Program Management
Community Development Block Grant Program
Overview | Economic
Development Pgm.
Community Development Pgm.
2001 Contract Documents
2001 Table of Contents
for General Conditions
2001
General Conditions
2002 Index
| 2002 Contract
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2002
General Conditions
2003 CDBG Handbook
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2004 CDBG Handbook
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2005 CDBG Handbook
Introduction
Chapter |
Environmental Chapter
Finance Chapter |
Equal Opportunity/Fair Housing
Chapter
Acquisition
Chapter |
Labor Chapter
Relocation Chapter |
Housing Chapter
2006 CDBG Handbook
Introduction
Chapter |
Environmental Chapter
Finance Chapter |
Equal Opportunity/Fair Housing
Chapter
Acquisition
Chapter |
Labor Chapter
Relocation Chapter |
Housing Chapter
OVERVIEW
PRIMARY REGULATIONS
Every grant or loan must meet one of three "national objectives."
 Principally benefit low and moderate income (LMI) persons.
Eliminate or prevent slums and blight.
Address imminent health and safety problems.
Almost all CDBG projects, including all economic development projects, meet the LMI national objective.
There are a number of other regulations that apply. Principal among these are the following:
Environmental review.
Davis-Bacon wage rates.
Civil rights legislation.
Public bidding (required for grants and some loans).
One additional major regulation applies only to economic development programs.
This will be discussed in a later section.
SMALL CITIES VERSUS ENTITLEMENTS
ECD administers the "Small Cities" CDBG program. There are thirteen "entitlement
programs" which receive money directly from HUD, and we are prevented from
making grants and loans in these areas.
Entitlement areas are Shelby County, Memphis, Jackson, Clarksville,
Davidson County, Murfreesboro, Oak Ridge, Knox County, Knoxville, Chattanooga, Cleveland, Morristown,
Kingsport, Bristol, and Johnson City.
PROGRAM DESIGN
There is considerable flexibility in the use of CDBG money as long as we
stay within the parameters of the legislation and regulations.
Local officials and the "public" must be consulted regarding goals,
objectives, and priorities. The program is designed around this input.
The greatest weight in program design is given to the opinions of mayors
and county executives as expressed in public meetings, questionnaires,
and informal contact.
There are basically two programs within the CDBG program.
- Economic development program.
Grants for industrial infrastructure.
Loans for industrial buildings and equipment.
- Community development program (also called "regular round").
Grants for water and wastewater.
Grants for housing rehabilitation.
Grants for community livability.
FUNDING LEVELS
The level of funding is determined annually through congressional appropriations.
For the last few years, Tennessee's allocation has been in the range of
$30 million a year. Each state receives a protected allocation of CDBG
funds, based on a federal formula, and does not compete with other states
for funding allocations.
Level
of Funding - FY 2005
(starting allocations)
| Acquisition |
$ |
280,000 |
| Public Facilities |
$ |
23,508,661 |
| Clearance/Demolition |
$ |
52,000 |
| Relocation |
$ |
550,000 |
| Economic Development |
$ |
3,000,000 |
| Housing Rehabilitation |
$ |
1,500,000 |
| Technical Assistance |
$ |
10,000 |
| Project Administration - Local Governments |
$ |
1,600,000 |
| General Administration - State Governments |
$ |
685,738 |
| Governor's Set-aside |
$ |
1,000,000 |
| Total |
$ |
32,186,399 |
At the end of the program year (normally in May), unused economic development
funds are allocated to "regular round" categories, largely based on the
volume of applications. This has traditionally amounted to $5 to $10 million.
The Governor's set-aside is used to accommodate severe problems that
do not rank high in the project rankings.
GRANT CYCLES
The economic development program operates continuously.The community development
program operates on a once-a-year application cycle, with applications
being submitted in February.
