DEPARTMENT: Center City Development & Operations
DEPARTMENT HEAD: John Jacks
COUNCIL DISTRICTS IMPACTED: Citywide
SUBJECT:
Authorization for Hemisfair to receive Paycheck Protection Program (PPP) Loan
SUMMARY:
An ordinance approving Hemisfair Park Area Redevelopment Corporation (HPARC) to participate in the Small Business Administration’s Paycheck Protection Program (PPP) to accept a forgivable loan up to $187,500.00 and to authorize its CEO to execute all applications, notes and other related or required documentation.
BACKGROUND INFORMATION:
On August 13, 2009, City Council approved, through Ordinance #2009-08-13-0025R, the creation of Hemisfair Park Area Redevelopment Corporation (HPARC). HPARC was created to manage and revitalize the Hemisfair area in line with the vision and guiding principles outlined in its Articles of Incorporation (Articles). Per Section 4(e) of the Articles, City Council approval is required for HPARC to enter into any debt instruments.
On September 27, 2012, HPARC was recognized as an established non-profit 501(c)(3) by the Internal Revenue Service (IRS).
Given the Coronavirus (COVID-19) crisis, the federal government established under the Coronavirus Aid, Relief and Economic Security Act (CARES), a Paycheck Protection Program (PPP) to assist with payroll shortfalls and other economic impacts of the crisis.
On April 3, 2020 the Small Business Administration (SBA) allowed lenders to begin processing PPP loan applications, including 501(c)(3) organizations. On April 6, HPARC applied through Frost Bank for loan consideration. On April 16, HPARC was notified by Frost Bank that funds have been secured and loan closing is scheduled for the week of April 20.
PPP is a loan designed to provide direct incentive for small businesses, including non-profit organizations, to keep their workers on payroll. The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (at least 75% of the forgiven amount must be used for payroll).
Loan payments are deferred for six months. No collateral nor personal guarantees are required. Neither the government nor lenders will charge any fees.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
This loan has a maturity of two years and an interest rate of 1%.
HPARC is expected to seek full forgiveness and will repay any portion of the loan that is not forgiven using existing or future non-City revenue sources. The City has no financial obligation imposed by the execution of this loan.
On April 17, HPARC Board of Directors, an 11-member Council-appointed board comprised of representatives from a cross-section of local stakeholders including Assistant City Manager Lori Houston, passed a resolution to authorize HPARC to participate in the PPP and assign its CEO Andres Andujar as a signature authority for the loan documents subject to authorization of City Council.
ISSUE:
This ordinance approves Hemisfair Park Area Redevelopment Corporation’s (HPARC) participation in the PPP and authorizes Andres Andujar, the Chief Executive Officer, to execute all applications, notes and other related or required documentation under the PPP. The loan will not exceed $187,500. The loan will not impose financial obligations to the City.
ALTERNATIVES:
As an alternative, City Council could choose not to approve HPARC participation in the PPP, however doing so would harm the financial health of HPARC and cause cash flow constraints on the existing budget. Additional funding would have to be secured through other funding sources not currently available.
FISCAL IMPACT:
This ordinance authorizes Hemisfair Park Area Redevelopment Corporation to accept up to $187,500.00 from the PPP to be used substantially for payroll costs related to the Coronavirus crisis. There is no fiscal impact to the City’s Budget.
RECOMMENDATION:
Staff recommends approval of an ordinance for Hemisfair Park Area Redevelopment Corporation (HPARC) to participate in the PPP and for its CEO to execute all applications, notes and other related or required documentation as required.