HomeMy WebLinkAboutStaff Report 4625
City of Palo Alto (ID # 4625)
City Council Staff Report
Report Type: Informational Report Meeting Date: 5/5/2014
City of Palo Alto Page 1
Summary Title: Microenterprise Assistance Program
Title: Microenterprise Assistance Program - Update Regarding the Success of
the FY14 Pilot Program
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
This is an informational report and no Council action is required.
Background
On May 6, 2013 the City Council voted to approve the Community Development Block Grant
(CDBG) Program budget for Fiscal Year 2014. The budget included an allocation of $150,000
towards the development of a Pilot Microenterprise Assistance Program (MAP). The princip al
goal of the Community Development Block Grant Program (CDBG) is to provide funding for the
development of decent housing, a suitable living environment, and expanding economic
opportunities for low- and moderate income persons. Palo Alto’s CDBG Program has primarily
focused on social services and affordable housing. While these efforts have been successfully
executed, one area that has lacked attention is investment of CDBG funds in Economic
Development strategies. The adopted 2010-2015 Consolidated Plan for Palo Alto’s CDBG
Program identified the following as high priority needs in the community:
Employment opportunities for low income persons, especially youth; and
Small business loan/grant programs for low income residents
In response, Palo Alto established a partnership with Downtown Streets, Inc. in July of 2011 for
the development of a Pilot Workforce Development Program with a primary focus on homeless
or previously homeless individuals. The program focuses on developing employment skills and
establishing partnerships with local businesses. Over a two year period this program has
successfully placed 40 previously unemployed individuals into employment and has created
partnerships with local businesses.
To date the Workforce Development Program (WDP) has flourished and we are seeing more
people reenter the workforce and feel a sense of pride. However, there are instances where
City of Palo Alto Page 2
individuals are not thriving in traditional work place environments and are not managing to
sustain the positions in which they are placed. Moreover, the types of jobs are low-skilled and
low-paying and do not provide a living wage. A second constraint is that some local businesses
do not respond positively to hiring WDP participants, although a strategy is underway to
strengthen the relationship between the WDP and local businesses. With a focus on the
homeless population, we have also found that there is a gap in services amongst low -income
individuals who could benefit from a similar program but have not been specifically targeted
and/or may require different services and support system than currently offered through the
WDP.
To that end, there is a desire to create new and direct economic opportunities in our
community and an environment that empowers individuals instead of enabling them to depend
on the system for assistance. According to the 2013 Silicon Valley Index, while Silicon Valley
has been adding jobs, income growth is uneven and there is a narrowing of middle-income
wage earners. Examining median income by educational attainment and ethnicity reveals the
complexity of our income gap. The report calls for Silicon Valley, and the greater bay area, to
take a fresh look at regional planning.
As funding for services continues to decrease, and with the manner in which federal dollars are
allocated, the availability of dollars that can be dedicated to public service activities will
continue to decrease. Therefore, the City must begin to think about the long term objectives of
the CDBG program and explore a different approach in the use of funds. The pilot MAP serves
as an opportunity to increase awareness of the potential innovative use of CDBG funds.
Discussion
Staff’s approach in developing the pilot MAP is rooted in Palo Alto’s spirit of innovation and the
power of an idea. A humble goal of helping one microenterprise was set as the benchmark for
success of the program. While staff took the time to conduct extens ive research for the
development of this program, a simple framework and program design was prepared to guide
the general direction of the program (Attachment A). The framework allowed sufficient
flexibility to adjust as staff prepared the program to the public. Essentially it was the flexibility
in the program that afforded staff the opportunity to successfully launch MAP and exceed the
goal set for the pilot phase. Our strategy included leveraging existing community and business
networks to create the necessary infrastructure to support income eligible microenterprise
businesses. Specifically, staff worked with the business community to assist in the review of
applications for funding and with two existing CDBG subrecipients to create a pipeline of
applicants. In fact, one of the unique aspects of MAP is that is offers access to professionals at
no cost to participants.
