1. The scoring systems and the rating of applications in the current rule used to make funding determinations related to economic development and public facilities economic development applications are replaced by sets of determinations and considerations the Department is required to make under the proposed rule before it may fund applications under either of the programs. For the most part, the determinations and considerations treat all the issues raised by the minimum requirements in the current scoring systems. The significant differences include:
a. A broader view of benefit to low and moderate income persons which allows the low and moderate income requirement to be met by a project that provides job training, child care or transportation to low and moderate income persons as well as a project that creates or retains jobs for low and moderate income persons. This increased flexibility related to benefit for low and moderate income persons parallels a change in the federal rules that allows the state to use these alternative methods of measuring benefit to low and moderate income persons.
b. An examination of the public purpose of the project that considers for both economic development and public facilities economic development applications several items that can be found in the existing s. DOD 6.15 or elsewhere in the subchapter and which also looks at such new considerations for both programs as the extent of poverty, unemployment and other economic factors in the project area; the prospects for new investment and economic development in the project area; the amount of investment that is likely to result from the project; and the willingness of the business to work cooperatively with job service and private industry councils to provide job opportunities to persons with low to moderate income. For economic development projects, the public purpose examination also considers the availability of satisfactory collateral and personal guarantees to assure repayment.
2. Under current rules, public facilities economic development projects may be funded only out of CDBG funds that have been returned to the Department. The proposed rule authorizes the Department to assign up to 20% of each allocation for public facilities economic development grants.
3. Under current rules CDBG funds that have been returned to the Department may be used for public facilities economic development and public facilities projects. The proposed rule allows such funding to also be used for economic development projects.
4. Under current rules, the Department is required to announce the annual allocation of funds between economic development and public facilities by August of the prior year. The proposed rule eliminates that requirement.
5. Under current rules, the maximum amount that a business may receive under the economic development program is $750,000. The proposed rule instead provides that the maximum amount that may be provided to a local government for the purpose of making a loan to any business is $1 million.
6. Under current rules, the maximum amount available to assist any business under the public facilities economic development program is $750,000. The proposed rule reduces the maximum amount that may be provided to a local government to assist a business under the public facilities economic development program to $500,000. The total a local government may receive under the public facilities program in a year is reduced from $1.5 million to $1 million.
7. The proposed rule provides that any program income in the possession of a local government in excess of the limits for that local government must be paid to the Department within 30 days of the local government's receipt of those funds.
8. Under current rules the Department can waive the program income limits to the extent that the excess income will be applied to continue the activities that generated the income. The proposed rule establishes a formal process and criteria for increasing the program income limits in increments equal to 25% of a local government's original limits. Local governments that wish to retain 50% of the excess program income must apply to the Department. To make a determination, the Department must consider the following:
a. Whether the local government complied with all of the state and federal requirements related to its use of program income.
b. The number of loans made by the local government out of program income and the total dollar volume of those loans.
c. The default rate on such loans made by the local government.
d. The demonstrated need for the increase.
Initial Regulatory Flexibility Analysis
Notice is hereby given that pursuant to s. 227.14, Stats., the proposed rule will have no impact on small businesses. The initial regulatory flexibility analysis as required by s. 227.17 (3) (f), Stats., is as follows:
a. Types of businesses affected: Businesses located within a local government eligible for CDBG funds from the state.
b. Description of reporting and bookkeeping procedures required: None.
c. Description of professional skills required: None.
Fiscal Estimate
The proposed order will produce a fiscal effect on the Department of Development as it is likely to change the amount of program income that will be returned to the Department. However, it is not possible to determine the amount of fiscal effect or even whether it will be a positive or negative fiscal effect. The total amount available to local governments under the community development block grant is not changed by the order as all program income returned to the department is redistributed as additional block grant funding to local governments.
Contact Person
Dennis Fay, General Counsel-608/266-6747
Text of Rule
Pursuant to the authority vested in the Department of Development by s. 560.04 (2) (j), Stats., the Department hereby repeals, renumbers, renumbers and amends, amends, repeals and recreates and creates rules interpreting s. 560.04 (2) (j), Stats., as follows:
SECTION 1. DOD 6.01 is amended to read:
DOD 6.01 PURPOSE. The purpose of subchapters I, II and III is to set forth the criteria the department will use in administering the federal funds in the Wisconsin development fund that the department receives pursuant to 42 USC 5301 to 5319, as it may be amended, and 24 CFR 570.480 to 570.496 Part 570.
