This chapter prescribes the policies, procedures, and authorizations for providing financial assistance to eligible business projects from the Community Development Administration, an agency in the Division of Development Finance of the Department of Housing and Community Development. In this chapter, the following terms have the meanings indicated and as defined in the Act. Terms Defined. “Act” means Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland. “Administration” means the Community Development Administration, an agency in the Division of Development Finance of the Department of Housing and Community Development. “Borrower” means a recipient of any type of financial assistance from the Administration under this chapter. “Business project” means a project that is located in a priority funding area or an eligible opportunity zone and: Is acquired, owned, developed, constructed, reconstructed, rehabilitated, or improved by a person or an entity for the purposes of carrying on a business, whether or not for profit; or Is eligible for funding from the Neighborhood Business Development Fund under Housing and Community Development Article, §6-310, Annotated Code of Maryland. “Department” means the Department of Housing and Community Development, a principal department of the State. Development Costs. “Development costs” means the costs incurred in acquiring, developing, operating, and expanding a business that the Department considers reasonable and necessary for the project. “Development costs” includes the costs for: Acquisition of land, equipment, and machinery; Operating costs; Necessary studies, surveys, plans, and specifications; Architectural, engineering, or special services; Site preparation and development; Labor and materials for construction; Fees and closing costs incurred in connection with financing the project; Indemnity and surety bonds; Premiums on insurance; and Other costs the Administration deems reasonable and necessary. “Eligible opportunity zone” means an area designated as a qualified opportunity zone under §1400 Z-1 of the Internal Revenue Code that is located in Allegany County, Garrett County, Somerset County, or Wicomico County. Financial Assistance. “Financial assistance” means any form of assurance, guarantee, grant, payment, loan, loan participation, loan insurance, credit enhancement, or other assistance. “Financial assistance” includes a reduction in the principal obligation of, or in the rate of interest payable on, a loan or portion of a loan. “Nonprofit organization” means a corporation, foundation, or other entity that specifies in its charter or bylaws that no part of the net earnings may inure to the benefit of any private shareholder or individual holding any interest in the entity. “Priority funding area” means an area designated as a priority funding area under State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland. “Program” means the business lending program within the Administration. “Project” means a business project. “Secretary” means the Secretary of Housing and Community Development of Maryland. To qualify as an eligible recipient of financial assistance, an applicant shall: If a nonprofit organization, corporation, or partnership, be in good standing and qualified to do business in Maryland; Have the legal capacity and all necessary authorization to incur the obligations of the financial assistance; Own the project or have a valid contract to purchase or lease the project; Demonstrate credit worthiness and repayment ability acceptable to the Department; and Demonstrate the ability to complete and operate the project. To be eligible for financial assistance, business projects shall be: Properly zoned for the proposed use; If involving construction or renovation, rehabilitated, constructed, and operated in accordance with the applicable federal, State, and local building, zoning, environmental, health, and safety standards; and Licensed and registered as applicable. Financial assistance may be used for the development costs of a business project. The Administration shall establish interest rates and fees for the financial assistance based on the underwriting of each project. Terms for repayment of principal and interest shall be established based on the underwriting for each project. A loan shall be evidenced by a promissory note and secured by deed of trust or other security agreement in the form acceptable to the Administration. Financial assistance shall be disbursed in accordance with a draw schedule approved by the Administration, which may include releasing funds upon successful inspections. Borrowers shall pay any servicing fees, loan insurance premiums, bond insurance premiums, late charges, or other fees that the Administration or the loan insurer may require and that are permitted by State law. Escrow Accounts. The Administration may require the borrower to make monthly deposits with the Administration for real estate taxes, insurance, mortgage insurance premiums, a reserve for replacements, and other expenses of the project. Appraisal. Borrowers may be required to provide or pay for an appraisal performed by an appraiser acceptable to the Administration which shows the current value of the property and the expected value of the property after completion of the improvements. The Administration may require certified financial statements for all partners, corporate borrowers, or any other individuals or entities having an interest in the project, in a form acceptable to the Administration. The recipient of financial assistance shall agree not to sell, cease to own, assign, transfer, or dispose of all or any part of the business project or their interest in it, without the prior written consent of the Administration. Taxes and assessments against the property which are due and payable shall be paid at or before closing. The borrower shall maintain property, fire, and extended coverage insurance on the real and personal property comprising a project both during and after construction. If the project is located on real property in the 100-year flood plain, as designated by the United States Administration of Housing and Urban Development, the project shall be covered by a flood plain insurance policy. For all secured loans, the borrower shall provide a standard American Land Title Association (ALTA) Loan policy or other form of title policy approved by the Administration. The