A. ECONOMIC DEVELOPMENT PROGRAMFunds for economic development activities are provided to communities as gap funding to assist businesses in the creation/retention of jobs for low- and moderate-income persons. Economic development programs are offered in the following categories:
CategoryMaximum Award Amount
Business Assistance (BA) $400,000
The BA program provides grants for gap financing to assist businesses to create or retain jobs for low and moderate-income persons.
Applications Due: February 20, 2004, May 21, 2004, August 20, 2004
Development Fund (DF) $250,000
The DF program provides loans for gap financing to assist businesses to create or retain jobs for low and moderate-income persons.
Applications Due: February 20, 2004, May 21, 2004, August 20, 2004
Regional Assistance Fund (RAF) $200,000
The RAF program provides grants for required local match to bring additional money to the State to assist businesses to create or retain jobs for low and moderate-income persons or for eligible economic development planning activities.
Applications Due: February 20, 2004, May 21, 2004, August 20, 2004
1. Threshold Criteria:(a)Project Benefit: Projects must be an eligible economic development planning activity in the case of RAF or in all other instances, at a minimum, 51% of all jobs created or retained as a result of the project must be taken by persons of low and moderate income. Jobs created/retained must be in the community applying for the program award, be new jobs to that community, and not be associated with any other branches of the assisted business located in another community. Transfer positions cannot be counted toward the job creation/retention requirements. In the event that job creation requirements are not met, the applicant community will be responsible for immediate repayment of all CDBG funds to the State.(b)Cost Per Job: The targeted cost per job created or retained with program funds is $10,000.(c)Eligible Activities: The eligible activities are as follows: BA - acquisition, reconstruction, rehabilitation, or installation of commercial or industrial buildings, structures, capital equipment, and real property improvements.
DF - acquisition, reconstruction, rehabilitation, or installation of commercial or industrial buildings, structures, capital equipment, real property improvements, personal property and equipment and operating capital. DF program funds cannot be used to refinance existing debt.
RAF - provide the required local match necessary to secure new funds to the State for acquisition, reconstruction, rehabilitation, or installation of commercial or industrial buildings, structures, capital equipment, and real property improvements, personal property and equipment and eligible economic development planning activities.
2. Program Requirements:(a) Necessary and Appropriate: Program assistance to a business must be for projects that are necessary and appropriate. The application must describe the need for program assistance, reasonableness of the amount requested, the repayment plan (DF only), and assurance that the assistance provided is commensurate with the community benefits that will accrue from the project. Documentation must be provided that the project cannot proceed without program participation and that program funds provide gap financing.(b) Financing Plan: For other than eligible RAF planning activities, the program application must present a financing plan for a project in which the request comprises the lesser of the maximum award amount or 40% of the total project cost. Project activities and use of funds to calculate the non-program financing must represent a new investment or a new project. The financing necessary to support at least 60% of the total project cost must be firm commitments from non-CDBG funds and must be documented by binding commitment letters submitted with the application.(c) Exclusions: Communities receiving a BA, DF or RAF award may not receive any other CDBG funded economic development activity award (including EDI) for the same project or business during the same program year.(d)DF Program ONLY:(i)Loan: The DF program is a grant to the unit of general local government. The recipient must use the funds as a loan to the identified business. The loan must be provided under the terms stated in a DF Program Letter of Commitment and the contract between DECD and the community.(ii)Repayment Terms: Justification for the repayment terms relate to filling the financing gap, identifying the rate of return allowed through the repayment terms, or specifying the locational cost differentiations and the benefit derived from the assistance. A special interest rate of 2% will be available for projects located in a downtown area as defined in PL 776 enacted by the 119th legislature.3. Selection Process: Project applications will be evaluated as a viable business proposal or RAF eligible planning activity. The following will be considered: (a) Strategy Priority: The program will give priority to business activities that support the state's economic development strategy. The Program, whenever possible, will be targeted towards economic sectors identified in the strategy.(b) Chance of Success: The proposal must demonstrate the following: - a market/need exists for the product, service or planning activity
- the cost of the product, service or planning activity is competitive in current market conditions
- the cash flow projections are adequate to support operating expenses and indebtedness for the business activities
- management has the capacity to carry out the business or development plan
- no unidentified costs are necessary for implementation.
(c) Financial Plan: The financing for the project must be in place and legally binding commitments submitted with the application. The financing need for the project must be based on an assessment of its financial resources and show a reasonable leverage ratio of private and public dollars. The proposal must be structured to meet any cash flow projections. The project pro forma must be reviewed by an independent qualified financial professional. The financing plan must be complete with no unidentified uses of funds necessary to complete the project. Any attorney fees and closing costs are the responsibility of the business and cannot be paid with program proceeds. In the case of DF awards, the business must pay all attorney fees and related closing fees at the time of loan closing.(d) Equity: The proposed program recipient has made an equity commitment to the project, preferably through cash injection. Other substantial participation may substitute for cash equity as determined by the DECD.(e) Repayment - DF Loan: Loan repayment terms will allow a project to be implemented while providing the maximum and most expeditious return of CDBG DF monies.(f) Security DF ONLY: The proposed loan recipient must present collateral appropriate to secure the DF Loan and indicate a willingness to execute security agreements. The discount collateral coverage ratio is 1:1. In projects involving subsidiary corporations a corporate guaranty must be obtained from the parent corporation. Personal guaranty and/or principal life insurance assignment may be required on a case-by-case basis. Purchase money security interest is required on all machinery and equipment purchased with DF loan proceeds unless the purchase price exceeds the loan amount, in which case a pro-rated share interest will be held with any other lender(s).(g) Public Benefit: The proposal will be evaluated on the basis of the community and economic benefits resulting from the project.(h) Cost: The number of permanent jobs created or retained per program dollar and the increase in local tax revenue resulting from the project will be evaluated. Overall project cost effectiveness also will be considered.(i) Low and Moderate Income Benefit: Benefit to LMI persons will be evaluated. The integration of job training programs, job advancement opportunities, education and training programs, and referral services from Joint Training Partnership Act and Job Service will also be reviewed.(j) Community and Economic Development: The primary and secondary impacts of the project on the community's current and future economic development will be evaluated.4. Approval Process:(a) Application: Applications must be submitted on the appropriate dates. RAF applications must not be submitted until an application has been accepted by the appropriate agency (such as EDA) and is working toward a full application. Once submitted, the DECD Economic Development application Review Team will evaluate applications using the criteria outlined in the Program Statement and the individual application package. Successful applicants will be invited to proceed into the project development phase. DECD or its designee will conduct a project development, financial and credit analysis for each proposal.(b) Staff Recommendations: Following the ED Review Team evaluation, one of the following recommendations will be made to the Director, Office of Community Development and the DECD Commissioner:(i) approval of requested amount and terms;(ii) approval of requested amount but under different terms;(iii) rejection with staff recommendations for resubmission or to provide additional information; or,