MAP Grant Review Committee
Planning staff partnered with the City’s Economic Development Manager on the formation of
the MAP Grant Review Committee. On November 7, 2013 staff pitched MAP, via a business
forum held at Boston Private Bank in Downtown Palo Alto, to a group of business leaders
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(Attachment B). In a sense, this was staff’s presentation of its own microenterprise to gain
interest and buy in on a “prototype” for a formal program. Staff asked for individuals to serve
on the Map Grant Review Committee and for a subset of that group to help in providing us with
feedback on program implementation. Ultimately the grant review committee helped guide
the development of the program, served as an advisory committee to staff and mentors to MAP
applicants.
MAP Cohort
Research shows that people learn better in groups. Cohort programs provide an interactive
environment that brings members together to build community, foster creativity, build
leadership skills, and encourage greater progress. As such, our strategy included partnering
with two of the City’s CDBG subrecipients to create a pipeline of applicants and the formation
of a MAP cohort. On December 20, 2013 staff hosted an orientation meeting with individuals
identified by Palo Alto Housing Corporation and Downtown Streets as potential applicants of
MAP funds. While we were expecting only a handful of individuals a total of seventeen people
attended. The program included a presentation by a local business owner on the challenges of
being a business owner and a “hopes and fears” exercise led by Palo Alto Housing Corporation
staff.
After the initial orientation, staff held two follow up meetings: a business plan 101 workshop
and a budget and credit workshop. The m eetings and workshops were well-attended and
members were interacting and encouraging each other. Staff is currently working on three
additional workshops including legal structures for businesses, business taxes, and marketing.
Application Process and Results
A call for pre-applications, along with a program at a glance flyer (Attachment C), was released
in December with application due by January 15, 2014. The flyer and pre-application was
routed to our community partners, business partners, and a news detail posted to the City’s
main website for four weeks. Given the program is in its pilot phase, staff decided to limit the
marketing of the Program and not implement an extensive marketing campaign. Nevertheless,
Planning staff received twenty-six (26) pre-applications for MAP funds; 14 from the MAP cohort
and 12 from the general public. The grant review committee, along with Staff, reviewed the
applications and established a list of individuals that would then be eligible for MAP funds. Of
the twenty-six pre-applications, eleven individuals were placed on the eligibility list. Only those
placed on the eligibility list were invited to submit a for mal application for MAP funds. Each
was assigned a business mentor to help with business related questions and assistance with the
development of a business plan. Of the eleven individuals placed on the eligibility list, seven
applicants for MAP funds were received. On March 18, 2014 the Grant Review Committee met
to review the applications and voted to approve six of the seven applications for funding.
An award ceremony was held on April 17, 2014 at Lucie Stern Fireside Room to honor both
grantees and our partners. Table 1, FY 2014 MAP Grantees, provides a list of the grantees, the
type of business, and the grant amount approved by the Grant Review Committee.
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TABLE 1: FY 2014 MAP GRANTEES
Grantee Name Business Type Grant
Amount
Sherice Lane Hand crafted items $ 1,500
Kathy Wu Independent health insurance provider $ 7,000
P. Christopher
Murphy
Publishing company including website creation $ 9,200
Heekyoung Kim Hair stylist $15,000
Robin Angstadt Fine art and jewelry online $ 4,500
Walter Barnes Baseball and Softball Umpires $ 1,000
TOTAL $38,200
Funds have been committed to these six microenterprises with the funding phased and linked
to actionable items related to the implementation of their business idea. A grant agreement
detailing the terms of the grant and the expectation from the City have been prepared for each
grantee. In summary, cash grants will not be awarded to recipients, but will be used to
“reimburse” eligible expenses. Each grant recipient will be required to provide quarterly
updates on their progress of launching their business. As an added perk, each recipient of MAP
funds will also be provided with a one-year membership to the Palo Alto Chamber of
Commerce.
Program Evaluation
As staff embarked upon launching the pilot MAP, four general program evaluation themes and
questions were developed. Specifically, staff wanted to make a determination on the target
groups, program scale, training, and overall program efficiency upon completion of the pilot
phase. Below is a summary of the themes and the associated questions:
Target Groups: Did we serve those who we set out to serve?