STAFF RESPONSIBILITIES
Paula Lovett is responsible for the non-economic development (regular
round) program. Jeff Bolton is responsible for the economic development
program. Carolyn Hirschi is responsible for contracts and the disbursement
of funds.
ECONOMIC DEVELOPMENT PROGRAM
ELIGIBLE PROJECTS
Eligible economic development projects
include grants for
industrial infrastructure (similar to the FIDP program) and
loans for industrial buildings and equipment. Projects are
eligible for grants if they are in the public domain, and available
for use by a large
segment of the community (i.e. infrastructure). CDBG assistance
is in the form of a loan when the asset being financed is for
the exclusive use of one industry (i.e. buildings and equipment).
LEVELS OF FUNDING, INTEREST RATES, AND TERMS
Funding levels, interest rates, and terms are structured to provide
an incentive for economic development in economically distressed counties
whose economic development has lagged behind the rest of the state.
Economically distressed counties are those which are among the worst
ten in three year unemployment, per capita income, and poverty
rates.
| Maximum grant and/or loan |
|
$750,000 |
| Interest rates years 1-5 |
|
5 points below prime |
| 6-10 |
|
4 points below prime |
| 11-20 |
|
3 points below prime |
All other counties are eligible for the following:
| Maximum grant and/or loan |
|
$500,000* |
| Interest rates years 1-5 |
|
3 points below prime |
| 6-10 |
|
2 points below prime |
| 11-15 |
|
1 points below prime |
*Certified Three-Star communities are eligible for greater loan amounts based on the level of Three-Star acheivement.
Currently there are 25 economically distressed counties. New designations
are made on July 1, based on the latest information available
at that time.
Economic development infrastructure grant rates are based on the ability-to-pay
of the applicant as calculated by the Center for Business and Economic
Research at the University of Tennessee. Three Star Communities will have additional benefit in utilizing this aspect
on the program. Level I, Level II and Level III communities’ Ability-to-Pay percentages will be reduced in Cities
(-1%, -2% and -3%) and in Counties (-3%, -4% and -5%).
STRUCTURE OF APPLICATIONS
CDBG economic development applications must be submitted by a local unit
of government, even though a private company may be the principal beneficiary.
A pre-application meeting involving Program Management, community officials,
and representatives of the company involved is required in order that all
parties may become informed about the project, and the process from application
preparation to grant approval can operate as smoothly as possible.
An economic development application is composed of two parts, community
information and company information. Community information requested includes,
but is not limited to, the following:
-
Information about the project, including a brief narrative explaining what
is to be purchased with CDBG funds and why this is necessary.
-
A preliminary engineering report if the project is for industrial infrastructure.
-
A project budget including the source of all non-CDBG funds that are involved.
-
Various kinds of information that are required to satisfy federal regulations.
Company information requested includes, but is not limited to, the following:
-
A statement of the company's intent, including jobs to be created, capital
investment, product or service to be produced, etc.
-
Plans and specifications for infrastructure and building construction,
and lists of equipment to be purchased with CDBG funds.
-
Commitment letters for other funding that is involved in the project. Applicants
for start-up funding must have 20 percent equity and 30 percent of the
project financing must come from private sources.
-
A business plan and marketing plan.
-
Various kinds of information that are required to satisfy federal regulations.
APPROPRIATE AND PUBLIC BENEFIT
This issue is a concern only to the economic development program.
The "appropriate" part refers to the company's need
for assistance available through the CDBG program, as compared
to the benefit provided by the company to the community.
"Public Benefit" refers to the justification for making CDBG
assistance available in a particular community for a particular
project. Generally this is demonstrated by the need for jobs,
or higher paying jobs, and the economic factors of the community
as compared to the state and federal averages.
Normally this issue is not a problem. In a few instances, however,
a company's financial situation is such that the "appropriate"
test can not be met, and CDBG assistance can not be provided.
