Neighborhood and Economic Development Opportunities Grant ... · Neighborhood and Economic Development Opportunities Grant Program (NEDO) Funding Source: Community Development Block

Neighborhood and Economic Development Opportunities

Grant Program (NEDO)

Funding Source: Community Development Block Grant (CDBG)

Amount of Available FY20: $1.2 M

Award Floor: $25,000.00 Award Ceiling: $250,000.00 # of Awards Estimated: 6

Application Open: Tuesday, December 3, 2019 Application Deadline: Friday, January 31, 2020

Program Description

The Neighborhood Economic Development Opportunities Program (NEDO) seeks to support activities that nurture and energize neighborhood improvement projects and sustainable economic development opportunities.

The NEDO program will support programs and projects that enhance a neighborhood’s overall quality of life by investing in economic development activities that support anchor neighborhoods of opportunity as defined in the Memphis 3.0 Comprehensive Plan and HCD Consolidated Plan (specifically in ‘Accelerate’ neighborhoods – areas seeing real estate market investment and that have infill opportunities can be accelerated with public and private support, AND ‘Nurture’ anchor neighborhoods – areas with low market demand or experiencing higher vacancy and disinvestment can be nurtured catalytic public investments and incremental improvements. To view the Memphis 3.0 anchor map, go to http://bit.ly/MEM_ANCHOR_MAP.1

The Memphis 3.0 goals and objectives for strengthening neighborhood commercial districts

include:

• Develop a small business creation, attraction, and retention strategy to support and strengthen community-oriented retail and services within anchor neighborhoods.

• Pilot tenant attraction efforts in accelerate anchors to build critical mass and experience that can scale to other anchors.

• building improvements, tenant buildouts, and infrastructure improvements needed in anchors.

• Redevelop underutilized commercial properties in anchor neighborhoods

• Adaptive reuse

• Create or expand neighborhood-based entities to assist with and support the revitalization of anchors.

1 For more information on how the anchor neighborhoods were identified and other recommendations, please view the full comprehensive plan at www.memphis3point0.com.

• Improve walkability and multimodal access within and around community and Citywide Anchors to promote local economies and connect neighborhood residents and local businesses.

• Preserve existing businesses in Community Anchors with an emphasis on legacy businesses that have contributed to neighborhood history and identity.

• Promote and leverage tactical urbanism interventions in Community Anchors to stimulate neighborhood commercial activity.

• Buy local campaigns.

• Explore business improvement districts (BIDs) to revitalize and strengthen commercial

• corridors

• Encourage higher-density commercial and residential development in anchors supported by high frequency transit.

• Target efforts to reduce solid waste generation from large commercial, institutional, and industrial entities.

• Pilot high quality public wireless internet in key anchors and commercial corridors and determine opportunities to scale Citywide.

Projects and/or programs are encouraged to activate vacant and under-used storefronts and real

properties to help build local businesses within anchor neighborhoods. Based on the notion that

retail plays a vital role in revitalizing neighborhoods, NEDO seeks to help build local programs,

projects and businesses and increase neighborhoods visibility and vibrancy.

NEDO offers four categories of Projects

1. Special Economic Development Activities

• This category of eligible activities is very broad in its ability to assist in large-scale project

development and is a very common way of undertaking such activities.

• Activities may be undertaken by non-profit subrecipients or for-profit businesses

• Non-profit subrecipient Activities:

▪ Acquire, construct, reconstruct, rehabilitate, or install commercial or industrial

buildings, structures, and real property equipment and improvements

▪ Possible activities under this category might include things like: Recipient-

owned commercial facilities such as a farmer’s market; Subrecipient-owned

commercial properties, such as an office building or retail plaza; or Purchase

or installation of recipient- or subrecipient-owned commercial equipment such

as the walk-in freezer or the air cooling system in a recipient-owned farmers’

market.

• For-Profit Business Activities:

▪ This category is extraordinarily flexible and permits recipients to provide the for-

profit business with a loan, grant, loan guarantee, interest supplement,

technical assistance, and other forms of support for any type of activity for

which assistance is appropriate to carry out an economic development activity.

• Activities explicitly prohibited under 24 CFR Part 570.207(a) may not be

undertaken.

▪ The assistance to the business must minimize displacement of existing

businesses and jobs in the neighborhood.

▪ Given the flexibility within this category, there are a huge variety of large-scale

activities that may be funded by recipients, including assistance to a business to:

Build or renovate their commercial establishment; Buy or install equipment;

Increase the amount of working capital (receivable financing, purchase

inventory, commercial supplies, etc.); or Clean up or clear the site of their

business.

2. Commercial Rehabilitation

• Certain types of commercial rehabilitation as a rehabilitation activity may be undertaken

under this category, rather than a special economic development activity.

• Additional CDBG assistance must be considered under the special economic

development activities category discussed above.

• Assistance may be provided to for-profits and non-profits. For-profit property

owners are limited in the use of the funding for rehabilitation. For-profits can

only use rehab dollars to improve the exterior and correct code violations on the

interior of the structure regarding electrical, plumbing, and HVAC.

3. Public Facilities for Economic Development

• Development of Public Facilities that are specifically related to creating

employment and economic opportunities

4. Public Facilities for Neighborhood and Community Facilities

• Development of public facilities including neighborhood and community facility

owned by nonprofits and available to the general public.

