HomeMy WebLinkAbout38-07 - Res. Approving Hood Canal Regional Septic Loan ProgramResolution I\o0 3 8 — 0 7
resolution approvng the Hood Canal Regiona Septic ,oan Program & entering into an
Interlocal Agreement
WHEREAS the Mason County recognizes the need to aadress aging or failing individual onsite sewage
treatment systems in the Hood Canal watershed; in other areas of Jefferson, Kitsap and Mason Counties;
and on the Port Gamble S"Klallam and Skokomish ' 'ribal Reservations; and
WHEREAS eliminating failing individual onsite sewage treatment systems in these areas has been
identified as necessary to protect and improve water quality; and
WHEREAS the high cost of repair or replacement of these systems, when they fail, is a significant burden
on individual homeowners, especially homeowners with low or fixed incomes, and often prevents them
from addressing the problem; and
WHEREAS the good Canal Coordinating Council and ShoreBank Enterprise Cascadia have developed a
program to provide low interest loans for onsite sewage treatment system repair or replacement; and
WI- AREAS Shorebank Enterprise Cascadia has a demonstrated record of success in administering financial
assistance programs in rural areas of the Pacific Northwest that achieve environmental benefits; and
WHEREAS ShoreBank interprnse Cascadia has secured a significant amount of private foundation funding
for this new program, to be matched with an equivalent amount of public funding from the Washington
State �,egislature, through the Washington Department of Ecology;
NOW I -(ERE -� ORE BE IT RESOLVED that Mason County approves this program (Attachment A) as one
of the five chartering government members of the Hood Canal Coordinating Council, and agrees to use the
program, and participate in it as described in the Interlocal Agreement (Attachment ) between Jefferson,
Kitsap and Mason Counties and Port Gamble S 'Klallam and Skokomish bribes and in its associated
Program Guidelines.
BE -'1l' FURTHER RESOLVED that Mason County authorizes its Chair to sign that Interlocal Agreement
on its behalf.
Dated this 27th day of March, 2007.
ATT NS't':
&tee'40-1-01,4_�
Rebecca S. Rogers, Clerk of the Board
APPROVED AS '0 FORM:
Dep _ ., 'rop - cuting Attorney
BOARD OF COUNTY COMMISSIONERS
MASON COUNTY, WASHINGTON
zo2Cv•-)
g Erickson, Chair
Tim Sheldon, Commissioner
3/27/07
Ross Gallagher, Commissioner
.t:\.ESOLUTIONS\2007\HCCC Interlocal Agreement.doc
Attachment A
PROGRA GUIDELINE
H1: 1 D ANAL RE I 1 NAL
SEPTIC L I AN PROGRAM
January, 2007
Hood Canal Regional Septic Loan Program V.12-23-06 Page 1 of 25
I. Document Name and Purpose
These Program Guidelines, together with attachments incorporated into the
Guidelines, govern the Hood Canal Regional Septic Loan Program ("Program") This
document has been approved for use by the Program Advisory Board. Unless otherwise
provided for in the Program documents, exceptions to the policies and procedures set
forth herein require the approval of the Advisory Board.
II. Name
The name of this Program is Hood Canal Regional Septic Loan Program. The
name may be modified should the program extend beyond the jurisdictions that
border Hood Canal. The loan product available through the program shall be known
as the ShoreBank Septic Loan.
III. Purpose
The primary purpose of the Program is to assist eligible property owners to repair,
upgrade and/or replace existing onsite sewage treatment systems to standards that
meet or exceed applicable code requirements of the participating jurisdictions.
Secondary purposes of the Program include:
• Increase the asset values of property owners participating in the Program'
• Educate current and prospective users of onsite sewage treatment about the
importance of functional and well maintained systems to human health,
water quality and property values; and
• Support the contributions of the shellfish industry and onsite septic
professionals to economic activity in participating jurisdictions.
IV. Program Overview
a. Program Background
The Program has been designed to assist property owners who depend on onsite
sewage treatment systems to treat wastewater. The Program will provide financial
assistance in the form of a below market interest rate loan to cover 100% of all costs
associated with the design, permitting, installation, testing and initial maintenance of an
approved onsite system which has the appropnate technology for a particular site In
some circumstances the Program will assist individual property owners to (1) connect to
Hood Canal Regional Septic Loan Program V.12-23-06 Page 2 of 25
an off -site sewage treatment system; or (2) participate with neighbors to design, install
and connect to community or small cluster sewage treatment systems
The Program is a collaborative approach shared by multiple jurisdictions. These
jurisdictions share a common concern with the actual and potential negative impacts of
faulty onsite sewage treatment systems on human and ecological health. Portions of each
of these jurisdictions are located withinthe Hood Canal watershed which may be at risk
from failing septic systems. Participating jurisdictions recognize the value of a single,
scalable approach to financing onsite sewage treatment quality and capacity throughout
their respective geographies.
The Program is also a joint venture between participating jurisdictions and
ShoreBank Enterprise Cascadia (SEC), a non-profit lending organization supporting
economic development and environmental quality in the Pacific Northwest SEC is
responsible for delivery of the Program throughout the jurisdictions in a manner that
reflects locally approved policies, land use regulations, and applicable health codes. The
Program is not a code enforcement strategy. Rather, the Program is intended to reduce the
financial barriers that prevent property owners from taking corrective action to repair,
upgrade or replace failed, obsolete and/or inefficient existing septic systems
With the Program, property owners who require financing assistance may apply for a
loan through ShoreBank Enterprise Cascadia (SEC) All applicant information is
confidential. The Program has been designed to assist borrowers with low incomes,
existing debt, and previous credit problems. The Program loan product, adjusted for the
income of borrowers, covers 100% of the costs of complying with or exceeding the code
requirements for onsite sewage treatment systems in all participating jurisdictions.
b. Program Participants
i. State of Washington: The Washington State Department of
Ecology provides financial support to the Program. As such, the
Program is subject to the procedural and reporting requirements of
the Department. This financial support is provided via an
Agreement with Kitsap County, which administers the funds on
behalf of the other participating jurisdictions.
Hood Canal Regional Septic Loan Program V.12-23-06 Page 3 of 25
ii. Kitsap County: Kitsap County is the lead agency for receipt and
management of financial assistance from the State of Washington.
Their role is defined in a Memorandum of Understanding between
themselves and Mason and Jefferson Counties.
iii Hood Canal Coordinating Council (HCCC). HCCC represents all
local government jurisdictions within the Hood Canal watershed.
HCCC has provided leadership for the development and initial
public financing of a single Program serving its member
jurisdictions.
iv. Health Districts and Departments: The Health District of Kitsap
County and the Health Departments of Jefferson and Mason
Counties are the founding government sponsors of the Program.
Each District is empowered to be a participant in the Program as it
affects their jurisdiction. In addition, all regulatory requirements to
be satisfied by the Program and its borrowers are those of the
respective jurisdiction in which the borrower is located.
v. ShoreBank Enterprise Cascadia: SEC is responsible for
management of all aspects of Program marketing, delivery,
customer service, loan management, reporting, and compliance.
