Richard Turner Department of Commerce & Economic Opportunity

2013 CDAP 2013 CDAP Grant Administration WorkshopGrant Administration Workshop

CDAP Revolving FundCDAP Revolving Fund

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Sequence of TopicsSequence of Topics

• National Goals and Objectives

• Purpose

• Federal Regulations/Title I

• Recapture Strategy/Assurances

• RF Policy Guidelines

• Use of Funds

• Security

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National Goals / ObjectivesNational Goals / Objectives

• Assist in building the financial and operational capacity of communities to carry out local economic development

– Expand Economic Opportunity

– 51% LMI Benefit

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Low and Moderate-Income PersonsLow and Moderate-Income Persons47 Ill. Adm. Code 110.22047 Ill. Adm. Code 110.220

"Low and Moderate-Income Persons" shall mean those individuals in a family whose income is less than 80% of the median income of the area (for non-metropolitan areas the non-metropolitan median income or county income shall apply, whichever is higher).

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CDAP RFsCDAP RFs

• 174 CDAP RFs Statewide

• $59.8 million – Dec. 31, 2012

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REVOLVING FUNDREVOLVING FUND

FEDERAL CDBG HUD $$’s

STATE (DCEO) CDBG $$’s

CDBG LOAN TO BUSINESS

CDBG LOAN REPAYMENTS (PROGRAM INCOME) TO ULG REVOLVING FUND

ECONOMIC DEVELOPMENT GRANT CDBG $$’s to Unit of Local Government (ULG)

LOANS MADE FROM PROGRAM INCOME BY ULG REVOLVING FUND

CDBG-Community Development Block Grant

HUD-US Dept. of Housing & Urban Development DCEO-Dept. of Commerce & Economic Opportunity

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PurposePurpose• Economic Development Financial projects

– Job creation with 51% LMI– Job retention with 51% LMI

• Public Infrastructure in Support of Business – Participation Agreement– Job creation with 51% LMI– Job retention with 51% LMI

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PurposePurpose47 Ill. Adm. Code 110.21047 Ill. Adm. Code 110.210

The primary objective of CDAP-funded revolving funds (RF) is to enable grantees to carry out local economic development activities in a way that will expand economic opportunity, principally for low and moderate-income persons. Each RF project shall result in private sector job creation or retention. At least 51% of such jobs shall be filled or retained by persons of low and moderate-income.

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Eligible BorrowersEligible Borrowers47 Ill. Adm. Code 110.21047 Ill. Adm. Code 110.210

• Private for-profit

• Not-for-profit entities

Borrowers must directly create or retain jobs; indirect jobs (employed by other than the borrower) are not sufficient to meet program guidelines.

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Ineligible BorrowersIneligible Borrowers47 Ill. Adm. Code 110.21047 Ill. Adm. Code 110.210

• RF Community

• Units of Local Government

• Public School Districts

• Developers and business incubators (generally will not create/retain sufficient direct jobs)

• private for-profit or not-for-profit entities.

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Federal Regulations/Title 1Federal Regulations/Title 1• Job Creation/Retention with 51% LMI Benefit• Environmental Review

– Required prior to loan closing• Davis-Bacon

– Required for construction work using RF funds

• Uniform Act– Required when real property is acquired or

persons displaced

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Recapture StrategyRecapture Strategy47 Ill. Adm. Code 110.23047 Ill. Adm. Code 110.230

• Goals & Objectives of the RF

• Strategy for achieving goals

• Management Plan

• Assurances

Must be approved by DCEO

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AssurancesAssurances

• Administrative Costs– No more than 10% annual program income– Expenses documented

• receipts, bills, invoices, etc.• 51% LMI benefit• Report to DCEO semi-annually• Any changes to Recapture Strategy must be

approved by DCEO

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Assurances, cont.Assurances, cont.• Pursue all legal remedies to recover delinquent

financial assistance project funds

• One FTE job created or retained for every $15,000 of financial assistance provided.

