State seizes SAFE-BIDCO, will liquidate Santa Rosa lender

State regulators seized troubled Santa Rosa-based SAFE-BIDCO late Monday and announced plans to liquidate the state-chartered nonprofit, which is devoted to helping small businesses obtain loans.

The 36-year-old organization had been under scrutiny after a blistering state audit issued in April found that it risked going insolvent by next June as a result of questionable spending decisions. In response, the state Department of Business Oversight in July ordered the agency to develop a self-liquidation plan, which SAFE-BIDCO did not comply with.

In an order issued Monday, Department of Business Oversight Commissioner Jan Lynn Owen found SAFE-BIDCO - formally known as the State Assistance Fund for Enterprise, Business and Industrial Development Corporation - had years of operating losses that left it in an “unsafe and unsound condition.” Owen also said the nonprofit lacked a viable plan to beef up its capital portfolio and protect its creditors.

The state will soon establish a claims procedure for the agency’s customers and creditors.

Mary Jo Dutra, SAFE-BIDCO president and chief executive officer, could not be reached for comment Monday on the action. In an interview with The Press Democrat in July, Dutra disputed much in the auditor’s report, including that the agency was at risk of insolvency by next year. It has about a half-dozen employees at its office off Sebastopol Road.

The order notes the two years that the agency actually posted a surplus over the last decade were the result of one-time allocations from the federal government. In 2008, the U.S. Department of Energy forgave $2.75 million in loans from the agency. If not for that action, SAFE-BIDCO would have posted a $381,000 loss. This year, SAFE-BIDCO took over a $1.2 million loan portfolio and $1 million in loan funds under a U.S. Department of Agriculture rural development program. Without such funding, the agency was on track to lose $120,000 for the year. In recent years, the nonprofit has not made any loans in certain areas such as microloans and energy efficiency.

The order also cites the declining total of net assets for the agency over the past decade. In 2008, its capital base was more than $5 million, but by 2017 it had shrunk to $1.8 million.

The audit had questioned some of the agency’s spending given its limited funding base, including 17 out-of-state trips by Dutra from 2011 to 2016. It also noted that it spent $60,000 in fiscal 2015-16 on a consultant to lobby the Legislature.

Dutra had been seeking help from the Legislature, most recently to expand SAFE-BIDCO’s line of credit from $2.5 million to $15 million.

Since it was created by the Legislature, the agency contends it had made more than $200 million in loans and saved some 13,000 jobs in California.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.