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The Underground Economy

Thanks to Small Business California for this information.

The underground economy is one in which employees are paid on a cash basis thereby eliminated the cost of taxes and workers compensation.

The Labor Enforcement Task Force put out a Fiscal Year 2013-2014 Report about the underground economy in California. Here’s a smattering of results they found.

  • Agriculture where 72% of the businesses looked at were out of compliance
  • Automotive where 94% were out of compliance
  • Beauty Salons where 72% were out of compliance
  • Construction where 81% were out of compliance
  • Garment where 87% were found out of compliance
  • Manufacturing where 71% were found out of compliance
  • Restaurant where 75% were found out of compliance.
  • Other where 74% were found out of compliance.

The Labor Enforcement Task Force (LETF) welcomes referrals and leads on underground economy activity from both employers and employees. The public can contact LETF by any of the following methods:
LETF Public Hotline: 855 297 5322
LETF Email Address
The new LETF Online Referral Form

CRA Resources

for Bankers & Community Development Practitioners

Do you know your local bank’s CRA rating or where to find it? Could you write a performance context for your bank’s next CRA exam? The San Francisco Fed is pleased to offer resources for those looking to expand their understanding and application of the CRA.

cra-ratings-tool CRA Ratings Search Tool  The CRA Ratings Search Tool allows you to quickly and easily locate CRA evaluations for state member banks regulated by the San Francisco Fed. Beyond the ratings themselves, the performance evaluations (PE) contain valuable information about an institution’s CRA activities and assessment areas. The search tool allows you to filter by bank size and geography and directly links users to a bank’s two most recent PEs.
Community-Development-Data-Guidebook-cover Community Development Data Guidebook The Community Development Data Guidebook is meant to serve as a “how to” for those interested in conducting more robust community development research. This type of community-based research, often termed performance context in the regulatory world, is critical to bankers looking to make impactful investments and loans pursuant to Community Reinvestment Act (CRA) requirements.
Understanding-Community-Development-Needs-through-the-CRA-Performance-Context-cover Understanding Community Development Needs through the CRA Performance Context

This working paper attempts to demystify the performance context and establish its strategic value to the CRA process. The paper explores new opportunities for strengthening the performance context as a community development tool, from the perspective of both bankers and regulators.

For more, please visit our CRA page.

Claudia Talks DIY Economies at IEDC

Healthcare Reform and Small Biz

What Healthcare Reform Means for your Micro-Business

Health care continues to be an important issue for small business owners. The Small Business Administration and Small Business Majority are committed to helping businesses navigate the changes and opportunities in health care through the Affordable Care Act 101 webinar series.

Small business owners can learn the basics of the Affordable Care Act and how they can enroll in small business health insurance marketplaces. Other topics discussed include insurance reforms, the small business health care tax credit, and employer shared responsibility provisions. SBA representatives help small business owners understand the facts of the Affordable Care Act so they can make informed decisions about providing health insurance for their employees.

What the Healthcare Law Means for your California Small Business



Learn more about how the new health care law affects small businesses.

For more information visit Covered California.

Profile – Accion San Diego

Combining Growth and Mission

Susan Brown, CAMEO’s microlending guru, interviewed Elizabeth Schott, CEO of Accion San Diego and CAMEO’s board president for the first installment of our series profiling California’s most prolific microlenders: Accion San Diego, Opportunity Fund, and VEDC. Here’s Susan’s profile:

We have averaged 15-30% portfolio growth over the past several years and project continued growth for the next five years…. We don’t make loans. We change communities and local economies. –Elizabeth Schott

This impressive growth is combined with her commitment to a high-touch lending process that amounts to “more of a movement than a set of transactions.”

Accion San Diego is a member of the Accion Network, worldwide leaders in micro-enterprise development. Launched in May of 1994, Accion San Diego’s mission is to create economic opportunity for primarily low-to-moderate income business owners who lack access to traditional sources of credit. Through business loans and support services, the lender strengthens the roots of emerging entrepreneurs and helps them to thrive in their communities, creating social and economic change.

