MAY/JUNE 1997
MAY/JUNE 1997
In this Issue...Oklahoma coordinates self-employment and
entreprenuerial strategies with CDBG and the Community Services Block Grant program
(CSBG), the SEEDS program. Georgia coordinates pre-qualifying employment
and training applicants between state agencies for low-income participants. Unique
Project Feature;Spooner, Wisconsin.The remaining three issues of
UPDATE will include a section that highlights a particularly unique project that has been
funded with CDBG funds. These projects will show how localities and states work together
and use the flexibility of the program to make innovative/creative projects work.The state
of Wisconsin funds innovative homebuyer program in Spooner,
Wisconsin.
Oklahoma
Coordinates CSBG and CDBG in Small Loan Economic Development
Program: The SEEDS Program
Program coordination in Oklahoma may be easier than in other states because most of the
state’s large housing and community development programs; CDBG, HOME, ESG, and CSBG
are housed in the same agency, the Oklahoma Department of Commerce. When the SEEDS program
was conceived in 1989, within the Oklahoma Department of Commerce/Division of Community
Affairs and Development, distribution of program funds was done on an “activity
basis” instead of on a programmatic basis. Projects were funded based on the
activity, such as housing, instead of by a program, such as a CDBG housing project. The
state would determine what source of funds was most suitable for a project and make an
award accordingly. Presently, the system has changed to allow specific programs to handle
specific activities, such as all housing projects are funded through the HOME program.
Housing programs are dedicated to the HOME program and often linked with ESG funds, with
CDBG and CSBG focused on economic development and infrastructure activities.
This article highlights one program that has been successfully used througout the state to
assist lower income residents on the road to self-sufficiency, the SEEDS program. SEEDS is
the acronym for the Self-Employment and Entreprenuerial Development System, an innovative
business and economic development program. SEEDS was developed by the Oklahoma Department
of Commerce/Division of Community Affairs and Development/Community and Economic
Development Team (ODOC/DCAD/CEDT), and funded as a part of the state’s annual CSBG
allocation, (approximately $6 million) under the concept of self-employment. It was
designed to coordinate well with other state employment and training programs, including
the CDBG program.The self-employment concept emphasizes the creation of new jobs for low
income individuals, and establishes linkages within a cadre of local community resources
that promotes individual economic self-sufficiency, improves individual earning power,
enhances individual entrepreneurship, and creates additional self-employment
opportunities. The end result is the creation of new jobs through individually owned and
operated small business ventures.
The SEEDS program fits well with Oklahoma’s coordination and collaborative
initatives. Oklahoma was recently awarded a technical assistance grant as part of the
National Affordable Housing Training Institute Super NOFA that COSCDA received.
Essentially this effort coordinates funding from various sources to select demonstration
communities in a way that has never been tried before using HOME, CDBG, ESG, CSBG and
other programs. The premise behind the idea is to encourage communities to strengthen
planning and coordinating efforts to better prepare for issues associated with
self-sufficiency and welfare reform.
The ODOC/DCAD and SEEDS operates on the premise that self-employment and entrepreneurial
development training programs are a viable alternative to “traditional” economic
development strategies, which provide remedial skills training or on-the-job training,
which train employees to work for someone else. SEEDS programs, much like the CDBG program
provides a flexible framework that allows creative solutions for any self-employment
strategy, which can be structured to utilize existing educational, business and economic
development systems for maximum effectiveness.
The promotion of individual entrepreneurship and small business development is a postive
community goal. Through this type of training and networking of resources, low-income
earning individuals can develop essential skills and access those resources necessary to
create their own employment opportunities and become successful business owners and
operators who evetually hire other people from within the community.
The Oklahoma state legislature annually appropriates companion funding for this program
which has been targeted to Community Action Agencies (CAP). Although the program was
originally targeted toward CAP agencies, there are no prohibitions on linking CDBG or any
state “development” sources with SEEDS. Because the program is such a natural
link with the CDBG program, and projects have used CDBG as an additional funding source,
Oklahoma is considering a stronger CDBG linkage. The current CDBG connection with the
SEEDS program is in Oklahoma’s Enterprise Community Program, which provides small
loans in the same program/project with the CSBG funds. CDBG provides the business loan
funds and CSBG pays for the overhead, or administration costs.
How the Program Works
The SEEDS program offers a Self-Employment and Entrepreneurial Development training
program for individuals who have a strong desire to start and own a businesses. This is
developed around sequential and competency based stages of development. The stages are:
1. Recruitment, screening and selection of individuals with business related skills and
individual motivation necessary for self-employment;
2. A customized business management training course requiring each participant to attend a
variety of training courses specifically designed for small business/owner operators;
3. The development and completion of a viable business plan;
4. Financing methods and loan packaging; and
5. Outlining a process for obtaining follow-up managerial technical assistance during the
first year of the business operation.
