Code of Maine Rules
19 - DEPARTMENT OF ECONOMIC AND COMMUNITY DEVELOPMENT
498 - OFFICE OF TOURISM AND COMMUNITY DEVELOPMENT
Chapter 35 - COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) PROGRAM 2007 PROGRAM STATEMENT
Section 498-35-3 - ECONOMIC DEVELOPMENT

Universal Citation: 19 ME Code Rules ยง 498-35-3

Current through 2024-38, September 18, 2024

A. ECONOMIC DEVELOPMENT PROGRAM

Funds 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. The Economic Development Program (EDP) offers the following two categories:

1. Business Assistance Grant Category (BA)
(a) Activity Group 1 - Non-Municipal owned
(i) Grants for gap financing to assist an identified business to create or retain jobs for low and moderate-income persons; or

(b) Activity Group 2 - Municipal owned
(i) Grants to Maine communities for gap financing to develop or rehabilitate public infrastructure or facilities that is essential for the location or expansion of identified business and industry.

(ii) Grants for required local match to conduct eligible economic development planning and technical assistance activities.

2. Development Fund Loan Category (DF)
(i) Loans for gap financing to assist specified businesses to create or retain jobs for low and moderate-income persons.

3. Threshold Criteria:
(a) Project Benefit: Except for eligible economic development technical assistance and planning activities, projects must document that at a minimum, 51% of all jobs created or retained as a result of the project must be taken/held by persons of low and moderate income as defined by HUD. Jobs created/retained must be in the community applying for the EDP 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 maximum cost per job created or retained with EDP funds in a non Pine Tree Development Zone is $20,000. The maximum cost per job created or retained with EDP funds for eligible Pine Tree Development Zone applicants is $30,000. Pine Tree Development Zone eligible means that the business has been certified as a Pine Tree Development business by the DECD at the time of application and the business is/will be located in a Pine Tree Development Zone.

(c) Minimum EDP Application Amount: $100,000.

(d) Maximum Project Size for Utilizing EDP Funds: $5,000,000

(e) Eligible Activities: The eligible activities for each program category are as follows and also include eligible planning activities in order to complete the Project Development Phase:

Category 1 - Business Assistance Grant (BA) Maximum Award
Activity Group 1 - Non-Municipal Owned
1) Rehabilitation of commercial or industrial buildings, structures, capital equipment, and real property improvements.$400,000
2) Non-capital equipment and operating capital; or technical assistance provided regionally to businesses facing closure/bankruptcy needing advice to retain jobs and/or in need of advice to expand operations for the purpose of new job creation. $200,000
Activity Group 2 - Municipal owned
1) Acquisition, relocation, demolition, clearance, construction, reconstruction, installation, and rehabilitation associated with public infrastructure projects such as water and sewer facilities, flood and drainage improvements, publicly-owned commercial and industrial buildings, parking, streets, curbs, gutters, sidewalks, etc. which are necessary to create or retain jobs in the non-retail private sector for low and moderate income persons.$400,000
2) Required local match necessary to secure new funds to the State for eligible economic development planning activities.$ 50,000
Category 2 - Development Fund Loan (DF)
1) Acquisition of existing facilities or land and site Improvements necessary for the construction of a new facility. DF program funds cannot be used to refinance existing debt.$400,000

4. Program Requirements:
(a) EDP Pre-Application Due Dates: 4:00PM on February 2, 2007 and May 4, 2007. The May 4 application deadline is based upon availability of funds.

(b) Necessary and Appropriate: EDP 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.

(c) Agreement to Participate and Benefit Certification: The business and the applicant community must submit signed documentation agreeing to participate in the EDP program, to comply with all program requirements and to complete the Job Creation/Retention Agreement.

(d) Maximum % of EDP Assistance and Matching Funds Requirements:
(i) For non-municipal owned BA and DF 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 50% of the total project cost. Projects totaling over $5,000,000 are not eligible for EDP assistance. Project activities and use of funds to calculate the non-program financing must represent a new cash investment or a new project. The financing necessary to support at least 50% of the total project cost must be firm commitments from non-CDBG funds and must be documented by binding commitment letters submitted in the application process. In addition, for municipal owned BA activities, the community must provide a minimum cash match of 20 percent of the total BA award. This match must be directly related to the BA infrastructure portion of the project and is in addition to any investment made by the assisted business.

