REPORT TO THE CITY COUNCIL
June 16, 2016
TO: City Council
FROM: Bruce Rudd, City Manager
SUBJECT
Title
***RESOLUTION - Amending the Better Business Act to add an exception when the City serves as co-applicant for certain State and Federal funds
Body
RECOMMENDATION
Staff recommends that the City Council adopt a resolution amending the Better Business Act to add an exception when the City serves as a co-applicant for certain State and Federal funds.
EXECUTIVE SUMMARY
The intention of the Better Business Act (BBA) of 2009 was to establish a process that would fully vet private sector applicants requesting financial assistance from the City of Fresno (City). The BBA applies to projects which involve financial risk or exposure to the City exceeding one million. The City has been asked by a number of developers to be a co-applicant for projects applying for the Strategic Growth Council’s Affordable Housing and Sustainable Communities Program (AHSC) funding, as having the City as co-applicant increases a project’s competitiveness. Serving as a co-applicant is analogous to being a guarantor, and thus subjects the project to the BBA.
The BBA includes a two-step process made up of a Preliminary Evaluation Phase and Detailed Investigation Phase with several markers for Council review and approval. The proposed exception would allow the bypass of this lengthy evaluation and is specific to instances where the City is serving as co-applicant on grant applications such as the AHSC program, when the developer agrees to certain provisions to protect the City’s interest.
The AHSC program funds land-use, housing, transportation, and land preservation projects to support infill and compact development that reduces greenhouse gas emissions. Many projects are submitted but few are funded due to their lack of competitiveness which can be increased in various ways such as co-applying with the municipality where the project is being developed. In an effort to increase competitiveness and assist projects that are beneficial to the residents of Fresno, staff recommends the approval of the proposed exception in order to expedite the co-applicant process.
BACKGROUND
In 2009, Councilmember Lee Brand brought forth the BBA as a safety measure that would minimize the City’s risk when entering into partnerships where a private entity was requesting financial assistance from the City and any state or federal funding programs. The BBA set in place a due diligence process that would require all potential “partners” to be fully vetted through a comprehensive, objective evaluation and, if approved, a stringent oversight policy.
Currently, there are exceptions to the comprehensive evaluation process within the BBA for projects selected through a Request for Proposal (RFP) process, and affordable, mixed use projects requesting assistance of less than two million dollars. While the City is not committing any financial assistance in the case of the AHSC applications, the application or project is still subject to the BBA since the private entity is requesting financial assistance in amounts greater than two million dollars for which the City is effectively serving as guarantor by virtue of being co-applicant. The City, as co-applicant, will be jointly and severally liable for ensuring project completion in compliance with the terms of the grant agreement. This proposed amendment to the BBA would give an exception for AHSC and similar programs encouraging joint-applications, and eliminate the comprehensive evaluation that could possibly delay the approval of co-applicant status. Delaying the approval of co-applicant status would jeopardize all Fresno applications by reducing their competitive edge.
Even though these applications would not be subject to the comprehensive evaluation, as a condition of invoking this proposed exception a developer must agree to comply with safeguards to minimize the City’s risk. Developers will be required to indemnify the City for any damages incurred by the City due to the developer’s failure to complete the project for which the funds were awarded. Additionally, a developer must obtain labor and material, payment, and performance bonds equal to at least 110% of the estimated construction costs for any phase of the project then under construction. The bonds will name the City as a co-obligee, and shall expressly provide that, for the purpose of the bonds, the developer is solely responsible for the completion of the project and payment of all costs, and is solely responsible to the surety in the event the Project is not completed.
FISCAL IMPACT
There is no fiscal impact to the General Fund or any other fund within the City of Fresno. The co-applicant will be required to indemnify the City through separate agreements, and bonds will be required to be in full effect until the issuance of the “Safe to Occupy” certificate to assure the project is complete.
Attachment:
Resolution