TO: Board of Supervisors
FROM: Sheryl L. Bratton, County Counsel
REPORT BY: Jennifer Palmer, Director of Housing & Homeless Services
SUBJECT: Promissory Note Loan Forgiveness
RECOMMENDATION
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Adopt a Resolution approving a scheduled partial loan forgiveness for the relocation incentive loan provided to the County Executive Officer, as set forth in the employment agreement, modifying terms of a prior resolution concerning interest accrual, and extending the term from 30 to 90 days for loan repayment in the event of early separation from employment. (Fiscal Impact: $15,000 Expense; General Fund; Budgeted; Mandatory)
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BACKGROUND
Napa County extended an employment contract, dated June 13, 2023, to Ryan John Alsop (“Borrower” or “Employee”) to serve as the Napa County Executive Officer. The employment agreement includes a relocation incentive loan in the amount of Seventy-Five Thousand Dollars ($75,000) to assist with the acquisition of a personal residence in Napa County. Under Section 4.4.6 of the employment agreement, the loan would be interest free and would be forgivable each year in the amount of Fifteen Thousand Dollars ($15,000) per year for each year that Employee is employed by the County commencing from the anniversary of the loan closing date. Loan forgiveness is to be made through action of the Napa County Board of Supervisors for each year the Borrower is eligible for forgiveness. The loan shall be considered satisfied in full after five years from the effective date, provided Borrower is still employed with Napa County.
After the execution of the employment agreement, the Employee requested, and staff recommended, that the loan should accrue interest at the applicable federal rate. On July 25, 2023, the Board adopted Resolution No.2023-97, approving the relocation loan, plus interest at the applicable federal rate, to assist Employee with the acquisition of a personal residence in Napa County. Thereafter, Employee executed a Promissory Note dated August 28, 2023, memorializing the terms of the loan and accrual of interest and also setting forth forgiveness of $15,000 of the loan per year.
Because Employee has served as the Napa County Executive Officer continuously since August 7, 2023, the time for the annual loan forgiveness has been triggered. If the Board adopts the proposed Resolution, the Board will be taking the following action: First, the proposed Resolution forgives $15,000 of the $75,000 relocation incentive loan. Second, per the recommendation of the Auditor-Controller (Employee agrees), the Resolution amends the loan terms to clarify that interest accrual only occurs if the employee separates prior to the final loan forgiveness (fulfillment of employment over a five-year term), removing the implied compensation of interest forgiveness being earned during the term of the loan. Third, the proposed Resolution extends the time in which Employee must pay any outstanding loan amounts in the event of early separation from employment. Section 4.4.6 of the employment agreement provides that in the event Employee separates for any reason from the County prior to the loan being forgiven, the balance of the loan shall be due and payable within 30 days, and if not paid within 30 days, the balance owing shall accrue interest penalty of 5% for each month thereafter on the outstanding balance owed the County until such time as the loan balance is repaid. Employee has requested that the 30-day provision referenced in Section 4.4.6 of the Employment Agreement be changed to 90 days, and the Resolution makes this modification.
Requested Action: Adopt a Resolution approving a scheduled partial loan forgiveness for the relocation incentive loan provided to the County Executive Officer.
FISCAL & STRATEGIC PLAN IMPACT
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Is there a Fiscal Impact? |
Yes |
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Is it currently budgeted? |
Yes |
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Where is it budgeted? |
General Fund - CEO salaries and benefits |
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Is it Mandatory or Discretionary? |
Mandatory |
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Is the general fund affected? |
Yes |
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Future fiscal impact: |
Additional years of loan forgiveness will be recorded in future fiscal years according to the terms of the loan. |
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Consequences if not approved: |
The County will be out of compliance with the terms of the relocation incentive loan. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.