(ii) For BA eligible planning activities, the community must provide documentation that the amount requested is the lesser of the maximum award amount or the actual match required by the funding agency.

(e) Exclusions: Communities receiving a BA or DF award may not receive any other EDP award for the same project or business during the same program year or for the same project or business from a prior program year that has not met final closeout status.

(f) EDP Projects in Support of Retail Businesses: OCD may accept an EDP application in support of a retail business activity only under the following limited conditions:
(i) The retail business represents the provisions of new products and services previously unavailable in the community or is a tourism-related business.

(ii) The development or expansion of the retail business represents a net economic gain for the community and the region. Applications supporting a retail business or businesses are required to certify that the development represents a new overall gain for the region economy and not a shift from existing established businesses to a new or expanded one; and

(iii) The retail business is located in either a downtown district meeting the definition of PL 776 enacted by the 119th legislature; or a designated local growth area contained in an adopted and consistent comprehensive plan; and

(iv) At least 50% of the jobs created by the retail business must be full time jobs.

(g) DF Program Specific Requirements:
(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. The normal interest rate will be 5% however, 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.

5. Selection Process: The selection process will consist of three phases, a pre-application phase, a final application phase and a project development phase. EDP pre-applications will be evaluated as a viable business proposal or eligible planning/technical assistance activity. Each EDP pre-application will be rated in relation to all others. The total points from the Problem, Solution, Citizen Participation and Numerical Analysis will be used to determine the score for each pre-application. Pre-applications will be placed in rank order from highest to lowest and those scoring more than 70 points will be given first consideration from the top of the list and continuing downward to be invited into the final application phase. Applicants that are successful in the final application phase will be invited into the project development phase.

6. Review Process:

The following criteria will be considered during the pre-application phase:

(a) Problem (20 points) Describe the problem facing the community/business as it relates to job creation/retention activities and document why the community/business is unable to finance the proposed project on its own, or with assistance from other sources.

(b) Solution (20 points) Describe the activities that will be undertaken with EDP funds to resolve the stated problem/need; how the project will proceed to completion within 12 months from the date of a contract award with DECD; and the effect the project will have on the ability of the business to create/retain quality jobs for LMI persons.

(c) Citizen/Business Participation (15 points) Describe the involvement of the specific business and the general citizenry in this application process.

(d) Numerical Analysis (45 points) Based on an analysis of the following factors completed by OCD:
(i) Strategy Priority (5 points) Does the activity support the State's economic development strategy.

(ii) Natural Resource Based (10 points) Does the activity support a natural resource based industry (5 pts). Does the activity provide value added products derived from natural resource based industries (5 pts).

(iii) Project Significance (30 points) Each application will be evaluated in relation to all others. Scores will be based on a maximum of 5 points in each of the nine following areas:

- # of jobs to be created/retained

- # of jobs created/retained as % of municipal unemployment

- # of jobs created/retained as % of LMA unemployment

- % community unemployment above state average

- % of LMA unemployment above state average

- $'s per job created/retained

Pre-applications must be submitted on the appropriate due dates. BA planning activity applications and match for programs such as revolving loan funds, must not be submitted until an application has been accepted by the appropriate agency (such as EDA, RD) and is working toward a full application. Once submitted, the EDP Review Team will evaluate the pre-applications using the criteria outlined in the Program Statement and the individual application package. Successful applicants will be invited to proceed into the final application phase.

The following criteria will be considered during the final application phase:

Upon being invited into the final application phase an OCD staff person will be assigned to assist the community and the business in completing the process. The final application phase must be completed by April 6, 2007 for the first round and by July 6, 2007 for the second round. The final application phase consists of completing documentation such as local legislative approval, match commitments, community benefit, job creation/retention data and agreements, additional public hearing business financial information and program certifications by the community and business. A final score will be determined using the review team analysis score from the pre-application phase and adding a new numerical analysis using the factors from the pre-application and adding up to 5 points for each of the following: % average hourly salary of jobs created/retained exceeds per capita income by county where the jobs will be; Quality of jobs created/retained based on wages and fringe benefits; % non EDP funding in the project. Applications from this phase will be placed in rank order from highest to lowest. Applications scoring more than 75 points will be given first consideration from the top of the list and continuing downward based on recommendations of the review team as outlined below. During this phase DECD or its designee may conduct a project development, financial and credit analysis for each proposal.

