Chowchilla City Council
October 25, 2022

AGENDA
City Council Meeting
Council Chambers, Chowchilla City Hall
130 S. Second Street, Chowchilla, CA 93610
Tuesday, October 25, 2022
Closed Session: 6:00 p.m. - Open Session: 7:00 p.m.

City Hall is open to the public for business. The City Council Chamber is OPEN to the public for City Council meetings. City Council meetings will also be available to view and participate via Zoom. Please read Page 4 of this agenda packet for Zoom login and participation information.

Agendas for all City Council meetings are posted at least 72 hours prior to the meeting in the kiosk just outside of City Hall, 130 S. Second St., Chowchilla, CA 93610.

Agendas for Special Meetings are posted 24 hours prior to the meeting.

Any writing or documents provided to a majority of the City Council regarding any item on this agenda will be made available for public inspection on the city website at www.CityofChowchilla.org.

The City of Chowchilla complies with the Americans with Disabilities Act (ADA of 1990). The Council Chambers is accessible to the physically disabled. If you need special assistance, please call (559) 665-8615, ext. 102 at least 4 days prior to a regular meeting, 1 day for a special meeting.

CALL TO ORDER/ROLL CALL
Mayor: John Chavez
Mayor Pro Tem: Ray Barragan
Council Members: Waseem Ahmed, Diana Palmer, Kelly Smith City staff and contract employees present at the meeting will be reflected in the minutes.

CONSIDERATION OF APPROVAL OF AGENDA
Additions and/or Deletions:

PUBLIC ADDRESS – CLOSED SESSION
This time is reserved for members of the audience to address the City Council on items listed on the Closed Session agenda only. It is recommended that speakers limit their comments to no more than 3 minutes each.

CLOSED SESSION – 6:00 PM

1. PUBLIC EMPLOYEE PERFORMANCE EVALUATION - Pursuant to Government Code Section 54957
Title: City Administrator
City Council Meeting Agenda October 25, 2022

2. PUBLIC EMPLOYEE APPOINTMENT/EMPLOYMENT – Pursuant to Government Code Section 54957
Titles: Police Chief and City Administrator
OPEN SESSION – 7:00 PM

PLEDGE OF ALLEGIANCE
INVOCATION:

CLOSED SESSION REPORT:

PRESENTATIONS/WORKSHOP - Section 1

1.1 Domestic Violence Awareness Month Proclamation

1.2 Appreciation Plaque to Golden Memorial Foundation for Sponsoring Dinner for the Fresno – Madera Counties Police Chiefs Association

1.3 Madera County Economic Development Commission Update & Introduction of New Executive Director

PUBLIC ADDRESS
This time is reserved for members of the audience to address the City Council on items of interest that are not on the agenda and that are within the subject matter jurisdiction of the Council.

It is recommended that speakers limit their comments to no more than 3 minutes each and it is requested that no comments be made during this period on items on the Agenda.

Members of the public who are joining the meeting via Zoom and would like to address the Council on items on the agenda should follow the policy on page 4 of this agenda packet.

The Council is prohibited by law from taking any action on matters discussed that are not on the agenda. No adverse conclusions should be drawn if the Council does not respond to public comment at this time.

COUNCIL AND STAFF VERBAL REPORTS – Section 2

2.1 COUNCIL VERBAL REPORTS
Legislative, Collaborative Agency, Ad Hoc

2.2 STAFF VERBAL REPORTS
CONSENT CALENDAR – Section 3

3.1 Approval of the October 11, 2022 City Council Meeting Minutes (McClendon) City Council Meeting Agenda October 25, 2022
PUBLIC HEARINGS – Section 4
DEFERRED BUSINES – Section 5
NEW BUSINESS – Section 6

6.1 Consideration and Adoption of a City Council Resolution Approving the Community Development Block Grant (CDBG) Economic Development Loan Program Guidelines (Hamilton)

6.2 Consideration and Adoption of a City Council Resolution Authorizing the City Administrator to Execute any and all Documents Related to Retaining Wulff Hansen as the Municipal Advisor for the City of Chowchilla and a Budget Amendment for the Associated Costs (Pruett)
ANNOUNCEMENTS – Section 7
OCT 28 HALLOWEEN TRUNK OR TREAT & MOVIE NIGHT, VETERANS PARK, 5:30 PM NOV 5-8 CALIFORNIA ELECTION, CITY HALL, 8AM
NOV 8 CITY COUNCIL MEETING (CANCELLED DUE TO ELECTIONS) NOV 11 VETERANS DAY, CITY OFFICES CLOSED
NOV 16 PLANNING COMMISSION MEETING, CITY HALL, 7PM

ADJOURNMENT
I, Joann McClendon, CMC, City Clerk, do hereby declare under penalty of perjury that the foregoing agenda was posted at Chowchilla City Hall, 130 S Second Street, Chowchilla, CA and made available for public review on this 20th day of October, 2022 at or before 5:00pm.

Joann McClendon, CMC, City Clerk
*SPECIAL NOTICE REGARDING PUBLIC PARTICIPATION DUE TO
COVID-19*
Public meetings are still open to the public to attend in-person.

However, if you wish to attend remotely, please read the message below.

Zoom login instructions
Use the following url to start Zoom:
https://us06web.zoom.us/j/84486633920?pwd=ZEh1cXNUZC9xWGJoamhNVjF2N VdLUT09
Passcode: 160 398
---------------------------------------------------------------------------------------------------- To participate by phone, dial: 1-877-853-5247
Webinar ID: 844 8663 3920
Passcode: 160 398
Staff highly recommends that participants log into Zoom 15 minutes before the meeting begins to perform an audio check and to make sure you have optimal internet connection.

Options to participate / view / and listen to the meeting:
• If you wish to speak on an item using the Zoom platform on your computer/laptop or smart phone, please use the “raise hand” icon and you will be unmuted when it is your turn to speak. Please provide your name when unmuted. You will be able to speak to the Council for up to 3 minutes.
• If you are calling in to the meeting only (no camera/video) and you wish to make a comment, press *9 to “raise your hand” and *6 to unmute yourself.

MINUTES
City Council Meeting
Council Chambers, Chowchilla City Hall
130 S. Second Street, Chowchilla, CA 93610
Tuesday, October 11, 2022
Closed Session: 6:00 p.m. - Open Session: 7:00 p.m.

CALL TO ORDER/ROLL CALL: 6:01p.m.

Mayor: John Chavez
Mayor Pro Tem: Ray Barragan
Council Members: Waseem Ahmed, Diana Palmer, Kelly Smith City staff and contract employees present: City Administrator Rod Pruett, City Attorney Mary Lerner, Police Commander Jeff Palmer, Fire Chief Fred Gaumnitz, Public Works Director Jason Rogers, Community & Economic Development Director Mark Hamilton, Finance Director Kerri Williams, Deputy Director of Recreation & Community Engagement Stacy Wisener, IT System Administrator Carlos Berrocal, City Clerk Joann McClendon

CONSIDERATION OF APPROVAL OF AGENDA
Additions and/or Deletions:

Motion by Council Member Ahmed, Seconded by Council Member Smith to Approve the Agenda as Presented. Motion passed unanimously by roll call vote.

PUBLIC ADDRESS – CLOSED SESSION
None.

CLOSED SESSION – 6:04 PM

1. PUBLIC EMPLOYEE PERFORMANCE EVALUATION - Pursuant to Government Code Section 54957
Title: City Administrator
OPEN SESSION – 7:00 PM

PLEDGE OF ALLEGIANCE
INVOCATION: Wendy York
CLOSED SESSION REPORT: Nothing to report.

PRESENTATIONS/WORKSHOP - Section 1
None.

PUBLIC ADDRESS
None.

Item 3.1

CLICK HERE

TO RETURN TO

THE AGENDA
City Council Meeting MINUTES October 11, 2022
COUNCIL AND STAFF VERBAL REPORTS – Section 2

2.1 COUNCIL VERBAL REPORTS
Legislative, Collaborative Agency, Ad Hoc
Council Member Smith attended a Community Action Committee meeting, reporting out that the prisons went back to normal activities now that COVID infections are low. The Inmate Council will be looking at awarding non-profit groups with grants and asked for input on which groups to consider.

Council Member Palmer reported out regarding the Beautify Chowchilla project; the latest event had 35 volunteers plus Public Works staff. More bark is needed to fill in the playground areas of the parks. All painting projects were completed. She also met with Senator Anna Caballero, toured the City’s wastewater treatment plant and talked about infrastructure needs; attended a MCTC meeting talking more about Measure T.

Council Member Ahmed attended an annual mini roast event with Greenhills Association; attended a Madera County LAFCO meeting; participated in the Beautify Chowchilla event.

2.2 STAFF VERBAL REPORTS
City Administrator Pruett, with Finance Director Williams, met with Lavine Hansen regarding the City’s investments; met with the California High Speed Rail discussing a reimbursement agreement for the wastewater treatment plant project.

City Clerk McClendon asked the Council to consider cancelling the November 8 City Council meeting due to the elections being held in the Council Chamber, or move the venue where the meeting can still be broadcasted.

Deputy Director of Recreation & Community Engagement Wisener announced there will be a ribbon cutting ceremony tomorrow at the Police Department for fence project; participate in the Beautify Chowchilla event and the graduation of an incoming Police Officer. She is currently working on upcoming holiday events.

Public Works Director Rogers also attended the Beautify Chowchilla event with his kids. He attended a meeting with State Senator Anna Caballero, the City Administrator, and Councilmembers where they discussed numerous subjects, including the Fairmead Sewer Consolidation Project, and funding needs for various City projects such as the Roundabout.

Afterwards, the Senator was provided a tour of the City’s WWTP.

He met with Self Help Enterprises to discuss the Fairmead Consolidation Project. They are setting up a community meeting for Fairmead to address the survey results from the community and to collect more right of entry (ROE) signatures. They want someone from Chowchilla to attend to discuss some of the sewer utility elements such as rates, payment process and answer any questions the residents might have. The meeting is tentatively scheduled for Monday, October 24th, at 5pm.

Regarding the Humboldt Street Improvement, the contractor connected the new storm drain into the existing storm drain pipe on 15th St. They are currently working on 10th St drainage improvements this week and will be moving to 3rd St. afterwards.

Staff completed the draft Reconnecting Communities Pilot Program grant application. Our partners, MCTC and Caltrans are reviewing prior to Thursday’s submittal date. I would also like City Council Meeting MINUTES October 11, 2022
to thank Caltrans, MCTC, and the high school and elementary school districts for their letters of support.

And finally, he attended a Measure T Renewal Townhall meeting trying to get information out on how important it is to vote yes. As a reminder, a yes vote helps us to ensure a stable source of funding for general street maintenance and ability to leverage local funds for match requirements for State and Federal Grants, such as the RCP grant.

Community & Economic Development Director Hamilton reported out on all current projects and inquiries within his department.

Finance Director Williams met with the City’s municipal advisor regarding potential cash investment options to create a better return for the City, and is working on bond fiscal reports that are due by the end of this month.

Fire Chief Gaumnitz reported out on Fire Prevention week activities. He updated the Council on the Fire Station expansion project; and, thanked the Volunteer Firefighters for continuing to be an amazing part of our community.

Police commander Palmer reported out Police Department stats. He attended the Fresno City College police academy graduation of which the City was able to send an applicant thanks to Measure N; reported on the SWAT activity incident that occurred and thanked the corresponding agencies that assisted.

CONSENT CALENDAR – Section 3

3.1 Approval of the September 27, 2022 City Council / Redevelopment Successor Agency Meeting Minutes (McClendon)

3.2 Consideration and Approval of the September 2022 Check Register (Williams)

3.3 Consideration and Adoption of a City Council Resolution Authorizing the Submittal of Applications for Payment Programs and Related Authorizations with California Department of Resources Recycling and Recovery, and Authorizing the City Administrator or Designee to Sign All Related Documents Thereto (Rogers)

3.4 Consideration and Adoption of a City Council Resolution Accepting Improvements and Authorizing Filing of the Notice of Completion for the Chowchilla Police Department Site Improvements Project (Rogers)
Motion by Council Member Palmer, Seconded by Council Member Smith to Approve the Consent Calendar as Presented. Motion passed unanimously by roll call vote.

PUBLIC HEARINGS – Section 4
DEFERRED BUSINES – Section 5
NEW BUSINESS – Section 6
City Council Meeting MINUTES October 11, 2022

6.1 Consideration and Approval of a City Council Resolution Approving an Increase of Rent Cost for Land Areas at the Chowchilla Municipal Airport to $0.20 Per Square Foot (Rogers)
Motion by Council Member Smith, Seconded by Mayor Chavez to Approve City Council Resolution # 84-22, Approving an Increase of Rent Cost for Land Areas at the Chowchilla Municipal Airport to $0.20 Per Square Foot. Motion passed unanimously by roll call vote.

