Subchapter A. AQUACULTURE PRODUCTION DEVELOPMENT PROGRAM
Sec.
106.1. Program objectives.
106.2. Definitions.
106.3. Eligibility.
106.4. Ineligible activities.
106.5. Program requirements.
106.6. Application submission and approval procedure.
106.7. Application evaluation criteria.
106.8. Processing of applications.
106.9. Cancellation/default.
106.10. Right of recovery.
106.11. Deficits.
106.12. Contact information.§ 106.1. Program objectives.
The APDP is designed to stimulate the expansion and assist in the retention of fish farms for the purpose of creating new businesses and jobs and retaining existing business within this Commonwealth. The APDP provides low-interest loan financing for a portion of the costs of land, building, machinery and equipment, working capital and training to businesses to enable them to fully finance these projects by leveraging equity, bank financing, or other private and public sources. The APDP may be used in conjunction with other State financing programs or with programs operated by local and regional economic development providers.
§ 106.2. Definitions.
The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise:
AEEP—The Aquaculture Education Enhancement Program.
AEPP—The Aquaculture Export Promotion Program.
ALO—Area loan organization—A local development district, industrial development agency organized and existing under the Pennsylvania Industrial Development Authority Act (73 P. S. § § 301—314) or another not-for-profit economic development organization approved by the Department to evaluate and administer loans under this subchapter.
AMIP—The Aquaculture Marketing Information Program.
APDP—The Aquaculture Production Development Program.
APIP—The Aquaculture Product Identification Program.
APPP—The Aquaculture Products Promotion Program.
APRP—The Aquaculture Producer Resource Program.
Act—The Aquaculture Development Law (3 Pa.C.S. § § 4201—4223).
Advisory Committee—The Aquaculture Advisory Committee.
DEP—The Department of Environmental Protection of the Commonwealth.
Department—The Department of Agriculture of the Commonwealth.
Generally acceptable pollution prevention and environmental stewardship practices—Those best management practices (BMPs) for aquaculture categorized and explained in the Pennsylvania Aquaculture BMP Guide as approved by the Advisory Committee.
In good standing—Entities registered or licensed in accordance with applicable State and Federal laws and current with all debts owed to the Commonwealth and other government entities.
Local service provider—An organization not meeting the definition of an ‘‘ALO,’’ but approved by the Department to evaluate and administer loans under this subchapter. The term includes a commercial lending institution.
Secretary—The Secretary of the Department.§ 106.3. Eligibility.
(a) Eligible applicants.
(1) Borrowers shall be aquaculture enterprises whose project is located within this Commonwealth.
(2) Each applicant approved for participation shall comply with the criteria established by the act and this chapter, including the general program requirements and all licensing and governmental permitting requirements.
(3) Projects whose applicants, principals, primary consultants or senior employees, or both, have criminal indictments or convictions or have been directly associated with two or more aquaculture ventures which have not been successful in the opinion of the Department, as set forth in subsection (e)(4), may be deemed ineligible.
(b) Eligible activities.
(1) The APDP will provide loan or loan guarantees to approved applicants for development or improvement of aquaculture production facilities. Projects may consist of land, buildings, machinery and equipment, construction or renovation costs, working capital, environmental stewardship and compliance and training which needs to be acquired, or used as part of a for-profit project or venture by an aquaculture enterprise.
(2) For a project to be eligible for environmental stewardship and compliance funds, the project shall bring the borrower into compliance with the environmental laws or regulations that are sought to be addressed by the project or the project shall adopt generally acceptable pollution prevention and environmental stewardship practices.
(3) Projects shall have a direct relationship to increasing the breadth and profitability of aquaculture production within this Commonwealth.
(c) Eligible costs.
(1) Land costs. Land costs may include acquisition, site preparation and testing, utilities, site mapping, legal and other related costs. To be eligible, land costs shall be directly associated with the purchase, renovation or new construction of a building or production facility to be used for aquaculture.
(2) Building costs. Building costs may include building acquisition, construction, rehabilitation and engineering, architectural, legal and other related costs.
(3) Machinery and equipment costs. Machinery and equipment costs may include costs of acquisition, delivery and installation. These costs are eligible if associated with acquisition of machinery and equipment that the borrower has newly purchased, even if the machinery had previously been in service with an unrelated user. Costs of mobile equipment are eligible only if the equipment is not titled or registered for highway use.