• Enhanced Public Facilities and Improvements including:

i. Acquisition, construction, reconstruction, rehabilitation or installation of

public facilities owned by a nonprofit and operated so as to be open to

the general public

ii. Public improvements, such as streets, sidewalks, parks, water and sewer

facilities, sanitary sewers, neighborhood centers.

iii. Activities may be directed to the removal of material and architectural

barriers that restrict the mobility and accessibility of elderly or severely

disabled persons to public facilities and improvements.

iv. Design features and improvements which promote energy efficiency may

be included to these activities. Such activities may also include the

execution of architectural design features and similar placemaking

treatments intended to enhance the aesthetic quality of facilities and

improvements receiving CDBG assistance, such as decorative pavements,

railings, sculptures, pools of water and fountains, and other works of art.

v. Redevelop underutilized facilities in neighborhoods

Within each Project, the eligible activities include:

1. Acquisition

2. Rehabilitation/Facade Improvements

3. New Construction

4. Clearance/Demolition

All projects must:

• Must comply with CDBG guidelines at 24 CFR Part 570

• Must meet HUD national objectives of benefitting low and moderate income residents; or

low to moderate income areas.

NATIONAL OBJECTIVES

Since the NEDO Program uses Community Development Block Grant (CDBG) funds, all project

activities must meet a national objective to be eligible. The three national objectives in the

CDBG program are: (1) benefiting low-and-moderate income (LMI) persons; (2) preventing or

eliminating slums or blight; and (3) meeting other community development needs that are

deemed to be urgent because of existing conditions pose a serious and immediate threat to the

health and welfare of the community, and other financial resources are not available to meet

the need.

The National Objective that applies to the NEDO program is benefitting low and moderate

income persons.

Benefit to LMI persons defined: Benefit to LMI persons may be either direct or area-wide

benefit.

□ Direct benefits are those activities that serve certain persons.

□ Area-wide benefits are those activities that benefit communities and are not participant

specific.

Please note that applicants must ensure that both area-wide benefit at least 51% low and

moderate-income (LMI) persons, and direct activities benefit 100% low and moderate-income

(LMI) persons. If proposing economic development activities, 60% of beneficiaries must be LMI.

Additionally, applicants must ensure that NEDO projects do not benefit moderate-income

persons to the exclusion of low-income persons.

Low- and Moderate-Income (LMI) Households Defined:

Low and moderate-income households in metropolitan areas are defined as those with incomes

equal to or less than eighty percent (80%) of the median family income of the metropolitan

area. “2019 or the most current Income Limits,” published by the Department of Housing and

Urban Development (HUD), defines income limits for low and moderate-income families per

family size for non-metropolitan and metropolitan areas of the state. The document is available

on the HUD Exchange Website using this link https://www.huduser.gov/portal/datasets/il.html.

CDBG Financial Assistance

CDBG financial assistance must be in the form of a loan and not a grant.

CDBG loans may be deferred, deferred forgivable, or amortized with low interest. A deferred loan is

repaid if the property funded by the program is transferred to another owner. A deferred forgivable

loan is proportionally forgiven over an applicable term of recapture. An amortized loan is repaid

monthly during the term of the loan. The City’s equity position in the development will be secured through

a Deferred Lien secured by a Deed of Trust at closing and will be released when the loan is paid off or the

term of the compliance period has ended. The loan amount is dependent on program funding availability

and the project and will be determined by such factors as the type of development project and the terms set

by the other participating lenders. The loan amount and terms will be negotiated before contract execution.

An equity investment of 20%-30% of total project cost is required, depending on funding request amount.

CDBG PROGRAM REQUIREMENTS

Selected projects will be subject to the requirements listed below subject to applicability.

ENVIRONMENTAL REVIEW

An Environmental Review is required for each project or program that receives CDBG funding. If the

Application is funded, City staff will initiate the review and the agency will be kept informed about the

estimated length of time to clear the project.

The Environmental Review process for CDBG funded activities usually (but not always) requires a lower

level review, normally can be completed at no cost, and can usually be cleared quickly so as not delay the

program start up. However, if an Environmental Assessment or higher level of review is required, the City

ensure that the assessment is completed. Depending upon the project location and environmental

conditions, projects involving construction, rehabilitation and demolition can take up to 120 days to

obtain an environmental clearance. HCD Compliance staff will provide guidance through this process.

SECTION 3 REQUIREMENTS

All housing construction, demolition, rehabilitation and other public construction projects funded with

CDBG funds must comply with Section 3 requirements to the greatest extent feasible. The City is

committed to improving economic conditions in our community. The City will actively implement Section

3 regulations to direct work paid for by federal funds to Section 3 Residents and to Section 3 Business

Concerns. Under the federal regulations, Contractors will satisfy the “greatest extent feasible”

requirements by meeting the following numerical goals:

• 30% of all New Hires shall be Section 3 Residents. A New Hire is defined as a new, fulltime

employee hired on a permanent, temporary or seasonal basis for a position that is generated from

the expenditure of HUD funds covered by the Section 3 regulations. New Hire refers to a person

who is not on the Contractor’s payroll at the time of award of a Section 3 Covered Contract or at

the time of receipt of Section 3 Covered Assistance.

• 30% of the total dollar amount of all covered construction contracts and subcontracts shall be

awarded to Section 3 Business Concerns; and

• 3% of the total dollar amount of all covered non-construction contracts shall be awarded to

Section 3 Business Concerns. This includes professional service agreements provided that the

work to be performed by the professional is for work generated by the expenditure of the Section

3 Covered Assistance or for work arising in connection with a Section 3 Covered Project.

HCD Compliance staff will provide guidance through this process.