Accion offers two main products to entrepreneurs in San Diego County:

  1. The Quick Loan, $2,000 or less, has a 48 hour turn-around time.
  2. The Complete Loan, from $2,001- $75,000, has a turn-around time of approximately 2-3 weeks.

They closed 209 loans in 2013, and will close around 270 in 2014, with an average loan size between $11,000 – $12,000 and a current portfolio of $4.4 million. Their self-sufficiency ratio (percentage of operating expenses covered through earned revenue) has increased from 38% in 2007 to approximately 60% in 2014.

Schott saw an opportunity to meet increased market demand in 2008-10 — when banks tightened lending to small entrepreneurs. This has become an ongoing strategic objective. She notes three organizational pillars she has pursued to support this objective:

Increased focus to raise program revenue and loan capital. A growing portfolio, along with 10%-19% interest rate, has provided increased earned revenue to support operations, as reflected in their nearly doubled self-sufficiency ratio. Schott has also focused on building successful and diverse relationships with key stakeholders and funders providing a broad base of grant revenue for operations and programs. As for increasing their loan fund capitalization, ASD has received four back-to-back CDFI loan fund grant awards.

Investment in technology and infrastructure. ASD has upgraded their portfolio management system to offer more-detailed, real-time reporting which informs management and outreach decisions. In addition, the staff, now out-fitted with remote technology (smart phones and laptops), are not tied to their desks, but rather spend their time in the field generating deals while still responding to new inquiries, answering borrower questions and gathering loan documents. ASD is also participating in a pilot with the Accion Network to automate some of the assessment and underwriting process, “without losing the personal touch” so critical to their mission. This in-the-field approach combined with remote technology generates high productivity, with approximately 17 deals closed per FTE staff member in 2014.

Investing in The Team. “We have invested a lot in our people, which has a direct correlation to our growth,” says Schott. ASD provides all staff flexibility accessing training opportunities for professional growth. They have restructured their staffing to provide career ladders within ASD and they plan to continue building this as future growth occurs.

“People can join ASD at an entry position, and see a next step for their career path within the organization,” says Schott. They also invest in ongoing, bottom-up team building activities, offering opportunities for staff at all levels to design and lead activities to build employee engagement and highlight those who have gone above and beyond. “Managers underestimate the power of small things that can lead to an increase in productivity and retention of valuable staff.”

a next step for their a career path within the organization for themselves right here,

When asked what she sees as important future focus for the CDFI microlending industry, Schott notes, “We have to invest in tracking data capacity to demonstrate our effectiveness. I can’t tell you how often funders comment that they love to see all the results we pack into our annual report. This is what will set us apart when competing for future funds.”

Excellence in MicroLending Step One

by Susan Brown

CAMEO’s long-standing commitment to building California’s microlending sector is the force behind many of our recent programs: Kiva and Accion Texas partnerships, the training series last October, Claudia’s many successes in building resources for lending, to name a few.

Our latest program, Excellence in Lending (EiL), focuses on the program elements needed for a high-quality loan fund poised for growth. Using Kiva’s Field Partner metrics as a starting point, we created an assessment that included:

  • Marketing
  • Product Design
  • Technology Use
  • Portfolio Management
  • Underwriting
  • Approval Process
  • Servicing
  • Risk Management
  • Earnings, Liquidity, Capitalization
  • Delinquencies and Collections

Fifteen of CAMEO’s 28 lending members responded. We compiled the aggregate answers, and have created confidential reports to each responding organization so they can see how they stand compared to their peers.

We will use the assessment responses for the morning portion of our 2015 Microlending Forum on January 15. The assessment yielded rich content for discussion. Some topics that show a wide variety of standards and practices are:

  • Use of technology
  • Staff time in the field
  • Servicing practices
  • Loan volume per FTE staff
  • Portfolio at Risk definitions
  • Use of State Guarantee programs
  • Risk rating practices
  • Interest rates charged

At the Forum participants will discuss what they think of the results: Are there areas that the industry as a whole should address or improve? Are there areas where establishing performance metrics make sense? What needs to be in place for a CDFI to successfully scale up to, say, 200 loans per year?

