CCLME.ORG - DIVISION 1. HOUSING AND COMMUNITY DEVELOPMENT

(continued)
(4) An activity funded from the Enterprise Fund or the OTC Component shall be reevaluated by the Department or grantee pursuant to subsections (a)(2) and (a)(3) of this Section if the underlying assumptions relied upon by the Department or the Enterprise Fund grant recipient in making its original funding decision materially change. A "material change", for these purposes, means: (1) a change in the size, scope, location or public benefit of the activity; or (2) a change in the terms or the amount of the private funds (including lender's funds and equity capital) to be invested in the activity; or (3) a change in the terms or the amount of the CDBG assistance to be made available to the activity. If a material change has occurred and a reevaluation of the activity indicates that the financial elements and public benefit to be derived have also changed, then appropriate adjustments in the amount, the type of CDBG assistance and/or the terms and conditions under which that assistance has been offered shall be made to reflect the impact of the material change.
(5) In the event that an activity funded under the Enterprise Fund or OTC Component fails to meet a federal national objective or state or federal eligibility requirement, at the Department's discretion, a Grantee may be required to repay all or a portion of the grant amount from a non-federal source of revenue, and/or may be required to return all or part of any program income received from the CDBG-assisted activity to the Department. In determining the appropriate remedy, the Department shall, at a minimum, consider the following factors: (1) actions taken by the Grantee to avoid the adverse circumstances in the first place; (2) actions taken by the Grantee to mitigate the circumstances once the problem was discovered; and (3) timeliness of steps taken to protect and/or recover CDBG funds. Failure by a Grantee to comply with any requirements or written instructions issued by the Department pursuant to this subsection shall be considered a failure by the Grantee to resolve any "audit findings or performance problems" as that phrase is used in Section 7056(a)(2).
(6) Funding maximums from the Economic Development Allocation and the Planning Component shall be as set forth in Health and Safety Code Section 50832 subdivision (a) and Section 50833 subdivisions (a) and (b). The Department may waive the eight hundred thousand dollar ($800,000) and five hundred thousand dollar ($500,000) limitations for the Economic Development Allocation after September 1 of each year.
(7) All Economic Development Allocation funds returned, disencumbered or paid to the State in the form of program income ( "returned funds") shall be made available to fund current-year applications to the Enterprise Fund or the OTC Component. On May 1 of each year, if there are any unawarded Enterprise Funds or OTC Component funds, including returned funds, the Department may reallocate funds between the components based on relative demand, notwithstanding the provisions in subsection (b) of this Section. On June 1 of each year, unawarded funds remaining in the Enterprise Fund, the OTC Component, or the Planning Component, including returned funds, shall be made available to fund unfunded applications submitted pursuant to Section 7072.
(8) Grants to eligible local governments may be passed through to qualified organizations chartered to perform economic development activities.
(9) Notwithstanding any other provision of this Section, the Director may alter the order applications are reviewed for applicants requesting funds for an urgent need such as an imminent plant closure, an emergency recognized by the State. The Director's decision to alter the order an application is reviewed shall be in writing and made part of the application file.
(b) Enterprise Fund. Economic Development Allocation funds set aside for use pursuant to this subsection shall be known as the California Community Economic Enterprise Fund (Enterprise Fund). The purpose of the Enterprise Fund is to provide a source of funds to establish or enhance local revolving loan fund programs. For the 1995 program year only, not more than fifty percent (50%) of the Economic Development Allocation funds shall be allocated to the Enterprise Fund. For all subsequent program years, not more than seventy percent (70%) of all Economic Development Allocation funds shall be allocated to the Enterprise Fund.
(1) Al least seventy (70) days prior to the due date for applications, the Department shall notify all eligible cities and counties of the anticipated level of funding for the Enterprise Fund through a Notice of Funding Availability (NOFA) and the deadline for receipt of applications. The Department shall also make available application forms and a training manual which will provide eligible applicants with a consistent format for presenting proposals, information on proposal review factors, and guidance on program policies that may affect an applicant's program design.
(2) The maximum Enterprise Fund grant award to a single applicant in a program year shall not exceed $500,000, except as specified at 7062.1(a)(6). The Director may establish a lower maximum award through each year's NOFA. A decision to reduce the maximum award shall be based upon the relative demand for Enterprise Fund grants and OTC Component funds during the previous year and the total Economic Development Allocation funds available.
(3) Activities which are eligible for funding from a local revolving loan fund include, but are not limited to: construction loans; new equipment purchase loans; working capital loans; land acquisition loans; loan guarantees; loans for privately owned on-site improvements; grants for public off-site sewer, water and road improvements; and assistance to microenterprises.
(4) The cost-per-job created or retained for a grantee's aggregate activities proposed for funding from the Enterprise Fund shall not exceed $35,000 in CDBG funds, or $50,000 in CDBG funds per job created or retained for each activity. Any activity funded under this component shall meet the standards for public benefit set forth in subsection (f) of 24 CFR Section 570.482.
(5) Allocation Review Procedures and Evaluation Criteria.
(A) Each eligible applicant shall submit an original and two (2) copies of its application to the Department by the application deadline specified in the NOFA. Applications submitted by mail shall be received no later than the deadline. Applications delivered to the Department must be date stamped by the Department prior to 5 P.M. on the due date.
(B) In order to be considered complete, an application shall contain the information requested in the NOFA and such other information as necessary for the Department to evaluate the application using the points and rating factors set forth in subsection (b)(5)(D) of this Section. If an application contains a description or analysis which includes quantified information, the source of the information, and the method of computation shall be described. If the Department determines that the method of computation leads to conclusions which are inaccurate or misleading, it may, after consultation with the applicant, adjust the method of computation or the conclusions during the evaluation process.
(C) Within thirty (30) days of receipt of an incomplete application, the Department shall return the application to the applicant with a written explanation of the reasons why the application is incomplete.
(D) The Department shall evaluate, rate and rank each complete application utilizing the following evaluation criteria and assigned points:

