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CDC - Item 2 - Changes To Agency Commercial Rehab GuidelinesSO / • Date: -7 VASQUEZ TAYLOR CLARK BRUESCH IMPERIAL Agenda Item No. a. RES/ORD No. Title: ~y~/ .y Rosemead Community Development Commission ROL 8838 East Valley Boulevard, CA 91770 Tel 626.569.2100 Fax 626.307.9218 TO: HONORABLE CHAIRMAN AND MEMBERS ROSEK7 D COMMUNITY DEVELOPMENT COMMISSION FROM: BILL C WE, EXECUTIVE DIRECTOR DATE: JULY 2, 2002 RE: APPROVAL OF CHANGES TO AGENCY COMMERCIAL REHABILITATION GUIDELINES In 2001, the Commission approved the adoption of Agency Commercial Rehabilitation Guidelines. These Guidelines were patterned on the City's existing CDBG-funded Commercial Rehabilitation Program and were designed to provide "expedited and streamlined commercial rehabilitation. opportunities in Redevelopment Project Areas." The City's CDBG-funded Commercial Rehabilitation and Economic Development Loan program has several federally mandated requirements that require time delays and special compliance regulations. Owners cite these delays and requirements as reasons not to participate in the CDBG-funded program. In addition, there are items, such as landscaping and parking lot improvements that have additional federal restrictions on eligibility that do not exist under Redevelopment. COMMISSION AGENDA JUL © 9 2002 ITEM No._o2- Approval of Changes to Agency Commercial Rehabilitation Guidelines, 2 While the Commission program has been more successful with business owners than its CDBG-funded City program, nevertheless, owners of businesses in the Project Areas have cited parking lot improvements and landscaping as two (2) areas where there is a high need for rehabilitation. Under the Commission's current program, the Guidelines require that owners take a low interest loan if exterior parking lot and landscaping is to be undertaken. In at least two (2) cases, owners are willing to fund 50% of the rehabilitation cost under a grant if exterior parking improvements and landscaping are eligible costs. Because of this, Staff is proposing to make the following changes to the Commercial Rebate: 1) Add general exterior parking lot improvements and landscaping improvements as eligible activities in the Commercial Rehabilitation Rebate; and 2) Increase the maximum amount of Commission rebate from $15,000 to $25,000 of approved project costs in order to allow for these types of improvements. The percentage of rebate, 50%, would remain unchanged. There is no change proposed to the multi-property rebate. The benefits to the Commission are as follows: More businesses may participate " Elimination of visible physical conditions that may be blighted or leading to blight Better curb appeal in Project Areas The benefits to the business include no loan against the property in order to make these improvements. Attached is a copy of the current guidelines Recommendation Approve the aforementioned changes in the eligible activities and the maximum amount of rebate to the Rosemead Community Development Commission's Commercial Rehabilitation Guidelines. Mg, '~~Guidelines~ Rehab"'-"Community Development Division City of Rosemead, I ROSEMEAD REDEVELOPMENT AGENCY COMMERCIAL REHABILITATION GUIDELINES TABLE OF CONTENTS Introduction . 2 2 Commercial Rebate Program 2 General Provisions 2 Applicant Eligibility Requirements Property Eligibility Requirements 3. Eligible Activities . 5 5 . Ineligible Activities . 6 Property Rehabilitation Standards Inspection Requirements : 6 6 . Design Review Committee.................................................................. 7 Owner Participation Agreements 7 Commercial RehakJ0tation Rebate Rehabilitation Incentives . .........7 7 Contracting for Rehabilitation Work Appeals 8 8 If Plans are Required 9 Final Approval of Proposed Rehabilitation Work Bidding Procedures 9 9 Agency Approval.............. . 9 Award of Contract . 9 Notice to Proceed : 9 . Change Orders 10 Completion . . 10 Check Request : 10 Commercial Loan Program . 10 . . General Provisions : 10 . Eligible Activities 10 Ineligible Activities Owner Participation Agreements, Note and Deed of Trust 10 Commercial Loan Program 11 t 1 Introduction The City of Rosemead and the Rosemead Redevelopment Agency are committed to restoring the vitality of the City's Commercial districts. The City of Rosemead has a CDBG-funded commercial rehabilitation program and economic development loan program. The Redevelopment Agency has initiated the expansion of Redevelopment in the City through Redevelopment Project Area #2. As part of this, the Redevelopment Agency has created this commercial rehabilitation program for properties in the Redevelopment project areas and has created a separate economic development program. This financial assistance is" being offered in the form of rebates based on a cost percentage of the improvements and loans that offer lower interest rates for more substantial rehabilitation. This document contains the guidelines and procedures for opOFN' on of this financial assistance program. It addresses such items as personal and property. "eligibility requirements, eligible activities and terms and conditions for rebates and loans. In preparing these guidelines and procedures, the Redevelopment Agency has formulated a program that has a balance of being attractive to business, while correcting existing deficiencies and maximizing use of program funds. Commercial Rebate Program Genera/ Provisions Applicant Eligibility Requirements Eligibility for assistance under the Commercial Rehabilitation Program will be based on the following applicant eligibility requirements: 1. In the public interest, employees, or officials of the City of Rosemead, or the. Rosemead Redevelopment Agency, who exercise any functions or responsibilities in connection with the administration of the Commercial Rehabilitation Program, including consultants, shall not be eligible for assistance under the program. However, City or Agency officials or employees otherwise eligible may be granted assistance in accordance with the rules, procedures, and regulations of the program. 