N.Y. Urban Development Corporation Act 174/68 § 16-a: Regional revolving loan program

§ 16-a. Regional revolving loan program. (1) The corporation shall

establish a fund to be known as the "regional revolving loan trust fund"

and shall pay into such fund any monies made available to the

corporation for such fund from any source. The monies held in or

credited to the fund shall be expended solely for the purposes set forth

in this section. The corporation shall not commingle the monies of such

fund with any other monies of the corporation or any monies held in

trust by the corporation.

(2) The corporation shall allocate any monies made available for such

fund for the purpose of making grants to regional corporations. The

grants shall be allocated as follows:

(a) fifty percent divided equally among the regions;

(b) fifty percent according to a formula weighted in favor of those

regions with the greatest levels of economic distress as determined by

poverty rates, number of persons receiving public assistance,

unemployment rates, rate of employment decline and such other indicators

of economic distress as the corporation deems appropriate; and

(c) in the event a regional corporation advises the corporation that

it does not require all or a portion of the funds to be distributed

pursuant to this subdivision, such funds shall be re-distributed by the

corporation equally among the other regional corporations.

(3) In accordance with the rules and regulations of the corporation,

each regional corporation shall establish two special accounts for

monies received by the regional corporation pursuant to the provisions

of this section. The grant monies received from the corporation,

earnings on such monies, and any principal repayments shall be deposited

in a loan fund account; any interest earned by the regional corporation

on loans will be deposited in a separate interest repayment account. A

regional corporation shall be authorized to provide financing assistance

to eligible projects. Any interest earned from its loans may be used by

a regional corporation for the cost of administering the programs

authorized by this section.

(3-a) Notwithstanding subdivision three of this section, where

applicable, the corporation is authorized to enter into agreements as

may be necessary for the administration and reporting of funds repaid,

received, expended or collected in a manner consistent with the

provisions in section sixteen-t of this act. The use of such funds by

the corporation shall be consistent with the terms, conditions and

restrictions set forth in subdivision four of this section, to provide

financial assistance to eligible regional corporations as defined in

subdivision eighteen of section three of this act. Outstanding expenses,

loans and other obligations executed prior to the effective date of this

subdivision shall be subject to the terms and conditions of the original

contract or contracts.

(4) Regional corporations shall be selected by the corporation from

among eligible applicants to administer a regional revolving loan

program. An eligible applicant shall:

(a) represent at least two entire contiguous counties;

(b) have available to it staff with sufficient expertise to analyze

applications for financial assistance, to regularly monitor financial

assistance to clients, and have made arrangements to provide management

or technical assistance to clients;

(c) have an effective plan to market its services to small businesses

through such entities as chambers of commerce, industry trade

associations, banks, local development corporations, community based

organizations and industrial development agencies; and

(d) have established a loan committee composed of five or more persons

experienced in commercial lending or in the operation of a for-profit

business and a staff person of the regional office of the department of

economic development. Such loan committee shall review every application

to the regional corporation for financial assistance pursuant to this

section, shall determine the feasibility of the transaction proposed in

the application and shall recommend to the board of directors or other

governing body of the regional corporation such action as the committee

deems appropriate.

(5) Applications to the corporation for certification or

recertification as a regional corporation shall:

(a) describe the applicant corporation, including its organization,

membership, loan committee, staff, and sources of other funds, if any;

(b) identify the geographic region to be served;

(c) explain the methods and criteria to be used in determining firms

eligible for financial assistance from the regional revolving loan

program;

(d) describe the means for coordinating financial assistance available

from the regional revolving loan program with financial assistance

available from other public funding sources within the region and how

such program will be used to leverage private financing for projects;

(e) at any time, the corporation may consider proposals to reconfigure

geographic areas served by regional corporations; and

(f) contain such other information as the corporation deems

appropriate.

(6) The corporation shall select, from among eligible applicants,

regional corporations to administer revolving loan programs, on the

basis of:

(a) the ability of the regional corporation to administer the

financial assistance programs authorized under this section;

(b) the extent of coordination with other publicly supported financial

assistance programs available within the region represented by the

regional corporation;

(c) the degree of public and private support within the region for the

applicant regional corporation; and

(d) the ability of the regional corporation to provide financial and

other assistance to businesses located in distressed areas within the

region.

(6-a) The corporation shall, every five years, recertify that each

regional corporation has complied with the terms and conditions of this

section. In the event a regional corporation is not recertified, or its

certification is withdrawn pursuant to subdivision nineteen of this

section, then the corporation shall give written notice to such regional

corporation which shall thereafter neither make new loans nor undertake

new obligations except upon written approval of the corporation. The

corporation may thereafter certify another regional corporation in the

manner provided in this section for the selection of regional

corporations. Upon the certification of a successor regional

corporation, all remaining loan funds, records and accounts of the

regional corporation not recertified shall be transferred to the

corporation and the regional corporation not recertified shall cease to

function pursuant to this section. The corporation shall transfer

returned funds to a successor regional corporation, or in the event no

successor regional corporation is formed, equally to other existing

regional corporations.