Evaluation Criterion
Need for Program: 30 Total Points
Relative Poverty Index 15 Points
Relative Unemployment Rate 10 points
Adverse Economic Event 5 Points

Local Program Capacity: 50 Total Points
Performance on Past CDBG ED Grants 20 points
Relative Strength of Basic Program Design 10 Points
Relative Experience of Program Operators 10 Points
Other Local Organizational Support 10 Points
Program Effectiveness: 20 Points
Commitment of Other (non-state, non-federal)
Funding Sources 10 Points
Extent to Which Program Complements
Local or Regional Economic
Development Plan 10 points
Maximum Total Points 100 Points

(E) For purposes of this subsection (b)(5), the foregoing terms shall be defined or applied as follows:
1. "adverse economic event" shall mean an event of recent origin which has the effect of significantly reducing employment opportunities for the labor force within the applicant's jurisdiction.

2. "unemployment rate" shall mean the unemployment rate for the city or county applicant as measured by the applicant county's unemployment rate as published in the most recently available State Employment Development Department's "Monthly Labor Force For Counties".
3. Factors which shall be considered in assessing an applicant's performance on past CDBG grants shall include: Achievement of job creation or job retention objectives specified in the grant agreement; leveraging of other funds as specified in the grant agreement; and, timely expenditure of CDBG funds.
4. "basic program design" shall be evaluated as follows: The extent to which the applicant's program guidelines are consistent with CDBG program requirements and reflect prudent lending practices and procedures.
5. "other local organizational support" shall mean: The documented intent of local economic development organizations, such as local economic development corporations, Economic Development Districts, or Small Business Development Corporations, to commit resources towards implementation of the Enterprise Fund program.
(F) The Department shall complete the ranking of applications within eighty (80) days from the application deadline. Applicants shall be notified in writing of point scores, fund reservations and any adjustments necessary to comply with national objective or eligibility requirements. The Department may condition its award of funds in order to achieve the purposes of this subchapter and to ensure compliance with applicable State and federal requirements.
(G) Successful applicants shall receive a reservation of Enterprise Funds equal to the approved grant amount. These reserved funds shall be held by the Department pending drawdown requests for specific eligible activities.
(H) Successful applicants shall be subject to the requirements of Section 7076(d) in ensuring timely execution of the grant agreement and in the timing for incurring costs under the grant agreement.
(6) The assessment of a specific proposed activity's eligibility for funding for activities of $50,000 or less shall be performed by Grantee and reviewed by the Department as part of the grant monitoring process. The assessment of eligibility for specific activities over $50,000 shall be performed by the Department and shall occur prior to approval of the initial drawdown request for that activity.

