UDC-13-09-00001-P The Upstate Regional Blueprint Fund Program

4/1/09 N.Y. St. Reg. UDC-13-09-00001-P

NEW YORK STATE REGISTER

VOLUME XXXI, ISSUE 13

April 01, 2009

RULE MAKING ACTIVITIES

URBAN DEVELOPMENT CORPORATION

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. UDC-13-09-00001-P

The Upstate Regional Blueprint Fund Program

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Addition of Part 4247 to Title 21 NYCRR.

Statutory authority:

Urban Development Corporation Act, section 5(4); L. 1968, ch. 174; L. 2008, ch. 57, part QQ, section 16-q

Subject:

The Upstate Regional Blueprint Fund Program.

Purpose:

To set forth the available assistance, evaluation criteria, application and project process.

Text of proposed rule:

A new Part 4247 of 21 NYCRR is added as follows:

UPSTATE REGIONAL BLUEPRINT FUND PROGRAM

Section 4247.1 General

These regulations set forth the types of available assistance, evaluation criteria, application and project process and related matters for the Upstate Regional Blueprint Fund (the "Program"). The Program was created pursuant to section 16-q of the New York State Urban Development Corporation Act, as added by Part QQ of Chapter 57 of the Laws of 2008, and promotes economic development in the State of New York by encouraging economic and employment opportunities for Upstate New York's citizens by supporting: intellectual capital capacity building; investment products; applied research and development; opportunities for foreign investment and international export; and infrastructure requirements to attract new businesses or expand existing businesses.

Section 4247.2 Definitions

For the purposes of this Part 4247, the terms below should have the following meanings:

(a) "The Act" shall mean the New York State Urban Development Corporation Act, added by Chapter 174 of the Laws of 1968 (as amended).

(b) "The Corporation" shall mean the Upstate Empire State Development Corporation, a subsidiary of the New York State Urban Development Corporation.

(c) "Distressed communities" shall mean areas as determined by the Corporation meeting criteria indicative of economic distress, including land value, employment rate, rate of employment change, private investment, economic activity, percentages and numbers of low income persons, per capita income and per capita real property wealth, and such other indicators of distress as the Corporation shall determine.

(d) "Not-For-Profit Corporation" shall mean a corporation organized under the provisions of the Not-For-Profit Corporation Law.

(e) "Upstate New York" shall mean the geographical area defined by the chairperson of the Urban Development Corporation, in consultation with the chairperson of the Corporation or if no such chairperson is appointed, the president of the Corporation, subject to approval by the board of directors of the Urban Development Corporation. The approved geographical area will be disseminated to eligible parties by the Urban Development Corporation's regional offices at the time of approval.

Section 4247.3 Types of Assistance

The Program offers assistance in the form of loans and/or grants to for-profit businesses, not-for-profit corporations, public benefit corporations, municipalities, and research and academic institutions, for activities including, but not limited to, the following:

(a) those identified through region-wide collaborative efforts as part of the overall growth strategy for the local economy, including but not limited to smart growth and energy efficiency initiatives;

(b) activities that involve the attraction or expansion of a business, including, but not limited to, those primarily engaged in activities identified as a strategic industry, and minority-owned and women-owned business enterprises as defined by subdivisions (c) and (g) of section nine hundred fifty-seven of the General Municipal Law;

(c) activities that involve land acquisition and/or the construction, acquisition or expansion of buildings, machinery and equipment associated with a project;

(d) those identified as a city by city or regional blueprint priority.

Section 4247.4 Eligibility

(a) Eligible applicants shall include, but not be limited to, business improvement districts, local development corporations, economic development organizations, institutions of higher education, incubators, technology parks, private firms, municipalities, counties, regional planning councils, tourist attractions and community facilities.

(b) The Corporation shall be eligible for assistance in the form of loans, grants, or monies contributing to projects for which the Corporation or a subsidiary acts as developer.

(1) The Corporation may act as developer in the acquisition, renovation, construction, leasing or sale of development projects authorized pursuant to this Program in order to stimulate private sector investment within the affected community.