Ginger McNally, Senior Vice President for Strategic Consulting at Opportunity Finance Network, will join us to give us her take on the results, relative to the CDFI small business lending trends she sees around the country.

We look forward to our members’ participation in this discussion to digest the results and plan future direction for meeting the need for small and microloans in California.

Who Are MMS Borrowers ?

With the first year of CAMEO’s MMS program completed, and our users having made over 100 loans, we’re taking a closer look at what MMS borrowers look like. MMS offers a robust set of demographic tools, and CAMEO will be taking fuller advantage of these program features in the coming year.

Most MMS borrowers are young businesses, with 70% of loans going to businesses less than three years old.


Borrowers serve a variety of industries, from accounting services to fashion design. The top three industries were personal/design services, retail, and restaurant service.


Most loans were for $15,000 or less, with a median loan size of 15,000.


The three most common reasons for needing a loan were working capital, start up costs, and leasehold improvements. The majority of approved loans were for working capital, which was most commonly used to purchase inventory.


Sonora – DIY Economy in Action

IMG_1813On December 17, the CAMEO staff took a field trip to visit Larry Cope, the head of economic development in Tuolomne County, at his office in Sonora. After chatting with him for a few minutes, it was clear to all of us that the work Larry and his team do represents the epitome of a DIY Economy.

Shortly after Larry started his job in March of 2009, Sonora (the county seat) lost 4,500 jobs from the closure of Mervyn’s, Gottshalk’s, and Sierra Pacific. He had his work cut out for him.  So he set his team to work.

Not wanting to lose more companies, they focused on business retention for the first three years – and entrepreneurship. They weren’t planning on beefing up the latter, but he found out that all of the entities that provided business assistance were duplicating services. And in a rural area with a small economic development budget, that needed to change. He sat everyone down at the table – Columbia College, SCORE, the SBDC and other stakeholders – and created the Business Alliance of Tuolome County. They streamlined their offerings and each entity concentrated on what they did best.  They organize 25 basic classes a year in workshop format in everything from business plan basics to marketing to social media; and they started an enhanced counseling program with CDBG funds for businesses in the city of Sonora.

In 2012, Larry organized the Central Sierra Economic Development District that includes Alpine, Calaveras, Tuolome, and Mariposa counties as well as a handful of cities. They share resources and provide classes. This year their main goals will be to expand broadband connectivity outside the towns and expand support to microbusinesses.

IMG_1825In another effort, Larry and his team marshaled resources and leveraged relationships to open the InnovationLab in September 2014.  They partnered with UC Merced and others, raised just $35,000, negotiated very cheap rent with the county, and cut the ribbon on a collective space that includes a networking/co-working space, a computer lab, an electronics lab, a hard tool workspace, a 3-D printing lab and more. They should break even in six months and after two months are well on their way.

Before Larry started, the county’s economic development strategy was based on chasing smoke stacks, or business attraction.  The idea of business attraction needs to be reformed, and alternative incentives need to be developed. Cash and tax give-aways aren’t the only thing.  Larry and his team are using free rent in vacant government properties and connecting potential businesses with local investors. They’re beefing up the STEM curriculum in the high school and community college. Attraction at any cost has to go” says Larry.  “We need to think of the types of businesses that would provide sustainable, long term economic growth for the community.”

The type of businesses Larry and his team try to attract to Sonora are small technology companies and family-based businesses that are squeezed out of the Bay Area. Family-based businesses aren’t worried about shareholder value; they have a stake in their community and have an expanded sense of what it means to be successful. If a business is all about the bottom line, then at some point or another, that business is bound to leave.

IMG_1831It’s not all about hi-tech. Larry helped Mountain People Organics, an organics buying club, find space in the old National Guard building for 20 cents a square foot. Two days a week, the space holds MPO’s buying club, as well as a farmer’s market with organic food producers and craftspeople – collectively called The Farmory. Larry and his team connect the microbusiness owners with the resources the county and city have to offer. I couldn’t resist supporting at least a couple of the local businesses.