SEC's procedure and policy for fulfilling this role is detailed in
these Guidelines and in the attached Program Credit Policy.
vi. Sovereign Lands: The Port Gamble S'Klallam and Skokomish
Indian Tribes may be participating jurisdictions if they deem the
Program relevant to their needs and priorities. Program funds are
reserved for their participation. Due to the unique requirements of
delivering Program loans within the boundaries of Indian
Reservations, customized and separate Program delivery
requirements may be necessary In this event, a separate Guideline
will be developed to govern Program activity accomplished with
these sovereign nations. All activity financed by Program loans
Hood Canal Regional Septic Loan Program V.12-23-06 Page 4 of 25
must comply with the health and safety standards and requirements
of the sovereign nation in which the affected property is located.
V Authority
a. Authority for oversight and Program administration is vested in each of
the five participating jurisdictions: Jefferson, Kitsap and Mason Counties
and Port Gamble S'Klallam and Skokomish Tribes. These five
governments have authority to charter the Program to operate in their
Jurisdictions and the authority to revoke that charter. They will receive a
report from SEC and review the Program on an annual basis. If they wish
to revoke or substantially change that charter, those changes must be
agreed to unanimously by all five governments.
b.
The following individuals have been granted authority to act on behalf of
their participating governments as an Advisory Board to the Program:
i. For SEC• John Berdes, President
ii. For Kitsap County: Stuart Whitford
iii For Mason County: Debbie Riley
iv. For Jefferson County: Mike McNickel
v. For Port Gamble S'Klallam: Pending
vi. For Skokomish Indian: Pending
c. The Program Guidelines are the governing document of the Program.
These guidelines, and any exceptions or amendments to them must be
approved by the Advisory Board (unless otherwise provided for in this or
the attached Program documents).
d. The Program is monitored by an Advisory Board charged with oversight
on behalf of participating jurisdictions. The parties identified in Section
V(b), above, shall constitute the membership The Advisory Board may, at
its discretion, adopt such rules, regulations and procedures as it deems
necessary to conduct its business. The Advisory Board shall meet as
necessary, but at least semi-annually, to receive progress reports and
recommendations for action from SEC staff and management assigned to
Hood Canal Regional Septic Loan Program V.12-23-06 Page 5 of 25
the Program. No modifications to the Program, as defined herein, shall be
made without the unanimous consent of the Advisory Board.
e. SEC has sole and exclusive authority to approve or decline credit as
provided for in the Program Credit Policy. Certain exceptions apply and
are detailed in Section X.x, below SEC has the authority to protect the
confidentiality of applicants and borrowers and shall not be required to
divulge the names and personal information of any applicant or borrower.
f. SEC shall report to the Advisory Board and all participating jurisdictions
on a regular basis, as defined by the Advisory Board. Such reports shall
include data specific to each jurisdiction and include, at a minimum.
i. Number of inquiries received
ii Number of applicants in process
iii. Number and dollar amount of loans approved and disbursed
iv. Number and dollar amount of projects completed
v. Number and dollar amount of defaulted loans
vi Losses expensed to date and amount of reserve for future losses
vii The revenue and expense associated with Program delivery
viii Total lending by household income status as defined in these
Guidelines
VI. Eligible Borrowers
a. Ehgible: Any person, corporation, or partnership that owns real property
located within the boundaries of the approved Health Districts or
Departments of participating jurisdictions is eligible to apply to the
Program for financing assistance, provided that the property's assessed
valuation includes a value for improvements to land.
i. Any eligible borrower that demonstrates their existing on -site
sewage treatment system is older than 25 years is automatically
eligible.
ii. Eligible borrowers with systems less than 25 years old may be
required to document a system failure or inadequacy before
completing an application Such documentation may be obtained
Hood Canal Regional Septic Loan Program V.12-23-06 Page 6 of 25
from any local health jurisdiction (see iii, below) or from a
qualified on -site professional.
iii. Any eligible borrower officially referred by a participating
Jurisdiction or Program partner shall not be required to further
document disfunctionality of the existing system.
b. Financially Distressed Borrowers: Financially distressed borrowers are
defined as follows:
i. A household earning 80% or less of the average median income for
all participating Jurisdictions;
ii. Any non-profit entity that serves primarily financially distressed
households; and
iii. A household that demonstrates that amortizing payments on a loan
will cause their total housing costs to exceed 40% of their gross
income
Insert new section header for Ineligible borrowers here
VII. Ineligible Borrowers:
a. The following are not eligible borrowers under the Program:
i. Except for applicants with homes on lands held in Trust by the
Bureau of Indian Affairs, those that do not have the legal right to
encumber the real property with a beneficial interest of SEC (Deed
of Trust) as collateral for the Program loan, unless the party who
possesses such rights consents to the loan and the resulting security
interest;
ii. Property owners that have not paid property taxes and/or other
assessments levied on the property owner by any local or state
taxing district for the period covering the previous two tax years;
iii. Property owners who are residing on property for which there is no
record of permitted improvements;
iv. Property owners requesting repairs to existing connections to
municipal or public sewage treatment systems.
Hood Canal Regional Septic Loan Program V.12-23-06 Page 7 of 25
v. Property owners in a locale that has been identified by a local
jurisdiction for development of a shared or community sewage
treatment system.
VIII. Uses of Loan Proceeds
a. Eligible Use of Loan Funds' Program loan proceeds may be used to pay
for any of the following expenses associated with repair, upgrading and/or
replacement of onsite septic systems:
i. Testing, evaluation and assessment of an existing system for
failure or needed repairs (with documented costs reimbursed to the
borrower by loan proceeds);
ii. Design, testing, specifications and bidding for repairs, upgrades
and/or replacements of onsite or community systems by licensed
contractors provided however that;
1 the resulting system capacity accommodates no more than
one additional bedroom to an existing permitted single
family residential use or a 25% increase in treatment
capacity for commercial or multi -family (more than 1 unit)
uses.
iii. Permit application and regulatory inspection fees;
iv. Installation costs for repairs, upgrades and/or replacement systems
provided however that no systems or approaches not explicitly
authorized by applicable code shall be allowed (e.g. terra lifting is
prohibited)
v Loan fees, loan interest and loan closing costs;
vi. Costs associated with installation of fixtures and fittings that
reduce water consumption, to a maximum of $1,000;
vii. Costs associated with the creation of riparian (shoreline) habitat, to
a maximum of $1,000,
viii. Costs associated with the services of qualified third parties to
service, inspect and maintain on -site treatment systems to
specifications provided by the designer and/or supplier of the new
Hood Canal Regional Septic Loan Program V.12-23-06 Page 8 of 25
system, to a maximum of $1,000 (provided that such sums are held
in escrow by SEC for payment to qualified parties identified and
approved by SEC);
ix. All costs associated with establishing service with and connection
to an existing off -site treatment system located within 200 linear
feet of the property boundary;
x. Payment of sums to third parties that may be required to perfect
and/or protect the recorded interests of SEC in the real property,
including additional loan sums advanced after loan closing
b. Limited Eligibility
i. The Program will consider loans to support the development of
community and cluster systems serving multiple properties. Total
loans for such systems shall not exceed 10% of total available
Program financial resources at any time. In the case of community
systems, the Program shall determine eligibility, feasibility and
types of assistance on a case -by -case basis as directed by the
Advisory Board. Advisory Board approval for all Program
assistance to community and cluster systems is required.
c. Prohibited Uses
i. The Program shall not finance on- or off -site systems when the
new system is not replacing, repairing or improving an existing
system.
ii The Program shall not finance on- or off -site systems for
improvements not recognized as permitted and compliant by
participating jurisdictions.
iii The Program shall not finance costs for labor or other services not
incurred by a licensed or otherwise certified professional.
