An Introduction to ECONOMIC DEVELOPMENT Using CDBG

1. An Introduction to ECONOMIC DEVELOPMENT Using CDBG WELCOME!

2. Course sponsor • Training workshop sponsored by the NCDA • Conducted by ICF International • Carole Norris, Vice President, San Francisco Regional Office

3. THE PROCESS Economic Analysis Evaluation & Refinement Strategy Development Program Implementation

4. ECONOMIC ANALYSIS • Assess qualitative and quantitative conditions • Evaluate business and social environment • Assess monetary, human, and physical resources & obstacles

5. STRATEGY DEVELOPMENT • Choose priority outcomes and market sectors • Determine how to direct your assistance: locational approach; minority business; sectoral approach • Choose activities to match intended outcomes

6. IMPLEMENTATION • Describe goals • Written strategy summarizes plans and needs • Action plan implements the strategy • Plan is iterative and refined based on monitoring and evaluation

7. USING CDBG FOR ED • CDBG Regulations • Found at 24 CFR 570 • 1980s/early 1990s: the context for change • ED edits published 1/5/95 • Consolidated rule effective 11/9/95 • Revised rule 4/29/96

8. KEY ED CHANGES • Microenterprise eligibility category • Job training flexibilities • Public benefit standards for ED • National objective criteria and presumptions • Neighborhood Revitalization Strategies • CDFI and CBDO flexibilities

9. ELIGIBLE ED ACTIVITIES • Four major types: • Special economic development (570.203) • Microenterprise assistance (570.201(o)) • Commercial rehabilitation (570.202) • Assistance to CBDO (570.204) • Section 108 and BEDI are special CDBG enabled ED options

10. SPECIAL ECONOMICDEVELOPMENT • 570.203 • a) Commercial/industrial improvements by recipient or subrecipient • b) Assistance to for-profit business • c) Economic development services in conjunction with above activities (including job training)

11. MICROENTERPRISE • 570.201(o) • Financial assistance • Technical assistance • General support • Training and TA to increase capacity of recipient/subrecipient to work with microenterprise businesses

12. MICROENTERPRISES DEFINED Five or fewer employees, including owner • Commercial enterprise • Existing business or persons developing microenterprises

13. COMMERCIAL REHAB • 570.202 • Limited types of rehab on commercial structures • If for-profit owned, only exterior improvements or correction of code violations

14. CBDO ACTIVITIES • 570.204 • Neighborhood revitalization • Community economic development • Energy conservation

15. INELIGIBLE ACTIVITIES • Buildings for conduct of government • General government expenses • Political or religious activities • New housing construction • Income payments • Purchase of equipment • Operations and maintenance (some exceptions for ED activities and CBDOs)

16. NATIONAL OBJECTIVES • 570.208 • All CDBG activities must either: (1) Benefit low and moderate income persons • 70% of funds must be spent this way (2) Prevent slums and blight • used only in specific area or for specific structure (3) Meet urgent needs • only used in emergencies

17. NATIONAL OBJECTIVES • Area Benefit LOW/MOD BENEFIT • Limited Clientele • Housing • Jobs • Area SLUM/BLIGHT • Spot URGENT NEED

18. LMI: AREA BENEFIT • Activity that benefits all residents of area • Where 51% of residents are LMI • That is primarily residential • That meets the needs of the residents • Street improvements • Water/sewer lines • Commercial façade programs • Upper-quartile exception, area benefit only

19. AREA BENEFIT • Need to determine the area served by the business • Need to determine whether the service area is • Primarily residential • 51% LMI • Area will differ with various kinds of businesses…. examples

20. LMI: LIMITED CLIENTELE • Activity that benefits specific population • Presumed clientele; or • Eligibility requirements limit participation to LMI; or • Documentation that 51% participants are LMI; or • Nature and location indicate LMI; or • Removal of architectural barriers (some activities); • Microenterprise activities with LMI owners; or • Certain types of job training efforts.

21. LMI: HOUSING ACTIVITIES • Permanent housing where 51% of occupants are LMI (based on HH inc!) • Ownership or rental w/ ‘affordable’ rents • Single-unit structure: LMI occupied • 2 units: at least 1 occupied by LMI • 3 + units: 51% or more LMI • New, MF, non-elderly: 20% or more

22. HOUSING NATIONAL OBJECTIVE • What type of businesses can meet this national objective?

23. JOB CREATION & RETENTION • Must create or retain jobs • 51% of jobs must be held by or available to LMI persons • Most common national objective for economic development

24. JOB RULES • Permanent FTE basis, no temporary jobs • For each business: 51% of jobs must be held by or available to LMI persons • Can aggregate jobs if: • Property development only (incubator) • Loans are provided by a CDFI

25. LMI PRESUMPTION • Job can be presumed LMI if either: • Job holder resides in • Census tract with 20% poverty & general distress; • Census tract with 30% poverty, CBD, & general distress; • EZ/EC area; or • Census tract/block group with 70% LMI. • Business and job located in • Census tract with 20% poverty and general distress; • Census tract with 30% poverty, CBD, and general distress; or • EZ/EC area.