(7) A Grantee's unused Enterprise Fund grant funds shall be disencumbered twenty-four months after grant agreement execution. The Department may waive this provision in writing if it determines that compelling circumstances warrant the waiver. For purposes of this subsection only, for activities of $50,000 or less, funds shall be considered "unused" if not approved by the local loan committee for disbursement as a loan to a specified borrower; for activities over $50,000, funds shall be considered unused if the Department has not yet received complete documentation, as determined by the Department, of the proposed borrower's eligibility.
(8) Upon receipt of an application and based on availability of funds, the Director may allocate a portion of the Enterprise Funds to assist eligible jurisdictions directly affected by announced military base closures or reductions. Enterprise Funds shall be made available pursuant to this subdivision (b)(8) only if the Enterprise Funds will be used to obtain federal funds for capitalizing local revolving loan funds which will be used to mitigate the economic displacement caused by such base closures or reductions.
(c) Over-the-Counter Component. Economic Development Allocation funds not allocated to either the Enterprise Fund or the Planning Component shall be made available for award pursuant to this subsection (c), which shall be known as the "Over-the Counter-Component" or "OTC Component". Through the OTC Component, the Department shall provide grants to eligible cities and counties to: make loans to employers for an identified CDBG-eligible activity, provided the loan will result in the creation or retention of permanent jobs; or to construct infrastructure improvements which are necessary to accommodate the creation, expansion or retention of a business that will create or retain jobs.
(1) Through a notice of funding availability ( "NOFA"), each program year the Department shall notify all eligible cities and counties of the anticipated level of funding for the OTC Component. OTC Component applications shall be accepted on a continuous basis.
(2) Awards from the OTC Component to a single city or county in a single program year shall not exceed $500,000, regardless of the number of applications, except as specified in subsection 7062.1(a)(6).
(3) Notwithstanding Section 7064(c), two or more applicants may submit a joint application for an OTC Component award. The maximum award for a joint application shall be five hundred thousand dollars ($500,000) per participating applicant per program year.

(4) In order to be considered complete, an application shall contain the information requested in the NOFA, and such other information as necessary for the Department to evaluate the application using the points and rating factors set forth in subsection (c)(7) of this section and the following information as appropriate:
(A) If an applicant contains a description or analysis which includes quantified information, the source of the information, and the method of computation shall be described. If the Department determines that the method of computation leads to conclusions which are inaccurate or misleading, it may, after consultation with the applicant, adjust the method of computation or the conclusions during the evaluation process.
(B) Evidence that activities proposed for funding meet one of the national objectives specified under Section 7056(b)(3) and detailed under 24 CFR Section 570.483.
(C) If an applicant asserts that an activity will meet the national objective of principally benefitting the TIG, the application shall include a description of the means of verification which the applicant will use to determine the number and income of those households actually benefitting from the program.
(D) A schedule demonstrating that any new jobs that will be generated by the program will be available within 24 months of execution of the grant agreement by the Department.
(E) For off-site public improvement activities, the application shall document the following: how the activity meets the national objective and public benefit requirements specified in 24 CFR Section 570.482(f); that the applicant has negotiated with the businesses and other beneficiaries that will be served by these improvements and obtained an appropriate funding contribution towards the cost of the improvements; and how the activity meets the requirements of paragraphs (2) and (3) of subsection (a) of this Section.
(5) The Department shall review applications based on order of receipt. Within thirty (30) days of receipt of an incomplete application, the Department shall notify the applicant in writing of the reasons why the application is incomplete.
(6) Within 60 days of the date an application is determined to be complete, the Department shall review the application for compliance with state and federal program requirements and provide the applicant, in writing, the Department's decision to approve or deny funding for the application. Applications eligible for funding shall be funded in order of receipt of a complete application.
(7) In making funding decisions, the Department shall first evaluate the application using the following factors and points as threshold criteria.
Factor Points
(A) Percent of county-wide unemployment relative to the Statewide average A maximum of twenty-five points
(B) Ratio of CDBG funds per job - maximum ratio of $35,000 per job created or retained A maximum of fifteen points
(C) Ratio of private funds to CDBG funds A maximum of fifteen points
(D) Quality of applicant's past performance for CDBG economic development contracts A maximum of fifteen points
(E) Percent of funds allocated to applicant's general administrative costs (for this purpose, general administrative costs do not include funds budgeted for planning studies). A maximum of ten points
(8) Applications which have received 50 or more points shall be reviewed for funding using the following factors:
(A) the extent of the applicant's need for CDBG funds,
(B) the market feasibility of the proposed activities,
(C) the feasibility of the proposed activities under local and other regulatory requirements,
(D) the financial feasibility of the proposed activities. (In analyzing this factor, the Department may determine that an activity is feasible even though other funding sources have not committed their funding to an activity. If the application documents the terms and conditions that will be offered by the other funding sources, then the Department may conditionally commit to funding. This commitment of funding by the Department shall be conditioned upon the final commitment from the other funding sources.),