EDP Review Team Recommendations: Following the EDP Review Team evaluation of the final application, one of the following recommendations will be made to the Director, Office of Community Development and the DECD Commissioner:

(i) approval of award under recommended amount and/or terms;

(ii) rejection with staff recommendations for resubmission or to provide additional information; or,

(iii) rejection.

Successful applicants will be invited into the project development phase as funds allow.

7. Project Development Phase: The project development phase will include the following additional information along with required state and federal requirements necessary for final approval.
(a) Financial/Management Plan: The application must include a business, management and financial plan as outlined in the application package. Submission will be rated on completeness and soundness of information.

(b) 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.

(c) Repayment - DF Loan: Loan repayment terms will allow a project to proceed while providing the maximum and most expeditious return of CDBG DF monies.

(d) Chance of Success: does the proposal 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; and

- no unidentified costs are necessary for implementation.

(e) 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.

(f) Public Benefit: The proposal will be evaluated on the basis of the community and economic benefits resulting from the project including the increase in local tax revenue resulting from the project will be evaluated.

(g) Community and Economic Development: The primary and secondary impacts of the project on the community's current and future economic development will be evaluated.

B. NON-PROFIT DEVELOPMENT GRANT PROGRAM

The Non-Profit Development Grant Program (NPDG) provides funding for communities forming partnerships with local non-profit development organizations to carry out activities in blighted areas located in designated downtown areas which will foster community economic development initiatives leading to the elimination of slum and blight and increased job opportunities for LMI persons.

1. Special Threshold Criteria and Requirements: NPDG Program funds will be distributed through an annual grant submission and review process
(a) Eligible Activities: Eligible activities in the NPDG Program are demolition, site clearance, structural stabilization, removal of environmental contaminants, installation of security devices, including sprinkler systems and smoke detectors, energy conservation measures, including replacement of heating and cooling equipment, removal of architectural barriers, and replacement of landscape materials, sidewalks and driveways where it is incidental to rehabilitation of the property; and eligible planning activities necessary to complete the Project Development Phase.

(b) Match: All communities applying for NPDG funds must certify that a cash match of at least 20 percent of the total grant award will be injected into the project activities. This match may consist of all non-CDBG loans, grants, endowments, etc contributed to the project.

(c) Maximum NPDG Grant Amount: $250,000

(d) Project Implementation: Implementation of all project activities must be carried out by a non-profit development organization that has established a contractual relationship with the applicant community.

(e) Bona-fide Non-Profit Development Organization: NPDG activities may only be carried out by bona-fide non-profit development organizations that meet the Internal Revenue Service definition as a non-profit, and are organized under state or local law to carry out community and economic development needs of the applicant community. Examples of bona-fide non-profit development organizations include but are not limited to: Neighborhood-Based Non-Profit Organizations, Local Development Corporations, SBA Section 504 C ertified Development Companies, Small Business Investment Companies organized under 15 USC Section 681 and Community Action Agencies.

(f) Ownership of Project Site: The non-profit development organization must own the site on which all NPDG activities will take place.

(g) Demonstration of National Objective: Applicants must demonstrate at the time of application that the project meets the National Objective of preventing or eliminating slum or blighting conditions. An officially adopted declaration of slum/blight conforming to the requirements of MRSA Title 30-A, Chapter 205, 5202 and HUD must be submitted with the application. For spot blight activities documentation must be submitted substantiating the condition of the structure as "blighted."

2. Selection Process: The selection process will consist of two phases an application phase and a project development phase.
(a) Application: There is currently no scheduled application process for the NPDG Program in the 2007 program year. If additional funds become available OCD may exercise the right to reinstate the application process under Section 5 of this Statement.

(b) Rating Criteria: The following rating criteria will apply to all NPDG applications:
(i) Documentation of bona-fide status for Non-Profit Development Organization carrying out NPDG activities: 10 points

(ii) Verification of property ownership of project site by Non-Profit Development Organization: 10 points

(iii) Documentation that project site is in a designated downtown area as defined in an adopted and consistent comprehensive and/or an approved downtown revitalization plan; and that proper slum/blight designation exists for the site: 15 points

(iv) Project Summary - A maximum 2-page summary of all project activities funded with NPDG and matching funds: 20 points

(v) Budget Summary & Matching Funds Review - a review of the Budget Summary Page, Matching Funds Table and required documentation and how they assure the project is fully funded and ready to proceed: 15 points

(vi) Summary of potential jobs, which may be created for LMI persons as a result of the NPDG project: 10 points

(vii) Assurances that NPDG activities will be completed within 12 months of CDBG contract award; including a summary of any financial, permitting, political, environmental or contracting concerns which could delay project: 20 points

(viii) Pine Tree Zone Bonus: NPDG applications supporting project activities taking place in a designated Pine Tree Zone shall receive a bonus of 10 points.