ANNOUNCEMENTS – Section 7
OCT 12 RIBBON CUTTING, PD FENCE PROJECT, PD PARKING LOT, 2PM OCT 19 PLANNING COMMISSION MEETING, CITY HALL, 7PM
OCT 25 CITY COUNCIL MEETING, CITY HALL, 7PM

ADJOURNMENT
Mayor Chavez Adjourned the October 11, 2022 Regular City Council Meeting at 7:34 p.m.

ATTEST: APPROVED:

Joann McClendon, CMC, City Clerk Mayor John Chavez

REPORT TO THE CITY COUNCIL
Item 6.1

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TO RETURN TO

THE AGENDA
Meeting of: October 25, 2022
AGENDA SECTION: New Business
SUBJECT: Council Resolution adopting the CDBG Economic Development Loan Program Guidelines
PREPARED BY: Mark Hamilton, Community and Economic Development Director ATTACHMENTS: 1. Resolution for Economic Development Loan Program Guidelines

2. Draft CDBG Economic Development Loan Program Guidelines

REVIEWED BY
ADMINISTRATOR ☒ REVIEWED BYATTORNEY ☒ REVIEWED BY FINANCE ☒ RECOMMENDATION:

Staff recommends the City Council approve a resolution adopting the Community Development Block Grant (CDBG) Economic Development Loan Program Guidelines.

BACKGROUND:

The City of Chowchilla was awarded two competitive CDBG grants in the amounts of $500,000.00 each.

In partnership with our vendor, staff has successfully spent approximately $450,000.00 of the $1,000,000.00 awarded for the Economic Development Loan Program.

The two Economic Development Loan Program activities and related administrative expenses are as follows:
• Business assistance
• Microenterprise assistance (including Micro-financial assistance and Technical assistance) On September 14, 2021, City Council approved the current Economic Development Loan Program Guidelines. With the approval of these guidelines, our Vendor has been able to successfully implement and issue multiple loans to eligible community businesses. The program has been used to successfully award over 7 (seven) loans to various businesses and retained over 20 eligible jobs within the community.

However, it has come to staff attention these guidelines needed to be updated to allow for the successful continuation of the program. One of the primary changes to the guidelines staff is recommending is related to the start date of the program. Previously, to be eligible, the business would have been required to be operational prior to March 19, 2020. This date was creating a challenge as many of the businesses that were requesting assistance opened during the pandemic, not prior to. Another item that needed to be changed was businesses needed to show a Profit and Loss Statement for 2019 and 2020.Many of the businesses were unable to demonstrate a loss of revenue for 2019, since they were not open for business. The remaining modifications to the guidelines were administrative changes recommended by California Department of Housing and Community Development (HCD).

With council’s consideration of the updated guidelines, the City will review the current loan applications previously considered ineligible. Upon review under the new program guidelines, if the applications are deemed eligible by MBI’s underwriting team, staff will then begin the process of funding the loan accordingly.

FISCAL IMPACT:

At this time, there is no fiscal impact to the City of Chowchilla. City Staff will work with Michael Baker International, our Economic Development Consultant, to assist City Staff with reviewing the loan applications using the new guidelines. There is no impact to the City’s General Fund.

ACTIONS FOLLOWING DECISION:

Upon approval of the updated guidelines, the City will review the current loan applications previously considered ineligible. Upon review under the new program guidelines, if the applications are deemed eligible by MBI’s underwriting team, staff will then begin the process of funding the loan accordingly.

ALTERNATIVES:

1. Continue the Item to a future City Council meeting (date and time to be specified in City Council motion).

2. Approve, subject to other than those updates recommended by staff (identify specific findings and/or conditions amended; or, to be addressed in City Council motion); or,

3. Deny; or,

4. Refer to City Staff for reconsideration of specific items to be addressed in City Council motion.

COUNCIL RESOLUTION # -22

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHOWCHILLA, CALIFORNIA

APPROVING THE COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) ECONOMIC

DEVELOPMENT LOAN PROGRAM GUIDELINES
WHEREAS, the City of Chowchilla has previously received and continues to receive Community Development Block Grant (CDBG) funds from various grant programs offered from the California Department of Housing and Community Development (HCD) for implementation within the City of Chowchilla; and,
WHEREAS, the City of Chowchilla is required to have an adopted and state approved Economic Development Loan Program Guidelines in order to continue to receive and implement these funds from CDBG in the community;
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chowchilla hereby finds, determines and declares the following:

1. The City Council hereby adopts its Community Development Block Grant (CDBG) Economic Development Loan Program Guidelines dated September 2021, a copy of which is attached hereto.

2. The City Administrator, or designee, is authorized to sign and act on the City's behalf in all matters relating to the Economic Development Loan Program Guidelines.

PASSED AND ADOPTED by the City Council of the City of Chowchilla this 25th day of October, 2022 by the following vote to wit:

AYES:

NOES:

ABSENT:

ABSTAIN:

APPROVED:

Mayor John Chavez
ATTEST:

Joann McClendon, CMC
City Clerk

TABLE OF CONTENTS

1. INTRODUCTION............................................................................................................................... 1

1.1 Purpose .................................................................................................................................... 1

1.2 Definitions and Abbreviations ................................................................................................. 1

1.3 Administration ......................................................................................................................... 2

2. TYPE OF ASSISTANCE AVAILABLE.................................................................................................... 2

3. MEETING A CDBG NATIONAL OBJECTIVE ....................................................................................... 2

3.1 Low/Mod Income Owner Microenterprise – Priority Activity .................................................2

3.2 Low/Mod Job Retention – Priority Activity .............................................................................2

3.3 Low/Mod Job Creation .............................................................................................................2

3.4 Urgent Need and Low/Mod Area Benefit .................................................................................3

4. ECONOMIC DEVELOPMENT PUBLIC BENEFIT STANDARD .............................................................. 3

4.1 Low/Mod Job Retention and Job Creation National Objective Activities................................ 3

4.2 Low/Mod Area Benefit National Objective Activities.............................................................. 3

5. HUD CDBG REQUIREMENTS FOR ASSISTANCE TO A FOR-PROFIT ENTITY...................................... 3

5.1 Restrictions on Duplication of Benefits.................................................................................... 4

5.2 Prohibition of Job Pirating Activities........................................................................................ 4

5.3 Unique Entity Identifier and Non-Debarment......................................................................... 4

6. EQUAL OPPORTUNITY MARKETING................................................................................................ 4

7. APPLICANT ELIGIBILITY.................................................................................................................... 5

7.1 Eligible Applicants.................................................................................................................... 5

7.2 Ineligible Applicants................................................................................................................. 5

8. USE OF FUNDS................................................................................................................................. 5

8.1 Eligible Costs ............................................................................................................................ 6

8.2 Ineligible Costs......................................................................................................................... 6

9. BUSINESS ASSISTANCE FORGIVABLE LOAN TERMS ........................................................................ 6

9.1 Maximum Loan Amount .......................................................................................................... 6

9.2 Interest Rate............................................................................................................................. 6

9.3 Loan Term ................................................................................................................................ 6

9.4 Loan Disbursement Schedule................................................................................................... 6

9.5 Loan Forgiveness...................................................................................................................... 7

9.6 Term of Payment...................................................................................................................... 7

9.7 Loan Fee ................................................................................................................................... 7

9.8 Prepayment Penalty................................................................................................................. 7

9.9 Collateral Requirements.......................................................................................................... 7

10. CONFIDENTIALITY ........................................................................................................................... 7

11. APPLICATOIN SUBMISSION REQUIREMENTS.................................................................................. 7

12. UNDERWRITING CRITERIA FOR BUSINESS ASSISTANCE FORGIVABLE LOANS................................ 8

12.1 HUD Underwriting Objectives................................................................................................ 8

12.2 Program Criteria for Business Assistance Loans.................................................................... 8

12.3 Exceptions to Underwriting Criteria ...................................................................................... 9

13. APPROVAL AND APPEAL PROCESS.................................................................................................. 9

13.1 Loan Advisory Committee...................................................................................................... 9

13.2 Approval/Denial ..................................................................................................................... 9

13.3 Loan Disbursement................................................................................................................ 9

13.4 Appeal Process....................................................................................................................... 9

14. OTHER FEDERAL REQUIREMENTS................................................................................................... 9

14.1 Conflict of Interest ............................................................................................................... 10

15. PORTFOLIO MANAGEMENT.......................................................................................................... 10

15.1 Ineligible Expenditure of Program Funds............................................................................. 10

15.2 Loan Default Procedures...................................................................................................... 10

16. CONFLICT WITH FEDERAL LAW, REGULATION OR GUIDANCE ..................................................... 11 APPENDICES:

APPENDIX A – INCOME LIMITS FOR MADERA COUNTY.......................................................11 APPENDIX B – LOAN UNDERWRITING CRITERIA SUMMARY..............................................12

1. INTRODUCTION
In response to economic hardships experienced by small businesses due to the COVID-19 pandemic, the City of Chowchilla (City) has established a business assistance program using Community Development Block Grant (CDBG) funding received from the U.S. Department of Housing and Urban Development (HUD). The COVID-19 Response Small Business Assistance Program (the Program) will provide assistance to small businesses affected by the COVID-19 pandemic with a focus on support for job retention for low- and moderate-income persons and microenterprise businesses. These guidelines are intended to establish the Program and are subject to review and amendment as needed to respond to the evolving economic environment resulting from the pandemic.

All federal requirements for CDBG funded assistance to for-profit entities will be followed unless waived or otherwise exempted by HUD.

1.1 Purpose
The Program will provide financial assistance to small businesses with a physical location in the City of Chowchilla to minimize job losses resulting from the economic impacts of the COVID-19 pandemic.

The Program is designed to promote economic stability by providing relief in the form of a onetime forgivable loan for essential operating expenses and supplies to the City’s small businesses negatively impacted by COVID-19.

1.2 Definitions and Abbreviations
CARES Act – Coronavirus Aid, Relief and Economic Security Act.

CDBG – Community Development Block Grant funding received from HUD.

City – The City of Chowchilla, City staff, or agents designated by the City to act on its behalf.

Full Time Equivalent (FTE) Job – Equals at least 1,750 hours annually (approximately 34 hours per week). A total of two jobs may be added together to equal one FTE.

HUD – The U.S. Department of Housing and Urban Development.

Low/Mod person – A low- and moderate-income person is defined by HUD as a person whose family income does not exceed 80% of the HUD median income, adjusted for family size, for the Chowchilla area (see Appendix A for current income limits).

For COVID-19 related job creation or retention activities, a Low/Mod person may also be a person holding a job with annual wages that do not exceed 80% of the HUD median income limit for a one-person family (see Appendix A for current income limits).

Microenterprise – The CDBG program defines a Microenterprise as a business with five or fewer employees, one or more of whom own the business.

1.3 Administration
The City has secured the services of a qualified CDBG Business Loan Program underwriter who is responsible for working with the banks. Public lenders, originating and underwriting business loans, documenting compliance with CDBG regulations, and preparing the loan closing documents,

2. TYPE OF ASSISTANCE AVAILABLE
The maximum funding will be $35,000 per FTE job created and/or retained upon approval, not to exceed $105,000 per applicant. If the business meets the requirements in Section 9 below, the loan may be forgivable.

3. MEETING A CDBG NATIONAL OBJECTIVE
All CDBG funded activities must meet one of the three CDBG National Objectives:
• Provide benefit to Low/Mod income persons or neighborhoods; • Prevention or elimination of slums and blight; or
• Addressing an unplanned urgent need that poses a serious and immediate threat to the health and welfare of the community.

At least 70% of the City’s annual CDBG expenditures must meet the Low/Mod income National Objective.

COVID-19 funds give priority to Low/Mod Job Retention and Microenterprise activities. Business Assistance Forgivable Loans must meet a National Objective in at least one of the four following methods:

3.1 Low/Mod Income Owner Microenterprise – Priority Activity Available to Microenterprise businesses with five or fewer employees, one of which must be an owner with family income under the federal CDBG income limits (Appendix A). The City will verify owner’s family income using HUD approved methods.

3.2 Low/Mod Job Retention – Priority Activity
Available to all eligible businesses, including Microenterprise businesses. CDBG funds are used to support a business that would lose job(s) without assistance. The business must employ at least one full time equivalent (FTE) job. At least 51% of the retained jobs must be held by or made available to Low/Mod Persons.

3.3 Low/Mod Job Creation
Available to all eligible businesses, including Microenterprise businesses. The business must create at least one new full time equivalent (FTE) job and at least 51% of the jobs created must be held by or made available to Low/Mod Persons.

3.4 Urgent Need and Low/Mod Area Benefit
As noted above, the focus of the Program is to support job retention for Low/Mod income persons.

However, in rare circumstances, business assistance may qualify under the Urgent Need or Low/Mod Area Benefit National Objectives. Funds must be used to prevent, prepare for, or respond to the COVID-19 pandemic.

Urgent Need requires that the City certify and document the following:
• The activity is designed to alleviate existing COVID-19-related conditions; • The conditions pose a serious and immediate threat to the health or welfare of the community and are of recent origin or recently became urgent; and • The City and the business are unable to finance the activity and that other sources of funds are not available.

