Transcript No Slide Title

USING CDBG
AND SECTION
108 FOR JOB
CREATION
National Community Development Association
FLEXIBILITIES OF CDBG FOR
JOB CREATION
q Multiple eligible activity categories
q Local decision-making in soliciting & funding
individual businesses/deals
q Local decision-making on program design re:
types of businesses, forms of
assistance/rates/terms, etc.
q No leverage/match requirements
q Plays well with other E.D. programs
HUD, Office of Block Grant Assistance
Slide 2
ELIGIBLE ECONOMIC
DEVELOPMENT ACTIVITIES
q Special economic development activities
q Community-based development
organizations
q Technical assistance to businesses
q Microenterprise activities
q Commercial rehabilitation
q Infrastructure to assist businesses
q Job training
HUD, Office of Block Grant Assistance
Slide 3
SPECIAL ECONOMIC
DEVELOPMENT ACTIVITIES
q Acquire, construct, rehabilitate, reconstruct or
install commercial/industrial buildings or
equipment
 By recipient or subrecipient only
q Assistance to for-profit businesses
HUD, Office of Block Grant Assistance
Slide 4
SPECIAL ECONOMIC
DEVELOPMENT (cont)
q Special economic development has flexibility in
types of assistance to businesses
 Grants
 Loans
 Guarantees
 Technical assistance & support services
q May meet several different national objectives;
depends on business & location
HUD, Office of Block Grant Assistance
Slide 5
COMMUNITY BASED
DEVELOPMENT ORGANIZATIONS
q CBDOs may carry out three kinds of projects:
 Community economic development
 Neighborhood revitalization
 Energy conservation
q If job training done through a CBDO, doesn’t
count against public services cap
HUD, Office of Block Grant Assistance
Page 137
Slide 6
TECHNICAL ASSISTANCE TO
BUSINESSES
q Helps reduce risk of business failure
q Often focused on business plan
development or legal and accounting
issues
q Often offered in conjunction with financial
assistance
q Critical to programs directed to start-ups
HUD, Office of Block Grant Assistance
Slide 7
MICRO ENTERPRISE
ASSISTANCE
q Micro enterprise defined as:
 Owners or persons who work toward developing,
expanding or stabilizing a business
 Commercial enterprise with employees (including
owner)
q Note: This definition differs from SBA
q May provide assistance as loans, grants and
other forms of financial support
HUD, Office of Block Grant Assistance
Slide 8
MICROENTERPRISE
ASSISTANCE (cont)
q Other support activities eligible:
 TA, advice, and business services to owners and
persons developing microenterprises
 General support to owner and persons developing
microenterprises
 Training and TA to build recipient and subrecipient
capacity
 No limit on amount or type of CDBG
loan/grant to each microenterprise
HUD, Office of Block Grant Assistance
Slide 9
COMMERCIAL
REHABILITATION
q Rehabilitation of commercial or industrial
structures – §570.202(a)(3)
q If private, for-profit owner:
 Rehabilitation limited to exterior of building and
correction of code violations

Other improvements must be carried out under the
special economic development category §570.203
HUD, Office of Block Grant Assistance
Slide 10
INFRASTRUCTURE FOR
ECONOMIC DEVELOPMENT
q Roads, streets, sewers that are:
 Leading to business location
 Within an industrial park
 On a business site
q If public facility must be owned by public
agency/nonprofit
q If owned by business, conduct as special economic
development
HUD, Office of Block Grant Assistance
Slide 11
JOB TRAINING
q Help unemployed or under-employed persons
gain skills to meet labor market demands
q Linked to job placement
q Four ways to do job training:
 As a public service -- §570.201(e)
 As part of special economic development
project -- §570.203 (c)
 By CBDOs -- §570.204
 As part of micro-enterprise activities -§570.201(o)
HUD, Office of Block Grant Assistance
Slide 12
INELIGIBLE ACTIVITIES
q Job pirating is prohibited
 If assist in relocation of plant, facility or operation
AND
 Relocation will result in significant loss of jobs in
another geographic area of U.S.
q Significant loss defined as:
 Number of lost jobs is equal or greater than 1/10th of
1% of jobs in labor market area
OR
 Loss of 500 jobs
HUD, Office of Block Grant Assistance
Slide 13
ECONOMIC DEVELOPMENT
NATIONAL OBJECTIVES
q Economic development projects typically fall
under Low/Mod Job Creation/Retention
q Be sure to document:

