Community Development Block Grant ECONOMIC DEVELOPMENT for Entitlement Communities March 2011
Participating in the Webinar • Call will last approximately 90 minutes. • All callers are “muted” due to the high number of participants. • The slides are posted on the Community Connections website at: http://www.comcon.org/programs/economic.html • Webinar will be recorded for future use and made available for viewing /downloading. 2
Participating in the Webinar • If you are having audio difficulties, use telephone instead of your computer. • If you have questions on the material that is covered today, you are welcome to submit them throughout the presentation using the “questions” function on the GoToWebinar toolbar. • A resource advisor will forward some questions to presenters to answer at the end of the webinar. • HUD will be developing additional guidance on Economic Development. 3
Community Development Block Grant ECONOMIC DEVELOPMENT for Entitlement Communities March 2011 4
Overview of Today’s Presentation • Eligible Activities • National Objectives • Underwriting Guidelines • Public Benefit Standards • Other Requirements 5
Eligible Economic Development Activities • Special economic development activities • Technical assistance to businesses • Microenterprise activities • Commercial rehabilitation • Community-based development organizations • Infrastructure to assist businesses • Job training 6
SPECIAL ECONOMIC DEVELOPMENT ACTIVITIES • Recipient or subrecipient activities – Acquire, construct, rehabilitate, reconstruct or install commercial/industrial buildings or equipment • For-profit assistance • Economic development services in support of economic development activities 7 7
SPECIAL ECONOMIC DEVELOPMENT (cont) • Special economic development provides flexible business assistance: • Grants • Loans • Loan Guarantees • Technical Assistance & Support Services • May meet several different national objectives; depends on business and location • Triggers the requirement for public benefit standards 8
TECHNICAL ASSISTANCE TO BUSINESSES • Helps reduce risk of business failure • Often focused on business plan development, legal, and/or accounting issues • Often in conjunction with financial assistance • Critical for programs directed to start-ups 9
TECHNICAL ASSISTANCE TO BUSINESSES (cont) • Under CDBG: – As part of special economic development • Caveat: Must meet public benefit standards – As a public service – Through a CBDO • Must also meet public benefit standards 10
COMMERCIAL REHABILITATION • Rehabilitate publicly or privately-owned commercial/industrial buildings - §570.202(a)(3) • If building is private for-profit business: – 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 • Not subject to public benefit standards if carried out under §570.202(a)(3) 11
MICROENTERPRISE ASSISTANCE • CDBG can fund microenterprise assistance • Microenterprise = – Owners or persons who work toward developing, expanding, or stabilizing a business – A commercial enterprise, with employees (including the owner) • Note: this definition differs from SBA 12
MICROENTERPRISE ASSISTANCE (cont) • May provide assistance as loans, grants and other forms of financial support • 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 13
MICROENTERPRISE ASSISTANCE (cont’) • Can do TA and training to increase capacity of recipient/subrecipient to do microenterprise programs • No limit on amount or type of CDBG loan/grant to each microenterprise • Not subject to public benefit test if separate program under §570.201(o) • Owner not required to be LMI, but remember must meet a national objective 14
COMMUNITY BASED DEVELOPMENT ORGANIZATIONS • CBDOs may carry out three kinds of projects: – Community economic development – Neighborhood revitalization – Energy conservation • If job training done through a CBDO, doesn’t count against public services cap • CBDO economic development activities do trigger public benefit standards 15
INFRASTRUCTURE FOR ECONOMIC DEVELOPMENT • Roads, streets, sewers that are: – Leading to business location – Within an industrial park – On a business site • If public facility must be owned by public agency/nonprofit • If owned by business, conduct as special economic development • Triggers the public benefit standard if using the jobs national objective standard and spend more than $10,000/job 16
JOB TRAINING • Help unemployed or under-employed gain skills to meet labor market demands • Linked to job placement • TA and entrepreneurial training to owners of micro-enterprises 17
JOB TRAINING (cont) • 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) 18
Economic Development National Objectives Every CDBG Activity Must Meet A National Objective: • Principally Benefit Low/Moderate Income Persons • Eliminate Slums/Blight • Address Urgent Need 19
ECONOMIC DEVELOPMENT: LOW/ MODERATE INCOME JOBS • Economic development projects typically fall under Low/Mod Job Creation/Retention • 51% of jobs must be for LMI persons • Based on family income, not salary of the job • Full-Time-Equivalent, and permanent positions – 2 half-time jobs = 1 FTE – Not construction/spin-off/indirect jobs – Seasonal jobs OK if the person’s principal source of yearly income 20
ECONOMIC DEVELOPMENT: LOW/ MODERATE INCOME JOBS • Jobs Created and/or Retained • Documentation of Retained jobs: – That jobs would actually be lost w/o assistance – Lost to the employees, not just to the grantee • Jobs Taken by LMI persons vs. Jobs Made Available to LMI persons 21
LMI JOB CREATION: • May presume employee is LMI if: – Lives in Census tract with 70% LMI – Lives in Census tract within EZ/EC – Lives in Census tract with 20% poverty rate (30% poverty if it includes the CBD) and evidences pervasive poverty and general distress – Business/job is located in EC/EZ; OR area with 20% poverty rate (30% if area includes CBD) and evidences pervasive poverty and general distress 22
ECONOMIC DEVELOPMENT: LOW/ MODERATE INCOME JOBS • General Rule: Each business assisted is a separate activity; 51% LMI jobs must be met business-by-business • Aggregation of jobs across businesses allowed for certain types of E.D. activities • Track job creation/retention by business for as long as jobs are still being created by the assisted activity 23
OTHER NATIONAL OBJECTIVE CRITERIA • Some activities may qualify under other LMI Benefit national objective criteria: – Microenterprises (limited clientele) – Job training (limited clientele) – Neighborhood retail businesses (area benefit) • Some E.D. activities may meet Slum/ Blight national objective: – Activities must address conditions of deterioration – Ensure remaining activities meet the 70% low/ moderate income benefit requirement 24
EVALUATING ECONOMIC DEVELOPMENT PROJECTS • Evaluation and selection of economic development projects has two parts: Voluntary underwriting guidelines Mandatory public benefit standards Determinations must be in writing §570.200(e) 25
VOLUNTARY UNDERWRITING GUIDELINES • Grantees should ensure that: – Project costs reasonable – All sources of financing are committed – CDBG not substituted for non-federal – Project is financially feasible – Return on investment reasonable – CDBG funds distributed pro-rata 26
PUBLIC BENEFIT STANDARDS • Mandatory for: – Special economic development projects -- §570.203 – CBDO projects, as applicable -- §570.204, and – Public improvement or facility projects classified under Low/Mod Job Creation/Retention where more than $10,000/job in CDBG assistance • Not applicable to microenterprise activities -- §570.201(o), or commercial rehabilitation -- §570.202(a)(3) 27
CALCULATING PUBLIC BENEFIT • Two options for determining benefit: – Jobs created or retained – Goods or services provided to LMI persons • Projects must meet individual test • Entire program must meet aggregate test • Applied at time of CDBG obligation, and • Assessed upon completion, based on actual achievements 28
INDIVIDUAL STANDARDS • May not exceed $50,000 per FTE permanent job created or retained OR • May not exceed $1,000 in expenditure per LMI person to which goods or services are provided 29
APPLYING THE INDIVIDUAL STANDARDS • Activities that create both jobs and LMI services are disqualified only if amounts exceed both standards • Standards applied at time of obligation • When job-training only activity, jobs considered created or retained for applying standards 30
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