Draft

June 2013

Western Wisconsin Economic Development Fund

Administrative Manual

This manual describes the policies and procedures on how the funds for business financing would be managed through the consolidation of county, city and village HUDCommunity Development Block Grant revolving loan funds in Western Wisconsin.

Western Wisconsin Economic Development Fund Administrative Manual

Table of Contents

INTRODUCTION 1

Section 1. PURPOSE 3

1.1U.S. Department of Housing and Urban Development Community Development Block Grant Low and Moderate

Income National Objective and Anti Job Piracy Regulations 4

1.2Source of Funding From CDBG RLF Counties and Communities 4

1.3Non Discrimination Policy 4

1.4Amendments and Modifications 4

SECTION 2. ORGANIZATION AND ADMINISTRATIVE ROLES 5

2.1 A Regional Nonprofit Corporation Will Be Established 5

2.2 Program Administrator 6

2.3 Wisconsin Economic Development Corporation (WEDC) 6

2.4 County and Community Loan Committees 6

2.5 Administration Funding 7

2.6 Loan Review Meetings 8

SECTION 3. GENERAL ELIGIBILITY CONSIDERATIONS 8

3.1 Eligible Area 8

3.2 Eligible Applicants 8

3.3 Eligible Activities 9

3.4 Ineligible Activities 9

3.5 Ineligible Businesses 10

3.6 WWEDF Board and Local RLF Board Loan Decision Making Policies 10

SECTION 4. BUSINESS FINANCING PROGRAMS 11

4.1 Conventional Loan 11

4.2 Micro Loan 12

4.3 Facade/Historic Loan Program 13

4.4 Retention and Efficiency Loan 14

4.5 Innovation Fund 15

4.6: Loan Payments 16

4.7 WWEDF Financing Program Comparison Table 16

Table 4.1 - Western Wisconsin Economic Development Fund Loan Program General Summary 17

SECTION 5.0 PROCESS AND PROCEDURES………………………………………………………………….18

5.1 Loan Application Process 18

5.2 Loan Documentation 19

5.3 Delinquency and Default Procedures 20

5.4 Use of Loan Repayments and Reporting 21

5.5 Loan Servicing 21

5.6 Recordkeeping 22

Table 5.1 –WWEDF Organization Decision Flow Chart 24

Western Wisconsin Economic Development Fund Administrative Manual

Western Wisconsin Economic Development Fund Administrative Manual

Introduction

For over 20 years the State of Wisconsin through their annual allocation of Department of Housing and Urban Development – Community Development Block Grant (CDBG) funds have awarded counties, cities and villages funding to assist with significant business expansion projects that leveraged significant private sector investment and jobs. This funding is how over 200 Revolving Loan Funds (RLFs) in Wisconsin were formed. This funding in the form of loans to businesses was also how 12 county, city and village RLFs in Western Wisconsin were capitalized. The Wisconsin Economic Development Corporation (WEDC) in reviewing the large number of local government RLFs across the State decided to include in their Strategic Plan an initiative to encourage the consolidation of county, village and city RLFs into regional RLFs to increase business lending and administrative efficiencies. WEDC estimates that over $75 million is available for lending among the RLFs across the State and $32 million is actively working.

The Region’s RLFs: The Region’s RLFs have helped fill financing gaps or provided incentive financing for many business expansions in Western Wisconsin focusing primarily on local projects that were too small for state or federal programs. The RLFs have created many jobs and leveraged millions in private investment in the region. The following is a summary of the RLFs in the region based on a June 30, 2012 report from WEDC.

  • 12 Revolving Loan Funds in the region
  • Counties with RLFs: Pierce, Pepin, Buffalo, Jackson, La Crosse, Monroe, and Vernon
  • Cities and Villages with RLFs: Sparta, Tomah, Kendall, Hillsboro and Osseo
  • Total cash available to lend by all RLFs: $3 Million
  • Total amount owed to all RLFs: $5.7 Million
  • Average Loan Size $75,000 - $85,000
  • Loan Range $10,000 - $200,000
  • During the last 6 month reporting period 6 loans were made among the 12 RLFs

Federal Regulations Limit Local RLF Lending Flexibility but a Regional RLF can be “De-Federalized” Providing More Lending Opportunities and Flexibility: U.S. Department of Housing and Urban Development (HUD) requirements impose a variety of regulations limiting use of a Local RLF, but HUD and WEDC have an agreement whereby these regulations can be lifted or “de-federalized” if the local RLFs are consolidated into a regional RLF. The reason for this de-federalization is that some of consolidated regional funds have met their original federal objective regarding jobs and low and moderate income benefits and the federal strings do not have to be tied to these funds forever but can be cut and used in a more opportunistic and flexible manner. The following are a list of federal regulations and issues that eventually would be lifted on some of the local fundsthat are consolidated into a regional RLF.

