Department of
Economic & Community Development
Matthew Kisber, Commissioner
Community Development Block Grant Program
Grant dollars are available to communities with a population of fewer than 50,000 residents for the purpose of attracting new or expanding existing companies, as long as the projects align with one of three national objectives:
- 1. Principally benefit low and/or moderate income people.
- 2. Eliminate or prevent slums and/or blight.
- 3. Address imminent health and/or safety problems.
Read a more detailed overview of the CDBG Program here.
CDBG Grants are administered as part of two primary programs:
- Economic Development, which includes grants for industrial infrastructure, as well as loans for industrial buildings and equipment.
- Community Development, which includes grants for water and wastewater treatment facilities, housing rehabilitation and projects aimed at improving community livability.
Read more about the Community Development CDBG Program here.
Additional Resources
Overview
Primary Regulations
As stated above, every grant or loan in the CDBG Program must meet one of three national objectives:
- 1. Principally benefit low and/or moderate income people.
- 2. Eliminate or prevent slums and/or blight.
- 3. Address imminent health and/or safety problems.
Almost all CDBG projects, including all economic development projects, meet the LMI national objective.
There are a number of other regulations that apply. Principal among these are the following:
- • Environmental review.
- • Davis-Bacon wage rates.
- • Civil rights legislation.
- • Public bidding (required for grants and some loans).
One additional major regulation applies only to economic development programs. This will be discussed in a later section.
Small Cities Versus Entitlements
ECD administers the "Small Cities" CDBG program. There are 13 "entitlement programs" that receive money directly from HUD, and we are prevented from making grants and loans in these areas.
Entitlement areas are Shelby County, Memphis, Jackson, Clarksville, Davidson County, Murfreesboro, Oak Ridge, Knox County, Knoxville, Chattanooga, Cleveland, Morristown, Kingsport, Bristol and Johnson City.
Program Design
There is considerable flexibility in the use of CDBG money as long as we stay within the parameters of the legislation and regulations.
Local officials and the "public" must be consulted regarding goals, objectives and priorities. The program is designed around this input.
The greatest weight in program design is given to the opinions of mayors and county executives as expressed in public meetings, questionnaires and informal contact.
Funding Levels
The level of funding is determined annually through congressional appropriations. For the last few years, Tennessee's allocation has been in the range of $30 million a year. Each state receives a protected allocation of CDBG funds, based on a federal formula and does not compete with other states for funding allocations.
Level of Funding - FY 2009 (starting allocations) |
|
|---|---|
| Acquisition | $ 250,000 |
| Public Facilities | $ 19,415,890 |
| Clearance/Demolition | $ 50,000 |
| Relocation | $ 500,000 |
| Economic Development | $ 2,500,000 |
| Housing Rehabilitation | $ 1,400,000 |
| Project Administration - Local Governments | $ 1,400,000 |
| General Administration - State Governments | $ 638,241 |
| Governor's Set-aside | $ 1,000,000 |
| Total | $ 27,154,131 |
At the end of the program year (normally in May), unused economic development funds are allocated to "regular round" categories, largely based on the volume of applications. This has traditionally amounted to $5 to $10 million.
The Governor's set-aside is used to accommodate severe problems that do not rank high in the project rankings.
Grant Cycles
The economic development program operates continuously. The community development program operates on a once-a-year application cycle, with applications being submitted in February.
Contact
For information about the Community Development CDBG Program, contact Paula Lovett at (615) 253-1895.
For information about the Economic Development CDBG Program, contact Jeff Bolton at (615) 253-1909.
For information about contracts and the disbursement of funds, contact Carolyn Hirschi at (615) 253-1894.
Economic Development CDBG Program
Eligible Projects
Eligible economic development projects include grants for industrial infrastructure (similar to the FIDP program) and loans for industrial buildings and equipment. Projects are eligible for grants if they are in the public domain and available for use by a large segment of the community (i.e. infrastructure). CDBG assistance is in the form of a loan when the asset being financed is for the exclusive use of one industry (i.e. buildings and equipment).
Levels of Funding, Interest Rates and Terms
Funding levels, interest rates and terms are structured to provide an incentive for economic development in economically distressed counties whose economic development has lagged behind the rest of the state. Economically distressed counties are the worst 10 counties in three-year unemployment, per capita income and poverty rates.
Economically distressed counties are eligible for the following:
| Maximum Grant and/or Loan | $750,000 |
|---|---|
| Interest Rates Year 1-5 | 3 points below prime |
| 6-10 | 2 points below prime |
| 11-20 | 1 point below prime |
All other counties are eligible for the following:
| Maximum Grant and/or Loan | $500,000* | ||
|---|---|---|---|
| Interest Rates Year 1-5 | 3 points below prime | ||
| 6-10 | 2 points below prime | ||
| 11-20 | 1 point below prime | ||
*Certified Three-Star communities are eligible for greater loan amounts based on the level of Three-Star achievement. |
|||
Currently, there are 25 economically distressed counties. New designations are made on July 1, based on the latest information available at that time.
Economic development infrastructure grant rates are based on the ability-to-pay of the applicant as calculated by the Center for Business and Economic Research at the University of Tennessee. Three-Star Communities will have additional benefit in utilizing this aspect on the program. Level I, Level II and Level III communities’ Ability-to-Pay percentages will be reduced in cities (-1%, -2% and -3%) and in counties (-3%, -4% and -6%).
