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(continued)
"Nonprofit Corporation" is defined in Section 50091 of the Health and Safety Code.
"Permanent Financing" means a long-term loan which is secured by a deed of trust.
"Persons of Low Income" shall have the same meaning as "Lower Income Households" as defined by Section 6928 of this Part.
"Persons of Very Low Income" shall have the same meaning as "Very Low Income Households" as defined by Section 6926 of this Part.
"Predevelopment Loan" is defined in Health and Safety Code Section 50530.
"Public Transit Corridor" is defined in Health and Safety Code Section 50093.5.
"Preservation" in this subchapter means the acquisition of At-Risk Housing, its rehabilitation if needed, and its continued operation as Assisted Housing.
"Rural Area" is defined in Section 50199.21 of the Health and Safety Code.
"Urban Area" is defined in Section 50104.7 of the Health and Safety Code.
"Very Low Income Person" shall have the same meaning as "Very Low Income Households" as defined by Section 6926 of this Part.


Note: Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 18007, 18008, 18214, 50055, 50091, 50093.5, 50105, 50199.21, 50530, 50530.5, 50531 and 50532.5, Health and Safety Code.Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 18007, 18008, 18214, 50055, 50091, 50093.5, 50105, 50199.21, 50530, 50530.5, 50531 and 50532.5, Health and Safety Code.








s 7003. Sponsor Eligibility.
(a) Eligible Sponsors for Predevelopment Loans are:
(1) Local Government Agencies;
(2) Nonprofit Corporations;
(3) Cooperative Housing Corporations; or
(4) Limited Liability Corporations or limited partnerships where all of the general partners are nonprofit mutual or public benefit corporations.
(b) Predevelopment Loans may be made only to Eligible Sponsors who meets the following standards:
(1) Adequate administrative capacity to implement the loans;
(2) Substantial housing development experience or substantial experience in development and administration of other types of public or non-profit programs; and
(3) If the Eligible Sponsor has received any other loans or grants from the Department, a good record of performance under those loan or grant agreements.


Note: Authority cited: Sections 50402 and 50406(n), Health and Safety Code. Reference: Sections 50530, 50530.5, 50531 and 50532, Health and Safety Code.








s 7004. Project Eligibility.
(a) Eligible Sponsors must have site control of the proposed project property by one of the following means, in the name of the Eligible Sponsor or an entity controlled by the Eligible Sponsor:
(1) Fee title.
(2) A leasehold interest on the project property with provisions that enable the Eligible Sponsor to make improvements on and encumber the property, provided that the terms and conditions of any proposed lease shall permit compliance with all Predevelopment Loan requirements.
(3) An enforceable option to purchase or lease which shall extend, or may be extended, for a minimum of 3 months beyond the deadline for application submittal. The Department may accept options of less than 3 months if the Eligible Sponsor provides evidence satisfactory to the Department that it has sufficient committed financing to acquire the property prior to expiration of the option.
(4) A disposition and development agreement with a public agency.
(5) An agreement with a public agency that gives the Eligible Sponsor exclusive rights to negotiate with that agency for acquisition of the site, provided that the major terms of the acquisition have been agreed to by both parties; or
(6) A land sales contract, or other enforceable agreement for the acquisition of the property.
(b) Housing assisted by the Predevelopment Loan Fund must be Assisted Housing at least 51% of which is designated to be occupied by Persons of Low Income and affordable to such persons in accordance with Section 6910 et seq. of this Division.
(c) No Predevelopment Loan may be made unless the Department may reasonably anticipate that a commitment can be obtained by the Eligible Sponsor for Construction Financing or Permanent Financing that will permit occupancy by Persons of Low Income.
(d) In making Predevelopment Loans, the Department may consider, but need not be limited to, the following factors:
(1) The past achievements of the Applicant or the relevant experience of the Applicant's board or consultant;
(2) The general availability of public financing for the Assisted Housing;
(3) The need for the Assisted Housing;
(4) The proposed cost of the land and the Assisted Housing;
(5) The number of units assisted by the Predevelopment Loan in relation to the loan amount;

(6) Whether the Assisted Housing will incorporate innovative or energy efficient design and techniques which promote affordable development costs and/or operating expenses;
(7) The number or percentage of units in the Assisted Housing that will be occupied by Very Low Income Persons;
(8) Whether the Assisted Housing will be located within one quarter-mile of schools, major employment centers, medical facilities, grocery stores, pharmacies, parks, and/or police and fire stations,
(9) If the Applicant is a Local Government Agency, the degree to which the city or county in which the Assisted Housing is located has complied with State Housing Element Law (Government Code Section 65580 et. seq.), in accordance with evaluation criteria established by the Department. Failure of the Applicant to comply with State Housing Element Law may be grounds for disapproving a Predevelopment Loan application.
(e) To the extent feasible, the Department shall ensure a reasonable geographic distribution of the funds. Other things being equal, the Department shall give priority to assisting developments that meet either of the following requirements:
(1) The developments will be located in Public Transit Corridors.
(2) The developments will be used for the Preservation and acquisition of existing government-assisted rental housing at risk of conversion to market-rate use. Within this category, the Department shall give priority to those applications that include matching financing from local redevelopment agencies or federal programs.
(f) The Department shall, in each Notice of Funding Availability (NOFA) issued for the program, set a minimum funding target for Rural Areas based on the lesser of:
(1) Historical level of awards made under the Rural Predevelopment Loan Program (PDLP-R), or
(2) Twenty percent (20%) of available funds at the time of NOFA issuance.


