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To the uninitiated, Santa Rosa’s SAFE-BIDCO can seem a bit of a mystery — an apparent arm of state government and yet a separate nonprofit agency that exists to help small businesses get loans.

In contrast, recent criticism of the organization seems straightforward enough. The state auditor’s office this spring contended that the nonprofit stands at risk of going insolvent as early as next June and its leaders have made “questionable” spending decisions. Late last week, a state agency sent the nonprofit a letter ordering its leaders to develop a “self-liquidation plan.”

All of which leaves a question mark hanging over the future of a 36-year-old organization based in an office park off Sebastopol Road.

SAFE-BIDCO, or the State Assistance Fund for Enterprise, Business and Industrial Development Corporation, is listed as a “state entity” in the government’s online California Directory, its name nestled between those of the Board of State and Community Corrections and the State Bar of California. Nonetheless, the organization’s half-dozen employees aren’t eligible to join CalPERS, the state’s retirement system.

Because of its preponderance of state-appointed board members, the nonprofit isn’t permitted to offer certain federal loan programs as a designated community development financial institution. And the Internal Revenue Service has concluded that SAFE-BIDCO doesn’t need to file an annual return Form 990, a common requirement for nonprofits.

“We’re the only thing like us out there,” said President/CEO Mary Jo Dutra. “And that makes it very confusing.”

Since the Legislature created the nonprofit in 1981, it has made more than $200 million in loans and created or saved more than 13,000 jobs around the state, according to details in an April state audit report.

The nonprofit, located in an office on Corporate Center Parkway, helps startups and other small companies that often can’t get loans anywhere else, its leaders said.

Glen Stanley, the chairman of the board, said that without SAFE-BIDCO, “businesses will fall between the cracks.”

“They don’t get formed, and that is a negative impact to the California economy,” said Stanley, who first became involved with the nonprofit as a bank vice president. He was appointed to the board in 1999.

One state legislator sees a need for organizations like SAFE-BIDCO because the state’s small towns and rural communities lack enough lenders to help small businesses create jobs and boost economic growth.

“Rural California needs help,” said state Sen. Mike McGuire, D-Healdsburg.

The nonprofit is located within his legislative district.

While McGuire had offered to work with SAFE-BIDCO officials to get the nonprofit put under the direct oversight of a state agency, state regulators ultimately stepped in with their own plans to deal with the nonprofit.

Officials from that department told him that regulators intend to review whatever self-liquidation plan the nonprofit submits, after which “a formal time line will be developed for liquidation.”

“The future of SAFE-BIDCO is now in the hands of the Department of Business Oversight,” McGuire said.

SAFE-BIDCO came to Santa Rosa from Sacramento in the mid-1990s, said Dutra, who has been its CEO since 2000. Past officials have told her the move happened because the organization took over part of a state loan guarantee program with a focus on the North Coast. As such, it was required to relocate to the region.

The nonprofit touts that it has provided loan guarantees or other financial aid to such North Bay businesses as Rosso Pizzeria in Santa Rosa and Petaluma, the Metro Hotel & Cafe in Petaluma, Bodkin Wines in Healdsburg and Bicycle Brüstop in Novato.

It currently has eight board members, including two appointed by the governor, one each by the Senate president pro tem and the Assembly speaker, and one representing the California Energy Commission. An open ninth position has yet to be filled by the governor.

This spring, the state auditor concluded in a formal audit report that “because of its declining financial positions, SAFE-BIDCO could become insolvent as soon as June 2018.”

State Auditor Elaine M. Howle wrote in an April 27 cover letter to Gov. Jerry Brown and legislative leaders that the nonprofit “has imprudently spent its limited funds on questionable items.” Such expenses included “16 out-of-state trips and one international trip to Ireland” that Dutra made in a five-year period ending in June 2016.

All involved said the nonprofit needs more capital in order to survive and expand its work. Dutra said the need for new funds became obvious soon after she arrived 17 years ago.