The lack of planning and poor management are two primary reasons for most small business
failures. In the early recruitment stage, individuals with entrepreneurial potential are
identified based upon a criterion that reveals both technical and commercial skills and
motivation for self-employment. To augment individual business skills, a customized
business management training component has been designed that offers competency based
benchmarks for each individual participant. The training program consists of small
business ownership, small business taxation, and marketing principles. Various methods of
financing for small businesses are identified and elements of loan packaging are made
available to each program participant. To ensure eventual success of each new business
startup, the Seeds program provides business management assistance on a regular basis for
a period of one year, directly and indirectly, as necessary, and offers continuous
training and technical assistance for each program participant upon request.
Oklahoma SEEDS contact person, Jack Smid says ”...The program is highly successful
because it emphasizes follow-up support and mentoring. It has a 70 to 80 percent success
rate, which is very similar to other government lending programs. This is surprising
because of the deeply targeted low-income population that the CSBG program requires. If
this program had CDBG targets, [for the economic development programs] the success rate
would probably be higher, and we could do more creative programs...” Jack looks
forward to future links with CDBG that could do more to promote entrepreneurship and
self-employment opportunities within the SEEDS program.
To Apply
Participating CAP Agencies act as program administrators and work with area
Vocational-Technical schools, banks, and business consultants to assist applicants with
their proposals. Applicants must obtain a SEEDS application package and is put in contact
with a professional business counselor to assist in preparing and/or analyzing business
proposal and business plan. According to Jack Smid, business professionals often donate or
volunteer their time to assist CAP agencies with the SEEDS program. Banks receive CRA
“points” for their participation either on a donated time level or as a
consultant to assist CAP agencies with review of business proposals.
Type of Assistance Received
• The Development of a business plan that will help the participant outline the goals
necessary for the business to succeed. It will also help the applicant provide future
growth projections.
• On-going management and technical assistance after business start-up to assist the
participant with problem areas that may arise in the day-to-day operation of a business.
• To increase individual skills, all SEEDS participants are required to attend either
the Self-Employment Training Course or the Small Business Management Course offered at an
area Vocational-Technical School. Business Management, Marketing, Product Research,
Bookkeeping, Small Business Taxation, Insurance and Legal Procedures, Loan Packaging, and
Preparing a Business Plan are covered in these courses.
Financial Assistance
Funds are available in the form of low-interest loans ranging from $500 to $5,000, to
qualified applicants who may not be eligible for loans from traditional lending
institutions.To apply for a business start-up loan the applicant must have completed or
agreed to complete a Self-employment Training course, a Small Business Management Course,
or some form of customized business management training, and present a viable business
plan at time of application. In each CAP area, staff are available to assist applicants
with every facet of the program. If an applicant is turned down, staff will help them find
alternate financing mechanisms. The following are examples of typical SEEDS projects.
Custom Video Services
Anthony Woubishet started Custom Video Services company in April of 1995. He purchased top
quality, high-tech, high resolution equipment with the loan funds. Services included the
video and audio taping of wedding, recitals, classroom session and other special events.
Custom Video Services is still in business and Anthony continues to repay his loan, always
five day early.
Kalimba Bar-B-Q
Mark ”Kalimba” Stafford started Kalimba’s Bar-B-Q in the summer of 1995.
All meats are smoked on the premises; specialities include; ribs, chicken, turkey and
stir-fry dishes. Over 30 varieties of cheesecake are also available. Holiday turkeys and
or other meats can be custom ordered by Kalimba.
Hertz Baum Toys
Miriam and Jim Costilow wanted to start a toy business but were twice denied for bank
loans. They received a $5,000 SEEDS loan. In the two years the company has been in
operation, it has become a thriving business that now employs eight people, two of which
were former welfare recipients.
For more information on the SEEDS program and its CDBG applicability and connection,
please contact Brenda Williams, Division Director and Jack Smid, SEEDS Contact at
405-815-5352.
Georgia Uses CDBG to Collaborate in Job Training and Placement Efforts
The State of Georgia has set-aside $5,000,000 of its annual $44,764,000
CDBG allocation to fund the Employees Incentive Program (EIP). Chantal Matthews of the
Georgia Department of Community Affairs and Michael Thurmond of Division of Human
Resources, recently signed a Memorandum of Understanding (MOU) which certifies that
participants in any one of several job training or temporary assistance programs can
automatically be qualified as “eligible employees” for the purposes of EIP.