Low/Mod Area Benefit may be used for businesses that provide necessary goods or services to persons living in an area with 51% or more low/mod income residents.

4. ECONOMIC DEVELOPMENT PUBLIC BENEFIT STANDARD
The Public Benefit Standard is not applicable to Microenterprise businesses or to activities approved under the Urgent Need National Objective.

4.1 Low/Mod Job Retention and Job Creation National Objective Activities
Businesses must demonstrate that with the assistance of Program funds, they may be expected to retain or create at least one permanent full time equivalent (FTE) job for every $35,000 in funding received. This will be determined using the underwriting criteria below.

Only permanent jobs may be counted. If part time positions are used for the Public Benefit Test, no more than two positions may be added together to create the one FTE. Seasonal jobs normally may not be counted. Seasonal jobs may be counted only if the job season lasts long enough to provide sufficient hours and pay to be considered the employee’s main source of income. A minimum of six months would be acceptable, if a minimum of 34 hours is paid for each week during the season. Only two seasonal positions may be counted towards the 34-hour minimum.

4.2 Low/Mod Area Benefit National Objective Activities
The service area of the business must be 51% or more Low/Mod based on HUD census mapping data.

5. HUD CDBG REQUIREMENTS FOR ASSISTANCE TO A FORPROFIT ENTITY All federal requirements for CDBG assistance to for-profit entities will be followed unless waived or otherwise exempted by HUD.

5.1 Restrictions on Duplication of Benefits
CDBG funds may not be used to supplant or duplicate private, federal, State, or local government funding.

The Applicant must disclose any funds received in response to the COVID-19 pandemic from private sources, and from any federal, State, or local government programs. Acceptance of other funding will not disqualify an applicant from the Program but may affect the amount of funds available or eligible costs.

Applicants will provide personal and business bank statements. The City will review the statements to identify any unreported influx of cash.

If a Borrower receives funds from any source for the same costs that are funded under this Program, the Borrower must repay the duplicative funding. Either the CDBG business loan or the other funding source may be repaid. Other sources may include, but not are not limited to:
• Private sources including bank loans (not including documented loan from a relative); • Small Business Administration (SBA) Paycheck Protection Program (PPP), Economic Injury Disaster Loan Program (EIDL) or Economic Adjustment Assistance Program (EAA); • State of California iBank Small Business Disaster Relief Loan Guarantee Program; • State of California Pandemic Unemployment Assistance; or • Any other federal, State, or local government program providing funding for items noted as eligible costs for this Program.

5.2 Prohibition of Job Pirating Activities
CDBG funds may not be used to facilitate the relocation of a for-profit business from one labor market to another if the relocation is likely to result in a significant job loss to the original labor market.

5.3 Unique Entity Identifier and Non-Debarment
The Unique Entity Identifier (UEI) is the official identifier for doing business with the U.S. Government.

Businesses must obtain a UEI to be eligible to receive assistance under the City’s Economic Development Loan Program. The Applicant and all business owners may not be under debarment or suspension in the federal System for Award Management (SAM.gov) to receive federal funding assistance.

6. EQUAL OPPORTUNITY MARKETING
Marketing of the Program will be accomplished through a variety of modes to provide all eligible small businesses within the City of Chowchilla with an opportunity to access funding. At a minimum, the Program will be announced in the local newspaper, with marketing brochures, information posted on the City website and social media, marketing through business-related newsletters, and other business venues.

7. APPLICANT ELIGIBILITY

7.1 Eligible Applicants
Eligible applicants include locally owned restaurant, retail, and service businesses with a physical storefront/office location in the City of Chowchilla. Applicant businesses may be private for-profit business concerns, corporations, partnerships, or sole proprietorships.

Businesses must employee at least one full-time equivalent position (FTE), not counting the Owner.

Businesses may have no more than 100 employees.

Applicants must have been financially viable a minimum of one year prior to the date of application submittal. Financial viability will be determined based on business and personal financial information.

Applicants must have been in business and employing people for a minimum of one year prior to the date of application submittal.

Applicants must have been in good standing with the City of Chowchilla a minimum of one year prior to the date of application submittal (e.g., no liens or judgments, no unresolved code violations, etc.).

Any bankruptcies must have been discharged at least 3 years .

7.2 Ineligible Applicants
Federal CDBG regulations prohibit assistance to the following entities:
• Businesses or business owners are ineligible for assistance if a loan would create a conflict of interest as defined in this document or under HUD regulations. • Businesses or business owners that are debarred or suspended under a federal program are ineligible for assistance. Debarment/suspension status will be determined using the SAM.gov website.
• Professional sports teams.
• Privately owned recreational facilities that serve a predominately higher-income clientele. • A business or business owner that is the subject of unresolved findings of noncompliance related to previous CDBG assistance.

8. USE OF FUNDS
Funds provided by the Program must be used for the prevention of, preparation for, or in response to impacts from the COVID-19 pandemic. Financial assistance needed due to loss of revenue or increased costs due to the pandemic; due to related stay-at-home order, needed to address public health concerns related to the virus; or needed to retain job are considered to be in response to the COVID-19 pandemic.

8.1 Eligible Costs
Use of Program funds is restricted to working capital for COVID-19 related expenses required to remain in business, to retain jobs for Low/Mod Persons; to create new jobs for Low/Mod Persons; or to address the COVID-19 pandemic. Examples of eligible costs include:
• Employee salaries and benefits;
• Lease, mortgage payments or insurance for buildings where employees are working; • Purchase of personal protective equipment (PPE), social distancing signage, thermometers, hand sanitizer dispensers, cleaning supplies and other items used to reduce the spread of the COVID-19 virus.

Utilities may be considered on a case-by-case basis. HUD does not allow the Program to provide funds to pay utilities administered by the City of Chowchilla. This is considered a conflict of interest under federal guidelines.

8.2 Ineligible Costs
• Costs incurred prior to final loan approval unless allowed by HUD. • Costs incurred prior to the City’s completion of environmental review unless allowed by HUD. • Costs already funded by private sources including private bank loans; or from federal, State, or local government programs.
• Costs associated with construction or renovation.
• Costs not associated with the prevention, preparation for, or in response to, effects of the COVID19 pandemic.

9. BUSINESS ASSISTANCE FORGIVABLE LOAN TERMS

9.1 Maximum Loan Amount
Maximum loan amount shall be $105,000 for up to three FTE jobs created and/or retained.

9.2 Interest Rate
Loans will be at zero percent interest rate.

9.3 Loan Term
The Loan will terminate upon completion of all program requirements and execution of the forgiveness requests submitted by project application with supporting documentation demonstrating all terms have been met.

9.4 Loan Disbursement Schedule
The City will disburse 50% of loan funds upon execution of the Promissory Note and receipt of the Request for Initial Disbursement form signed by the Borrower. The remainder of loan funds will be disbursed upon receipt of documentation that the initial disbursement was spend on eligible costs and the Request for Final Disbursement form signed by the Borrower.

9.5 Loan Forgiveness
The City may forgive 100% of the maximum $105,000 loan if:
• The borrower is in compliance with the terms of the loan; • The borrower has met the requirements of the Program; • The borrower has submitted payroll documentation as evidence of any Job Retention required under the Promissory Note;
• The borrower has provided evidence of payment of eligible costs to the City six months from the execution date of the Promissory Note;
• The borrower has returned any funds not expended on eligible costs one year from the execution date of the Promissory Note; and
• The borrower has submitted a Request for Loan Forgiveness form one year from the execution date of the Promissory Note.

9.6 Term of Payment
If the borrower does not meet the requirements for loan forgiveness, repayment becomes due and payable one year from the execution date of the Promissory Note.

9.7 Loan Fee
There are no loan fees.

9.8 Prepayment Penalty
None.

9.9 Collateral Requirements
All loans shall be secured by a Promissory Note. Other collateral is not required.

10. CONFIDENTIALITY
The information submitted by Applicants and income self-certification forms provided by employees will be treated as confidential by the City to the extent permitted under State and federal law. The Loan Review Committee receives a summary of business information, not detailed business, or personal information.

11. APPLICATION SUBMISSION REQUIREMENTS
Applications are available by contacting the City of Chowchilla Economic Development Department. Due to health concerns related to the COVID-19, virus electronic documents are preferred; however, paper loan applications are allowed.

Applications will be reviewed on a first come, first served basis until funding is exhausted or the program is terminated.

Applications must be completed in full and signed by a person authorized to execute contracts on behalf of the business. Applications must include all requested attachments to be considered complete and ready for review.

12. UNDERWRITING CRITERIA FOR BUSINESS ASSISTANCE

FORGIVABLE LOANS
Normal business lending underwriting practices are difficult to apply in the uncertain economic climate created by the COVID-19 pandemic. The pandemic has resulted in unprecedented shelter-in-place orders, layoffs and enforced business closures. As businesses slowly are allowed to reopen, new rules and procedures are needed to ensure the health and safety of employees, customers, and the community. The Program is designed to provide financing flexibility for businesses while still meeting federal CDBG business lending requirements. Program underwriting criteria are summarized in Appendix B.

Review of applicants for CDBG assistance ensures that local economic needs are met and that the CDBG requirements are observed. The criteria below will be evaluated during the underwriting process to determine past earning record and future prospects; projected ability to pay fixed debt and expenses; and projected job retention or creation (if applicable).

12.1 HUD Underwriting Objectives
Program underwriting criteria are established to ensure that the following HUD required CDBG underwriting criteria are met for loans unless waived or otherwise exempted by HUD. • Project costs are reasonable;
• Other sources of financing needed for business success are committed; • Documentation of need for CDBG funds, including verification that CDBG funds are not substituted for non-Federal financial funding or support;
• Business operations will be financially feasible with CDBG assistance; • To the extent practicable, the return on the Borrower’s equity investment will not be more than 20 percent of the return on investment; and
• To the extent practicable, CDBG funds will be disbursed on a pro-rata basis with other finances provided to the business.

HUD does not require the above criteria to be evaluated for Microenterprise businesses; however, the City is required to create its own underwriting criteria for lending to a Microenterprise.

12.2 Program Criteria for Business Assistance Loans
Applicant’s credit will be reviewed. Applicant and the business should demonstrate the ability to pay debts and bills and demonstrate good credit history a minimum of one year prior to the date of application submittal. To the extent practicable, Applicant’s financial projections should demonstrate the ability, with CDBG assistance, to pay debts and bills; and to retain and/or create any required jobs for a one-year period.

Applicant’s financial projections should demonstrate the need for financial support as identified in the application.

12.3 Exceptions to Underwriting Criteria
The underwriting criteria are general guidelines that apply to most Applicants. Additional requirements or exceptions may be warranted, depending on the creditworthiness of the Applicant, the history of the business, or other Applicant-specific considerations.

13. APPROVAL AND APPEAL PROCESS
Applications will be reviewed on a first come, first served basis. Priority will be given to businesses providing Job Retention for Low/Mod Persons and to Low/Mod income Microenterprise business owners.

Should any funding remain after priority businesses are assisted, businesses providing Job Creation for Low/Mod Persons will be considered.

13.1 Loan Advisory Committee
Once underwriting is completed, a summary of the business and underwriting criteria will be presented to the Loan Advisory Committee, which is responsible for making recommendations for approval or denial to the Director of Community and Economic Development. The Director of Community and Economic Development or his/her designee will make the final approval or denial. The loan summary and its contents will be kept confidential to the maximum extent possible.

13.2 Approval/Denial
If approved, the Applicant will be contacted to arrange to sign loan documents.

If denied, the Applicant will be provided with a written explanation of the denial and any appeal process that may be available within seven (7) days.

13.3 Loan Disbursement
Initial disbursement of 50% of approved funding will proceed as soon as all required documents are executed, and Borrower submits a signed Request for Initial Disbursement to the City. Disbursement of remaining funds will be processed upon receipt of documentation that the initial disbursement was spent on eligible costs and the Borrower submits a Request for Final Disbursement to the City.

13.4 Appeal Process
An appeal process is established to provide full opportunity for applicants and their business's circumstances to be considered for assistance. Applicants denied assistance may request a second review by the Director of Community and Economic Development. Requests for appeal must be in writing and may be submitted through U.S. mail to: Director of Community and Economic Development, City of Chowchilla, 130 South 2nd Street, Chowchilla, CA 95678. Application denials by the Director may not be appealed.

14. OTHER FEDERAL REQUIREMENTS
Federal requirements will be followed regarding anti-lobbying certification; prohibitions against payments of bonus or commissions; Clean Air and Water Act; equal opportunity; Affirmative Action; Americans with Disabilities Act (ADA) of 1990; flood disaster protection; federal labor standards provisions (also known as Davis Bacon); lead based paint hazards; federal National Labor Relations Board (NLRB) certification; procurement; program income; relocation, displacement and acquisition; and additional requirements as required by HUD.

