In an earlier article I focused attention on the failure to employ the over $8 million in Community Development Block Grant Funds to stimulate economic development activities in Southbridge.
In this piece I want to address one particular area in which those funds might be employed to benefit the community.
At present we have a great fundamental driver of potential for growth in the career training programs offered by Quinsigamond Community College. These include courses in areas such as Career and Professional Development, Business & Marketing, Computer and Technologies, Technical and Trades and Healthcare.
What is needed is a mechanism that allows those that are so inclined to translate these skills into viable businesses. One mechanism for this is the establishment of a small business incubator.
The CDBG program has a more than 25 year experience in funding the development of such a program.
Incubators are multi-tenant buildings that provide affordable, flexible space along with a variety of office and professional services typically to small and/or new businesses. Incubators are different from other types of commercial and industrial facilities in that their purpose is to create an atmosphere conducive to the creation and growth of fledgling businesses. Incubators can be either for-profit or nonprofit, and their developers typically focus on either generating a financial profit or new jobs.
CDBG funds can be provided either to the developer or operator of an incubator, or to one or more of the businesses located within the incubator, as long as the activity is eligible and meets one of the program’s national objectives.
A wide range of activities that pertain to the development and operation of an incubator or to a business within an incubator are eligible for CDBG funding. Examples of these types of ctivities are listed below within citations to the CDBG regulations at 24 CFR Part 570, Subpart C:
• acquisition of land and buildings for an incubator (570.201(a); 570.203(a,b)),
• architectural, engineering and design costs for construction or rehabilitation of an incubator
(570.201(c); 570.202; 570.203(a,b)),
• construction of a new incubator (570.201(c); 570.203(a,b)),
• demolition of existing buildings to clear land for an incubator (570.201(b); 570.203(a,b)),
• rehabilitation, preservation, or renovation of existing buildings for use as incubators
(570.201(c); 570.202(b,d,e); 570.203(a,b)),
• public improvements integral to an incubator including curbs, gutters, water/sewer
improvements, street improvements, and lighting (570.201(c)), 3
• development of feasibility studies, business assistance strategies, market assessments, and tenant selection plans either for a specific business (570.203(b), or as part of the
grantee’s incubator project plans (570.205(a)(4)(iii)),
• operational costs, such as utilities and maintenance, and equipment for an incubator or a business within the incubator (570.203(b)),
• technical assistance (570.203(b)).
To qualify for CDBG funding, each assisted activity must meet one of the national objectives of the CDBG program. Assistance for the development and operation of an incubator or to a business within an incubator must either benefit low-and moderate–income persons, or prevent or eliminate slums or blight (24 CFR Part 570.208(a,b)). Because of the nature and function of incubators and the businesses within them, it is highly unlikely that an activity would ever meet the urgent needs objective.
1. Low-and moderate–income persons benefit objective: As with any other business assistance, this objective may be met either by the creation/retention of jobs, or by the provision of services to an area containing a sufficient concentration of low-and moderate–income residents. When CDBG assistance is provided directly to an individual business in an incubator, each such business must meet the objective independently from the other business in the incubator.
When assistance is provided to a developer or operator of an incubator, compliance with the jobs creation/retention requirement can be met by aggregating the jobs created by the businesses occupying the incubator, as described below:
Businesses "initially occupying" the incubator are:
• those businesses that occupy space in the incubator at the time the CDBG assistance is provided,
• any other firms that move into the incubator after the assistance has been provided until enough firms are included in this count so that the total amount of space these firms occupy (or occupied) is equal to the total square footage of space in the incubator.
Count the jobs created by each of the businesses described above as follows:
• for those businesses already housed in the facility when the assistance is provided, count the jobs created for three years from the date of the assistance OR until the business moves to of the incubator, whichever comes first.
• for those businesses that enter the facility subsequent to the time of the provision of assistance, count the jobs created over a three year period from the date of their initial occupancy OR until the business moves out of the incubator, whichever comes first. In counting jobs, include any jobs created or retained by the incubator and the business, but exclude any positions held by the business owners and any other having a substantial equity in the business.
To help ensure that each business fulfills its responsibilities for meeting its share of the low/mod job requirements and for maintaining the necessary records and providing periodic reports, the agreement between the operator of the incubator and the business must specify these quirements. In addition, the agreement should describe the financial penalties or lease termination if the requirements are not met.
2. Under the slums/blight objective, the assistance may be for the development of an incubator facility:
Which is or will be in a slum or blighted area, if the assistance is for an activity which addresses at least one of the conditions which qualified the area as such (e.g., rehabilitation of a blighted building), or
Located outside of a slum or blighted area, if the assistance is for demolition, rehabilitation, or historic preservation designed to eliminate specific conditions of blight or physical decay on a spot basis. Under this criterion, rehabilitation is limited to the extent necessary to eliminate specific conditions of blight or physical decay on a spot basis. Under this criterion, rehabilitation is limited to the extent necessary to eliminate specific conditions detrimental to the public health and safety. Relocation and property acquisition activities may also be assisted if they are an integral part of the demolition, rehabilitation or historic preservation activities.
Grantees are required to maintain documentation demonstrating that each activity assisted with CDBG meets one of the national objectives:
• Low/Mod Jobs Benefit: When CDBG assistance is to be provided to a business on the basis of low/mod job creation/retention, the grantee must enter into a written agreement with the business prior to the provision of assistance to ensure that adequate documentation will be maintained to show the number and types of jobs created (both projected and actual), what hiring process was used, which low–and moderate–income persons were interviewed for which jobs, and which of the low–and moderate–income interviewees were hired.
A “first source” hiring agreement can be incorporated in the standard lease with each assisted business. These agreements obligate the business to go to a state, county or local government agency, or an Jobs Training Partnership Act (JTPA) entity first when new jobs become available, and to give serious consideration to hiring low-and moderate income-applicants referred by such entities. The assisted business should be required to maintain documentation on which these referrals were interviewed, whether or not they were interviewed, whether or not they were offered a job, and which accepted a job with the business.
• Low/Mod Area Benefit: Documentation must identify the service area of the activity and show that the required percentage of the residents of this area are of low and moderate income. When CDBG assistance is provided to an individual business, these records must be maintained only for that business’ business. When assistance is provided to the operator of the incubator, records documenting compliance with this benefit objective must be maintained for each firm occupying the incubator until enough firms have been included to equal the total square footage of space in the incubator.
• Area Slums/Blight Objective: The documentation that is required to show that this objective has been met include a designation of the boundaries of the area, a description of the conditions which qualified that area at the time of its designation, identification of the factors that qualified it under the state or local law (including the applicable citation), and the way in which the assisted activity addresses one or more of the conditions which qualified the area as slum or blighted.
• Spot Slums/Blight Objective: The records to be maintained to show how this objective has been met are: (1) A description of the specific condition of blight or physical decay that was treated; (2) For rehabilitation carried out under this category, a description of the specific conditions detrimental to public health and safety which were corrected, and (3) Details and scope of the CDBG assisted rehabilitation, by structure.
It seems to me that this is an area that should be explored by the Planning and Development subcommittee of the town council. It could constitute a first step in redirecting the orientation of our use of CDBG funds. It could also, if implemented, leverage existing resources toward building a basis for future growth and employment opportunities in the community.