(2) In acting as a developer, the Corporation may borrow for purposes of this subdivision for approved projects in which the lender's recourse is solely to the assets of the project, and may make such arrangements and agreements with community-based organizations and local development corporations as may be required to carry out the purposes of this section.

(3) Prior to developing any such project, the Corporation shall secure a firm commitment from entities, independent of the Corporation, for the purchase or lease of such project. Such firm commitment shall be evidenced by a memorandum of understanding or other document describing the intent of the parties.

(4) Projects authorized under this subdivision whether developed by the Corporation or a private developer, must be located in distressed communities, for which there is demonstrated demand within the particular community.

(c) No full-time employee of the state or full-time employee of any agency, department, authority or public benefit corporation (or any subsidiary of a public benefit corporation) of the state shall be eligible to receive assistance under this initiative, nor shall any business, the majority ownership interest of which is beneficially controlled by any such employee, be eligible for assistance under this initiative.

Section 4247.5 Evaluation Criteria

The Corporation shall give priority in granting assistance to those projects:

(a) with significant private financing or matching funds through private or other public entities;

(b) likely to produce a high economic return on public investment;

(c) with existence of significant support from the local business community, local government, community organizations, academic institutions and other regional parties;

(d) with significant regional breadth or likely to have wide regional impact;

(e) with cost benefit analysis that demonstrates clear economic benefits from new private sector job creation and/or investments;

(f) located in distressed communities; or

(g) whose application is supported by multiple entities, both public and private.

Section 4247.6 Application and project process

(a) The Corporation may, at its discretion and within available appropriations, issue requests for proposals and may at other times accept direct applications for program assistance.

(b) Promptly after receipt of the application, the Corporation shall review the application for eligibility, completeness, and conformance with the applicable requirements of the Act and this Rule. Applications shall be processed in full compliance with the applicable provisions of Section 16-q of the Act.

(c) If the proposal satisfies the applicable requirements and initiative funding is available, the proposal may be presented to the Corporation's directors for adoption consideration in accordance with applicable law and regulations. The directors normally meet once a month. If the project is approved for funding and if it involves the acquisition, construction, reconstruction, rehabilitation, alteration or improvement of any property, the Corporation will schedule a public hearing in accordance with the Act and will take such further action as may be required by the Act and applicable law and regulations. After approval by the Corporation and a public hearing the project may then be reviewed by the State Public Authorities Control Board ("PACB"), which also generally meets once a month, in accordance with PACB requirements and policies. Following directors' approval, and PACB approval, if required, documentation will be prepared by the Corporation. Notwithstanding the foregoing, no initiative project shall be funded if sufficient initiative monies are not received by the Corporation for such project.

(d) Nothing herein shall prevent the Corporation from requiring applicants to submit materials prior to submission of a formal application to determine if the proposal meets eligible criteria for Program assistance.

Section 4247.7 Confidentiality

(a) To the extent permitted by law, all information regarding the financial condition, marketing plans, manufacturing processes, production costs, customer lists, or other trade secrets and proprietary information of a person or entity requesting assistance from the Corporation, which is submitted by such person or entity to the Corporation in connection with an application for assistance, shall be confidential and exempt from public disclosures.

Section 4247.8 Expenses

(a) An application fee of $250 must be paid to the Corporation for projects that involve acquisition, construction, reconstruction, rehabilitation, alteration or improvement of real property, the financing of machinery and equipment and working capital loans and loan guarantees before final review of an application can be completed. This fee will be refunded in the event the application is withdrawn or rejected.

(b) The Corporation will assess a commitment fee of up to two percent of the amount of any Program loan involving projects for acquisition, construction, reconstruction, rehabilitation, alteration or improvement of real property, the financing of machinery and equipment and working capital payable upon acceptance of commitment with up to one percent rebated at closing. No portion of the commitment fee will be repaid if the commitment lapses and the project does not close. The Corporation will assess a fee of up to one percent, payable at closing, of the amount of any Program grant involving the acquisition, construction, reconstruction, rehabilitation, alteration or improvement of real property or the financing of machinery and equipment or any loan guarantee.

