Department of Economic & Community Development
Bill Hagerty, Commissioner

Overview

Funding is available to communities in Tennessee from the U.S. Department of Housing and Urban Development (HUD) through the Tennessee Department of Economic and Community Development (ECD). The Community Development Block Grant (CDBG) funds are used to promote economic and community development in small cities across the state. The projects must align with one of three national objectives:

CDBG Grants are administered as part of two primary programs:

Contact Us

For information about the Community Development CDBG Program, contact Brooxie Carlton at(615) 741-8806 .

For information about the Economic Development CDBG Program, contact Jeff Bolton at (615) 253-1909.
 
For information about the disbursement of funds, contact Stephanie Burnette at (615) 253-1912.

Primary Regulations

There are a number of regulations that apply. Principal among these are the following:

One additional major regulation applies only to economic development programs. This will be discussed in a later section.

Eligibility

ECD administers the "Small Cities" CDBG program. All communities in Tennessee are eligible except those in entitlement communities which are communities 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, Franklin, Hendersonville, 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.

Each year, typically in October, there is a public meeting to discuss priorities for the next year’s program.

The economic development program operates continuously. The community development program operates on a once-a-year application cycle, with applications being submitted in February.

Funding Levels

The level of funding is determined annually through congressional appropriations. Each state receives a protected allocation of CDBG funds, based on a federal formula and does not compete with other states for funding allocations.

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.

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).

Additional Resources

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:

All other counties are eligible for the following:

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:

Company information requested includes, but is not limited to, the following:

Application Review

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.

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.

Eligible Projects

CDBG "regular round" projects have a quality-of-life objective rather than an economic development objective. 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.

Additional Resources

• 2013 Applications
• Handbooks
• Title VI Compliance

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:

Community development 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.

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). Line and system 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 line and system 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. Line and system projects can earn up to 100 points in project impact, while livability and housing projects can earn only 50. For the 2012 application round, 10 additional points in the project impact category are available if the application shows that the proposed project affects the community's economic development.

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.

ECD ocassionally receives funding from HUD related to presidentially declared disasters. This funding can be used for projects that are eligible under the regular round that are directly related to damage from the disaster. As the funding becomes available, ECD will notify eligible communities. Currently there is funding for disasters that occurred in 2008, 2010 and 2011.

Additional Resources

•  Duplication of Benefits Form

2008 Disaster Funds

On February 5th and 6th 2008, a series of tornadoes crossed the state from Memphis through the Jackson area and then to the Nashville area and beyond. Straight-line winds and floods associated with the systems also caused damage and deaths across the state. On February 7, President Bush declared the event a disaster and eventually 16 counties were designated as disaster areas. Designated counties include Benton, Fayette, Fentress, Hardin, Haywood, Hickman, Houston, Lewis, Macon, Madison, McNairy, Perry, Shelby, Sumner, Trousdale and Williamson Counties.

A total of $92,517,890 is available to the affected communities through the U.S. Department of Housing and Urban Development (HUD) in addition to FEMA funds that were spent immediately following the disaster. ECD is administering the funds. One round of grant applications for the affected communities has been accepted; 35 grants totaling more than $19 million have been awarded to communities for public infrastructure and housing repairs.

2010 Disaster Funds

Between April 30 and May 2, 2010 more than 22-inches of rain fell in the western portion of Tennessee. Fed by massive rainfall and run-off from creeks and streams, the large rivers in the affected regions attained record crests. More than half of the state had reports of flood damage and approximately a dozen tornadoes in the storm touched down across the state.

As a result of the May flooding, as many as 10,000 individuals were displaced and more than 1,500 homes were destroyed in Tennessee. Around the state, 102 bridges, 239 roads, and 19 water treatment plans were impacted or damaged. 49 counties received Presidential Disaster Declarations. Through HUD $30,906,517 of CDBG Disaster Recovery Funding is available for the affected communities to assist with unmet housing, infrastructure, and economic revitalization needs. Customer Value Partners has been selected through an RFP process to administer these disaster funds for the state.

ECD will notify the affected communities when applications for funding will be accepted or announced.