14.1 Conflict of Interest
Per State CDBG regulation §7126 (California Code of Regulations, Title 25), any activities that create a conflict of interest as defined in federal CDBG regulations at 24 CFR 570.611 are prohibited. In general, the conflict-of-interest prohibition applies to any person who is an employee, agent, consultant, officer, or elected official or appointed official of a recipient of CDBG funds, or of any public agencies, or subrecipients that receive CDBG funds. These persons who are in a position to participate in a decisionmaking process or gain inside information regarding CDBG funds and CDBG funded activities are prohibited from obtaining a financial interest or benefit from a CDBG assisted activity.

15. PORTFOLIO MANAGEMENT
A loan file will be maintained for the period required under City and HUD file retention requirements.

Loan files will be maintained for both approved and denied applications in compliance with City and HUD retention periods.

15.1 Ineligible Expenditure of Program Funds
Unless otherwise waived or exempted by HUD, loan funds that do not meet Program requirements must be repaid.

Repayment of loan funds that were not spent on eligible costs are to be entered into the City’s accounting system as a repayment of local funds rather than CDBG Program Income.

15.2 Loan Default Procedures
If a Borrower defaults on loan payments, every effort will be made to develop a workout plan with the business owner.

If the Borrower cannot fulfill the terms of the loan or cannot fulfill a workout plan, the City, at its sole discretion, may exercise one of more of the following options. The City will evaluate the cost in staff time, attorney fees and other expenses to determine the most effective and efficient course of action:
• Extend the time of payment or otherwise alter the terms of the remaining indebtedness; • Accept additional security of any kind, including USB filing on business assets, real property trust deeds or a personal guarantee from a third party; and/or • Write off a portion or the full amount of outstanding indebtedness.

16. CONFLICT WITH FEDERAL LAW, REGULATION OR GUIDANCE
If any portion of this document is in conflict with federal law, regulation, or guidance regarding the CDBG program, federal requirements will apply.

APPENDIX A
2022 INCOME LIMITS* FOR MADERA COUNTY
https://www.hcd.ca.gov/grants-and-funding/income-limits/state-and-federal-income-rent-and-loan-value-limits *To be updated annually when HCD releases current year income limits

APPENDIX B

LOAN UNDERWRITING CRITERIA SUMMARY
B.1 ELIGIBLE LOAN APPLICANTS
Eligible EDLP Forgivable Loan applicants, here after called “Borrower Eligible for Loan Forgiveness” must meet the criteria outlined below and as amended by U.S. Department of Housing and Urban Development (HUD) and the California Housing and Community Development Department (HCD):
• Be an existing business with no more than 100 full-time equivalent (FTE) employees a minimum of one year prior to the date of application submittal and in financial distress as a result of the COVID 19 pandemic or other presidentially declared disaster (“disaster”) that has resulted in (or will result in) the loss of jobs, 51% are held by LMI individuals as a result of the COVID crisis. • Is shown to have been financially viable a minimum of one year prior to the date of application submittal. Financial viability may be demonstrated by one or more of the following:
 A profit and loss statement (including income from operations, other income, cost of goods sold, operating expenses, taxes and fees, short-term debt service) showing profitable operations, (non-cash expenses such as depreciation, major capital investments and amortization of capital may be excluded).
 A cash flow forecast showing the expected potential for positive net income in subsequent periods demonstrated by accounts receivable, backlog, opening of new markets and expansion of customer base.
 A business plan that supports good prospects for viability going forward. • Be in operation a minimum of one year prior to the date of application submittal and be able to provide the prior year’s federal business tax return (with all schedules) or appropriate federal personal tax returns with appropriate business-related schedules and forms (e.g., Schedules C, D, E, SE, 1, 1099’s, etc.).
• Be an existing business with a previous history of creditworthiness that is 51% or more owned and operated by a U.S. Citizen(s) or permanent legal resident(s) • The creditworthiness determination will also include an assessment of the previous creditworthiness of any owners with a 20% or greater ownership interest. • Be able to provide Year-to-Date (YTD) financial statements a minimum of one year prior to the date of application submittal including (P&L statement, A/P Aging Report, A/R Aging Report, Debt Schedule).
• Have or developed the capacity to generate monthly financial statements (i.e., P&L Statement, A/P Aging Report, A/R Aging Report, Debt Schedule) following receipt of the loan. • The business must be established to operate legally in the State of California [e.g., registration with the CA Secretary of State and/or Madera County as a “Doing Business As” (DBA) Fictitious Business Names Statement (FBNS)] with a valid City of Chowchilla Business License (if applicable). A FBNS will be required for all businesses.
• The business must have:
 Required local, state, and federal permits.
 Proper insurance for current and proposed business activities.  Be operating out of a location with zoning that allows for current and proposed business activities.
 An existing commercial lease with renewal options that extend, at a minimum, to the month and year designated as the final month and year of the loan agreement. A home-based business must have a comparable mortgage, lease or rental agreement that extends, at a minimum, to the same period required for a commercial lease.  NOTE: If a Borrower is an existing business relocating to the City of Chowchilla or is a new startup business and does not have proper permits, licenses, leases, or insurance at the time of application, then these items can be made a condition of funding the loan.

B.2 INELIGIBLE LOAN APPLICANTS
Ineligible EDLP Loan applicants include those businesses for which any of the following are true:
• The resulting EDLP Loan will result in a “duplication” of funding from other disaster related funding programs (e.g., SBA PPP, SBA EIDL, insurance reimbursement, local/regional funding/grant programs) that will be used for the same expense.
• The business and underwriter cannot establish a clear nexus between the financial impacts of the disaster and the need for EDLP funding.
• The business and/or business owners with a 20% business ownership interest have liens or pending lawsuits that may have an adverse impact on the financial viability of the business. • The business’s physical place of business is located outside of the jurisdictional boundaries of the City of Chowchilla.
• The business’s physical place of business is located on tribal lands. • The business or any one of its principals is on the Federal debarred list. • The business or any of its principals have defaulted on any Federal debt. • The business or any of its principals have a relationship with the Lender that violates CDBG Conflict of Interest guidelines.
• The business’ goods or services involve the distribution, sale or use of cannabis or products containing cannabis or cannabis derivatives.
• The business is involved in a business activity prohibited by CDBG regulations (e.g., private golf club).

B.3 ELIGIBLE USES OF FUNDS FOR LOANS WITH FORGIVABLE

LOAN TERMS
The uses of EDLP funds for loans with forgivable loan terms are restricted to eligible uses as approved by HUD and HCD CDBG Program Guidelines.

Loan proceeds may be used to cover the following eligible costs:
• Operating Expenses (OE) and Working Capital (W/C) as defined below:
 OE includes primary expenses including, but not limited to, payroll, insurance, lease payments and utilities.
 W/C is any additional capital needs (e.g., inventory) with the amount to be net of OE.  The amount of OE and W/C needs presented in financial and cash flow statements must reflect amounts per month that are supported by pre-disaster financial information (e.g., monthly financial statements or Year End business tax returns). • Purchase of furniture, fixtures, and equipment (FF&E) to support the business’ needs to re-open and/or operate as a result of the disaster. FF&E purchases that will trigger Federal or State prevailing wage requirements will be considered on a case-by-case basis. • Refinancing of some forms of existing short-term debt when the refinancing complies with HUD and HCD CDBG underwriting guidelines, is done in conjunction with financing other eligible costs and contributes to the business’ ability to sustain operations and retain the required number of CDBG eligible jobs. NOTE: Examples of short-term debt that may be refinanced could include high interest credit cards or short-term loans from on-line lenders where the business can provide supporting documentation that clearly demonstrates that funds were used for eligible business purchases and expenses).
• Loan funds will be disbursed as per the terms outlined in section B.8 B.4 LOAN REQUIREMENTS – CDBG NATIONAL OBJECTIVES

INCLUDING APPROVED WAIVERS
Borrowers that are eligible for HUD and HCD approved waivers must comply with CDBG National Objectives in accordance with the guidelines presented in Appendix M of the NOFA and any supplemental written guidance provided by HCD.

B.5 LOAN REQUIREMENTS – CDBG AND EDLP UNDERWRITING

CRITERIA FOR LOANS WITH FORGIVENESS TERMS
B.5.1CDBG Underwriting Criteria
Eligible EDLP applicants for loans with forgiveness terms are underwritten in accordance with the following CDBG underwriting criteria.
• Project costs are reasonable as evidenced by 3rd party cost estimates (e.g., vendor quotes, copy of online search, etc.).
• All project costs are eligible per federal regulations and HCD guidelines. • All sources of project financing are committed to support the financial projections that demonstrate that, with EDLP funds, the business is likely to continue operations and retain (or recreate) the projected number of jobs (51% of which are filled by LMI individuals or, if lost due to normal turnover, will be may available to LMI individuals). This may include:
 Borrower or other private funds (proof of funds availability such as bank statements and a signed letter indicating that the funds will be contributed to the project are required).  A detailed letter of interest from a financial institution outlining the loan amount, loan term, interest rate, collateral requirements, loan-to-value ratio, debt service coverage ratio (DSCR), etc. will be required for the underwriting process.
 An approval letter from another government, nonprofit or other business or infrastructure financing program.
• To the extent practicable, EDLP funds are not substituted for non-Federal financial support. This will include an assessment to ensure no duplication of funds from other federal, state, or private sources that may have been provided to assist the business in response to a disaster, economic downtown or other event.
• The project is financially feasible based on the underwriter’s assessment of the items defined below:
 The management team has the capacity to execute the business plan and meet the financial projections (i.e., sales revenues, COGS, operating expenses, and profitability).  The historic creditworthiness of owners with a 20% or greater interest or any member of the management team with check writing authority.

NOTE: A formal, signed commitment letter from the financial institution with the same loan amount, loan terms, interest rate, collateral requirements, loan-to-value ratio, DSCR, etc. will be required before EDLP funds will be released.
• The financial operating and cash flow projections:
 Are in line with the business’ previous seasonal fluctuations in financial performance and/or reflect anticipated conditions that may impact Revenues, COGS (if applicable), Operating Expenses and Profitability during the term of the EDLP.  Show an ability for the business to reach a level of financial breakeven with EDLP and other funding during the term of the EDLP.
 Clearly demonstrate that the Borrower will generate sufficient income to retain (or re-create) the projected number of jobs within an agreed upon term established between the Borrower, the Administrator, and the Lender.
 Demonstrate that the business will meet the (DSCR) required by other lenders.  Demonstrate that the business will generate sufficient revenue to provide the salaries, wages or draws needed by the owner(s) to cover their personal expenses taking into consideration other sources of income available to meet owners’ personal financial needs. • As EDLP loans with forgiveness terms will be limited to businesses that have faced financial conditions that resulted in the loss of jobs or are in imminent danger of facing financial conditions that will result in the loss of jobs, underwriting will not include 1) an assessment of the return on owner’s equity invested in the project, nor 2) an assessment of the disbursement of EDLP funds on a pro-rata basis with other project financing.

The EDLP underwriting process for loans with forgiveness terms will require documentation to assess the ability of the business to sustain operations (e.g., documentation on other debt, historic business financial statements and tax returns for 2019, historic personal financial statements and tax returns for 2019, personal credit reports, financial projections and DSCR).

The EDLP underwriting process for loans with forgiveness terms will require documentation to assess the ability of the business to sustain operations (e.g., documentation on other debt, historic business financial statements and tax returns for a minimum of one year prior to the date of application, historic personal financial statements and tax returns for the year prior to the date of application, personal credit reports, financial projections and DSCR). However, the following additional (or more detailed) information may, at the underwriter’s discretion, be required due to the CBDG underwriting criteria outlined above and the willingness of the City of Chowchilla to consider higher risks loans in exchange for the project the CDBG National Objective and Public Benefit requirements outlined above.
• A detailed breakdown in the financial statements with line items showing:
 Salaries/wage, employment taxes and benefit expenses for existing employees with a breakdown for those employees that will be retained with the assistance from the EDLP loan and should align with the Job Tracking Form submitted with the Borrower’s application.  A history of the business and brief bios of each of the key members of the management (e.g., CEO, CFO, CTO, etc.) and operating team (e.g., Production Manager, Sales Manager, etc.).  A summary of the market(s) served and any adjustments to accommodate for disaster related impacts.
 A schedule of owner’s equity invested in the businesses and any new debt incurred prior to one year from the date of application (the debt summary should include the name of the source, the amount borrowed, loan terms, interest rate, current balance, etc.).  A timeline outlining when funds from each source of financing will be expended (including EDLP and non-EDLP sources).

B.5.2EDLP UNDERWRITING CRITERIA FOR LOANS WITH

FORGIVENESS TERMS
Eligible EDLP applicants for loans with forgiveness are underwritten in accordance with the following EDLP underwriting criteria.
• Business is located within the jurisdictional boundaries of the City of Chowchilla. • Financial Ratios:
 DSCR – an aggregate business DSCR of no lower than 1.0 (includes an aggregate of the DSCR for all non- EDLP debt financing).
 Global Cash Flows – an aggregate of business DSCR and personal cash needs are sufficient to cover personal operating expenses including a personal DSCR of no lower than 1.0.  Net Income (after taxes and interest) sufficient to meet DSCR requirements outlined above. • The Administrator will work closely with the eligible businesses to ensure they understand the requirements of the EDLP and the benefits of participating.