• Minimum leverage- $1 non-CDAP to every $1 CDAP RF

• Comply with environmental reviews and prevailing wages

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RF Policy GuidelinesRF Policy Guidelines47 Ill. Adm. Code 110.360 et al.47 Ill. Adm. Code 110.360 et al.

• Finance no more than 50% of project• Not to exceed $15,000 for every FTE

created/retained• No speculative financing• 51% LMI benefit• Economic Development grant request may

be reduced by balance of RF15

Eligible Use of FundsEligible Use of Funds47 Ill. Adm. Code 110.25047 Ill. Adm. Code 110.250

• Site development/infrastructure extension• Construct new facility/addition• Renovation of existing facility• Leasehold improvements• Purchase of machinery or equipment• Working Capital

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Ineligible Use of FundsIneligible Use of Funds47 Ill. Adm. Code 110.25047 Ill. Adm. Code 110.250

• Projects of speculative nature• Forgivable financial assistance projects• Refinancing existing private debt

– Restructuring RF loans is eligible– Refinancing RF loans (with additional funds) is

NOT!

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Ineligible Use of FundsIneligible Use of Funds47 Ill. Adm. Code 110.25047 Ill. Adm. Code 110.250

• Relocation of business from one area of the state to another (generally no, requires DCEO written approval)

• General marketing activities

• Preparing CDAP application

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SecuritySecurity47 Ill. Adm. Code 110.30047 Ill. Adm. Code 110.300

COLLATERAL

COLLATERAL

COLLATERAL

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SecuritySecurity47 Ill. Adm. Code 110.30047 Ill. Adm. Code 110.300

• All RF financial assistance projects to businesses shall be secured– Financial assistance agreement, mortgage,

security agreement, promissory note, UCC, financing statement or other assignment of rights of the assets of assisted firms.

• Don’t expect the bank to protect your RF

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Security, Cont.Security, Cont.47 Ill. Adm. Code 110.30047 Ill. Adm. Code 110.300

• Necessary actions to protect interests of the RF– Timely action to sell, collect, liquidate, or

otherwise recover financial assistance funds or guarantees

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Employee Income Certification FormsEmployee Income Certification Forms

• Use current Section 8 HUD income guidelines

• Jobs created by 24th month

• Completion required only until goal is achieved

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Other Uses of RF FundsOther Uses of RF Funds47 Ill. Adm. Code 110.25047 Ill. Adm. Code 110.250

• CDBG eligible activity with prior DCEO approval– 51% LMI benefit

– Leverage $1 : $1

– Environmental Clearance

– Davis-Bacon

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Other Uses of RF FundsOther Uses of RF Funds47 Ill. Adm. Code 110.25047 Ill. Adm. Code 110.250

• You must use the entire fund balance and closeout the local RF when doing a CDBG eligible activity

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-WARNING--WARNING-47 Ill. Adm. Code 110.34047 Ill. Adm. Code 110.340

• Failure to comply with State or Federal Regulations could result in:– Pending, future grant requests will not be

considered;

– Payment requests for active grants suspended;

– RF recovery procedures by DCEO.

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Revolving Fund Program Revolving Fund Program

DCEO Websitehttp://www.illinoisbiz.biz/dceo/Bureaus/Community_Development/Community+Programs/RF.htm

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Program DocumentsProgram Documents• RLF Handbook

• RF Report Forms– Excel Semiannual RF Report Form– Instructions for Completing Excel Semiannual

Revolving Fund Reports– Employee Income Certification– HUD Income Limit Retrieval– Sample RF Recapture Strategy– Uniform Act – Voluntary Sale Form

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ConclusionsConclusions

• RF Program is a valuable local economic development tool

• Minimum leverage funds must be included in all projects

• 51% LMI benefit must be met

• 1 FTE job created/retained for every $15,000

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Contact InformationContact InformationRichard Turner, RF Manager

Department of Commerce & Economic Opportunity500 E. Monroe St, R-2Springfield, IL 62701

(217) 558-4221(217) 4107 FAX

richard.turner@illinois.gov

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• Questions???

• Comments!!!

• Concerns~~~

Thank you and good luck!

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