EMERGENCY 
 RULES 
 
 An agency may adopt a new or amended section or repeal an existing section on 
an emergency basis if it determines that such action is necessary for the public 
health, safety, or welfare of this state. The section may become effective 
immediately upon filing with the  Texas Register, or on a stated date less than 
20 days after filing and remaining in effect no more than 120 days. The 
emergency action is renewable once for no more than 60 additional days. 
  Symbology in amended emergency sections. New language added to an existing 
section is indicated by the use of  bold text. [Brackets] indicate deletion of 
existing material within a section. 
 
   
  TITLE 10. COMMUNITY DEVELOPMENT 
 Part I. Texas Department of Housing and Community Affairs 
  Chapter 9. Texas Community Development Program 
  
  Subchapter A. Allocation of Program Funds 
 
  10 TAC sec.9.1, sec.9.7 
 
  The Texas Department of Housing and Community Affairs (TDHCA) adopts on an 
emergency basis amendments to sec.9.1 and sec.9.7, concerning the application, 
the selection criteria, and the deletion of the small business incubator program 
and loan program for the Texas Capital Fund Program under the Texas Community 
Development Program. In addition, the amendments address the expanded role of 
the Texas Department of Commerce in the Texas Capital Fund Program. 
 The amendments are adopted on an emergency basis to ensure that Texas residents 
will have timely access to federal funds available under the Community 
Development Block Grant Program (CDBG) (42 United States Code, sec.sec.5301 et 
seq). The emergency rule is in conformance with the requirements of the CDBG 
statute and complies with 42 United States Code, sec.5305. 
 The amendments are adopted on an emergency basis under Texas Government Code, 
Chapter 2306, sec.2306.053(b)(4) and sec.2306.098(b), which authorizes the 
Department of Housing and Community Affairs to adopt rules to implement the CDBG 
program in Texas. 
 
 
  sec.9.1. General Provisions. 
 
  (a) Definitions and abbreviations. The following words and terms, when used in 
this subchapter, shall have the following meanings, unless the context clearly 
indicates otherwise. 
 
  (1) (No change.) 
   
  (2) Application-A written request for Texas Community Development Program 
funds in the format required by the Department <nl>or by the Texas Department of 
Commerce for Texas Capital Fund applications. 
   
  <nl>(3) Commerce-The Texas Department of Commerce. 
   
  <nl>(4)<ol>[(3)] Community Development Block Grant nonentitlement area funds-
The funds awarded to the State of Texas pursuant to the Housing and Community 
Development Act of 1974, Title I, as amended, (42 United States Code, 
sec.sec.5301 et seq) and the regulations promulgated thereunder in 24 Code of 
Federal Regulations, Part 570. 
   
  <nl>(5)<ol>[(4)] Community-A unit of general local government. 
   
  <nl>(6)<ol>[(5)] Contract-A written agreement, including all amendments 
thereto, executed by the Department and contractor which is funded with 
community development block grant nonentitlement area funds. 
   
  <nl>(7)<ol>[(6)] Contractor-A unit of general local government with which the 
Department has executed a contract. 
   
  <nl>(8)<ol>[(7)] Department-The Texas Department of Housing and Community 
Affairs. 
   
  [(8) Incubator-An incubator or small business incubator is defined as a 
facility within which small businesses share space, equipment, and support 
personnel and have access to professional consultants for advice related to the 
technical and management aspects of conducting a commercial enterprise. 
   
  [(9) Incubator sponsor-A nonprofit organization or entity including a quasi-
governmental entity, a junior college, an institution of higher learning as 
defined by the Education Code, sec.61.003, a private college or university, a 
small business development center, a development corporation created under state 
law, or a research and development authority established under Texas Local 
Government Code, Chapter 382, that enters into a written agreement with the 
applicant to establish, operate, and administer a small business incubator. ] 
   
  <nl>(9)<ol>[(10)] Local government -A unit of general local government. 
   
  <nl>(10)<ol>[(11)] Low- and moderate-income person-A member of a family which 
earns less than 80% of the area median family income, as defined under the 
United States Department of Housing and Urban Development Section 8 Assisted 
Housing Program. 
   
  <nl>(11)<ol>[(12)] Nonentitlement area-An area which is not a metropolitan 
city or part of an urban county as defined in 42 United States Code, sec.5302. 
   
  <nl>(12)<ol>[(13)] Permanent job <nl>/permanent full-time job  -A permanent 
position for which continuation of employment is not dependent on funds provided 
through the Texas Community Development Program. 
 
  <nl>(A) A full-time job is defined as employment for 1,820 hours or more per 
year or 35 hours or more per week per person annualized. 
   
  <nl>(B) A permanent seasonal job is defined as employment of less than 1,820 
hours annually and which provides a salary that meets or exceeds 50% of the 
county median income per person. 
   
  <nl>(C) A part-time job is defined as employment for less than 1,820 hours per 
year and 20-34 hours per week per person annualized. 
     
  <nl>(13)<ol>[(14)] Poverty-The current official poverty line established by 
the Director of the Federal Office of Management and Budget. 
   
  <nl>(14)<ol>[(15)] Primary beneficiary -A low- or moderate-income person. 
   
  <nl>(15)<ol>[(16)] Regional review committee-A regional community development 
review committee, one of which is established in each of the 24 state planning 
regions established by the governor pursuant to Texas Local Government Code, 
sec.391.003. 
   