26. JOBS “AVAILABLE TO” LMI • No special skills/education beyond HS required, or if so, business will train • Ensure that LMI persons receive first consideration • Must have a written agreement • Reasonable application process, pool of applicants, and no logistical barriers

27. JOBS “HELD BY” LMI • 51% of the FTE jobs must be held by LMI persons • Must document income of LMI persons or evidence of presumption • Can use self-certification from person • Must have a written agreement with business

28. ACTIVITIES THAT RETAIN JOBS • Document that jobs would be lost without CDBG and that: • Job currently held by LMI person; or • Job expected to turn over in 2 years and will be filled by/available to LMI person

29. SLUM AND BLIGHT: AREA • Area must meet state/local definition • Substantial number of deteriorated buildings/ all infrastructure in disrepair • Activity must address these conditions • Occasionally used for ED when working in specified renewal area

30. SLUM & BLIGHT: SPOT • Activities that address specific condition • Acquisition, clearance, relocation, historic preservation, building rehab • Rehab limited to public health and safety • May rarely use for ED given limited eligible activities

31. URGENT NEED • 570.208 (c) • Activities that alleviate emergency conditions • Threat to health/welfare of the community • Recently became urgent • Inability of recipient to finance the activity on their own • No other means of funding

32. PUBLIC BENEFIT STANDARDS • Measures $ cost in CDBG funds against benefits derived • # Jobs or LMI persons served used as “benefit” criteria • Grant or loan, does not matter • Applies to 570.203 activities, some 570.204 activities, and infrastructure undertaken as jobs activity

33. INDIVIDUAL STANDARDS • Create/retain 1 Job per $50,000 CDBG funds OR • Goods and services to 1 LMI person per $1,000 CDBG

34. AGGREGATE STANDARDS • Create/retain 1 Job per $35,000 CDBG funds OR • Goods and services to 1 LMI person per $350 CDBG

35. APPLYING INDIVIDUAL STANDARDS • If activity creates jobs and provides goods/services, qualifies as long as it passes at least one criteria • Applied at time of obligation

36. APPLYING AGGREGATE STANDARDS • All activities obligated during any program year • Categorize each activity as either jobs or goods/ services! But meet both criteria! • Some job activities may be excluded: • Unemployed • Homeless • Low-skill, LMI w/ clear advancement • Highly distressed or NRS areas

37. ADMINISTERING ENTITIES • Options: • Grantee staff • Subrecipients • CBDOs • Contractors • CDFIs

38. CBDO -- DEFINITION • Association or corporation organized under state law to engage in community development w/i jurisdiction • Primary purpose is the improvement of service area • May be nonprofit or for profit (under certain circumstances) • 51% of governing body is LMI or representative • Not a public agency • Governing body is nominated by membership • Assets do not revert to grantee • Free to contract for goods and services

39. OTHER ADMINISTRATIVE ISSUES • Compliance with OMB Circulars • Grantee and subrecipients • Ensure proper use/accounting for program income • Comply with other Federal requirements

40. SMALL BUSINESS DEVELOPMENT • Development of small business is important activity for economy and many grantees • Two types: • Micro business • Small business • Existing • Start-ups

41. WHAT IS A SMALL BUSINESS? • Relative • Typical thresholds • Number of employees • Project size • Sales • Net profit after tax; net worth

42. SMALL BUSINESS AND ECONOMIC DEVELOPMENT • Business attraction • Focus on Fortune 1000 • Birch Report • Importance of small and medium sized businesses • Business Retention

43. CDBG ASSISTANCE TO SMALL BUSINESS • Typically done under 570.203, Special Economic Development • Permits wide range of assistance to for profit entities • Includes financial assistance (direct loans, guarantees, equity, leases, etc.) and TA • Triggers public benefit considerations

44. TECHNICAL ASSISTANCE • Helps reduce risk • 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

45. PROVIDING TA UNDER CDBG • Under CDBG: • As part of special economic development • Caveat: public benefit • Public service • Through a CBDO • Public benefit

46. FINANCIAL ASSISTANCE • Usually done under Special Economic Development • Grants • Loans • Guarantees • May meet several different national objectives

47. SMALL BUSINESS PROGRAMS -- OTHER SOURCES • Small Business Administration and partners: • Small Business Development Centers • Service Corps of Retired Executives • Business Information Centers • Small Business Institutes • Women's Demonstration Program • Women's Network for Entrepreneurial Training • Minority Enterprise Network

48. MICROENTERPRISE ASSISTANCE • CDBG can fund micro enterprise loans • Microenterprise = • Owners or persons who work toward developing business • Commercial enterprise with employees (including owner) • 570.201(o)

49. NATIONAL OBJECTIVE • Limited clientele if the owner is LMI • Otherwise: • Job creation/retention • Presumptions • Possibly under LMI area benefit or area slum and blight

50. WHAT IS MICRO BUSINESS ASSISTANCE? • Assistance to small companies • Funding • Technical Assistance • Training • Support Services (such as childcare or transportation)