B.6 DETERMINATION OF LOAN AMOUNTS
EDLP loan with forgiveness terms will comply with HUD and/or HCD regulations and guidelines as outlined in NOFA Appendix M and other written documentation provided by HUD and/or the HCD.

B.7 DETERMINATION OF LOAN TERM
EDLP loan with forgiveness terms will comply with HUD and/or HCD regulations and guidelines as outlined in NOFA Appendix M and other written documentation provided by HUD and/or the HCD.

B.8 DETERMINATION OF LOAN INTEREST RATE
EDLP loan with forgiveness terms will comply with HUD and/or HCD regulations and guidelines as outlined in NOFA Appendix M and other written documentation provided by HUD and/or the HCD. It is anticipated that loans with forgiveness terms will be zero percent (0%) for the specified term of the loan unless otherwise specified by the HCD.

B.9 LOAN DISBURSEMENT – LOANS WITH FORGIVENESS TERMS
Loan disbursement for loans with forgiveness terms will be in accordance with HUD and HCD regulations, guidelines, or other written procedures.

Disbursement of loan proceeds will take place only after all conditions have been met and loan documents executed. The procedure for loan disbursement will vary depending upon the purpose of the loan funding as outlined below:
• Operating Expenses and Working Capital – to be disbursed at 50% upon execution of the Promissory Note and 50% after six months in an amount that aligns with the cash flow needs as presented in the pro forma financials provided by the Borrower during the application process and updated as necessary prior to loan closing or due to changing operating conditions following loan closing.
• Furniture, Fixtures & Equipment – to be paid directly to the vendor upon receipt of a valid invoice or to be paid to the borrower upon receipt of a valid invoice and proof of payment (e.g., cancelled check or paid credit card bill)
The Administrator will approve all disbursements and evaluate the sustained viability of the business prior to disbursing future monthly Operating Expense and/or Working Capital advances.

B.10 LOAN MONITORING AND COMPLIANCE FILES – LOANS WITH

FORGIVENESS TERMS
Following closing, monitoring files will be set up. Two separate physical and/or electronic loan files shall be maintained. The first is the legal file which holds all the original executed loan documentation. This electronic and/or physical file shall be kept in Lender’s or Administrator’s fireproof vault or cloud-based backup for safekeeping. At a minimum the legal file shall include (if applicable):
• Promissory Note
• Loan Agreement with required CDBG language
• Deed of Trust
• General Security Agreement
• Personal Guaranty
• Corporate Guaranty
• Subordinate Agreement
• Life Insurance Policy and Agreement
• Hazard Insurance Policy and Agreement
• General Resolution
• Certificate of Secretary
• Opinion of Counsel
• Inter-creditor Agreement
• Documentation of Site Control (i.e., lease, deed of trust, etc.) The second is a credit file which will contain the day-to-day administrative records of the loan. The credit file will include, at a minimum, the loan application and financial information associated with the application, loan memorandum, Lender LAC recommendation, disbursement records, reports of site visits, updated financial information provided by the Borrower, CDBG compliance data and other routine information related to the loan.

Application information should include the following as appropriate:
• Loan Disbursement Schedule
• Map verifying borrower is physically located within program boundaries • Documentation of compliance with federal acquisition requirements, if appropriate (e.g., land purchase)
• Documentation of compliance with federal debarred requirements • Copy of CDBG NEPA documents including Authorization to Use Grant Funds, if required (Original to be maintained in Lender’s Environmental Review Records file) • Copy of Documentation to determine Cost Reasonableness • Documentation to support National Objective/Public Benefit requirements for job retention that shows clear and objective evidence that jobs will be lost without CDBG assistance. • Signed CDBG Documents:
 Loan Certification Form
 Job Tracking Form (demonstrating CDBG compliance with LMI job creation/retention)  No Conflict-of-Interest Certification
 No Job Anti-Pirating Certification
 Income Certification forms (including Part 5 if required or other required income certification documentation)
B.11 LOAN SERVICING – LOANS WITH FORGIVENESS TERMS
B.11.1 Loan Servicing Agent
Loan servicing will be conducted by the Administrator with the Lender.

B.11.3 Loan Servicing And Document Collections Procedures Once the loan is closed, the Borrower is entered into a forgivable loan servicing system. EDLP loan with forgiveness terms will be serviced as follows:
• Administrator to secure evidence of purchase and payment for FF&E purchased with EDLP funds for review and comparison to loan application documents and budgets to validate cost reasonableness and CDBG compliance (e.g., NEPA, Prevailing Wage, etc.). If in noncompliance, Administrator and Lender will determine if corrective action is required and implement corrective action if necessary.
• Borrower to provide the following to the Administrator for review by the 15th of the month following the close of the previous month:
 P&L and Balance Sheet or a P&L, A/P Aging and A/R Aging statements.  An updated Debt Schedule.
 Payroll records.

Once the loan is closed, the Administrator will monitor the loan to maintain the loan records in compliance with the Program objectives and CDBG guidelines. A servicing and documentation system will be maintained with a file for each borrower.

B.12 ONGOING MONITORING
Ongoing monitoring of loans with forgiveness terms will be handled as outlined above and in Section A.11 and A.12. Any significant variances will be reported to the LAC for further direction.

B.12.1Forgiveness Monitoring, Compliance, and Reporting The guidelines for loan forgiveness monitoring and reporting will be refined upon receipt of final guidance and approval by the HCD.

B.12.2Forgiveness Monitoring
Following loan closing the Administrator will collect and review the information outlined in Section B.10 monthly. Following the review, the Administrator will meet as necessary with Borrower either in person or via video conference to discuss current conditions and any adjustments that may be needed, or additional technical assistance provided.
• If additional technical assistance is needed the Borrower will be connected with appropriate resources to assist them with this need.
• If Revenues and Operating Expense and Work Capital expenditures are in alignment with pro forma financial and cash flow projections (or if reasonable adjustments are warranted), Administrator to authorize Lender to disburse EDLP funds to support the next month’s Operating Expense and Working Capital allocation as per the pro formal financial and cash flow projections (with reasonable adjustments if warranted).
• If Revenues and Operating Expense and Work Capital expenditures are NOT in alignment with pro forma financial and cash flow projections and there is evidence that the business will not be able to continue to sustain operations or retained the projected number of jobs, Administrator will discuss the situation with the Lender and make a determination to implement one of the following actions as appropriate:
 Reduce the amount of EDLP funds disbursed to support the next month’s Operating Expense and Working Capital needs in alignment with the reduced labor costs, etc.  Terminate and write off the loan.
 If the Borrower fails to provide the required information by the 15th of the month as outlined above, the loan will be considered in default and all further loan disbursements will be halted until the Borrower is in compliance. If the Borrower fails to bring the loan into compliance in two consecutive months, the loan will be considered in default and the Administrator will develop options and present the loan to the LAC to determine the appropriate action.

B.13 FORGIVENESS COMPLIANCE
The loan will be determined to be forgivable if the Borrower meets the following criteria. • Borrower makes every effort to retain and/or re-create the agreed upon number of jobs for the minimum period designed in Appendix M of the CDBG NOFA, 51% of which were initially filled by LMI individuals and, if turnover occurs, agrees to make these positions available to an LMI individual.
• Borrower uses EDLP funds for eligible uses of funds as outlined in Section A.3, in accordance with the projects Sources and Uses Statement submitted as part of the loan application and in compliance with CDBG cost reasonableness requirements.
• Provides the required monthly financial and payroll information monthly by the 15th of the month following the close of the previous month.
• Meets with the Administrator monthly via telephone or video conference to review financial performance, business needs, etc. for the term of the loan.

The EDLP funds loaned to the point will also be forgiven If one or more of the following occurs:
• The Borrower ceases business operations prior to the end of the loan term. • A determination is made between the Borrower, the Lender, the Administrator, and the LAC that every effort has been made to retain and/or re-create the agreed upon number of jobs but is unable to do so due to circumstances beyond the control of the Borrower (e.g., recurring disaster related closures or reduced operations due to government mandates, inability to find qualified employees to fill vacant positions, etc.).

B.14 FORGIVENESS REPORTING
Program reporting will conform to CDBG job retention reporting requirements including maintenance of Income Certification forms and payroll records for a minimum period of three (3) months for submission to HCD to certify job retention. Additional documentation will be provided if circumstances arise that result in the business’ inability to retain the projected number of jobs. All other reporting will comply with HCD semi- annual and annual reporting requirements.

REPORT TO THE CITY COUNCIL
Item 6.2

CLICK HERE

TO RETURN TO

THE AGENDA
Meeting of: October 25, 2022
AGENDA SECTION: New Business
SUBJECT: Consideration and Adoption of a City Council Resolution Authorizing the City Administrator to Execute Any and All Documents Related to Retaining Wulff Hansen as the Municipal Advisor for the City of Chowchilla and a Budget Amendment for Associated Costs
PREPARED BY: Rod Pruett, City Administrator
ATTACHMENTS: Resolution
Wulff Hansen Agreement
Addendum 1
Program Analysis

REVIEWED BY
ADMINISTRATOR ☒ REVIEWED BYATTORNEY ☒ REVIEWED BY FINANCE ☒ RECOMMENDATION:

That the City Council adopts a resolution approving Wulff Hansen as the Municipal Advisor for the City of Chowchilla.

BACKGROUND:

The City has used Wulff Hanses as our Municipal Advisor for various Bond transactions since 2015. The city used them for the Johnson Controls Project which had multiple bonds issued between the Water, Wastewater and General funds as well as for the Pension Obligation Bonds the city issued.

Previous resolutions were specific to the issuance of those bonds. This resolution is to approve using Wulff Hansen as the general Municipal Advisor for the City. The City may have different needs for the Municipal Advisor over time and those individual needs will be addressed with Addendums to the agreement.

This particular instance we are wanting to diversify our investments to get a better return and provide more income to the City, as reflected in the attached Addendum.

REASON FOR RECOMMENDATION:

The City currently invests all of its money in the Local Agency Investment Funds (LAIF). While in the past this has provided adequate returns, the current market has changed and we need to look outside of LAIF for better returns on our investments.

Due to the Federal Rate being increased recently, the Treasury market is providing significantly greater returns than LAIF which is fluctuating in the 1.0% to 2.0% range. The 1 to 2-year Treasury market is in the

4.0% range currently.

We need the expertise of the Municipal Advisor to take advantage of the ever-changing market to ensure we are getting the best possible return on our investments.

FISCAL IMPACT:

As you will see in the attached analysis, even if LAIF were to reach 2.0%, the Treasury market would yield us an additional $158,000.00 on a $10MM investment and $257,000.00 on a $15,000,000.00 investment on top of LAIF. This is after paying for the initial start up costs of roughly $39k annual ongoing costs are estimated to be roughly $14,000.00.

A budget amendment will have to be done to account 100-1705-3364 Contracted Services to increase the amount by $39,750, the estimated start-up cost for the program. These costs will be allocated in our cost allocation plan and be offset by the increase in Interest Income we receive which also gets allocated to all the funds based off the amount of cash they have.

ALTERNATIVES:

Do not approve retaining Wulff Hansen as our Municipal Advisor and stay status quo. However, staff does not have the expertise to take advantage of the market.

ACTIONS FOLLOWING APPROVAL:

City Administrator will execute the agreement and Addendum with Wulff Hansen.

COUNCIL RESOLUTION # -22

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHOWCHILLA, CALIFORNIA

AUTHORIZING THE CITY ADMINISTRATOR TO EXECUTE ANY AND ALL DOCUMENTS RELATED

TO RETAINING WULFF HANSEN AS THE MUNICIPAL ADVISOR FOR THE CITY OF CHOWCHILLA

AND A BUDGET AMENDMENT FOR THE ASSOCIATED COSTS
WHEREAS, the City seeks to diversify its investment portfolio; and WHEREAS, the City has used Wulff Hansen in the past and has been pleased with their performance as the City’s Municipal Advisor; and
WHEREAS, the City reasonably expects to reimburse itself for the costs of using the Municipal Advisor with the additional return on investments earned; and WHEREAS, it is desirable to appoint a municipal advisor.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chowchilla hereby finds, determines and declares the following:

1. The Council sees the benefit of using a Municipal Advisor for the City’s investments

2. Wulff, Hansen & Co., San Francisco, California, is hereby designated as municipal advisor to the City.

3. The City Administrator is hereby authorized and directed in the name and on behalf of the City to execute an agreement for municipal advisory services with such firm.

4. A budget amendment is approved to increase account 100-1705-3364 by the amount of $39,750.00

5. This Resolution shall take effect from and after the date of its passage and adoption.

PASSED AND ADOPTED by the City Council of the City of Chowchilla this 25th day of October, 2022 by the following vote to wit:

AYES:

NOES:

ABSENT:

ABSTAIN:

APPROVED:

Mayor John Chavez
ATTEST:

Joann McClendon, CMC
City Clerk
October 12, 2022
Rod Pruett
City Administrator
City of Chowchilla
130 South Second Street
Chowchilla, CA 93610
This is an Agreement (AGREEMENT) between the City of Chowchilla (CLIENT) and Wulff, Hansen & Co. (MUNICIPAL ADVISOR or ADVISOR or MA) a registered municipal advisory firm. The purpose of the AGREEMENT is to provide a framework allowing MUNICIPAL ADVISOR to provide municipal advisory services (SERVICES) to CLIENT from time to time as may be mutually agreed upon by both parties. All such SERVICES to be delivered under this Agreement will be specifically described in an Addendum to the AGREEMENT accepted by both parties, and no services will be provided in the absence of such an Addendum. The terms and conditions of this Agreement are set forth below.