  • Federal Davis-Bacon wage regulations on real estate construction projects.
  • Screening job applicants income status to adhere to hiring at least 51% Low and Moderate Income (LMI) persons
  • Requirement that a RLF loan must be in combination with a private lender and have a certain equity investment.
  • Reporting on the performance of all the funds could be conducted in a more efficient manner, instead of multiple reports from all the RLFs in the region, one regional report would be required that would use modern RLF reporting software, reducing the administrative burden for the local RLFs and the State.

Forming a Western Wisconsin Regional Revolving Loan Fund: To increase lending, reduce the administrative burden on local RLFs and maintain the region’s competitiveness with other regions of the state (At least four other multi-county regional RLFs have already formed in Wisconsin since 2006 and more are in the process of forming)the Wisconsin Economic Development Corporation (WEDC) sponsored the first regional RLF meeting in Western Wisconsin on January 31st 2012. Since then thru May 23, 2013, ten meetings and two teleconferences were held with participating counties, communities and economic development organizations. During these meetings opinions on the creation of a regional RLF were varied but two key concerns were expressed. They were: (1) For a Regional RLF to be accepted in Western Wisconsin local decision making on loans needed to be incorporated into the Regional RLF structure and (2) Safeguards needed to be established to prevent an unusually high concentration of funds being loaned to any one county or community.

To accommodate these concerns the proposed administrative structure for a Western Wisconsin regional RLF as described in this Manual involves a regional board that would make loan decisions on loans of $200,000 or more, since this would be a significant amount of the total funds available for lending. The Regional Board would be comprised of one board member appointed from each county revolving loan fund committee. TheCounty or Community RLF Loan Committees would make loan decisions on loans less than $200,000. Lending thresholds have also been established based on a county’s population or the amount of funds contributed to safeguard a high concentration of lending going to any one county. The Regional RLF will also contract with a program Administrator to market and administer the fund in a uniform manner throughout the region. The following persons are acknowledged for taking the time to attend one or more of the meetings and providing valuable input into this regional RLF administrative manual.

Regional Revolving Loan Fund Meeting Participants
Terry Mesch, Pepin County Economic Development / Rachel Hansen, Vernon County Treasurer / Adam Sontag, Hillsboro City Administrator
Sara Westbrook, La Crosse Area Development Corporation / Herbert Cornell, Vernon County Board Chair / Ken Witt, Sparta City Administrator
Jo Ann Miller, Pierce County Administrator / Roger Niefieldt, Vernon County RLF Committee / Lynn Hanson, Kendall Village Clerk
Chris Hanson, Tomah Chamber of Commerce / Nancy Jaekel, Vernon County RLF Committee / Amy Rindahl, City of Osseo, Treasurer
Brian Fukuda, Community Development Specialist, La Crosse County / Bill Warner, Pierce County Economic Development Corporation / Jeff Goelke, Vernon Economic Development Association
David Connolly, Crawford County Economic Development Corporation / Vicki Markussen, Seven Rivers Alliance / Bryan Law, Mississippi River Regional Planning Commission
Ann Hlavacka, UW La Crosse Small Business Development Center / Cathy Schmidt, Monroe County Administrator / Sharon Folcey, Monroe County Board
Richard Yarrington, City of Tomah / Del Twidt, Buffalo County Board Chair / Amy Peterson, City of La Crosse
Ron Carney, Jackson County Supervisor / Karl Green, La Crosse County, UW Extension / Brenda Hicks Sorensen, Wisconsin Economic Development Corporation
Chela O Connor, Wisconsin Economic Development Corporation / John Severson, Viroqua City Administrator / Pam Kolasinski, Wisconsin Economic Development Corporation
Jim Hill, La Crosse Area Development Corporation / Greg Flogstad, Mississippi River Regional Planning Commission / Will Cronin, Monroe County UW Extension
Pat Malone, UW Extension Trempealeau County / James Bialecki, Tomah City Administrator / Roger Gorius,Tomah City, Administrator

Section1. PURPOSE.