Note: Authority cited: Sections 50402 and 50406(n), Health and Safety Code. Reference: Sections 50530, 50530.5, 50531 and 50532, Health and Safety Code.








s 7005. Uses of Funds.
(a) Predevelopment Loans may be made for required expenses which are incurred in the process of, and prior to, securing Construction or Permanent Financing for production, conversion, Preservation or rehabilitation of Assisted Housing, including Mobilehome Parks, which are recoverable from Construction or Permanent Financing once it is obtained. Loans may be made for purposes that include, but are not limited to:
(1) Costs associated with the purchase of land, including existing structures such as mobilehome parks; options to buy land or existing structures; and extensions of the time periods of options to buy land or existing structures.
(2) Fees for professional services, including but not limited to:
(A) Consultant fees;
(B) Architectural fees for reasonable architectural costs in connection with the preparation of an application for Construction or Permanent Financing;
(C) Engineering fees connected with the preparation of an application for Construction or Permanent Financing;
(D) Legal fees incurred in connection with the preparation of an application for Construction or Permanent Financing, obtaining local government approvals, site purchase, a loan closing, or for representation in litigation affecting a Predevelopment Loan Program-assisted project.
(3) Permit or application fees;
(4) Bonding fees;

(5) Costs of site preparation, related water or sewer development, or on-site material expenses;
(6) Repayment of a predevelopment loan obtained from another source and utilized by the Applicant in connection with the proposed housing development;
(7) Escrow deposits; and
(8) Other expenses recoverable from the Construction or Permanent Financing.
(b) Land purchased partially with Predevelopment Loan funds may be used for purposes other than Assisted Housing, for example, the development of non-Assisted Housing or commercial or agricultural uses. In such cases, the amount of the Predevelopment Loan may not exceed the cost for authorized purposes attributable to that portion of the land which will be used for Assisted Housing for Persons of Low Income.
(c) The Department may make Predevelopment Loans for land purchase to Eligible Sponsors even if the Eligible Sponsor is not able at the time the Predevelopment Loan is made to proceed with the development of Assisted Housing on the purchased site.
(d) The Department may make Predevelopment Loans for the development of Mobilehome Parks and Manufactured Housing subdivisions.
(e) Predevelopment Loans may not be made for Construction Financing or for the administrative expenses of the Applicant.
(f) The following limitations on eligible expenses shall apply:
(1) No more than 20% of the total monies appropriated to the Fund, or a lower limit which the Department may set in a Notice of Funding Availability (NOFA), shall be committed to any single Borrower at any time. If the Applicant is a Limited Liability Corporation or limited partnership, all Predevelopment Loan commitments to the general partner or general partners shall be counted when determining whether this limit has been reached.
(2) The aggregate amount loaned for purposes other than for an option to purchase land or existing structures, the purchase of real property or existing structures, or physical site development shall not exceed $100,000.
(3) The amount loaned for the purchase or refinance of real property shall not exceed its fair market value. Fair market value shall be determined by an appraisal based on comparable sales or by any other appraisal method or evidence of value approved by the Department. The Borrower shall pay the cost of an appraisal, but the cost may be financed through a Predevelopment Loan.
(4) Predevelopment Loans or special account disbursements for purchase option payments, purchase option extensions or escrow deposits shall not exceed 10% of the purchase price.
(5) Except for loans for option payments or escrow deposits of $1,000 or less, the option or escrow agreement shall provide for the return of the option Payment or escrow deposit if:
(A) The seller is unable to deliver clear title to the land or is unable to convey the land for any other reason, or
(B) The purchase price exceeds fair market value.
(6) If the Predevelopment Loan for an option payment or escrow deposit exceeds $15,000, the option or escrow agreement shall provide for the return of the payment or deposit if a Construction or Permanent Financing commitment cannot be obtained.
(7) Options and escrow agreements shall be assigned to the Department as security.
(8) Predevelopment Loans may be made for land purchase only if the Department finds that development of the site for affordable housing is feasible.
(9) Predevelopment Loans for engineering fees shall not exceed 50% of a housing development's total engineering costs or $10,000, whichever is greater. The Department may increase this limit if the housing development includes the construction of water and sewer lines or facilities. Disbursement of engineering fees shall be staged in accordance with the completion of engineering work.
(10) Disbursement of architectural fees shall be staged in accordance with the completion of architectural work.
(11) Predevelopment Loans for legal fees shall not exceed $5,000. Loan funds shall not be disbursed unless the legal fees are itemized. Predevelopment Loans shall not be made for legal fees incurred in the formation of Eligible Sponsors.
(12) Predevelopment Loans for consultant fees shall not exceed 1% of the housing project's development costs, and shall only be made if the tasks of the consultant are enumerated in an agreement between the Applicant and the consultant which is approved by the Department. Payments to a consultant shall be staged in accordance with the completion of various tasks.
(13) Predevelopment Loans for bonding, permits, deposits and application fees may be made to the extent that there is a need to pay for such fees prior to obtaining Construction or Permanent Financing.
(14) Predevelopment Loans for site preparation, on-site material expenses and related water or sewer development may be made only if the Applicant has made a reasonable effort to obtain funds for these purposes from alternative sources.
(15) Limitations on other loan purposes pursuant to subdivision (a)(8) of this section may be established by the Director. The Director may waive any requirement of this section not otherwise required by law if it is determined that the waiver would not adversely affect the purposes of the Fund or that the requirement would impose an intolerable burden on the Borrower.


