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DEVELOPMENT CITY OF LA U R E L
TO: Montana Local Government Officials, Community Development Agencies and Staff, and
Others Interested in Community &Economic Development
FROM: Ann Desch, CDBG ED Program Manager 611,
DATE: December 17,2001
RE: CDBG Program for Economic Development—Proposed Changes for the 2002 Program
Year beginning April 1,2002
PUBLIC HEARING ON January 16,2001
1:30 p.m.,Downstairs Conference Room at the Department of Commerce
1424 9th Avenue,Helena,Montana
Following is a summary of proposed changes to the CDBG ED guidelines for Program Year 2002,which
begins the administrative rule-making process for the State CDBG Program. We intend to have the
administrative rules for the program adopted at the end of February 2002. The public hearing is set for
Wednesday,January 16,2002,with written comments due by January 17, 2002.
We will continue accepting applications and completing start-up activities even after all 2001 funds are
committed with the intent of readying projects to release project funds in April 2002, when the new HUD
funding allocation is received.
The guidelines for the program will remain the same as the 2001 program except for the following:
1. Funding Amounts -Page I
Montana's total state allocation for the CDBG Program will be$8,060,000. One-third, or$2,572,800, is
reserved for the economic development program.
2. Eligible Activities—Page 2
The multi-project revolving loan fund assistance to businesses impacted by summer wildfires will no
longer be an eligible activity.
• Technical Assistance/Planning Grants -Page 3
Total set aside for technical assistance grants is proposed to be $205,000. Technical assistance to
the MicroBusiness Development Corporations (MBDC)and State SBIR(Small Business
Innovation Research)Outreach Program activities would be continued. Funding levels proposed
are similar to the amount distributed in year 2001:
1) $55,000 for the network of MBDCs. A maximum of$5,000 would be available to each
MBDC region, and a maximum of$7,500 to an MBDC region serving seven or more
counties
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1424 9th Avenue • PO Box 200505 • Helena,MT 59620-0505 • PH:406 444 3814 • FX:406-444-1872
2) $50,000 for SBIR State Outreach Program activities
3) $100,000 for planning activities related to economic development planning,which does not
include project-specific feasibility studies or business plans. Some examples of planning
activities include: redevelopment plans, strategic planning for the Certified Communities
Program,development of the Comprehensive Economic Development Strategy(CEDS), and
the economic conditions component of growth policy requirements under SB 97. Other
examples include community needs assessments, income surveys, action plans or
implementation strategies. The maximum amount for planning grants is $10,000,which will
require a 1:1 match of cash or in-kind contributions. More detailed application guidelines
will be developed.
• Customized Training for Employees—Page 4
Grants for customized employee training will again be available to companies, allowing up to $5,000
of grant funds per employee trained where the employee is paid at least$11.35 (salary or salary plus
benefits) after training. The minimum application amount is $100,000,which may include a
combination of loan and training grant funds.
Workforce Investment Act(WIA)funds from the Department of Labor are available to supplement
employee training grants available under the CDBG ED Program that pay at least$11.35 plus per
hour for salary or salary plus benefits. In addition,the Montana Manufacturing Extension Center
(MMEC)will use$230,000 of the WIA funds from the Department of Labor in Program Years 2002
and 2003 to provide customized training to company managers and employees. These funds will be
administered through the Montana Department of Commerce.
Funds for employee training will be awarded in accordance with the State of Montana Workforce
Investment State Vision. The intent of this funding activity is to assist companies in Montana with
customized labor training to provide needed skills and better-paying jobs for their workers. The goal
is to facilitate the growth of companies in Montana, increase wages for trained workers,increase
employee productivity,and assist in the skill development of employees. Preference will be given to
training that focuses on developing skills in emerging industries such as information and advanced
technology,health services,value-added agriculture and communications.
3. Maximum Brant amount—Pan 7
The maximum grant amount remains the same- $400,000 for a local government applicant in a program
year(April 1 through March 31). The minimum application amount is$100,000.
4. Ineligible Activities—Page 7
Assistance to businesses such as hotels,motels and retail operations will generally be considered an
ineligible activity, except under mitigating circumstances,because of the lower quality of jobs and the
high likelihood of competition with existing local businesses. Projects may be eligible where certain
mitigating circumstances exist and support by other competing local businesses can be documented; i.e., a
grocery store in a small town in a sparsely populated area where there is no other competition.
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5. Application Requirements—Page 9
Applications will be accepted on a continuous basis even after the entire year's funding allocation is
awarded. Project applications will be accepted and may be awarded under the next program year where
the project administrator anticipates being able to complete"start-up"activities for a release of funds in
the next program year. This should enhance the state's ability to meet HUD's policy for a more timely
expenditure of funds.