  <nl>(16)<ol>[(17)] Slum or blighted area-An area which has been designated a 
state enterprise zone, or an area within a municipality or county that is 
detrimental to the public health, safety, morals, and welfare of the 
municipality or county because the area: 
 
  (A) has a predominance of buildings or other improvements that are 
dilapidated, deteriorated, or obsolete due to age or other reasons; 
   
  (B) is prone to high population densities and overcrowding due to inadequate 
provision for open space; 
   
  (C) is composed of open land that, because of its location within municipal or 
county limits, is necessary for sound community growth through replatting, 
planning, and development for predominantly residential uses; or 
   
  (D) has conditions that exist due to any of the causes enumerated in 
subparagraphs (A)-(C) of this paragraph or any combination of those causes that: 
 
  (i) endanger life or property by fire or other causes; or 
   
  (ii) are conducive to: 
 
  (I) the ill health of the residents; 
   
  (II) disease transmission; 
   
  (III) abnormally high rates of infant mortality; 
   
  (IV) abnormally high rates of juvenile delinquency and crime; or 
   
  (V) disorderly development because of inadequate or improper platting for 
adequate residential development of lots, streets, and public utilities. 
         
  <nl>(17)<ol>[(18)] Slum or blight, spot basis-A building which has been 
declared as a slum or blight and has multiple and unattended building code 
violations, and qualifies as slum or blighted on a spot basis under local law. 
   
  <nl>(18)<ol>[(19)] State review committee-The State Community Development 
Review Committee established pursuant to Texas Government Code, sec.2306.100. 
   
  <nl>(19)<ol>[(20)] Unemployed person-A person between the ages of 16 and 64, 
inclusive, who is not presently working but is seeking employment. 
   
  <nl>(20)<ol>[(21)] Unit of general local government-An entity defined as a 
unit of general local government in 42 United States Code, sec.5302(a)(1), as 
amended. 
     
  (b) Overview-Community Development Block Grant nonentitlement area funds are 
distributed by the Texas Community Development Program to eligible units of 
general local government in the following program areas: 
 
  (1)-(6) (No change.) 
   
  (7) Young v. Cisneros <ol> fund. <nl>The Texas Capital Fund is administered by 
Commerce under an interagency agreement with Department. Applications for the 
Texas Capital Fund shall be submitted to Commerce. 
     
  (c) Types of applications. 
 
  (1) (No change.) 
   
  (2) Multi jurisdiction applications. Subject to each participating community 
satisfying the application requirements of the Texas Community Development 
Program fund under which the application is submitted and this paragraph, an 
application will be accepted from two or more units of general local government 
if the application clearly demonstrates that the proposed activities will 
mutually benefit the residents of the communities applying for funds. A multi-
jurisdiction application solely for administrative convenience will not be 
accepted. Any community participating in a multi-jurisdiction application may 
not submit a single jurisdiction application under the project fund for which 
the multi-jurisdiction application was submitted. One of the participating 
communities must be primarily accountable to the Department <nl>and Commerce, in 
instances where the Texas Capital Fund is accessed,<ol> for financial compliance 
and program performance. Only one unit of general local government may be the 
official applicant and this applicant must enter into a legally binding 
cooperation agreement with each participant that incorporates Texas Community 
Development Program requirements. A proposed project which is located in more 
than one jurisdiction or in which beneficiaries from more than one jurisdiction 
will be counted must be submitted as a multi-jurisdiction application (except as 
specified for the Texas Capital Fund and single jurisdiction applications which 
include beneficiaries located in a city's extraterritorial jurisdiction). 
   
  <nl>(3) Applications for the Texas Capital Fund shall be submitted to 
Commerce. 
     
  (d)-(e) (No change.) 
   
  (f) Citizen Participation. 
 
  (1) Public hearing requirements. For each public hearing scheduled and 
conducted by an applicant or contractor, the following public hearing 
requirements shall be followed. 
 
  (A) Notice of each hearing must be published in a newspaper having general 
circulation in the city or county at least 72 hours prior to each scheduled 
hearing. The published notice must include the date, time, and location of each 
hearing and the topics to be considered at each hearing. The published notice 
must be printed in both English and Spanish, if appropriate. Articles published 
in such newspapers which satisfy the content and timing requirements of this 
subparagraph will be accepted by the Department <nl>and, in the case of Texas 
Capital Fund hearings, by Commerce <ol> in lieu of publication of notices. 
Notices should also be prominently posted in public buildings and distributed to 
interested community groups. 
   
  (B)-(C) (No change.) 
     
  (2) Application requirements. Prior to submitting a formal application, an 
applicant for Texas Community Development Program funding shall satisfy the 
following requirements. 
 
  (A) At least one public hearing shall be held prior to preparing its 
application and at least one additional public hearing <nl>shall be held<ol> 
prior to submitting its completed application to the Department <nl>and, in the 
case of Texas Capital Fund applications, to Commerce <ol>. 
   
  (B)-(G) (No change.) 
     
  (3) Contractor requirements. 
 
  (A) A contractor must hold a public hearing concerning any substantial change, 
as determined by the Department  <nl>and, in the case of Texas Capital Fund 
program changes, by Commerce<ol>, proposed to be made in the use of Texas 
Community Development Program funds from one eligible activity to another. 
   
  (B)-(D) (No change.) 
     
  (4)-(5) (No change.) 
     
  (g) Appeals. An applicant for funding under the Texas Community Development 
Program may appeal the disposition of its application in accordance with this 
subsection. 
 
  (1) The appeal may only be based on one or more of the following grounds. 
 
  (A) Misplacement of an application. All or a portion of an application is 
lost, misfiled, or otherwise misplaced by Department staff <nl>and, in the case 
of Texas Capital Fund applications, by Commerce staff<ol>, resulting in unequal 
consideration of the applicant's proposal. 
   
  (B) Mathematical error. In rating the application, the score on any selection 
criteria is incorrectly computed by the Department <nl>and, in the case of Texas 
Capital Fund applications, by Commerce <ol> due to human or computer error. 
   
  (C) Other procedural error. The application is not processed by the Department 
<nl>and, in the case of Texas Capital Fund applications, by Commerce <ol> in 
accordance with the application and selection procedures set forth in this 
subchapter. Procedural errors alleged to have been committed by a regional 
review committee may only be appealed in accordance with the provisions of 
sec.9.8 of this title (relating to Regional Review Committees). 
     