Note: Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50530, 50530.5, 50531 and 50532, Health and Safety Code.Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50530, 50530.5, 50531 and 50532, Health and Safety Code.








s 7006. Rates and Terms.
(a) Interest. The interest rate for Predevelopment Loans is 3%. Interest will be charged only on funds actually advanced to, or on behalf of, the Borrower.
(b) Reduced Interest. The interest rate for loans may be reduced or eliminated prior to repayment of the loan if the Director makes a finding that charging it would prevent a significant number of Persons of Very Low Income from owning or occupying new or rehabilitated Assisted Housing.
(1) To obtain a reduction or elimination of the current interest rate, the Borrower shall expressly so request and submit written evidence which demonstrates the necessity of the reduction or elimination of the interest rate.
(2) On the basis of the written evidence submitted, the Department shall determine the appropriate interest rate, if any, to be charged on the loan.
(3) For all loans for which no interest is to be charged, an amount not to exceed 2% of the loan amount shall be charged as a loan origination fee, which may be:
(A) Paid in cash by the borrower at the time of loan closing; or
(B) Added to the approved loan amount and be payable at the time of loan repayment.
(c) Term. Predevelopment Loans may be made for a term of up to two years. Existing loans may be extended at the discretion of the Director.


Note: Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50530, 50530.5, 50531 and 50532, Health and Safety Code.Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50530, 50530.5, 50531 and 50532, Health and Safety Code.








s 7008. Special Conditions.
(a) Loan Documents. Before the Department disburses funds to any Borrower, the Borrower will be required to submit to the Department the following executed documents which will have been prepared by the Department or at its direction:
(1) A borrowing resolution.
(2) A Loan Agreement.
(3) A promissory note.

(4) Security instrument(s).
(5) Any other documents necessary to complete the transaction which are required by the Department. Additional documents may include, but not be limited to, a policy of titles insurance, preliminary title report, appraisal, and environmental reports.
(b) Loan Disbursements. Loan funds will be disbursed to, or on the behalf of, the borrower as the need for funds arises. Borrowers must request disbursements in writing from the Department. Disbursement requests must be supported by evidence of an obligation that is due or is about to become due.
(c) Non-Discrimination and Affirmative Action. Borrowers must agree to adopt and implement all current contract requirements of HCD and the Department of General Services for the Loan Agreement, which may cover all aspects of the construction, marketing, and management of the housing developed with the assistance of the Fund.
(d) Local, State or Federal Requirements. Borrowers will be required to abide by such local, state or federal regulations as are applicable to the proposed housing developments. These may include but are not limited to: zoning ordinances; building codes; planning; historic preservation; environmental and relocation regulations; and Article XXXIV of the California Constitution.
(e) Relocation. If the housing development financed with loan funds will result in the temporary or permanent displacement of one or more persons from their residences, the Borrower shall submit a relocation plan to the Department prior to disbursement of loan funds. Such plan shall adequately respond to the needs of displacees, as determined by the Department.
(f) Security. Each loan will be secured in a manner that adequately protects the interests of the Department. Security may include but is not limited to:
(1) Deeds of trust or other liens on real property;
(2) Assignments of options or escrow agreements;
(3) Liens on personal property; or
(4) A deed of trust or other lien on a leasehold interest in Indian trust land.
(g) Reports. Borrowers are required to provide the Department with reports on the progress of housing developments and the purposes for which the loan funds have been used. Reports must be submitted monthly.


Note: Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50530, 50530.5, 50531 and 50532, Health and Safety Code; and Section 7261.6, Government Code.Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50530, 50530.5, 50531 and 50532, Health and Safety Code; and Section 7261.6, Government Code.








s 7010. Disbursements for Unspecified Sites.