IX. Loan Terms
a. Overview' In the interest of maximizing the impact of the Program on
human health and water quality, loan terms and conditions are other than
standard for the lending industry. Those experiencing financial distress
Hood Canal Regional Septic Loan Program V.12-23-06 Page 9 of 25
shall be priority beneficiaries, with rates and terms to reflect this priority
status Loan terms and conditions shall be reviewed annually; any
modifications shall require the unanimous consent of the Advisory Board
and SEC management SEC shall not agree to loan terms and conditions
that it cannot justify from a financial operating perspective.
b. Interest and Repayment Requirements The chart below establishes the
initial loan terms and interest rates for household borrowers in owner
occupied dwellings based on annual gross household income as reported
IRS form(s) 1040 for the previous calendar year
Annual
HH
Interest
Rate
Repayment
Terms
Income
$<26,566
No
due
2%
compounded
annually
loan amount
and
added
to
payments
required;
on
sale,
transfer or refinance
$26,567-35,420
4%,
of
which
2% is
Interest
rate)
with
only
balance
(50%
due
of applicable
on
sale,
added
annually
to
loan amount
transfer
or refinance
$35,421-44,276
4%
paid
monthly
Interest
sale,
transfer
only
payments,
or refinance
due
on
>$44,276
6%
Fully
on
a
amortizing
term not
to exceed
payments
15
years
based
c. Interest and Repayment Requirements for Non -Owner Occupied
Dwellings: Any borrower that is not a resident owner of the dwelling unit
receiving septic system support shall receive a 6% loan and be required to
make monthly payments, including interest, for a team not to exceed 15
years.
d. Loan Fees SEC Program Loan Policy shall establish a schedule of loan
fees applicable to the Program. The fees collected shall cover its
reasonable costs of delivering services associated with the Program All
fees may be included in the loan amount.
e. Operation, Maintenance and Monitoring
i. Reserves Each loan shall include a sum necessary to cover
specified costs of system maintenance and monitoring inspections
for at least five years, or $1,750 (I spoke with our O&M
Coordinator and he says this is a better estimate of actual O&M
Hood Canal Regional Septic Loan Program V.12-23-06 Page 10 of 25
for five years. (Whichever is greater). Such sums shall be held by
SEC as a loan escrow available to cover the directly billed costs of
specified OM requirements.
ii Requirements• All borrowers shall agree to comply with operation,
maintenance and monitoring procedures specified by the project
designer, the system manufacturer and/or the local health
jurisdiction. Failure to do so will constitute a default and may
result in enforcement actions by SEC
iii. Access• All borrowers must stipulate that SEC and its agents or
assigns shall have the legal right of access to the financed system
for purposes of verifying proper operation and maintenance and, if
necessary, conducting specified maintenance and/or monitoring
inspections.
f. Collateral• All Program loans shall be secured by a security interest in the
borrower s real property assets. Additional collateral or loan loss reserve
allocations may be required when the subject property does not satisfy
standards of SEC as defined in the Credit Policy (Attachment 1).
g. Loan Loss Reserve: 10% of each loan amount shall be expensed at loan
closing as a deposit to a restricted account for the purposes of reserving
for loan losses, unpaid property taxes, the interests of priority security
interests, and eventual loan write offs. From time to time, SEC shall report
to the Advisory Board and the State of Washington on the adequacy of
such reserves relative to the actual risk embedded in the Program loan
portfolio. Based on the analysis of adequacy, reduced or increased
collections for loan loss reserves may be recommended and/or approved.
h. Special Loan Loss Reserve: When a financially distressed applicant is
declined for credit and/or risk management reasons, SEC may request an
additional allocation of Program resources in public funds for loan loss
reserves. In this event, SEC shall detail its rationale for the additional
reserve requirements using its approved risk rating system (refer to
Program Credit Policy, attached) If additional reserves are approved, SEC
Hood Canal Regional Septic Loan Program V.12-23-06 Page 11 of 25
shall approve the applicant's request for a loan and dedicate the additional
reserves to the borrower's loan record.
X. Credit Administration
a. SEC is responsible for administration of the Program consistent with
adopted Policy included as Exhibit 1 and by reference incorporated herein
b. The Program Advisory Board shall review and advise SEC on its credit
administration policies. However, SEC has sole authority for adopting and
implementing Credit Administration Policy associated with the Program.
XI. Marketing and Outreach
a. Strategy: The Program will be broadly marketed throughout participating
jurisdictions. The marketing strategy will be designed to reach the
broadest cross section of prospective participants, but place special
emphasis on:
i. Property owners with current or pending citations for non-
compliance;
ii. Property owners proximate to Hood Canal shorelines;
iii Property owners proximate to documented water quality problems
commonly associated with the presence of human sewage.
b Implementation• SEC is responsible for design and delivery of marketing
and outreach activities. At a minimum, marketing activities will include:
i. Public service TV and radio spots;
ii. Advertisements in local media;
iii. Brochures available at banks, health departments, social service
agencies, real estate offices and other similar locations,
iv. Presentations to service clubs and community groups.
c. Partners: The Program expects significant marketing support from onsite
and real estate professionals SEC will offer specialized marketing
materials and financial incentives to these marketing partners to support
their full participation in the Program.
XII. Financial Administration
Hood Canal Regional Septic Loan Program V.12-23-06 Page 12 of 25
a. Overview: The use of private and public resources available to the
Program shall be governed by a separate agreement between SEC and
Kitsap County. It is the goal of the Program to equitably apply available
private and public resources in ways which maximize the recovery and
reapplication of these resources over time.
b. Cost Sharing* In general, the availability of private resources and public
resources to support overall Program operations will be equal. Special
efforts shall be made to apportion resources and costs in a manner that
minimizes the regulatory constraints placed on borrowers.
c. Responsibility* SEC shall have full responsibility for the financial
administration of the Program consistent with GAAP and shall report on
the fulfillment of these responsibilities as required by Kitsap County and
the State of Washington.
d. Budget* SEC shall prepare a budget for the Program activities annually
and obtain the approval of the Advisory Board.
e. Audit SEC shall present the findings of its independent auditors for
financial activities and compliance on an annual basis within six months
following the end of its fiscal year (December).