  (2) The appeal must be submitted in writing to the Texas Community Development 
Program of the Department no later than 30 days after the date the announcement 
of community development fund and planning/capacity building fund contract 
awards is published in the Texas Register<ol>. In addition, timely appeals not 
submitted in writing at least five working days prior to the next regularly 
scheduled meeting of the state review committee will be heard at the subsequent 
meeting of the state review committee. The Department staff will evaluate the 
appeal and may either concur with the appeal and make an appropriate adjustment 
to the applicant's scores, or disagree with the appeal and prepare an appeal 
file for consideration by the state review committee at its next regularly 
scheduled meeting. The state review committee will make a final recommendation 
to the executive director of the Department. The decision of the executive 
director of the Department is final. <nl>If the appeal concerns a Texas Capital 
Fund application, the appeal must be submitted in writing to Commerce no later 
than 30 days following the date of the notification letter of the denial. <ol> 
If the appeal concerns a disaster relief fund or urgent need fund application, 
the appeal must be submitted in writing to the Department no later than 30 days 
following the date of the notification letter of the denial. If the appeal 
concerns a colonia fund or Young v. Cisneros <ol> fund application, the appeal 
must be submitted in writing to the Department no later than 30 days after the 
date the announcement of contracts awards is published in the Texas 
Register<ol>. The staff <nl>of either the Department or Commerce, when 
appropriate, <ol> evaluates the appeal and may either concur with the appeal or 
disagree with the appeal and prepare an appeal file for consideration by the 
<nl>appropriate <ol> executive director. The executive director<nl>, of the 
agency with which the appeal was filed, <ol> then considers the appeal within 30 
days and makes the final decision. 
   
  (3) In the event the appeal is sustained and the corrected scores would have 
resulted in project funding, the application is approved and funded. If the 
appeal concerning a community development fund or planning/capacity building 
fund application is rejected, the Department notifies the applicant of its 
decision, including the basis for rejection after the meeting of the state 
review committee at which the appeal was considered. If the appeal concerns a 
Young v. Cisneros <ol> fund, Texas Capital Fund, colonia fund, disaster relief 
fund, or urgent need fund application, the applicant will be notified of the 
decision made by the <nl>appropriate <ol> executive director within ten days 
after the final determination by the executive director. 
   
  (4) (No change.) 
     
  (h)-(i) (No change.) 
   
  (j) False information. If an applicant provides false information in its 
community development fund or planning/capacity building fund application which 
has the effect of increasing the applicant's competitive advantage, the number 
of beneficiaries, or the percentage of low to moderate income beneficiaries, the 
Department refers the matter to the state review committee for disciplinary 
action. If the applicant provides false information in a Young v. Cisneros<ol> 
fund, [Texas Capital Fund,] colonia fund, disaster relief fund, or urgent need 
fund application, the Department staff shall make a recommendation for action to 
the executive director of the Department. <nl>If the applicant provides false 
information in a Texas Capital Fund application, Commerce staff shall make a 
recommendation for action to the appropriate executive director.<ol> The state 
review committee makes a recommendation for action to the executive director of 
the Department at its next regularly scheduled meeting. Documentation of false 
information must be submitted at least ten business days prior to the next 
regularly scheduled meeting of the state review committee to be considered at 
that meeting. Recommendations that the state review committee or executive 
director may make include, but are not limited to: 
 
  (1)-(2) (No change.) 
     
  (k) Substitution of standardized data. Any applicant that chooses to 
substitute locally generated data for standardized information available to all 
applicants must use the survey instrument provided by the Department and must 
follow the procedures prescribed in the instructions to the survey instrument. 
<nl>This option does not apply to applications submitted to the Texas Capital 
Fund. 
 
  (1)-(5) (No change.) 
     
  (l) Unobligated and recaptured funds. <nl>Deobligated funds, unobligated funds 
and program income generated by Texas Capital Fund projects shall be retained 
for expenditure within the Texas Capital Fund subject to the approval of the 
executive director of Commerce. Any deobligated funds, unobligated funds, 
program income, and unused funds from previous years' allocations derived from 
any Texas Community Development Program Fund other than the Texas Capital Fund 
and any reallocated funds which HUD has recaptured from Small Cities may be 
redistributed among the above categories, except the Texas Capital Fund, for 
otherwise eligible projects. The selection of eligible projects to receive such 
funds will be approved by the executive director of the Department on a priority 
needs basis with eligible disaster relief and urgent need projects as the 
highest priority, and the Department's special targeted activities (e.g., 
colonias, special housing projects, etc.) as the next highest priority.<ol> [Any 
additional funds resulting from the recapture of dollars from a prior year's 
allocation, recapture of program income, unobligated or unused funds from a 
program area specified in subsection (b) of this section, or reallocated funds 
which the United States Department of Housing and Urban Development has 
recaptured from small cities grantees are redistributed to eligible communities 
on a priority basis with eligible disaster relief and urgent need projects as 
the highest priority; eligible projects with Young v. Cisneros<ol> activities, 
colonia activities, or federally designated empowerment zone and/or enterprise 
community activities as the next highest priority; and eligible economic 
development projects as the next highest priority. Any additional remaining 
funds may be redistributed to eligible communities at the discretion of the 
executive director of the Department within such program areas.] 
   
  (m) Waivers. The Department may waive any provision of this subchapter upon 
its own motion, or upon an applicant's or contractor written request for such a 
waiver if the Department finds that compelling circumstances exist outside the 
control of the applicant or contractor which justify the approval of such a 
waiver. <nl>The Department shall not waive any provision hereof concerning the 
Texas Capital Fund program unless written request to do so is received from the 
Executive Director of Commerce. The provisions of the foregoing sentence shall 
not apply to contracts other than those awarded and/or administered by Commerce 
for the Department. Issues related to audit requirements will be handled by the 
appropriate agency. 
   
  (n) Performance threshold requirements. In addition to the requirements of 
subsection (h) of this section, an applicant must satisfy the following 
performance requirements in order to be eligible to apply for program funds. A 
contract is considered executed for the purposes of this subsection on the date 
stated in Section 2 of such contract. 
 
