To: Honorable Mayor and Members of City Council
From: Molly Rattigan, Interim Community Development Director
Prepared By: Molly Rattigan, Interim Community Development Director
TITLE:
Title
Loan to Le Petit Elephant
LABEL
RECOMMENDED ACTION:
Recommendation
(1) Approve and authorize the City Manager to execute a loan agreement with Le Petit Elephant in the amount of $175,000 at no interest, for a term of three years from Certificate of Occupancy of 15 Chapel Hill Drive in Napa, for the payment of building, impact, and related fees for the relocation of 128 childcare slots and the creation of a minimum of 70 child care slots in the City of Napa; and
(2) Approve the budget actions necessary to move $175,000 ($29,360.70 of which was already appropriated) from the General Fund Contingency to the Non-Recurring General Fund Contingency to fund a loan in an equal amount with Le Petit Elephant as documented in Budget Adjustment No. 277P12.
Body
DISCUSSION:
On May 21, 2024, the Napa City Council denied an appeal and upheld a decision by the Planning Commission to grant a Use Permit to Le Petit Elephant for up to 250 childcare slots at 15 Chapel Hill Drive in Napa.
A lawsuit was subsequentially filed, which delayed the closure of a Small Business Administration Loan to acquire the property, requiring the owners to seek a Bridge Loan to close on the property and progress the project forward. The lawsuit has since been resolved via a settlement agreement.
The County of Napa has invested $1,350,000 into this project as part of an initiative funded by the American Rescue Plan Act. The County of Napa has reached out to the City to seek assistance in moving this project to construction to allow for the relocation of existing childcare slots that may be lost come January 2026, as well as the creation of additional childcare slots to fill a gap in the community. Losing approximately 128 childcare slots when Le Petit Elephant’s current lease expires in December 2025 would be devastating to working parents and the local economy.
After reviewing the project in depth, staff have determined that due to the unanticipated expenses of approximately $500,000 related to the lawsuit and subsequent mediation, and the Bridge Loan, which delayed the ability to seek and close a Small Business Administration Loan, the project has a cash flow deficit and a very tight timeline. Therefore, City staff is recommending the City Council authorize the City Manager to execute a loan with Le Petit Elephant to allow the project to seek building permits to move into the construction phase.
Under the terms of the proposed loan, Le Petit Elephant’s building and impact related fees would be paid by the City’s General Fund and Le Petit’s obligation to pay the City back would be deferred for up to three years, at zero interest, to allow for the cash flow issue to be resolved. A loan of $175,000 would be issued within the Non-Recurring General Fund. These funds would directly finance all building and impact related fees with no cash going directly to Le Petit Elephant. Le Petit Elephant would in turn agree to secure the loan with the property located at 15 Chapel Hill Drive, though the City would be in a lien position behind other loans including the Small Business Administration loan for the construction of the childcare facilities at the site. The proposed loan process is similar to the loan process the City uses for affordable housing projects.
The loan of $175,000 must be paid back under the terms presented and is therefore not a gift of public funds.
FINANCIAL IMPACTS:
A loan in the amount of $175,000 would be placed on the Non-Recurring General Fund from the General Fund Contingency. No cash would be transferred outside of the City because of this loan, rather, the assessed fees will be funded by the loan, with the loan balance recorded in the Non-Recurring General Fund.
CEQA:
The Interim Community Development Director has determined that the loan agreement is not subject to review under CEQA pursuant to CEQA Guidelines Section 15060(c)(3), because it is not a “project” as defined by CEQA Guidelines Section 15378 and is more akin to a governmental fiscal activity. The project was also subject to CEQA review when the use permit was considered and approved.
DOCUMENTS ATTACHED:
ATCH 1- Loan Terms
ATCH 2- Estimated Fees
ATCH 3-Budget Adjustment No. 277P12
NOTIFICATION:
Le Petit Elephant
County of Napa