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Report Number : 2016-133

SAFE-BIDCO
At Risk of Insolvency, It Needs Increased Oversight if It Is to Receive State Funding and Continue to Help Small Businesses in California Gain Financing

Figure 1

Figure 1 is a list SAFE-BIDCO’s eight loan programs.  These eight programs are listed along with a brief description of each program. The eight boxes are as follows:

SAFE-BIDCO reviews and approves loan guarantees of up to $2.5 million for loans of up to $20 million with a maximum term of seven years for loans that small businesses are seeking from traditional lenders. If a small business defaults on the loan, the State pays the guaranteed portion of the loan amount. SAFE-BIDCO currently receives a fee of 2.5 percent of the amount of each approved guarantee for its administration of the program.

SAFE-BIDCO makes loans to small businesses in rural areas for up to $250,000 with a maximum term of 7, 15, or 25 years depending on the type of project. USDA provides funding for the program by lending capital to SAFE-BIDCO at a very low rate.  SAFE-BIDCO also participates in the USDA’s Rural Microentrepreneur Assistance Program, offering loans of up to $50,000 to small businesses located in eligible rural areas.

SAFE-BIDCO makes loans of up to $250,000 to predominantly Native American-owned businesses with a maximum term of 10 or 15 years depending on the type of project.  SAFE-BIDCO created this program in cooperation with the USDA, which provided grant funding to SAFE-BIDCO to make loans for this program.

The State Water Resources Control Board makes loans up to $750,000 to small gas station owners and operators who meet certain requirements to replace, remove, or upgrade underground storage tanks.  SAFE-BIDCO gathers loan documentation from applicants, reviews the documentation, and recommends loan approval to the Water Resources Control Board.  SAFE-BIDCO earns a 1 percent administration fee from the State Water Resources Control Board along with a $1,000 per loan fee for its services.

SAFE-BIDCO makes loans up to $750,000 to qualifying small businesses that meet SBA eligibility standards. The loans can have maximum terms of 7, 10, or 25 years depending on type of project and have an interest rate set at a fixed percentage above the prime interest rate.

SAFE-BIDCO makes loans of up to $450,000 to small businesses, qualifying landlords, and non-profit organizations for a maximum term of 15 years.  These loans are for projects that conserve energy up to 15 percent of normal usage, manage load, or retrofit equipment. 

 

SAFE-BIDCO makes loans of up to $25,000 to qualifying small businesses for projects including start up costs, expanding operations, or acquisition of existing enterprises.  Loan terms range from 3 to 6 years depending on the size and purpose of loan.

SAFE-BIDCO makes loans of between $10,000 and $500,000 to owners and operators of family farms that can be used for equipment acquisition, crop production, harvest costs, farm improvements, operational costs, and farm ownership.  Loan terms can range up to 40 years depending on the purpose of the loan.

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Figure 2

Figure 2 is a pie graph that displays SAFE-BIDCO’s revenue sources with each revenue source displayed as a slice. Revenue amounts listed for each source are the actual average revenue amounts for fiscal years 2011-12 through 2015-16. This graphic presents the following revenues sources, dollar amounts, and percentages of total revenue:

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Figure 3

Figure 3 is shows SAFE-BIDCO’s organizational structure with each position represented by a box.  The top row shows those entities who appoint SAFE-BIDCO’s nine Board of Directors members. One box is the California Energy Commission, which appoints one board member. Another box is the Governor, who appoints three board members. Another box is the Senate Rules Committee that appoints one board member. Another box is the Speaker of the Assembly, which appoints one board member. The final box on the top row is Regional Director, which indicates that the final three board members are regional directors.
The next row down has nine boxes representing the nine members of the board of directors. The three appointed by the Governor have qualifications: one is from the Governor’s cabinet, one is a small business representative, and one is a financial institutions representative. 
Below the Board of Directors, lines connect to the next row that has a box representing SAFE-BIDCO’s Chief Executive Officer. 
Below the Chief Executive Officer are four lines representing those individuals that report to the Chief Executive Officer. Two of the lines connect to two staff positions; the Executive Assistant and Chief Financial Officer. The other two lines connect to a series of boxes representing the functions of contractors who work for SAFE-BIDCO. Those functions are: Human Resources, Information Technology, Legal, Retirement, Business Development, Payroll, and Auditor.

Below the Chief Financial Officer are boxes representing four staff positions that report to the Chief Financial Officer: Bookkeeper, Loan Officer, Credit Analyst, and Business Development Officer. Go back to Figure 3

Figure 4

Figure 4 is a line graph showing three projections of when SAFE-BIDCO could become insolvent. The line graph shows net assets listed on the vertical axis and fiscal years listed on the horizontal axis.  A single line shows SAFE-BIDCO’s actual declining net assets from July 2012 through June 2016.  From July 2016 through June 2024 the line splits into three separate lines.  Each line shows a decline in net assets based on a projection made based on the data from the prior five fiscal years. 
The line showing the average projection is based on the average change in net assets for fiscal years 2011-12 through 2015-16.  This amount, $396,000, is projected at a constant rate.  Under this projection, SAFE-BIDCO’s net assets decline by $396,000 each year and SAFE-BIDCO would be insolvent by October 2019.
The line showing the best case projection is based on the smallest annual decline in net assets for fiscal year 2011-12 through 2015-16.  This amount, $170,000, is projected at a constant rate.  Under this projection, net assets decline by $170,000 each year and SAFE-BIDCO would be insolvent by February 2024.
The line showing the worst case projection is based on largest annual decline in net assets for fiscal years 2011-12 through 2015-16.  This amount, $656,000 is projected at a constant rate.  Under this projection, net assets decline by $656,000 each yea and SAFE-BIDCO would be insolvent by June 2018.

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Figure 5

Figure 5 is a map of the United States with a subset of a globe to the right of the United States showing Europe facing the reader.  This map shows the 17 flights that SAFE-BIDCO’s Chief Executive Officer took during fiscal years 2011-12 through 2015-16, including departure airports and destinations.  Each flight is displayed as an airplane that is placed on a line between two cities.  The figure displays a line between San Francisco and Washington D.C. with nine airplanes, which represents that SAFE-BIDCO’s CEO took nine flights between San Francisco to Washington D.C. from fiscal year 2011-12 through 2015-2016. This figure also shows that the CEO took the following flights:  one flight from Santa Rosa to Seattle, one flight from San Francisco to Las Vegas, one flight from Sacramento to Las Vegas, one flight from San Francisco to Dallas, one flight from San Francisco to Austin, one flight from San Francisco to Raleigh, one flight from San Francisco to Charleston, and one flight from San Francisco to Dublin, Ireland.

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Figure 6

Figure 6 is a graphic displaying membership on SAFE-BIDCO’s subcommittees. The figure displays three different boxes laid out horizontally representing three different subcommittees that include SAFE-BIDCO Board Members. The box on the left is labeled “Executive Subcommittee.” This box contains three boxes within it that represent the individual members of the subcommittee, labeled “Board Member A”, “Board Member B”, and “Board Member C.” The box in the middle is labeled “Audit Subcommittee.” This box contains three boxes within it that represent the individual members of the subcommittee, labeled “Board Member A”, “Board Member B”, and “Board Member D.” The box on the right is labeled “Investment Subcommittee.” This box contains three boxes within it that represent the individual members of the subcommittee, labeled “Chief Executive Officer”, “Chief Financial Officer” and “Board Member A.”

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