# COMAR Title 05 — Department of Housing and Community Development

## Subtitle 15 — State Action Loans for Targeted Areas

### Chapter 01 — State Action Loans for Targeted Areas Program

**Authority:** Housing and Community Development Article, §§2-102 and 2-111, Annotated Code of Maryland; Chapter 654, Acts of 1996

**Administrative History:** Effective date:

**Administrative History:** Regulations .01—.17 adopted as an emergency provision effective

**Administrative History:** October 31, 1988 (15:24 Md. R. 2760); emergency status extended at 16:10 Md. R. 1101; adopted permanently effective August 7, 1989 (16:15 Md. R. 1650)

**Administrative History:** Chapter revised effective April 15, 1991 (18:7 Md. R. 771)

**Administrative History:** Regulation .03B amended effective February 1, 1993 (20:2 Md. R. 111)

**Administrative History:** Regulation .15B amended effective February 1, 1993 (20:2 Md. R. 111)

**Administrative History:** Chapter recodified from COMAR 05.07.04 to COMAR 05.15.01 effective September 6, 1999 (26:18 Md. R. 1373)

**Administrative History:** Chapter revised effective September 6, 1999 (26:18 Md. R. 1373)

**Administrative History:** Regulation .12 amended effective March 16, 2015 (42:5 Md. R. 485)

#### Regulation .01 General.

*COMAR 05.15.01.01*

These regulations prescribe the policies, procedures, and authorizations for administering existing loans under the State Action Loans for Targeted Areas Program.

#### Regulation .02 Objectives.

*COMAR 05.15.01.02*

The objectives of the Program are to provide financial assistance for the purposes of:

A. Creating housing and jobs in targeted areas through support of private sector initiatives;

B. Promoting commercial redevelopment and economic revitalization efforts in targeted areas;

C. Supporting retention of housing stock and existing businesses;

D. Providing a source of funds for emergency housing and business assistance;

E. Supporting development efforts for projects undertaken jointly by the public and private sectors; and

F. Providing financial assistance for projects which would not be undertaken otherwise.

#### Regulation .03 Definitions.

*COMAR 05.15.01.03*

A. In this chapter, the following terms have the meanings indicated.

B. Terms Defined.

  (1) “Act” means Housing and Community Development Article, §§2-102 and 2-111, Annotated Code of Maryland, as amended.

  (2) “Administration” means the Community Development Administration of the Division of Development Finance, a division of the Department.

  (3) “Area” means a geographic area within a local jurisdiction described by a closed perimeter boundary.

  (4) “Business entity” means a person operating or conducting a trade or business.

  (5) “County” means any of the 23 counties of this State and the Mayor and City Council of Baltimore.

  (6) “Department” means the Department of Housing and Community Development, a principal department of the State.

  (7) “Emergency housing” means short term or temporary housing, the demand for which arises out of a natural disaster declared by the Governor of the State or certified by the appropriate State or federal agency. “Emergency housing” does not include shelter for the homeless, battered men or women, or for other special populations.

  (8) “Family” means all individuals who occupy a housing unit including individuals who are related by birth, marriage, or adoption, one person living alone, or any other group of related or unrelated individuals who share living arrangements.

  (9) “Fiduciary representative” means a legal entity designated by a local jurisdiction and approved by the Department to receive and disburse on behalf of the Department, the financial assistance provided by the Program.

  (10) “Financial assistance” means any form of assurance, guarantee, payment, credit enhancement, or other assistance, and may include a loan, loan guarantee (including insurance and coinsurance), reduction in the rate of interest payable on a loan or portion of a loan, and prepayment of interest on a loan or portion of a loan. “Financial assistance” does not include grants.

  (11) “Financial assistance documents” means those documents executed by and among the local jurisdiction, sponsor, and the Department which set forth the terms and conditions of financial assistance under the Program.

  (12) “Fund” means the State Action Loans for Targeted Areas Fund.

  (13) “Housing Finance Review Committee” means the Housing Finance Review Committee established pursuant to Housing and Community Development Article, §4-208, Annotated Code of Maryland, as amended.

  (14) “Legal entity” means a corporation, association, general partnership, limited partnership, joint venture, organization, business, government or political subdivision thereof, or governmental agency.