Structure of Applications
CDBG economic development applications must be submitted by a local unit of government, even though a private company may be the principal beneficiary. A pre-application meeting involving Program Management, community officials and representatives of the company involved is required so that all parties may become informed about the project and the process from application preparation to grant approval can operate as smoothly as possible.
An economic development application is composed of two parts, community information and company information. Community information requested includes, but is not limited to, the following:
- Information about the project, including a brief narrative explaining what is to be purchased with CDBG funds and why this is necessary.
- A preliminary engineering report if the project is for industrial infrastructure.
- A project budget including the source of all non-CDBG funds that are involved.
- Various kinds of information that are required to satisfy federal regulations.
Company information requested includes, but is not limited to, the following:
- A statement of the company's intent, including jobs to be created, capital investment, product or service to be produced, etc.
- Plans and specifications for infrastructure and building construction and lists of equipment to be purchased with CDBG funds.
- Commitment letters for other funding that is involved in the project. Applicants for start-up funding must have 20% equity, and 30% of the project financing must come from private sources.
- A business plan and marketing plan.
- Various kinds of information that are required to satisfy federal regulations.
Appropriate and Public Benefit
This issue is a concern only to the economic development program. The "appropriate" part refers to the company's need for assistance available through the CDBG program, as compared to the benefit provided by the company to the community.
"Public benefit" refers to the justification for making CDBG assistance available in a particular community for a particular project. Generally, this is demonstrated by the need for jobs, or higher paying jobs, and the economic factors of the community as compared to the state and federal averages.
Normally this issue is not a problem. In a few instances, however, a company's financial situation is such that the "appropriate" test can not be met, and CDBG assistance cannot be provided.
Application Reviews
Applications are reviewed with a primary emphasis on the long-term success of the business being assisted. For infrastructure grants, the concern is for the longevity of the company and for the likelihood of continued employment opportunities. For building and equipment loans, the concern is for the repayment of the loan, as well as job creation. Standard loan underwriting procedures are followed, and collateral and personal guarantees are required as security for the CDBG loan.
Applications are reviewed on a first-come-first-served basis. A complete application with few deficiencies may be reviewed and approved within 30 days. Normally, this process requires 60 to 90 days to complete. Grant or loan approvals are made by the ECD Loan and Grant Committee, which meets as needed.
Community Development ("Regular Rounds") CDBG Program
Eligible Projects
CDBG "regular round" projects have a quality-of-life objective rather than an economic development objective. Applications may be submitted in one of four categories: Water; Sewer; Housing Rehabilitation and Community Livability. Water, sewer and housing rehabilitation are self explanatory. Community livability projects include anything else that is eligible under the federal legislation. Popular community livability projects include rural fire protection, primary health care and other similar projects related to health and safety conditions in the community.
Application Requirements
In addition to the federal regulations cited in the Overview, there are a number of state requirements that have been imposed on "regular round" projects, primarily in order to ensure that as many communities as possible are able to benefit from the CDBG program. These state regulations are as follows:
- Applications may be submitted only once a year. Normally, this is in February.
- Previous projects must be completed before another application can be submitted. It is difficult for most construction projects to be completed within one year, and there is normally a one- or two-year lapse between applications.
- Eligible cities, with the exception of metros, or counties can submit only one application. Therefore, if there are competing needs in the community, the executive and legislative body must determine which need is most important and submit an application for only that project.
- Maximum grants are $500,000 for water, sewer and housing rehabilitation. Maximum grants for community livability projects are $300,000. The maximum grant in two consecutive fiscal years is $750,000. Regional projects can receive up to $1 million grants.
Overview of Evaluation Criteria
The "regular round" program operates on a point system that measures four factors.
Community need measures unemployment and income levels in the applicant city or county and in the service area of the project. Each project is eligible for up to 100 points in community need.
Project need is a relative measure of the community need for the project being requested compared to similar projects that may be submitted. Project need is calculated differently for different kinds of projects (for example, a water project may measure bacteria content in the water, while a housing rehabilitation project uses the extent of deteriorated housing as a measure of need). Water and sewer projects can receive up to 100 points in project need, while livability and housing projects can receive only 50 points.
Project feasibility measures the adequacy of the design and engineering of the project. For water and sewer projects, feasibility is a threshold for approval as determined by the Department of Environment and Conservation; no points are assigned, but the project must be determined to be feasible. Livability and housing projects may receive up to 50 points for feasibility.
Project impact is a benefit/cost measure and compares the number of people being served and the amount of money being requested. Water and sewer projects can earn up to 100 points in project impact, while livability and housing projects can earn only 50.
Project essentialness is used only in community livability projects in order to ensure that the those projects related to health and safety receive the greatest opportunity for funding. A maximum of 50 points is available in essentialness.
Project Rankings/Approvals
Projects are reviewed and scored based on the evaluation criteria and are arrayed from highest to lowest based on the total number of points earned. Project approvals are based on these rankings.
It does not matter that some categories are eligible for more points than others, since the competition is within categories rather than among categories.
The governor's set-aside is reserved for projects for which there is an exceptionally high project need score, but for other reasons (perhaps low unemployment and high income) did not rank high enough to be funded. If the governor's set-aside is not used, the $1 million is transferred to other project categories.