(c) The applicant will be obligated to pay for expenses incurred by the Corporation in connection with the project, including, but not limited to, expenses related to attorney, appraisals, surveys, title insurance, credit searches, filing fees, public hearing expenses and other requirements deemed appropriate by the Corporation.

Section 4247.9 Affirmative action and non-discrimination

Program applications shall be reviewed by the Corporation's affirmative action department, which shall, in consultation with the applicant and/or proposed recipient of the program assistance and any other relevant involved parties, develop appropriate goals, in compliance with applicable law (including section 2879 of the public authorities law, article fifteen-A of the executive law and section 6254(11) of the unconsolidated laws) and the Corporation's policy, for participation in the proposed project by minority group members and women. Compliance with laws and the Corporation's policy prohibiting discrimination in employment on the basis of age, race, creed, color, national origin, gender, sexual preference, disability or marital status shall be required.

Text of proposed rule and any required statements and analyses may be obtained from:

Stephen Gawlik, Deputy General Counsel, Urban Development Corporation d/b/a Empire State Development, 95 Perry Street, Suite 500, Buffalo, New York 14203, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

1. Statutory Authority: Section 9-c of the New York State Urban Development Corporation, as added by Chapter 174 of the Laws of 1968 (the Act)(Unconsolidated Laws § 6259-c) provides, in part, that the New York State Urban Development Corporation (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.

Section 12 of the Act provides that the Corporation shall have the right to exercise and perform its powers and functions through one or more subsidiary corporations.

Section 16-q of Part QQ of Chapter 57 of the Laws of 2008 provides for the creation of the upstate regional blueprint fund. The Upstate Empire State Development Corporation, a subsidiary of the Corporation, is authorized to provide financial, product development, or other assistance from such fund to eligible entities as set forth in this subdivision to support the upstate revitalization fund, and in support of such projects that focus on: intellectual capital capacity building; investment products; applied research and development; opportunities for foreign investment and international export; and infrastructure requirements to attract new businesses or expand existing businesses.

2. Legislative Objectives: Section 16-q of the Act, sets forth the Legislative intent of the Upstate Regional Blueprint Fund to provide financial assistance to eligible entities by supporting projects in Upstate New York that focus on: intellectual capital capacity building; investment products; applied research and development; opportunities for foreign investment and international export; and infrastructure requirements to attract new businesses or expand existing businesses. It further states such activities include but are not limited to: support for projects identified through region-wide collaborative efforts as part of the overall growth strategy for the local economy, including but not limited to smart growth and energy efficiency initiatives; support for the attraction or expansion of a business, including, but not limited to, those primarily engaged in activities identified as a strategic industry, and minority-owned and women-owned business enterprises as defined by subdivisions (c) and (g) of section nine hundred fifty-seven of the general municipal law; support for land acquisition and/or the construction, acquisition or expansion of buildings, machinery and equipment associated with a project; and support for projects identified as a city by city or regional blueprint priority.

The Legislative intent of Section 16-q of the Act is to assist business in Upstate New York in a time of great need and to promote the retention and creation of jobs and investment in the region.

The adoption of 21 NYCRR Part 4247 will further these goals by setting forth the types of available assistance, evaluation criteria, application and project process and related matters for the Upstate Regional Blueprint Fund.

3. Needs and Benefits: Chapter 53 of the Laws of 2008, page 884, lines 17 thru 27 allocates $120 million in capital funding to the Upstate Regional Blueprint Fund Program (the Fund) for regional economic development and revitalization. Many areas in the upstate economy show the effects of decades of economic decline. The scale of investments in infrastructure and in the development of strategic industries required to support growth is far beyond the ability of municipalities to undertake. The Fund would provide the necessary stimulus for strategic capital investment by both the public and private sectors.