  (15) “Local jurisdiction” means a county or municipality.

  (16) “Long-term leasehold interest” means a lease for a period at least 3 years longer than the repayment period of any financial assistance.

  (17) “Low-income persons” means an individual or household whose income does not exceed 60 percent of the State or area wide income for a household of like size.

  (18) “Minor rehabilitation” means nonstructural improvements to interior or exterior of buildings, including but not limited to such items as facade improvements or repair of signage, doors, windows, trims, cornices, siding, awnings, roofing, interior walls, and ceilings.

  (19) “Moderate-income persons” means an individual or household whose income does not exceed 80 percent of the State or area-wide median income for a household of like size.

  (20) “Municipality” means a municipal corporation subject to the provisions of the State Constitution, Article XI-E.

  (21) “Nonprofit organization” means a:

    (a) Legal entity no part of the earnings of which inures to the benefit of any private shareholder or individual holding an interest in that entity; or

    (b) Limited partnership if:

      (i) Each of the general partners qualifies as a nonprofit organization, or

      (ii) The limited partnership is a wholly owned subsidiary of a nonprofit organization,

      (iii) The limited partnership is formed for the purpose of undertaking a SALT project that is eligible in whole or in part for federal programs or incentives, including low-income housing tax credits, and

      (iv) An organization that meets the criteria set forth in §B(23)(a) of this regulation is managing the project or will be the recipient of net cash flow or the residual sale proceeds upon sale of the project.

  (22) “Program” means the State Action Loans for Targeted Areas Program (SALT).

  (23) “Program funds” means monies from the Program that are used to provide financial assistance.

  (24) “Program income” means any interest or other form of income generated by the Fund.

  (25) “Project” means a residential, commercial, industrial, or mixed-use development which qualifies for financial assistance under the Program.

  (26) “Reasonable proximity” means that the location of a project in relation to a targeted area is such that the project has a substantial impact on the provision of jobs, housing, or overall commercial revitalization to a targeted area, but a project may not be located more than 1/2 mile from the boundary of a targeted area.

  (27) “Secretary” means the Secretary of Housing and Community Development.

  (28) “Sponsor” means any individual, local jurisdiction, legal entity, or nonprofit organization, that is eligible to receive financial assistance under the Program.

  (29) “Targeted area” means an area which has been designated in accordance with Regulation .10 of this chapter.

#### Regulation .04 Eligible Sponsors.

*COMAR 05.15.01.04*

Sponsors shall meet the following minimum requirements to be eligible to apply for financial assistance under the Program:

A. If a sponsor is a legal entity other than a local jurisdiction, be in good standing and qualified to do business in Maryland;

B. Have the legal capacity and all necessary legal authority to incur the obligations involved in the form of financial assistance provided under the Program; and

C. Demonstrate site control as evidenced by the following:

  (1) Own the project,

  (2) Have a long-term leasehold interest in the project,

  (3) Have a valid sales contract to purchase the project,

  (4) Have an option on or agreement of understanding acceptable to the Department to purchase the project, or

  (5) Have some other form of interest in the project acceptable to the Department.

#### Regulation .05 Eligible Uses.

*COMAR 05.15.01.05*

A. Financial assistance may be used for:

  (1) Loans for project development costs including, but not limited to:

    (a) The acquisition of land, structures, equipment, or furnishings which are or will be a part of a project;

    (b) Reasonable fees, as determined by the Program, for architectural, engineering, legal, or other special services;

    (c) Preparation of title binders, surveys, plans, and specifications as approved by the program;

    (d) Special studies such as:

      (i) Market and feasibility studies,

      (ii) Property appraisals,

      (iii) Test borings, and

      (iv) Other studies acceptable to the Department;

    (e) Site preparation and extension of utilities on-site;

    (f) Cost of labor and materials for new construction or rehabilitation or installation of improvements as set forth in approved plans and specifications for a project;

    (g) Acquisition of machinery and equipment necessary to the operation of a commercial/industrial enterprise as set forth in approved plans and specifications;

    (h) Indemnity and surety bonds;

    (i) Premiums on hazard, liability, title, and mortgage insurance;

    (j) Necessary fees, licenses, and permits related to construction, project review, and approval;

    (k) Payment and performance bonds;

    (l) Other direct project costs and fees acceptable to the Department;

  (2) Assurances, guarantees, loan guarantees, or other credit enhancement;

  (3) Buy-down of the rate of interest payable on a loan or a portion of a loan made by a third party;

  (4) Prepayment of interest on a loan or portion of a loan.