Administration may require the borrower to obtain any of the following types of insurance, depending on the size of the project and risks to the Administration: Owner's liability; Owner's property or hazard or contractor's builder's risk; Contractor's liability; Architect's errors and omissions; and Engineer's errors and omissions. All insurance required under this regulation shall meet the following requirements: Be written by a company registered with the Maryland Insurance Administration; Name the Administration as an additional insured; Be in force at the time of closing; Not be terminable without prior notification to the Administration; Be in force for the duration of the financial assistance; and Contain such other terms and coverage satisfactory to the Administration. In addition to a promissory note and security agreement, the Administration may require the borrower to execute or provide additional loan documents, which may include any of the following: A loan agreement; An agreement and declaration of covenants and restrictions; A disbursement agreement; A guaranty of completion or loan payments; A completion assurance agreement; An assignment of the construction contract; An opinion of borrower's counsel; An opinion of contractor's counsel; A contractor's letter and certification; An assurance of compliance with civil rights requirements; A fair practices certification; and Such other documents as the Administration may find it desirable or necessary to require. The Administration, at its sole discretion, may require additional security or collateral from the borrower to assure completion of the construction of the project or repayment of the loan. The collateral may be in the form of one or more of the following: A cash escrow; A letter of credit in an amount and form and from a financial institution acceptable to the Administration; Depository accounts pledged to the Administration; Performance and payment bonds from a surety acceptable to the Administration; A completion assurance agreement executed by the borrower and backed by some form of monetary collateral; A guaranty of completion or loan payments, or both, executed by a third party who is financially able and willing to back the guarantee by some collateral acceptable to the Administration; A pledge of the developer's fee; or Other collateral acceptable to the Administration. Credit Enhancement. After consideration of underwriting and the requirements of any bond issuance, the Administration shall determine and notify the borrower whether the borrower will be required to insure or guarantee the proposed loan, or otherwise insure or enhance the bonds financing the loan. If required by the Administration, the borrower shall engage a credit enhancer and secure a commitment to insure or guarantee the proposed loan, or otherwise insure or enhance any bonds financing the loan. The borrower shall comply with any conditions of the insurance or guarantee commitment so that the insurance or guarantee will be in effect from the time of loan closing, with respect to loan insurance, or from the time of the issuance of the bonds, with respect to bond insurance. Disclosure. All directors, officers, principals, members, general partners, and limited partners of the borrower shall be identified, and the proportionate share of each in the proposed project so indicated in the application. Subsequent changes in either a general partner, a limited partner having more than a 25 percent interest in the borrower, a managing member, or member owning more than a 20 percent interest in the borrower shall be subject to the written approval of the Administration. The borrower is responsible for providing any disclosure required by the Administration or any credit enhancer relating to the project, the borrower, the syndication, and the construction team. An application for financial assistance shall be submitted to the Department and shall be made upon standard forms prescribed by the Department. Each application shall: Be submitted by an eligible applicant as described in Regulation .03 of this chapter; Contain the applicant's organizational documents, including, as applicable, its articles of incorporation, bylaws, articles of organization, operating agreement, certificate of partnership, partnership agreement, or joint venture agreement; Contain a description of the project; Contain a description of all sources of funding the applicant has obtained for the project; Contain sufficient information to determine that the: Project is located in a priority funding area; Project is eligible in accordance with Regulation .04 of this chapter; and Terms and requirements of financial assistance as set forth in Regulation .05 of this chapter can be met; and Contain the following additional information: The estimated number and types of jobs to be created or retained by the project; The amount, size, and types of space to be created or retained; The cost of the project; A project budget identifying all sources and uses of funds; A pro forma showing anticipated project revenue, expenses, and debt service and other indebtedness of the project; Identification of the revenues which can be used to repay the financial assistance provided by the Administration; and Other information as the Administration may request. Application Evaluation. Each application submitted shall be reviewed by the Administration to determine whether all of the information required is contained in the application. Upon submission of all required information, the Administration shall undertake an analysis of each application and make a recommendation to the Secretary as to whether, in accordance with this section, a project is eligible for financial assistance, the amount of financial assistance, and any special terms and conditions for a project. The Administration may take the information set forth in an application and the following factors into consideration in recommending an award of financial assistance: The ratio of Program and other State funds to both private and other non-State public funds; The relationship of a project to area revitalization plans, efforts, and strategies; The capability of an applicant to administer a project; The potential of the business to serve the needs of the priority funding area in which it is situated; and Other factors which the Administration determines are desirable in fostering commercial and economic