The purpose of the policies and procedures contained within this manual, hereafter referred to as the Western Wisconsin Economic Development Fund (WWEDF)Administrative Manual, is to present how the economic development activities from funds made available through the consolidation of state awarded Community Development Block Grant (CDBG) Revolving Loan Funds (RLFs) within Western Wisconsin and other approved sources of funding are to be governed.These CDBG funds originated from the U.S. Department of Housing and Urban Development’s Small Cities Program. Western Wisconsin shall include the following counties:Buffalo, Crawford, Jackson, La Crosse, Monroe, Pepin, Pierce, Trempealeau, and Vernon.

The WWEDF shall serve as an economic development financing programfor businesses in Western Wisconsin that is intended to meet the following objectives:

  1. To provide funding opportunities to businesses to help meet their diverse capital utilization needs.
  2. To provide employment opportunities for low and moderate income persons, see Section 1.1
  3. To encourage the creation and retention of permanent jobs that provide quality wages and benefits
  4. To encourage the leveraging of new private and public investment in Western Wisconsin
  5. To increase the tax base for communities in Western Wisconsin
  6. To perpetuate a positive and proactive business climate that encourages the retention and expansion of existing businesses and helps to attract desirable new businesses.
  7. To fosterbusiness entrepreneurs and high technology
  8. To develop a higher knowledge and skilled workforce
  9. To maintain and promote a diverse mix of employment opportunities and reduce employment fluctuations
  10. To promote agricultural, commercial and industrial development in Western Wisconsin
  11. To encourage the development and use of modern technology and create safe and healthy work environments
  12. To encourage an environmentally sensitive and sustainable business community
  13. To implement the economic development goals and objectives of Western Wisconsin communities, counties and regional organizations.
  14. To contribute a positive economic development benefit rather than maximizing return on investment.

1.1 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT COMMUNITY DEVELOPMENT BLOCKGRANTLOW AND MODERATE INCOME NATIONAL OBJECTIVE AND ANTI JOB PIRACY REGULATIONS.

Some of the funding of the WWEDF is subject to the U.S. Department ofHousing and Urban Development -Community Development Block Grant low and moderate income national objective and anti-job piracy regulations. Therefore thefollowing terms and conditions apply to recipients and projects receiving funds from the “federalized” pool of funds.

  1. A Project shall create jobs,at least 51% of the jobs will be held by or made available to Low and Moderate Income (LMI)persons.
  2. “LMI Persons” means persons with household income less than eighty (80) percent of the median household income by family size in the County where the Project is located.
  3. “Made Available to LMI Persons” means the Borrower will document that at least 51% LMI Persons were hired or Received First Considerationby interviewing at least 51% LMI Persons for created positions that do not require special skills or education beyond high school.
  4. “Received First Consideration” means the Borrower must document and use a hiring practice that results in at least 51% LMI Persons interviewed for created positions and demonstrate that under usual circumstances this hiring practice will result in at least 51% LMI persons being hired.Part of the Borrower’s hiring practice must include the posting of available positions with the local Job Service Office or Workforce Development Boards.
  5. The following documentation evidencing compliance must be collected. A listing of all job titles which were planned to be held by or made available to low to moderate income persons, a commitment to hire or make at least 51% of jobs available to low to moderate income persons, a written plan for how such persons were given first consideration for jobs including what hiring process was used, a list of the low to moderate income persons interviewed for particular positions, including the size and annual income of the person’s family prior to interviewing for the position.
  6. Every applicant for an employment position associated with a Project must complete the self-certification form included as an addendum to this Manual.
  7. The borrower must certify that it does not have immediate plans to relocate jobs in violation of CDBG Anti-Piracy regulations. The following language will be included in all agreements with the borrower. “The Borrower certifies it is and will maintain compliance with CDBG Anti-Piracy regulations as stated in 24 CFR 570.482(h). Violation of this regulation will constitute an Event of Default.” To implement this provision the following language shall be included in all loan agreements with the borrower. “The borrower certifies it is and will maintain compliance with CDBG Anti-Piracy regulations as stated in 24 CFR 570.482(h). Violation of this regulation will constitute an Event of Default.