6. Thresholds Summary—Page 11, and Pages 18 through 24
The public "benefit test"or the maximum amount of CDBG funds that can be disbursed per job created or
retained will be raised from$15,000 per job to $25,000 per job, in order to allow small companies that
hire fewer employees to qualify for funding.
7. Application Requirements—Pages 12— 16
No changes are proposed.
8. General Policies on Loan Requests—Page 15
Interest Rates—The rate will be lowered from 6.5%to 5%.
9. Application Thresholds A through E—Pages 18 through 24
The Public Benefit Test or the amount of CDBG funds requested for each job created or retained will be
raised from$15,000 to $25,000. The public benefit test for job training grants will remain at$5,000 for
each employee trained.
10. Hiring and Training Plan for Customized Training of Employees—page 25
On page 26,paragraph#2,revise the minimum wage required to be paid after training from$11.00 to
$11.35 per hour,which is the hourly equivalent of the Private Annual Wage of$23,611 as of July 1, 2001
through June 30,2002,used by the Montana Board of Investments for their job creation programs.
11. Funding Criteria—Page 18
Add as criterion#11 new language that the loan review committee will place a greater weight on the
quality of the job and the wage it pays when evaluating loan applications.
L:\CDBG\Publications\02_Guidelines\memo_proposed changes.doc
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MONTANA
DEPARTMENT OF COMMERCE
Local Government Assistance Division FAX: (406)444 4482
1424 9th Avenue PO Box 200523 TDD: (406)444-2978
Helena,MT 59620-0523
TO: LOCAL GOVERNMENT OFFICIALS, STAFF, COMMUNITY DEVELOPMENT
AGENCIES, ORGANIZATIONS AND OTHERS INTERESTED IN THE
MONTANA COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG)
PROGRAM
FROM: GUS BYROM, CDBG PROGRAM MANAGER
HOUSING AND PUBLIC FACILITIES
SUBJECT: PROPOSED CHANGES TO THE APPLICATION GUIDELINES FOR THE YEAR
2002 AND 2003 CDBG PROGRAM FOR THE HOUSING AND PUBLIC
FACILITIES CATEGORIES
DATE: December 17, 2001
The following presents a summary of proposed changes to the federal fiscal year (FFY) 2002
Montana Community Development Block Grant (CDBG) Program Application Guidelines for
Housing and Public Facility projects.
Introduction
Montana's CDBG program is a federally funded, competitive grant program designed to help
communities of less than 50,000 population.with their greatest community development needs.
All CDBG projects must principally benefit low and moderate income persons. The program was
established by the federal Housing and Community Development Act of 1974. The Montana
Department of Commerce (MDOC) administers the program "under contract" with the U.S.
Department of Housing and Urban Development (HUD). In 1982, MDOC took over
administration of the "nonentitlement" CDBG program for communities of less than 50,000
population from HUD. The MDOC Economic Development Division administers the Economic
Development category. The Housing and Public Facilities categories are administered by the
MDOC Community Development Division.
In response to pressure from Congress and HUD to expedite the expenditure of CDBG funds,
the Montana CDBG Program is proposing to accept applications for both FFY 2002 and FFY
2003 Housing applications during the fall of 2002 and move up the normal deadline for FFY
2003 Public Facilities applications from the spring to January, 2003. Together these actions
would constitute a significant proposal in regards to operation of the CDBG program for housing
and public facilities during the upcoming twelve months. We would appreciate your reaction to
these proposals or suggestions for alternatives.
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COAL BOARDNM1444.24004 CDBG14061444-2488 CTAM4061 4 4 417 57 HRMI BOARD(406)4443757 75EP(406)4442400
To expedite the public comment process and reduce printing and distribution costs, the MDOC
is distributing a summary of only the major proposed changes to the guidelines at this time,
rather than the entire text. This summary focuses on the key issues that local government
officials and others need to be aware of in order to offer comments. The final guidelines will be
distributed to local governments and other interested persons on the CDBG mailing list prior to
the application periods for Planning, Public Facilities, and Housing funds.
Public Hearina on CDBG Guidelines Scheduled for January 16, 2002
A public. hearing on the 2002 CDBG Application Guidelines will be held Wednesday,
January 16, 2002 at 1:30 P.M. at the Downstairs Conference Room of the Montana
Department of Commerce, 1424 9th Avenue, Helena, Montana. Written comments may
also be submitted to the Community Development Division, Montana Department of
Commerce, P.O. Box 200523, Helena, Montana 59620-0523. Comments must be received
no later than 5:00 P.M., Friday, January 25, 2002 in order to be incorporated into the
formal record.