ADA ACCESSIBILITY FOR PERSONS WITH DISABILITIES

The Americans with Disabilities Act (ADA), State Title 24, and the Fair Housing Act prohibit discrimination

based on disability. Please be advised that your project will be reviewed for compliance with federal and

state laws as they relate to accessibility. Accessibility includes such things as: entrance ramps, parking

with universal logo signage, grab bars around commodes and showers, required height for toilet seats,

space for wheelchair maneuverability, accessible water fountains and counters, and other improvements

needed to assure full access for the disabled, including the blind and deaf. HCD Compliance staff will

provide guidance through this process.

SECTION 504

Section 504 focuses on programs not building, therefore any CDBG funded program must accommodate

persons with disabilities, this requirement is met when every eligible person including a person with a

disability (physical or mental) can fully participate in a CDBG funded program. Structural modifications of

existing facilities need to undertake only where other methods are inadequate to ensure that a program

is available to persons with disabilities. HCD Compliance staff will provide guidance through this process.

DAVIS-BACON LABOR STANDARDS

Construction work that is financed in whole or in part with CDBG funds is most likely subject to the Federal

labor standards requirements, including the Davis-Bacon and Related Acts, for payment of prevailing

wages. Additional information is available in the publication Contractor’s Guide to Davis-Bacon: Prevailing

Wage Requirements for Federally-Assisted Construction Projects. If Davis-Bacon is trigger or any Related

Acts project cost may increase. HCD Compliance staff will provide guidance through this process.

CONFLICT OF INTEREST

Conflicts of interest (or appearance thereof) can plague activities supported with federal funds. The

general rule is that no employee, board member, officer, agent, consultant, elected official, or appointed

official of the recipients or sub-recipients that are receiving funds under a CDBG assisted program who

have responsibilities with respect to the CDBG activities or are in a position to participate in decision

making processes or have access to inside information with regard to the activities can obtain a financial

interest or benefit from a CDBG assisted activity during their tenure or for one year thereafter (Federal

Regulation 24 CFR 570.611). Agencies should maintain a written code of standards of conduct governing

the purchase of materials, product, supplies, and services and awarding and administering sub-recipient

contracts. Personnel involved in the procurement process must be trained to recognize situations that

create conflicts of interest, or the appearance of a conflict of interest.

MONITORING

The Department of Housing and Urban Development (HUD) requires monitoring of sub-

recipient/contractors agencies on an annual basis. Monitoring is a system to evaluate whether sub-

recipients are carrying out their CDBG program(s) in compliance with Department of Housing and Urban

Development regulations, the contract terms, and conditions and policies of the City of Memphis, TN

Housing and Community Development.

Monitoring is an ongoing process of reviewing performance using agency data to make judgments about

the performance, and to assist in improving that performance. The contract compliance monitoring

performed by the City is different from an annual audit. Monitoring is not an audit of the agency, but

rather is focused on the “program” that is CDBG funded. To meet HUD requirements, the City may conduct

an on-site monitoring visit, or in certain instances, the City may conduct a “desktop” monitoring visit,

whereby the agency is not visited, and their grant is monitored only by review of the information in City

files.

Program Monitoring Goals

A. To review sub-recipient/contractor agencies to determine if services are being delivered in

accordance with contract requirements as to type of services and number of units of service.

B. To review records of sub-recipient/contractor agencies to determine if systems are in place to

properly document the provision of services, client eligibility, and compliance with any other

contract requirements.

Fiscal Monitoring Goals

A. To review sub-recipient/contractor agencies to determine if expenditures of allocated funds are

being made in accordance with contract requirements.

B. To review records of sub-recipient/contractor agencies to determine if systems are in place to

properly document financial transactions, the use of allocated funds, use of program income, and

any other contract requirements.

SUMMARY OF ADDITIONAL CDBG PROGRAM REQUIREMENTS

1. Congress created the CDBG program and numerous federal regulations apply. Applicants that

are will be required to execute a contract with the City listing their responsibilities for meeting

all federal requirements along with the City.

2. If the total amount of Federal funds received by your Agency from all sources exceeds $500,000

during the fiscal year ending on June 30th, you must prepare a Single Audit in compliance with

OMB Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations.”

3. Affirmative action, nondiscrimination in services and employment practices and ADA

requirements apply; certification of a Drug Free Work Place is required.

4. Applicants (sub-recipients and contractors) must not be de-barred.

5. Funded applicants cannot be indebted to the IRS or to the City of Memphis nor have judgments

or liens.

6. The City’s Section 3 and MBE/WBE goals must be met to the greatest extent feasible.

7. Applicant (sub-recipients and contractors) must have a verifiable DUNS number.

8. City and HUD shall have access to the project records and payroll records as set forth in the

funding agreement.

9. Applicants (sub-recipients) are responsible for Worker's Compensation benefits, or claims by

employees and must indemnify and hold the City harmless against any and all claims.

10. CDBG funds are reimbursed monthly and based upon required source documentation, i.e.

timecards, cancelled checks, receipts, bank statements, etc.

11. Quarterly and Annual performance reports are required

12. Proof of Insurance is required if funding is awarded

13. Sub-recipients will be subject to desk and/or on-site monitoring throughout their contract

period.

14. Organizations are strongly discouraged from applying for funds unless they are ready to

implement the activity proposed for funding.

15. The City will require that the Applicants (sub-recipient) submit reimbursements on a monthly or

quarterly basis in order to meet this criteria.