EIP, an initiative that resulted as part of Georgia’s welfare reform efforts, Work
First is available to support private companies in expansions that will result in job
creation for low- and moderate-income persons. Local governments may undertake a variety
of activities under EPI on behalf of participating businesses, including direct loans and
the installation of infrastructure.
For a business to participate in the EPI program, it must enact temporary hiring programs
that are targeted at low- and moderate-income persons. These hiring requirements allow
local “authorized government agencies” who provide job training, educational, or
temporary assistance programs to certify their clientele as meeting or exceeding
HUD’s CDBG eligibility. The MOU pre-qualifies all the state’s Temporary
Assistance for Needy Families (TANF) and JTPA participants, Job Opportunities for Basic
Skills (JOBS), Supplemental Social Security (SSI) and Food Stamp Programs as well as
residents of public housing complexes and Empowerment Zones and Enterprise Communities as
eligible for EIP.
Brian Williamson, Director of the Office of Economic Development states that “...The
MOU will allow local governments and institutions to design and fine-tune EIP projects
[to] fit...local situations.” For example, in many communities local industries often
work with area technical schools and the Georgia Department of Labor to design short-term
customized training. The MOU would allow a participating industry to use its existing
training relationship with the technical school. Assuming the technical school is
coordinating with the local DHR and DOL offices, it should be a simple matter to make EIP
employment opportunities available to Georgia WorkFirst participants.The EIP-assisted
industry would generally follow its normal hiring practices; the job referral and
certifications process would take place within the local DOL, DHR offices, and/or the area
technical school. Since local state offices have the capacity to match their clients or
students with the participating industry’s needs, the state can meet its objective of
placing “at need” individuals in employment while relieving the company of the
responsibility of certifying individuals for EIP eligibility. The streamlined EIP hiring
methodology can be quickly adopted in those communities that have local coordination of
their job-referral processes in place. Where a local coordination process is lacking, an
ad-hoc effort can produce program implementation with minimal effort given that the new
EIP process can assist all the state’s programs in serving their targeted clientele.
Several communities are currently exploring the possibilities allowed under the MOU.
The process that led to the signing of the MOU is also noteworthy. Along with the Office
of Economic Development’s contribution, other units within the Business and Financial
Assistance Division contributed to collaborative effort. Susan Hart with the EZ/EC unit
drafted the initial MOU, and coordinated discussions with offices at DHR to insure that
eligibility requirements of the federal and state agencies involved could be satisfied. In
addition, the compliance unit within the Office of Grant Administration expedited its
review of the MOU to insure compliance with HUD’s requirements.
Georgia’s Memorandum of Understanding
This document certifies that participants in the Georgia This This document certifies that participants in the Geoprgia Department of Human Resources’ Aid to Families with Dependent Children (AFDC/ Temporary Assistance for Need Families (TANF) program automatically qualify as low-to-moderate income individuals as defined by the U.S. Department of Housing and Urban Development for the purposes of the Community Development Block Grant Program. Based on the following eligibility table, each AFDC/TANF recipient hired by the recipient of economic development CDBG loan funds automatically qualifies as a low-to-moderate income person for purposes of satisfying the job creation requirements of Georgia’s CDBG-funded Employment Incentive Program.
| Family Size | AFDC/TANF Gross Income Ceiling | Lowest County CDBG LMI Ceiling (month/year) |
| 1 person | $435 | $1,517/$18,200 |
| 2 persons | $659 | $1,733/$20,800 |
| 3 persons | $784 | $1,950/$23,400 |
| 4 persons | $925 | $2,167/$26,000 |
| 5 persons | $1,060 | $2,342/$28,100 |
| 6 persons | $1,149 | $2,513/$30,150 |
| 7 persons | $1,243 | $2,688/$32,250 |
| 8 persons | $1,319 | $2,858/$34,300 |
| 9 persons | $1,389 | $3,033/$36,400 |
| 10 persons | $1,487 | $3,207/$38,480 |
| 11 persons | $1,591 | $3,380/$40,560 |
This program (EIP) and the Memorandum of Understanding can work in any state’s CDBG program. The program is simple, and coordinates state agencies’ existing programs that target low- and moderate- income persons for job training and hiring opportunities, and removes the burden of qualifying applicants and participants at the local/business level, thereby reducing the amount of paperwork for all parties involved. The MOU serves as a guarantee the state and federal program administrators that all participants meets the income requirements of each program without a duplication of effort in certification.
For more information on this program, please contact Brian Williamson
of the Georgia Department of Community Affairs at 404-679-4940.