(7) A regional corporation certified by the corporation shall use the

funds received from the corporation, subject to the terms, conditions

and restrictions set forth in this section, to provide financial

assistance to eligible businesses as defined in subdivision seventeen of

section three of this act, for projects that demonstrate a substantial

likelihood of providing increases in net new permanent jobs or retaining

jobs in businesses that need such financial assistance to remain viable.

(8) The decision to approve or reject an application for financial

assistance pursuant to the provisions of this section shall be made by a

majority of the directors of the regional corporation, and such decision

shall be final. No member of the board or other governing body of a

regional corporation shall participate in a decision on a project

application when such member is a party to or has a financial interest

in such project. Any member who cannot participate in a decision on a

project application for such reason shall not be counted as a member of

the board or other governing body for purposes of determining the number

of members required for a majority vote on such application.

(9) No employee or officer of any regional corporation shall be a

party to or have any financial interest in any project that receives

financial assistance pursuant to this section.

(10) A regional corporation, in approving applications for financial

assistance, shall give priority to projects:

(a) that will provide increases in net new permanent jobs;

(b) located in economically distressed areas as defined by the

corporation or employing persons who live in such areas;

(c) of minority or women-owned enterprises or enterprises owned by

dislocated workers, such workers as defined in the Workforce Investment

Act (P.L. 105-220); and

(d) of businesses in the early stages of development that have been

denied access to credit.

(11) The funds allocated to each regional corporation pursuant to this

section may be used to guarantee the repayment of a working capital loan

provided by a banking organization to finance an eligible project.

Guarantees may be provided for up to ninety percent of the required

total project financing, provided that no more than one hundred thousand

dollars may be guaranteed for any project. Guarantees may be made for

the following types of financing: short and medium term loans for

working capital, revolving lines of credit, and seasonal inventory and

accounts receivable loans. Guarantees may be made for up to ninety

percent of the required total financing up to a maximum of one hundred

fifty thousand dollars for interim financing where another lender or

guarantor will provide permanent financing within one hundred eighty

days. In no event may a loan guarantee be for a term longer than five

years. Any loan made by a banking organization that is guaranteed

pursuant to this subdivision shall be secured by a security agreement,

chattel paper, loan agreement, or such other instruments or documents

deemed necessary or convenient by the regional corporation to secure the

loan. Any guarantee made pursuant to this subdivision shall be backed by

a minimum reserve within the account established by each regional

corporation of at least twenty-five percent of the amount guaranteed

that is outstanding.

(11-a) A regional corporation, in addition to receiving funds as

provided in this section, may also apply for and accept funds from any

other source for the purpose of furthering its goals and objectives.

Such funds may be used in the same manner as funds received from the

corporation to carry out the purposes of this section.

(12) The funds of each regional corporation derived pursuant to this

section may be used to provide loans for working capital for eligible

projects; provided that the amount of the loan does not exceed ninety

percent of the total project cost, or one hundred thousand dollars,

whichever is less. The interest rate and the terms on such loans shall

be determined by the regional corporation, but in no event shall the

interest rate be less than five percent. The term of any loan shall not

exceed five years. All loans shall be secured by lien positions on

collateral at the highest level of priority that can accommodate the

borrower's ability to raise sufficient debt and equity capital for the

project.

(13) A regional corporation shall not provide any financial assistance

authorized by this section unless the following conditions are met:

(a) the applicant has demonstrated that there is little prospect of

obtaining the project financing requested from other public sources of

funding within the region, including local revolving loan funds, and

that there is little prospect of obtaining adequate project financing

from private sources of capital, or in the case of a loan guarantee,

that there is little prospect of obtaining project financing without the

guarantee; except that in the case of local revolving loan funds,

financial assistance from the regional revolving loan fund account may

be provided for a project in conjunction with financial assistance from

a local revolving loan fund, provided that assistance from the regional

revolving loan fund is no greater than that provided by the local

revolving loan fund, and that a project qualifying for financial

assistance available from a local revolving loan fund is not denied such

assistance;

(b) the applicant has a minimum equity interest of at least ten

percent in the business or project;

(c) there is a reasonable prospect of repayment;

(d) the project is located in the region represented by the regional

corporation;

(e) the project will comply with any applicable environmental rules or

regulations;

(f) the applicant has certified that it will not discriminate against

any employee or any applicant for employment because of race, religion,

color, national origin, sex, or age;

(g) a staff member or a representative of the regional corporation

acting in an official capacity has personally visited the project site

and/or the applicant's place of business; and

(h) financial commitments for the project have been obtained from

other public and private sources.