(E) the capacity of the applicant and its borrower, subcontractors or subgrantees to manage the proposed activities,
(F) the appropriateness of the terms proposed by the applicant, given the documented needs of the business and given the amount of public benefit in the form of job creation or job retention that will result from the CDBG-assisted activity,
(G) the status of the ownership or control of any real estate needed for the proposed activities,
(H) the extent to which the proposed activities involve intrastate relocation of jobs or business, and
(I) the extent of recruitment, training and promotional opportunities for targeted income groups.
(d) Planning and Technical Assistance Component. Through the Planning and Technical Assistance Component ( "Planning Component"), eligible cities and counties may apply for, and the Department may award, grants for economic development planning and technical assistance activities. No single city or county shall receive more than two grants or thirty five thousand dollars ($35,000) per year. Two or more applicants which share a planning program may submit a joint application. The maximum award for a joint application shall be thirty five thousand dollars ($35,000) per participating applicant.
(1) Eligible Activities. To be eligible for funding under the Planning Component, the proposed planning studies or technical assistance must assist or support an economic development activity which, if brought to completion, will meet a national objective as specified in 24 CFR Section 570.483 and result in job creation or retention. For purposes of this subsection (d)(1), an activity shall be considered as meeting the national objective of principally benefitting TIG persons if the applicant presents convincing information that at least fifty-one percent (51%) of the anticipated beneficiaries of the economic development activity assisted with funds provided by this component will be members of the TIG. General studies not reasonably related to an economic development activity likely to result in the creation or retention of jobs are not eligible for funding under the Planning Component; nor are activities related to implementation of a program.
(2) As a condition of receiving a commitment of funds under the Planning Component, successful applicants shall be required to provide a cash match the amount of which shall be based on the amount of the applicant's local sales and use tax revenues relative to the sales and use tax revenues for each potentially eligible city and county, up to a maximum of twenty-five percent (25%) of the CDBG grant award.
(3) Application Procedures and Evaluation Criteria. Each program year, the Department shall notify all eligible cities and counties of the anticipated level of funding for the Planning Component and the earliest date for submitting applications through a notice of funding availability ( "NOFA"). The Department shall review Planning Component applications to determine if they meet minimum program eligibility and cash match requirements. The Department shall notify applicants, in writing, within 60 days of receipt of a complete application of the Department's funding determination. To be eligible for funding consideration, an application must meet the following requirements:
(A) The funding request shall contain all the information required in the NOFA and shall contain a certified resolution adopted by the governing body of the eligible jurisdiction documenting the availability of the cash match;
(B) The funding request shall be for an eligible activity and must meet a national objective as specified in 24 CFR Section 570.483; and

(C) If funds will be used to provide direct assistance to an identified business, the activity shall be considered to be technical assistance to a private, for-profit business and the application must include a letter from the benefitted business which: (i) explains why the benefitting business is unable to provide funding for the activity; and (ii) conditionally commits the business to proceeding with the activities which are the subject of the CDBG grant.

Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code; and 24 CFR 570.489(b). Reference: Sections 50406, 50407, 50832, 50833 and 50834, Health and Safety Code; 42 U.S.C. 5304(b)(3), 42 U.S.C. 5305(a) and 42 USC 5306(d)(2) and (3); 24 CFR 570.482, 570.483, 570.489 and 570.493.

s 7062.2. Special Jobs Bill Provisions.

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; 42 USC 5306(d)(2) and (3); Public Law 98-8 (Emergency Jobs Bill); and 24 CFR 570.489.

s 7062.3. Special 108 Loan Guaranty Pledges.
(a) Commitment of future federal allocations of CDBG Funds to the State ( "State pledges") by the Department as collateral for federal guarantees of notes or other obligations issued by eligible cities and counties ( "loan guarantees") pursuant to Section 108 of the Act (42 U.S.C. Sec. 5308) and 24 CFR Subchapter C, Part 570, Subpart M commencing with Section 570.700 (collectively, "Section 108") shall be subject to the following conditions:
(1) State pledges shall be given as collateral for loan guarantees only for loans of between $500,000 and $2,000,000.
(2) The total of all outstanding State pledges at any given point in time shall not exceed $16,000,000.
(3) To receive a State Pledge, in addition to the eligibility requirements established by Section 108 of the Act (42 U.S.C. Sec. 5308), an activity must: meet the eligibility requirements specified at Section 7062.1 subsection (a)(2) and (a)(3); and address one of the three CDBG national objectives specified in Section 7052 and as specified in 24 CFR Section 570.483.
(4) Applicants shall demonstrate a reliable repayment source and adequate security in the event the primary source of repayment defaults. The Department may require that the applicant city or county pledge other sources of repayment for the loan such as any local CDBG program income.
(5) State pledges shall not be committed as security for a guaranty which guaranty is the primary source of repayment for federally-issued securities.
(6) The proposed activity upon which the application for State pledges has been based shall be reviewed by the Department according to the HUD guidelines for financial underwriting referenced at Section 7062.1(a)(3).
(7) Any Loan Guaranty Pledges made pursuant to Section 7062.3 are excluded from any funding limitations set forth in this section or set forth at Health and Safety Code Section 50832(a).
(b) Application Procedures and Evaluation Criteria.
(1) To obtain a State pledge, eligible jurisdiction shall make a formal application in writing to the Department.
(2) Applications which have been determined by the Department to be complete shall be reviewed and a decision whether or not to issue a State pledge shall be made in writing within 60 days of the date of receipt of a complete application.
(3) In order to be considered complete, an application shall, at a minimum, include the following:
(A) the amount of the State pledge requested;