Program Scale: How many clients received funding and/or training-related services?
What is the magnitude of program services delivered in a fi scal year? What is the
volume of funding activity?
Training Program Effectiveness: To what extent does the program succeed in assisting
clients to achieve key training objectives?
Program Efficiency and sustainability measures: How efficiently does the program use
internal resources? How self-sufficient is the program? How diversified is the funding?
Some of the lessons learned include a higher focus and emphasis on technical assistance up
front and the introduction of a “meet and greet” for the MAP m entors and applicants.
Debriefing meetings will be scheduled with our partners and participants to review the program
from their perspectives beginning in June 2014. A full program evaluation will be conducted by
staff in June 2014 to inform the future of the program.
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Resource Impact
The total investment of CDBG funds for MAP approved for Fiscal Year 2014 was $150,000. Of
this amount, $36,000 was directed to cover staff time, $14,000 for Technical Assistance and
Supplies, and $100,000 for direct seed grants. Grants in the amount of $38,200 have been
awarded, as outlined in Table 2, FY 2014 MAP Budget. The amounts provided in Table 2 are
presented as commitment amounts since reimbursements have not been processed for the
direct grants. Staff is also scheduling three additional workshops prior to the end of the fiscal
year and they are included in the “commitments” to date column. Final expenditure totals will
be included in the City’s 2014 Consolidated Annual Performance and Evaluation Report due to
HUD by September 30, 2014.
TABLE 2: FY 2014 MAP BUDGET
Item Budget Commitments To Date
Personnel $ 36,000 $27,000
Supplies and Technical Assistance $ 14,000 $ 5,400
Direct Grants $100,000 $38,200
TOTAL $150,000 $69,000
Any balance in funds will be carried forward into Fiscal Year 2015 to provide additional
technical assistance to the six grantees mentioned above and/or for future MAP applicants.
Funding will not be used for personnel costs. Projects that are encumbered will be continued
into the next fiscal year. Unused funds will fall to the fund balance for future use. As part of
future budget cycles, staff will recommend uses of these funds for City Council consideration.
Environmental Review
For purposes of the National Environmental Policy Act (NEPA) and the California Environmental
Quality Act (CEQA), this action itself is not a project; therefore, no environmental impact
assessment is necessary.
Attachments:
Attachment A: MAP Program Design (PDF)
Attachment B: Business Forum Presentation (PDF)
Attachment C: MAP Program At a Glance (PDF)
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PILOT MICROENTERPRISE ASSISTANCE PROGRAM
FRAMEWORK/PROGRAM DESIGN
I. MISSION
Increase economic opportunities for low- to moderate-income residents through
self-employment, job creation, and business development.
II.VISION STATEMENT
Empower and improve the economic well-being of low income families and individuals
by providing local aspiring entrepreneurs with systems of support to start and grown
their own business that will increase their self-sufficiency and psychological outcomes.
This includes but is not limited to improved self-esteem and sense of control,
empowerment, and flexibility of care for family.
III. GOALS
Provide access to new opportunities to improve the economic self-sufficiency of low-
income families and individuals.
IV. TARGET GROUP
Very-low and low-income individuals
Participants of DST Workforce Development Program
Tenants of SRO developments
V. PROGRAM STRATEGY
Poverty Alleviation and Business Development:
The goal is to help the poor gain access to new opportunities that will enable
them to move out of poverty. This approach builds on the foundation of
entrepreneurship and seeks to empower clients by increasing their economic
literacy, business skills, self-esteem, and personal behavior appropriate to the
workplace. Ideally the Pilot MAP will help to accomplish the following:
Provide an innovative path out of poverty
Create self-sufficiency
Improve the survival rate of microenterprise businesses
Improve employment skills
Promote economic development
ATTACHMENT A - MAP PROGRAM DESIGN
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VI. MARKET ASSESSMENT
Market Demand
Currently the market demand for this service and program is primarily anecdotal.