f. Reporting* SEC shall provide internally prepared financial reports as
necessary to Kitsap County and the Advisory Board. At a minimum, such
internal reports shall include the following information comparing actual
to forecast (budget) performance:
i. Revenues derived from fees, interest, contract and grant revenues
ii. Expenses attributable to the delivery of the Program, including
indirect administration costs, loss reserves, and the expensing of
loan losses;
iii. Availability of lending resources for future program activity; and
iv. Statement of Program cash flows
Hood Canal Regional Septic Loan Program V.12-23-06 Page 13 of 25
ATTACHMENT ONE•
ShoreBank Enterprise Pacific
Hood Canal Regional Septic Loan Policy
December 2006
I. GENERAL CREDIT POLICY STATEMENT FOR THE SEPTIC REPAIR
PROGRAM 16
A. Confidentiality 16
B. Conflict of Interest 16
C. Exchange of Credit Information 17
D. Gifts 17
E. Doing Business with Customers 17
F. Credit References 17
G. Non -Discrimination 17
H. Funder Restrictions 17
II. FISCAL PARAMETERS 17
A. Segregation of Assets 18
B. Idle Funds 18
C. Delinquency rate 18
D. Allowance for Losses 18
E. Cumulative charge -offs 18
III. OBLIGATION OF SEC 18
IV. APPROVAL PROCESS 19
A. Approving Authority Responsibilities 19
B. Management Responsibilities 20
C. Loan Officer Responsibilities 20
Hood Canal Regional Septic Loan Program V.12-23-06 Page 14 of 25
D. Modifications Prior to Closing 21
E. Terms Modifications Subsequent to Closing 21
✓ . CREDIT QUALITY MANAGEMENT 21
A. Process and Procedures 21
B. Annual Loan Review 21
C. Collateral 21
D. Terms & Pricing 21
E. Fees 22
✓ I. UNDERWRITING AND APPLICATION REQUIREMENTS 22
Risk Mitigation 22
Credit History 22
✓ II. INVESTMENT PROCESS 23
A. Loan Write -Up 23
B. Closing Requirements 24
C. Credit Files 24
D. Collateral Files 25
E. Charge -Offs 25
ATTACHMENT A ERROR! BOOKMARK NOT DEFINED
Hood Canal Regional Septic Loan Program V.12-23-06 Page 15 of 25
I. General Credit Policy Statement for the Septic Repair Program
Mission: The mission of ShoreBank Enterprise Cascadia is to support strong economies and a
healthy environment in the places it does business. The purpose of this document is to set forth
ShoreBank Enterprise Cascadia's (SEC) policies for 1) making loans within the Hood Canal
Regional Septic Loan Program (` Program"), 2) portfolio and risk management practices for the
Program, and 3) management of problem loans. This Policy and any addendum is an official
statement of SEC's Board of Directors and must be followed by all staff. All loan staff will
receive a copy of this Policy and any addendum and should understand and refer to it as needed.
SEC will administer funds from third parties for the express purpose of financing the Program as
defined in the Program Guidelines dated December XX, 2006 SEC will advance loans secured
by real estate to property owners regardless of generally accepted credit standards Loans will
cover engineering, permits, installation and subsequent regular inspection and servicing of on
site waste treatment systems.
SEC will meet customer needs in the context of its mission and Program guidelines for
administering the Program based on any agreed upon MOU and may include
■ Customized credit, such as deferred or irregular payments, and credit facilities, which
may require greater effort and involve greater risk than conventional credits may be
utilized while administrating this Program. The mission implications of lending in these
target areas and/or sectors may demand that SEC take greater overall risk in making a
loan and may demand pricing which is other than standard.
■ Lending to individuals and businesses that do not qualify for or have reached the limit of
conventionally available credit within their operating territory.
SEC's Board has approved this policy and the addendum referred to within It will be reviewed
annually and adjusted at the discretion of the Directors.
Throughout this Policy, Board of Directors refers to the Board of Directors of SEC; Credit
Committee refers to the highest level of loan approval authority given by the Board of Directors.
Management refers to the President, the Risk Manager, Program Manager or Senior Loan Officer.
Lending staff refers to any and all individuals in the loan process including management, loan
officers and administrative personnel. Loan Funder refers to any and all individuals or
committees that provide funds in support of the Septic Loan Program.
A. Confidentiality
To promote trust, respect and confidence, all customer personal and business financial affairs will
be kept strictly confidential. All customer records and information will be safeguarded and
unauthorized access or use is prohibited All loan customers will be provided with a
Confidentiality Statement outlining SEC's commitment to maintaining confidentiality this policy
at loan closing.
B. Conflict of Interest
To ensure that the highest degree of honesty, integrity and objectivity is maintained in making
loans, real or potential conflicts of interest between loan officers employees, directors, and their
related interests, customers and SEC must be disclosed immediately. No employee officer or
credit committee member shall participate in any processing, review, approval or documentation
affecting any potential loan in which a conflict exists or could be perceived to exist.
Hood Canal Regional Septic Loan Program V.12-23-06 Page 16 of 25
SEC seeks to avoid loans to SEC employees, officers, directors or their immediate families,
affiliates and employees of affiliates, or to firms in which any of the proceeding has an ownership
interest. Although such loans are not prohibited, the Board of Directors of SEC must approve all
exceptions to this policy in advance. Such transactions shall comply, with IRC Section 4958.
C. Exchange of Credit Information
Credit information about SEC customers will be released outside the ShoreBank system only with
the express written consent of the customer. A customer's name and general business information
will be used for publicity or marketing purposes only if the customer has signed a "Publicity
Authorization" or consent form
D. Gifts
Accepting tangible property or services or anything exceeding $50 in value as a gift is prohibited.
Soliciting or accepting tangible property or services as a condition to a transaction is strictly
prohibited and is grounds for immediate termination
E. Doing Business with Customers
Purchases from or sales to customers, directly or indirectly involving an officer, employee,
director of SEC, or their related interests, will be made on the same terms as for disinterested
parties or the transaction will be fully disclosed and will be approved in advance by the Board.
Such transactions shall comply with IRC Section 4958
F. Credit References
SEC does not report to credit agencies on the performance of its customers. Upon written request
from the customer, SEC shall provide a written credit reference to any customer that requests one.
G. Non -Discrimination
SEC is fully committed to the principal that all credit decisions should be made without regard to
race, color, national origin, religion, sex age, marital status, sexual onentation, mental or
physical disability (provided the applicant has the legal capacity to enter into a binding contract),
receipt of public assistance, or any other basis prohibited by law. To avoid an unintended
discriminatory effect, credit policies are to be applied consistently to all customers, applicants,
co -applicants and guarantors. Discrimination by any employee will not be tolerated and may be
grounds for termination. This commitment will be fulfilled while maintaining prudent credit
discipline
H. Funder Restrictions
Hood Canal Septic Loan Program capital will have restrictions and compliance requirements
associated with the funds All loan and investment documentation and agreements must conform
to the limitations as defined by the grant or Memorandum of Understanding or other governing
document with the capital provider.
II. Fiscal Parameters
The fiscal parameters listed below are considered good Loan Fund management guidelines SEC
will prepare financial statements that segregate assets, liabilities and net assets related to the
Program Loan Fund from the rest of the company. The analysis should be calculated quarterly per
the internally generated financial statements and calculated annually per the audited financial
statements If these fiscal parameters are not met, management will make a written
recommendation for correction to the Board of Directors for its approval at the next meeting after
Hood Canal Regional Septic Loan Program V.12-23-06 Page 17 of 25
the exception occurs Management should also make a report to ShoreBank Holding Company
management, or their designee.