CLIENT understands and acknowledges that any information or services provided by ADVISOR pursuant to an Addendum to this Agreement are for the purpose of serving as Municipal Advisor to CLIENT and not as an Underwriter or otherwise facilitating the placement of municipal securities issued by CLIENT.

This AGREEMENT also contains various disclosures and other information required under MSRB Rule G-42 and, with its Addenda, will serve as written documentation of certain specific terms, disclosures and other items of information relating to our relationship as of the date this AGREEMENT is signed by ADVISOR. If this information materially changes during the relationship any such change will be described in writing and delivered to you.

1. Scope of Services.
(a) Services to be provided.

From time to time CLIENT may request that ADVISOR provide municipal advisory services relating to a specific project or projects. The scope of any such services, any limitations thereon, any compensation to be earned by ADVISOR in connection with their delivery, and any conflicts of interest (other than those disclosed in this AGREEMENT) that ADVISOR may have in connection with such services will be described in an Addendum to this AGREEMENT. No services which are not so described and documented in an Addendum will be provided by ADVISOR to CLIENT. (b) Limitations on Scope of Services
Where an Addendum to this Agreement describes the scope of services to be provided under that Addendum, any limitations on such scope in addition to those included in this Agreement will be described in that Addendum.

Unless otherwise specifically provided in an Addendum to this Agreement, ADVISOR is not responsible for preparing any preliminary or final official statement, or for certifying as to the accuracy or completeness of any preliminary or final official statement, other than with respect to any information about Municipal Advisor provided by Municipal Advisor for inclusion in such documents. In addition, ADVISOR will not provide any of the following services in connection with any engagement pursuant to this Agreement or any associated Addenda:
a) Legal services of any kind;
b) Assistance to CLIENT with regard to CLIENT’s responsibilities under the federal securities laws and regulations relating to initial or continuing disclosure in connection with municipal securities, inclusive of the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934. Such services will be provided only if ADVISOR is explicitly engaged by CLIENT in a separate contract unrelated to this Agreement or any Addenda thereto.
c) Engineering services of any kind;
d) Special Tax Rate Consulting
e) Absorption Analysis or the review thereof;
f) Feasibility Studies or the review thereof
g) Fiscal Consulting;
h) Underwriting or placement agent services;
i) Accounting services;
CLIENT acknowledges its responsibility with respect to compliance with federal securities laws and represents its intention to comply in all respects with such laws. CLIENT acknowledges and understands that state and federal laws relating to disclosure in connection with municipal securities may apply to the CLIENT and that the failure of ADVISOR to advise CLIENT respecting these laws shall not constitute a breach by ADVISOR of any of its duties and responsibilities under this Agreement.

2. Municipal Advisor’s Regulatory Duties When Advising CLIENT.

MSRB Rule G-42 requires that Municipal Advisor make a reasonable inquiry as to the facts that are relevant to CLIENT’s determination whether to proceed with a course of action or that form the basis for any advice provided by MA to CLIENT. The rule also requires that MA undertake a reasonable investigation to determine that it is not basing any recommendation on materially inaccurate or incomplete information. Municipal Advisor is also required under the rule to use reasonable diligence to know the essential facts about CLIENT and the authority of each person acting on CLIENT’s behalf.

Accordingly, MA will seek CLIENT’s assistance and cooperation, and the assistance and cooperation of CLIENT’s agents, with the carrying out by Municipal Advisor of these regulatory duties, including providing to Municipal Advisor accurate and complete information and reasonable access to relevant documents, other information and personnel needed to fulfill such duties. In addition, to the extent CLIENT seeks to have MA provide advice with regard to any recommendation made by a third party, MA requests that CLIENT provide to MA written direction to do so as well as any information it has received from such third party relating to its recommendation.

3. Term.

This AGREEMENT shall become effective upon acceptance by both parties and shall terminate December 31, 2027 unless terminated earlier by one of the parties. Either party may terminate this AGREEMENT upon thirty days written notice to the other party or as may be mutually agreed by both parties. ADVISOR’s engagement to provide municipal advice on a specific project or projects described in an Addendum to this document shall terminate as described in that Addendum.

4. Compensation.

The form and basis of any compensation for any of Municipal Advisor’s services provided or expenses incurred pursuant to an Addendum to this AGREEMENT will be as described in that Addendum.

5. Limitation of Liability.

In the absence of willful misconduct, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of Municipal Advisor or any of its associated persons, Municipal Advisor and its associated persons shall have no liability to CLIENT for any act or omission in the course of, or connected with, rendering services hereunder, or for any error of judgment or mistake of law, or for any loss arising out of any issuance of municipal securities, any municipal financial product or any other investment, or for any financial or other damages resulting from CLIENT’s election to act or not to act, as the case may be, contrary to any advice or recommendation provided by Municipal Advisor to CLIENT. No recourse shall be had against Municipal Advisor for loss, damage, liability, cost or expense (whether direct, indirect or consequential) of CLIENT arising out of or in defending, prosecuting, negotiating or responding to any inquiry, questionnaire, audit, suit, action, or other proceeding brought or received from the Internal Revenue Service in connection with any Issue or otherwise relating to the tax treatment of any Issue, or in connection with any opinion or certificate rendered by counsel or any other party. Notwithstanding the foregoing, nothing contained in this paragraph or elsewhere in this Agreement shall constitute a waiver by CLIENT of any of its legal rights under applicable U.S. federal securities laws or any other laws whose applicability is not permitted to be contractually waived nor shall it constitute a waiver or diminution of Municipal Advisor’s fiduciary duty to CLIENT under Section 15B(c)(1) of the Securities Exchange Act of 1934, as amended, and the rules thereunder.

6. Required Disclosures.

MSRB Rule G-42 requires that MUNICIPAL ADVISOR provide CLIENT with the following disclosures of material conflicts of interest and of information regarding certain legal events and disciplinary history. (a) Disclosures of Conflicts of Interest. MSRB Rule G-42 requires that municipal advisors provide to their clients disclosures relating to any actual or potential material conflicts of interest, including certain categories of potential conflicts of interest identified in Rule G-42, if applicable. If no such material conflicts of interest are known to exist based on the exercise of reasonable diligence by the municipal advisor, municipal advisors are required to provide a written statement to that effect.

Accordingly, any material conflicts of interest known to MUNICIPAL ADVISOR in connection with the Scope of Services are disclosed below, including those conflicts applying to various forms of compensation which are described in a document attached to this AGREEMENT. We believe that these conflicts are mitigated by our duties to CLIENT as assigned to us under Federal and State laws and regulations and the rules of the Municipal Securities Rulemaking Board. In addition, because MUNICIPAL ADVISOR is a broker-dealer with significant business and economic interests due to the nature of its overall business, the success and profitability of MUNICIPAL ADVISOR is not dependent on maximizing short-term revenue generated from individualized recommendations to its clients but instead is dependent on long-term profitability built on a foundation of integrity, quality of service and strict adherence to its fiduciary duty where such duty exists. Furthermore, MUNICIPAL ADVISOR’s municipal advisory supervisory structure, leveraging our long-standing and comprehensive broker-dealer supervisory processes and practices, provides strong safeguards against individual representatives of MUNICIPAL ADVISOR potentially departing from their regulatory duties due to personal interests.

Other Municipal Advisor or Underwriting Relationships.

MUNICIPAL ADVISOR serves a wide variety of other clients that may from time to time have interests that could have a direct or indirect impact on the interests of CLIENT. For example, MUNICIPAL ADVISOR and/or its Municipal Advisor Representatives provide municipal advice to other municipal advisory clients and, in such cases, owes a regulatory duty to such other clients just as it does to CLIENT under this Agreement. These other clients may, from time to time and depending on the specific circumstances, have competing interests, such as accessing the new issue market with the most advantageous timing and with limited competition at the time of the offering. In acting in the interests of its various clients, MUNICIPAL ADVISOR could potentially face a conflict of interest arising from these competing client interests. In other cases, as a broker-dealer that engages in underwritings of new issuances of municipal securities by other municipal entities, the interests of MUNICIPAL ADVISOR to achieve a successful and profitable underwriting for its municipal entity underwriting clients could potentially constitute a conflict of interest if, as in the example above, the municipal entities that MUNICIPAL ADVISOR serves as underwriter or municipal advisor have competing interests in seeking to access the new issue market with the most advantageous timing and with limited competition at the time of the offering. None of these other engagements or relationships would impair MUNICIPAL ADVISOR’s ability to fulfill its regulatory duties to CLIENT.

Broker-Dealer and Investment Advisory Business.

MUNICIPAL ADVISOR is a broker-dealer and investment advisory firm that engages in a broad range of securitiesrelated activities to service its clients, in addition to serving as a municipal advisor or underwriter. Such securitiesrelated activities, which may include but are not limited to the buying and selling of new issue and outstanding securities and investment advice in connection with such securities, including securities of CLIENT, may be undertaken on behalf of, or as counterparty to, CLIENT, personnel of CLIENT, and current or potential investors in the securities of CLIENT. These other clients may, from time to time and depending on the specific circumstances, have interests in conflict with those of CLIENT, such as when their buying or selling of CLIENT’s securities may have an adverse effect on the market for CLIENT’s securities, and the interests of such other clients could create the incentive for MUNICIPAL ADVISOR to make recommendations to CLIENT that could result in more advantageous pricing for the other clients. Furthermore, any potential conflict arising from MUNICIPAL ADVISOR effecting or otherwise assisting such other clients in connection with such transactions is mitigated by means of such activities being engaged in on customary terms through units of the MUNICIPAL ADVISOR that operate separately from MUNICIPAL ADVISOR’s municipal advisory business, thereby reducing the likelihood that the interests of such other clients would have an impact on the services provided by MUNICIPAL ADVISOR to CLIENT under this Agreement.

In addition to the considerations above, the fact that MUNICIPAL ADVISOR’s staff are engaged in support of these other business activities could create a conflict when multiple demands exist on a particular individual’s time and resources. We reasonably believe that this conflict is mitigated by our staff’s desire to complete CLIENT’s work in a timely manner and consequently be compensated by MUNICIPAL ADVISOR for their efforts.

Other Business Relationships
MUNICIPAL ADVISOR may have existing or future business relationships, unrelated to CLIENT or MUNICIPAL ADVISOR’s services to CLIENT, with underwriters, placement agents, attorneys, accountants, financial institutions, contractors or other entities whose services it may recommend to CLIENT or whom CLIENT may select on its own initiative. MUNICIPAL ADVISOR’s business relationships with such entities may include payments or referrals made to Advisor by such entities or payments or referrals made by Advisor to such entities in connection with matters wholly unrelated to CLIENT’s business or activities. Because under no circumstances will Advisor accept any form of payment or other remuneration, directly or indirectly, from any third party in connection with Advisor’s services to CLIENT, Advisor believes that none of these other engagements or relationships would create a material conflict or otherwise impair MUNICIPAL ADVISOR’s ability to fulfill its regulatory duties to CLIENT.

Secondary Market Transactions in CLIENT’s Securities.

MUNICIPAL ADVISOR, in connection with its sales and trading activities, may take a principal position in securities, including securities of CLIENT, and therefore MUNICIPAL ADVISOR could have interests in conflict with those of CLIENT with respect to the value of CLIENT’s securities while held in inventory and the levels of mark-up or markdown that may be available in connection with purchases and sales thereof. In particular, MUNICIPAL ADVISOR or its affiliates may submit orders for and acquire CLIENT’s securities issued in an Issue under the Agreement from members of the underwriting syndicate, either for its own account or for the accounts of its customers. This activity may result in a conflict of interest with CLIENT in that it could create the incentive for MUNICIPAL ADVISOR to make recommendations to CLIENT that could result in more advantageous pricing of CLIENT’s bond in the marketplace.

Any such conflict is mitigated by means of such activities being engaged in on customary terms through staff members of the MUNICIPAL ADVISOR that operate independently from MUNICIPAL ADVISOR’s municipal advisory business, thereby reducing the likelihood that such investment activities would have an impact on the services provided by MUNICIPAL ADVISOR to CLIENT under this Agreement.

Other Conflicts of Interest.