Palo Alto’s 2010 -2015 Consolidated Plan identified a need to provide
employment opportunities for low-income persons including small business loan
programs for low income residents. As such, there is a desire to introduce a new
funding source and program. Staff will partner with PAHC and DST to complete
an entrepreneurial assessment of their participants in which they learn how to
identify their current skills and how to transform those skills into a viable
business. Through this partnership we have also identified an opportunity to
partner with the Palo Alto Adult School.
VII. SERVICES
Microenterprise development is defined by three basic services: training,
technical assistance to entrepreneurs, and access to capital. The selection of
services involves decisions about which ones have the most priority, how
distinct services will be sequenced and linked, and defining the eligibility criteria
for accessing them. Ideally the program aims to leverage existing services in
the community and utilize CDBG funds for seed capital grants.
Training
•Economic Literacy:
Prior to starting a
business, many
people need a better
understanding of basic
money matters such
as banking, saving,
taxes, and budgeting.
•Business Training:
Starts by exploring a
business idea and
culminates in a
business plan, closely
reviewing the many
steps in between,
including market
analysis, financing,
legal issues, and
management.
Technical Assistance
•Business Plan Review:
Clients often need
individual help to
work out specific
aspects of their
business plans.
•Loan Applications:
Program staff often
help clients prepare
loan applications.
•Mentoring: Programs
match new
entrepreneurs with
experienced ones for
advise and support.
Capital
•Seed capital grants:
For income eligible
clients, capital may be
provided in the form
of grants to encourage
specific business
activity that might
otherwise represent
too much risk for the
client.
•Individual
Development
accounts: Matched
savings instrucments
that encourage capital
accumulation for
approved purposes,
including business
investment.
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VIII. PARTNERSHIPS
The program proposes to explore a variety of partnerships categorized as
follows:
Local Community Partners
Downtown Streets Inc.,
Palo Alto Housing Corporation
Palo Alto Adult School
Business Community
Banks
Chamber of Commerce
Local entrepreneurs
Workforce Development Services
NOVA
Work2Future
Renaissance Entrepreneurship Center
Lenders for Community Development
East Palo Alto Micro Business Initiative
SCORE
Small business administration
IX. MEASURABLE OUTCOMES
Our short-term goal is to issue one seed grant to an income-eligible individual in
Palo Alto by the end of the second quarter of Fiscal Year 2014. Program funds
will be used to leverage existing resources in the community and it is our
intention to track the following outcomes:
The number of jobs created as a result of the funding
The number of grants issued
The number of people assisted
X. INFORMAL BOARD
Planning staff will work with the City ’s Economic Development Manager to reach
out to the business community about their role in the Pilot MAP. The short term
goal is to establish a grant review committee to assist in the review of
applications for funding and to serve as business mentors.
XI. EVALUATION
The intent of the program is to identify a new funding source to income eligible
microenterprises. Several evaluation questions have been developed to help
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inform the future of the program. There are four basis evaluation themes and
corresponding questions:
Target Groups: Did we serve those who we set out to serve?
Program Scale: How many clients received funding and/or training-related
services? What is the magnitude of program services delivered in a fiscal year?
What is the volume of funding activity?
Training Program Effectiveness: To what extent does the program succeed in
assisting clients to achieve key training objectives?
Program Efficiency and sustainability measures: How efficiently does the
program use internal resources? How self-sufficient is the program? How
diversified is the funding?
ATTACHMENT B - BUSINESS FORUM PRESENTATION
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PILOT MICROENTERPRISE
ASSISTANCE PROGRAM
The Need
Program Overview
Business Community
BUSINESS FORUM
OVERVIEW
“Empower and improve the economic well-being of low income
families and individuals by providing local aspiring entrepreneurs
with systems of support to start and grow their own business that will
increase their self-sufficiency.”
- Pilot MAP Implementation Plan, City of Palo Alto
•2010-2015 Consolidated Plan
•Identified a need for a small business loan/grant program
•Pilot Workforce Development Program
•In 2011 the City partnered with Downtown Streets, Inc.