A. Segregation of Assets
Assets designated for the Program Loan Fund (as reflected in the annual audit) will not be used to
fund operations for the corporation as whole.
B. Idle Funds
SEC will comply with all Funder requirements as to the handling of idle funds from their MOU
guidelines In those cases where the Funder has no guidelines, SEC will maintain accounts in
credit -worthy state or federally regulated financial institutions or will make investments in
government or government agency instruments. Staff will ensure that sufficient cash is available
to fund loans and investments and should avoid early withdrawal penalties.
C. Delinquency rate expectations
The ratio of past due loans (loans more than 30 days past due) to total loans outstanding should
not exceed 5%.
D. Allowance for Losses
The Program loans follow consumer lending legal requirements. SEC has received a special cash
loan loss reserve for this Program that will be accounted for separately from the core portfolio
cash loan loss reserve* allowance for losses will follow the guideline presented for the core
portfolio and they will be accounted for Separately from "core". Management will report these
loans separately from the core portfolio.
SEC shall establish a minimum reserve for loan losses equal to 10% of each loan approved. Third
party financial resources shall be available and on hand to fully fund such reserves prior to the
program becoming operational. Additional deposits to reserves in excess of 10% of the loan
amount shall be required for loans initially declined for risk management purposes but
subsequently approved by the Program Advisory Board for advances to reserves in excess of 10%
of the loan amount.
The Risk Manager shall report monthly on reserve adequacy based on actual portfolio conditions
and performance. Any report that indicates the Fund is under -reserved (<10% of loans
outstanding plus special reserve assessments as discussed above) shall be immediately reported to
the Directors and the Advisory Board Allowance for Losses must be more than 7% at all times
and equal or exceed 100% of actual forecast loss exposure, as determined by the Risk Manager.
E. Cumulative charge -offs
It is acknowledged that the risk in the Program portfolio will be higher than SEC's usual
standards. As a guideline for staff to manage the loan Program, on a Program to date basis,
cumulative aggregate charge -offs should not exceed five percent (5%) of the cumulative
aggregate principal amounts advanced.
III. Obligation of SEC
SEC agrees to use Program grant funds received from Program funders to administer the Program
consistent with the Program Guidelines Loan parameters will be determined by the agreed MOU
between SEC and participating jurisdictions SEC agrees to provide the following services in
support of the on -site Septic repair loan fund Program:
Hood Canal Regional Septic Loan Program V.12-23-06 Page 18 of 25
a Provide loans to eligible homeowners to cover the complete cost of onsite septic
system repair including permitting, engineering, installation, and on -going
inspection and/or servicing All households must own their property (or have the
legal owners consent); all loans will be secured by real estate (Deed of Trust)
with all supporting documents in place (e.g. Promissory Note).
b. All loans will include a reserve amount for annual Operation and Maintenance of
the installed system
c. A loan loss reserve fund will be established. Unrecoverable loan losses shall be
recovered from the loan loss reserve account. Un-recovered and fully expensed
loan losses (write offs) shall be reported to the IRS as taxable income to the
defaulted borrower. SEC shall document its collection efforts to funders and the
Advisory Board on request.
d. Enforce/Act upon default of loans. Loan default would occur if (1) required
payments are not made; (2) on -going maintenance and servicing of a system once
constructed is not performed; or (3) if a property is refinanced, sold or transferred
without the loan being paid off; or (4) borrower does not comply with reasonable
provisions of the Loan Agreement, Promissory Note and/or Deed of Trust.
e. Market the availability of loans to onsite septic system installers, designers,
septic maintenance inspectors, realtors septic tank pumping firms real estate
professionals, and to the general public.
f. Provide loan information, application materials, and assistance to the public and
to loan applicants.
g. Coordinate with onsite septic system designer(s) and/or engineer(s) to facilitate
one -stop shopping of design, permitting, financing, installation, and maintenance
of systems
h. Ensure that SEC, or its agent(s) secure a minimum of three competitive bids from
licensed onsite Septic system installers.
i. Facilitate low cost, expedited loan closing when available.
j. Provide loan servicing including collections, enforcement and reporting
k. Reporting* Reporting to funders and participating jurisdictions as provided for in
the Program Guidelines.
1. Charge to the Program only those costs directly benefiting eligible recipients for
the cost of loans closed and systems repaired Administrative loan fees and
related charges may not be charged to the fund for loans applied for or approved
but not closed, and/or for repair systems designed or permitted, but not installed.
IV. Approval Process
The SEC Credit Committee will approve Program Guidelines and this Credit Policy.
Management will provide annual reports on Program status to the Credit Committee, including an
analysis of the portfolio and delinquencies, allowance for losses and actual losses Program loans
shall be approved by the designated individual(s) specified by the SEC Credit Committee, agreed
upon by the Board of Directors. Under no circumstance is a commitment to be made or a loan to
be closed and funded unless it was approved and documented by the appropriate Approving
Authority.
A. Approving Authority Responsibilities
1 Review and approve or disapprove all loan applications presented for approval in
conjunction with Program Guidelines All approvals will be documented with an internal
approval memo a copy of which will be kept in the SEC Credit Committee Minutes
notebook in a designated section.
Hood Canal Regional Septic Loan Program V.12-23-06 Page 19 of 25
2. Review and approve charge -offs.
3. Review and approve the credit grades and total Allowance for Loan Losses at least on a
quarterly basis.
All loans approved or modified within the Program by the Approving Authority must be reported
to the Credit Committee. Such reports shall contain information that is deemed appropriate by the
Directors.
Loans declined for credit or risk management reasons must be promptly reported to the THE
PROGRAM Advisory Board The requirements of SEC for additional loan loss reserve
allocations will be detailed and justified Upon approval of the Advisory Board, an approval may
be documented, conditioned upon confirmation from funding authorities that additional cash
disbursements for loan loss reserves have been approved.
B. Management Responsibilities
Management is responsible for the performance of the Septic Loan Program loan portfolio,
minimizing losses and meeting development goals. Management is responsible for establishing
processes and procedures to ensure that the action of the Committee, including any conditions
placed on the recommendation, delegations of authority to individual Committee members or
management, and/or actions required as a condition of approval, are to be thoroughly carried out
and reviewed prior to moving forward with closing.
C. Loan Officer Responsibilities
1. Provide loan information, application materials and assistance to the public and to loan
applicants.
2. Screen each loan request to determine that the project fits within the Program guidelines
3. Conduct financial review due diligence and present recommendation for loans to the
appropriate Approving Authority per the guidelines established in the MOU.
4. Review lien and encumbrances report from approved title company.
5. Coordinate with on -site Septic system designer(s) and/or engineers(s) to facilitate "one -
stop shopping" of design, permitting, financing, installation and maintenance of system.
a. Ensure that SEC, or its agent(s) secure a minimum of three bids from licensed
on -site Septic system installers.
b. Facilitate low cost, expedited loan closing when available.