Economic Development – Public Benefit Standards

Recipients receiving assistance for special economic development projects, must comply with the

public benefits standards (24 CFR Part 570.482(e), (f) and (g)). There are two types of public

benefit standards as follows:

• Jobs created and retained;

o Individual Standard – every project – Create/retain 1 Job per $50,000 CDBG funds

o Aggregate Standard – average of all projects grantee funds in a program year –

o Create/retain 1 Job per $35,000 CDBG funds

• Goods or services provided to LMI persons.

o Individual Standard – every project - Goods and services to 1 LMI person per $1,000

CDBG

o Aggregate Standard - average of all projects grantee funds in a program year – - Goods

and services to 1 LMI person per $350 CDBG

EVALUATION CRITERIA

Applications are reviewed by staff of he Division of Housing and Community Development to

determine completeness and eligibility. Applications are further reviewed by a committee of

external stakeholders who have expertise in the areas of community and economic

development. Applications are reviewed and recommended by means of a competitive

evaluation process in accordance with the specific criteria detailed below.

While a well-written application is no guarantee of funding, every effort should be taken to

make sure that the application is clear and concise. In addition to completeness and eligibility,

the categories below will be used to evaluate applications. The table below outlines the

selection criteria, review factors, and maximum points for each criterion.

The individual application score is the primary factor in determining the recommended awards,

but other factors that may be considered include, but are not limited to, the income area of the

project areas, an applicant’s recent CDBG funding level, geography, and an applicant’s fiscal

resources.

Selection Criteria Review Factors Maximum Points

Completeness of Application

Points will be subtracted for areas not complete and for missing documents

Negative Impact Only

Project need and Justification

• Clear project description/project location provided

• Summary of need and justification is sufficient

• Legible map and/or photos provided

• Description of anticipated accomplishments and outcomes

25

Capacity and Skills to Execute the Project

• Clear explanation of the capacity and skills to execute the project, including past track record or other demonstration of capacity

• Describes similar past projects executed and the outcomes

• Past MBE/WBE/Section 3 contracting/hiring performance

• Project sustainability

25

Clarity and Reasonableness of Proposed Costs

• Project budget is complete

• Proposed cost estimates are reasonable

• Cost estimates/budget prepared by a certified architect, engineer, contractor, etc. as applicable

• Estimates prepared within last six months

10

Leveraging Other Funding

• Provides clear description of matching funds

• Provides information regarding efforts to secure funds

• CDBG support will leverage additional investments

10

Readiness to Proceed

• Project eligibility information is complete and accurate

• Summary of project readiness contains needed information

• Project start date and completion schedule is clearly defined

10

Broader Context of Project

• Proposed project advances a broader plan/vision, such as Memphis 3.0

• Connected to anchor areas identified in Memphis 3.0

• Contains innovative or creative elements

• Includes economic development activities/impact

10

Financial Capacity • Provides audit and other financial records

• Audit is current

• Includes explanation of unresolved audit findings, if any, and corrective actions

10

Bonus Points • Includes Green Building or retrofit standards

• Is located in a high frequency transit corridor

5

Total Points 105

CITY OF MEMPHIS

DIVISION OF HOUSING AND COMMUNITY DEVELOPMENT

NEIGHBORHOOD AND ECONOMIC DEVELOPMENT OPPORTUNITIES

APPLICATION

INSTRUCTIONS

Please submit the following information to the City of Memphis’ Division of Housing and

Community Development (HCD) via the online application portal. The City reserves the right to

reject any application that it determines to be incomplete or inaccurate.

NEXT STEPS

Upon receipt of a complete application, the HCD will convene a team to review the proposed

project. The underwriting and review process is expected to be complete in 60 days, at which

point the applicant will receive notification that the project has been awarded or declined for

funding.

The entire process, from submission of a complete application to execution of a contract

agreement, should take 4 to 6 months.

APPLICANT/ORGANIZATION CONTACT INFORMATION

Organization Name:______________________________________________________

Organization

Address:____________________________________________________________

Organization Telephone:____________________________________________

Authorized Representative Name and Title:

__________________________________________________________________________

Contact Number:

________________________________________________________________

Contact Email:

__________________________________________________________________

Address (if different from above): __________________________________________________

Type of Organization: Nonprofit ____ For Profit _____

Date of Formation: ________________________________________________

APPLICATION

Please submit all of the information and attachments described below.

Part One: Applicant Information

1. Attach organizational chart and formation documents of Applicant and its members or

partners, including a disclosure of any direct or indirect relationship or interest between

the parties.

2. Experience: Description of any comparable projects completed in the prior 5 years,

including addresses.

3. Experience: Description of any projects currently underway or completed in the prior 3

years in the city of Memphis, including addresses.

4. Experience: Has the applicant used CDBG funds before? Yes___ No___ , if yes please

explain use of CDBG funding:

5. If No, does the applicant have experience carrying out similar activities with the City,

County or State:

6. Provide brief overview of organization background (include length of time in operation

and organization’s purpose).

7. Capacity: List of staff, consultants, attorneys, architects, contractors, and other advisors

to be involved in the project, contact information for each, and a description of each

person or entity’s qualifications and relevant experience in conformance with Exhibit

A, Section I.10.

8. List of Related Companies, subsidiaries and disclose identity of interests between

parties. i.e. between owner, developer, broker, contractor, investor, etc.