B. The Fund may be used to pay the expenses of the Program.

#### Regulation .06 Eligible Projects.

*COMAR 05.15.01.06*

A. In order to be eligible for financial assistance, a project shall satisfy the following requirements:

  (1) The project is located within the State;

  (2) The project is located in a targeted area or in reasonable proximity to a targeted area;

  (3) The project has a commitment of monies from private, local, federal, or other State funds so that upon receipt of financial assistance under the Program there will be adequate funding to assure completion of the project;

  (4) The project will not be feasible but for the financial assistance from the Program and the financial assistance from the Program may not exceed:

    (a) 50 percent of the project costs anticipated to be financed with private funds or public funds not appropriated by the State, or

    (b) 60 percent of the project costs anticipated to be financed with private funds or public funds not appropriated by the State when funds from the federal Small Cities Community Development Block Grant Program for nonentitlement jurisdictions will be used to pay for a portion of project costs;

  (5) The local jurisdiction in which the project is located has agreed to make a material and substantial contribution to the project contributed pursuant to the provisions of Regulation .07 of this chapter;

  (6) The financial assistance requested is the least amount of money necessary to complete the project as determined by the Department;

  (7) Financial assistance provided by the Program will not be used as a local jurisdiction's contribution to a project, nor shall the financial assistance be used as a local match for other State assistance programs;

  (8) The projected operating income and expense statements for the project show income sufficient to repay on schedule any loans authorized or guaranteed by the Program;

  (9) The project will not facilitate the relocation of industrial plants or commercial facilities from one area within the State to another;

  (10) Upon completion, the project will be in compliance with all applicable zoning requirements and standards as well as the applicable building code of the local jurisdiction in which the project is located.

B. Projects funded in whole or in part with monies from the Administration also shall constitute a community development project or public purpose project as defined in Housing and Community Development Article, Title 4, Subtitle 2, Annotated Code of Maryland, as amended.

#### Regulation .07 Local Contributions.

*COMAR 05.15.01.07*

A. The local jurisdiction in which the proposed project is situated shall make or agree to make a local contribution which materially reduces the development costs or operating costs, or otherwise significantly supports the project.

B. In evaluating the local contribution for the project, the Department shall take into consideration the significance of the local contribution in relation to the:

  (1) Local jurisdiction's ability to contribute; and

  (2) Needs of the project.

C. A local contribution may be a contribution which:

  (1) Reduces development costs, such as:

    (a) The donation or leasing of a site,

    (b) Capital funds for acquisitions, construction, rehabilitation, or development costs, and

    (c) Locally installed infrastructure which reduces off-site costs attributable to the project;

  (2) Reduces operating costs, such as:

    (a) Real estate tax deferral, abatement, or payment instead of taxes,

    (b) Operating subsidies for the project, or

    (c) Long-term agreements for a local government to provide services at no cost to a project such as trash collection, road maintenance, or grounds care;

  (3) Otherwise supports a project such as:

    (a) Allocation of rent subsidies,

    (b) Guarantees of deficits or completion of construction,

    (c) Long-term provision of needed social services for special use projects, or

    (d) Sponsorship or solicitation of local or community services, materials, or funds which benefit the project and make a material impact on the feasibility of a project and which may, in some cases, be acceptable local contributions.

D. Local Contributions.

  (1) Local jurisdictions whose taxes are below tax capacity and which do not have access to discretionary federal funds are expected to contribute directly of their own assets.

  (2) The Department's preferred local contributions are:

    (a) Donation of, or long-term leasing of, land and buildings;

    (b) Contribution of capital funds from local appropriations or discretionary federal funds;

    (c) Locally installed infrastructure and site improvements; or

    (d) Real estate tax deferral, abatement, or payment instead of taxes.