Proposed Application Deadlines. Allocation of Funds. and Program Changes for the Year
2002 and 2003 Program
I. Proposed Application Deadlines
For several years, the U.S. Department of Housing and Urban Development (HUD) has been
placing increasing pressure on all of the states that administer the State CDBG Program to
expedite the expenditure of their CDBG funds. Congress and HUD are continuing to place
pressure upon the states and entitlement cities that administer the CDBG program to
expend funds more quickly. Because, overall, on the national level, local governments have
been slow in completing their CDBG projects (at least in the view of Congress), HUD finds it
very difficult to persuade Congress to maintain constant levels of funding for the program while
billions of CDBG funds remain "in the pipeline" unspent. It has also been difficult for Congress
to understand the lag that occurs between its approval of an appropriation for CDBG nationally
and the actual expenditure of those funds by a local CDBG project. HUD staff believe that there
is a very real possibility that CDBG funds could eventually be cut significantly as a result of
Congress' concerns.
MDOC typically receives notification of the amount of its CDBG allocation for each federal fiscal
year (FFY) in April. Applications for CDBG public facilities grants are currently due in May and
the grant awards are usually announced in August or September. This results in at least a five
month delay between when MDOC receives its fiscal year allocation and when public facility
funds are awarded. Applications for CDBG housing grants are currently due in late August and
the grant awards are usually announced in November or December. The lag time between
receipt of the state's CDBG allocation and housing grant awards is seven to eight months.
Overall, Montana has had a good track record in the expenditure of CDBG funds, ranking
in the top half of states in its rate of spending. However, in response to Congress'
concerns and with HUD's encouragement, the Montana Department of Commerce
(MDOC) is considering a change in the funding cycle that, if implemented, would impact
the FFY 2002 and 2003 CDBG programs. In essence, the Department is considering the idea
of conducting grant competitions for both FFY 2002 and 2003 funding allocations over a 12-
month period. This doubling of the grant competitions would be a one-time only event.
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The objective of this proposal would be to establish a long-term annual grant application cycle
for future years that would provide for the ranking of both housing and public facility applications
in the calendar year prior to the actual receipt of the FFY CDBG allocation that would fund those
projects. This would allow MDOC to award grants to communities immediately upon notification
of that year's CDBG allocation. Grants would be awarded in order of the ranking scores
assigned during the previous calendar years grant competition, based on the amount of funds
allocated to the housing and public facilities project categories. This is a step that has either
already been implemented or is being seriously considered by several other states which
administer the State CDBG Program.
Public Facilities applications for 2002 would be due in May, 2002 and a combined Housing
competition for 2002 and 2003 would have applications due in October, 2002 (in the case of
housing, communities would indicate which FFY program's grant competition they are applying
for.) The 2003 Public Facilities applications for FFY 2003 CDBG funds would be due in
January, 2003.
Consistent with current policy, MDOC would not accept public facility applications for
FFY 2002 CDBG funds for projects which would also require Treasure State Endowment
Program (TSEP) funds to be requested from the 2003 Legislature. Public facility projects
which propose to use both CDBG and TSEP funding (subject to 2003 legislative approval)
would have to apply for the FFY 2003 grant competition, instead. This would avoid committing
FFY 2002 CDBG funds to public facility projects which could not even begin start up activities
until after legislative approval in May, 2003.
The FFY 2002 public facilities competition would be limited to public facility projects that would
use funding sources other than TSEP funds, which are dependent on 2003 legislative approval.
Projects that already have a TSEP commitment from earlier legislatures could apply in May,
2002. The Public Facilities competition could include the full range of eligible public facilities
projects including water and wastewater projects or facilities such as senior centers, Headstart
centers, etc.
No major change in the overall distribution of CDBG funds used in past years would be
proposed for 2002 and 2003:
• One-third of the total amount available for new grants would be set aside to allow economic
development funds to be available to applicants on a continuous basis.
• As in the past, funding allocations for the Housing and Public Facilities categories would be
based on the approximate percentage of applications requested for the previous two-year
period. Using a two year average adjusts for any variability in the demand for CDBG public
facilities funding associated with the biennial cycle of the State's legislatively-approved
infrastructure funding programs: the Department of Natural Resources and Conservation
Renewable Resources Grant and Loan Program and the MDOC Treasure State Endowment
Program. In this way, the funding reserved for each category can respond to changing
demand for CDBG Housing and Public Facilities grants over time.
Under this proposal, communities would be applying for FY 2003 and subsequent years wfthout
knowing precisely how much CDBG funding is available for each grant category. As always, the
award of FY 2003 funds is contingent on Montana receiving its CDBG grant funds from
Congress and HUD. However, over the history of Montana's CDBG program, the funding levels
have not varied significantly from year to year.
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• The tentative application deadlines for the 2002-2003 grant competitions would be as presented
in Figure 1. The tentative deadlines for 2004 are set forth as well to show how the program
would return to a normal annual cycle again.
This proposal would offer some advantages over the current cycle:
• This alternative would eliminate the current delay between when MDOC receives its fiscal
year allocation and when grants are actually awarded. Depending upon circumstances,
some public facility or housing projects may be able to initiate construction activities that
same year.