9. Indicate the name of the partners you will work with during the project (including the

role and contribution of each partner):

10. Please list and provide (attach) letters of support, demonstrations, partnerships, and

commitments to the project:

Part Two: Project Information

CDBG AMOUNT REQUESTED - $______________

Project Title/Name: _______________________________________________________

Type of Project

☐ Special Economic Development Activities

☐ Public facilities and improvements for

Economic Development

☐ Commercial Rehabilitation

☐ Public Facilities for Neighborhood and

Community Projects

What eligible activity category best fits the proposed activity? (Please mark only one)

☐ Acquisition

☐ Clearance/Demolition

☐ Rehabilitation

☐ New Construction

National Objective: Please check the appropriate option (all project activities must meet at

least one the following national objectives to be eligible)

_____Benefit to low- and moderate-income persons

_____Benefit to a low- and moderate–income area

1. Provide and executive summary of the proposed development, project schedule and

phasing, capital improvements to be constructed, residential components, and plans for

any required relocation.

2. How will the proposed project meet the National Objective Selected (if low-and moderate

income persons, specify how the benefit to persons will be tracked and if low-and

moderate income area, specify how the area will benefit)?

3. Provide Specific Location of Project (include street address, legal description, parcel

number, and project map that includes Census Tract where activity will take place).

4. Please check the appropriate option

Applicant requests CDBG funds to acquire the property located at:

Appraisal or market analysis included

Applicant owns the property

Documentation of ownership included

Applicant leases the property

Minimum 15-year lease attached

5. Provide a detailed project description:

Project Relevance and Need

6. Summary of Project Need and Justification (include the need for the project and why the

project is a priority):

7. Provide evidence to support the need for the project (research evidence/statistics on your

target population and the issue being addressed).

8. Describe the targeted audience that will benefit from the project:

Project Outcomes and Impact

9. Describe how the project will have a positive effect on the neighborhood it serves.

10. What aspects of the project will be self-sustaining and describe how they will continue

after funding has ended.

11. Does the project advance Memphis 3.0 Comprehensive Plan goals of connecting

communities, equity and opportunity? Explain how the development supports the goals

of the Memphis 3.0 Comprehensive Plan, include key details relative to connectivity,

equity and opportunity.

12. Is this project within one of the Memphis 3.0 anchor areas? If so, which of the three

anchor types does it cover – sustain, nurture, or accelerate? Click here to see Memphis 3.0 Areas.

13. Describe the economic impact the completed project will have on the local economy.

(This consists of increased jobs, increased private investment, and/or increased local

revenue stream)

14. When is the target date for completion?

15. Provide a timeline or milestone schedule for implementation and completion of the

proposed project. Provide the timetable for execution of project activities, explaining any

phasing or staging of activities that will be required. Timetable should include any

needed design or bid preparation activities, procurement actions, and all major

components up to occupancy of the facility. Assume that the City’s funding will be

available after July of the program year from which funding is being requested. Include

benchmarks and measurable goals.

16. Conceptual schematic drawings (including floor plans, elevations, and site plans) which

have been reviewed and approved by the Planning and Urban Design Department’s Urban

Design Peer Review Panel. These should be submitted in PDF format.

17. Streetscape plans such as sidewalk dimensions, landscaping and irrigation plans,

pedestrian lighting plan, utility burial locations, and description of any utility upgrades.

18. Copies of market feasibility studies or other third-party market studies in conformance

with Exhibit A, Section I.7.

19. Description of existing and proposed improvement values (real property, business

personal property, inventory).

20. Description of jobs to be created, relocated, or retained by project, with timelines, wage

information, benefits information, and plans or commitments to hire Memphis residents.

If jobs are to be relocated, please provide address where jobs currently exist.

21. Confirmation that you have already met with the Planning and Urban Design

Department’s Urban Design Peer Review Panel and the Minority/Women Business

Enterprise staff of the City’s Business Development and Procurement Services

Department, the dates of the meetings, the person(s) you met with, and the outcome of

those meetings.

22. Information about community engagement completed or planned.

Part Three: Property Information

1. Site address and Parcel Numbers.

2. Description of current property ownership. If property is owned by someone other than

Applicant, include a description of the Applicant’s plan to acquire site control as well as

copies of any lease, option, or purchase agreements.

3. Copy of recent title policy or title commitment.

4. Survey of the property from a licensed land surveyor showing metes and bounds, a written

legal description, easements, encumbrances, rights-of-ways, physical features, and utility

lines.

5. Copies of engineering, environmental, or other property studies in conformance with

Exhibit A, Section I.8. If necessary, describe any plans for remediation or other

environmental cleanup.

6. Current zoning classification, and a Zoning Verification Letter from the Office of

Planning and Development in conformance with Exhibit A, Section I.8, along with

description of any required or desired change in zoning classification or any zoning

variance.

7. Appraisal of property prepared by a license appraiser of the State of Tennessee and dated

within one year of the application submission date.

8. Description of current property use.

9. Disclose any property within ¼ mile of the development site that is owned, controlled, or

under option or purchase agreement for future site control, by Developer or any affiliate

or subsidiary of Developer.

Part Four: Financial Information

BUDGET NARRATIVE

Project Budget and Leveraging

Complete and upload budget template at the top of this screen under “Important Templates to

Complete”. You will need to open and save, then complete and upload.

BUDGET WORKSHEET (UPLOAD ATTACHMENTS)

Program/Project Budget

Sources and Uses

Leveraging and other funding

1. Most recent two years of audited financial statement of Applicant or anyone having 20%

or more ownership interest. If Applicant is a special purpose or single-asset entity, also

submit the most recent two years of audited financial statements for the controlling entity

of Applicant. These will be submitted separately to the third-party underwriter.

