CDFA CDBG Workshop - Economic Development

"Economic is providing assistance to businesses that are creating (or retaining) i jobs for low- and moderate-income people. In order to meet the National Objective, 51% of the jobs must be filled by (or available to) LMI persons. In order qualify under NH state rules, at least 60% of the jobs must be available to LMI people. CDBG also provides assistance to very small businesses, called microenterprises, indirectly through training and technical assistance. 2

Grantee: municipal sponsor of project, responsible for documenting jobs and LMI benefit, in addition to all other administrative i ti activities iti Subrecipient: an Economic Entity (EDE) responsible for making a loan to the business or developing real estate for the business An EDE is defined as: One of the ten Regional Corporations (RDCs), or A local non-profit economic development corporation which satisfies specific thresholds Business: the entity which will create (or retain) the jobs. Can be a for-profit or a nonprofit 4

Economic is all about JOBS! Jobs with good pay and benefits Jobs with new skills or training Jobs offering improvement Creation or retention Special Requirements for Job Retention 1. The job is held by a low- or moderate-income person; AND/OR 2. The job can reasonably be expected to turn over within the following two years and steps will be taken to ensure that the job will be filled by, or made available to, a low- or moderate-income person upon turnover. 5

Available to LMI: Job does not require more than a high school diploma Job does not require special training or skills Income reporting is required on jobs created with CDBG funds. 6

The Business provides a commitment to create the jobs with the application. The commitment is formalized in the Beneficiary Employment Commitment Agreement between business and municipality, which is executed upon grant approval Starting Payroll establishes job baseline CDFA income survey available on website Business reports income status of all those hired during the project period Final Payroll compared to Starting (If starting date is before G&C approval, it must be stated in the application.) 7

Business receives CDBG assistance in the form of a loan, through an EDE. EDE reviews, analyzes and underwrites the loan. EDE negotiates loan structure. Business repays the loan to the EDE and creates jobs. Principal helps capitalize RLF, and interest is for EDE operations. Project must score a minimum of 265 points. Limitations: For-profit business must receive funds in the form of a loan. CDBG funds must not unduly enrich the owner of a for-profit business. Any concessions, such as interest-only for a length of time, must be justified and necessary. 8

EDE uses funds to acquire, build, or renovate real estate for a specific business. Business leases the facility, possibly with an option to buy; proceeds of the sale would capitalize the RLF of the EDE. The EDE reviews the business plan and negotiates the terms of the lease. The business commits to the creation of the jobs. The project must score a minimum of 265 points. 10

A non-profit organization can receive a CDBG grant, if the jobs are being created on their own payroll. The non-profit commits to the job creation. If non-profit is providing training for individuals to be hired by a for-profit business, the business makes job commitment. The project must score a minimum of 250 points. 12

NO direct assistance to micro businesses. CDBG provides indirect support with training, technical assistance and small loans. Micro has a separate application and scoring. Micro does not count against grantee s other CDBG applications. $340,000 000 available this year. CDFA is requesting that applications be submitted by February 16, 2012. Contact Cassandra Bradley at 603.717.9114 or cbradley@nhcdfa.org 16

Once you log in, you ll be brought to the Main Menu. From here, you ll be able to change your profile and manage your grants. If you re awarded, you ll be doing all your grant reporting through GMS (*) The link you re looking for is in the middle; it s Funding Opportunities. This will take you the current funding opportunities page. You ll want to select the link to CDBG Housing & Public Facilities 2012: 2 nd Application Round. 17

This brings you to General Information, which is exactly what it sounds like. (*) It will ask you for the name of the Primary Contact, the Authorized Official, and the Organization. Your choices come from a drop-down menu that s based on the information you ve already filled out in when you registered. (*) () Also, it will ask you for the Title of your project (limited to 250 characters). Don t give a paragraph 19

This brings you into the actual application. You ll notice here the application is divided into 13 smaller components. You ll need to fill each of these components out in order to complete the application. (*) You ll see the first component is GENERAL INFORMATION which you just filled out. So this component is marked Complete You can fill out the components in any order. (*) Let s go to the next component on the list, which is Project Information. 20