(B) sufficient information for the Department to determine that all of the conditions of subsection (a) of this Section have been met; and
(C) sufficient information to conduct the financial underwriting review required by subsection (a)(6) of this Section.
(4) An incomplete application shall be returned to the applicant with a written explanation as to the applicant's deficiencies.
(c) If the Department determines that the requirements of subsection (a) have been met, and that the activity underlying the application conforms to the underwriting standards of subsection (a)(6), the Department shall prepare and issue to the applicant a certification containing, at a minimum, the following statements:
(1) the State of California, acting by and through the Department, agrees to make a pledge of future CDBG grants for which the State may become eligible in the amount of the approved application as security for a loan guaranty from HUD in an equivalent amount;
(2) the Department possesses the legal authority to make such a pledge;

(3) at least seventy percent (70%) of the aggregate use of CDBG funds received by the State, guaranteed loan funds, and program income during the one, two, or three years specified by the Department for its CDBG program will be for activities that benefit low and moderate income persons; and
(4) the Department agrees to assume the responsibilities set forth in 24 CFR Section 570.710 requiring the Department to ensure that the applicant complies with all applicable federal requirements governing the use of guaranteed loan funds.

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; 42 U.S.C. 5308; and 24 CFR 570.700 et seq.

s 7062.4. Use of Un-allocated Colonia Funds.

Note: Authority cited: Section 50406, subdivisions (h) and (n), Health and Safety Code. Reference: Section 50407, Health and Safety Code; Sections 5305(a) and 5306(d), 42 U.S.C.; and Sections 570.489 and 570.204, 24 C.F.R.

s 7062.5. Special Allocation for Disaster Assistance.

Note: Authority cited: Section 50833.1(d), Health and Safety Code. Reference: Section 50833.1, Health and Safety Code; Public Law 105-18; and HUD Disaster Recovery Final Rule (Fed. Reg. Vol. 62, No. 173, p. 47344 (Sept. 8, 1997)).

s 7064. Grant Funding.
(a) The amount of funds available for grants is equal to the total allocation of federal funds made available to the State under the Act after subtracting an allowable amount for State administrative costs. Grant funding is subject to the availability of federal funds.
(b) Eligible applicants may apply for funds to undertake any one or any combination of the eligible activities described in Section 7058.
(c) Except as provided in Section 7062.1, applicants may apply for funds from either one, two or three annual funding awards. The maximum grant amount per application for one funding award, regardless of the number of cities and counties included in the application, is five hundred thousand dollars ($500,000). The maximum grant amount per application for up to three annual funding awards regardless of the number of cities and counties included in the application, is one million, five hundred thousand dollars ($1,500,000). Funds applied for under Section 7062 are not included in these funding maximums. There is no maximum amount for applications submitted under Section 7062 other than the amount of funds set aside for this purpose. In the annual application process, priority for funding will be given to applicants that received prior State approval for a grant for the second or third year funding award. These priorities are subject to the availability of federal funds and the satisfactory performance by grantees. If federal funding to the State is insufficient to meet commitments for the second or third part of a two or three year funding award, the Department will establish a procedure for awarding available funds based on previous rankings and program performance.

Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code. Reference: Section 50832(a), Health and Safety Code; and 42 U.S.C. 5306(d)(2).

s 7065. Emergency Program Amendments.
(a) A grantee may make a written request to the Department to amend or replace a project or activity set forth in a grant agreement with a project or activity which would alleviate existing conditions which pose a serious actual or impending threat to the health or welfare of the community.
(b) Notwithstanding any other provision of this Subchapter, the Department shall approve such a request and amend the grant agreement accordingly if the Department makes the following findings in writing:

(1) The grantee is located in an area for which the Governor has proclaimed either a "state of emergency" or a "local emergency", as those terms are defined in Government Code Section 8558, within 18 months of the grantee's application under this section.
(2) The replacement project or activity is designed to alleviate existing conditions which pose a serious actual or impending threat to the health and welfare of the community;
(3) The grantee is unable to finance the project or activity on its own, and other sources of funding are not available; and
(4) The replacement project or activity is otherwise eligible for funding under this Subchapter.