•To date 40 previously unemployed individuals have been placed into
employment
•Obstacles with the program include low paying jobs
•Income growth is uneven in Santa Clara County
•2013 Index of Silicon Valley notes the gap between high- and low-income
earners is increasing
4/14/2014
2
MAP is perfectly in line with Downtown Streets Team's mission of
empowering people with the tools to become self-sufficient. This is
the opportunity for our team members to create their own
opportunities for economic independence. We can't wait to see
our team members thriving on their own terms.
-Chris Richardson, Downtown Streets Inc.
•Microenterprises are the smallest, least portion of the business world,
but are one of the major job generators in our economy
•U.S. SBA in 2010 reported that small businesses are responsible for between
65 and 90 percent of all job creation
•1 in 3 Campaign
•The Association for Enterprise Opportunity launched this campaign arguing
that if 1 in 3 microbusinesses hired one worker the nation would be at full
employment
•It is a strategy that can foster personal, community and economic
development
•Income gained can lift families out of poverty
•Theory of change
•Skills development and financing can unleash entrepreneurial capacity
•“I'm very excited to hear about how the Microenterprise Assistance
Program is working out. It's such a great idea. I really hope that
it's successful and can maybe even be used as a model for other
communities.”
- Julia Van Roo, HUD CPD Representative
• City Council approved
• Staff’s 6-month goal
• Grant vs. Loan Program
Pilot Program
• Community Partners
• Building a MAP Cohort
Target
Population
• Leveraging existing resources
• Engage the business communityNetworks
4/14/2014
3
•NOVA’s Microenterprise Program
•Funded through Sunnyvale
•Staff intensive
•Most successful business – Tailored Leather Motorcycle Clothing Company
•Recommendations
•Education and Technical Assistance is Key
•Leverage existing resources
•Engage the business community
•Creating a Pipeline for our Target Group
•Partnering with PAHC and Downtown Streets
•Application of Interest to gauge need and business types
•Orientation (proposed for late November)
•Two hour orientation to learn more about the program and application
•Sample Business Plan
•Information on available Technical Assistance
•2-Part Workshop
•Foundation Planning – Business Readiness, basic banking and savings
•Idea development and Benchmarking – Developing the Business Plan
Café Idea
WHO CAN APPLY?
•Applicant must meet the
income eligibility
requirements
•New and existing business
•Microenterprise
•Five or fewer employees
•At least one must be the owner
•Recipient must create one
new job to an LMI person
ELIGIBLE USE OF FUNDS
•Seed grants
•Up to $15,000
•Working capital
•Equipment
•Inventory & supplies
•Marketing
•Payment of utilities, licenses,
and insurance
4/14/2014
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Household Size 1 Person 2 Persons 3 Persons 4 Persons 5 Persons 6 Persons 7 Persons 8 Persons
30% of Area
Median Income
(Extremely Low)
$21,300 $24,350 $27,400 $30,400 $32,850 $35,300 $37,700 $40,150
50% of Area
Median Income
(Very Low)
$35,500 $40,550 $45,600 $50,650 $54,750 $58,800 $62,850 $66,900
80% of Area
Median Income
(Low)
$52,550 $60,050 $67,550 $75,050 $81,100 $87,100 $93,100 $99,100
Grant Application
•Draft application for review
and comment
•Formal Release Date:
December 2, 2013
•Application Due Date:
January 8, 2014
•Staff will be available to
answer questions
Review and Award
•CDBG Staff will screen
applications for completeness
and eligibility
•MAP Grant Review
Committee will be provided
with a packet
•Committee will review
applications and make
recommendation
•Formal Award ceremony with
City Council
MAP is a rare opportunity for low-income entrepreneurs to not only
connect with community resources, but also to network with like
minded individuals facing similar challenges in starting a business.
In short, MAP embodies the idea of "community,'' allowing for
what starts as an individual idea to collective ownership by Palo
Altans.
-Zia MacWilliams, Downtown Streets Inc.
