National Community Development Association USING CDBG AND SECTION 108 FOR JOB CREATION

HUD, Office of Block Grant Assistance Slide 2 FLEXIBILITIES OF CDBG FOR JOB CREATION qMultiple eligible activity categories qLocal decision-making in soliciting & funding individual businesses/deals qLocal decision-making on program design re: types of businesses, forms of assistance/rates/terms, etc. qNo leverage/match requirements qPlays well with other E.D. programs

HUD, Office of Block Grant Assistance Slide 3 ELIGIBLE ECONOMIC DEVELOPMENT ACTIVITIES qSpecial economic development activities qCommunity-based development organizations qTechnical assistance to businesses qMicroenterprise activities qCommercial rehabilitation qInfrastructure to assist businesses qJob training

HUD, Office of Block Grant Assistance Slide 4 SPECIAL ECONOMIC DEVELOPMENT ACTIVITIES qAcquire, construct, rehabilitate, reconstruct or install commercial/industrial buildings or equipment  By recipient or subrecipient only qAssistance to for-profit businesses

HUD, Office of Block Grant Assistance Slide 5 SPECIAL ECONOMIC DEVELOPMENT (cont) qSpecial economic development has flexibility in types of assistance to businesses  Grants  Loans  Guarantees  Technical assistance & support services qMay meet several different national objectives; depends on business & location

HUD, Office of Block Grant Assistance Slide 6 Page 137 COMMUNITY BASED DEVELOPMENT ORGANIZATIONS qCBDOs may carry out three kinds of projects:  Community economic development  Neighborhood revitalization  Energy conservation qIf job training done through a CBDO, doesn’t count against public services cap

HUD, Office of Block Grant Assistance Slide 7 TECHNICAL ASSISTANCE TO BUSINESSES qHelps reduce risk of business failure qOften focused on business plan development or legal and accounting issues qOften offered in conjunction with financial assistance qCritical to programs directed to start-ups

HUD, Office of Block Grant Assistance Slide 8 MICRO ENTERPRISE ASSISTANCE qMicro enterprise defined as:  Owners or persons who work toward developing, expanding or stabilizing a business  Commercial enterprise with  employees (including owner) qNote: This definition differs from SBA qMay provide assistance as loans, grants and other forms of financial support

HUD, Office of Block Grant Assistance Slide 9 MICROENTERPRISE ASSISTANCE (cont) qOther 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 10 COMMERCIAL REHABILITATION qRehabilitation of commercial or industrial structures – § (a)(3) qIf 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 §

HUD, Office of Block Grant Assistance Slide 11 INFRASTRUCTURE FOR ECONOMIC DEVELOPMENT qRoads, streets, sewers that are:  Leading to business location  Within an industrial park  On a business site qIf public facility must be owned by public agency/nonprofit qIf owned by business, conduct as special economic development

HUD, Office of Block Grant Assistance Slide 12 JOB TRAINING qHelp unemployed or under-employed persons gain skills to meet labor market demands qLinked to job placement qFour ways to do job training:  As a public service -- § (e)  As part of special economic development project -- § (c)  By CBDOs -- §  As part of micro-enterprise activities -- § (o)

HUD, Office of Block Grant Assistance Slide 13 INELIGIBLE ACTIVITIES qJob 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. qSignificant loss defined as:  Number of lost jobs is equal or greater than 1/10 th of 1% of jobs in labor market area OR  Loss of 500 jobs

HUD, Office of Block Grant Assistance Slide 14 ECONOMIC DEVELOPMENT NATIONAL OBJECTIVES qEconomic development projects typically fall under Low/Mod Job Creation/Retention qBe 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 qTrack 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 15 JOB CREATION NATIONAL OBJECTIVE qMay 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 16 OTHER NATIONAL OBJECTIVES qSome activities may qualify under other Low/Mod national objective categories  Microbusinesses (limited clientele)  Job training (limited clientele)  Service type businesses (area benefit) qCan 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 17 VOLUNTARY UNDERWRITING GUIDELINES qGrantees 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 18 PUBLIC BENEFIT STANDARDS qMandatory for the following activities:  Special economic development projects -- §  CBDO projects, as applicable -- § , and  Public improvement projects classified under Low/Mod Job Creation/Retention where more than $10,000/job in CDBG assistance qNot applicable to microenterprise activities (§ (o)) or commercial rehabilitation – (§ (a)(3))

HUD, Office of Block Grant Assistance Slide 19 CALCULATING PUBLIC BENEFIT qTwo options for determining benefit:  Jobs created or retained  Goods or services provided to LMI persons qEach Project must meet individual test qEntire economic development program must meet aggregate test

HUD, Office of Block Grant Assistance Slide 20 INDIVIDUAL ACTIVITY STANDARDS qMay not exceed $50,000 per FTE permanent job created or retained  OR qMay not exceed $1,000 in expenditure per LMI person to which goods or services are provided qEach applicable activity must meet one or the other standard

HUD, Office of Block Grant Assistance Slide 21 AGGREGATE STANDARDS qCreate or retain at least one full-time- equivalent (FTE) permanent job per $35,000 of CDBG funds -OR- qProvide goods and/or services to at least one LMI person per $350 of CDBG funds qStandards apply to all activities obligated in any given CDBG program year

HUD, Office of Block Grant Assistance Slide 22 SECTION 108 Loan Guarantees qMethod of expanding CDBG funds by using future CDBG grant as collateral to borrow funds qSection 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 23 ADVANTAGES OF SECTION 108 qLeverages grants qNot a general obligation qReceive funds now (no pay as you go) qSpread costs over multi-year period qLong-term, fixed-rate financing at favorable rates

HUD, Office of Block Grant Assistance Slide 24 SOURCES OF REPAYMENT OF SECTION 108 LOANS qCDBG funds qProgram income qAdditional 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