for
the lower level of sales.
Piedmont Farms. Inc.
The loan file included copies of all application, committee and OBD review, and closing
documents. The file did not include all documentation required to support the leverage
required in OBD's approval of the loan. Prior to project closeout, the RLF must submit
documentation supporting the injection of $500,000 as leverage for the RLF loan.
9723. 15
The Honorable George E. Baxter
September 30, 1997
Page 5
Since the time of the monitoring visit, the RLF has provided all necessary
documentation to support the injection of an additional $500,000 in loan proceeds
from the United States Department of Agriculture, Farm Service Agency.
During the review, it was noted that the RLF deviated from the terms and conditions
contained in the project approval letter for the Piedmont loan as issued by OBD. OBD staff
and the RLF Administrator were is close communication by telephone as the project
proceeded to closing. The deviations included the change in lender from CFA to the
United States Department of Agriculture (Federal Disaster Loan). This change resulted
in an improvement in the interest rate and repayment schedule which should positively
impact Piedmont's cash flow through the 1997 and future growing seasons.
Also, due to the change in lender and the timing required for USDA's due diligence, the
RLF was unable to require a pro rata disbursement of funds. In recognition of the urgency
of the approaching planting season and the impending bankruptcy, RLF and OBD staff
determined that this deviation was necessary in order to allow Piedmont to operate with
sufficient cash flow to adequately fund all required activities. The amount of the RLF draw
requests were supported by invoices and payroll records and were kept at the minimum
required to continue operations at that time. Without the immediate injection of RLF funds,
Piedmont would have been at extreme risk of closing its doors and 24 full time year round
positions (and multiple part time and secondary positions) would have been lost.
It appears that each decision to deviate from OBD's original approval was viewed as the
best decision based on the information available at that moment, and in recognition of the
importance of meeting the national objective by retaining the employment opportunities in
the community.
On the Quarterly Employment Report submitted for the quarter ended June 30, 1997, the
RLF reported that all 24 retained positions at Piedmont were held by low -to -moderate
income individuals. In reviewing the Employee Demographic Forms only 17 of the 24
positions were found to be held by low -to -moderate income individuals. Prior to project
closeout, the RLF must submit an amended Employment Report for the quarter
ended June 30, 1997 to accurately reflect the demographics for Piedmont Farms as
supported by the documentation in the RLF's file. Since the time of the monitoring
visit, the RLF has provided an amended Employment Report.
.y -1g
The Honorable George E. Baxter
September 30, 1997
Page 6
Please feel free to call Jaime Gomez or Karen Thorson at the Office of Business
Development at any time to discuss the information in this letter.
Jaime Gomez, Director
Finance and Business Delopment Programs
cc: Don Warden, Clerk to the Weld County Board of Commissioners
Jodi Hartmann, RLF Administrator
Jaime Gomez, OBD
Bill Verbeten and Teri Davis, DOLA
File
3'7231.5
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