2. 2. The leaseholder of the commercial property for which rehabilitation assistance is requested must obtain written permission from the owner(s) of the structure prior to application for assistance under this program. 3. The applicant must have a current City business license if applicable. 4. The applicant must demonstrate that it has sufficient funds to complete the project. Property Eligibility Requirements In order to be eligible for assistance under the Commercial Rehabilitation Program, properties must comply with the following eligibility requirements: 1. The property must be a commercial property located in a Redevelopment Project Area. . 2. The property for which assistance is requested must need exterior rehabilitation to conform to the property rehabilitation standards for this program. 3. The applicant must permit inspections of the property by City of Rosemead personnel prior to completing improvements. 4. The property for which assistance is requested must be used solely for commercial purposes. No residential or industrial uses are eligible on any part of the property. 5. The property cannot be rented or occupied by the following uses and owner/lessee must agree in writing to these restrictions: • Automobile storage garage • Bars and cocktail lounges, except in conjunction with a bona fide dinnerhouse restaurant Club or lodge Frozen food lockers Mortuaries Sanitariums Baths, Turkish and the like 3 Churches • Coin-operated and automatic car washes - Public garages • Open air theatres Refrigerated lockers, except in conjunction with other uses allowed by this Agreement" Storage garage Upholstery shop Used furniture thrift shop • Utility trailer and truck rental yard . Any establishment selling, renting or exhibiting adult 'materials . defined in Section 19.63.020 of the RMC that accounts for more than 10% of the business of the establishment or which sells drug paraphernalia • Any flea market, amusement arcade, pool or billiard hall • ' Any operation used primarily as a warehouse operation and any ' " . assembling, manufacturing, distilling, refining, smelting, agricultural or mining operation • Any "second'hand" store, army, navy or government "surplus" store • Video arcades Pawn shops ' • Check cashing services • Laundromats Bail bonds n. • Liquor stores i y • Massage parlors Garment manufacturer • Poultry, fish or meat processing establishment Eligible Activities A rehabilitation rebate provided under this program may be used to cover the cost of the following: 1. Rehabilitation activities necessary to make the qualified structure conform to the property rehabilitation standards for the program. 2. Fagade improvements, including sandblasting, repair or replacement of damaged or deteriorated fagade components, window replacement, new stucco, wood or other basic exterior wall materials, painting, and the installation of awnings or shutters as appropriate. 3. Signs, both the removal of existing signs and the installation of new signs. 4. Architectural plans, building permits, title reports, credit reports, lien certificates, recording, document appraisal and other related fees which are required to carry-out the proposed exterior rehabilitation work. Ineligible Activities A rehabilitation rebate provided under this program may not be used to cover the cost of the following: , 1. Inventory 2. Fixtures or furnishing related to the merchandising operation of a business (certain permanent tenant improvements may be eligible under the loan program) 3. Prohibited land uses 4. Working capital ' 5. Refinancing or repayment of existing debt 6. New roofing, excepting repair occasioned by the fagade improvement (eligible under loan program only) 7. Repair, replacement of installation of basic equipment, except for heating/air conditioning and other exterior equipment (eligible under loan program only) 8. Repair, replacement or installation of security and safety devices, including exterior lighting (eligible under loan program only) 9. Installation of energy conservation devices (eligible under loan program only) 5 10. Any work to parking lots, fences, landscaping and irrigation not related to the fagade (eligible under loan program only) . . 11. Any work which has begun before the Redevelopment Agency issues a Notice to Proceed Property Rehabilitation Standards The property, rehabilitation standards'for this program are: 1. The City of Rosemead building, electrical, mechanical, fire, plumbing and other Codes adopted by the City Council. 