2. Sources of project funding and copies of all supporting information in conformance with

Exhibit A, Section I.2.

3. Comprehensive development budget. Must be broken out with sufficient detail that City

can determine cost reasonableness in conformance with Exhibit A, Section I.1. Must

include specific line items for public improvements, contractor and developer overhead,

profit, and travel.

4. Operating proforma with a minimum 20-year term. If any permanent financing source

5. contemplates a term longer than 20 years, the proforma should have a term matching the

term for that financing source. If the project includes a residential component, the

proforma should account for the requirements of Memphis City Code Chapter 20A related

to housing vouchers, as well as the affordable housing requirements of any relevant TIF

project and financing plan.

6. Description of any prior or pending bankruptcy by Applicant or its affiliates, and of any

current, pending, or threatened litigation against the City involving Applicant, its

affiliates, or any member of the development team including Applicant’s attorneys.

7. For each person owning or controlling a 20% or greater interest in Applicant (or a 20%

or greater interest in a member, partner, or other entity with an ownership interest in

Applicant), the following information must be submitted. The information may be

submitted separately from the other application information, either through a Dropbox or

other file sharing account controlled by the individual owner, or via submission directly

to the City’s third-party underwriter, if applicable.

a. A personal financial statement, and

b. A signed and notarized Authorization and Release on the form attached as

Exhibit B.

OTHER ATTACHMENTS

If applicable, proposed project needs are justified by submitting the following items.

Facility/Site Photographs

Design Specifications

Plans/Blueprints

Elevation Drawings

Site Surveys

Other:

EXHIBIT A

City Standards for Financial Underwriting

The City Standards for Financial Underwriting (the “Standards”) will comply with local, state

and federal regulations. If the Standards contradict said regulations, the regulations shall control

in all respects.

All City Funding is provided as a gap financing mechanism. This means that the project must

maximize the project’s debt capacity based on reasonable lending market ratios and provide an

equity investment that delivers a reasonable return.

I. ASSUMPTIONS

The Standards operate on the following assumptions:

1. Project Costs are Reasonable

All project costs will be carefully reviewed for reasonableness. A breakdown of all

project costs will be required as part of the City Funding application. Fair market price

quotations, engineer’s estimates, and/or appraisals must be submitted to support all

project cost elements. Third party price quotations or a comparison of prices under

existing contracts or services from previous projects are required to verify all costs.

A “sources and uses of funds” form will be reviewed for each “use of funds” (cost

element). A determination will be made by the City in its sole discretion on the

reasonableness of the cost for construction, machinery, and equipment costs. Costs will

be reviewed based on estimates from third-party contracts (architect, engineer,

equipment supplier, installer, etc.) for land/building acquisition. A determination will be

made by the City in its sole discretion that the price of real estate is reasonable based

upon fair market value by a certified real estate appraisal. For development costs (such

as building fees, architectural/ engineering fees, or financing fees), a determination will

be made by the City in its sole discretion if the costs are itemized and supported by

contracts or other documentation.

For a working capital loan (if applicable), a comparison will be made on the amount of

working capital requested as compared to industry averages, risk, historical needs of the

business and the projected need. This will be accomplished by analyzing the financial

statements, projections, operating cycle and financial ratios of the borrower.

2. All Sources of Project Financing Are Committed

A review will be made to determine if sufficient sources of funds have been identified

and are committed to the project as determined by the City in its sole discretion. The

participating financing parties must have the demonstrated financial capacity to provide

the funds in a timely manner. The terms and conditions of all other sources of funding

must be disclosed.

A “sources and uses of funds” form will be reviewed for all sources of funds. A

determination will be made if there is evidence verifying the commitment or an intent to

commit funds under terms and conditions acceptable to the City.

For debt sources, letters of intent or interest dated no more than three months prior to the

date of application must be provided. Letters must include the specific level of

commitment and the terms and conditions of the loan. The application must also include

a copy of the actual loan package that was submitted to the lender. If a development

Funding is approved, documentation of a firm commitment of debt sources must be

submitted during the closing process.

For grant sources, a letter of commitment for each source must be provided which

outlines the level of commitment, the terms of the commitment, any conditions precedent

to funding, and the timing for receipt of the funds.

For equity sources, a determination will be made by the City in its sole discretion if the

equity can be verified by business or personal bank financial statements. If the equity is

to be provided by an outside investor, evidence must be obtained on the level of

commitment, the terms and conditions if any, and availability of funds (with an

accompanying financial statement from the investor verifying the availability of the

funds).

3. The Project Is Financially Feasible

The project will be examined to determine its viability and assure that the public benefit

will be realized. The current and historical financial statements of both the business and

principals will be analyzed. Income and expenses shall be evaluated and compared to

historical and industry averages. Project costs will also be reviewed to determine their

reasonableness, as determined by the City administrator in its sole discretion.

As a part of this financial analysis, the past, current, and projected financial data will be

analyzed to determine if the job estimates are reasonable and can be supported. Labor

costs shall be checked against industry averages.

The terms and conditions of the City Funding financing must be appropriate. The interest

rate should be set such that available cash flow is sufficient to meet debt obligations with

enough remaining cash flow to operate successfully. The terms of the financing will be

determined based on the use of funds. Generally speaking, terms will be established

based upon the following:

• Working Capital: 3 – 7 years

• Machinery and equipment: 3- 15 years, depending on the useful life

▪ Non-residential real estate: 15-20 years, construction/bridge 2 years

▪ Residential Real Estate: permanent 15 – 20 years, construction/bridge 2-3 years

A longer loan amortization schedule may be justified on a case by case basis with a

balloon payment due at the end of the term of the loan or economic life of the asset. Each

Funding review will include a written explanation of the appropriate analysis and the

reason for recommending the loan terms and conditions.