revitalization within a local jurisdiction. Approval of Applications. The Administration shall evaluate each application for financial assistance. If the Administration recommends approval of a project for financial assistance, the Administration shall present the project to the Secretary. The Secretary shall approve, disapprove, or approve with modifications all financial assistance to be provided under the Program. The Secretary, in the sole discretion of the Secretary, may delegate to an authorized officer of the Department and Administration the authority to recommend approval, approve, disapprove, or approve with modifications financial assistance provided under the Program. Rejection of Applications. If the Administration does not recommend approval of a project for financial assistance, the Administration shall issue a written notice of rejection with an evaluation and explanation for rejection. Reconsideration. An applicant may request reconsideration of a rejection by submitting a written request, to the Secretary, which is received within 30 days following the date of the rejection notice. The request for reconsideration shall address each reason for the rejection and provide documentation supporting reasons for reconsideration of the issues. The Secretary shall respond in writing to the applicant's request for reconsideration within 30 days of receipt by the Secretary of the request for reconsideration. An initial decision or reconsideration of a decision is not a contested case within the meaning of the Administrative Procedure Act or COMAR 05.01.01.02. The Secretary, in the sole discretion of the Secretary, may delegate to an authorized officer of the Department the authority to approve, disapprove, or approve with modifications a request for reconsideration of a rejection under the Program. Closing. The closing of an award of financial assistance shall be scheduled at a time acceptable to the Department and the Office of the Attorney General. Disbursement of Financial Assistance. Financial assistance may be disbursed in accordance with the terms and conditions set forth in the financial assistance documents. Applicants, contractors, and subcontractors shall maintain such books, accounts, and records and shall file with the Department such financial and other reports as the Department may from time to time require. All of the books, accounts, and records under §A of this regulation shall be open to the inspection of representatives of the Department or other agencies of the State during reasonable working hours. Books, accounts, and records of contractors and subcontractors shall be maintained and made available for inspection for 3 years past the date of termination of the contractual relationship between the contractor and the applicant. The Administration may establish from time to time detailed Program guidelines containing underwriting standards, processing requirements, and other requirements or matters relating to providing financial assistance. The Department may charge and collect from an applicant or recipient of financial assistance under this title: Origination, application, and processing fees; and Any other charges, fees, or reimbursements incidental to a project application or providing financial assistance. The Department shall ensure that Program guidelines, fee information, and application forms are publically available on its website and at its offices. The Administration may: Sell, assign, or otherwise dispose of all or a portion of any Program loan or revenue from a loan on terms and conditions acceptable to the Administration; and Pledge a program loan as security for any: Business project loan, bond, or security that is issued, made, or purchased by Administration under Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland; or Insurance, guaranty, or credit enhancement on a program loan or bond issued to fund a program loan. An applicant or contractor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, physical or mental disability, sexual orientation, or age, except with regard to age as permitted under the federal Housing for Older Persons Act, as amended from time to time, or other similar federal laws, in leasing or otherwise providing dwelling accommodations or in any other aspect of the development, administration, or operation of any project or undertaking financed or assisted under the Program, or in any aspect of employment by any sponsor, developer, or contractor in the construction, repair, or maintenance of any property financed or assisted under the Program. An applicant or contractor shall comply with all applicable federal, State, and local laws and Department policies and programs regarding discrimination, equal opportunity in employment, housing, and credit practices, and drug-free and alcohol-free workplaces, including: Title VI and VII of the Civil Rights Act of 1964, as amended; Title VIII of the Civil Rights Act of 1968, as amended; The Fair Housing Amendments Act of 1988, as amended; The Department’s Minority Business Enterprise Program, as amended; Executive Order 01.01.1989.18, Drug and Alcohol Free Workplace, and any Department or State regulations adopted or to be adopted to carry out the requirements of that Order; State Government Article, Title 20, Annotated Code of Maryland, as amended; and The Americans with Disabilities Act of 1990, as amended. Covenants implementing the requirements of this regulation, including affirmative action measures, shall be included in appropriate agreements between the Administration and other parties. The Secretary may waive or vary provisions of these regulations to the extent that the waiver or variance is consistent with the Act and if, in the written determination of the Secretary, the application of a regulation in a specific case or in an emergency situation would be inequitable or contrary to the purposes of the Act. An applicant or recipient of financial assistance who knowingly makes or causes to be made a false statement or report, whether in the nature of an understatement or overstatement of financial condition or any other fact material to the Department's action, shall be subject to immediate acceleration of the loan, in addition to the criminal penalties authorized by the Act. Housing and Community Development Article, §§2-111 and 3-206 and Title 4, Subtitle 2, Annotated Code of Maryland Effective date: July 16, 2020 (47:14 Md. R. 674)