Municipal Advisor represents to Client that its fees for the anticipated services are intended to be contingent on its delivery of services to CLIENT. Because neither CLIENT nor Municipal Advisor can control or influence market conditions, it is possible that there could be future periods in which Municipal Advisor’s provision of such services may not produce any quantifiable financial benefit to CLIENT despite CLIENT’s obligation to pay for such services. In such a period Municipal Advisor would have an incentive to continue providing services despite the absence of immediate tangible benefit to CLIENT. This conflict is mitigated by the fact that it is anticipated that Municipal Advisor’s contract will allow the CLIENT to terminate its contract and the provision of services at any time upon thirty days notice, thus eliminating its obligation to continue paying Municipal Advisor any ongoing annual fees if CLIENT believes that it is no longer receiving benefits exceeding the amount of the fee. (b) Disclosures of Information Regarding Legal Events and Disciplinary History. MSRB Rule G-42 requires that municipal advisors provide to their clients certain disclosures of legal or disciplinary events material to its client’s evaluation of the municipal advisor or the integrity of the municipal advisor’s management or advisory personnel.

Accordingly, Municipal Advisor addresses below the required disclosures and related information in connection with such disclosures.

DISCLOSURE OF CONFLICTS OF INTEREST WITH VARIOUS FORMS OF

COMPENSATION
The Municipal Securities Rulemaking Board requires us, as your Advisor, to provide written disclosure to you about the actual or potential conflicts of interest presented by various forms of compensation. We must provide this disclosure unless you have required that a particular form of compensation be used. You should select a form of compensation that best meets your needs and the agreed upon scope of services.

Forms of compensation; potential conflicts. The forms of compensation for Advisors vary according to the nature of the engagement and requirements of the client, among other factors. Various forms of compensation present actual or potential conflicts of interest because they may create an incentive for an Advisor to recommend one course of action over another if it is more beneficial to the Advisor to do so. This document discusses various forms of compensation and the timing of payments to the Advisor.

Fixed fee. Under a fixed fee form of compensation, the Advisor is paid a fixed amount established at the outset of the transaction. The amount is usually based upon an analysis by the client and the Advisor of, among other things, the expected duration and complexity of the transaction and the agreed-upon scope of work that the Advisor will perform. This form of compensation presents a potential conflict of interest because, if the transaction requires more work than originally contemplated, the advisor may suffer a loss. Thus, the advisor may recommend less timeconsuming alternatives, or fail to do a thorough analysis of alternatives. There may be additional conflicts of interest if the Advisor’s fee is contingent upon the successful completion of a financing, as described below.

Hourly fee. Under an hourly fee form of compensation, the Advisor is paid an amount equal to the number of hours worked by the advisor times an agreed-upon hourly billing rate. This form of compensation presents a potential conflict of interest if the client and the Advisor do not agree on a reasonable maximum amount at the outset of the engagement, because the advisor does not have a financial incentive to recommend alternatives that would result in fewer hours worked. In some cases, an hourly fee may be applied against a retainer (e.g., a retainer payable monthly), in which case it is payable whether or not a financing closes. Alternatively, it may be contingent upon the successful completion of a financing, in which case there may be additional conflicts of interest, as described below.

Fee contingent upon the completion of a financing or other transaction. Under a contingent fee form of compensation, payment of an Advisor’s fee is dependent upon the successful completion of a financing or other transaction. Although this form of compensation may be customary for the client, it presents a conflict because the Advisor may have an incentive to recommend unnecessary financings or financings that are disadvantageous to the client. For example, when facts or circumstances arise that could cause the financing or other transaction to be delayed or fail to close, an Advisor may have an incentive to discourage a full consideration of such facts and circumstances, or to discourage consideration of alternatives that may result in the cancellation of the financing or other transaction.

Fee paid under a retainer agreement. Under a retainer agreement, fees are paid to an Advisor periodically (e.g., monthly) and are not contingent upon the completion of a financing or other transaction. Fees paid under a retainer agreement may be calculated on a fixed fee basis (e.g., a fixed fee per month regardless of the number of hours worked) or an hourly basis (e.g., a minimum monthly payment, with additional amounts payable if a certain number of hours worked is exceeded). A retainer agreement does not present the conflicts associated with a contingent fee arrangement (described above).

Fee based upon principal or notional amount and term of transaction. Under this form of compensation, the Advisor’s fee is based upon a percentage of the principal amount of an issue of securities (e.g., bonds) or, in the case of a derivative, the present value of or notional amount and term of the derivative. This form of compensation presents a conflict of interest because the advisor may have an incentive to advise the client to increase the size of the securities issue or modify the derivative for the purpose of increasing the Advisor’s compensation. 1 ADDENDUM TO MUNICIPAL ADVISORY AGREEMENT
Addendum A

1. Purpose
This Addendum A to the Municipal Advisory Agreement dated October 12, 2022 between the City of Chowchilla (hereafter, “CLIENT”) and Wulff, Hansen & Co. (hereafter, “Municipal Advisor” or “Advisor” or “MA”) specifies and describes specific municipal advisory services to be performed by Municipal Advisor under that Agreement.

2. Services

2.1 Scope of Services
Municipal Advisor will provide the following services to CLIENT pursuant to this Addendum:

Advisor will assist CLIENT in developing and administering an asset allocation program intended to create and maintain an investment portfolio balanced appropriately between the State Treasurer’s Local Agency Investment Program (LAIF) and US Treasury securities backed by the full faith and credit of the United States Government.

Advisor will provide the following services with respect to the program. a) Assist CLIENT in determining the appropriate total amount of funds to be invested in a laddered portfolio of US Treasury Securities;
b) Assist CLIENT in designing a laddered portfolio of U.S. Treasury Securities with a suitable term structure that meets the CLIENT’s cash-flow and liquidity needs;
c) Assist CLIENT in selecting and engaging a Registered Investment Advisor (RIA) to solicit competitive bids from eligible bidders for all security purchases in an effort to assist CLIENT in obtaining fair and competitive pricing on any security transactions;
d) Assist CLIENT in selecting and engaging a third-party Custodian Bank to hold CLIENT’s U.S. Treasury securities in the name of the CLIENT;
e) Assist CLIENT with coordinating with CLIENT’s chosen Registered Investment Advisor/Bidding Agent during the process of soliciting, reviewing and accepting bids and arranging subsequent delivery of the purchased portfolio of U.S. Treasury Securities to the CLIENT’s selected Custodian Bank; f) Prior to the maturity of each security in the portfolio, the Municipal Advisor will assist CLIENT in evaluating its cash flow and liquidity needs, and its potential reinvestment options. If the CLIENT elects to reinvest all or a portion of the proceeds from a maturing security, or to modify the size, term structure or composition of the portfolio, Municipal Advisor will assist CLIENT in accomplishing the reinvestment on a timely basis and in accordance with the CLIENT's preferences and current investment policy; g) Provide CLIENT with quarterly written reports that include the following:
i. An analysis of the quarterly and year-to-date performance of the CLIENT’s portfolio in absolute terms and relative to LAIF
ii. An updated estimate of total interest income anticipated to be generated by the portfolio during the current fiscal year and during the subsequent fiscal year, if applicable; h) Assist CLIENT, if requested, in determining how best to create immediate portfolio liquidity should CLIENT experience an urgent, unexpected, or emergency need for cash from the portfolio. i) Provide CLIENT with any other services that are within the purview of Advisor’s expertise that are necessary and/or desirable to help the CLIENT achieve its objectives.

2.2 Limitations on Scope of Services
The services to be provided by Municipal Advisor to CLIENT pursuant to this Addendum are subject to the following limitations in addition to those described in the Agreement. 2 a) Municipal Advisor notes that U.S. Treasury securities with maturities of 5 years or less presently constitute ‘Allowable Investment Instruments’ for local agencies per the relevant sections of the California Government Code. If CLIENT has created a more restrictive investment policy, CLIENT is solely responsible for ensuring that any investments made in connection with the services in Section 2.1 are consistent with such policy. The scope of services does not include advice connected with creating or revising CLIENT’s written investment policy, if any. Should CLIENT wish Advisor’s assistance with creating or amending such a policy, such services will be provided only if ADVISOR is explicitly engaged by CLIENT in a separate contract for that purpose. b) Municipal Advisor’s services under this Addendum will be limited to those described in Section 2.1 above and will not include advice or support for any securities investment programs other than those involving US Treasury securities and/or LAIF.
c) Municipal Advisor is also a Registered Investment Advisor and a Broker/Dealer but will not be acting in either capacity in connection with this Addendum or with any other services provided under its Municipal Advisory Agreement with CLIENT. Under no circumstances will Municipal Advisor be a party to any securities transactions executed in connection with the services described in Section 2.1 above, nor will it at any time buy, sell, trade, or hold securities for or on behalf of CLIENT.

3. Termination
This Addendum shall become effective upon acceptance by both parties and shall terminate on December 31, 2024 unless terminated earlier by one of the parties. Either party may terminate this Addendum upon thirty days written notice to the other party or as may be mutually agreed by both parties. This Addendum A may only be extended or amended by a written agreement between CLIENT and Wulff, Hansen & Co.

4. Fees
With regard to Services to be provided by Municipal Adviser under this Addendum A, Municipal Advisor shall be compensated as follows:

Fees payable for Advisor’s services under this Addendum are composed of two components: a one-time initial fee and an ongoing annual administration fee.

The one-time initial set-up fee due to Advisor for Services regarding the implementation and construction of the initial laddered portfolio to the CLIENT shall be $17,500. This initial fee is due to Advisor from any source of legally available funds upon initial presentation of its recommended investment program to CLIENT and CLIENT’s approval and implementation of said recommendation, and will be paid within 30 days of presentation of Advisor’s invoice to CLIENT following delivery to CLIENT’s chosen Custodian of the initial US Treasury securities purchased.

An on-going annual fee of $10,000 will be due to Advisor for Services provided regarding the ongoing administration and maintenance of the program. This fee is payable to Advisor, in arrears, from any source of legally available funds on a quarterly basis upon presentation of Advisor’s invoice to CLIENT.

5. Conflicts of Interest
CLIENT and Municipal Advisor understand that Municipal Advisor’s fees under this Addendum are contingent on its delivery of services to CLIENT as described in Section 2.1 above. Because neither CLIENT nor Municipal Advisor can control or influence market conditions, it is possible that there could be future periods in which Municipal Advisor’s provision of such services may not produce any quantifiable financial benefit to CLIENT despite CLIENT’s obligation to pay for such services. In such a period Municipal Advisor would have an incentive to continue providing services despite the absence of immediate tangible benefit to CLIENT. This conflict is mitigated by the fact that Section 3 above allows CLIENT to terminate this Addendum at any time upon thirty days notice, thus eliminating its obligation to continue paying Municipal Advisor ongoing annual fees if CLIENT believes that it is no longer receiving benefits

September 23, 2022
Rod Pruett, City Administrator
Kerri Williams, Finance Director
City of Chowchilla
Dear Mr. Pruett and Ms. Williams,
As you know, the City of Chowchilla has approximately $20 million invested in the Local Agency Investment Fund (LAIF).

LAIF is a component of the Pooled Money Investment Account or PMIA, which is a very large, $225 billion investment pool that is managed by the California State Treasurer on behalf of the State of California, State Agencies, and LAIF participants.

LAIF is a popular investment among California cities, counties, school districts and special districts due to its low cost and convenience, and its emphasis on safety and liquidity.

Notwithstanding its many advantages, one disadvantage of investing in LAIF is that the interest rate or ‘yield’ currently paid by LAIF is significantly lower than the current yield on U.S. Treasury securities. This does not reflect any defect in LAIF; rather, it is a function of LAIF’s policy of maintaining a highly liquid portfolio with a very short average life (311 days as of 6/30/22) and the fact that LAIF purchased many low-yielding investments in recent years that have yet to roll-off. U.S. Treasuries, on the other hand, are available in a wide variety of maturities/durations and can thus provide significantly higher yields under present market conditions.

Interest Rates
Interest rates or ‘yields’ have increased significantly this year, due to a sharp rise in the rate of inflation and the Federal Reserve Board’s policy of raising interest rates to combat inflation.

As you can see from the graph below, yields on short-term Treasury securities have increased dramatically since last year, whereas the yield paid by LAIF has increased by less than half as much.
1 Comparison of Average Monthly Yields: U.S. Treasury Securities vs. LAIF (Sources: U.S. Department of Treasury and California State Treasurer’s Office) Investing in U.S. Treasury Securities
Given the large difference or ‘spread’ between the yield on short-term Treasury securities and the yield paid by LAIF, the City of Chowchilla may wish to invest a portion of its money in Treasury securities in order to earn more interest income.

Treasury securities are direct debt obligations of the United States Government that are issued to fund its day-to-day obligations for defense spending, entitlement programs, discretionary spending, the war in Ukraine, etc.

The payment of principal and interest on U.S. Treasury securities is guaranteed by the ‘full faith and credit’ of the U.S. Treasury, which is the same pledge that secures FDICinsured bank account deposits. However, unlike FDIC insurance, there is no dollar limit on the Federal guarantee for Treasury securities.

Treasury securities are widely considered to be the safest and most liquid investments in the world, and the market for U.S. Treasury securities is vast. Approximately $23.3 trillion of outstanding Treasury securities are owned by investors worldwide including foreign central banks, foreign and domestic commercial banks, mutual funds, private investors, corporations, pension funds, State and local governments, etc.