E. Less Preferred Type of Contribution. If a political subdivision can demonstrate that it is taxing at capacity, does not have discretionary surplus funds, and does not have discretionary federal resources to allocate to specific projects, it may provide a less preferred type of contribution such as:

  (1) Sponsorship or solicitation of local services, materials, or funds for the benefit of the project;

  (2) Guarantee of construction;

  (3) Assistance with or packaging of a successful project-specific award of federal funds; and

  (4) Long-term provision of local services such as trash collection, road or grounds maintenance, or necessary social services.

F. Other Local Resources and Assets.

  (1) Local resources and assets are preferred sources for contributions when the local jurisdiction has total discretion in allocating the resources.

  (2) Federal funds such as Housing Development Action Grants and Urban Development Action Grants, or federal subsidies such as §8 Moderate Rehabilitation, which are awarded at the federal level for a specific project, may not be eligible to be used as a local contribution unless the local jurisdiction qualifies to make a less preferred type of contribution under §D of this regulation, and is instrumental in the application for and administration of the federal resources.

  (3) Local contributions which are made in conjunction with grants from the Department's Small Cities Community Development Block Grant Program may be counted toward or may satisfy the local contribution requirement if the grant is used for the project.

  (4) Other State funds may not be permitted as a local contribution even if the local government has discretion in allocating the funds.

#### Regulation .08 Terms and Conditions of Financial Assistance.

*COMAR 05.15.01.08*

A. The local jurisdiction in which a project is located shall make a material and substantial contribution to the project which may take the form of:

  (1) Cash;

  (2) A site for a project;

  (3) Provision of or improvements to on-site project-related facilities;

  (4) Provision of or improvements to off-site facilities such as related streets, utilities, or other public improvements;

  (5) Payment of predevelopment costs such as market studies, preliminary architectural or site plans, engineering studies, or feasibility studies; and

  (6) A tax abatement or waiver of taxes or fees imposed by a local jurisdiction.

B. The Department will determine on a case-by-case basis what constitutes a material and substantial contribution by a particular local jurisdiction and what form the contribution may take.

C. Security. The security or collateral to assure repayment of financial assistance shall be acceptable to the Department and may be:

  (1) A mortgage lien;

  (2) A cash escrow;

  (3) A letter of credit;

  (4) A pledge of depository accounts;

  (5) A pledge of accounts receivable;

  (6) An assignment of income;

  (7) A pledge of syndication proceeds; or

  (8) Any other form of security or collateral acceptable to the Department.

D. Repayment. The principal and interest of a loan made or guaranteed under the Program shall:

  (1) Be repayable out of revenues specified by a sponsor;

  (2) Bear interest at a rate determined to be necessary and reasonable for the project which in exceptional circumstances and at the discretion of the Secretary may be as low as zero percent; and

  (3) Be repayable in accordance with a schedule determined by the Department and may, at the discretion of the Secretary, be on a deferred payment schedule.

E. Default. In the event of default, the Department shall have the right to modify the rate of interest, the time or amount of payment, or any other term of financial assistance in order to ensure repayment and achieve the purposes of the Program.

F. Insurance.

  (1) Multi-Peril Insurance. The sponsor shall maintain fire and extended coverage insurance on the project both during and after construction or rehabilitation. The insurance coverage shall include such endorsements as the Department may require, including:

    (a) Collapse;

    (b) Explosion;

    (c) Loss of rents; and

    (d) Vandalism.

  (2) Liability Insurance. Comprehensive general liability insurance shall be maintained with such endorsements as the Department may require, both during and after construction or rehabilitation of a project.

  (3) Flood Insurance. If the project is located on real property which is in the 100-year flood plain, as designated by the United States Department of Housing and Urban Development, the project shall be covered by a flood plain insurance policy. Before closing of financial assistance for a project, permits shall be secured from the Maryland Department of Natural Resources and the political subdivision in which the project is located.

  (4) Contractor's Insurance. If a project involves construction or rehabilitation of a building or improvements of any kind, the general contractor shall provide insurance coverage for comprehensive public liability, property damage, and workers' compensation in form and amounts required by the Department.