  (1)-(2) (No change.) 
   
  (3) Expend all but the audit funds for a Texas Capital Fund contract funded 
prior to the <nl>1995<ol> [1994] program year that has been in effect for at 
least 36 months and submit to the Department the close-out documents (and any 
close-out document revisions requested by the Department) required by the most 
recent edition of the Texas Community Development Program Project Implementation 
Manual prior to submitting an application for the <nl>1995<ol> [1994] program 
year Texas Capital Fund program. The Department may direct that certain 1993 
<nl>and 1994 <ol> program year Texas Capital Fund program contracts be submitted 
to Commerce rather than to the Department. 
   
  [(4) Starting with the 1994 program year Texas Capital Fund contracts, local 
governments that have not closed Texas Capital Fund contracts within the three 
year contract period are required to establish a repayment plan for any expended 
contract funds.] 
     
  (o) (No change.) 
 
     
  sec.9.7. Texas Capital Fund. 
 
  (a) General Provisions. This fund covers projects which will result in either 
an increase in new, permanent employment within a community or retention of 
existing permanent employment. Under [the small business incubator program or] 
the main street improvements program, projects may also qualify if they meet the 
national program objective of aiding in the prevention or elimination of slum or 
blighted areas. 
 
  (1) (No change.) 
   
  (2) If the project is designed to aid in the prevention or elimination of slum 
or blighted areas, then it must meet the area slum or blight or spot slum or 
blight criteria and threshold requirements outlined in [each of] the separate 
<nl>main street<ol> program <nl>application <ol> [pre-applications]. 
   
  (3) A firm financial commitment from all funding sources other than United 
States Department of Commerce Economic Development Administration <nl>or Farmers 
Home Administration<ol> is required upon submission of <nl>an application<ol> [a 
pre-application]. 
   
  [(4) A letter from the United States Department of Commerce Economic 
Development Administration inviting a formal application under its public works 
program must be included in the pre-application if applicable.] 
   
  <nl>(4)<ol>[(5)] The leverage ratio between all funding sources and the Texas 
Capital Fund request must not be less than 1:1. [The only exception is the small 
and minority businesses loan program which requires a minimum leverage ratio of 
1:3.] 
   
  <nl>(5)<ol>[(6)] In order for an applicant to be eligible under the low and 
moderate income persons benefit national program objective, the Texas Capital 
Fund cost per job calculation must not exceed $25,000. 
   
  <nl>(6)<ol>[(7)] No assistance will be provided for projects intended to 
facilitate the relocation of industrial or commercial plants or facilities from 
one unit of general local government within Texas to another unit of general 
local government within Texas unless a 10% net gain of jobs will occur and one 
or more of the following requirements has been met prior to submitting an 
application for consideration under this section: 
 
  (A) Business to relocate with approval of current locality. Local government 
must provide [(in the application)] written documentation <nl>, within the 
application,<ol> verifying the chief elected official (mayor or judge) of the 
unit of local government from which the business is relocating supports and 
approves the relocation proposal. A written agreement between the two local 
governments involved in the business relocation is preferred. 
   
  (B) Business to relocate out-of state. Business must provide written 
documentation between business and out-of-state contact verifying the 
<nl>business<ol> [company] has secured out-of-state location. 
   
  (C) Local government notification with no response. Local government must 
provide written documentation that a letter has been mailed, by registered mail, 
to the local government from which the business is relocating, notifying <nl>it 
<ol> [them] of the relocation. The local government, upon receipt of the 
notification, then has 30 days to object to the relocation, in writing, <nl>to 
Commerce <ol> before the Texas Capital Fund application can be considered. A 
written objection to a relocation from a local government <nl>will<ol> [would] 
prevent the application from being considered. 
     
  <nl>(7)<ol>[(8)] <nl>Commerce <ol> [The Department] will not consider any 
application for funding which <nl>will <ol> [would] result in the provision of 
assistance for an economic development project where the applicant and one or 
more other cities or counties are competing to provide economic development 
project funds to that project. 
   
  <nl>(8)<ol>[(9)] <nl>Commerce <ol> [The Department] will not consider any 
application for funding in which the business[,] <nl>or <ol> principals[,] [or 
incubator] to be assisted thereunder <nl>, or a business that shares common 
principals<ol> has filed under the Federal Bankruptcy Code, and the matter is in 
the process of being adjudicated or in which such business has been adjudicated 
bankrupt. <nl>On a case by case basis, extenuating circumstances will be 
evaluated. 
   
  <nl>(9)<ol>[(10)] With the exception of the main street improvements program,  
<nl>Commerce<ol> [the Department] will only consider applications that provide 
funding for one business [or incubator sponsor]. 
   
  <nl>(10)<ol>[(11)] <nl>Commerce <ol> [The Department] may consider providing 
funding for an economic development project proposed by a city that is outside 
the city's corporate limits or extraterritorial jurisdiction and may consider a 
project proposed by a county that is outside the unincorporated area of the 
county if the applicant demonstrates that the project is appropriate to meet its 
needs, if the applicant has the legal authority to engage in such a project, and 
if at least 51% of the principal beneficiaries reside within the applicant's 
jurisdiction. 
   
  <nl>(11)<ol>[(12)] A business [or incubator sponsor] which is currently being 
provided assistance from the Texas Capital Fund must create at least 50 
permanent jobs in each additional proposed Texas Capital Fund project in order 
for such project to be considered for funding[,] [with the exception of small 
business incubator program projects that have the national program objective of 
aiding in the prevention or elimination of slums or blight]. 
   
  <nl>(12)<ol>[(13)] A Texas Capital Fund contractor must satisfactorily close 
out a contract in support of a specific business[,] [incubator sponsor,] or main 
street improvements program city in order to be eligible to receive additional 
funds under the Texas Capital Fund for the same business[,] [incubator sponsor,] 
or main street city. The contractor is eligible for an additional Texas Capital 
Fund award in support of a specific business<nl>, provided that <ol> [(if] the 
prerequisite program income choice has been selected[)], if the assisted 
business is not in the designated main street[/incubator] geographic area or if 
the main street[/incubator] project selected the elimination of slums and blight 
as its national program objective and the assisted business will create or 
retain jobs to meet the national program objective. 
   