The Fund allocation of $120 million in new capital spending could support approximately 1,405 construction-related jobs, generating an additional $66.7 million in personal income in upstate communities. The Corporation used the Implan® regional economic analysis system to model employment and personal income multipliers for construction spending to estimate the direct, indirect and induced jobs related to the Fund amounts assumed to be devoted to capital spending on infrastructure and construction-related activity. Implan® is used by a number of state and federal agencies to include the U.S. Forest Service and the U.S. Census Bureau. Over the past fifteen years, Implan® has grown to become the industry standard for determining the total economic outputs of an industry or specific project.

New York State may collect over $4 million in personal income tax and sales tax on income spending. To estimate the personal income tax revenues generated by this spending, the Corporation assumed the tax calculation for single or married filing separately on taxable income over $20,000, using the standard deduction and 6.85% on income over $20,000. Sales tax was estimated on taxable disposable income earned by wage earners. The Corporation assumed that 75% of gross income is disposable income and 40% of that is taxable.

This level of capital spending (assumed to be primarily on infrastructure and rehabilitation and new construction of facilities related to tourism, R&D, incubator space, technology parks, and central business district redevlopment) will provide the basis for significant follow-on investment in a broad range of high-growth economic activity.

4. Costs: The Fund as identified in Chapter 53 of the Laws of 2008, page 884, lines 17 thru 27 will be funded through the issuance of Personal Income Tax bonds. In addition to the interest costs, it is expected that fees and costs associated with issuing bonds, including the Corporation's fee, underwriting, banking and legal fees, will be approximately 1.6% of the total amount borrowed.

The costs to municipalities and other regulated parties involved would depend on the extent to which they participate in and support the proposed projects. For municipalities, this may involve matching funds or the commitment of other public resources for project development. Participation is voluntary and would be considered on a case-by-case basis depending on the location of the municipality involved.

5. Paperwork / Reporting: There are no additional reporting or paperwork requirements as a result of this rule on regulated parties. Standard applications used for most other Corporation assistance will be employed keeping with the Corporation's overall effort to facilitate the application process for all of the Corporation's clients. The rule provides that the Corporation may, however, require applicants to submit materials prior to submission of a formal application to determine if a proposal meets eligible criteria for Fund assistance.

6. Local Government Mandates: The Fund imposes no mandates - program, service, duty, or responsibility - upon any city, county, town, village, school district or other special district. To the contrary, the Fund offers local governments potentially enhanced resources, either directly or indirectly, to encourage economic and employment opportunities for their citizens. Participation in the program is optional; local governments that do not wish to be considered for funding do not need to apply.

7. Duplication: The regulations do not duplicate any existing state or federal rule.

8. Alternatives: The Fund proposed regulations provide for a variety of potential program outcomes, by type of assistance (loans, loan guarantees, and grants), eligible applicants (municipalities, industrial development agencies, local development companies, public authorities and public benefit corporations, private developers or businesses, and other entities), and eligible uses (planning, sewer and water systems, energy facilities, transportation facilities and systems, pipelines, land acquisition, demolition and site clearing, etc.)

The Fund criteria were developed through an extensive outreach process conducted by Upstate ESDC in Fall 2007. These seven, half-day regional blueprint sessions (1 in each Upstate economic development region designated as Western New York, Finger Lakes, Central New York, Southern Tier, North Country, Mohawk Valley, and Capital Region) gathered input from regional economic leaders across five categories: infrastructure, innovation, intellectual capital, international, and investment. After the meetings the input was summarized and used in design of the program.

The following are three examples of alternatives that were provided during the outreach portion of the rulemaking process. All of the suggestions offered were from members of the small business community and local governments who responded to the Corporations request for input. All of the suggestions were included in the rules and regulations submitted with this Regulatory Impact Statement.

1. Regulations should be drafted to give priority to projects in developed areas that use smart growth principles, and that promote energy efficiency and conservation.

Section 4247.3, Part (a) provides for "support for projects identified through collaborative efforts as part of the overall growth strategy for the local economy, including but not limited to, smart growth and energy efficiency initiatives."