Over lunch, I asked Larry how successful Tuolomne’s economic development strategy is in terms of jobs and businesses. After letting us know that the occupancy rate is 98%, he laughed and said “we know we’re doing a good job when the owner of the restaurant bakes you cookies.” All kidding aside, Larry says that the challenge is to develop metrics that truly reflect the improvements in business and the improved entrepreneurial ecosystem so that businesses are committed for the long haul.

Paid Sick Leave in California

From the California Employers Association:


The Healthy Workplace, Healthy Families Act of 2014 (AB 1522) was signed into law in 2014.
The basic intent of the law is to provide all employees with at least three days or 24 hours of paid sick leave each year.

What does this mean for you as an employer?
Effective January 1, 2015 ALL employers must post a Paid Sick Leave Notice in their place of business. Effective July 1, 2015, ALL employers, both public and private, will be required to provide paid sick leave to all of their employees, with a few exceptions (unionized workers, home health care providers and airline flight crews).

Employers are not required to pay out accrued sick time at termination.

What does AB 1522 mean for employees?
Under AB 1522, ALL employees who work in California for 30 or more days in a calendar year will earn paid sick leave at a rate of one hour for every 30 hours worked! This accrual method begins as of 7/1/15 and employees must be allowed to use any accrued time after 90 days of employment. (Former employees that are re-hired within one year are entitled to have previously accrued and unused paid sick days be reinstated.)

Employers will be allowed to limit an employee’s use of paid sick days to three (3) days per year and can cap accrual of paid sick leave at six days.

Another option to the accrual method described above is to give employees all of their paid sick leave up front. This has been called “front loading”, “the lump sum method”, or “granted leave”. In each case, employers are permitted to grant three or more days of paid sick leave at the start of the year to their employees to avoid the administrative burdens of tracking accrual and carry over.

When can employees use AB 1522?
Employees can use AB 1522 to take paid leave for themselves or a family member for preventive care or care of an existing health condition or for specified purposes if they are a victim of domestic violence, sexual assault or stalking.

Family members include the employee’s parent, child, spouse, registered domestic partner, grandparent, grandchild, and sibling. Preventive care would include annual physicals or flu shots. For partial days employers can require leave be taken in two hours increments, but otherwise the determination of how much time is needed is left to the employee.

Existing law already requires employers that provide paid sick time to allow employees to use half of their yearly allotment for “kin care” (care of their sick child, parent, spouse, registered domestic partner). The new law does not repeal “kin care” but expands it to include grandparents, grandchildren and siblings.

Employers with more generous plans will have to allow employees to use 1/2 of the annual sick leave entitlement for Kin Care.

Posting, Notice and Record Keeping Requirements
In addition to accounting for and providing the accrued leave, employers are required to:

  • Display a Paid Sick Leave Poster as of 1/1/2015
  • Include the amount of paid sick leave accrued on employees~itemized wage statements
  • Retain all paid sick leave records for three years
  • Use the revised Wage Theft Prevention Act Notice on or before 7/1/15

What if I already provide paid sick leave for my employees?
California employers who already provide at least three days of paid sick time, will now have additional administrative requirements, including:

  • Recording an employee’s sick leave balance on itemized wage statements, or another writing, on each pay day.
  • Carry-over of accrued sick leave with the cap of six days.
  • Documentation showing hours worked as well as paid sick days accrued and used by an employee.
  • Rate of Pay

Employees should be paid their regular rate of pay for sick leave. However, if your employee is paid different hourly rates, is paid a commission, is paid by piece rate or flag rate, etc. then you must “Divide employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay period of the prior 90 days of employment” to determine an hourly rate to be paid for sick leave.

Where to find help

California Employers Association is here to assist you in navigating this new law. We have webinars dedicated to this topic in December, February and again in June. We can assist you in developing a Paid Sick Leave Policy that fits your company’s needs. By July 1, 2015 you will be informed and ready to address this new law with your employees and in your employee handbook.

Recommendation and Source Information
Don’t change your policy or create a new one just yet! This bill was just passed and there are still many unanswered questions. A list of frequently asked questions was released the first week of December, and we anticipate there will be more to come. For now, get informed, ask questions and watch for our updates.