2. The City of Rosemead Zoning Ordinance, General Plan and Redevelopment Plan. Inspection Requirements An initial property inspection will be conducted for any property for which rehabilitation assistance is requested under this program. The purpose of this initial inspection is to determine the amount of rehabilitation needed and/or to determine the eligibility of proposed improvements desired by the applicant. This inspection will be conducted by City staff in such manner that each deficiency/violation will be recorded with respect to the property rehabilitation, standards for this program. Any Code deficiencies or violations that are hazardous to health or safety must be corrected first before other improvements are made when financial assistance is requested under this program. All rehabilitation work financed under this program must be inspected by the Rosemead Building and Safety Department. To accomplish this, staff shall make: Progress inspections necessary to assure that rehabilitation work is being performed in accordance with the construction contract and the City's building laws. A final inspection to determine that the rehabilitation work has been completed in accordance with the construction contract/work write-up and building codes. Design Review Committee. All plans for fagade or general property improvements (i.e. exterior work only) shall be approved by a Design Review Committee before a rebate is approved for rehabilitation work under this program. In some cases, the plans may require submission to the Planning Commission. Depending on the nature of improvements, construction drawings may be required for submission to the Building Department. 6 The Design Review Committee shall consist of the Planning Director, a representative from Administration, the Grants Coordinator or designee, the -Building Official or designee, City Engineer (if applicable). The Committee is responsible for reviewing proposed fagade or general property improvement plans for consistency with the Rosemead Zoning Ordinance and Building laws and Public Works requirements. Owner Participation Agreements The Agency will require an-applicant to enter into an Owner Participation Agreement (OPA). All applicants may be required to execute covenants or other recordable instruments to formalize program obligations extending beyond project completion Commercial Rehabilitation Rebate Cash rebates for exterior improvements are based on 50 percent of approved costs. The minimum rebate is $2,500 and the maximum rebate (excluding Rehabilitation Incentives) is $15,000. The owner or lessee must advance all costs with subsequent reimbursement by the Agency. The owner or lessee must demonstrate that it has adequate financial resources to complete the job before construction can begin. Rehabilitation Incentives In order to encourage the rehabilitation of commercial properties within the established project areas, an incentive shall be provided when either 1) an individual owner/tenant simultaneously rehabilitates more than one property or 2) . a group/consortium of individual owners/tenants simultaneously rehabilitate at least three properties in one block. In these cases, the maximum rebate offered is 75 percent of the approved costs, or a total of $30,000.per building.. Contracting for Rehabilitation Work 1. Rebates can be used only to pay for costs of materials and services necessary to carry out rehabilitation for which the. rebate is approved. 2. The applicant must obtain written cost estimates from a State. licensed contractor(s) or subcontractor(s). Estimates must be clear, specific and complete. 3. Estimates will be reviewed by Community Development staff for completeness, cost reasonableness and whether selected contractor meets all applicable requirements. 4. All work financed with a rebate under this program will be performed by a qualified, licensed contractor. 7 5. All work financed through this program will be undertaken only after execution of a written contract between the owner and contractor on a form provided by the Agency. 6. General specifications will be checked and verified by Rosemead Department of Building and Safety; the review of the Planning Department will also be necessary. 7. The contractor shall maintain, for the duration of the work, the following insurance: Workers Compensation Insurance, providing coverage as required by the State of California Liability Insurance in the minimum amount of $1,000,000. . Property damage insurance in the minimum amount of $50,000 Certificates, or other evidence of insurance satisfactory to the Agency, shall be filed with the Community Development Division. The contractor shall hold harmless and indemnify each property owner and the Agency and City and their respective officers, agents and employees from all claims, demands, actions, liability, or loss which may arise there from, or . be incurred as a result of, injury or damage to the persons or property in the performance of said work, including but not limited to, damage to the premises. 8. Before commencing work, the contractor shall submit evidence of the coverage required to the Agency and to the City of Rosemead. 