HomeMy WebLinkAbout7. Follow up Use of Repaid Small Cities Development Program Funds
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City of Shakopee COt~SE'iT
Memorandum
TO: Economic Development Authority
Mark McNeill, City Administrator
FROM: Kris Wilson, Assistant to the City Administrator
SUBJECT: Potential Uses of Loan Repayment Funds
DATE: November 8, 2005
Introduction
At the November 1 EDA meeting, staffwas asked to do some additional research on
potential uses of the money the city has as a result of repayments on Small Cities
Development Program (SCDP) loans. Specifically, the question was whether the funds
could be used for some of the projects that the Shakopee Downtown Partnership has
approached the city about partnering with them on. As I understand it, these included
monuments, walking tours, promotional brochures and maps, etc.
Findings
Our contact person at the Department of Employment and Economic Development
(DEED) told me that in order to use the repayment funds for something other than
additional deferred loans within the original SCDP project area, the city would have to
submit a request/proposal to DEED that outlines how the proposed alternative use ofthe
funds would meet one of the federal objectives of the program.
Attached is a one-page description ofthe federal objectives of the program, which comes
from a 250 page document outlining the SCDP program.
After reading the attached description ofthe federal objectives and some sections which
provide additional detail later on in the document, it does not appear that the activities
proposed by the Shakopee Downtown Partnership would qualify. The following is a
quick breakdown of the requirements.
1. The activity must principally benefit low and moderate income persons. The
attached explanation goes on to say that "for activities with area-wide benefit...
at least 51 % ofthe persons benefiting must meet the low and moderate income
guidelines." Since the projects in question would benefit downtown business
owners and the city at-large I don't believe the 51 % threshold could be met.
2. The activity must prevent or eliminate slums or blight. This is elaborated on
later in the SDCP guide, where it says "activities which most often address the
federal objective of preventing or eliminating slumlblight are commercial
rehabilitation, acquisition, and demolition/clearance. Under limited
circumstances public facilities projects such as streets, sidewalks, sewer, water or
storm sewers may qualify as meeting the slumlblight federal objective." If"hard"
costs such as streets, sidewalks and sewers qualify only in limited cases, I don't
believe we could make the case that "soft" costs related to beautification and
promotion would qualify.
3. The activity must alleviate an urgent community development need. Again, it
seems extremely unlikely that we could make the case that the types ofprojects
proposed by the Shakopee Downtown Partnership constitute an "urgent" need.
While it does not appear the items specifically in question would be allowable uses of the
funds, under the action taken at last week's EDA meeting, any repayments received on
loans made to commercial properties as part of the SCDP project would be used to fund
additional loans to commercial properties in the core downtown area - and effort I expect
the Shakopee Downtown Partnership would support.
Action Requested:
At the November 1 EDA meeting, a motion was adopted to "authorize use ofthe Small
Cities DevelopmentProgram fund balance to make additional deferred loans to
qualifying property owners under the terms and conditions applied to the original
program." No additional action is required, unless the EDA wishes to revise the action
taken at the November meeting.
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. Federal Objectives of the Program
Federal regulations require that each activity funded in whole or in part with SCDP funds must
meet one of three Federal Objectives. Applicants must be able to document how each proposed
project meets one of these three objectives:
o The activity must principally benefit low and moderate income persons, or
o The activity must prevent or eliminate slums and blight, or
o The activity must alleviate an urgent community development need.
Federal Objectives Definitions
Low and moderate income persons: Households whose total income from all members does
not exceed 80% of the Area Median Income, adjusted for household size. These income figures
are determined by HUD annually. The most current income limits and definitions of income are
included in Appendix 1 of this Guide.
Activities which benefit persons directly (such as housing rehabilitation) must benefit only low
and moderate income persons. For rental rehabilitation, at least 51 % of the units, after
rehabilitation is complete, must be occupied by low and moderate income persons at affordable
rents. For activities with area-wide benefit, such as public facilities, at least 51 % of the persons
benefitting must meet the low and moderate income guidelines. See Chapter Three for detailed
guidance on documenting Federal Objectives.
Slums or blight: The phrase "slums and blight" means areas or neighborhoods that are in
deteriorated condition. In order to qualify under the federal objective of slums/blight, there must
be a substantial number of deteriorated or deteriorating buildings or public improvements
throughout the area.
Conditions and the areas of "slum and blight" must be described and designated by the
governing body (Le., city council) in a formal resolution. The selected area must meet a statutory
definition of "slum and blight." See Chapter Three for further guidance on this subject.
Urgent community development need: A condition which poses a serious and immediate
threat to the health or welfare of the community. Applicants using this Federal Objective must
certify that the condition became critical or developed within the preceding 18 months and that
no otherfunding source is available to correct it. Chapter Three contains more information on
this Federal objective.
SCDP Applicant Guide (updated December 2003) 1-4
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