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3-Month Treasury 6-Month Treasury 9-Month Treasury 12-Month Treasury LAIF 2 On average, investors worldwide buy and sell more than $500 billion of Treasury securities every day in the ‘secondary market’.

Treasury securities come in many varieties – some Treasuries mature in 30 days while others mature in 30 years, and everything in between. The wide variety of Treasury securities offers investors like the City of Chowchilla the flexibility to design an investment portfolio that exactly meets their cash flow and liquidity needs.

Investing in a Laddered Portfolio of U.S. Treasury Securities The investment program being discussed here is called a ‘laddered portfolio’. Laddered portfolios are not new; far from it. They’ve been around for decades and remain popular today among certain retail and institutional investors. Laddered portfolios are appealing because they are relatively simple, inexpensive, flexible and transparent.

Presented below are two examples of laddered portfolios that may be suitable for the City of Chowchilla. Both of these portfolios consist solely of U.S. Treasury securities and are based on interest rates and reinvestment rates as of September 21, 2022 and assume an initial start date of October 1, 2022.

Example 1 depicts a $10 million laddered portfolio with quarterly principal maturities and a 1-year term. With this portfolio, every three months one of the Treasury securities in the portfolio will mature, whereupon the U.S. Treasury will wire the scheduled principal payment directly to the City’s bank account, thereby providing the City with a guaranteed amount of cash flow and financial liquidity on a fixed schedule.

Upon receipt, the City can spend the money on capital projects, operating costs, or any other lawful purpose, or reinvest all or any portion of the money back into the ladder.

At today’s interest rates this portfolio will yield 3.98% and generate $398,375 of gross interest earnings during the first year, including re-investment earnings. After deducting all Year 1 Program Expenses, this portfolio will yield 3.59% and generate $358,625 of net interest earnings during the first year.

By comparison, the most recently reported yield paid by LAIF was 1.57% as of September 21, 2022.
3 Example 1
$10 million Laddered Portfolio with Quarterly Principal Maturities and a 1-Year Term Example 2 depicts a $15 million laddered portfolio, also with quarterly principal maturities and a 1-year term. With this portfolio, every three months one of the Treasury securities in the portfolio will mature, whereupon the U.S. Treasury will wire the scheduled principal payment directly to the City’s bank account, thereby providing the City with a guaranteed amount of cash flow and financial liquidity on a fixed schedule. Upon receipt, the City can spend the money on capital projects, operating costs, or any other lawful purpose, or reinvest all or any portion of the money back into the ladder.

Date of
Investment
Face Value of
Investment
Term of
Investment
Final
Maturity
Annual Yield
(9-21-2022)
Year 1
Interest
Earnings
10/1/2022 2,500,000 3 months 12/31/2022 3.31% 20,688
10/1/2022 2,500,000 6 months 3/31/2023 3.86% 48,250
10/1/2022 2,500,000 9 months 6/30/2023 3.97% 74,438
10/1/2022 2,500,000 12 months 9/30/2023 4.08% 102,000
10,000,000 245,375
Date of
Re-Investment1
Face Value of
Re-Investment
Term of
Re-Investment
Final
Maturity2
Annual Yield
(9-21-2022)3
Year 1
Interest
Earnings
1/1/2023 2,500,000 12 months 12/31/2023 4.08% 76,500
4/1/2023 2,500,000 12 months 3/31/2024 4.08% 51,000
7/1/2023 2,500,000 12 months 6/30/2024 4.08% 25,500
153,000

3.98% 398,375

0.40% (39,750)

3.59% 358,625
Gross Interest Earnings
Total Year 1 Program Expenses
Net Interest Earnings
1 Re-investment of proceeds from maturing Treasury securities. 2 Denotes securities which will also generate interest earnings during Year 2. 3 Re-investment rate as of 9-21-2022; subject to change over time as interest rates rise and fall. 4 At today’s interest rates this portfolio will yield 3.98% and generate $597,563 of gross interest earnings during the first year, including re-investment earnings. After deducting all Year 1 Program Expenses, this portfolio will yield 3.72% and generate $557,813 of net interest earnings during the first year.

Example 2
$15 million Laddered Portfolio with Quarterly Principal Maturities and a 1-Year Term Date of
Investment
Face Value of
Investment
Term of
Investment
Final
Maturity
Annual Yield
(9-21-2022)
Year 1
Interest
Earnings
10/1/2022 3,750,000 3 months 12/31/2022 3.31% 31,031
10/1/2022 3,750,000 6 months 3/31/2023 3.86% 72,375
10/1/2022 3,750,000 9 months 6/30/2023 3.97% 111,656
10/1/2022 3,750,000 12 months 9/30/2023 4.08% 153,000
15,000,000 368,063
Date of
Re-Investment1
Face Value of
Re-Investment
Term of
Re-Investment
Final
Maturity2
Annual Yield
(9-21-2022)3
Year 1
Interest
Earnings
1/1/2023 3,750,000 12 months 12/31/2023 4.08% 114,750
4/1/2023 3,750,000 12 months 3/31/2024 4.08% 76,500
7/1/2023 3,750,000 12 months 6/30/2024 4.08% 38,250
229,500

3.98% 597,563

0.27% (39,750)

3.72% 557,813
3 Re-investment rate as of 9-21-2022; subject to change over time as interest rates rise and fall.

Gross Interest Earnings
Total Year 1 Program Expenses
Net Interest Earnings
1 Re-investment of proceeds from maturing Treasury securities. 2 Denotes securities which will also generate interest earnings during Year 2. 5 At today’s interest rates, a $10 million laddered portfolio of U.S. Treasury securities with a 1-year term and quarterly principal maturities would generate approximately $201,000 more interest earnings during the first year (including reinvestment earnings) than a $10 million investment in LAIF.

If the yield paid by LAIF averaged 2.00% during the first year, a $10 million laddered portfolio of U.S. Treasury securities with a 1-year term and quarterly principal maturities would generate approximately $158,000 more interest earnings during the first year (including reinvestment earnings) than a $10 million investment in LAIF.

Similarly, at today’s interest rates a $15 million laddered portfolio of U.S. Treasury securities with a 1-year term and quarterly principal maturities would generate approximately $322,000 more interest earnings during the first year (including reinvestment earnings) than a $15 million investment in LAIF.

If the yield paid by LAIF averaged 2.00% during the first year, a $15 million laddered portfolio of U.S. Treasury securities with a 1-year term and quarterly principal maturities would generate approximately $257,000 more interest earnings during the first year (including reinvestment earnings) than a $15 million investment in LAIF. 1-Year Laddered Portfolio $10MM $15MM
Total Year 1 Earnings (Treasury Securities) $398,375 $597,563 (less) Total Year 1 Investment Program Expenses (39,750) (39,750) (equals) Net Year 1 Earnings (Treasury Securities) $358,625 $557,813 Total Year 1 LAIF Earnings @ 1.57% 157,000 235,500
Estimated Year 1 Excess Net Benefit above LAIF at 1.57% $201,625 $322,313 Total Year 1 LAIF Earnings @ 2.00% 200,000 300,000
Estimated Year 1 Excess Net Benefit above LAIF at 2.00% $158,625 $257,813 6 Benefits of a Laddered Portfolio of U.S. Treasury Securities • A laddered portfolio can be created and maintained at relatively low cost and is easy to understand, administer, modify and track performance; • Each security in the portfolio will be held in the City’s name by its Custodian Bank, and only the City will have access to these funds; • A laddered portfolio can be competitively bid in an effort to ensure the City obtains fair and competitive pricing on its Treasury securities; • A laddered portfolio of Treasury securities will provide the City with a U.S.

Government-guaranteed amount of cash flow and financial liquidity on a fixed schedule;
• Laddered portfolios are very flexible and can accommodate whatever principal payment frequency and term-to-maturity best aligns with the City’s cash flow and liquidity needs. Moreover, if circumstances change over time and the City ever needs to modify the structure of its portfolio, making such changes is relatively easy and inexpensive;
• If interest rates rise, the proceeds from each maturing security can be reinvested in new, higher yielding Treasuries, and if interest rates fall, the impact on interest earnings will be cushioned by the portfolio’s blend of higher yielding older securities with lower yielding newer securities;
• Over time, as circumstances change, the City can easily increase or decrease the size of its laddered portfolio, modify the term structure, and/or diversify the security types in its portfolio;
• As interest rates rise and fall over time, if it ever becomes more beneficial for the City to invest in LAIF rather than in Treasury securities, then the City can shift its money back into LAIF;
• If an emergency situation were to arise (e.g. an earthquake) and the City needed to quickly raise a large sum of capital, some or all of the securities in the portfolio could be sold almost immediately.
7 Competitive Bidding Process
To help ensure the City of Chowchilla pays a competitive price for the securities in its portfolio, the entire portfolio can be purchased via a competitive bidding process, much like the one the City uses when it conducts an RFP for other goods and services.

Causey Demgen & Moore (“CDM”) could serve as Bidding Agent and Registered Investment Advisor for this portfolio. CDM is a Registered Investment Advisor (“RIA”) and would be acting as such when recommending individual securities.

Further information on CDM, their services, and their professional qualifications may be accessed online at: https://www.causeycpas.com/services/public-finance-consulting/ Municipal Advisory Services
The Municipal Advisor (Wulff, Hansen & Co.) would provide the following services in connection with the proposed investment of City funds in a laddered portfolio of U.S.

Treasury Securities:
• Municipal Advisor will help the City determine the appropriate amount of funds to be invested in a laddered portfolio of U.S. Treasury securities; • Municipal Advisor will help the City design a laddered portfolio of Treasury securities with a suitable term structure that meets the City’s cash flow and liquidity needs;
• Municipal Advisor will help the City engage a Registered Investment Advisor (RIA) as Bidding Agent to solicit competitive bids from eligible bidders for all security purchases in an effort to assist the City in obtaining fair and competitive pricing on any security transactions;
• Municipal Advisor will assist the City with coordinating with the City’s chosen Registered Investment Advisor /Bidding Agent during the process of soliciting, reviewing and accepting bids and arranging subsequent delivery of the purchased portfolio of U.S. Treasury Securities to the City’s selected Custody Agent; 8 • Every quarter, approximately 30 days prior to the maturity of each security in the City’s portfolio, the Municipal Advisor will meet with the City to evaluate its cash flow and liquidity needs, and potential reinvestment options. If the City elects to reinvest all or a portion of the proceeds from a maturing security, or to modify the size, term structure or composition of its portfolio, then the Municipal Advisor will facilitate the completion of any such reinvestment or changes to the City’s portfolio on a timely basis and in accordance with the City's preferences; • The Municipal Advisor will monitor the performance of LAIF and advise the City if at any quarterly review point it could be advantageous for the City to shift funds out of Treasury securities and back into LAIF;
• If at any point in time the City needs to quickly raise funds to meet a large unexpected capital need, or for other purposes, the Municipal Advisor will assist in the process of promptly liquidating Treasury securities in the City’s portfolio to meet the need;
• The Municipal Advisor will also provide the City with quarterly reports that include the following: (1) an analysis of the quarterly and year-to-date performance of the City’s portfolio in absolute terms and relative to LAIF (or other applicable investment vehicles, at the direction of the City), and (2) an updated estimate of total interest earnings generated by the portfolio during the current fiscal year and, if applicable, during the subsequent fiscal year; • The Municipal Advisor will provide the City with any other services in its purview of expertise that are necessary and/or desirable to help the City achieve its investment objectives.

Timeline
The process of investing in a laddered portfolio of U.S. Treasury securities takes approximately three weeks to complete and includes the following steps:

Week 1: Retain Wulff, Hansen & Co. and select Custody Agent and Bidding Agent; Week 2: Bidding Agent/RIA solicits competitive bids from eligible bidders; Week 3: Winning bidder delivers portfolio of Treasury securities to Custody Agent. 9 Fees
The proposed fees for creating, maintaining and monitoring a $10-$15 million laddered portfolio of U.S. Treasury securities for the City of Chowchilla are as follows:

One-time up-front fees:

Municipal Advisor $ 17,500
Bidding Agent/Registered Investment Advisor (RIA) 7,500 Custody Agent 750
$ 25,750
On-going annual fees:

Municipal Advisor $ 10,000
Custody Agent (1.25 bps subject to $2,500 minimum) 2,500 Bidding Agent/Registered Investment Advisor (RIA) 1,500 $ 14,000
Notes
Municipal Advisor does not receive any form of compensation from any third parties; Municipal Advisor is compensated solely and exclusively by the City.

Fees may vary for a portfolio smaller than $10 million or larger than $30 million.

The Municipal Advisor’s on-going annual fee assumes Municipal Advisor will (1) provide quarterly investment reports to the City, and (2) conduct quarterly update meetings with City management.

Thank you again for the opportunity to submit this proposal for Wulff, Hansen & Co. to provide municipal advisory services to the City of Chowchilla. As you can see, there is a lot of information in this proposal, and we will be happy to review the details with you anytime, either in person or via a Zoom call. Please call us anytime if you have any questions.
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