APPLICATION REVIEWS
Applications are reviewed with a primary emphasis on the long-term success
of the business being assisted. For infrastructure grants, the concern
is for the longevity of the company, and for the likelihood of continued
employment opportunities. For building and equipment loans, the concern
is for the repayment of the loan as well as job creation. Standard loan
underwriting procedures are followed, and collateral and personal guarantees
are required as security for the CDBG loan.
Applications are reviewed on a first come first served basis. A complete
application with few deficiencies may be reviewed and approved within 30
days. Normally this process requires 60 to 90 days to complete. Grant or
loan approvals are made by the ECD Loan and Grant Committee which meets
as needed.
COMMUNITY DEVELOPMENT ("REGULAR
ROUND") PROGRAM
ELIGIBLE PROJECTS
CDBG "regular round" projects have a quality-of-life objective rather than
an economic development objective. Applications may be submitted in one
of four categories: Water; Sewer; Housing Rehabilitation; Community Livability.
Water, sewer, and housing rehabilitation are self explanatory. Community
livability projects include anything else that is eligible under the federal
legislation. Popular community livability projects include rural fire protection,
primary health care, and other similar projects related to health and safety
conditions in the community.
APPLICATION REQUIREMENTS
In addition to the federal regulations cited in the Overview, there are
a number of state requirements that have been imposed on "regular round"
projects, primarily in order to ensure that as many communities as possible
are able to benefit from the CDBG program. These state regulations are
as follows:
-
Applications may be submitted only once a year. Normally this is in February.
-
Previous projects must be completed before another application can be submitted.
It is difficult for most construction projects to be completed within one
year, and there is normally a one or two year lapse between applications.
-
Eligible cities, with the exception of metros, or counties can submit only one application. Therefore,
if there are competing needs in the community, the executive and legislative
body must determine which need is most important and submit an application
for only that project.
-
Maximum grants are $500,000 for water, sewer, and housing rehabilitation.
Maximum grants for community livability projects are $300,000. The maximum
grant in two consecutive fiscal years is $750,000. Regional projects can
receive up to $1 million grants.
Community development grant rates are based on the ability-to-pay of the
applicant as calculated by the Center for Business and Economic Research
at the University of Tennessee.
OVERVIEW OF EVALUATION CRITERIA
The "regular round" program operates on a point system which measures four
factors.
Community need measures unemployment and income levels in the applicant
city or county and in the service area of the project. Each project is
eligible for up to 100 points in community need.
Project need is a relative measure of the community need for the project
being requested compared to similar projects that may be submitted. Project
need is calculated differently for different kinds of project (for example
a water project may measure bacteria content in the water, while a housing
rehabilitation project uses the extent of deteriorated housing as a measure
of need). Water and sewer projects can receive up to 100 points in project
need, while livability and housing projects can receive only 50 points.
Project feasibility measures the adequacy of the design and engineering
of the project. For water and sewer projects, feasibility is a threshold
for approval as determined by the Department of Environment and Conservation;
no points are assigned, but the project must be determined to be feasible.
Livability and housing projects may receive up to 50 points for feasibility.
Project impact is a benefit/cost measure, and compares the number of
people being served and the amount of money being requested. Water and
sewer projects can earn up to 100 points in project impact, while livability
and housing projects can earn only 50.
Project essentialness is used only in community livability projects
in order to ensure that the those projects related to health and safety
receive the greatest opportunity for funding. A maximum of 50 points is
available in essentialness.
PROJECT RANKINGS/APPROVALS
Projects are reviewed and scored based on the evaluation criteria, and
are arrayed from highest to lowest based on the total number of points
earned. Project approvals are based on these rankings.
It does not matter that some categories are eligible for more points
than others, since the competition is within categories rather than among
categories.
The Governor's set-aside is reserved for projects for which there is
an exceptionally high project need score, but for other reasons (perhaps
low unemployment and high income) did not rank high enough to be funded.
If the Governor's set-aside is not used, the $1 million is transferred
to other project categories.
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