(4) Working capital. Capital used by an aquaculture enterprise for operations including personnel, marketing and training costs.
(d) Limitations. The following limitations apply to eligible costs:
(1) Eligible costs of land, buildings and machinery and equipment are limited to actual costs incurred by the borrower. Unrealized appreciation in value may not be considered in determining eligible costs.
(2) Fees charged to the borrower by brokers, finders, financing consultants and economic agencies are not eligible project costs, except that fees payable to the Department, if any, and fees and expenses charged to the borrower by an ALO or local service provider may be included as part of the eligible project cost.
(3) Costs of a borrower’s own employees are treated as working capital expenditures and are subject to the program’s limitations on working capital financing even if the costs are incurred in connection with land acquisition or preparation, building acquisition or construction, or machinery and equipment acquisition and installation.
(e) Restrictions.
(1) No delinquencies. The borrower and its principals may not be delinquent in or in default of an existing private or public loan relating to the borrower, unless they have entered into a refinancing/payback agreement satisfactory to the respective creditors and are fully in compliance with the terms of that agreement. The borrower and its principals shall be required to execute an affidavit to that effect. For the purposes of this program, a ‘‘principal’’ of a borrower is a record or beneficial owner of 20% or more of an ownership interest in the borrower.
(2) Taxes current. The borrower and its principals shall be current in payment of all applicable Federal, State and local taxes unless they have entered into a workout agreement satisfactory to the respective taxing authority and are fully in compliance with the terms of that agreement. The borrower and its principals will be required to execute an affidavit to that effect.
(3) Conflicts of interest. The borrower and its principals and managerial officers shall disclose any potential conflicts of interest with any officials or employees of the Commonwealth or with any officials or employees of the ALO or local service provider involved in submission of the borrower’s application. A member of the Advisory Committee may apply for a loan under this subchapter provided all decisions regarding the loan application are subject to 65 Pa.C.S. § 1103(j) (relating to restricted activities) and the action does not violate the State Adverse Interest Act (71 P. S. § § 776.1—776.9), or 4 Pa. Code Chapter 7, Subchapter K (relating to code of conduct for appointed officials and State employees). Members of the Advisory Committee shall supply a signed statement with their application certifying they have complied with the referenced codes. Copies of the codes will be made available to members upon request.
(4) Nonsuccessful aquaculture ventures. The borrower, its principals, primary consultants or senior employees may not have been directly associated—such as being Executive Officers, Board members, senior management, partners, principals, consultants or senior employees—with aquaculture ventures which did any of the following:
(i) On two or more occasions resulted in financial losses for the principal investors, shareholders or clients.
(ii) On two or more occasions declared bankruptcy.
(iii) Have existing violations of local, State, Federal or international law.
(iv) Had a license denied, suspended or revoked or were forced to suspend or cease operations because of past violations of local, State, Federal or international law.
(f) Verification of funding sources and uses. The borrower shall provide documentation verifying the project costs and sources of funds being used for the project under consideration. Each projected source of funds shall show what the funds will be used for and provide proof that the funds are available and committed to the project. The borrower shall also provide copies of any applications for project funds from other sources and whether those requests were approved or denied.
(g) Nonprejudicial approvals.
(1) The borrower, with the approval of the ALO or local service provider, may request nonprejudicial approval from the Department. If the Department grants nonprejudicial approval, the borrower may continue with the project while its loan is under review. In these instances, the borrower is continuing at its own risk in the event the ALO, local service provider or the Department does not approve the loan.
(2) Prior to receiving nonprejudicial approval, the borrower may place orders, sign sales agreements and make security deposits on machinery and equipment and land and buildings prior to approval by the local service provider, ALO or the Department without making its project ineligible.
(3) A project will be ineligible unless there is a nonprejudicial approval in place, if the borrower, prior to accepting the commitment letter and returning it to the Department does any of the following:
(i) Occupies land or buildings to be financed with the loan.
(ii) Installs or uses the machinery and equipment except under a short-term lease or similar arrangement subject to cancellation by the borrower without substantial penalties.
(iii) Finances any working capital needs.
(4) When the local service provider or ALO has approved the borrower’s request for a nonprejudicial approval, the Department may also grant nonprejudicial approval to allow the total aquaculture operation to be considered as the total eligible project cost if the renovations or expansion being considered will allow the farm to meet new environmental standards or economic efficiencies that allow the farm to sustain economic viability under current markets.