Affordable Housing/New Construction Program in Spooner, Wisconsin
Martha Wilson, CDBG Program Manager in the Wisconsin Division of Housing
received a call from the folks in Spooner. City officials wanted to acquire and develop a
track of land and offer lots to low-income persons interested in becoming home owners.The
idea was to sell the developed lots, which would give low-income persons an asset
(collateral) which could be used to secure a new home construction loan. The City of
Spooner, population 2,500 is located in a part of Wisconsin, where the availability of any
housing, regardless of its affordability is non-existent. This program would afford
home-ownership opportunities to low-income people, where, in any other case could not have
happened.
Often, members contact COSCDA staff, to ask... “Have you ever heard of a project that
even comes close to what the City of Spooner would like to do? Is it even eligible under
CDBG?” In discussions with Marti Wilson and a quick review of the regulations,
suggested that it could be done, if the CDBG dollars were used on the appropriate
activities. The project just made too much sense for it not to be eligible. It had all the
aspects that makes CDBG such a good program. It provided low-income persons with
affordable housing, where none existed; it would hire local contractors on a large scale;
it would build assets for low income people which is one of the first things that puts
people on the road to economic self-sufficiency; and it would have a 100 percent benefit
to low- and moderate income people. How could this not be an eligible project? The big
question was the “new construction” angle.
In discussion with HUD staff the question was, “how can you do this project and allow
CDBG dollars to be used for infrastructure improvements for new housing construction,
without the benefit of an eligible subrecipient, a neighborhood non-profit entity who
would act as the owner of units and sell or lease to low-income persons? The discussion
centered on a couple of scenarios, including the non-profit developer angle as a way to do
the project without violating CDBG rules on new housing construction.
New housing construction has been an eligible activity under the CDBG program. The
regulations governing the limited use of new housing construction are located in the
entitlement regulations at Section 24 CFR 570.207(b) (3) have not changed, however, for
states the interpretation of the “new housing construction” activity under the
CDBG program has evolved. Many states took an extreme interpretation on this activity,
based on advice from field staff, or based on state policy that dictated other funds
should be used for new housing construction. Some states placed such strict requirements
for funding this activity that made it difficult for applicants to undertake new housing
contruction, even using an eligible subrecipient as the regulations allow. In discussions
with HUD headquarters staff, they agree that over the years there have been policy changes
and interpretations on how to fund projects, and what activities constitutes the actual
construction of new housing with CDBG funds. In the final analysis, new construction can
be done and the City of Spooner chose to do it by using CDBG funds to acquire the land,
install water and sewer (on publically owned land), complete site preparation, which
includes streets, sidewalks, curb and gutter. The lots will be subdivided and sold (with
deferred loans) to low-income persons who have secured, or are able to secure mortgage
financing for their new homes.
Spooner Affordable Housing Subdivision
The project involves:
(1) The purchase of land for the subdivision
2) Surveying and subdividing the land into individual building lots;
(3) Installation of water, sewer, streets, curb and gutter, and
(4) Selling the developed sites
to low-and moderate-income households to build new homes.
Note: The value of the subdivided, improved lots will be determined by a licensed real
estate appraiser.
How the Program will Work
The city will use CDBG funds to purchase land and subdivide it into individual building
sites and to cover a portion of the costs of infrastructure improvements that will serve
the new subdivision. After the installation of the infrastructure, the city will sell the
developed lots to eligible households with a no-interest deferred payment loan. The loans
will be repaid when the residents sell their homes. The city’s loan, for the cost of
the lot, will take a second position to the mortgage loan and may be considered as a down
payment by the mortgage lender.
Construction
Northwest Affordable Housing, Inc. (A non-profit Corporation) will be the developer and
construction manager for this project to ensure that the homes will be affordable to
low-income households. It is anticipated that homes could be constructed in the price
range of $65,000 to 70,000 depending on the desired size and amenities. Northwest
Affordable Housing, Inc. will act as the general contractor and subcontract the
construction work to local building contractors.
Project Financing
The city will finance the development of the affordable housing subdivision with a
combination of CDBG funds, Tax Increment Financing, and utility assessments if necessary.
Individual homes will be financed by private mortgage lenders.
--Chandra Western
If you are interested in receiving the most current information on the
stateadministered Community Development Block Grant program in a specific state or
nationally, e-mail Chandra Western at cwestern@coscda.org
with the following information:
State CDBG Update is published bimonthly by the Council of State
Community Development Agencies (COSCDA) under cooperative agreement #DCBG000295 with the
U.S. Department of Housing and Urban Development. The opinions expressed do not
necessarily reflect the policies or positions of the Department of Housing and Urban
Development, COSCDA, or COSCDA members. Council of State Community Development Agencies ©1997 COSCDA. This publication cannot be reproduced in part or in whole without
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