Application Type Single or Joint If joint Secondary applicant name and address Project Address Census Tract and Block Group Important- if awarded we need this to set up in IDIS Proposed number of Beneficiaries and LMI Beneficiaries Important to be accurate this is part of the scoring and funding of your application If awarded, you will be required to report against what you submitted in your application 21

Basic Business Information: Legal Name of Business Business Address Authorized Official/CEO Name DUNS # Headquarters Address Business Ownership Describe the ownership of the business, the business organization, its other affiliated businesses, and (if applicable) its relationship to a larger corporate structure. Business History Include a brief business history. Management Qualifications Describe any particular qualifications of management relative to the project. 22

Historical Data on the Business Discuss the ability of the business to manage cash flow appropriately, review and identify contingent liabilities, and determine if the sales and market projections are realistic. Discuss the strength of the business's present financial position and any circumstances that may affect the future of the business. Projections and the Impact of the Project Check project proforma for accuracy and probability; bilit Analyze cash flow projections to determine that adequate cash flow will exist to cover all indebtedness and meet job creation and compensation commitments; Examine project costs for reasonableness. (HUD feels that cost components more than $10,000 should be verified by independent, third party sources such as appraisers and suppliers); Describe the financing gap; Develop financing terms appropriate to cash flow needs; Determine collateral, security, and conditions appropriate to project; Review the appropriate North American Industry Classification System (NAICS) code for the business. (Using reference manuals like the Robert Morris Associates Annual Statements Studies and Financial Studies of the Small Business by Financial Research Associates, compare the business with other businesses of a similar size in the same NAICS code); Ensure that the business has provided their Dun & Bradstreet (DUNS) number; (if the business does not have a DUNS number, the business can call a toll free DUNS number request line at 1 866 705 5711 to obtain a number); Compare rates of return to the business ownership to those of comparable businesses in the industry; and Determine what will be the rate of return on investment to the business ownership and to the EDE, as a result of the project. Other Issues Within the financial analysis, determine what benefits were negotiated for low and moderate income people with the business. Also, assess the cash value of those benefits; Describe the proposed project and the structure of the financing and equity arrangements, including that of the proposed CDBG loan; and Demonstrate that CDBG funds will not be disbursed in a manner that puts them in disproportionate or undue risk. EDE Analysis The project does not provide undue enrichment to any of the owners or private investors; and The analysis makes an assessment of the risk of the project. Non CDBG Project Financing Lastly, the EDE should determine what form the non CDBG project financing will take and what are the terms/structure of the other project financing. The EDE must also determine that all sources of financing are firmly committed. The business is required to provide the evidence of the non CDBG match commitment, in whatever form it will take: Bank financing, Owner s Equity, etc. Evidence of the EDE s Commitment to the Project Resolution of the EDE Loan Committee or Board and Commitment Letter A resolution of the EDE Loan Committee or Board with regard to the structure of the deal (attach signed resolution to EDE Attachments component). The proposed structure of the financing arrangement offered by the EDE may vary based upon the use of the CDBG funds: (a) If a line of credit: the EDE should discuss the interest rates, fees, form of set up and disbursement; or (b) If long term financing: the EDE should define the terms of the transaction such as interest rates, amortization schedules, repayment schedules, collateral, guarantees, and balloons which will capitalize the Revolving Loan Fund; or (c) For both short or long term financing, the resolution should also indicate what is the commitment of the Board of the EDE, with regard to the Revolving Loan Fund, i.e. how will repayments of principal and interest be apportioned to the RLF; or (d) If the project involves leasing property to the businesses, describe how those leases compare with the regional rental market. In addition, the EDE must provide its own commitment letter to the Business, which will define the terms of the loan being proposed (attach a signed copy of the commitment letter in the EDE Attachments component). Acceptance of these terms by the Business is required. Evidence of the EDE s Need for the Project Project Effect The EDE should provide a written description with regard to how the project will affect its organization with regard to support from the project for any of the following: (a) the cost of EDE staff, current and/or additional; (b) the cost of overhead; (c) toward a contribution in the form of capitalization of the Loan Loss Reserve of the EDE; and (d) toward the capitalization of the RLF beyond principle payments. As evidence of the above, again a letter of commitment from the EDE should be provided. 23