2. Regulations should allow the Upstate program to include Suffolk County and the Hudson Valley/Catskill regions.

Section 4247.2, Part (e) states that "Upstate New York" shall mean the geographical area defined by the chairperson of the Urban Development Corporation, in consultation with the chairperson of the Corporation or if no such chairperson is appointed, the president of the Corporation, subject to approval by the board of directors of the Urban Development Corporation. The approved geographical area will be disseminated to eligible parties by the Urban Development Corporation's regional offices at the time of approval.

3. A streamlined application and reporting process is important to encourage small business participation.

ESDC uses one standard application for this, and many other economic development programs. The information required under Section 4247.6 "Application and project process" from all applicants is needed for the corporation to make sound investment decisions. Private financing institutions request similar, if not more robust information from their applicants.

9. Federal Standards: There are no minimum federal standards related to this regulation. The regulation is not inconsistent with any federal standards or requirements.

10. Compliance Schedule: The regulation shall take effect immediately upon adoption.

Regulatory Flexibility Analysis

1. Effects of Rule: "Small business" is defined by the State Economic Development law to be an enterprise with 100 or fewer employees. The vast majority - roughly 98 percent - of New York State businesses are small businesses.

We applied this criterion to ESD's models of the Upstate economy to determine how many small businesses could benefit from the Upstate Blueprint Fund. We limited the analysis to industries that are likely to have eligible businesses: manufacturing, transportation and warehousing, information, finance and insurance, professional and technical services, management of companies and enterprises, and arts, entertainment and recreation.

Across these 7 broad sectors our analysis indicates that approximately 40,000 small businesses will be eligible for funding under the Upstate Blueprint Fund.

In addition approximately 2,000 municipalities and local economic development-oriented organizations will be eligible for funding.

2. Compliance Requirements: There are no compliance requirements for small businesses and local governments in these regulations.

3. Professional Services: Applicants do not need to obtain professional services to comply with these regulations.

4. Compliance Costs: To the extent that there are existing capabilities at the local level to administer the projects funded through this program, there should be relatively little, if any additional administration costs.

5. Economic and Technological Feasibility: Compliance with these regulations should be economically and technologically feasible for small businesses and local governments.

6. Minimizing Adverse Impact: This rule has no adverse impacts on small businesses or local governments because it is designed to provide financing for discretionary and competitive economic development infrastructure projects. Reporting requirements for loans, loan guarantees, and grants are limited to those customary to effectuate financial due diligence for all parties.

7. Small Business and Local Government Participation: The National Federation of Independent Business, New York Farm Bureau, and the New York Conference of Mayors were consulted during this rulemaking and comments requested. In addition, 17 rural organizations, cooperatives, and agricultural groups and 10 local government associations were also notified.

ESDC received 10 responses to its outreach to interested parties on the proposed regulations. Much of the responses received consisted of general supporting statements for the programs or critique of the enabling legislation.

Listed are several comments received on the proposed rules related to the Upstate Regional Blueprint Fund and our response to the comment.

1. Regulations should be drafted to give priority to projects in developed areas that use smart growth principles, and that promote energy efficiency and conservation.

Section 4247.3, Part (a) provides for "support for projects identified through collaborative efforts as part of the overall growth strategy for the local economy, including but not limited to, smart growth and energy efficiency initiatives."

2. Regulations should clearly define "distressed communities" using specific, objective criteria.

Section 4247.2, Part (a) defines "Distressed Communities"

3. For the Upstate Regional Blueprint program, define "strategic industries."

Section 4247.3, Part (b) refers to a section of the General Municipal Law where "strategic industries" is defined.

4. Regulations should allow the Upstate program to include Suffolk County and the Hudson Valley/Catskill regions.

Section 4247.2, Part (e) states that "Upstate New York" shall mean the geographic area defined by the chairperson, in consultation with the chairperson of the upstate empire state development corporation, subject to approval by the board of directors of the Urban Development Corporation." These definitions are decided apart from the rulemaking process.

5. A streamlined application and reporting process is important to encourage small business participation.

ESDC uses one standard application for this, and many other economic development programs. The information required under Section 4247.6 "Application and project process" from all applicants is needed for the corporation to make sound investment decisions. Private financing institutions request similar, if not more robust information from their applicants.