(14) Grants made by the corporation pursuant to this section shall not

be made available for:

(a) projects that would result in the relocation of any business

operation from one municipality within the state to another, except

under one of the following conditions: (i) when a business is relocating

within a municipality with a population of at least one million where

the governing body of such municipality approves such relocation; or

(ii) the regional corporation notifies each municipality from which such

business operation will be relocated and each municipality agrees to

such relocation;

(b) projects of newspapers, broadcasting or other news media; medical

facilities, libraries, community or civic centers; or public

infrastructure improvements;

(c) refinancing any portion of the total project cost or other

existing loans or debts of an applicant, except for the purpose of

transferring to the employees or to other local interests ownership of a

company that would otherwise depart from or cease or substantially

reduce operations in the state;

(d) providing funds, directly or indirectly, for payment,

distribution, or as a loan, to owners, partners or shareholders of the

applicant enterprise, except as ordinary income for services rendered;

and

(e) retail projects, except where the regional corporation finds there

will be an increase in net new permanent jobs.

(15) A regional corporation may charge application, commitment and

loan guarantee fees pursuant to a schedule of fees adopted by the

regional corporation and approved by the corporation.

(16) The regional corporations shall submit annual reports for the

previous fiscal year to the corporation describing the financial

assistance provided pursuant to this section, including: the number of

projects assisted; the amount and type of assistance provided; a

description of the projects; the number of jobs created or retained; the

status of outstanding loans, guarantees, earnings and account balances;

and such other information as the corporation may require.

(17) The corporation shall, assisted by the commissioner of economic

development and in consultation with the department of economic

development, promulgate rules and regulations in accordance with the

state administrative procedure act setting forth procedures to be

followed by, and the responsibilities and obligations of, regional

corporations and the corporation. Such rules and regulations shall be

consistent with the program plan required by subdivision nineteen of

section one hundred of the economic development law.

(18) For any positions opened as a result of assistance provided in

this section, businesses so assisted shall first consider unemployed or

low income individuals eligible to participate in programs funded

through the Workforce Investment Act (P.L. 105-220) who shall be

referred to the business by local workforce investment boards created

pursuant to such act or by the job service division of the department of

labor.

(19) The corporation shall annually conduct an audit of each regional

corporation to ensure conformity of all aspects of program

administration and of financial assistance transactions with the

substantive and procedural provisions of this section. In the event that

the corporation finds instances of substantive noncompliance by a

regional corporation with any of the provisions of this section and such

instances were, or should have been, known to be in noncompliance, the

regional corporation shall return, within thirty days, upon demand by

the corporation, all uncommitted grant funds on hand and provide an

accounting of the loans currently outstanding.

The corporation may withdraw a regional corporation's certification:

(a) when a member of a board of directors or other governing body, an

officer or an employee of said regional corporation is party to or has

financial interests in loan projects;

(b) when said regional corporation fails to comply with the

requirements for project loans pursuant to this section; or

(c) when a regional corporation makes no loans within the previous

fiscal year and there is more than one hundred thousand dollars

remaining in its loan fund account.

The corporation shall transfer funds returned from a decertified

regional corporation to a successor regional corporation, or, if there

be none, distribute such funds equally among other existing regional

corporations. Outstanding loans and other obligations payable to such a

decertified regional corporation shall be assigned to its successor

regional corporation, or to the corporation or an agent designated by

the corporation upon such terms and conditions as the corporation shall

determine.

(20) Reporting. (a) The lending organization shall submit to the

corporation annual reports stating: the number of program loans made;

the amount of program funding used for loans; the use of loan proceeds

by the borrower; the number of jobs created or retained; the status of

each outstanding program loan, including fund balance; and such other

information as the corporation may require.

(b) The corporation shall, on or before October 1, 1988 and on or

before each October first thereafter, submit a report to the governor

and the legislature on the operations and accomplishments of the

regional revolving loan program. Such report shall include a summary of

the information contained in the reports submitted pursuant to

subdivision sixteen of this section and of the results of the audits

performed by the corporation pursuant to subdivision nineteen of this

section, and shall set forth the status of the regional revolving loan

program for the previous fiscal year, including grants to the regional

corporations, earnings and account balances as reported to the

corporation. The report to be submitted on October 1, 2005 and on or

before each October first thereafter shall be consolidated with the

annual program report of the corporation required under the provisions

of subdivision (b) of section thirty of this act, as amended.

(c) Beginning April 1, 2019, the corporation shall publish on its

website the information contained in the annual reports required under

paragraphs (a) and (b) of this subdivision in aggregate form omitting

borrower identifiable information.

(21) Evaluation. (a) The corporation shall submit to the director of

the division of the budget, the chairperson of the senate finance

committee, and the chairperson of the assembly ways and means committee

an evaluation of this program prepared by an entity independent of the

corporation. Such evaluation shall be submitted by September 1, 2005 and

by September first every four years thereafter.

(b) Between evaluation due dates, the corporation shall maintain the

necessary records and data required to satisfy such evaluation

requirements and to satisfy information requests received from the

director of the budget, the chairperson of the senate finance committee

and the chairperson of the assembly ways and means committee between

such evaluation due dates.

(22) The corporation shall recertify existing regional corporations

or, in the event a regional corporation's certification has been

withdrawn, seek successor corporations among eligible applicants after

April first, two thousand two.