California Code of Regulations › Title 25 - Housing and Community Development › Division 1 - Housing and Community Development › Chapter 7 - Department of Housing and Community Development Programs › Subchapter 2 - State Community Development Block Grant Program › Article 2 - Application Process › Section 7062.1 - Special Allocation for Economic Development

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) The Department shall set aside from the
					 total amount available from HUD, for grants to cities and counties an amount
					 equal to thirty percent (30%) for the activities specified in this section.
					 Applications submitted under this section must comply with all the requirements
					 of this subchapter except where noted in this section. Economic Development
					 Allocation funds shall be awarded through the NOFA process for eligible
					 activities listed in Section 7058 and 7062.1)(a)(1).
(1) Activities eligible for funding under the
					 Economic Development Allocation are those activities which are subject to the
					 Standards for Evaluating Public Benefits set forth in subsection (f) of 24 CFR
					 Section 570.482. Eligible activities shall also meet a national objective as
					 specified in Section 104(b)(3) of the Act (42 U.S.C. Sec. 5304(b)(3)) and 24
					 CFR Section 570.483. The Department shall utilize Section 105(a) of the Act (42
					 U.S.C. Sec. 5305(a)), 24 CFR Section 570.482, and Subpart C of Part 570 of the
					 federal CDBG regulations commencing with Section 570.200, for guidance in
					 determining the eligibility of activities proposed under this section. Where
					 CDBG funds are used for public improvements (e.g., water, sewer or road
					 improvements) the national objective shall be met pursuant to 24 CFR Section
					 570.483.
(2) In order to be
					 eligible for funding from the Enterprise Fund as set forth in subsection (b) or
					 the ED OTC as set forth in subsection (c), with the exception of assistance to
					 microenterprises, a project or activity (hereinafter collectively referred to
					 as an "activity") shall be capable of generating sufficient public benefit
					 relative to the amount of CDBG assistance provided as required by the Act. The
					 Department, with respect to activities funded from the ED OTC, and Grantees
					 with respect to activities funded with Enterprise Funds, shall utilize the
					 federal standards specified at 24 CFR Section 570.484(f) to determine whether
					 sufficient public benefit will be generated by a proposed activity.
(3) Prior to the funding of any activity from
					 either the Enterprise Fund or the ED OTC, the activity shall be underwritten to
					 ensure that:
(i) the activity's costs are
					 reasonable;
(ii) that all sources
					 of activity financing are committed;
(iii) that to the extent practicable, CDBG
					 funds are not substituted for non-Federal financial support;
(iv) that the activity is financially
					 feasible;
(v) that to the extent
					 practicable, the return on the owner's equity investment will not be
					 unreasonably high; and
(vi) that to
					 the extent practicable, CDBG funds are disbursed on a pro rata basis with other
					 finances provided to the activity. Activities shall be underwritten by the
					 Department, with respect to activities funded from the ED OTC, and by Grantees
					 with respect to activities funded with Enterprise Funds, utilizing the federal
					 Guidelines and Objectives for Evaluating Project Costs and Financial
					 Requirements set forth as Appendix A to 24 CFR Part 570.
(4) A activity funded from the Enterprise
					 Fund or the ED OTC shall be reevaluated by the Department or grantee pursuant
					 to subsections (a)(2) and (a)(3) of this Section if the underlying assumptions
					 relied upon by the Department or the Enterprise Fund grant recipient in making
					 its original funding decision materially change. A "material change", for these
					 purposes, means:
(1) a change in the size,
					 scope, location or public benefit of the activity; or
(2) a change in the terms or the amount of
					 the private funds (including lender's funds and equity capital) to be invested
					 in the activity; or
(3) a change in
					 the terms or the amount of the CDBG assistance to be made available to the
					 activity. If a material change has occurred and a reevaluation of the activity
					 indicates that the financial elements and public benefit to be derived have
					 also changed, then appropriate adjustments in the amount, the type of CDBG
					 assistance and/or the terms and conditions under which that assistance has been
					 offered shall be made to reflect the impact of the material
					 change.
(5) In the event
					 that an activity funded under the Enterprise Fund or ED OTC fails to meet a
					 federal national objective or state or federal eligibility requirement, at the
					 Department's discretion, a Grantee may be required to repay all or a portion of
					 the grant amount from a non-federal source of revenue, and/or may be required
					 to return all or part of any program income received from the CDBG-assisted
					 activity to the Department. In determining the appropriate remedy, the
					 Department shall, at a minimum, consider the following factors:
(1) actions taken by the Grantee to avoid the
					 adverse circumstances in the first place;
(2) actions taken by the Grantee to mitigate
					 the circumstances once the problem was discovered; and
(3) timeliness of steps taken to protect
					 and/or recover CDBG funds. Failure by a Grantee to comply with any requirements
					 or written instructions issued by the Department pursuant to this subsection
					 shall be considered a failure by the Grantee to resolve any "audit findings or
					 performance problems" and point deductions may be applied to subsequent
					 applications at the time those applications are scored.
(6) Funding maximums from the Economic
					 Development Enterprise Fund Allocation and the Planning Component shall be as
					 set forth in Health and Safety Code Section 50832 subdivision (a) and Section
					 50833 subdivisions (a) and (b). The Department may waive the eight hundred
					 thousand dollar ($800,000) and five hundred thousand dollar ($500,000)
					 limitations for the Economic Development Allocation after September 1 of each
					 year. Pursuant to Health and Safety Code 50834(c) all funds awarded to the
					 Department from HUD, must be awarded within the Funding Cycle. If not awarded
					 by the end of the Funding Cycle, the funds shall no longer be available for
					 Economic Development activities. The Department may allocate funds between the
					 Enterprise funds and OTC as set forth in the NOFA. The NOFA will announce open
					 and close dates for the ED OTC. These dates will be in compliance with
					 encumbrance regulations at 24 CFR 570.494 and Health & Safety Code Section
					 50834(c).
(7) All Economic
					 Development Allocation funds returned, disencumbered or paid to the State in
					 the form of program income ("returned funds") shall be made available to fund
					 current-year applications to the Enterprise Fund or the ED OTC.
(8) Grants to eligible local governments may
					 be passed through to qualified organizations chartered to perform economic
					 development activities.
(9)
					 Notwithstanding any other provision of this Section, the Director may alter the
					 order applications are reviewed for applicants requesting funds for an urgent
					 need such as an imminent plant closure, an emergency recognized by the State.
					 The Director's decision to alter the order an application is reviewed shall be
					 in writing and made part of the application file.