How jobs will be created or jobs will be lost without
CDBG (retained jobs)

How jobs made available to or held by LMI
q Track jobs for reasonable period of time (not
defined in regulations) as long as jobs are still
being created
HUD, Office of Block Grant Assistance
Slide 14
JOB CREATION
NATIONAL OBJECTIVE
q May presume person is LMI if:

Lives in Census tract with 70% LMI

Lives in Census tract within EZ/EC

Lives in Census tract area with poverty rate of 20%
and no CBD (unless 30% poverty) and evidences
pervasive poverty and general distress

Business/job is located in EC/EZ; OR area with
poverty rate of 20% and no CBD (unless 30%
poverty) and evidences pervasive poverty and
general distress
HUD, Office of Block Grant Assistance
Slide 15
OTHER
NATIONAL OBJECTIVES
q Some activities may qualify under other
Low/Mod national objective categories



Microbusinesses (limited clientele)
Job training (limited clientele)
Service type businesses (area benefit)
q Can do some economic development
activities under Slum/ Blight national objective


Activities must address conditions of deterioration
Ensure remaining activities meet the 70% requirement for
low-and moderate-income persons
HUD, Office of Block Grant Assistance
Slide 16
VOLUNTARY UNDERWRITING
GUIDELINES
q
Grantees should ensure that:
1. Project costs reasonable
2. All sources of financing are committed
3. CDBG not substituted for non-federal
4. Project is financially feasible
5. Return on investment reasonable
6. CDBG funds distributed pro-rata
HUD, Office of Block Grant Assistance
Slide 17
PUBLIC BENEFIT
STANDARDS
q Mandatory for the following activities:
 Special economic development projects -- §570.203
 CBDO projects, as applicable -- §570.204, and
 Public improvement projects classified under
Low/Mod Job Creation/Retention where more than
$10,000/job in CDBG assistance
q Not applicable to microenterprise activities
(§570.201(o)) or commercial rehabilitation –
(§570.202(a)(3))
HUD, Office of Block Grant Assistance
Slide 18
CALCULATING
PUBLIC BENEFIT
q Two options for determining benefit:

Jobs created or retained

Goods or services provided to LMI persons
q Each Project must meet individual test
q Entire economic development program
must meet aggregate test
HUD, Office of Block Grant Assistance
Slide 19
INDIVIDUAL ACTIVITY
STANDARDS
q May not exceed $50,000 per FTE permanent
job created or retained
 OR
q May not exceed $1,000 in expenditure per
LMI person to which goods or services are
provided
q Each applicable activity must meet one or
the other standard
HUD, Office of Block Grant Assistance
Slide 20
AGGREGATE
STANDARDS
q Create or retain at least one full-timeequivalent (FTE) permanent job per
$35,000 of CDBG funds
-ORq Provide goods and/or services to at least
one LMI person per $350 of CDBG funds
q Standards apply to all activities obligated
in any given CDBG program year
HUD, Office of Block Grant Assistance
Slide 21
SECTION 108 Loan
Guarantees
q
Method of expanding CDBG funds by using future
CDBG grant as collateral to borrow funds
q
Section 108 process basics:
1. Community applies to HUD
2. Based on community’s pledge, HUD issues
promissory notes
3. $$$ from sale of notes used for Section 108
eligible project
4. Notes are repaid
HUD, Office of Block Grant Assistance
Slide 22
ADVANTAGES OF
SECTION 108
q Leverages grants
q Not a general obligation
q Receive funds now (no pay as you go)
q Spread costs over multi-year period
q Long-term, fixed-rate financing at favorable rates
HUD, Office of Block Grant Assistance
Slide 23
SOURCES OF REPAYMENT OF
SECTION 108 LOANS
q CDBG funds
q Program income
q Additional security negotiated on a
case by case basis
 Assets created from use of Sec. 108 funds
 Real Property
 Portfolio income
 Parking revenue
 Non tax revenue
HUD, Office of Block Grant Assistance
Slide 24