(h) Funds available basis. Program activities will not be undertaken unless funds are available.
(i) Use of funds. Funds received through an APDP loan may be used for land and building acquisition, land and building improvements, building/facility renovation and new construction, machinery and equipment acquisition and installation, environmental stewardship and compliance, working capital and training. The project shall be directly related to production aquaculture. An APDP loan for processing of aquaculture products is eligible only if part of a total project for an integrated aquaculture production operation and at least 80% of the aquacultural product processed is produced within this Commonwealth.
§ 106.4. Ineligible activities.
Projects are not eligible if they relate to any of the following activities:
(1) Refinancing any portion of the total project cost, except for short-term ‘‘bridge’’ financing when the bridge financing is being promptly replaced by the proceeds of the loan and the bridge financing has been disclosed to the Department and the ALO in connection with its review of the loan and approved by the ALO or local service provider.
(2) Speculation in any type of property, real or personal.
(3) Providing funds, directly or indirectly, for payment, whether as loan repayment, dividend distribution, return of capital, loans, or otherwise, to owners, partners or shareholders of the aquaculture enterprise, except as ordinary compensation for services rendered.
(4) Related party transactions, that is, costs associated with a transaction when the buyer and the seller are one and the same or are related to each other by blood, marriage or law.
(5) Projects that have commenced, or to which the borrower has committed, before receiving approval of the APDP loan, unless the borrower has received non-prejudicial approval to commence.
(6) Loans may not be made for the purpose of investing in interest bearing accounts, certificates of deposit or other investments not related to the objectives of the APDP funds.
(7) Loans may not be used to acquire an equity position in a private business.
(8) Loans may not be used to subsidize interest payments on an existing loan.
(9) Loans may not be used to provide the equity contribution required of borrowers under other State or Federal programs.
(10) Loans may not be used to enable the borrower to acquire an interest in a business, either through purchase of stock or assets.
§ 106.5. Program requirements.
(a) Loan size. The maximum loan amount for land, buildings, machinery and equipment is $750,000 or 50% of the total eligible project cost, whichever is less. The maximum loan amount for working capital is $100,000 or 50% of the total eligible project cost whichever is less. The minimum loan amount is $10,000.
(b) Other required investment. Loans will be made in conjunction with another source of financing for the eligible costs incurred, such as another lender or equity from the owners or investors. Matching lending sources shall have either equivalent or longer terms than the APDP loan.
(c) Loan security.
(1) Loans shall be secured at the highest lien position available on one or more of the following assets:
(i) Land.
(ii) Buildings.
(iii) Machinery.
(iv) Equipment.
(v) Accounts receivable.
(vi) Inventory.
(2) The Department may require personal or corporate guarantees or may require other types of collateral as circumstances allow. The Department must have a collateral position of no less than a second lien on the assets being funded by the APDP unless specifically waived in writing by the Department.
(d) Terms. Loans used for real estate will have a repayment period of up to 15 years. Loans used for machinery and equipment will have a repayment period of up to 7 years. Loans used for working capital will have a repayment period of up to 5 years. In projects where two or more uses of APDP funds are planned, loan terms may be blended. The Department may approve a loan package containing an ‘‘interest only’’ payment period not to exceed 24 months at the beginning of the project term with the regular payments starting at the end of this period. When an ‘‘interest only’’ payment period is approved the repayment period of the loan will be extended. The repayment periods noted in this subsection will begin at the end of the interest only period, that is, a loan approved with a 15-year repayment period and a 12-month interest only period would be repaid over an effective loan period of 16 years.
(e) Interest rates. An annual fixed rate of 2%.
(f) Fees.
(1) Fees charged to the borrower by brokers, finders, financing consultants and economic agencies are not eligible project costs, except the fees payable to the Department, if any, and fees and expenses charged to the borrower by the local service provider or ALO may be included as part of the eligible project cost.
(2) Reasonable loan processing fees may be charged to the borrower by the service provider or ALO, if they are set forth in the commitment letter for the loan. The local service provider or ALO will set the fees.
(g) Aggregate limits on APDP financing. A borrower may not receive more than $750,000 in new financing under the APDP program in any 12-month period.