4. The Return on Equity Investment is Reasonable

The City Funding financing application will be reviewed to determine if the return on

investment to the Applicant is reasonable. The amount of cash that the Applicant is

projected to receive, in relation to its initial equity, shall not unduly enrich Applicant.

However, the analysis will also take into consideration if the return on investment is too

low, which could cause the Applicant to lose motivation and not follow through with the

project.

The City shall review projected revenues, expenses (including owners’ and officer’s

salaries), owners’ draws, debt service and net operating income. A comparison to

historical financial information will be made in relation to industry averages to determine

reasonableness.

A review of the business’ obligations and the personal obligations of the business

owner(s) will determine what return on equity investment is necessary to meet personal

and business obligations. If the return on investment is above the industry averages,

adjusted for risk and local conditions, steps will be taken to adjust the City’s

development Funding terms or owners’/officers’ salaries and/or draws. If the return on

investment is below the industry average, the terms may be adjusting to bring it closer

to the industry average in the sole discretion of the City.

5. The City Funding Schedule is Feasible

The disbursement of City funds will be negotiated with Applicant and other funding

sources. City funds should be disbursed in a manner that does not put the City financing

at undue risk relative to other sources of funds. The sources and uses of funds will be

reviewed to determine if the City financing will be expended at the same rate as the other

funds. A review of the other funding sources’ policies on the order of expenditure of

funds will be made. If these policies require the public funds to be disbursed first, the

Director of the City of Memphis HCD (“Director”) will insure that adequate safeguards

are taken to manage risk to the City. Such safeguards may include but not be limited to

performance or completion bonds.

6. The Project is Feasible

In addition to analysis of the development pro forma for a project, an analysis will also

be made on the operating pro forma of the development and the assumptions behind it.

HCD Funding application must thus be supported with additional documentation,

including but not limited to:

• Market studies

• Real estate appraisals

• Feasibility studies

These reports must be no more than 6 months old and prepared by an independent third-

party source which has the qualifications to perform the study. In-house or subsidiary

vendors will not be considered since this is not an arms-length transaction.

These studies are especially important in evaluating capacity to cover debt service for

housing projects, commercial projects and community development activities. For

projects that do not generate revenue, engineering and other types of feasibility studies

are necessary to properly evaluate a project.

7. The Site and Location Are Suitable

The project site and its location will also be evaluated for each funding application. The

following factors will be reviewed to determine the suitability of the project in relation

to its environment.

The neighborhood where the project is located should show signs of stability with strong

and continuous growth patterns. In the case of a redevelopment area, the proposed

redevelopment area plan must be sufficiently designed and funded to achieve the

anticipated outcomes.

The property’s condition is important, both structurally and environmentally. Third party

studies and reports will be analyzed to determine property condition, such as: a property

appraisal, Phase I Environmental Site Assessment, property condition assessment, and,

if necessary, an operations and maintenance program for removal of asbestos, lead-based

paint, radon, PCB’s, other toxic waste, and the removal of underground storage tasks.

An evaluation must be made regarding adequate zoning. A Zoning Verification Letter

from the Department of Sustainable Development must affirm that the proposed use of

the site is classified as either a legal conforming or a legal non-conforming use under

local zoning requirements.

Proof of ownership and proper title to the property must be demonstrated to City’s

satisfaction which can include purchase options, a title policy or commitment, or other

documentation satisfactory to Director in his or her sole discretion.

A survey of the property from a licensed land surveyor showing metes and bounds, a

written legal description, easements, encumbrances, rights-of-ways, physical features,

and utility lines must be furnished for review.

1. Public Benefit Shall be Determined

The Tennessee Constitution prohibits the city from making gifts of public funds.1 Tennessee

courts have found, however, that the Tennessee Constitution does not prohibit payments of

public funds if the payment serves a legitimate public purpose and affords a clear public benefit

received in return. 2. The Supreme Court of Tennessee established a three-part test to ensure

that a payment accomplishes a public purpose consistent with the Tennessee Constitution.3 To

satisfy the test, the City of Memphis must: (1) ensure that the payment’s predominant purpose

is to accomplish a public purpose, not to benefit private parties; (2) retain public control over

the funds to ensure that the public purpose is accomplished and to protect the public's

investment; and (3) ensure that the City of Memphis receives a return benefit.Each project will

be analyzed to ensure that the Funding serves a public purpose and provides a public benefit.

2. The Development Team Has the Capacity and Capability to Undertake the Project

A written description of the development team will be evaluated. This description will outline

roles and responsibilities and provide previous experience in similar types of developments. This

will be supplemented with resumes and historical backgrounds.

3. Repayment Ability

All City funds will be evaluated to determine whether any portion can be repaid. In all cases,

project cash flow and other sources of funds as appropriate will be evaluated to determine

capacity to repay the loan. Cash flow from the project must be sufficient to repay debt service.

