Notice is hereby given that pursuant to s. 560.04 (2) (j), Stats., the Wisconsin Department of Development will hold a hearing to consider a proposed order to repeal ss. DOD 6.20 to 6.23; to renumber ss. DOD 6.24; to renumber and amend ss. DOD 6.18 (5): to amend ss. DOD 6.01, 6.03 (16), 6.14 and 6.18 (1) to (4); to repeal and recreate s. DOD 6.15 and to create s. DOD 6.03 (1m), (1r), (4r) and (14r), 6.18 (4) (e) and (5) relating to the community development block grant portion of the Wisconsin development fund at the following place and time: Department of Development, Room 908, 123 West Washington Avenue, Madison, Wisconsin at 10:00 A.M. on Thursday, January 11, 1996.

Section 560.04 (2) (j), Stats., gives the Department of Development the authority to adopt the proposed order. The proposed order interprets s. 560.04 (2) (j), Stats., and relates to federal funding the department receives annually under section 107 (b) (5) of title I of the housing and community development act of 1974.

That federal funding supports the state administered community development block grant portion of the Wisconsin Development Fund. The rules contained in this proposed order relate primarily to the economic development and the public facilities economic development portion of the community development block grant program administered by the Department.

The substantive changes contained in the proposed rule include:

1. The scoring systems and the rating of applications in the current rule used to make funding determinations related to economic development and public facilities economic development applications are replaced by sets of determinations and considerations the Department is required to make under the proposed rule before it may fund applications under either of the programs. For the most part, the determinations and considerations treat all the issues raised by the minimum requirements in the current scoring systems. The significant differences include:

  a. A broader view of benefit to low and moderate income persons which allows the low and moderate income requirement to be met by a project that provides job training, child care or transportation to low and moderate income persons as well as a project that creates or retains jobs for low and moderate income persons. This increased flexibility related to benefit for low and moderate income persons parallels a change in the federal rules that allows the state to use these alternative methods of measuring benefit to low and moderate income persons.

  b. An examination of the public purpose of the project that considers for both economic development and public facilities economic development applications several items that can be found in the existing s. DOD 6.15 or elsewhere in the subchapter and which also looks at such new considerations for both programs as the extent of poverty, unemployment and other economic factors in the project area; the prospects for new investment and economic development in the project area; the amount of investment that is likely to result from the project; and the willingness of the business to work cooperatively with job service and private industry councils to provide job opportunities to persons with low to moderate income. For economic development projects, the public purpose examination also considers the availability of satisfactory collateral and personal guarantees to assure repayment.

2. Under current rules, public facilities economic development projects may be funded only out of CDBG funds that have been returned to the Department. The proposed rule authorizes the Department to assign up to 20% of each allocation for public facilities economic development grants.

3. Under current rules CDBG funds that have been returned to the Department may be used for public facilities economic development and public facilities projects. The proposed rule allows such funding to also be used for economic development projects.

4. Under current rules, the Department is required to announce the annual allocation of funds between economic development and public facilities by August of the prior year. The proposed rule eliminates that requirement.

5. Under current rules, the maximum amount that a business may receive under the economic development program is $750,000. The proposed rule instead provides that the maximum amount that may be provided to a local government for the purpose of making a loan to any business is $1 million.

6. Under current rules, the maximum amount available to assist any business under the public facilities economic development program is $750,000. The proposed rule reduces the maximum amount that may be provided to a local government to assist a business under the public facilities economic development program to $500,000. The total a local government may receive under the public facilities program in a year is reduced from $1.5 million to $1 million.

7. The proposed rule provides that any program income in the possession of a local government in excess of the limits for that local government must be paid to the Department within 30 days of the local government's receipt of those funds.

8. Under current rules the Department can waive the program income limits to the extent that the excess income will be applied to continue the activities that generated the income. The proposed rule establishes a formal process and criteria for increasing the program income limits in increments equal to 25% of a local government's original limits. Local governments that wish to retain 50% of the excess program income must apply to the Department. To make a determination, the Department must consider the following:

  a. Whether the local government complied with all of the state and federal requirements related to its use of program income.

  b. The number of loans made by the local government out of program income and the total dollar volume of those loans.

  c. The default rate on such loans made by the local government.

  d. The demonstrated need for the increase.