  (5) Other Insurance. The sponsor shall provide at closing of the financial assistance such other insurance as the Department may require, including builder's risk, boiler insurance, comprehensive automobile liability, and broad form workers' compensation.

  (6) Terms and Conditions. Insurance coverage shall meet the following minimum requirements plus any additional requirements which may be set by the Department:

    (a) Be provided by:

      (i) Companies or other legal entities which are authorized to transact business in the State and which are reputable and financially sound, as determined by the Department, or

      (ii) With respect to local jurisdictions, self-insurance programs acceptable to the Department;

    (b) To the extent applicable, be in force upon the closing of the financial assistance;

    (c) To the extent applicable, contain a standard mortgagee endorsement attached to or printed in the policy naming the Department as mortgagee;

    (d) To the extent required by the Department, name the Department as loss payee and additional insured;

    (e) Provide for notification to the Department before termination; and

    (f) Contain terms and coverage satisfactory to the Department.

  (7) Projects seeking financial assistance for minor rehabilitation may not be required to maintain multi-peril insurance, liability insurance, or flood insurance unless the Department, in its discretion, feels that the insurance is necessary.

#### Regulation .09 Limitations on Financial Assistance.

*COMAR 05.15.01.09*

Any interest earned on Program funds held by a sponsor or local jurisdiction shall be considered Program income and shall be returned to the Department in accordance with the terms specified in the financial assistance documents.

#### Regulation .10 Books and Accounts.

*COMAR 05.15.01.10*

Sponsors, local jurisdictions, 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 these books, accounts, and records 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 sponsor and local jurisdiction.

#### Regulation .11 Fees and Charges.

*COMAR 05.15.01.11*

If the form of financial assistance is a loan or guarantee of a loan, the Department may charge a local jurisdiction or sponsor an administrative fee, which may be financed by the loan, to cover the costs of making, servicing, or settling a loan.

#### Regulation .12 Nondiscrimination; Drug and Alcohol Free Workplace.

*COMAR 05.15.01.12*

A. Neither local jurisdictions nor sponsors may 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 any aspect of the Program, or in any aspect of employment by any local jurisdiction or sponsor in connection with any project financed or assisted under the Program.

B. Each local jurisdiction and sponsor shall comply with all applicable federal, State, and local laws and Department policies and programs regarding discrimination and equal opportunity in employment, housing, credit practices, and drug and alcohol free workplaces, including:

  (1) Titles VI and VII of the Civil Rights Act of 1964, as amended;

  (2) Title VIII of the Civil Rights Acts of 1968, as amended;

  (3) The Fair Housing Amendments Act of 1988, as amended;

  (4) State Government Article, Title 20, Annotated Code of Maryland, as amended;

  (5) The Department’s Minority Business Enterprise Program, as amended;

  (6) The Governor’s 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 that Order; and

  (7) The Americans with Disabilities Act of 1990, as amended.

C. Covenants implementing these requirements, including affirmative action measures, shall be included in appropriate agreements between the Department and other parties.

#### Regulation .13 Waiver.

*COMAR 05.15.01.13*

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.

#### Regulation .14 False Statements.

*COMAR 05.15.01.14*

A. A person may not knowingly make or cause to be made any false statement or report in any document required to be furnished to the Department by any agreement relating to financial assistance.

B. A person applying for or benefiting from financial assistance under the Program may not knowingly make or cause to be made any false statement or report for the purpose of influencing the action of the Department on an application or for the purpose of influencing the action of the Department affecting financial assistance already provided.

C. A person who violates §A or B of this regulation shall be subject to the following penalties:

  (1) Immediate cancellation or acceleration of the form of financial assistance provided by the Program; and

  (2) Guilty of a misdemeanor and upon conviction shall be subject to a fine not exceeding $50,000, or imprisonment not exceeding 5 years, or both.

#### Regulation .15 Severability.

*COMAR 05.15.01.15*

The provisions of these regulations are severable. A judgment by any court of competent jurisdiction finding or declaring that any provisions of these regulations or the application of any provision to a person or circumstance is invalid, does not affect the validity of the remaining provisions of the regulations or any other application of these regulations which may be taken by the Secretary.