RULES AND REGULATIONS
Title 12--COMMERCE, TRADE AND LOCAL GOVERNMENT
DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT
[12 PA. CODE CH. 141]
Community Development Grant Program
[36 Pa.B. 283] The Department of Community and Economic Development (Department), under section 1764 of the Community Development Block Grant Entitlement Program for Nonurban Counties and Certain Other Municipalities (act) (35 P. S. § 1764), amends Chapter 141 (relating to community development grant program).
Introduction
This final-omitted rulemaking is in response to Governor Rendell's Economic Stimulus Package as it relates to the 108 loan guarantee program. Under the current regulations, nonentitlement public entities may obtain Federally guaranteed loans through the Commonwealth to fund their economic development projects and undertake revitalization activities by committing the use of future Community Development Block Grant (CDBG) funds to pay off the loan in case of default. The final-omitted rulemaking will increase the amount of loan guarantee funds available, double the duration of the loan guarantee period and provide additional security from the Commonwealth for the loan guarantee. This final-omitted rulemaking should make the 108 loan guarantee program more attractive to nonentitlement public entities, which previously viewed the program as too burdensome and complicated for smaller communities to use.
Analysis
Section 141.302 (relating to definitions) is amended to add definitions of ''joint public entities,'' ''consortium'' and ''consortium member.''
Section 141.303 (relating to applicability of HUD implementing regulations) is amended to clarify that an application for 108 loan guarantees shall be submitted to and approved by the Department before it may be submitted to United States Department of Housing and Urban Development (HUD).
Section 141.304 (relating to limitations on loan commitments--entitlement public entities) is amended to revise the funding limitation for entitlement entities and to clarify that the funding limitation applies to both single public entities and joint public entities.
Section 141.305 (relating to limitations on loan commitments--nonentitlement public entities) is amended to revise the funding limitation for nonentitlement public entities; to clarify that the $3 million funding limitation established in this section applies to individual public entities; and to designate the existing paragraph as subsection (a). Subsection (b) is added to clarify that although a county may apply for assistance on behalf of multiple nonentitlement public entities, the county's funding limitation is $7 million. Subsection (c) is added to require consortium membership for nonentitlement entities seeking assistance under this program.
Section 141.306 is rescinded, as the amended regulations clearly recognize joint public entity applications for assistance.
Section 141.307(a) (relating to limitations on loan commitments--public entities) is amended to change the limitation on the repayment period for a guaranteed loan from 10 years to 20 years. Subsection (b) is amended to broaden the security offered by the Department to HUD.
Subsection (c) is deleted and replaced with language which would permit the Department to provide an additional guarantee from sources other than the public entity's annual CDBG grant, as well as clarifying that an additional guarantee would supersede the use of the public entity's CDBG funds as a source to guarantee debt payments for a section 108 loan. Subsection (e) is amended to permit amortization variations if approved in writing by the Department. Subsection (f) is amended to include HUD in the contracting process. Subsection (g) is amended to require security in addition to a pledge of CDBG allocations when the pledge of the allocation is insufficient.
Section 141.309(a) (relating to Department approval) is amended to permit the Department to consider factors other than those listed in this subsection when determining whether to disapprove a loan guarantee request or approve a loan guarantee request for an amount less than requested.
Fiscal Impact
The final-omitted rulemaking is cost neutral with respect to political subdivisions and the public. The Commonwealth will incur costs totaling $1,475,500, of which $880,000 will be expended in the first year to establish a loan loss reserve fund and $198,500 will be expended each year over the next 3 years to cover technical assistance costs. The costs incurred in administering this program and providing technical assistance will be covered through the Federal CDBG administrative funds available through this program and within existing authorization levels of those funds. While there are potential costs that may be incurred in future years if loans default, these costs will be absorbed by either the loan loss account that will be established with the new approach to administering the program or the use of CDBG program funds, or both.
Paperwork
No new or different paperwork requirements are imposed as a result of the final-omitted rulemaking.
Notice
Notice of proposed rulemaking has been omitted under section 204(3) of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. § 1204), known as the Commonwealth Documents Law (CDL), which specifies that a regulation may be adopted without notice of proposed rulemaking if proposed rulemaking procedures are ''in the circumstances impracticable, unnecessary, or contrary to the public interest'' or if it relates to ''Commonwealth property, loans, grants, benefits or contracts'' The existing regulations are directly related to a Commonwealth loan guarantee program.
Regulatory Review
Under section 5.1(a) of the Regulatory Review Act (71 P. S. § 745.5a(a)), on October 24, 2005, the Department submitted a copy of the final-omitted rulemaking and a copy of a Regulatory Analysis Form to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Commerce Committee and the Senate Community and Economic Development Committee. A copy of this material is available to the public upon request.
Under section 5.1(j.2) of the Regulatory Review Act, on November 30, 2005, the final-form rulemaking was deemed approved by the House and Senate Committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on December 1, 2005, and approved the final-omitted rulemaking.
Effective Date/Sunset Date
The final-omitted rulemaking will be effective upon publication in the Pennsylvania Bulletin. The regulations will be monitored on a regular basis and updated as needed.
Contact Person
For an explanation of this final-omitted rulemaking, contact Jill B. Busch, Deputy Chief Counsel, Commonwealth Keystone Building, 4th Floor, 400 North Street, Harrisburg, PA 17120, (717) 720-7314.
Findings
The Department finds that:
(1) The proposed rulemaking procedures in sections 201 and 202 of the CDL (45 P. S. §§ 1201 and 1202) are unnecessary because the amendments are directly related to a Commonwealth loan guarantee program.
(2) Public notice of intention to adopt the amendments has been omitted under section 204 of the CDL and the regulations thereunder, 1 Pa. Code § 7.4.