Note: Authority cited: Section 50406(h) and (n), Health and Safety Code. Reference: Sections 50407 and 50825, Health and Safety Code; 24 CFR 570.208(c), 24 CFR 570.483(d); and 24 CFR 570.489(a)(1)(i).

s 7066. Procedure for Continuation of Funding.
(a) Grantees with prior State approval for two or three year funding awards shall notify the Department in writing by the final date for submitting applications of their intent to continue the second or third year part of their program. Failure by the Grantee to so notify the Department will be deemed a waiver of continued funding.
(b) Funding will be continued provided adequate funds have been received by the Department from HUD, and the Grantee has performed in accordance with the grant agreement. Disencumbrance of funds not expended in accordance with the grant agreement and the performance measures described in Sections 7078.4 and 7062.1(b)(7) shall constitute satisfactory performance under the grant agreement.
(c) For a single year funding award 24-month contract, a grantee that does not expend twenty-five percent (25%) of awarded dollars by the 12th month of the Program contract shall be sent a hold out letter for the next funding cycle. A waiver from hold out status may be granted if the grantee expends seventy-five percent (75%) of awarded dollars by the 18th month. If a grantee cannot make the 18th month expenditure milestone, the grantee may avoid hold out status and a reduction in points in future applications for failure to meet milestones if, at the Grantee's request, the Department disencumbers funds from the Program contract equal to the difference between what has been expended and 75% of awarded dollars.
(d) For each program activity with multi-year funding awards, if a grantee does not spend twenty-five percent (25%) of an annual funding award by the 12th month from award, the Department may disencumber the difference between what was expended for that program activity and the 25% milestone. If a grantee does not spend seventy-five percent (75%) of an annual funding award by the 18th month from award, the Department may disencumber the difference between what was expended and the 75% milestone. All unexpended funds remaining 24 months from an award shall be disencumbered by the Department. A grantee that has funds disencumbered after 24 months shall not be eligible to apply for any additional funding in future application cycles, other than for the original difference, if any, described in Section 7060 between the amount of the annual award that was disencumbered and the maximum annual award of $500,000.
(e) For a multi-year funding award for a single program specific activity, the grantee shall specify in its application the times that Program funding will be needed. Department staff shall assign milestones based on the project's timeline shown in the application and the Department's need for timely expenditure of CDBG funds. If a grantee does not meet the milestones assigned to the project, the Department may disencumber funds up to the designated milestone.

Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code; 24 CFR 570.489(b). Reference: Sections 50406 and 50407, Health and Safety Code; 42 U.S.C. 5306(d)(2) and (3); 24 CFR 570.489 and 570.491.

s 7068. Administrative Cost Limitation.
Grantees may expend up to seven and a half percent (71/2%) of the grant amount for administrative costs, provided that such amounts are justified for the type and complexity of the program, and that there are records to document these charges.
Activity delivery costs directly related to a specific activity are not part of the general administrative costs. For example, the cost of a housing rehabilitation specialist is a rehabilitation cost and the legal costs relating to property acquisition are acquisition costs.
Administrative costs may include, but are not limited to, the following categories:
(a) General administrative activities. Such costs for administration include:
(1) Salaries, wages, and related costs of the Grantee's staff engaged in general management, general legal services, accounting, and auditing.
(2) Travel costs incurred in carrying out the general management of the program.
(3) Administrative services performed under third-party contracts including contracts for such services as general legal services, accounting services, and audit services; and
(4) Other costs for goods and services related to the general management of the program including rental and maintenance of office space, insurance, utilities, office supplies, and rental or purchase of office equipment.
(b) Information and resources provided to persons in the targeted income group, and to citizen organizations participating in the planning, implementation, or assessment of the Grantee's program.
(c) Costs incurred for environmental studies, including historic preservation clearances, and specific environmental assessments and clearances related to the CDBG Program.
(d) Fair housing activities to facilitate compliance with the requirements of Section 7084.
(e) Community development planning activities.
If a cost cannot be associated with one of the above listed groups and cannot be associated with direct program costs, the Department shall upon the grantee's request make a determination of whether it is an administrative cost, a program cost, or an ineligible cost.

Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code. Reference: 24 CFR 570.489; and Section 50833(c), Health and Safety Code.

s 7070. Contents of the Application.
Applications shall be submitted on forms prescribed by the Department and shall consist of the following items and any other information deemed necessary by the Department to judge the application. The specific forms and required information will be made available annually in the NOFA and accompanying application packet. This information provides the basis for the evaluation in Section 7078 and includes the assurances and agreements necessary for compliance with this subchapter. Where a description or analysis includes quantified information, the source of the information and the method of computation must be described. If the Department determines that the methods of computation are inaccurate or misleading, it may, after consultation with the applicant, adjust this information during the evaluation process.

Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code. Reference: Sections 50406 and 50407, Health and Safety Code.

s 7072. Submission of General Allocation and Native American Applications.
At least seventy (70) days prior to the due date for applications, the Department will notify all eligible cities and counties of the anticipated level of funding for the State program, and will provide them with a schedule for filing applications. Applications must be received by the closing date. Each eligible applicant shall submit two (2) copies of its application to the Department.

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

s 7074. Preliminary Review of Applications.
After the final date for the receipt of applications, the Department shall review each application for compliance with the provisions contained in Sections 7056 and 7070 and for a general understanding of the proposed projects. The Department will establish a schedule for applicants to respond to questions concerning their applications. These discussions will be recorded, and shall be limited to a discussion of the contents of the application. If there is a discrepancy between the applicant's written and oral statements, the written information in the application shall prevail. The Department may, in its sole discretion, request additional information to complete or clarify what is contained in the application.

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

s 7076. Award of Funds.
(a) The Department will rate and fund applications based on all of the activities in the application. Preliminary scores for each of the rating factors set forth in Section 7078 will be totalled by the Department, and applications will be ranked according to point totals. In case of a tied score, the application with the most points for the factor in Section 7078(a) shall receive the higher ranking. If the score remains tied after this computation, the application with the most points for the factors in Section 7078(b) shall receive the highest rating. The Department will establish a preliminary funding cutoff score based on the total amount of funds available for grants. For applications above the cutoff score, the Department will evaluate the activities in each application to determine whether or not the total amount of funds requested for housing and related activities complies with the requirements of Section 7052, which states that at least fifty-one percent (51%) of the funds made available through the State CDBG program must be used for the purpose of providing or improving housing opportunities for the targeted income group, or for directly related purposes, such as the construction of infrastructure. Targeted income group residents receiving housing or housing related benefits as a result of grants available as of that date under Section 7062.1 shall be included in the calculation of compliance with this provision. If the requirement is not met in the preliminary ranking, the Department will determine a method of increasing the amount of funding for housing activities.
(b) In the event there are insufficient funds to fund an applicant's whole program, this applicant will be offered the amount of funds available, provided it is sufficient to complete all or a complete portion of an activity which, if evaluated separately, would have been awarded funds.
(c) The Department may condition its award of funds in order to achieve the purposes of this subchapter and to ensure compliance with applicable State and federal law.
(d) The Department will complete the ranking process within eighty (80) days from the final date for submitting applications. Applicants will be notified in writing of point scores, fund awards, any grant conditions, and any adjustments made to comply with the requirement in Section 7052 that at least fifty-one percent (51%) of the State program funds be used for housing development and related improvements. Successful applicants have thirty (30) days from the date grant agreements are mailed by the Department to execute the grant agreements and return them to the Department and to comply with the provisions in Section 7056. The Department shall return to grantees a fully executed copy of the grant agreement provided the State has received funding authorization from HUD. Grantees shall not incur costs against the grant agreement prior to the date the agreement is signed by the State without prior State approval. If the State has not received this authorization from HUD by the time the grantee has forwarded to the Department the grant agreement executed by the grantee, the Department may withhold their execution of the agreements until this authorization is received. In the event an approved applicant elects not to participate in the Program or does not comply with the provisions in Section 7056, the unfunded applicant receiving the highest score will be offered a grant award, provided the requirements of Section 7052 are met.

Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code; and 24 CFR 570.489(b). Reference: Sections 50406, 50407 and 50828, Health and Safety Code; 42 U.S.C. 5306(d)(2); and 24 CFR 570.489.

s 7078. Evaluation Criteria.
All applications are given quantitative ratings and ranked against each other. In rating joint applications, information for the combined needs of all participating localities will be used for the purpose of evaluating these pursuant to this section. Points are assigned according to the criteria specified in Sections 7078.1, 7078.2, 7078.3, 7078.4, 7078.5, 7078.6, and 7078.7. The maximum score possible is 1,000 points. The total number of points in the rating system is allocated as follows:
(a) Poverty Index -a maximum of one hundred (100) points.
(b) Targeted Income Group Benefit -a maximum of three hundred (300) points.
(c) Need for Activity -a maximum of two hundred (200) points.
(d) Capacity -a maximum of one hundred and fifty (150) points.
(e) Performance -a maximum of one hundred and fifty (150) points.
(f) Leverage -a maximum of fifty (50) points.
(g) State Objectives -a maximum of fifty (50) points.

Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code. Reference: Sections 50406 and 50407, Health and Safety Code.

s 7078.1. Poverty Index (100 points).
The Department will compare all applicants in terms of the percentage of their population with incomes below the poverty level as defined in the latest available decennial census. The Department will compute individual scores by dividing each applicant's percentage of poverty persons by the highest percentage of poverty persons of any applicant and multiplying by 100. Applicants who elect to target their local program to fewer census tracts, or census block groups, than there are in their jurisdiction, shall receive scores based on either those targeted tracts or all the tracts, whichever results in a higher point score. In untracked counties, enumeration districts shall be used if the use of such data will result in a higher score for the applicant.

Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code. Reference: Sections 50406 and 50407, Health and Safety Code; and 42 U.S.C. 5306(d)(2).

s 7078.2. Targeted Income Group Benefit (300 points).
All applications shall be scored and ranked using the following methodology:
Extent to which the projects and activities will benefit the targeted income group (TIG) (a maximum of 300 points). The Department will assign points for benefit based on the percentage of total program funds that would benefit the targeted income group. Applicants that demonstrate the greatest benefit to the targeted income group receive the most points.
(a) The method of computing the amount of funds that benefit the targeted income group will vary depending on the type of activity, as follows:

(1) For activities that provide benefits directly to individual households, such as housing rehabilitation activities, the methods of determining benefit are:
A. If there are income eligibility limits for the beneficiaries of the activity and these limits do not exceed the targeted income group limits for each household size, the percentage of benefit for this project or activity is 100.
B. If there are no income eligibility limits or if the income eligibility limits exceed the targeted income group limits, the number of households, by household size, within these limits shall be estimated by the applicant to determine the percentage of benefit. To receive scoring credit for the stated estimate, the application must describe the methodology used in arriving at the estimate. Statistically valid sampling or data from a reliable third party, such as the U.S. Census Bureau, will be accepted. The Department shall make available methodologies for conducting sampling which it considers statistically valid. Applicants using methodologies other than those described by the Department must demonstrate the validity of their alternative methodology. The Department, at its sole discretion, will assign a need score based upon methodologically sound data as contained within the application. In the absence of methodologically sound data, the Department may rely upon available census data to establish a score.
(2) For activities that provide services or benefits to residents of a geographic area rather than to individual households, such as a public facilities activity, the applicant's method of determining benefit will be to estimate the percentage of all households in the service area that have incomes below the targeted income group limits. If data for income is not available by household size, this estimate will be based on the targeted income group limit for a family of four. To receive scoring credit for the stated estimate, the application must describe the methodology used in arriving at the estimate. Statistically valid sampling or data from a reliable third party, such as the U.S. Census Bureau, will be accepted. The Department shall make available methodologies for conducting sampling which it considers statistically valid. Applicants using methodologies other than those described by the Department must demonstrate the validity of their alternative methodology. The Department, at its sole discretion, will assign a need score based upon methodologically sound data as contained within the application. In the absence of methodologically sound data, the Department may rely upon available census data to establish a score.
(b) The point score for the percentage of funds in each application that benefits the targeted income group will be computed by the Department for each activity as follows:
(1) The amount of funds to benefit the targeted income group for each activity is determined by dividing the number of households in this income group to be benefited by the total number of households to benefit from the activity and multiplying by the amount of funds requested for the activity.
(2) To compute the percentage of funds benefiting the targeted income group, the amounts determined for each activity are added together and divided by the total amount of requested funds. This number, multiplied by 100, is the overall percentage of funds benefiting households in the targeted income group.
(3) To compute the actual number of points to be awarded to the applicant, the number fifty-one (51) is subtracted from the overall percentage of households in the targeted income groups benefiting from the activity, and the result is multiplied by seven and sixty nine hundredths (7.69). This product is the number of points, rounded to the nearest whole integer, assigned the application for the extent of benefit to the targeted income group. If the product is 301 or more points, the amount of points awarded shall be 300 points.

Note: Authority cited: Sections 50406(h) and (n), Health and Safety Code.Reference: Sections 50406 and 50407, Health and Safety Code; and 24 CFR 570.489. (continued)