6. Ensure all conditions are met at or prior to closing and perfect SEC's security interests.
7. Ensure all loans comply with SEC policies and the requirements and regulations of
Program Guidelines.
8. Monitor all loans in the portfolio, including delinquent and problem accounts and assign
credit grades. Take prompt action to protect SEC's position if the quality of the loan
declines.
9. Major events having a significant impact on the borrower are to be documented on an
ongoing basis
10. Regularly review all loan and investment files for proper preparation, documentation, and
execution of documents.
11. Update the Credit Committee on the loan status as appropriate.
12. Request and review evidence of annual property taxes paid and determine if an Operation
and Maintenance agreement has been completed per the Designer's recommendation.
Hood Canal Regional Septic Loan Program V.12-23-06 Page 20 of 25
D. Modifications Prior to Closing
The Approving Authority may approve minor modifications to a loan so long as they do not
materially affect the risk of the loan or violate this policy. Under no circumstances should a loan
condition specifically required by the Loan Committee be waived or materially modified
E Terms Modifications Subsequent to Closing
The Approving Authority may approve minor changes to loan terms and/or conditions subsequent
to closing so long as they do not materially affect the risk of the loan or violate this policy.
However, any loan classified as a Problem Asset must be presented to the Credit Committee for
review and approval prior to a modification or restructuring.
For modification prior to and subsequent to closing, all changes in loan terms are to be reported to
the Credit Committee at it's next meeting and should be clearly documented in the Credit File.
V. Credit Quality Management
A. Process and Procedures
SEC will ensure that adequate processes and procedures are in place to ensure the highest level of
credit quality management. At a minimum management will
1. Review the portfolio analysis and prepare reports listed under Reports on a quarterly
basis including crosschecks to ensure loan loss reserve adequacy.
2. Review the grade on each loan and investment and the total Allowance for Loan Losses
on a quarterly basis.
3. Review loans prior to presentation to the Approving Authority for compliance with
policy and encourage structures conducive to future capital raising endeavors, which may
include securitization in national capital markets.
B. Annual Loan Review
The Director of Risk Management and his/her staff from ShoreBank conducts the annual review
of the loan and investment files of SEC Reviews will take place at least annually and will include
compliance with credit/equity underwriting, proper preparation, documentation execution of loan
and investment documents mcludmg collateral security, and adequacy of file documentation to
support the Credit Grade. The review may also include compliance with Funder restrictions and
agreements The results of the reviews will be reported to the Credit Committee and the Board at
least annually.
C. Collateral
As a matter of policy, SEC will secure collateral for all loans closed in the Septic Loan Program
with a Deed of Trust. It is not uncommon for SEC to hold a subordinated position to a Borrowers'
Mortgagee. However, all loans should be structured to protect the investment to the highest
degree possible. Collateral value shall be determined by multiplying the total assessed value of
the property by 1.1. Resulting loan -to -value ratios in excess of 120% shall be declined unless
special loan loss provisions are available consistent with the Program Guidelines.
D. Terms & Pricing
SEC shall determine pricing policy in collaboration with the THE PROGRAM Advisory Board.
SEC will under all circumstances comply with Advisory Board guidelines
Interest rates will be fixed Interest rates are set with the assumption that the Borrower will
perform as agreed If the customer does not perform, pricing on the loan may be increased to
reflect the increased risk Default interest rates shall be established at the discretion of SEC.
Hood Canal Regional Septic Loan Program V.12-23-06 Page 21 of 25
E Fees
SEC's fee structure for the Program must be approved by the Advisory Board on an annual basis.
The initial fee schedule to borrowers for the Program follows:
® Origination Fees: SEC shall be entitled to a loan fee of $350, and such fee shall cover its
administrative and loan documentation costs. The fee shall be fully earned upon
acceptance of a loan approval by the borrower
▪ Document Fees: SEC shall be entitled to a standard documentation fee for each loan. The
fee may be included in the loan amount.
• Closing Costs: SEC shall pass on to the borrower its costs, plus 10% handling, of closing
the loan, including but not limited to credit reports recording, overnight mail, copying
and other related costs. These fees may be included in the loan amount
▪ Late Fees: Generally late fees are charged when a required loan payment is received
after the grace period (generally 10 days).
® Default Rates: Generally, a default rate of several percentage points (as determined by
management) over the Note Rate is applied to loans in default, retroactive to the date of
default.
® Other Charges Restructuring fees, assumption fees, and reconveyance or discharge fees
may be applied to the loan at the discretion of SEC
VI. Underwriting and Application Requirements
Risk Mitigation
SEC expects and accepts credit risks beyond the tolerance of regulated lenders. Management of
these risks is the primary source of risk mitigation. All professional staff is expected to be
actively involved in managing credit nsk in ways that exceed the standards of regulated lenders.
SEC believes that the best source of maintaining loan quality is its human resources and will
usually rely on the best judgment of these professionals in reviewing and making lending
decisions.
Following are certain risk factors with associated guidelines for mitigation. In addition to these
risk factors, staff is expected to identify the risk of each transaction and identify appropriate
mitigation on a case -by -case basis.
Credit History
It is understood that the primary purpose of the Program is to provide financing to promote
repair of failing onsite septic systems, and as such, additional risk is assumed when loans are
made to recipients with less than ideal credit histories. Credit history of customers should be
documented in all credit files through the receipt and review of a credit report.
Condition of Title: A significant risk point for SEC is its subordinate position on title to the
collateral asset In addition to the superior interests of other lenders, the interests of the local
taxing authorities are a significant risk point Applicants that have not paid property taxes
and/or assessments for the previous two tax years are not eligible. Credit management may
approve additional loan proceeds to cover such delinquent tax obligations only if additional
loan loss reserves are available to cover the inherent risk of future non-payment of such taxes.
A. Documents to be submitted by the Borrower
■ Applications: Standard application packets are available from all SEC offices, by
mail, and through local distribution systems Applications may also be completed on
line Completed, signed applications will be on file for all active loan customers
Hood Canal Regional Septic Loan Program V.12-23-06 Page 22 of 25
E
participating in the Program. Typically the application gives SEC permission to pull a
credit report on the Borrower(s).
Referral Certification: Standard referral Certification of Need from participating
jurisdictions and/or onsite professionals establishing the need for repair, upgrade or
replacement of the existing system.
Tax Returns and Property Tax Statements: Borrowers should submit last filing year's
tax returns and copy of property tax statement. In addition, Borrower will complete
and submit a financial statement (found in the application) After a loan is approved,
annual proof of property taxes paid are required to be submitted by all Borrowers. It
is the responsibility of lending staff to collect this information for loan files. SEC
may under some circumstances require the borrower to establish a reserve escrow
for the payment of property taxes.
ACH forms* If Borrower is to make regular monthly payments on the loan, payments
will be received via Automatic Clearing House (ACH) and pulled from the
Borrowers account each month as determined in the Promissory Note.
B. Credit Reports
It is the standard practice of SEC to order and review credit reports on potential borrowers,
guarantors and on -going borrowers should the need arise If credit histories include derogatory
information, extraordinary circumstances must be documented in writing and housed in the loan
file. It is the assumption of the Credit Committee that a credit report has been obtained for any
credit recommended and that the discussion of personal financial history is based on that report. It
is the responsibility of the loan officer to note exceptions. FICO scores will be reported In the
approval process.
