# Presentation: 589949

## CDBG WEBCAST

***CDBG WEBCAST***
***HUD, OFFICE OF BLOCK GRANT ASSISTANCE***

## MODULE 6: Economic Development 

## WELCOME

- Training Presented by HUD, Office of Community Planning and Development, Office of Block Grant Assistance (OBGA)
- Richard Kennedy, Director, OBGA
- Stan Gimont, Deputy Director, OBGA
- Steve Johnson, Director of Entitlement Programs
- Diane Lobasso, Director of State Programs
- Paul Webster, Director of Financial Management Division

## CDBG TRAINING SERIES

- Eight modules in series:
- Module 1: Welcome, CDBG Statutory/Regulatory Context, National Objectives
- Module 2: State CDBG Program
- Module 3: Administration/Planning, Financial Management, Including Program Income
- Module 4: Housing and Other Real Property Activities
- Module 5: Public Facilities, Interim Assistance, Public Services and Other Activities
**Module 6: Economic Development, Including Public Benefit**** **
- Module 7: Section 108
- Module 8: IDIS, Performance Measurement, Reporting
- Training presented by OBGA staff
- Available on HUD’s website at: http://www.hud.gov/offices/cpd/communitydevelopment/programs/index.cfm

## MODULE 6 TOPICS AND TRAINERS

- Topics:
- Special economic development
- Technical assistance
- Commercial rehabilitation
- Microenterprise assistance
- Infrastructure for economic development
- Public benefit standards
- Trainers:
- Dick Kennedy
- Stan Gimont
- Mark Walling

## 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

## SPECIAL ECONOMIC DEVELOPMENT ACTIVITIES

- Acquire, construct, rehabilitate, reconstruct or install commercial/industrial buildings or equipment
- By recipient or subrecipient only
- Assistance to for-profits
- Economic development services in connection with special economic development activities

## SPECIAL ECONOMIC DEVELOPMENT (cont)

- Special economic development has flexibility in types of assistance to businesses
- Grants
- Loans
- Guarantees
- Technical Assistance & Support Services
- May meet several different national objectives; depends on business and location
- Triggers the requirement for public benefit standards

## TECHNICAL ASSISTANCE TO BUSINESSES

- Helps reduce risk of business failure
- Often focused on business plan development or legal and accounting issues
- Often offered in conjunction with financial assistance
- Critical to programs directed to start-ups

## TECHNICAL ASSISTANCE TO BUSINESSES (cont)

- Under CDBG:
- As part of special economic development
- Caveat: must meet public benefit
- As a public service
- Through a CBDO
- Must also meet public benefit

## MICROENTERPRISE ASSISTANCE

**MICROENTERPRISE ASSISTANCE**

- CDBG can fund micro enterprise assistance
- Microenterprise =
- Owners or persons who work toward developing, expand, stabilize business
- Commercial enterprise with employees (including owner)
- Note:  this definition differs from SBA

## MICROENTERPRISE ASSISTANCE (cont)

**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

## MICROENTERPRISE ASSISTANCE (cont)

**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

## COMMERCIAL REHABILITATION

- Rehabilitation of commercial or industrial structures – §570.202(a)(3)
- 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
- _Not_ subject to public benefit standards if carried out under §570.202(a)(3)

## COMMUNITY BASED DEVELOPMENT ORGANIZATIONS

**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

## 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

## JOB TRAINING

**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

## JOB TRAINING (cont)

**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)

## ECONOMIC DEVELOPMENT NATIONAL OBJECTIVES

- Economic development projects typically fall under Low/Mod Job Creation/Retention
- 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
- Track jobs for reasonable period of time (not defined in regulations) as long as jobs are still being created

## JOB CREATION NATIONAL OBJECTIVE

- 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

## OTHER NATIONAL OBJECTIVES

- Some activities may qualify under other Low/Mod national objective categories
- Microbusinesses (limited clientele)
- Job training (limited clientele)
- Service type businesses (area benefit)
- 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

## 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)

## 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

## PUBLIC BENEFIT STANDARDS

- Mandatory for:
- 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
- _Not_ applicable to microenterprise activities -- §570.201(o), or commercial rehabilitation -- §570.202(a)(3)

## 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

## 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

## 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

## AGGREGATE STANDARDS

- Create or retain at least one full-time (FTE) permanent job per $35,000 of CDBG funds
- OR
- Provide goods and/or services to at least one LMI person per $350 of CDBG expenditure

## APPLYING THE AGGREGATE STANDARDS

- Applies to all activities obligated in a given CDBG program year
- Depending upon activity, applicable to job creation _or_ LMI goods/services, but *not both*
- When training only activity, jobs considered created or retained
- Certain activities may be excluded from aggregate standards