6. Regulations should allow for municipal comments when the applicant is not a municipality.

Section 4247.5, Part (c) gives preference to projects with the "existence of significant support from the local business community, local government, community organizations, academic institutions and other regional parties."

Rural Area Flexibility Analysis

1. Types and Estimated Numbers of Rural Areas: Much of New York State is rural. According to the Executive Law § 481 (7), some 44 counties, all located in the ESD Upstate Region, are rural, defined as having a population less than 200,000. Portions of an additional 9 counties have certain townships with population densities of 150 persons or less per square mile. Only 10 counties - all Downstate - have no rural character, according to Executive Law.

We applied these criteria to ESD's models of the Upstate economy to determine how many rural businesses could benefit from the Upstate Blueprint Fund. We limited the analysis to industries that are likely to have eligible businesses: manufacturing, transportation and warehousing, information, finance and insurance, professional and technical services, management of companies and enterprises, and arts, entertainment and recreation.

Across these 7 broad sectors our analysis indicates that approximately 20,000 rural businesses will be eligible for funding under the Upstate Blueprint Fund. In addition approximately 2,000 municipalities and local economic development-oriented organizations will be eligible for funding.

2. Reporting, Recordkeeping and Other Compliance Requirements and Professional Services: The rule will not impose any new or additional reporting or recordkeeping requirements; no affirmative acts will be needed to comply; and, it is not anticipated that applicants will have to secure any professional services in order to comply with this rule.

3. Costs: The costs to municipalities and other regulated parties involved would depend on the extent to which they participate in and support the proposed projects. For municipalities, this may involve matching funds or the commitment of other public resources for project development.

4. Minimizing Adverse Impact: The purpose of the Upstate Regional Blueprint Fund program is to maximize the economic benefit of new capital investment in areas in need of economic revitalization. The program requires that such investments coordinate with local area comprehensive development plans in order to maximize its effectiveness and minimize any negative impacts. It also requires that cost-benefit analyses be completed to demonstrate the effectiveness of projects undertaken and contribute to the assessment of overall impact.

5. Rural Area Participation: This rule maximizes geographic participation by not limiting applicants to those only in urban areas or only in rural areas, except for the requirement that applicants must be in upstate counties. The extent of rural local government support and involvement for loan, loan guarantee, and grant project applicants are two of the criteria for project acceptance. A public hearing may also be required under the NYS Urban Development Corporation Act. The National Federation of Independent Business, New York Farm Bureau, and the New York Conference of Mayors were consulted during this rulemaking and comments requested. In addition, 17 rural organizations, cooperatives, and agricultural groups and 10 local government associations were also notified. Examples of questions that were received and the Corporation's answers to these questions include the following:

1. Regulations should be drafted to give priority to projects in developed areas that use smart growth principles, and that promote energy efficiency and conservation.

Section 4247.3, Part (a) provides for "support for projects identified through collaborative efforts as part of the overall growth strategy for the local economy, including but not limited to, smart growth and energy efficiency initiatives."

2. Regulations should allow the Upstate program to include Suffolk County and the Hudson Valley/Catskill regions.

Section 4247.2, Part (e) states that "Upstate New York" shall mean the geographic area defined by the chairperson, in consultation with the chairperson of the upstate empire state development corporation, subject to approval by the board of directors of the Urban Development Corporation." These definitions are decided apart from the rulemaking process.

3. A streamlined application and reporting process is important to encourage small business participation.

ESDC uses one standard application for this, and many other economic development programs. The information required under Section 4247.6 "Application and project process" from all applicants is needed for the corporation to make sound investment decisions. Private financing institutions request similar, if not more robust information from their applicants.

Job Impact Statement

These regulations will not adversely affect jobs or employment opportunities in New York State. The regulations are intended to improve the economy of Upstate New York through strategic investments in intellectual capital capacity building; investment products; applied research and development; opportunities for foreign investment and international export; and infrastructure requirements to attract new businesses or expand existing businesses.

There will be no adverse impact on job opportunities in the state.