VII. Investment Process
All loans and investments must be supported by a personal financial statement, property tax
statements and tax returns.
A. Loan Write -Up
All loans under the Program are to be presented to the Approving Authority for approval via an
internal approval memorandum. The credit recommendation and credit approval memorandum
will be maintained in the loan file. Write-ups should contain at least the following information as
appropriate:
1 A summary and analysis of current personal financial statements, credit history,
including a review of the last years tax returns.
2. Short biography of borrower.
3. Project budget and design team
4. Evidence that
a. The project site is not within 200 feet of an existing off -site treatment
system;
b. The existing improvements are permitted and compliant with existing and
applicable codes;
c. A community system is not being actively considered in the immediate area
5. Description and valuation of collateral and GIS coordinates of the proposed system
6. A schedule for repayment and an analysis of the sources of repayment, including
secondary and tertiary (if available) sources of repayment.
7. Full description of how funds will be used including interest rate, and term
8. Recommendations for and conditions of approval.
Hood Canal Regional Septic Loan Program V.12-23-06 Page 23 of 25
9. Description of why the project is needed including technical information on the
deficiencies of the current system and current plans for repairs and/or replacement.
10 Summary of required loan documentation or a Closing Checklist
A loan will be approved and closed only if the Approving Authority deems the risk acceptable
and that it qualifies under the Program parameters.
B. Closing Requirements
The process, including responsibilities of various parties is outlined in a Loan Procedures
Manual In general all security and collateral documentation is in place and properly executed.
Preparation of at least the following (in perfectible condition) must be present and executed to
close a financing transaction:
1. The Promissory Note
2 Loan Agreement (listing terms and conditions)
3. Deed of Trust
4. Truth in Lending Disclosure Statement
5. Notice of Right to Cancel
6. A copy of the bid contract signed by installer and Borrower including an Operations and
Maintenance Schedule.
7. Non Conflict of Interest Certification
8. SEC Information and Photo Release Form
9. ACH form, if applicable
C. Credit Files
Loan staff will maintain contact with customers at a level that provides maximum management of
the loan to minimize portfolio risk. Loan staff is responsible for sufficiently documenting all
lending relationships so that the credit file becomes the primary source of all pertinent
information necessary for credit decisions.
The Loan Officer is responsible for assuring that the credit file on each customer contains the
application, credit memorandum credit approval memo, all information utilized in making the
investment decision and all follow-up information provided by the customer on an ongoing basis.
Electronic Information. Every effort is made by employees to receive, maintain and save as much
non -collateral credit information as possible in a digital format to reduce paper usage. The
electronic files from SEC's contact system are to be ` hard" copied to the credit file semi-
annually.
Credit Files should contain:
1. Record of Compliance Review: A compliance review is to be completed to ensure the
Operation & Maintenance schedule is followed and annual property taxes are paid
current.
2. Documentation of customer contact: Loan Officers should provide updates on the
customers regularly Memos must be generated and placed in the Credit File when either
a significant event occurs concerning the borrower or operation of the borrower or when
there have been deviations from the Loan Policy or the credit approval
3. Field Office Reporting• Any non -binding hard copy credit file information received in
field offices 's to be forwarded to SEC's main office on a monthly basis for placement in
credit files Forwarding of this information may be accelerated at times when the credit is
a problem or watch list asset or SEC is anticipating any type of portfolio review or audit.
Hood Canal Regional Septic Loan Program V.12-23-06 Page 24 of 25
Organization of each credit file will follow a standard format.
Under no circumstances are original files to be sent outside of SEC's offices except as required
by legal counsel. Should field staff need a file, a complete photocopy or digitized electronic copy
should be delivered
D. Collateral Files
All original binding collateral documentation for a loan is maintained in main SEC's Ilwaco
office in a fireproof safe/filing cabinet Organization of each collateral file will follow a standard
format.
E. Charge -Offs
Whenever any portion of a loan is deemed uncollectible in part or in whole, a full or partial
charge -off against the Allowance for Loan Losses shall be made to assure that the value of SEC'
assets are stated as accurately as possible even though partial recovery may be possible at some
time in the future.
The Credit Committee must approve a charge -off, as appropriate. Management will recommend
when borrowers outstanding balance(s) should be charged -off to the loss reserve account. A
charge -off does not imply any lessening of efforts to collect the loan in full. Management has
responsibility for all loan workouts and collection efforts. Factors such as the amount of debt, the
probability of collection and the time involved must be considered when determining a course of
action and pursuing collection and follow-up.
Hood Canal Regional Septic Loan Program V.12-23-06 Page 25 of 25
Attachment B
HOOD CANAL REGIONAL SEPTIC LOAN PROGRAM
AN INTERLOCAL AGREEMENT BETWEEN
Jefferson County
Kitsap County
Mason County
Port Gamble S'Klallam Tribe
Skokomish Tribe
THIS AGREEMENT ("AGREEMENT") is entered into by and between
Jefferson County, Kitsap County, Mason County, the Port Gamble S'Klallam Tribe,
and the Skokomish Tribe, (collectively 'the parties') for the purpose of implementing
a program to provide financial assistance to citizens of those jurisdictions to address
water quality issues in Hood Canal caused by onsite sewage systems.
I. RECITALS
1.1 INTERLOCAL COOPERATION ACT. The Interlocal Cooperation Act, RCW
Chapter 39.34 provides that public agencies, including counties and Indian tribes,
may enter into cooperative agreements to more efficiently provide services within
their jurisdiction.
1.2 HOOD CANAL PROGRAM. This Agreement establishes the Hood Canal
Regional Septic Loan Program ("Program"). The parties, working through the Hood
Canal Coordinating Council, have developed the Program with Shorebank Enterprise
Cascadia ( Enterprise") to leverage private capital with available state funding to
implement the Program. The Program Guidelines are attached to this Agreement as
Exhibit A and incorporated by reference herein. Except as described in Sections 2.3
and 2.5 below, or if state funding or private funding described below is fully
expended, ends, or is no longer available for the purposes of this Program, the
Agreement and the Program it establishes are deemed to have no termination date.
1.3 STATE FUNDING Kitsap County has entered into a contract with the
Washington State Department of Ecology ("Ecology") for the state funding portion of
the Program. Kitsap County is required to provide the treasury functions for the
Program by RCW 43.09.285, as it is has the largest population of any of the parties
Hood Canal Program
Interlocal Agreement -1
to this Agreement. The contract between Kitsap County and Ecology is attached to
this Agreement as Exhibit B and incorporated by reference herein.
1.4 PRIVATE FUNDING Enterprise has approximately $3 million dollars in
private funding available to leverage public funding to implement the Program.
Enterprise has entered into a contract with Kitsap County for the purposes of
managing and implementing the Program and providing private matching funds for
the Program The contract between Kitsap County and Enterprise is attached to this
Agreement as Exhibit C and incorporated by reference herein.
1.5 PURPOSE OF AGREEMENT. The purpose of this Interlocal Agreement is
to establish and define management and financial responsibilities for the Program.