Notice is hereby given that pursuant to s. 227.14, Stats., the proposed rule will have no impact on small businesses. The initial regulatory flexibility analysis as required by s. 227.17 (3) (f), Stats., is as follows:

a. Types of businesses affected: Businesses located within a local government eligible for CDBG funds from the state.

b. Description of reporting and bookkeeping procedures required: None.

c. Description of professional skills required: None.

The proposed order will produce a fiscal effect on the Department of Development as it is likely to change the amount of program income that will be returned to the Department. However, it is not possible to determine the amount of fiscal effect or even whether it will be a positive or negative fiscal effect. The total amount available to local governments under the community development block grant is not changed by the order as all program income returned to the department is redistributed as additional block grant funding to local governments.

Dennis Fay, General Counsel-608/266-6747

Pursuant to the authority vested in the Department of Development by s. 560.04 (2) (j), Stats., the Department hereby repeals, renumbers, renumbers and amends, amends, repeals and recreates and creates rules interpreting s. 560.04 (2) (j), Stats., as follows:

SECTION 1. DOD 6.01 is amended to read:

DOD 6.01 PURPOSE. The purpose of subchapters I, II and III is to set forth the criteria the department will use in administering the federal funds in the Wisconsin development fund that the department receives pursuant to 42 USC 5301 to 5319, as it may be amended, and 24 CFR 570.480 to 570.496 Part 570.

SECTION 2. DOD 6.03 (1m), (1r), (4r) and (14r) are created to read:

DOD 6.03 (1m) “Business” means a business that benefits from a grant by the department to a local government under the economic development or public facilities economic development programs.

(1r) “CDBG funds” means community development block grant funds awarded to the department by the federal government pursuant to 42 USC 5301 to 5319 as it may be amended.

(4r) “Local government” means a unit of general purpose local government that is eligible to apply for and receive CDBG funds under s. DOD 6.02.

(14r) “Target population” means persons with low to moderate income.

SECTION 3. DOD 6.03 (16) is renumbered 6.03 (13r) and as renumbered is amended to read:

DOD 6.03 (13r) “Wisconsin Small cities development fund grant” means a grant available to an eligible applicants as provided in s. DOD 6.02 local government for the purpose of undertaking economic development projects, public facilities projects that support economic development and public facilities projects.

SECTION 4. DOD 6.14 is amended to read:

DOD 6.14 Applicability. Sections DOD 6.01, 6.02, 6.03 (1), (1m), (1r),(2), (3), (4) (4r) (5), (6), (8), (14r), (15) and (16) and the provisions of this subchapter except for s. DOD 6.16 (f) apply to the economic development program. Sections DOD 6.01, 6.02, 6.03 (1), (1m), (1r), (2), (3), (4r) (6), (8), (10), (14r) (15) and (16) and the provisions of this subchapter except for ss. DOD 6.16 (7) 6.15 and 6.18 (1) to (2) (a) and (3), (4) (a), (c) and (d) and (5) to (6) apply to the public facilities economic development program.

SECTION 5. DOD 6.15 and 6.16 are repealed and recreated to read:

DOD 6.15 Economic development program. (1) The department may award a grant under the economic development program upon receipt and consideration of an application from an eligible local government if the department determines all of the following:

(a) The project serves a public purpose.

(b) The local government has a community development plan as required by 42 USC 5301 to 5319.

(c) The project costs are reasonable.

(d) All sources of project financing will be committed prior to the disbursement of the grant.

(e) The project is financially feasible.

(f) The business that will benefit from the economic development grant has the economic ability to repay the funds.

(g) The project will likely retain or create jobs in this state.

(h) The percentage of jobs retained or created that are made available to persons in the target population will likely exceed the percentage specified in the application manual.

(i) Financing for the project is unavailable from any other source on reasonably equivalent terms.

(j) The business that will benefit from the economic development grant will contribute at least 50% of the total cost of the project from private funding sources.