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2. Economic Development Grant ApplicationCONCEPT PAPER: COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM FOR ECONOMIC DEVELOPMENT Northwest Montana Human Resources, Inc. operates the Northwest Business Center, which is a group of economic development programs which offer gap financing and business technical assistance to small business in Flathead, Lake, Lincoln and Sanders Counties. The objective of the program is to reduce the significant unemployment and underemployment that exists within the region by assisting businesses with their expansion efforts thus creating jobs. Technical Assistance The Center offers business assistance through the SBA funded Small Business Development Center Program, USDA funded Loan Packaging Assistance, Engineering Services through the MSU sponsored Manufacturing Extension Center, and assistance in attaining government contracts as a member of the Government Marketing Assistance Group. The Center assisted over 400 businesses last year, packaged over $2,000,000 in financing and assisted local companies in landing over $1,000,000 in government contracts. Since 1991 the Center has assisted companies in developing 205 full time jobs. Financing Programs The financing programs that have been made available to the public by the Center include the Montana Microloan program, the USDA Intermediary Relending Program and the Flathead County Community Development Block Grant (CDBG) Program. Commercial loans are available from $1,0004750,000 through the 3 Loan funds operated by the Center. Clients who are eligible for financing from the Center are most often referred from bank loan officers. Most clients who are financed through the Center have need for capital that exceeds the bank's ability to lend, but are evaluated by the Center's Loan Review Board as financially viable operations that need further capital to make a growth step. Once refinanced, the clients are monitored for compliance with the terms of the loan, and to meet a hiring goal agreed upon prior to closing their loan. The Center reports all hiring and training activities to the state and federal sources for program compliance purposes. COMMUNITY DEVELOPMENT BLOCK GRANT: CAN IT WORK FOR KALISPELL? The U. S. Housing and Urban Development (HUD) provides an annual allocation of Community Development Block Grant funding to Montana of approximately 8 million 1 Component of the program. Each year, cities are eligible to compete for a maximum grant of $400,000 per local government entity which is, in turn, loaned out to a business that is relocating or expanding. The state must approve the local governments loan project based on its potential for creating permanent and year-round employment for low to moderate income Montanans. Funds are available at $20,000 per "full time employee" (FTE) the applicant business plans to create or retain and a bank or private lending source must match the loan at a minimum 1:1 basis. The borrower must commit to a hiring and training plan with goals planned for a 24-month period. If an award is granted to a local government entity, 8% of the $400,000 grant to the municipality will be used to track the performance of the company, especially the job development impact of the project over a 2-year period. In most cases in Montana, a local administrative organization with a solid history of community development lending is selected to manage the program on behalf of the government entity. This organization will provide due diligence for the loan, track, document and report the hiring and training activities of the client company, collect loan payments on loans that may have terms of 15 years or more, and provide technical assistance to companies. The local government that sponsors a CDBG loan program can customize their program to meet some of their local economic development objectives, as long as the state and federal objective to assist low to moderate income Montanans is maintained. If a management plan is approved by the state, the CDBG is granted to the local government entity and the funds are not paid back to the state. Some uses for the funding from loan payments to the program include: capitalization for the local loan fund; costs of maintaining the loans, business technical assistance, costs associated with preparing overall economic development plans; costs of training for staff who manage CDBG funding; or grant match for other programs that meet the CDBG objectives. It is important that the low to moderate income requirements continue to be the target population served by the program. Funds are considered federal in character unless the borrower loan payments are made to a qualified nonprofit community development organization. The municipal entity that sponsors a CDBG program must provide for approval a management plan, revolving loan fund plan, and program income plan. At present; the Center has sample plans that can be made available to the council. These examples are presently being used by Lewis and Clark County and the City of Helena as a model for their CDBG program. It is well designed, and can serve as a document to promote ideas on how the City of Kalispell may design its local program. 2 The staff at the Northwest Business Center has been doing community development lending for nine years, with 2 years of direct management of CDBG-ED funding. At present, the Center has more clients who are interested in CDBG financing than is available from Flathead County. If allowed the opportunity to administer the program, the staff of the Center will pledge its time to the City of Kalispell to assist in the development and successful implementation of the new CDBG Economic Development Program, which suits the City's needs. It is the intent of the Center to encourage the program in order to build further financing tools that will assist in the development of new jobs. If the City determines that it will consider the concept of a CDBG ED program, a public hearing would be the appropriate steps in getting the process underway. This hearing would encourage the public to provide their input regarding the formation of a CDBG-ED program, a new loan fund, and the use of funding to assist low to moderate income Montanans. The Center can coordinate the public hearing process with the City staff in the event that you choose to go forward. 3