“The auditor didn’t raise the issue” of additional capital, she said. “We raised the issue.”

She said the organization for years sought help from the Legislature, most recently through a request to expand its line of credit to $15 million from $2.5 million. SAFE-BIDCO even spent $60,000 in fiscal 2015-16 for a consultant to work on the funding request with legislators and their staff members — an expense the auditor’s report specifically criticized.

McGuire said he began working with Dutra about 18 months ago and eventually arranged a meeting with officials from the state Department of Finance.

From such conversations, he said, it became clear that Gov. Brown’s administration wasn’t interested in extending more capital to the nonprofit but wanted it to go “officially under the umbrella of a state department.”

Both Dutra and Stanley see a direct connection between SAFE-BIDCO’s requests for more state assistance and the eventual decision of a legislative joint audit committee to ask the State Auditor’s Office to look at the nonprofit.

“Unfortunately, that kind of blew up in our face,” Stanley said. The auditor’s report “certainly hasn’t helped” the nonprofit’s efforts in obtaining more state aid.

Even so, the two leaders defended SAFE-BIDCO’s spending and current financial status.

Both Stanley and Dutra insisted all travel included in the auditor’s report was taken for research or the development of additional sources of funding, a contention the auditor’s staff specifically disputed in a follow-up to Dutra’s April 6 written response.

The trips either were to attend annual conventions or to learn about programs that might help bring more business to the nonprofit, Dutra said.

Such travel is “not a whole lot of fun,” she said, but “it’s the fastest way to get information that you can’t get elsewhere.” Moreover, she maintained, the amount of money in question was small in relation to the nonprofit’s overall expenses — totaling $1.2 million in 2015-16, according to the audit — and the auditor’s office was “making a mountain out of a molehill.”

The two officials also disagreed with the audit’s finding that SAFE-BIDCO should have put a business development contract out to bid after the consultant failed to meet performance goals for four straight years.

Dutra maintained the audit didn’t adequately give the consultant credit for work performed, including assistance to businesses that ultimately didn’t receive loans.

The officials also disputed that the nonprofit is at risk of going insolvent within the next year. Stanley noted that preliminary numbers suggest SAFE-BIDCO ended the latest fiscal year in the black, and Dutra said this year’s budget proposes to operate without a deficit.

Outsiders generally showed caution in discussing SAFE-BIDCO. When asked, no one offered comment from the four North Bay businesses touted as success stories by the organization.

And Assemblyman Marc Levine, D-San Rafael, in whose legislative district the nonprofit is located, through a spokeswoman declined comment.

Al Lerma, director of business development for the Sonoma County Economic Development Board, did point out that competition has increased for organizations like SAFE-BIDCO.

“The lending landscape has changed quite a bit,” said Lerma, who has been involved with small business financing for two decades. It now includes a number of alternative lending and “microlending” institutions that didn’t exist 10 to 15 years ago, he said.

Despite the growth in alternative lending, McGuire said small business lending “is needed more than ever” in the state’s small towns and rural areas.

McGuire originally said he found the audit’s recommendations reasonable and said the nonprofit’s officials “would be smart to accept the recommendation” of the audit to bring SAFE-BIDCO under the oversight of a state agency, perhaps the state Treasurer’s Office.

But now that state regulators have stepped in, requiring the nonprofit to develop what he called a “30-day, self-liquidation plan,” McGuire suggested that goal seemed unattainable.

Should the nonprofit’s officials decline to prepare such a plan, he said, “the organization could be taken into receivership by the state of California.”

Dutra, however, still holds out hope that SAFE-BIDCO could survive after its leaders prepare the liquidation plan.

The end result, she said, might be that the nonprofit relinquishes part of its duties, but continues with other lending programs.

“The plan,” she said, “is to reorganize and look at a different kind of structure.”

You can reach Staff Writer Robert Digitale at 707-521-5285 or robert.digitale@pressdemocrat.com. On Twitter @rdigit.