II. AGREEMENT
2.1 PROGRAM GUIDELINES The parties agree that management and operation
of the Program will be based on the Program Guidelines attached as Exhibit A and
incorporated by reference into this Agreement. The Guidelines will include specific
provisions applicable to tribal lands. The Guidelines may be modified pursuant to
Section 2.9 of this Agreement.
2.2 TREASURY AND FINANCIAL REPORTING. Kitsap County will provide
treasury functions to support the Program and is responsible for all contracting
functions relating to the contract between Kitsap County and Ecology for the state
funding portion of the Program. Kitsap County will provide copies to the parties to
this Agreement of all contract, financial reports, payments, and relating documents
sent to and received from Ecology regarding the Program. Kitsap County will provide
quarterly financial reports to the other parties on the Program. Kitsap County's
quarterly financial reports will reflect reports prepared by Enterprise on the number of
loan applications submitted and approved projects currently under construction,
projects completed, and projects in default.
2.3 FINANCIAL RESPONSIBILITY The parties agree that Kitsap County is
providing the treasury and contracting functions as required by RCW 43.09 285, and
for the purpose of obtaining funding on behalf of all parties to this Agreement In the
event Kitsap County wishes to terminate its role in providing treasury and contracting
functions under this Agreement, Kitsap County shall provide six months written notice
to the other parties to the Agreement. The parties agree that no draw or obligation
under the State Revolving Fund Contract shall be incurred without unanimous
agreement by the parties.
2.4 PROGRAM ADVISORY BOARD Each party to this Agreement shall appoint
one member to the Program Advisory Board ('Advisory Board"). The Advisory
Board shall seek staff support from the Hood Canal Coordinating Council to assist
the Advisory Board in its functions. The functions of the Advisory Board will be to
review ongoing implementation of the Program, including financial status, marketing
program, and evaluation of program operations The Advisory Board shall meet at
least quarterly to review the implementation of the Program. The parties to this
Hood Canal Program
Interlocal Agreement - 2
Agreement, through the Hood Canal Coordinating Council, may periodically request,
but not more than twice yearly, a written report from the Advisory Board. The parties
will seek to coordinate reporting by the Advisory Board with reporting provided by
Enterprise relating to the Program. The Advisory Board may modify the Program
Guidelines through a unanimous vote of all members. The Advisory Board shall
coordinate its meeting schedule with the Hood Canal Coordinating Council.
2.5 TERMINATION OF PROGRAM. The Program shall be terminated only when
the legislative authorities of all the parties have determined that they no longer wish
to participate in the Program. The termination of the Program shall be effective only
u pon the end of the current calendar year. Upon termination of the Program, the
parties shall seek to reach agreement on the payment of financial responsibilities,
collection of loans, division of remaining funds, and ongoing implementation of an on -
site septic program by parties to this Agreement on an individual or shared basis. If
the parties cannot reach agreement on the terms for termination of the Program, then
the Dispute Resolution process in Section 2.10 of this Agreement shall apply.
2.6 RECORDS MAINTENANCE. The parties shall maintain books, records,
documents and other evidence, which sufficiently and properly reflect all costs
relating to the Program. These records shall be subject to inspection, review, or audit
by agencies so authorized by law. All books, records, documents, and other material
relevant to this Agreement will be retained for six years after expiration and the Office
of the State Auditor, federal auditors, and any persons duly authorized by the parties
shall have full access to and the right to examine any of these materials during this
period The local government parties will comply with all applicable provisions of Ch.
42.56 RCW, the Public Records Act. Records and other documents, in any medium
furnished by one party to this agreement to the other party, will remain the property of
the furnishing party, unless otherwise agreed. The receiving party will not disclose or
make available this material to any third parties without first giving notice to the
furnishing party and giving it a reasonable opportunity to respond Each party will
u tilize reasonable security procedures and protections to assure that records and
documents provided by the other party are not erroneously disclosed to third parties.
2.7 RIGHTS IN DATA. Unless otherwise provided, data which originates from this
Agreement shall be "works for hire" as defined by the U.S. Copyright Act of 1976 and
shall be owned equally by the parties. Data shall include but not be limited to
reports, documents, pamphlets, advertisements, books, magazines, surveys, studies,
computer programs, films, tapes and/or sound reproductions. Ownership includes
the right to use, copyright, patent, register and the ability to transfer these rights.
2.8 INDEPENDENT CAPACITY. The employees or agents of each party who are
e ngaged in the performance of this agreement shall continue to be employees or
agents of that party and shall not be considered for any purpose to be employees or
agents of the other party.
2.9 AGREEMENT ALTERATIONS AND AMENDMENTS. This Agreement may
be amended by unanimous agreement of the parties. Such amendments shall not be
Hood Canal Program
Interlocal Agreement - 3
binding unless they are in writing and signed by personnel authorized to bind each of
the parties.
2.10 DISPUTES. In the event that a dispute arises under this Agreement, it shall
be determined by a dispute board in the following manner Each party to this
agreement shall appoint a member to the dispute board. The members so appointed
shall jointly appoint two additional members to the dispute board. The dispute board
shall evaluate the facts, contract terms and applicable statutes and rules and make a
determination of the dispute. The determination of the dispute board shall be final
and binding on the parties hereto. As an alternative to this process, either of the
parties may request intervention by the Office of the Governor to provide dispute
resolution procedures based on RCW 43.17.330, in which event the Governor's
process will be binding on the parties.
2.11 GOVERNANCE. This contract is entered into pursuant to and under the
authority granted by the laws of the State of Washington and any applicable federal
laws. The provisions of this agreement shall be construed to conform to those laws.
In the event of an inconsistency in the terms of this Agreement, or between its terms
and any applicable statute or rule, the inconsistency shall be resolved by giving
precedence in the following order: 1. Applicable State and federal statutes and rules;
2. Any other provisions of this Agreement, including materials incorporated by
reference.
2.12 ASSIGNMENT. The obligations under this Agreement, and any claim arising
thereunder, are not assignable or delegable by either party in whole or in part
without the express prior written consent of all other parties, which consent shall not
be unreasonably withheld.
2.13 WAIVER A failure by any party to exercise its rights under this agreement
shall not preclude that party from subsequent exercise of such rights and shall not
constitute a waiver of any other rights under this Agreement unless stated to be such
in a writing signed by an authorized representative of the party and attached to the
original Agreement.
2.14 SEVERABILITY. If any provision of this Agreement or any provision of any
document incorporated by reference shall be held invalid, such invalidity shall not
affect the other provisions of this Agreement which can be given effect without the
invalid provision, if such remainder conforms to the requirements of applicable law
and the fundamental purpose of this agreement, and to this end the provisions of this
Agreement are declared to be severable.
2.15 ALL WRITINGS CONTAINED HEREIN. This Agreement contains all the
terms and conditions agreed upon by the parties. No other understanding, oral or
otherwise, regarding the subject matter of this Agreement shall be deemed to exist or
to bind any of the parties hereto.
Hood Canal Program
Interlocal Agreement - 4
0 WI T Nl' SS WHEW- I t tre
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Date:
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