  <nl>(13)<ol>[(14)] <nl>Commerce <ol> [The Department] will not consider or 
accept an application for funding <nl>from a community,<ol> [under the Texas 
capital fund] in support of  <nl>a business project that is currently receiving 
Texas Capital Fund assistance through that same community<ol> [the same 
project]. 
     
  (b) Overview. This fund is distributed to eligible units of general local 
government for eligible activities in the following program areas: 
 
  [(1) The loan program. The loan program provides financing for activities such 
as machinery and equipment, working capital, the purchase of land and 
depreciable property, new construction, rehabilitation of commercial or 
industrial facilities and infrastructure improvements on private property.] 
   
  <nl>(1)<ol>[(2)] The infrastructure program. The public infrastructure program 
provides funds for eligible activities such as the construction or improvement 
of water/wastewater facilities, public roads, natural gas-line <nl>main,<ol> 
[services] electric-power services, and railroad spurs, except that funding will 
not be provided for infrastructure improvements on private property. 
   
  <nl>(2)<ol>[(3)] The real estate development program. The real estate 
development program provides <nl>funds to purchase, construct, or rehabilitate 
real estate that is wholly or partially owned by the community and leased to a 
specific benefiting business<ol> [contract to an eligible applicant for the 
acquisition, construction or rehabilitation of real estate in support of a 
specific business] (either a for-profit entity or a non-profit entity). 
   
  [(4) The small business incubator program. The small business incubator 
program provides funds for an eligible applicant to acquire, construct, or 
rehabilitate real estate and to provide public improvements in support of a 
nonprofit incubator sponsor. 
   
  [(5) The small and minority businesses loan program. The small and minority 
businesses loan program provides a loan to a for-profit small or minority 
business for the purchase of machinery and equipment and for working capital.] 
   
  <nl>(3)<ol>[(6)] The main street improvements program. The main street 
improvements program provides public improvements in support of Texas main 
street program designated municipalities. 
     
  (c) Funding cycle. <nl>The Texas Capital Fund will be available three times 
annually for economic development funding to consider projects that will create 
or retain permanent employment opportunities, primarily for low- and moderate-
income persons<ol> [There are no pre-application deadlines for the loan, 
infrastructure, real estate development, small business incubator, and small and 
minority businesses loan programs]. <nl>Applications<ol> [Pre-applications] for 
the main street improvements program must be received by 5:00 p.m. on the date 
and location specified in the most recent [pre-] application guide for this 
program. 
   
  (d) Selection procedures. <nl>Commerce will accept applications every four 
months. Applications are reviewed after they have been competitively scored. 
Commerce staff will make recommendations to the executive director for final 
award.<ol> [The Department has entered into an interagency cooperation contract 
with the Texas Department of Commerce by which the Texas Department of Commerce 
performs marketing and underwriting services for this fund. Applications under 
this section are reviewed by Texas Department of Commerce staff, with input from 
Department staff, except for the main street program applications, which are 
reviewed and scored by a committee composed of Texas Department of Commerce and 
Department staff. The Texas Department of Commerce executive director makes 
recommendations to the Department executive director for final award.] The 
application and selection procedures consist of the following steps: 
 
  (1) <nl>Each applicant must submit a complete application to Commerce's 
Business Development Division.<ol> [Prior to submitting a formal application, 
each potential applicant must submit a complete pre-application to the Business 
Development Division of the Texas Department of Commerce.] 
   
  (2) <nl>Upon receipt of an application, Commerce staff will review it for 
eligibility and completeness in descending order based on the scoring. In those 
instances where the staff determines that the application is incomplete 
(evidenced by 13 or more inadequacies on the Application Checklist), the 
application will be returned to the applicant and may be resubmitted in the next 
funding cycle. Returned applications will not be considered for the current 
funding cycle. Applications resubmitted for future funding cycles will be 
competing with those applications submitted for that cycle. No preferential 
placement will be given for applications previously submitted and not funded. In 
those instances where the staff determines that the application has 12 or less 
inadequacies on the Application Checklist, the applicant will be given ten 
business days to rectify all deficiencies. In the event staff determines that 
the application contains activities that are ineligible for funding, the 
application will be returned to the applicant. Staff then conducts a review of 
each complete application to make threshold determinations with respect to: <ol> 
[Upon receipt of a pre-application containing financial information on the 
business or incubator sponsor or main street city to be considered for funding, 
the staff of the Texas Department of Commerce performs an initial review to 
determine whether the pre-application is complete, whether the activities 
proposed are eligible for funding and for compliance with threshold 
requirements. In those instances where the staff of the Texas Department of 
Commerce determines that the pre-application is incomplete, or the activities 
are ineligible for funding, or does not meet threshold requirements, the pre-
application is returned for the applicant to complete or is cited as ineligible. 
Texas Department of Commerce staff notify the Department when a pre-application 
is deemed ineligible before the applicant is notified. The staff at the Texas 
Department of Commerce then conducts a review of each complete pre-application 
to make threshold determinations with respect to:] 
 
  (A) the financial feasibility of the <nl>business <ol> [project] to be 
assisted based on a credit analysis; 
   
  (B) the strength of commitments from all other public and/or private 
investments identified in the <nl>application <ol> [pre-application]; 
   
  (C) (No change.) 
   
  (D) whether the use of Texas Capital Funds is appropriate[,] [as defined in 
the pre-application guidelines for this fund,] to carry out the project proposed 
in the <nl>application <ol> [pre-application]; [and] 
   
  (E) whether there is evidence that at least 51% of the permanent jobs created 
or retained will benefit low- and moderate-income persons <nl>;<ol> [.] 
[Projects proposed under the small business incubator program or the main street 
improvements program may meet the national program objective by aiding in the 
prevention or elimination of slums or blight.] 
   