Note: Authority cited: Sections 50406(n) and 50701, Health and Safety Code. Reference: Sections 50515-50517.4, 50530 and 50532.5, Health and Safety Code.








s 7012. Processing Applications.
(a) Requests for loans must be made to the Department on its Predevelopment Loan Fund Application Form. Applications may be obtained from the Program Manager of the Predevelopment Loan Funds at P.O. Box 952054, MS 390-5, Sacramento, CA 94252-2054.
(b) Applications for loan funds will be reviewed by the Predevelopment Loan staff of the Department.
(c) Completed applications will be submitted for approval or disapproval to the Department.
(d) Applicants will be notified in writing of the Department's action, including any conditions which the Director has placed on the loan. If the loan is rejected, the written notice will include the reasons for the rejection.
(e) Reconsideration Procedure.
(1) Applicants whose loan applications have not been approved by the Director may submit a request for reconsideration by writing to the Director.
(2) The Director will review all requests for reconsideration and inform the Applicant in writing of the decision.
(3) The decisions of the Director shall be final.


Note: Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50530 and 50532, Health and Safety Code.Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50530 and 50532, Health and Safety Code.








s 7014. Priorities in Use of Funds.


Note: Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50515-50517 and 50530-50532, Health and Safety Code.








s 7016. Loan Termination.
(a) Loan commitments or Loan Agreements may be terminated, or the loan amounts reduced, by the Department if the Director determines that:
(1) One or more conditions to commitment, agreement, or disbursement have not been or will not be met;
(2) Development of the Assisted Housing is not progressing or is anticipated not to progress within a reasonable time as determined by the Department.

(3) The objectives of the loan cannot be met; and/or
(4) The Department's security is jeopardized.
(b) If the Department determines that a purchased site cannot be developed by a Borrower within a reasonable period of time as determined by the Department, the Borrower shall convey the site to the Department, which shall transfer the site to be sold pursuant to Health and Safety Code Sections 50406(o) and 50532(c). In determining a reasonable period of time, the Department shall consider factors in 7004, Borrower cooperation with the Department's requirements, and continuing progress toward developing the site and obtaining Construction and Permanent Financing.


Note: Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50530, 50530.5, 50531 and 50532, Health and Safety Code.








s 7018. Reconsideration Procedure.


Note: Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50515-50517.4 and 50530-50532.5, Health and Safety Code.








s 7030. Authority.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Sections 50625-50629, Health and Safety Code.








s 7031. Purpose.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Sections 50626 and 50627, Health and Safety Code.








s 7035. Application.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Sections 50625-50629, Health and Safety Code.








s 7036. Scope.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Sections 50626 and 50629, Health and Safety Code.








s 7037. Amount of Grants and Funding Period.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Section 50627, Health and Safety Code.








s 7038. Restrictions on the Use of Grant Funds.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Section 50627, Health and Safety Code.








s 7039. Eligible Sponsors.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Sections 50627 and 50629, Health and Safety Code.








s 7040. Conditions of Grant Awards.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Section 50628, Health and Safety Code.








s 7041. Priorities in Awarding Grants.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Sections 50627 and 50629, Health and Safety Code.








s 7042. Submission of Grant Proposals.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Section 50627, Health and Safety Code.








s 7043. Required Proposal Information.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Section 50627, Health and Safety Code.








s 7044. Administration of Grants and Reporting Requirements.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Sections 50626 and 50627, Health and Safety Code.








s 7045. Technical Assistance.


Note: Authority cited: Section 50626, Health and Safety Code. Reference: Sections 50626 and 50627, Health and Safety Code.








s 7050. General.
The Federal Omnibus Budget Reconciliation Act of 1981 provides for State administration of the Federal Community Development Block Grant Nonentitlement Program. These regulations set forth the policies and procedures governing the State's management and use of these funds. In addition to these regulations, program participants must comply with Federal regulations contained in Title 24 of the Code of Federal Regulations, Part 570, Subpart I. In the event that Congress or the State Legislature add or amend any requirements concerning the use or management of these funds, grantees shall comply with such requirements upon receipt of notice from the Department of the additional requirements.


Note: Authorities cited: Sections 50406(h) and (n), Health and Safety Code; and 24 CFR 570.489(b). Reference: Sections 50406 and 50407, Health and Safety Code; 42 U.S.C. 5301 and 5306(d); Federal Omnibus Budget Reconciliation Act of 1981 (Public Law 97-35); and 24 CFR, Part 570, Subpart I.








s 7052. Primary Objectives.
The primary objectives of this program are: 1) the development and preservation of cities and counties by providing decent housing and a suitable living environment and expanding economic opportunities, principally for the targeted income group; and 2) not less than fifty-one percent (51%) of the funds made available to the Department pursuant to the program shall be utilized by the Department to make grants to eligible cities or counties for the purpose of providing or improving housing opportunities for the targeted income group or for purposes directly related to the provision or improvement of housing opportunities for the targeted income group including, but not limited to, the construction of infrastructure.
Pursuant to Section 104(a)(1) of the Housing and Community Development Act of 1974, as amended, the Department shall annually prepare a statement of community development objectives and projected uses of funds. This statement shall be made available to the public and published, and the Department shall conduct no less than two public hearings at different locations on its contents. The statement shall be available for review for at least thirty (30) days prior to the public hearings.


Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code; 24 CFR 570.489(b). Reference: Sections 50406, 50407 and 50828, Health and Safety Code; 42 U.S.C. 5301 and 5304(a)(1) and (2); 24 CFR, 570.489 and 570.490.









s 7054. Definitions.
"Act" means Title I of the Housing and Community Development Act of 1974, 42 U.S.C. 5301 et seq. , as amended.
"Activity" means any single eligible undertaking carried out as part of an applicant's program under the State CDBG Program.
"Applicant" means any eligible city or county that applies for funds pursuant to this subchapter as set forth in Section 7060.
"CFR" is the acronym used for the Code of Federal Regulations.
"Chief executive officer" of a unit of local government means the mayor of a city, the chairman of a county board of supervisors, or the official designated pursuant to law by the governing body of the unit of general local government who has the primary responsibility for the conduct of that unit's governmental affairs.
"Community Development Block Grant Funds," "CDBG Funds," or "Grant Funds" means any funds allocated by a grant agreement pursuant to this subchapter or previously funded to nonentitlement jurisdictions by HUD pursuant to their authority under the Act.
"Department" means the State of California Department of Housing and Community Development.
"Director" means the Director of the Department.
"Economic Development Allocation" means the funds set aside each year for economic development pursuant to Health and Safety Code Section 50827 and Section 7062.1.
"Federal regulations" means the federal regulations governing the State administration of the Community Development Block Grant nonentitlement funds set forth in the Code of Federal Regulations, Title 24, Part 570, Subchapter C, Subpart I, commencing with Section 570.480.
"Funding" means financial assistance provided in whole or in part for any eligible activity.
"Funding Cycle" means the annual period of time during which HUD makes funds available to the State for distribution to local governments pursuant to the Act, and includes the period of time during which the Department solicits applications and makes grant awards.
"Grant Agreement" means the contractual arrangement between the State and the Grantee which sets forth the terms and conditions by which State CDBG funds are utilized.
"Grantee" means a unit of general local government which has been awarded funds provided pursuant to this subchapter to carry out a program.
"Household" means persons occupying a housing unit as the place of residence.
"Housing Element" means the part of a city or county's General Plan as required by Article 10.6 (commencing with Section 65580) of Chapter 3 of Division 1 of Title 7 of the Government Code.
"HUD" means the United States Department of Housing and Urban Development.
"Infrastructure" means the physical systems such as roads, sidewalks, streetlights, water and sewer facilities which are necessary to provide basic community services.
"Lowest Targeted Income Group" means persons and households with incomes less than 50 percent of the latest HUD estimated area median family income who are intended to be beneficiaries of the State CDBG Program.
"Microenterprise" means a commercial enterprise that has five or fewer employees, one or more of whom owns the enterprise.
"Overpaying" means households which are paying more than 25% of their gross household income for housing costs, including utilities. Data used to document overpaying includes the percentage of renters who pay more than 25% of household income for gross rent, including utilities, and the percentage of homeowners who pay more than 25% of household income for selected housing costs, including utilities, based on the latest available U.S. Census data.
"Permanent job" means a full-time or full-time equivalent job created or retained by an activity funded under the Economic Development Allocation which is directly related to the expansion or retention of a business. To be considered "full-time" a job must provide at least 1,750 hours per year. Part-time jobs that provide at least 875 hours per year of employment may be aggregated to arrive at a full-time equivalent job of at least 1,750 hours per year.
"Poverty Persons" means individuals whose incomes are below the poverty level based on the latest available U.S. Census data.
"Program" means all of the activities funded in whole or in part included in an application which are funded under this subchapter.
"State" means the State of California.
"Targeted Income Group" or "TIG" means persons and households intended to be the principal beneficiaries of the State Community Development Block Grant program. The term targeted income group includes the component "lowest targeted income group" unless otherwise specified in this subchapter. Applicants shall use income limits provided annually by the Department in determining program benefit to the targeted income group. These income limits are based on the latest HUD estimate of area median family income with adjustments for unusually low income areas. For a family of four, the "targeted income group" limit is 80% of the latest HUD estimated or adjusted area median family income. For a family of four, the income limit for lowest targeted income group limit is 50% of the latest HUD estimated area median family income. Income limits for other household sizes are based on household size adjustment factors.


Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code; and 24 CFR 570.489(b). Reference: Section 65580 et seq., Government Code; Sections 50406, 50407 and 50827, Health and Safety Code; 25 California Administrative Code 6008(c)(5), 42 U.S.C. 5301, et seq.; and 24 CFR, Part 570, Subpart I.








s 7056. Application and Funding Requirements.
(a) The applicant shall meet the following requirements when the application is submitted:
(1) The applicant shall submit all the application information required in Section 7062.1 and/or Section 7070 as applicable.
(2) The applicant shall have resolved any audit findings, performance problems for program income or performance problems for prior CDBG grants awarded by an urban county, by HUD under the Small Cities Program or by the State under this subchapter. The Director may waive this requirement when such problems or findings result in no obligation to return funds to the grantor, arrangements satisfactory to the grantor have been made for repayment, disencumbrance, performance, or a formal action to resolve the matter has been taken.
(b) Applicants shall meet the following requirements prior to an award of grant funds:
(1) As a condition of receiving funds pursuant to this subchapter, an eligible city or county shall have submitted a housing element to the Department in accordance with the requirements of Article 10.6 (commencing with Section 65580) of Chapter 3 of Division 1 of Title 7 of the Government Code. However, except as otherwise provided in Section 50830 of the Health and Safety Code, no application for funds shall be denied because of the content of the housing element or because of the findings made by the Department pursuant to Section 65585 of the Government Code.
(2) (A) Except as otherwise provided in subparagraphs (B) and (C), no city or county shall be eligible to receive funds pursuant to this Subchapter if the city or county has adopted a general plan, ordinance, or other measure which directly limits, by number, either of the following:
1. The building permits that may be issued for residential construction.
2. The buildable lots which may be developed for residential purposes.
(B) Subparagraph (A) shall not apply to either of the following:
1. An ordinance adopted by a city or county which does any of the following:
a. Imposes a moratorium, to protect the public health and safety, on residential construction for a specified period of time, if, under the terms of the ordinance, the moratorium will cease when the public health or safety is no longer jeopardized by the construction.
b. Creates agricultural preserves pursuant to Chapter 7 (commencing with Section 51200) of Part 2 of Division 1 of Title 5 of the Government Code.
c. Was adopted pursuant to a specific requirement of a state or multi-state board, agency, department, or commission.

2. A city or county which has a housing element that the department has found to be adequate pursuant to subdivision (c) of Section 65585 of the Government Code or which is deemed to be in compliance with the requirements of Article 10.6 (commencing with Section 65580) of Chapter 3 of Division 1 of Title 7 of the Government Code pursuant to Section 65586 of the Government Code at the time the city or county applies for funds under the program, unless a final order has been issued by a court in which the court determined that the housing element is not in compliance with Article 10.6 (commencing with Section 65580) of Chapter 3 of Division 1 of Title 7 of the Government Code.
(C) A city or county which has adopted a general plan, ordinance, or other measure subject to the restrictions of subparagraph (A), which are not exempted by subdivision (B), may, notwithstanding subparagraph (A), receive funds pursuant to this subchapter if the use of the funds is restricted for housing for the targeted income group. However, applications from cities or counties which have not adopted a general plan, ordinance, or other measure subject to the restrictions of subparagraph (A) shall, to the extent that eligible applications for grants exceed the amount available for distribution pursuant to this Subchapter have priority over applications from cities or counties which have adopted such a general plan, ordinance, or other measure which are not exempted by subdivision (B).

(3) At least fifty-one percent (51%) of the funds applied for shall benefit the targeted income group. No activity or portion of a program assisted by these funds may exclude from its benefits the lowest targeted income group. Individual activities shall meet one of the three national objectives which are: (1) the development of viable urban communities by providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low- and moderate-income; (2) aiding in the prevention or elimination of slums or blight; or (3) meeting other community development needs having a particular urgency. For the purposes of this section, "slums" and "blight" means a blighted area or structure characterized by one or more of the following conditions: (1) the buildings and structures, used or intended to be used for living, commercial, industrial, or other purposes, which are unfit to occupy for such purposes and are conducive to ill health, transmission of disease, infant mortality, juvenile delinquency, and crime because of factors listed in Health and Safety Code Section 33031; and (2) properties which suffer from economic dislocation, deterioration, or disuse because of factors listed in Health and Safety Code, Section 33032. For the purposes of this section, an activity will be considered to address the standard of urgency if the applicant certifies that the activity is designed to alleviate existing conditions which pose a serious and immediate threat to the health or welfare of the community which are of recent origin or which recently became urgent, that the applicant is unable to finance the activity on its own, and that other sources of funding are not available to meet such needs. For the purposes of this section, any condition which has existed longer than eighteen (18) months prior to the final filing date for applications shall not be considered to meet the standard of urgency.
(4) The single-year program described in the application must be scheduled for completion within twenty-four (24) months from the date the grant agreement is executed by the State. The multi-year, two or three year program described in the application must be scheduled for completion within 36 or 48 months, respectively. The Department may waive this provision in writing if it determines that the program, by its nature, cannot be completed within the 24, 36, or 48 month period, or that conditions beyond the grantee's or State's control hinder program completion.
(5)(A) If CDBG grant funds or local program income will be used to operate a program (i.e., activities serving multiple separate projects, not persons), the applicant shall submit program guidelines to the Department for approval. No CDBG grant funds or local program income shall be expended to operate a program until the Department has approved the program guidelines in writing.