SECTION 2. DOD 6.03 (1m), (1r), (4r) and (14r) are created to read:
DOD 6.03 (1m) “Business” means a business that benefits from a grant by the department to a local government under the economic development or public facilities economic development programs.
(1r) “CDBG funds” means community development block grant funds awarded to the department by the federal government pursuant to 42 USC 5301 to 5319 as it may be amended.
(4r) “Local government” means a unit of general purpose local government that is eligible to apply for and receive CDBG funds under s. DOD 6.02.
(14r) “Target population” means persons with low to moderate income.
SECTION 3. DOD 6.03 (16) is renumbered 6.03 (13r) and as renumbered is amended to read:
DOD 6.03 (13r) “Wisconsin Small cities development fund grant” means a grant available to an eligible applicants as provided in s. DOD 6.02 local government for the purpose of undertaking economic development projects, public facilities projects that support economic development and public facilities projects.
SECTION 4. DOD 6.14 is amended to read:
DOD 6.14 Applicability. Sections DOD 6.01, 6.02, 6.03 (1), (1m), (1r),(2), (3), (4) (4r) (5), (6), (8), (14r), (15) and (16) and the provisions of this subchapter except for s. DOD 6.16 (f) apply to the economic development program. Sections DOD 6.01, 6.02, 6.03 (1), (1m), (1r), (2), (3), (4r) (6), (8), (10), (14r) (15) and (16) and the provisions of this subchapter except for ss. DOD 6.16 (7) 6.15 and 6.18
(1) to (2) (a) and (3), (4) (a), (c) and (d) and (5) to (6) apply to the public facilities economic development program.
SECTION 5. DOD 6.15 and 6.16 are repealed and recreated to read:
DOD 6.15 Economic development program. (1) The department may award a grant under the economic development program upon receipt and consideration of an application from an eligible local government if the department determines all of the following:
(a) The project serves a public purpose.
(b) The local government has a community development plan as required by 42 USC 5301 to 5319.
(c) The project costs are reasonable.
(d) All sources of project financing will be committed prior to the disbursement of the grant.
(e) The project is financially feasible.
(f) The business that will benefit from the economic development grant has the economic ability to repay the funds.
(g) The project will likely retain or create jobs in this state.
(h) The percentage of jobs retained or created that are made available to persons in the target population will likely exceed the percentage specified in the application manual.
(i) Financing for the project is unavailable from any other source on reasonably equivalent terms.
(j) The business that will benefit from the economic development grant will contribute at least 50% of the total cost of the project from private funding sources.
(k) The project includes job training, child care or transportation activities under 24 CRF 570.483 (b) (2) (v) designed to benefit low and moderate-income persons, job creation or retention activities under 24 CFR 470.483 (b) (4) designed to benefit low and moderate-income persons or other activities under 24 CFR Part 570 that meet the national objectives of benefit to low and moderate-income persons through job creation.
(2) To make a determination under sub. (1) (a), the department shall consider all of the following:
(a) The extent of poverty, unemployment and other economic factors in the area of the project.
(b) The prospects for new investment and economic development in the area.
(c) The amount of investment that is likely to result from the project.
(d) The total cost per job created or retained.
(e) The amount of wages and benefits to be provided by the business.
(f) The willingness of the business to work cooperatively with local job service offices and private industry councils to identify and offer job opportunities to persons in the target population.
(g) The availability of satisfactory collateral and personal guarantees to assure repayment of the economic development grant.
(h) Whether the award will provide the business with an unreasonable competitive advantage over other similar Wisconsin businesses in the vicinity of the project.
(i) Whether the project will involve relocation of a business and displacement of jobs from one local government in Wisconsin to another local government in Wisconsin.
(3) The amount of funds requested for each job to be created or retained
may not exceed $20,000. The amount awarded shall depend upon the department's consideration of the factors in sub. (2).
DOD 6.16 Public facilities economic development program. (1) The department may award a grant under the public facilities economic development program upon receipt and consideration of an application from an eligible local government if the department determines all of the following:
(a) Each of the items in s. DOD 6.15 (1) (a), (c), (d), (e), (g) and (h).
(b) The local government has a citizen participation plan as required under 24 CFR 570.486 (a).
(c) The local government will contribute at least 25% of the total cost of the project from funding sources other than the federal or state government.
(2) To make a determination under sub. (1) (a), the department shall consider each of the items in s. DOD 6.15 (2) (a) to (f), (h) and (i).
(3) The amount of public facility economic development program funds requested by an eligible local government for each job created or retained may not exceed $10,000. The amount awarded shall depend upon the department's consideration of the factors set forth in sub. (2).