  <nl>(F) whether efforts have been made to maximize other financial resources; 
and 
   
  <nl>(G) a copy of a complete application must be provided to the appropriate 
Regional Review Committee. Proposals submitted for funding under the Texas 
Capital Fund require regional review "from the standpoint of consistency with 
regional plans and other such considerations" as provided for under the Texas 
Review and Comment System and Chapter 391, Texas Local Government Code. Each 
regional review committee may, at its option, review and comment on an economic 
development proposal from a jurisdiction within its state planning region. These 
comments become part of the application file and are considered by the staff 
provided, such comments are received by the staff prior to the time that the 
staff makes a recommendation to the executive director of Commerce. 
     
  (3) <nl>Upon Commerce's determination that an application supports a feasible 
and eligible project, staff may schedule a visit to the applicant jurisdiction 
to discuss the project and program rules with the chief elected official, or his 
designee, and business representative(s), and to visit the project site.<ol> [If 
the Texas Department of Commerce or the Department invite a formal application, 
the staff of the Texas Department of Commerce is required to discuss the project 
and program rules with the mayor or judge, as applicable, or his designee, and 
one company official. A formal application may only be submitted if the Texas 
Department of Commerce or the Department authorizes such in writing. If an 
authorization to submit a formal application is granted, a formal application 
must be submitted within 30 business days of the authorization.] 
   
  (4) <nl>Staff prepares a project report with recommendations for the executive 
director who makes the final award. <ol> [A copy of a complete application must 
be provided to the appropriate regional review committee. Each regional review 
committee may, at its option, review and comment on an economic development 
proposal from a jurisdiction within its state planning region. These comments 
become part of the application file and are considered by the Department 
provided such comments are received by the Department prior to formal 
application review by Texas Department of Commerce staff.] 
   
  (5) <nl>Upon the executive director's selection, the projects selected for 
funding are announced by Commerce.<ol> [Applications are evaluated for 
compliance with threshold requirements or scored based on the selection criteria 
established for the Texas Capital Fund program. 
 
  [(A) For the loan, infrastructure and real estate development programs, the 
staff of the Texas Department of Commerce generates scores on selection criteria 
related to leverage ratio, cost per job, minority hiring, and project 
feasibility. Scores on factors in these categories are derived from information 
provided by the applicant. An infrastructure, loan, or real estate development 
program applicant must receive at least 60 points out of a possible 100 points 
to be considered for funding. 
   
  [(B) An application submitted under the small business incubator program or 
the small and minority businesses loan program is not scored, however, an 
applicant must meet the minimum threshold requirements specified in the pre-
application. 
   
  [(C) For the main street improvements program, the staff of the Texas 
Department of Commerce and the Department score pre-applications based on 
selection criteria related to project feasibility, leverage ratio and minority 
hiring. The Texas Historical Commission also scores pre-applications based on 
selection criteria related to project feasibility using its scores to place the 
applicants in rank order from highest to lowest scores. The five projects ranked 
highest by the Texas Historical Commission receive additional points. Final 
scores are reviewed by the Department and Texas Department of Commerce staff 
committee. Scores on factors in these categories are derived from information 
provided by the applicant. Formal applications are then requested from the two 
highest scoring applicants.] 
     
  (6) <nl>Commerce staff then negotiates the contract with the recipients. The 
contract terms are based on the information provided in the application, but 
Commerce may vary the terms of the contract with the recipient. <ol> [The staff 
of the Texas Department of Commerce and the Department may conduct a site visit 
of the proposed project. Site visits to the two highest scoring main street 
improvements applicants may include a verification of information submitted in 
the pre-application.] 
   
  (7) <nl>For the main street improvements program, Commerce staff scores 
applications based on selection criteria related to project feasibility, 
leverage ratio and minority hiring. The Texas Historical Commission also scores 
applications based on selection criteria related to project feasibility using 
its scores to place the applicants in rank order from highest to lowest scores. 
The five projects ranked highest by the Texas Historical Commission receive 
additional points. Final scores are reviewed by Commerce staff. Scores on 
factors in these categories are derived from information provided by the 
applicant.<ol> [If a project is determined not to be feasible by Texas 
Department of Commerce staff, the Department notifies the applicant of its 
decision, including the basis for denial.] 
   
  [(8) The executive director of the Texas Department of Commerce makes 
recommendations to the Department's executive director for final award. 
   
  [(9) The executive director of the Department reviews the recommendations and 
announces the projects selected for funding. 
   
  [(10) The staff of the Texas Department of Commerce and the Department work 
with the recipients to execute contract agreements. While the contract award 
must be based on the information provided in the pre-application and the formal 
application, the Department may negotiate any element of the final contract 
agreement with the recipient. A main street improvements program contract amount 
cannot increase and the level of benefits described in the pre-application and 
formal application cannot decrease.] 
     
  (e) Selection criteria for the <nl>Real Estate Improvements and Infrastructure 
Grant Programs of the Texas Capital Fund will focus upon factors which may 
include, but which are not limited to, paragraphs (1)-(7) of this subsection. 
Based on the selection criteria described in paragraphs (1) -(7) of this 
subsection, projects will be reviewed and evaluated upon the following 
additional factors: the history of the applicant community in the program; the 
strength of the business or marketing plan; the management experience of the 
business' principals; and the justification of the minimum Texas Capital Fund 
contribution necessary to serve the project):<ol> [loan, infrastructure and real 
estate development programs. The following is an outline of the selection 
criteria used for selection of projects under the loan, infrastructure, and real 
estate development programs. One hundred points are available. The terms and 
criteria used in this subsection are further defined in the pre-application 
guidelines for these programs.] 
 