(B) The program guidelines shall describe how the program will be operated and how it will comply with State and federal regulations. In addition, program guidelines shall address the following topics:
1. Loan terms and interest rates;
2. Loan underwriting standards;
3. Loan application processing procedures and timing for loan approvals;
4. Procedures for resolving disputes between the participant and the CDBG grantee;
5. Description of any property restrictions imposed as a condition of receiving the loan (e.g., resale controls, equity sharing);
6. Loan servicing policies addressing the issues of: subordination; refinancing; change in occupancy, change in use, assumptions, and verification of payment of taxes and insurance.

7. If the program will involve rehabilitation or construction, procedures for developing the scope of work, description of the contractor procurement and payment process, and a description of the conflict resolution process in the event of a dispute between the contractor and the program participant.


Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code; and 24 CFR 570.489(b). Reference: Sections 51200, et seq., and Sections 65580 et seq., Government Code; Sections 33031, 33032, 50406, 50407, 50829 and 50830, Health and Safety Code; 42 U.S.C. 5304 and 5306; 24 CFR 570.489(a) and (b) and 24 CFR 570.901(b)(3).








s 7058. Eligible Activities.
Activities eligible for funding are those described in 42 USC s5305.


Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code; and 24 CFR 570.489(b). Reference: Sections 50406 and 50407, Health and Safety Code; 15 U.S.C. 681; 42 U.S.C. 1450 et seq.; 42 U.S.C. 5305; 24 CFR, Part 570, Subpart C; 24 CFR 570.489 and 24 CFR 570.482.










s 7060. Eligible Applicants.
Any city or county is eligible to apply for the State CDBG Program except a city or county which participates in or is eligible to participate in the HUD administered Community Development Block Grant Entitlement Program. The following restrictions shall apply to all applicants under the State Program.
(a) Except as provided in Sections 7062 and 7062.1, an applicant may submit only one application each funding cycle for activities in its jurisdiction. A grantee receiving a grant award for up to three annual funding awards pursuant to Section 7064(c) that does not undertake the portion of its program funded from the second or third funding award may submit a new application, provided the multi year award has been terminated under the terms of the grant agreement. A grantee that has received a multiple year award for up to three years, where any of the annual awards is less than $500,000, may submit an application under the second and/or third year for additional awards, which when combined with their existing annual funding awards, do not exceed $500,000 per year.
(b) Applications may be submitted by individual eligible applicants or by groups of eligible applicants in any of the following forms. Except as provided in paragraphs (5) and (6) below, no eligible applicant may be included in more than one application that provides direct program benefits to that political subdivision.
(1) An eligible applicant may apply on its own behalf.
(2) An eligible applicant may apply on its own behalf and in the same application on behalf of one or more other eligible applicants.
(3) An eligible applicant may apply on behalf of one or more other eligible applicants in the same application or may apply on behalf of one or more other eligible applicants in separate applications.
(4) Two or more eligible applicants which share a program may submit a joint application.
(5) In addition to an application submitted under Section 7060(a), an eligible applicant may apply separately for activities in target areas within or outside of the applicant's jurisdiction when there are concentrations of Native American Indians as described in Section 7062 provided the concentration is within an eligible city or county. Applications for target areas outside the applicant's jurisdiction must include a joint powers agreement with the city or county in which the target area is located.
(6) In addition to an application submitted under Section 7060(a) or Section 7060(b)(5), an eligible applicant may apply separately for activities under Section 7062.1.
(c) Cooperation agreements. Executed joint powers agreements, consistent with the requirements of Section 6500 et seq. of the Government Code must be submitted with joint applications and applications on behalf of another unit or units of local government. These agreements must be on a form provided by the Department.


Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code; 24 CFR 570.489(b). Reference: Sections 6500, et seq., Government Code; Sections 50406 and 50407, Health and Safety Code; 42 U.S.C. 5303 and 5306(d)(2); and 24 CFR 570.489.