(c) Application Approval: The OCD Review Team will forward their recommendations for funding to the Director, Office of Community Development. A minimum Final Rating of 75 points will be required for an application to be considered for funding. Starting at the top of the scoring list, applicants will be invited to proceed to the Project Development Phase as funds allow.

C. INTERIM FINANCE PROGRAM

The Interim Finance Program (IFP) utilizes funds not disbursed in the State's Letter of Credit for grants to communities to assist businesses or developers in creating housing and job opportunities for low and moderate-income people through short-term loans. The duration of loans will be dependant on availability of CDBG funds.

1. Threshold Criteria:
(a) The proposed activities must meet the low and moderate-income objective as described below:
(i) At a minimum, 51% of the jobs created or retained as a result of the IFP project must be taken by persons of low and moderate income. Jobs created/retained must be in the community applying for the IFP, 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.

(ii) The maximum cost per job created or retained with IFP funds is $20,000. The maximum cost per job created or retained with IFP funds for eligible Pine Tree Development Zone applicants is $30,000.

(iii) At least 51% of the housing units created by the IFP project must be occupied by low and moderate-income households, or

(iv) The IFP expenditures reduce the development costs for new multi-family, non-elderly housing construction where not less than 20% of the units will be occupied by low and moderate-income households at affordable rents and the proportion of the total cost of developing the project to be borne by the IFP funds is no greater than the proportion of units in the project that will be occupied by low and moderate-income households.

(b) Complete the required IFP application materials.

(c) The application amount must be between $500,000 and $5,000,000. The Commissioner of DECD may waive the $500,000 minimum requirement if OCD determines it is in the best interest of the State and if OCD incurs no additional administrative costs as a result of the smaller award. Eligible planning activities necessary to complete the Project Development Phase are also an allowable expense.

2. Special Program Requirements: IFP applicants must also comply with the following:
(a) Need for Financing: There must be a demonstrated need for an IFP loan in order for the project to be funded. The need may be based upon either a gap in available funding for the project or on a determination that the costs of financing so adversely affect the project's rate of return that the project would not be undertaken without additional assistance. IFP grantees must demonstrate the proposed rate and term have been set to ensure that assistance provided is the minimum needed and the proposed assistance is necessary and appropriate to carry out the economic development project.

(b) Commitment of Non-CDBG Funds: The business being assisted must demonstrate that all non-CDBG financing, both permanent and interim, necessary for the project's completion has been secured.

(c) Community Benefit: The project must result in substantial benefit to the community: job creation/retention, tax revenue increases, new housing opportunities, or public facility improvements relative to the public dollar investment.

(d) Surety: The business being assisted by the IFP grantee must secure an unconditional, irrevocable letter of credit for the full amount of the Interim Financing Loan (principal plus any accrued interest to term) from a lending institution acceptable to DECD which will be assigned to the State. The State may accept a FAME guarantee in lieu of an irrevocable letter of credit, or other surety instrument deemed acceptable by DECD.

3. Selection Process: Applications may be submitted on an open basis. IFP grants will be made on a first come, first served basis. Projects that meet requirements may be awarded IFP grants until the amount of funds available in the State's letter of credit has been committed. Following full commitment of the IFP, the State will maintain a waiting list of eligible projects to be funded. If projected funds will not be available for a minimum of six months, the State reserves the right not to accept any additional applications.

4. Approval Process: Through its Technical Assistance Providers, direct mailings, and other marketing methods, the State will advertise the availability of funds within the IFP. Communities interested in applying will: notify the State of their intent to apply, identify the proposed loan recipient and provide an application describing the project. Following the acceptance of a complete application by the State, the DECD or its designee will conduct a financial analysis of the project, DECD will determine if the IFP loan is needed, if all non-CDBG permanent and interim funds are committed, and if an irrevocable letter of credit is in place. The DECD staff will recommend the loan terms and interest rates to the Director, Office of Community Development. The State will review all other program requirements. If these requirements are met, the Commissioner of the DECD will make a grant award based on the project meeting all program requirements.

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