  (1) <nl>Creation of jobs paying an above-average wage; <ol> [Project 
feasibility (total -30 points). The feasibility of each project is evaluated and 
scored based on the financial soundness of the project. Factors examined include 
firm commitments for financial investments and the jobs to be created or 
retained; the history of the business; the current financial condition of the 
business, including a full review of the credit analysis; cash flow projections; 
the business or marketing plan, including letters of intent to purchase products 
or services; and management experience of the business's principals. A project 
located in a designated state enterprise zone, federal empowerment zone, or 
federal enterprise community receives special consideration.] 
   
  (2) <nl>Generation of a greater ratio of private investment to Texas Capital 
Fund investment;<ol> [Minority hiring (total-20 points). Percentage of 
minorities presently employed by the applicant divided by the percentage of 
minority residents within the local community (20 points). In the event 10% or 
less of the applicant's population base is composed of minority residents, the 
applicant has seven or fewer non-seasonal full-time employees, or 5.0% or more 
of the applicant's population base is living in group quarters or institutions, 
the applicant is assigned the average score on this factor for all applicants 
for the previous program year or the score calculated on the actual figures, 
whichever is higher. The terms used in this paragraph are defined in the current 
application guide.] 
   
  (3) <nl>Expansion of markets through means such as exporting, value-added 
processing, and/or creating new or modified product lines;<ol> [Leverage ratio 
(total-30 points). Points are awarded by dividing the total other funds 
committed by the amount of Texas Capital Funds requested less administration, in 
accordance with the following scale: 
 
  [(A) 1.25:1 (125%)-10 points; 
   
  [(B) 1.50:1 (150%)-15 points; 
   
  [(C) 2.00:1 (200%)-20 points; 
   
  [(D) 2.50:1 (250%)-25 points; 
   
  [(E) 3.00:1 (300%)-30 points.] 
     
  (4) <nl>Provision of job opportunities at the lowest possible Texas Capital 
Fund cost per job;<ol> [Cost per job (total-20 points). Points are awarded by 
dividing the amount of Texas capital funds requested by the number of full-time 
job equivalents to be created or retained, in accordance with the following 
scale: 
 
  [(A) $8,000 or less-20 points; 
   
  [(B) $13,000 to $8,001-15 points; 
   
  [(C) $18,000 to $13,001-10 points; 
   
  [(D) $22,000 to $18,001-5 points.] 
     
  <nl>(5) Benefit to areas of the state most in need of new capital investment 
and/or jobs; 
   
  <nl>(6) Assistance for small businesses and manufacturers; and 
   
  <nl>(7) Feasibility of project and ability to create and/or retain jobs. 
     
  (f) Additional criteria for the [loan program and the] public infrastructure 
program. A minimum of a <nl>ten percent<ol> [10%] equity injection, <nl>based on 
<ol> [(of the] total project costs[)] in the form of cash, land, buildings, 
equipment, furniture, or fixtures by the business is required. 
   
  (g) Additional criteria for the real estate development program. A minimum of 
a <nl>ten percent <ol> [10%] equity injection, <nl>based on<ol> [(of the] total 
project costs[)] in the form of cash, land, buildings, equipment, furniture, or 
fixtures by the business is required if the business has been operating for at 
least three years. A minimum of a  <nl>thirty-three percent<ol> [33%] equity 
injection, [(of the] <nl>based on<ol> total project costs,[)] in the form of 
cash, land, buildings, equipment, furniture, or fixtures by the business is 
required if the business has been operating for less than three years. 
   
  [(h) Threshold requirements for the small business incubator program. The 
following is an outline of threshold requirements used for selection of projects 
under the small business incubator program. The terms and criteria used in this 
subsection are further defined in the pre-application guidelines for this 
program. In order for its pre-application to be considered, an applicant must 
meet either paragraphs (1), (2), or (3) of this subsection. 
 
  [(1) Low and moderate income persons objective. Document that at least 51% or 
more of all the persons to benefit from the economic development activities 
qualify as low and moderate income persons. 
   
  [(2) Area slums/blight objective. Document the boundaries of the area 
designated as a slum or blighted, document the conditions which qualified it 
under the definition in sec.9.1(a)(17), and the way in which the assisted 
activity addressed one or more of the conditions which qualified the area as 
slum or blighted. 
   
  [(3) Spot slum/blight objective. To show how this objective will be met, the 
applicant must: 
 
  [(A) document that the project qualifies as slum or blighted on a spot basis 
under local law; 
   
  [(B) describe the specific condition of blight or physical decay that is to be 
treated; 
   
  [(C) for rehabilitation carried out under this category, describe the specific 
conditions detrimental to public health and safety which will be corrected; and 
   
  [(D) provide details and scope of the proposed rehabilitation, by structure. 
     
  [(4) The staff at Texas Department of Commerce conducts a review of each 
complete pre-application to make threshold determinations with respect to the 
feasibility of each incubator project based on the soundness of the project. 
Factors examined include firm commitments for financial contributions; the jobs 
to be created or retained; the history of the incubator; the financial condition 
of the incubator, including a full review of the credit analysis and cash flow 
projections; the feasibility study and business plan; pre-lease commitments; 
demonstrated proof of community support; demonstrated linkages with related 
small business programs and educational institutions; and evidence of strong 
management experience of the incubator sponsor. 
     
  [(i) Additional criteria for the small business incubator program. 
 
  [(1) A minimum 10% equity injection (of the total project costs) in the form 
of cash, land, buildings, equipment, furniture, or fixtures by the applicant 
and/or incubator sponsor is required. 
   
  [(2) An incubator project located in a state designated enterprise zone, 
federal empowerment zone, or federal enterprise community receives special 
consideration. 
     
  [(j) Threshold requirements for the small and minority businesses loan 
program. The following requirements are used for the selection of projects under 
the small and minority businesses loan program. The terms and criteria used in 
this subsection are further defined in the pre-application guidelines for this 
program. In order for its pre-application to be considered, an applicant must 
document the following: 
 
  [(1) at least 51% or more of all the persons to benefit from the economic 
development activities qualify as low and moderate income persons; and 
   
  [(2) a minimum 10% (of the total project costs) equity injection in the form 
of cash, land, buildings, equipment, furniture, or fixtures of the business. 
     