Paid Sick Leave FAQ’s
Paid Sick Leave Poster
Updated WageTheft Notice

Webinars (click to register)

Thursday, December 11th – noon to 1:00 pm
Wednesday, December 17th – noon to 1:00 pm
Wednesday, February 4th – noon to 1:00 pm
Wednesday, June 10th – noon to 1:00 pm

Task Force to Improve Workforce Education and Promote Job Creation

California Community Colleges Board of Governors Creates Task Force to Improve Workforce Education and Promote Job Creation

SACRAMENTO, Calif. — Seeking to make community college workforce education even more responsive to the state’s economy, the California Community Colleges Board of Governors today established a task force to develop policies that will prepare more students for existing high value jobs and promote job creation with workforce training that sparks small business development and lures out-of-state business investment in key industry sectors.

“The Board of Governors is committed to improving our students’ employment prospects and growing the state’s economy,” said Manuel Baca, president of the California Community Colleges Board of Governors. “The California Community Colleges has served as an economic springboard for many Californians and it must enact smart and thoughtful policies in the future for it to continue in that role and I look forward to hearing the recommendations the task force develops.”

The Task Force on Workforce, Job Creation, and a Strong Economy will be comprised of representatives from the California Community Colleges, business community, labor groups, public agencies involved in workforce training, K-12 policy, and community based organizations.

“Community colleges serve as the workforce training engines behind California’s regional economies,” said California Community Colleges Chancellor Brice W. Harris. “The task force commissioned today will meet with industry leaders, college faculty and staff, elected officials, and other important members of the community to determine what our college system must do to help us achieve the best for our students and state.”

The task force will conduct its work in three separate phases. The first phase, set to begin this December, will involve holding meetings with community college practitioners to surface strategies and prioritize workforce training policies and practices that engender flexibility to respond to the changing labor market, regional responsiveness, partnership with industry, and ensure student degrees, certificates, credentials, and coursework are universally honored by colleges and have value to employers.

The second phase will start in February 2015 and involve town hall meetings in regions across the state with elected officials and leaders from business, economic development agencies, K-12, labor, and other community organizations to vet and build on ideas and practices that bring stronger alignment between community colleges and key industry sectors. The town hall meetings will include interactive discussions focused on how the community college system can act as a catalyst for growth in California’s regional economies.

The final phase involves meetings of the full task force itself. Members will deliberate over information and issues identified at the regional meetings and develop a set of recommendations by the end of summer 2015, which will be proposed for adoption by the Board of Governors.

Throughout the spring, the broader community would be invited to respond to the draft recommendations via the task force’s website.

The task force will build upon other initiatives that the California Community Colleges has undertaken to increase individual and regional economic competitiveness by providing the state’s workforce with relevant skills and quality credentials that match employer needs and fuel a stronger economy. .

In August, the California Community Colleges announced a goal of increasing student completions by nearly 250,000 statewide to help meet the needs of the labor market and to ensure more Californians have access to higher education.

The California Community Colleges Chancellor’s Office Doing What MATTERS for Jobs and the Economy framework and the Student Success Initiative provide the foundation to launch this task force and have also been working to increase workforce and economic competitiveness.

These measures are necessary in light of statistics indicating that there will be 6.3 million job openings in California through 2020, of which 2 million jobs will require a post-secondary certificate or associate degree.

Furthermore, studies show that the labor market is increasingly demanding a more skilled workforce. Whereas in the 1970s 28 percent of jobs required more than a high school education, by 2020 it is estimated that 65 percent of job openings in the United States will require some postsecondary education or training.

To see the calendar of events for the task force, go to:

The California Community Colleges is the largest system of higher education in the nation composed of 72 districts and 112 colleges serving 2.1 million students per year. Community colleges supply workforce training, basic skills education and prepare students for transfer to four-year institutions. The Chancellor’s Office provides leadership, advocacy and support under the direction of the Board of Governors of the California Community Colleges. For more information about the community colleges, please visit