•MAP Grant Review Committee
•Provide feedback on program implementation (November)
•Review committee meeting(s) /application review (January)
•Participate at the Award Ceremony (February)
•Sub-Committee
•Provide feedback on program implementation and application form
•Finalize Review Criteria (possible November meeting)
4/14/2014
5
•Mentorship/Coach: Consider
•Serving as a mentor for one of the applicants
•Serving as a guest speaker at one of the proposed MAP Cohort
Workshops
•Other Opportunities
•Donating time to the Workforce Development Program
•Providing information on supplemental resources or assistance
•Potentially consider an in-kind donations of space
•Contact
•Tommy Fehrenbach
thomas.fehrenback@cityofpaloalto.org
•Steven Turner
steven.turner@cityofpaloalto.org
•Consuelo Hernandez
consuelo.hernandez@cityofpaloalto.org
Special Thanks to
Boston Private
The City of Palo Alto has allocated $150,000 in CDBG
funds towards a Pilot Microenterprise Assistance
Program (MAP).
MAP is a new Palo Alto based community program that
offers seed grants to assist individuals in starting their
own business and/or grant funds to grow an existing
business as a means of increasing participant’s
economic self-sufficiency.
The goal of MAP is to provide access to new
opportunities to improve the economic self-sufficiency of
low-moderate income Palo Alto families and individuals.
Information Technology Solutions
Applicants may request a grant amount ranging
from $500 up to $15,000 as part of their
application. Eligible use of funds includes:
Working capital to support operations
Purchase of machinery, equipment, and
furniture
Technology Infrastructure and upgrades
Inventory and Supplies
Marketing
Payment of utilities, licenses, and insurance.
1.All Applicants must complete the City of
Palo Alto’s MAP Pre-Application form by
January 15, 2014.
2.Application forms should be submitted to:
City of Palo Alto
Planning and Community Environment
250 Hamilton Avenue
Palo Alto, CA 94301
Attn: Consuelo Hernandez
3.CDBG Staff and the MAP Grant Review
Committee will review all applications to
establish an eligibility list.
4.Those placed on the eligibility list will be
contacted with instructions pertaining to the
formal application process.
5.Formal Applications are tentatively due on
February 13, 2014. Only those placed on
the eligibility list will be considered for
MAP funds.
MAP VISION STATEMENT
“Empower and improve the
economic well -being of low -
moderate income families
and individuals by providing
local aspiring entrepreneurs
with systems of support to
start and grow their own
business that will increase
their self -sufficiency”
- Pilot MAP Implementation
Plan
For more information please visit our
website:
https://www.cityofpaloalto.org/news/di
splaynews.asp?NewsID=2480&Targe
tID=265
CDBG PURPOSE
The Community Development
Block Grant Program (CDBG)
provides financial resources to
assist in the development of
viable community by providing
decent housing and a suitable
living environment by
expanding economic
opportunities principally for
persons of low - and moderate
income (LMI). Palo Alto’s
CDBG Program is administered
by the Advanced Planning
Division of the Planning and
Community Environment
Department.
CONTACT INFORMATION
CITY OF PALO ALTO
Department of Planning and
Community Environment
250 Hamilton Avenue
Palo Alto, CA 94301
Consuelo Hernandez
(650) 329-2428
Consuelo.hernandez@cityofpaloalto.org
Steven Turner
Steven.turner@cityofpaloalto.org
Program Features and Benefits
Eligible Use of Funds
Who is Eligible to Apply?
PILOT MICROENTERPRISE ASSISTANCE PROGRAM
Eligible businesses are limited to new and existing commercial enterprises with five (5) or fewer
employees, one (1) or more of which is the principal and owns the enterprise at the time of
application. Businesses receiving funds must be owned by a person defined as low-moderate
income (LMI) and either live or operate their business in Palo Alto.
Pre-Application Process
Sample Micro-Businesses
Retail: vendors, jewelers, craft shops
Service: restaurants/caterers,
hairdressers, plumbers, and dog groomers
Manufacturers: carpenters, craft artisans,
bakers, and specialty gift makers.
ATTACHMENT C - MAP AT A GLANCE