9. Projects done under this program are subject to prevailing wage laws of the State of California. Appeals Any dispute regarding these procedures, including determinations with respect to applicant eligibility, amount of rebate, and/or allowable repairs, shall be adjudicated by a representative of the Executive Director's office, after receipt of a written appeal from the party seeking relief. The decision shall be final and conclusive. If Plans are Required If structural changes are being made, submit preliminary plans for review, including a plot plan, interior plan, elevations and detailed description of work as appropriate and submit to Building Department and Design Review Committee for plan check and Planning Department approval. 8 r Final Approval of Proposed Rehabilitation Work Following plan check approval, owner/lessee submits final plan of proposed rehabilitation work, including any changes or revisions. Bidding Procedures Applicant must obtain written estimates of approved project from licensed contractors. Applicant must obtain at least three bids. A copy of bids, including the bid chosen by the applicant, is submitted to the Community Development staff for approval. Agency Approval Agency approves the contract, verifies contractor eligibility and determines allowable amount of rebate. Award of Contract Property owner and/or lessee secure matching funds and provide verification to Community Development that is has the necessary funds to complete the project, awards contract to contractor, signs all agreements on approved Agency forms and presents executed originals to the Agency. _ Notice to Proceed Community Development staff, property owner and/or lessee and. contractor meet to discuss scope of work, issuance of permits, payment details and other requirements. Once all insurances are on file and agreements executed and permits obtained, a Notice to Proceed is issued and construction begins. Change Orders, Change orders are generated by the contractor and approved by the owner and Community Development staff. Change orders are the responsibility of the owner, excepting however, if the maximum rebate has not been reached, the Agency and owner may renegotiate the amount of rebate. Completion After completion of rehabilitation work, owner/lessee submits proof of contractor's invoices and payments made to contractor to the Agency. Notice of Completion is filed and all Labor and Lien Releases are supplied to the Agency., Check Request After review of receipts, etc., and final inspection by Building,. Planning and Community Development (as required), 35 days after filing of Notice . of Completion and including approval of filing of the Notice of Completion, a check request is issued for the amount of the approved rebate. Commercial Loan Program General Previsions Except as noted below, all other requirements of the Rebate Program apply also to the Loan Program. Eligible Activities The same activities are eligible under the Rebate program as under the Loan program. In addition, activities 6-10 under ineligible activities are also eligible under the Loan program. Ineligible Activities " A rehabilitation loan provided under this program may not be used to cover the cost of the following: 1. Inventory 2. Fixtures relating to conduct of general business 3. Working capital 4. Prohibited land uses 5. Any work which was begun before the Agency issues a Notice to Proceed Owner Participation Agreements, Note and Deed of Trust The Agency will require that an Owner Participation Agreement (OPA) be entered into as part of the Loan Program. In addition, all participants will be required to execute a Note and Deed of Trust to secure the Note. Commercial Loan Program The maximum amount of a loan under this program shall be $50,000. If the project requires additional monies and the Agency determines that such a loan would be in the best interest of the Agency, the Agency shall request a waiver of the $50,000 limitation from the Agency Board; The applicant shall maintain fire and extended coverage insurance on the property to be rehabilitated for the term of the loan and shall provide proof of coverage to the Agency prior to Loan approval. - The applicant shall not refinance, sell or transfer title to the rehabilitated property without repaying the entire rehabilitation loan amount due. As stated above, all loans issued under this program shall be secured via a Deed of Trust. The maximum term of the loan issued under this program shall be ten (10) years; subject, however, to the maximum term of lease of the property where the applicant is a tenant. In that case, the maximum term for a rehabilitation loan issued under the program shall not exceed six (6) months prior to the expiration of the lease on the subject property. The interest rate for loans under this program shall be as follows: Three (3) percent for loans of five (5) years or less; Six (6) percent for loans from six (6) to ten (10) years. These loans have monthly interest and principal, payment amounts. If the applicant requests a deferred loan in exchange for additional requirements as negotiated and the Agency believes this is in the best interest of the Agency, the Agency will request a deferred loan approval from the Agency Board. At the Agency's discretion,, it may either administer the loans directly or contract out to a bank to service the loan. If the loans are made by a bank servicing agreement, the Agency shall pay the difference between the interest rate charged for a loan under this program and the existing market rate of interest charged for the same loan: Where that is not feasible, the Agency may enter into a compensating balance fund. All applicants must submit to either the Agency's