COVID-19 Webinar: Moving Money to the Streets

CDBG April 20 Webinar Write Up

On April 20, IEDC hosted a webinar entitled “COVID-19: Moving Money to the Streets -Steps to Get CDBG Dollars Working Locally” where experts discussed the ins and outs of additional funding for the Community Development Block Grant (CDBG) under the CARES Act and how those funds can be deployed to make an impact.

Erik Collins, Director at Montgomery County Community & Economic Development (Dayton Ohio) moderated the session of four speakers who presented: Stanley Gimont - Senior Advisor for Community Recovery at Hagerty Consulting; Scott Farnin - Financial Services Counsel in the office of Congresswoman Joyce Beatty (Ohio) at the U.S. House of Representatives; Sue Southon – Senior Technical Specialist ICF International; and Raquel Favela – Senior Director at the National Development Council.

Stanley Gimont set the stage for the webinar by discussing the fundamentals of the CBDG and why Congress decided to choose the program as a reliable funding conduit for CARES Act funding. He outlined the program’s history, the jurisdictions it covers, and how it has been used as a channel for disaster recovery funds in the past (the most recent example being $1 billion dollars that was allocated to CDBG through the American Recovery and Reinvestment Act of 2009).

Under the CARES Act, $5 billion has been allocated to CDBG, on top of the grant’s regular funding for the 2020 financial year (which is $3.4 billion). The CARES Act stipulates a gradual release of funds in three tranches: an initial $2 billion to be deployed within 30 days of enactment (not later than April 26), a second $1 billion no later than May 11th, and the remaining $2 billion to be distributed on a rolling basis at the discretion of the HUD Secretary.

Eligible activities under the CDBG are projects in infrastructure, housing, economic development, and public services. Other stipulations under the CARES Act includes removing the cap on public services expenditure which is usually 15% and extends certain flexibilities to how FY2019/2020 funds can be used.

Gimont moved onto what states and communities should consider when deploying CDBG CARES Act funding allocations:

1. Only take actions that have a clear plan and direction, questions to consider:

  • What are your community’s needs and how can you use the funds to address them?
  • What are the other funding options under the CARES Act? – consider how multiple funding sources can be layered, and make informed choices based on the funding sources flexibility (e.g. the eligible activities under certain funding may be more stringent than others which will influence where your funding can go)

It is also important to keep in mind the duplication of funding if you are seeking FEMA disaster recovery financial assistance.

2. Consider organization’s strengths and weaknesses, questions to consider:

  • What can you accomplish with the staff you have?
  • Where do you have the appropriate policies, procedures, controls – can you build off from what you already know? 
  • Do you have any knowledge from past projects that can be applied to your current situation?

An organization should also consider adding additional staff to projects if appropriate, the CDBG funding has an allocation to support additional staffing needs.

3. Be mindful of the applicable CDBG requirements and the public optics of your project, questions to consider:

  • Does the funding provide relief in alignment with requirements of the low and moderate income benefits?
  • How do your actions appear to tax paying citizens and those in economic hardship?

Navigating the legislation surrounding COVID-19 relief funding can be tricky, so organizations should reach out to their CDBG representatives for assistance. HUD has a website (HUD Exchange) where organizations can find resources and technical assistance on the CDBG. 

Scott Farnin is the Financial Services Counsel for U.S. Congresswoman Joyce Beatty in the U.S. House of Representatives. He joined the webinar to provide insight on the nuances of the CARES Act and previewed what Americans can expect from the new stimulus bill that was passed on April 23. Farnin explained that the bill is an interim measure to replenish the initial program funds for the CARES Act, where an additional $380 billion has been allocated to Small Business loan programs (including the Paycheck Protection Program).

Farnin highlighted the assistance tabled for states and local governments, where $150 billion has been allocated to supplement budgets that may be impacted by revenue loss. The minimum allocation for each state is $1.25 billion and local governments that have a population of over 500, 000 can receive assistance directly from the Treasury. Congress is due back on May 4th where another wave of funding for states and local governments will be under deliberation.

Farnin closed off by discussing the importance of using the funds allocated wisely and discouraged against wasteful and under-utilized expenditure. 

Sue Southon transitioned the webinar into the implementation phase by presenting case studies on how communities have used CDBG funds and provided an overview of a 45-day deployment/operationalization plan that organizations and stakeholders can use to get the money to the streets.

Many states are using FEMA’s National Disaster Response Framework so that the pandemic response is executed in a coordinated way. Southon suggests that before implementing such a plan, stakeholders should reach out to your local emergency management city officials to find information on how decisions are being made about these programs within your respective jurisdiction.

