(a) Commitment of future federal allocations of CDBG Funds to the State (“State pledges”) by the Department as collateral for federal guarantees of notes or other obligations issued by eligible cities and counties (“loan guarantees”) pursuant to Section 108 of the Act (42 U.S.C. Sec. 5308) and 24 CFR Subchapter C, Part 570, Subpart M commencing with Section 570.700 (collectively, “Section 108”) shall be subject to the following conditions:
(1) State pledges shall be given as collateral for loan guarantees only for loans of between $500,000 and $2,000,000.
(2) The total of all outstanding State pledges at any given point in time shall not exceed $16,000,000.
(3) To receive a State Pledge, in addition to the eligibility requirements established by Section 108 of the Act (42 U.S.C. Sec. 5308), an activity must: meet the eligibility requirements specified at Section 7062.1 subsection (a)(2) and (a)(3); and address one of the three CDBG national objectives specified in Section 7052 and as specified in 24 CFR Section 570.483.
(4) Applicants shall demonstrate a reliable repayment source and adequate security in the event the primary source of repayment defaults. The Department may require that the applicant city or county pledge other sources of repayment for the loan such as any local CDBG program income.
(5) State pledges shall not be committed as security for a guaranty which guaranty is the primary source of repayment for federally-issued securities.
(6) The proposed activity upon which the application for State pledges has been based shall be reviewed by the Department according to the HUD guidelines for financial underwriting referenced at Section 7062.1(a)(3).
(7) Any Loan Guaranty Pledges made pursuant to Section 7062.3 are excluded from any funding limitations set forth in this section or set forth at Health and Safety Code Section 50832(a).
(b) Application Procedures and Evaluation Criteria.
(1) To obtain a State pledge, eligible jurisdiction shall make a formal application in writing to the Department.
(2) Applications which have been determined by the Department to be complete shall be reviewed and a decision whether or not to issue a State pledge shall be made in writing within 60 days of the date of receipt of a complete application.
(3) In order to be considered complete, an application shall, at a minimum, include the following:
(A) the amount of the State pledge requested;
(B) sufficient information for the Department to determine that all of the conditions of subsection (a) of this Section have been met; and
(C) sufficient information to conduct the financial underwriting review required by subsection (a)(6) of this Section.
(4) An incomplete application shall be returned to the applicant with a written explanation as to the applicant's deficiencies.
(c) If the Department determines that the requirements of subsection (a) have been met, and that the activity underlying the application conforms to the underwriting standards of subsection (a)(6), the Department shall prepare and issue to the applicant a certification containing, at a minimum, the following statements:
(1) the State of California, acting by and through the Department, agrees to make a pledge of future CDBG grants for which the State may become eligible in the amount of the approved application as security for a loan guaranty from HUD in an equivalent amount;
(2) the Department possesses the legal authority to make such a pledge;
(3) at least seventy percent (70%) of the aggregate use of CDBG funds received by the State, guaranteed loan funds, and program income during the one, two, or three years specified by the Department for its CDBG program will be for activities that benefit low and moderate income persons; and
(4) the Department agrees to assume the responsibilities set forth in 24 CFR Section 570.710 requiring the Department to ensure that the applicant complies with all applicable federal requirements governing the use of guaranteed loan funds.
Credits
Note: Authority cited: Sections 50406(h) and 50406(n), Health and Safety Code; and 24 CFR 570.489(b). Reference: Sections 50406 and 50407, Health and Safety Code; 42 U.S.C. 5308; and 24 CFR 570.700 et seq.
History
1. New section filed 11-8-95; operative 11-8-95 pursuant to Government Code section 11343.4(d) (Register 96, No. 48). For prior history, see Register 93, No. 47.
This database is current through 6/21/24 Register 2024, No. 25.