SECTION 6. DOD 6.18 (1) to (4) (a) are amended to read:
DOD 6.18 (1) Out of each annual allotment grant of federal Wisconsin development CDBG funds administered by the department from the federal government, the department may set aside up to 75% for the economic development program, up to 20% for the public facilities economic development program, or and up to 75% for the public facilities competition program administered under subch. I. The department shall announce the amount of the set aside no later than August 1 of the preceding year. The department shall report semiannually to the chairs of the economic development standing committees of the legislature on the status of the program. Funds in Program income received by the department's revolving loan fund, consisting of department from repayments from of prior economic development program awards, shall be
used allocated for economic development, public facilities economic development or public facilities program awards.
(2) (a) The maximum amount available of CDBG funds that may be awarded to any local government for the purpose of making a loan to
any a business under the economic development program is
shall be $750,000 $1 million. The maximum amount available to any business during any 5 year period shall be $1 million. The maximum aggregate amount available of CDBG funds that may be awarded under the economic development program to any local government, including any amount loaned to a business, is shall be 1.5 million per calendar year.
(b) The maximum amount available to assist any of CDBG funds that may be awarded to any local government for the benefit of a business under the public facilities economic development program is $750,000 shall be $500,000. The maximum aggregate amount available of CDBG funds that may be awarded to any local government under the public facilities economic development program is $1.5 shall be $1 million per calendar year.
(3) Each recipient of eligible local government that is awarded economic development program funds may retain a cumulative amount of program income from all grants awarded after January 1, 1987 subject to subs. (4), and (5) and (6) for the purpose of establishing to establish and capitalize an economic development revolving loan fund. The recipient of funds A local government that establishes an economic development revolving loan fund must comply shall administer and use the fund in accordance with all of the requirements established by the federal government under 24 CFR 570.489 (f) and the procedures established by the department.
(4) (a) Retained Subject to pars. (am) to (e) and subs. (5) and (6), retained cumulative program income from grants awarded after January 1, 1987 may not exceed:
1. $100,000 for an applicant a local government with a population of 1,000 or less.
2. $150,000 for an applicant a local government with a population of more than 1,000 but less than 2,000.
3. $250,000 for an applicant a local government with a population of 2,000 or more but less than 4,000.
4. $500,000 for an applicant a local government with a population of 4,000 or more but less than 10,000.
5. $750,000 for an applicant a local government with a population of 10,000 or more.
SECTION 7. DOD 6.18 (4) (am) is created to read:
DOD 6.18 (4) (am) As an alternative to the cumulative program income limits in par. (a) a local government may elect to retain program income from grants received prior to January 1, 1987 in excess of the limits in par. (a). A local government shall make the election on a form prescribed by the department. Any local government that makes the election under this paragraph, may not retain program income generated after the effective date of this rule from grants received on January 1, 1987 or thereafter except as provided in sub. (5).
SECTION 8. DOD 6.18 (4) (b) to (d) are amended to read:
(b) All program income from grants received by a local government in excess of these amounts the limits in par. (a) or (am), if the local government makes the election under par. (am), shall be returned paid to the state department within 30 days of receipt. The department shall use such program income to fund eligible economic development, public facilities economic development and public facilities activities, except that the department may waive this requirement to the extent such income is applied to continue the activities from which the income was derived.
(c) A recipient of economic development program funds which will generate local government that will generate and retain program income in excess of the amounts allowed in this section
from grants awarded prior to January 1, 1987 is par. (a), or (am) if the local government makes the election under par. (am), shall not be eligible to retain the excess program income from grants awarded after January 1, 1987, except as provided in par. (b) sub (5).
(d) All program income from grants awarded prior to January 1, 1987 shall be retained used by
the recipient a local government in accordance with 24 CFR Part 570.489 (e) (2) and (f) and the local government's original contract provisions with the department. The department may require the recipient to return any program income from grants awarded prior to January 1, 1987 if funds are not being spent in accordance with federal program regulations and contractual provisions or if program recordkeeping and reporting procedures are not being met.
SECTION 9. DOD 6.18 (4) (e) is created to read:
DOD 6.18 (4) (e) The department may require a local government to return program income if any of the following occurs:
1. The local government fails to use such funds in accordance with the requirements established by the federal government and the department.
2. The local government fails to comply with the recordkeeping and reporting requirements established by the federal government and the department.
3. The local government fails to make any economic development loans with the revolving loan fund for a period of two consecutive years and after receiving a notice from the department, fails to make any economic development loans for a period of 6 months.
