Title
a. Approve and authorize the Auditor-Controller to write off a $83,972.48 Small Business Revolving Loan Fund loan fund to Emmanuel C. Marchica doing business as (dba) Diesel Fitness, Inc. as bad debt;
b. Approve and authorize the Auditor-Controller to write off a $72,303.44 Small Business Revolving Loan Fund loan fund to Ernest and Candace Samudio, dba as Italica as bad debt; and
c. Approve and authorize the Auditor-Controller to write off a $45,178.30 Small Business Revolving Loan Fund loan fund to Alex Ortiz dba Zitro Elevator Company, Inc. as bad debt.
Report
RECOMMENDATION:
It is recommended that the Board of Supervisors:
a. Approve and authorize the Auditor-Controller to write off a $83,972.48 Small Business Revolving Loan Fund loan fund to Emmanuel C. Marchica doing business as (dba) Diesel Fitness, Inc. as bad debt;
b. Approve and authorize the Auditor-Controller to write off a $72,303.44 Small Business Revolving Loan Fund loan fund to Ernest and Candace Samudio, dba as Italica as bad debt; and
c. Approve and authorize the Auditor-Controller to write off a $45,178.30 Small Business Revolving Loan Fund loan fund to Alex Ortiz dba Zitro Elevator Company, Inc. as bad debt.
SUMMARY:
The County established a Small Business Revolving Loan Fund (SBRLF) in 1990 to assist businesses that could not qualify for conventional financing and support private sector job creation and retention. As with any loan portfolio, a certain percentage will ultimately be uncollectable and need to be charged off as bad debt. The action before the Board is to authorize the Auditor-Controller to write off write off three loans as bad debt. The three loans that are being considered for write-off at this time represent $201,454.22 in outstanding principal. All three loans have been discharged by the U.S. Bankruptcy Court and should be removed from the County's balance sheet.
DISCUSSION:
The County, through various Program Administrators, has operated the SBRLF since 1990. Since the County funded its first loan, the SBRLF has provided more than $9.1 million dollars in financing to more than 130 small businesses and supported the creation or retention of more than 1,000 jobs. The SBRLF was established to encourage private sector economic activity by loaning money to businesses that could not receive conventional financing on terms that would allow the enterprise to be successful.
Over the last four years four SBRLF borrowers have sought bankruptcy protection and three have had their debts wiped out. The action before the Board will be to recognize the U.S. Bankruptcy Court's action and remove these loans from the County's balance sheet. The specific loans, descriptions of the business activity and bankruptcy discharge dates are discussed below.
Diesel Fitness was a gym with operations in Marina and expanding into Seaside. The borrower hoped to distinguish this gym from others in the area by including a weekly 30-minute session with a personal trainer as part of the monthly membership fee. The County's loan was to allow the business to purchase a second gym in Seaside. The borrower filed a Chapter 7 bankruptcy on September 15, 2008. The bankruptcy was discharged on December 23, 2008.
Italica was a leather accessory store dealing in wallets, satchels and other leather goods sourced from Argentina and Italy. The business was located in the City of Monterey. The County's loan was to acquire the business and working capital to increase inventory. The borrowers closed the store in April 2010. The inventory was liquidated and the proceeds paid to the SBRLF. The SBRLF also had an assignment on their stock portfolio and this was liquidated and funds received on October 8, 2010 in the amount of $38,849.73. The proceeds funds were applied to the outstanding loan balance. The borrower filed a Chapter 7 bankruptcy on November 14, 2011, which was discharged on February 14, 2012.
The Zitro Elevator Company specialized in small residential and commercial elevators, dumbwaiters, vertical and inclined wheelchair and stairway lifts. The company handled all aspects of sales, permitting, installation and servicing of the lift systems. The company was operated in conjunction with a local building designer which enabled the lift system to be part of new development projects from the beginning and not as an afterthought. The County loan was for permanent working capital. The borrower filed a Chapter 7 bankruptcy petition on March 29, 2011. The bankruptcy was discharged on June 28, 2011.
OTHER AGENCY INVOLVEMENT:
County Counsel has reviewed the loans and associated bankruptcy documents and confirmed the court order discharging the debts. The Auditor-Controller has reviewed the fiscal provisions of the write offs and concurs with the recommendations
FINANCING:
These actions will have no impact on the General Fund. The recommended action will recognize the permanent loss of $201,454.22 in SBRLF capital that will not be repaid to Fund 011 (Economic Development) Organizational Unit 8044. Writing these loans off will raise the amount written off to $1,365,404, or 15% of all principal loaned since 1990. SBRLF loan repayments income cannot be used for any purpose besides continuing the program.
Prepared by: Darby Marshall, Housing Analyst, 5391
Approved by: David Spaur, Director of Economic Development, 5390
Attachments:
Diesel Fitness Bankruptcy Discharge
Italica Samudio Bankruptcy Discharge
Zitro Elevator Bankruptcy Discharge