s 7062. Special Allocation for Native American Indian Communities.
Pursuant to the requirements of 24 CFR, Part 1, the Department finds that there are within the State of California, communities principally comprised of low-income Native American Indians not recognized as Indian Tribes as defined in Section 102(a)(17) of the Act (the Act defines Indian Tribes as any Indian tribe, band, group, and nation . . . of the United States, which is considered an eligible recipient under the Indian Self-Determination and Education Assistance Act (Public Law 93-638), or under the State and Local Fiscal Assistance Act of 1972 (Public Law 92-512)). The Department also finds that these communities have, in previous years, received the benefits of the Act primarily through the Department's successful submittal of applications on their behalf. The Department further finds that its inability to continue to apply on behalf of this minority population, caused by the legal constraints of the 1981 amendments to the Act, and the legal ineligibility of these groups to apply on their own behalf for federally- or State-administered CDBG funds, will have the effect of depriving this minority group from participating in the State CDBG Program unless there are some affirmative measures to ensure its participation.
(a) Pursuant to the requirements and authority of 24 CFR 1.4(c)(6)(ii) and by the direction of the State Legislature, the Department shall set aside an amount equal to one and one quarter percent (1.25%) of the total State CDBG funds to be granted to eligible applicants for identifiable geographic areas within eligible cities and counties comprised of high concentrations of Native American Indians not recognized as Indian Tribes as defined in Section 102(a)(17) of the Act. For the purpose of this section, identifiable geographic areas comprised of high concentrations of Native American Indians means identifiable geographic areas comprised of no less than fifty one percent (51%) Native American Indians not recognized as an Indian Tribe by the Act. An identifiable geographic area may be defined by locally accepted social, historical, physical, political, or past programmatic boundaries.
(b) An application for this set aside may be in addition to another application submitted by an eligible city or county pursuant to Section 7060(b)(1)-(5). Applications submitted under this section will be independently evaluated and ranked against other applications for this special allocation without regard to the rating of an application submitted pursuant to another section of this subchapter.
(c) An application submitted pursuant to this section shall be in the form prescribed for applications in Section 7070 and shall comply in all other respects with this subchapter. CDBG funds utilized within the identifiable geographic areas must principally benefit residents in the targeted income groups without regard to race, religion, national origin, or sex. In the event all the set aside funds are not awarded in a funding cycle, the Department shall award the remaining funds to the highest ranked unfunded applications submitted under Section 7072.


Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code; and 24 CFR 570.489(b). Reference: Sections 50406, 50407 and 50831, Health and Safety Code; Public Law 93-638 (25 U.S.C. 450(b)); Public Law 92- 512 (31 U.S.C. 1227(4)); 42 U.S.C. 5306(d)(2); and 24 CFR 570.489.









s 7062.1. Special Allocation for Economic Development.
(a) The Department shall set aside from the total amount available from HUD, for grants to cities and counties an amount equal to thirty percent (30%) for the activities specified in this section. Applications submitted under this section must comply with all the requirements of this subchapter except where noted in this section. Economic Development Allocation funds shall be awarded through three components: the California Community Economic Enterprise Fund ( "Enterprise Fund") set forth in subsection (b); the Over-the-Counter Component ( "OTC Component") set forth in subsection (c); and the Planning and Technical Assistance Component ( "Planning Component") set forth in subsection (d).
(1) Activities eligible for funding under the Economic Development Allocation are those activities which are subject to the Standards for Evaluating Public Benefits set forth in subsection (f) of 24 CFR Section 570.482 as well as activities which assist microenterprises. Eligible activities shall also meet a national objective as specified in Section 104(b)(3) of the Act (42 U.S.C. Sec. 5304(b)(3)) and 24 CFR Section 570.483. The Department shall utilize Section 105(a) of the Act (42 U.S.C. Sec. 5305(a)), 24 CFR Section 570.482, and Subpart C of Part 570 of the federal CDBG regulations commencing with Section 570.200, for guidance in determining the eligibility of activities proposed under this section. Where CDBG funds are used for public improvements (e.g., water, sewer or road improvements) the national objective shall be met pursuant to 24 CFR Section 570.483.
(2) In order to be eligible for funding from the Enterprise Fund or the OTC Component, with the exception of assistance to microenterprises, a project or activity (hereinafter collectively referred to as an "activity") shall be capable of generating sufficient public benefit relative to the amount of CDBG assistance provided as required by the Act. The Department, with respect to activities funded from the OTC Component, and Grantees with respect to activities funded with Enterprise Funds, shall utilize the federal standards specified at 24 CFR Section 570.484(f) to determine whether sufficient public benefit will be generated by a proposed activity.
(3) Prior to the funding of any activity from either the Enterprise Fund or the OTC Component, the activity shall be underwritten to insure that: (i) the activity's costs are reasonable; (ii) that all sources of activity financing are committed; (iii) that to the extent practicable, CDBG funds are not substituted for non-Federal financial support; (iv) that the activity is financially feasible; (v) that to the extent practicable, the return on the owner's equity investment will not be unreasonablyhigh; and (vi) that to the extent practicable, CDBG funds are disbursed on a pro rata basis with other finances provided to the activity. Activities shall be underwritten by the Department, with respect to activities funded from the OTC Component, and by Grantees with respect to activities funded with Enterprise Funds, utilizing the federal Guidelines and Objectives for Evaluating Project Costs and Financial Requirements set forth as Appendix A to 24 CFR Part 570. (continued)