Discuss acquisitions, renovation, capital equipment purchases, working capital, etc. This should provide a description of the needs of the business and how this proposal will satisfy those needs. This should include a project timetable. This likely l will require consultation ti with the EDE. For a project which involves Real Estate, in support of a business, additional information with regard to property valuation must be provided and information on local rates for rentals of commercial property must be provided. For a project which involves Public Infrastructure improvements, in support of a business, additional information must be provided which documents the current debt outstanding and the debt capacity of the municipality. 24

Here is an example of what an applicantwould enter in this component: IMPLEMENTATION SCHEDULE Activity Hire a grant administrator Start Date June 2012 Status Scheduled Completion date October 2012 25

Salaries and Benefits Name of employee % of time spent on project Funded with CDBG funds Funded with non CDBG funds Grant Administrator (consultant) Amount paid with CDBG and Non CDBG funds Operations Enter amount funded with CDBG vs Non CDBG money Examples of operation expenses Rent Phone Utilities Supplies Travel Audit Grant writing fee 26

This is the Sources and Uses Table Column Definition Other 1 6 Enter who the funding is from if other than CDBG Uses Indicate which uses will be funded with (Amounts) CDBG funds and other funds Some examples of uses Acquisition Site Improvements Construction Architecture/ Engineering CDBG Admin Costs Sources Committed vs Pending CDBG vs. other The total of the sources and uses table should equal the total of the committed + pending amounts entered. CDFA will only accept firmly committed matching funds: a binding commitment of cash which may include value of real property. It does not include: anticipated money, previously expended money, or sweat equity. Please attach letter of commitment from source for all committed funds. CDBG Administrative costs must me equal to the costs presented in the Administrative Costs component. Please also be sure that the total of committed and pending costs equal the total t sources and uses amounts above. 27

Job Title/Function Category Drop Down list 1 Officials and Managers 2 Professionals 3 Technicians 4 Sales 5 Office and Clerical 6 Craft Worker 7 Operatives 8 Laborers 9 Service Workers # of Positions how many positions of this type will be filled Starting wages/ hr. Please enter dollars and cents; e.g. 9.03, without dollar sign. Time (full or part time) Educational Requirements High school degree College degree Etc. CDFA this CDBG is important, Workshop can - Economic only be considered available to LMI if the job requires no more than a high school education. 28

New Employment Describe the net employment increase (in full time, annualized terms) resulting from the project. This information must be very specific with regard to all the wages and benefits being provided to the Business employees. If the project involves job retention, the data must be supplemented by the submission of the business payroll and Income Surveys of all the affected persons. (See "business attachments") Describe the newly created positions by title, occupational type (and functions performed), the expected work hours, and the entry level wage for each of these positions. New Employment Details Describe which of the above positions will be made available to persons from LMI families; Describe hiring requirements for those positions, i.e. education, experience, licenses. Employment Benefits Describe all the benefits that the business will offer to these new employees that will result from the project. All the following possible benefits should be described: Medical and dental and vision coverage; The level of the above insurance coverage; All leave provided vacation, sick, holiday, bereavement insurance coverage provided life insurance, short and long term disability; Provision for retirement through a tax exempt savings plan or Pension; Provision for child care; Other employee benefits. Describe the training that will be provided by the business for these new employees. 29

Municipalities do not have to choose between HS/PF and ED projects. ED has its own annual municipal cap ($500K). Municipalities can sponsor more than one ED project per year, up to their aggregated annual cap. Submission Deadline: NONE, accepted all year until the money runs out (Jan Dec). Administrative Threshold Compliance Refers to the Public Noticing, Hearing and Municipal Certifications Project Specific Thresholds Testing for eligible uses ED Thresholds: Match funding and jobs - Sources and Uses - Commitment to Job Creation Same process as for Housing/Public Facilities Applications 30