• If projects are ranked in the calendar year prior to receiving the CDBG fiscal year allocation,
the projects can begin start up immediately as soon as the CDBG allocation for Montana is
determined and grants are awarded by MDOC. MDOC staff could even begin preparatory
activities, such as drafting contracts, during the time between application ranking and grant
award. MDOC CDBG staff can conduct the project administration workshop for the new
grant recipients soon after the grant awards for public facilities and housing projects are
announced. Local staff could also begin some preparatory activities in anticipation of the
funding announcement, such as beginning the environmental review process.
• Public facility projects which are applying for both CDBG and TSEP funding could be
reviewed concurrently which would provide significant cost savings for the engineering
review of the applications. Under the current process, the technical analysis of TSEP
applications occurs prior to the Legislature for TSEP ranking and, separately, following the
Legislature for CDBG ranking.
• Under current policy, projects which would be jointly funded by TSEP and CDBG, must
submit CDBG after the Legislature has acted on the TSEP application. The proposed
alternate CDBG cycle would allow TSEP and CDBG projects to be submitted in the same
calendar year. This would also make it easier to coordinate the public hearing requirements
for both programs.
• Delaying the annual Housing grant competition until October would allow time between the
ranking of public facilities and housing applications for MDOC staff to monitor local CDBG
projects on site while construction activity is still taking place. This would also allow the
ranking of Housing applications to take place in late fall and early winter when construction
activity has ended and travel is often more difficult.
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• II. Proposed Allocation and Distribution of Funds
In 2001, the Montana CDBG program received an allocation of $8,105,000. Montana's
allocation of CDBG funds for 2002 will be $8,060,000. One-third of the total amount available
for new CDBG grants will be set aside for the Economic Development category of the CDBG
program or$2,572,800.
As noted on page 4, MDOC attempts to allocate funds between the Housing and Public
Facilities categories based upon the relative and changing demand for funds for each category.
Funding allocations for the Housing and Public Facilities categories are based on the
approximate percentage of applications requested for the previous two-year period. Through
this method, the amounts allocated between the two categories will change based upon
actual past demand; however, the basic method of distribution remains unchanged. The
chart below lists the number of Housing and Public Facilities applications and the total dollars
requested for the last two years.
CDBG APPLICATIONS RECEIVED
2000-2001
HOUSING PUBLIC FACILITIES
YEAR #OF APPS TOTAL $ # OF TOTAL $
REQUESTED APPS REQUESTED
2000 5 $2,500,000 15 $5,801,956
2001 10 $3,744,096 19 $7,592,793
Total: 15 $6,244,096 34 $13,394,749
% of Total 31% 69%
Applications
Based upon an analysis of the average number of applications received yearly for each
category, the resulting percentage is 31% for Housing projects and 69 % for Public
Facilities projects.
As a result of the method of distribution described above, the allocations for the Housing and
Public Facilities categories for 2002 and 2003 will be established at 31% and 69%, respectively,
of the total available funding for these two categories (or$5,145,600 for 2002).
Based upon the method of distribution described above, CDBG funds are proposed to be
allocated for the year 2002 program in the following manner:
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Total Fiscal Year 2002 State CDBG Allocation $8,060,000
Less CDBG funds for State program administration 341,600
(as provided by federal statutory formula)
Amount Available for Award to Local Governments $7,718,400
Less 1/3 Allocation for Economic Development Projects $2,572,800
Total Available for Housing and Public Facility Projects $5,145,600
Less Planning Grants $ 150,000
Sub-Total $4,995,600
Allocation for Housing Projects (31%) $1,548,636
Allocation for Public Facilities Projects (69%) $3,446,964
III. Preliminary Architectural Report for CDBG Non-Water and Wastewater Public
Facilities Projects
CDBG public facility applications for drinking water and wastewater projects have long had to
submit a preliminary engineering report outlining the project concept and technical design for a
proposed project. For FY 2002 — 2003, the CDBG program proposes to include requirements
for a preliminary architectural report similar to the requirement for submittal of a preliminary
engineering report for water, wastewater, or solid waste facilities.
Conclusion
Since the establishment of the Montana CDBG program in 1982, the Community Development
Bureau of the Department of Commerce has attempted to keep the CDBG program as useful to
local governments as possible, consistent with the federal laws and regulations under which it
must operate. The proposals presented in this report are an important part of the Department's
on-going effort to continually re-evaluate and improve the program. It is very important that
local officials and others interested in community development review and provide comments on
these proposals. By responding to your suggestions, the CDBG program can continue to
positively assist Montana local governments as they seek solutions to their greatest community
development needs.
Email: Gbyrom@state.mt.us
Phone: (406) 444-4477
Fax: (406) 444-4482
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