The target range for cash flow coverage are as follows:

Economic Development Business loans: $1.25 in cash flow for every $1.00 of debt service

Commercial Real Estate loans: $1.25 in cash flow for every $1.00 of debt service

Community Facility loans: $1.10 in cash flow for every $1.00 of debt service

Bridge Loans: Debt Coverage Ratio not applicable, but take out financing must be committed

Additional sources of cash flow will be required for loans that have a cash flow coverage less

than the above requirements. This may include but is not limited to a cash reserve account for

debt service from the owner or an investor, and a cash equivalent resource, such as a certificate

of deposit. HCD can waive the minimum debt coverage on a case-by-case basis.

For projects that do not generate income from operations, other sources of funds that may be

considered for repayment including but not limited to:

Revenues derived from a project (e.g. lease payments, rental payments, or parking revenue)

User fees (e.g. water or sewer fees)

FINANCIAL GAP

To receive City funding, a project must have a “financial gap.” This gap must be documented.

There are three types of financial gaps.

Unavailability of Capital. The project can afford the cost of financing, but is unable to obtain the

funds from private debt and/or equity sources. The gap may be a result of a lender’s loan to value

requirements or the inherent risk of the project or the industry. For example, a loan may be

provided for 70% of the project’s costs, which leaves a 30% financing gap. The business may not

have the cash to “bridge” the gap, or its cash flow would be seriously restricted by doing so,

which would jeopardize the business. The project sponsor must demonstrate that it has applied

for funding from other sources and been rejected, or that other financing is not available, in a

form acceptable to the Director.

Cost of Capital. The project cannot support the interest rate, the loan term, and/or the collateral

requirements of other lenders. The lender must demonstrate, in a form acceptable to the Director,

that it is unwilling to change its terms. The gap may only be a problem in the initial years of the

project. A pro forma and cash flow statement must be reviewed with a sensitivity analysis to

determine whether to defer principal and/or interest, or to allow the loan to be amortized over a

longer period.

Return on Equity Investment. The project’s financial returns may be too low to justify the

business or a third-party investor to proceed with the project. The risks of the project outweigh

the returns. The rate of return on investment must be reviewed and adjusted to industry

standards, as well as location risks, to determine if the gap exists. The City funding financing

rate and term can be designed to provide a return that is in line with similar projects. This may

not apply to non-profit organizations.

EXHIBIT B AUTHORIZATION AND

RELEASE

TO OBTAIN PERSONAL CREDIT INFORMATION

The undersigned hereby authorizes the City of Memphis or its agents or employees

(collectively “City”) to obtain any and all information pertaining to my business or personal

credit history from any reporting agency or bureau, and to consider such information when

making any decisions regarding the NEIGHBORHOOD AND ECONOMIC DEVELOPMENT

OPPORTUNTIES PROGRAM submitted by _____________________________________

I understand that I am not obligated to provide City this authorization; however, I have

voluntarily agreed that such information can be released to City so that it will consider the

NEIGHBORHOOD AND ECONOMIC DEVELOPMENT OPPORTUNTIES PROGRAM. I

authorize, without reservation, any person or entity contacted by City to furnish information

requested by City.

I HEREBY RELEASE CITY FROM ANY AND ALL LIABILITY RELATED TO

THIS AUTHORIZATION AND RELEASE TO OBTAIN PERSONAL CREDIT

INFORMATION.

Dated: Signature: ___________________________

ACKNOWLEDGEMENT

STATE OF TENNESSEE§

COUNTY OF SHELBY§

This instrument was acknowledged before me on the day of , 20 , by

, an individual.

Notary Public, State of Tennessee

EXHIBIT C

AFFIDAVIT OF AUTHORIZED

REPRESENTATIVE AND AUTHORIZATION TO

OBTAIN INFORMATION

Before me on this day personally appeared as Authorized Representative for the Applicant

listed above, and after by me being duly sworn, hereby certifies that all materials submitted to

the City of Memphis or its agents or employees (collectively “City”) about this application are

true and correct. The undersigned understands that any submission of false information shall

result in disqualification for development Funding, and that submission of incomplete

information may result in rejection of the application.

The undersigned authorizes the City to contact any party in order verify information in this

application. The undersigned acknowledges that Applicant is not obligated to provide City this

authorization, but has voluntarily agreed to such release so that City will consider this

application. The undersigned hereby authorizes, on behalf of Applicant, without reservation,

any person or entity contacted by City to furnish all information requested by City.

Dated:______________________ Signature:

BEFORE ME, the undersigned authority, on this day personally appeared and by oath stated

that the facts herein stated are true and correct. SWORN TO AND SUBSCRIBED BEFORE

ME before me on this day of , 20 .

Notary Public in and for the State of

Tennessee

MISC.

Underwriting (For Economic Development and Commercial Projects Only)

Underwriting is the disciplined process an analyst pursues in determining risk, in establishing

procedures which enable a lender or investor to take only “reasonable” risk, and in evaluating

rewards so that they are commensurate with the risks incurred.

24 CFR Part 570.482(e) outlines six objectives for economic development underwriting.

• That project costs are reasonable;

• That all sources of project financing are committed;

• To the extent practicable, CDBG funds are not substituted for non-Federal financial

support;

• That the project is financially feasible;

• To the extent practicable, the return of the owner’s equity investment will not be

unreasonably high; and

• To the extent practicable, CDBG funds are disbursed on a pro-rata basis with other

finances provided to the project.

Guidelines for this analysis are available through the HUD Economic Development toolkit that

can be found at the following link.

https://files.hudexchange.info/resources/documents/Economic-Development-Toolkit-

Manual.pdf

Please provide a complete underwriting analysis of the project application. Each of the above

bullet points should be explicitly (and separately) addressed in the narrative.