How to operationalize a CDBG coronavirus program in 45 days:

Step 1: Identify key stakeholders 

This involves gathering stakeholders who have technical expertise to form a COVID-19 response task team. The key players that should be involved include: local and state government; regional representatives of federal agencies (e.g. FEMA, HUD, SBA, EDA, HHS); emergency management officials; the public health sector (local health department and hospital association); economic development organizations (EDOs); local banks (bankers association and the local branch of the Federal Reserve); and non-profit/foundation leaders.

Step 2: Identify opportunities to leverage resources

By using the technical expertise from your stakeholders, it will allow the team to prioritize flexible funding to ensure the maximum use of appropriated funding from various agencies. The team should identify possible funding gaps and shortfalls, and avoid a duplication of benefits (stipulated in the Stafford Act) so that assistance from more than one source is not used for the same need. This is done through a duplication of benefits analysis which occurs when CDBG funding is used in conjunction with other funding sources.

Step 3: Identify unmet needs and service gaps that could be filled with CDBG coronavirus funding

Step 4: Design a program

It is important to keep in mind that under current requirements, 90% of the funding should go towards low and moderate income beneficiaries. There are six phases of program design which need to be considered:

 

  • Define the program scope – identify eligible activities under the CDBG program requirements, make sure it fits in with the national objective, identify your beneficiaries, and consider program caps
  • Public comment period – this phase has been reduced to five days and has been amended to allow for virtual public meetings
  • Environmental review – this step will most likely be short as Southon anticipates that this CDBG funding will unlikely be used for construction projects
  • Execute subrecipient agreements – a decision must be made as to who will run the program and if sub-contractors will be utilized, CDBG procurement processes should be followed. The quickest course of action could be amending the contracts of sub-contractors and external partners that are already used for these kinds of projects
  • Develop policies and procedures – unless your program is truly unique, resources for policies and procedures can be find on the HUD Exchange or draw from your existing policies and procedures from previous projects.
  • Identify staffing, application, and organizational requirements 

 

To access a list of programs and case studies that are eligible CDBG activities, you can view the webinar’s slide presentation here. Examples include food banks, interim mortgage assistance, and business support programs. Southon includes a process map/timeline down to the number of days for a Business Grant Program and an Interim Mortgage Assistance Program.

Southon rounded off the discussion by reminding participants of some of the waivers to CDBG that have been granted under the CARES Act, including the public services cap, the public comment period, and a 24-month extension of interim mortgage assistance. It is important to consult HUD’s Federal Register for the latest waivers for the specific quarter.

List of HUD resources

Raquel Favela presented on utilizing CDBG funds for economic development projects with a specific focus on small business recovery, and how to develop a regional strategy. Favela supplemented this by highlighting the tools and resources that the National Development Council has developed for communities to successfully implement these interventions.

Tips and Best Practices for Disaster Small Business Loan Funds:

  1. Use CDBG Program Income to set up a small business revolving loan fund (RLF) as CDBG cannot be drawn in a lump sum. Consider other sources of funding for your RLF if CDBG does not align
  2. Create a program that meets National Objectives, e.g. for job retention (Favela cited an example of how setting up small business teleworking capabilities could be considered a CDBG activity as businesses are complaining that telework for some of their employees is difficult due to the digital divide), or supporting minority and women owned businesses. Consider deploying funds to areas where you already have a economic development program going, or resources on the ground that will make it easier to deploy funds fasters
  3. Decide what the loan funds will cover, e.g. for working capital, equipment, or inventory
  4. Consider if your activity needs an environmental review
  5. Clearly define the loan terms with the interest rate. Grants should mainly be used for business disruption activities, but do not completely rule out any real estate loans
  6. For larger loans, require beneficiaries to undergo training
  7. Leverage regional sources by pooling funds with adjacent cities and counties

If you do not have the capacity or infrastructure to manage loans, there are various loan funds from the EDA, SBA, and CDFI that can be utilized to leverage their resources. If capacity allows, use their loan servicing infrastructure.

Advantages of having a Centralized Fund Administrator for a city or region:

  • It assists with regulatory compliance reporting
  • Attraction more capital from the philanthropic and investor community
  • It creates capacity among trusted organizations and creates a flow of assistance through a coordinated channel: business disruption funding, business assessment, technical assistance and training, resiliency planning, and long-term financing

Favela rounded up the presentation with briefly discussing case studies of small business assistance programs that the National Development Council is doing in North Texas, communities in Ohio, and major metropolitan areas in California.