(*) Type in the name and path of the document, or, select BROWSE to search your computer for the correct document. USE ONLY.PDFs OR.JPGs NOT WORD DOCS TO INSURE THE INTEGRITY OF YOUR DOCUMENTS (*) () Once you ve selected the document, write in a brief description of what this document is, then hit save. 31

EDE Eligibility Tests the capacity of EDE to make and administer a loan with CDBG funds This is a checklist that applicant fills out, but CDFA staff will review. Supporting documentation will be provided 33

Tests the overall health of the business that will receive a loan from CDBG funds. This is filled out by the applicant as part of the EDE s review of the business. Maximum of 36 points (max 2 points per each indicator listed below) based on the following scale: 2=strong; 1=neutral; 0=weak. NOTE: A minimum score of 25 points is needed to proceed with further scoring of the application. Are days receivable nearly equal to payment terms? Are days payable nearly equal to payment terms? Are payables less than inventory? Are days accrual about equal to the payroll cycle? Are taxes current? Are days inventory nearly equal to the inventory cycle? Are there notes receivable? Are there notes payable or subordinated officer debt? Is there evidence that the officer s debt is truly subordinated? 35

CONFIDENTIAL ATTACHMENTS If you have confidential attachments to submit with you application, please send them by mail to the CDFA office attention: Glenn Coppelman. We are requiring confidential attachments to be submitted this way to maintain the integrity of the data contained in these documents. Business Plan The business plan should fully describe the historical environment in which the business operates, the competitive pressures it faces, the ongoing needs of the business and finally the rationale for the application for CDBG funds. However, the plan should address any issues which are applicable to the business, such as: Past, present and future markets and the businesses market share of business sales Geographic aspects of its business Organization of sales force Distribution channels Principal customers and their representative share of business sales Advertising strategy Competitive advantage of business in market Description of business operations 36

GMS action: Enter information - save - print - sign - scan/pdf - attach to component by clicking on + to the right of where it says PDF of Signed Municipal CEO Certification 38

Once the application is complete, all components are marked as complete click on Preview This will open a separate tab with the entire application as one document Print and save a copy of the application Once an application is submitted, the applicant cannot access it unless initiated iti t by CDFA 39

Project Area Need : Socio-Economic Factors: Annual Snapshot of municipal applicant, to establish a baseline for determining funding need. Seven Factors same as Housing and Public Facilities applications. Other Economic Factors Current factors affecting need: Current Unemployment Rate Current Median Family Income % of High School (9-12) Dropout Rate Project Impact: Effect on Employment: Number of jobs being created Cost of jobs created per CDBG $ % jobs for available to LMI persons % average entry wage of new jobs compared to LMA average Employee Benefits: Medical, dental, vision and Amount of coverage (employee and/or dependents) Paid time off Life Insurance, Disability (short- and long-term plans) Pensions and 401Ks Child Care, other benefits Other Public Benefits: Level of training provided by business % full-time jobs (versus part-time) % jobs for special needs groups LMA diversification Long term commitment to area by business Reduced demand d on local social services Historic rehabilitation/downtown revitalization 40

Match funding must be a minimum of 1:1. Must be committed and available. Must be new funds, not previously expended funds or future earnings. Match funds can be provided by the grantee, the subrecipient or the business. CDBG funds should be gap financing, not replacing other available funds. Commercial Debt: Must have signed letter of commitment from lender. OK if conditional on CDBG. OK if increasing existing LOC. Public funds: Letter of Grant Award or approval for funding from source. NH Business Finance Authority U.S. Small Business Administration NH Department of Environmental Services NH Regional Corporations and EDEs USDA Rural U.S. Economic Administration CDFA Tax Credit Program Equity funds: evidence of segregated funds available in a bank, plus a commitment (business and/or personal) to use these funds solely for the proposed CDBG project. Value of donated real estate must be documented with an appraisal and a review appraisal. Grantee or other entity can donate real estate (not EDE or business). 41