(1) The borrower may not relocate from one area of this Commonwealth to another without at least a 25% increase in net employment. For purposes of this paragraph, no relocation will be deemed to be a relocation from one area of this Commonwealth to another that is either of the following:
(i) Within the same county.
(ii) Within the same labor market as determined by the United States Department of Labor.
(2) If the recipient of an APDP loan relocates outside of this Commonwealth, the balance of the APDP loan remaining shall be immediately payable to the Department.
(h) Priority. Projects containing any of the following factors will receive priority in the approval and funding process for a loan:
(1) Applicants with credit ratings containing no late payments or write-offs.
(2) Current aquaculture facilities that have been in business 5 years or more and are doing environmental stewardship enhancements or facility upgrades.
(3) Facilities that currently have environmental stewardship enhancements such as bird and animal enclosures, secondary escapement prevention and discharge treatment structures such as settling basins and artificial wetlands.
(4) Principals having commercial aquaculture experience in a proven profit-making venture as documented by state and Federal tax returns showing taxes paid on business profits.
(5) Farmers of some other agricultural product wishing to transition to, or integrate, aquaculture in their farm operation.
(6) Equipment or management practices that improve the production efficiency of an operation.
(7) Applications that include environmental stewardship enhancements.
(8) Projects whose principals are Commonwealth residents will receive first consideration for funding.
(i) Participation agreement. The approved, signed contract for an APDP activity will constitute the participation agreement. An approved APDP loan program applicant shall enter into a contract. The contract will set forth the amount of funds and other terms and conditions as the Department may require. To be considered for an APDP loan, an applicant shall submit an application on a form provided by the Department. Upon receipt of a completed, signed application, the Department will review and process the application as set forth in § § 106.6—106.8 (relating to application submission and approval procedure; application evaluation criteria; and processing of applications) and issue an approval or denial of the application. Approved applicants will be required to execute a contract before funding is released.
(j) Default. A participant who fails to abide by the terms of the contract or the act or this subchapter shall be in default.
(k) Determination of fees. The participation fees for loans and loan guarantees may be set by the Department at rates not to exceed 2.5% of the total project amount requested.
§ 106.6. Application submission and approval procedure.
(a) The Department will review each application in the order it is received. Applications shall be submitted through an ALO or local service provider. The applicant is responsible for updating the application if changes occur during the review. Failure to do so may result in the application being declared ineligible or, if approved, the loan approval may be withdrawn.
(b) The Department will formally notify the ALO or local service provider of its decision to approve or reject a loan application within 30 business days of receipt of the completed loan application from the ALO or local service provider.
(c) Approved projects will receive a loan approval memorandum. The ALO or local service provider shall sign and return the loan approval memorandum within 30 days. Once accepted by the ALO or local service provider, the loan approval memorandum is valid for 90 days.
(d) Before the Department will authorize disbursement of loan funds, the ALO or local service provider shall confirm:
(1) All other sources of funding will be in place at the time of closing.
(2) The use of the funds remains as presented in the project application.
(3) There are no material changes to collateral or other terms and conditions of the loan as previously approved by the Department.
(4) The loan will close into an escrow account.
(5) The conditions of the ALO or local service provider’s commitment letter with the applicant have been satisfied.
(6) The Federal Employee Identification Number (FEIN) and Social Security numbers of the applicant, occupant and all guarantors.
(7) The principals are residents of this Commonwealth.
(8) The project will have expected sales of $1,000 or more per year.
(9) The APDP applicant has applied to be registered as an artificial propagator.
(10) The total number of jobs created or preserved by the proposed project.
(11) The number of jobs to be created or retained per APDP dollar invested.
(12) The dollar amount of private investment to be leveraged as a result of the APDP investment.
(13) The strategic importance to the Commonwealth of the business and the borrower being assisted or the area being served, or both.
(14) The collateral position of the Department will not be less than a second lien on the assets being funded unless specifically approved in writing by the Department. The approval shall only be considered when the appraisal of assets shows sufficient value to cover all liens of the Department if the assets were to be sold at a bankruptcy sale.
(e) Material changes in project application, collateral or terms shall be reviewed by the ALO or local service provider, and recommended to and approved by the Department.
(f) The ALO or local service provider will make arrangements to close the APDP loan within 7 business days of the selected closing date. If the APDP loan does not close within that time period, the ALO or local service provider shall return the APDP funds to the Department.