1.2 SOURCE OF FUNDING FROM CDBG RLF COUNTIES AND COMMUNITIES.

Funding for the WWEDF is to come from State Community Development Block Grant (CDBG) Revolving Loan Funds within Western Wisconsin. If all State funded CDBG RLFs in western Wisconsin decide to participate in the WWEDF the funding sources would include the Counties of: Pierce, Pepin, Buffalo, Jackson, La Crosse, Monroe, and Vernon; the cities of Sparta,Tomah, Osseo andHillsboro; and the Village of Kendall.

1.3 NON DISCRIMINATION POLICY.

The WWEDF Board, Program Administrator, County Loan Committee, or Community Loan Committee shall not discriminate in making financing decisions on the basis of age, race, religion, color, handicap, sex, physical condition, development disability as defined in Wisconsin Statute 51.01(5), sexual orientation or national origin.

1.4 AMENDMENTS AND MODIFICATIONS.

The WWEDFBoard may amend the provisions in this manual. Any amendments must comply with Wisconsin Economic Development Corporation agreements and with this Western Wisconsin Economic Development Fund Manual approved byparticipating counties, cities and villages.

SECTION2. ORGANIZATIONAND ADMINISTRATIVEROLES.

2.1A REGIONAL NONPROFIT CORPORATION WILL BE ESTABLISHED. A regional non-profit corporation called the Western Wisconsin Economic Development Fund(WWEDF)shall be established to manage the WWEDF. It will: accept the CDBG-funded RLF funds from the participating RLF counties, cities and villages in Western Wisconsin; assume the RLF loans and legal responsibilities from the RLF counties, cities and villages; and act as the oversight board. It will also administer this regional RLF in accordance with the policies and procedures of this manual.

The WWEDF Board shall review and adjust policies and procedures to meet the needs of the WWEDF and the financing needs of business in its service area. The WWEDF Board shall review loan performance activity reports.

The WWEDF Board shall enter into an administrative agreement to establish a regional revolving loan fund from the consolidation of the county, city and village revolving loan with the Wisconsin Economic Development Corporation.

The WWEDF Board shall entertain request for proposalsand/or undertake the research needed to determine what FDIC insured financial institution(s) it will deposit its funds in. Criteria for choosing a financial institution shall include but not be limited to: rateof return on deposits, terms and conditions of financial services offered,cost of financial servicesoffered, and security of deposits.

The WWEDF Board shall select and contract with a Program Administrator to manage the WWEDF.County Loan Committees and Community Loan Committees may utilize the Program Administrator to analyze or guide loan applications when they come to the County and Community Loan Committees or they may rely on their local RLF administrator.

The WWEDF Board shall approve all administrative costs, loan fees, litigation costs and deficiency judgments.

The WWEDF Board subject to Section 5.3shall approve all loan collection actions regarding delinquency, default,business or collateral foreclosure, repossession, bankruptcy and any other legal actions influencing loan collection.

The WWEDF Board shall set the administrative costs and loan fees so they are uniform throughout the WWEDF service area.

The WWEDF Board shall establish marketing activities and material that are uniformly applied throughout the WWEDF service area.

The WWEDF Board shall set loan interest rates at least annually based on points plus or minus the prime rate. The interest rates set shall apply throughout the WWEDF service area.

The WWEDF Board shall approve all investment policies involving unused funds.The ProgramAdministrator shall be responsible for the investment of unused funds per approved Board policies.

The WWEDF Board may set job creation and retention requirements on their Business Financing Programs that shall apply throughout the WWEDF service area. Any job creation and retention requirements at a minimum shall adhere to applicable State and/or Federal standards to the extent such standards apply to the WWEDF.

An independent auditor selected by the WWEDF Board shall audit the fund annually. Audit report findings shall be made available to all RLF participants, electronic or otherwise.

The WWEDF Board shall have one representative from each County Loan Committee. Each County Loan Committee shall select the person they want to represent their county on the WWEDF Board. The WWEDF Board shall consist of representatives from business lenders, businesses, local government and economic development organizations. A balance of these representatives on the WWEDF is to be sought. The WWEDF Board must contain at least one person with private commercial lending experience, and at least one attorney or accountant experienced in servicing businesses, at all times.When Board vacancies occur the County Loan Committeemust take into consideration the representational make-up of the WWEDF Board in choosing a replacement.