(3) Delay in implementing the final-omitted rulemaking will have a serious adverse impact on the public interest.
Order
The Department, acting under the authorizing statute, orders that:
(a) The regulations of the Department, 12 Pa. Code Chapter 141, are amended by deleting § 141.306 and amending §§ 141.302--141.305, 141.307 and 141.309 to read as set forth in Annex A.
(b) The Department shall submit this order and Annex A to the Office of Attorney General and the Office of General Counsel for approval as to legality as required by law.
(c) This order shall take effect upon publication in the Pennsylvania Bulletin.
DENNIS YABLONSKY,
Secretary(Editor's Note: For the text of the order of the Independent Regulatory Review Commission, relating to this document, see 35 Pa.B. 6852 (December 17, 2005).)
Fiscal Note: 4-80. No fiscal impact; (8) recommends adoption; $1.475 million in Federal Community Development Block Grant administrative funds will be used over 3 fiscal years (2005-2006 through 2007-2008) to create a reserve fund and for administrative costs associated with this regulation.
Annex A
TITLE 12. COMMERCE, TRADE AND LOCAL GOVERNMENT
PART V. COMMUNITY AFFAIRS AND DEVELOPMENT
Subpart C. COMMUNITY DEVELOPMENT AND HOUSING
CHAPTER 141. COMMUNITY DEVELOPMENT GRANT PROGRAM
SECTION 108 LOAN PROGRAM § 141.302. Definitions.
The following words and terms, when used in this section, §§ 141.301 and 141.303--141.309, have the following meanings, unless the context clearly indicates otherwise:
Consortium--A group of public entities that have entered into an agreement with the Department to apply jointly for an allocation of section 108 loan guarantee funds from HUD.
Consortium member--A public entity that has agreed to participate in the consortium to access section 108 loan guarantee funds from HUD.
Entitlement public entity--A city, county, borough, incorporated town or township that qualifies as an eligible entitlement entity under section 3 of the act (35 P. S. § 1753).
Joint public entities--Two or more public entities or a county that applies on behalf of a public entity, or both, which participate in a joint municipal or regional project.
Nonentitlement public entity--A unit of general local government that is eligible to participate in the State administered CDBG Program and which is not an eligible entitlement entity under section 3 of the act.
Public entity--A unit of general local government that is eligible to participate in the State administered CDBG Program.
§ 141.303. Applicability of HUD implementing regulations.
(a) An application for loan guarantees by the Department must meet the requirements in 24 CFR Subchapter C, Subpart M (relating to loan guarantees).
(b) An application for State guarantees submitted with or without assistance from the State shall first be submitted to, and approved by the Department before it may be submitted to HUD.
§ 141.304. Limitations on loan commitments--entitlement public entities.
The amount of loan guarantees that an entitlement public entity receives may not exceed the amount of a public entity's CDBG allocation that can support annual debt service payments based on the average amount of the CDBG allocation for the past 3 years or $7 million, whichever is less. This maximum amount applies to both single public entity applicants and joint public entity applicants.
§ 141.305. Limitations on loan commitments--nonentitlement public entities.
(a) The total amount of a loan guarantee made to a nonentitlement public entity may not exceed $3 million.
(b) The maximum aggregate amount of section 108 loan assistance made to a county which applies on behalf of multiple nonentitlement public entities may not exceed $7,000,000.
(c) Nonentitlement public entities shall join the consortium before applying for section 108 loan guarantee funds from the Department.
§ 141.306. (Reserved).
§ 141.307. Limitations on loan commitments--public entities.
(a) The repayment period for a guaranteed loan may not exceed 20 years.
(b) The security offered by the Department to HUD will include a pledge of all grants made to the State or for which the State may become eligible under applicable Federal law and regulations.
(c) The State may provide an additional guarantee from sources other than the public entity's annual CDBG grant. The additional State guarantee will supersede the use of the public entity's CDBG grant funds as a source to guarantee debt payments for a section 108 loan.
(d) A public entity shall pledge the full amount of CDBG grants to be received during the period of the loan guarantee. Grant amounts for any year sufficient to pay current debt service may not be expended until the debt service for that year has been paid, or until the public entity provides the Department with satisfactory evidence that funds to pay current debt service have been placed in a trust account.
(e) Loans must be amortized on an annual basis, unless otherwise approved in writing by the Department.
(f) A public entity shall enter into a contract with the Department and HUD, in a form acceptable to the Department and HUD, for the repayment of notes or other obligations guaranteed under this section, §§ 141.301--141.305, 141.308 and 141.309.
(g) Security in addition to a pledge of CDBG allocations will be required when the pledge of the allocations is not sufficient to protect all of the potential liability of the Department.
§ 141.309. Department approval.
(a) The Department may disapprove loan guarantees or may approve a guarantee for an amount less than requested, for reasons including one or more of the following:
(1) The Department determines that the guarantee in light of the financial condition of the applicant, the viability of the project or the costs of the project, constitutes an unacceptable financial risk.
(2) The requested guarantee amount exceeds one or more of the limitations in this section and §§ 141.301--141.308 or in applicable Federal regulations.
(3) Funds are not available in the amount requested.
(4) The performance of the public entity under §§ 141.61, 141.62, 141.81, 141.101, 141.102, 141.121--141.125 and 141.141--141.157 is unacceptable.
(5) The activities to be undertaken are ineligible under State or Federal law or regulations.
(b) The Department will notify the public entity in writing that the guarantee has been approved, reduced or disapproved. If the guarantee is reduced or disapproved, the public entity will be informed of the specific reasons for that action. If the guarantee is acceptable, the Department will approve the application of the public entity to HUD for its commitment.
[Pa.B. Doc. No. 06-89. Filed for public inspection January 20, 2006, 9:00 a.m.]
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