(g) The APDP loan funds will be disbursed at the loan closing between the ALO or local service provider and the borrower. The APDP loan proceeds may be disbursed to the borrower or into an escrow account with a commercial lending institution. Interest will accrue on the APDP loan from the date of closing. Unless otherwise agreed to by the ALO or local service provider, with the approval of the Department, regular amortization payments of principal and accrued interest on the APDP loan will begin at time of closing whether or not the loan is disbursed in whole or in part into escrow. The first payment of principal and interest will be due the first day of the second calendar month following the calendar month in which closing occurs.
Cross References This section cited in 7 Pa. Code § 106.5 (relating to program requirements).
§ 106.7. Application evaluation criteria.
(a) Evaluation. The ALO or local service provider will evaluate an application based on the ALO or local service provider’s standard loan eligibility criteria as well as the factors in the act, this subchapter and the APDP application
(b) Applicant eligibility. The Department will review applications to determine applicant eligibility according to the criteria in this subchapter. Only eligible applicants will be considered for participation in the APDP.
(c) Application completeness. The Department will not consider an application for an APDP loan unless it contains the required information and items in this subchapter.
(d) Release and hold harmless. Eligible participants will release and hold harmless the Commonwealth and the Department and their agents and officers from any liabilities for any losses as a result of participation in the APDP. Each application shall contain a release and hold harmless statement which the applicants agree to when they sign the application. Unsigned applications will be considered incomplete.
Cross References This section cited in 7 Pa. Code § 106.5 (relating to program requirements).
§ 106.8. Processing of applications.
(a) Approval or denial. The Department may approve, approve with special conditions or reject applications. The Department will issue approvals in accordance with the general considerations and criteria of the act and this subchapter.
(b) Processing. An application for participation in the APDP will be processed in the following manner:
(1) Dating. The applications will have the initial date of the postmark or initial date of receipt, whichever is earlier, noted on the application by Department staff. If the application is determined to be incomplete, the effective date of the application is the date on which all additional information is received and the application is determined by the Department to be complete. This date will be noted on the application.
(2) Completeness and accuracy. Upon receipt of an APDP application and the required supporting documentation, the Department will review the information for completeness and accuracy.
(3) Eligibility. Upon receipt of an APDP application and the required supporting documentation, the Department will review the information to verify applicant eligibility.
(4) Applications from ineligible applicants. An application from an ineligible applicant will be returned to the applicant through the ALO or local service provider with a written explanation of why the applicant is considered ineligible.
(5) Incomplete or inaccurate application from eligible applicants. If the Department determines an application from an eligible applicant is incomplete or inaccurate, final processing of the application may be discontinued or additional data may be requested. If additional data is requested, the request shall be in writing and will be sent to the applicant through the ALO or local service provider. The processing of the application will cease until the ALO or local service provider supplies the requested data. The Department may terminate the processing of an incomplete application when the additional data is not supplied within 10 business days of the request for the data. When the processing of the application is terminated, the Department will notify the applicant in writing, stating the reason for the termination, and refund the participation fee.
Cross References This section cited in 7 Pa. Code § 106.5 (relating to program requirements).
§ 106.9. Cancellation/default.
The Department, upon a determination that the recipient has violated the act, this subchapter or the participation agreement, may cancel an APDP loan approval. An APDP loan recipient will be considered to be in default if the recipient moves the funded business to a site not within this Commonwealth. Upon cancellation, the Department will seek recovery of all APDP loan funds.
§ 106.10. Right of recovery.
The Department has the right to make a claim for and receive from the applicant moneys not expended in accordance with the act, this subchapter, or the loan agreement and any interest.
§ 106.11. Deficits.
The Department’s financial obligation or liability is limited to the amount approved in the terms of a loan. The Department is not responsible for cost overruns or other expenses incurred by loan recipients.
§ 106.12. Contact information.
(a) Program inquiries and applications shall be directed to:
Aquaculture Production Development Program Bureau of Market Development Department of Agriculture 2301 North Cameron Street Harrisburg, Pennsylvania 17110 Telephone Number: (717) 783-8462Facsimile Number: (717) 787-5643 E-mail address: agmarkets@state.pa.us Website: www.pda.state.pa.us
(b) The Department may require an applicant to submit additional documentation as may be necessary to complete, verify or clarify the application.
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