  [(k) Enterprise zone designation. A small and minority businesses loan program 
project that is located in a designated state enterprise zone, federal 
empowerment zone, or federal enterprise community receives priority 
consideration.] 
   
  <nl>(h)<ol>[(l)] Selection criteria for the main street improvements program. 
The following is an outline of the selection criteria used for selection of 
projects under the main street improvements program. The terms and criteria used 
in this subsection are further defined in the <nl>application<ol> [pre-
application] guidelines for this program. 
 
  (1) Threshold criteria. In order for its <nl>application <ol> [pre-
application] to be considered, an applicant must meet the requirements of either 
subparagraph (A) or (B), and (C) of this paragraph: 
 
  (A) [Low and moderate income persons objective. Document that at least 51% or 
more of all persons to benefit from the economic development activities qualify 
as low and moderate income persons.] <nl>The national objective of aiding in the 
prevention or elimination of Slum or Blight on a spot basis. To show how this 
objective will be met, the applicant must: 
 
  <nl>(i)<nl> document that the project qualifies as slum or blighted on a spot 
basis under local law; and 
   
  <nl>(ii)<nl> describe the specific condition of blight or physical decay that 
is to be treated. 
     
  (B) Area slums/blight objective. Document the boundaries of the area 
designated as a slum or blighted, document the conditions which qualified it 
under the definition in <nl>10 TAC<ol> sec.9.1(a)<nl>(16) <ol>[(17)], and the 
way in which the assisted activity addressed one or more of the conditions which 
qualified the area as slum or blighted. 
   
  (C) Main street designation. The applicant must have been designated by the 
Texas Historical Commission as a Main Street City and must have received this 
designation two years prior to submitting a Texas Capital Fund application for 
main street improvements. 
     
  (2) Project feasibility (total-50 points). Factors examined by the Texas 
Capital Fund staff include Texas Historical Commission Main Street designation 
and demonstrated successful experience in the <nl>Main Street<ol> program; 
<nl>marketing strategies and identified funding sources for Main Street efforts 
<ol> [firm commitments for financial contributions]; <nl>documentation 
supporting secondary/indirect job creation or retention<ol> [the jobs to be 
created or retained]; <nl>community support and<ol> [the community's long-term] 
commitment to historic preservation and commercial revitalization; [a full 
review of the marketing strategy and funding for continued main street efforts 
existing] business [ownership] <nl>occupancy rates,<ol> [and] available space 
pre-lease commitments; [demonstrated proof of community support;] and 
demonstrated linkages <nl>between <ol> [with related] downtown [small] 
businesses; and [evidence of strong] management experience of the <nl>Main 
Street <ol> [main street] manager. [(A)Projects that address the primary benefit 
to low and moderate income persons through job creation/retention receive 
highest priority, regardless of the national program objective selected. 
Projects that leverage additional dollars and demonstrate firm financial 
commitments also receive priority. Applicants that have demonstrated successful 
experience in the Texas Historical Commission's Main Street Program and that 
submit projects addressing the needs of mobility impaired individuals are given 
additional consideration. Applicants that have demonstrated a long term 
commitment to historic preservation, continued main street efforts, and have a 
low first floor building vacancy rate in the impacted project area are also 
given additional consideration. A main street improvements program project that 
is located in a designated state enterprise zone, federal empowerment zone, or 
federal enterprise community receives priority consideration.] 
   
  (3) Leverage ratio (total-30 points). Points are awarded by dividing all other 
funds committed to the project, exclusive of Texas Capital Funds, by the amount 
of Texas Capital Funds requested, less administration, according to the 
following scales: 
 
  (A) Applicant with population less than 5,000 persons: 
 
  (i) 0.50: 1 (50%) -15 points; 
   
  (ii) 1.00: 1 (100%) -20 points; 
   
  (iii) 1.50: 1 (150%) -25 points; 
   
  (iv) 2.00: 1 (200%) -30 points. 
     
  (B) Applicant with population equal to or more than 5,000 persons: 
 
  (i) 1.50: 1 (150%) -15 points; 
   
  (ii) 2.00: 1 (200%) -20 points; 
   
  (iii) 2.50: 1 (250%) -25 points; 
   
  (iv) 3.00: 1 (300%) -30 points. 
       
  (4) Minority hiring (total-10 points). Percentage of minorities presently 
employed by the applicant divided by the percentage of minority residents within 
the local community (10 points). In the event <nl>ten percent <ol> [10%] or less 
of the applicant's population base is composed of minority residents, the 
applicant has seven or fewer non-seasonal full-time employees, or  <nl>five 
percent<ol> [5.0%] or more of the applicant's population base is living in group 
quarters or institutions, the applicant is assigned the average score on this 
factor for all applicants for the previous program year or the score based on 
the actual figures, whichever is higher. [The terms used in this paragraph are 
defined in the current application guide. ] 
   
  (5) Projects recommended by Texas Historical Commission (total-10 points). 
<nl>A maximum of ten points are awarded <ol> [Points are awarded up to a maximum 
of ten points] to the five applicants ranked highest by The Texas Historical 
Commission. The Texas Historical Commission scores [pre-] applications based on 
the <nl>Main Street Improvements Program<ol> project feasibility selection 
criteria [included in paragraph (2) of this subsection,] using its scores to 
place the applicants in rank order from highest to lowest scores. [A maximum of 
ten points is awarded according to the following scale:] 
 
  (A) Ranking 1-10 points; 
   
  (B) Ranking 2-8 points; 
   
  (C) Ranking 3-6 points; 
   
  (D) Ranking 4-4 points; 
   
  (E) Ranking 5-2 points. 
 
  Issued in Austin, Texas, on August 22, 1995. 
 TRD-9510655 
  Larry Paul Manley 
 Executive Director 
 Texas Department of Housing and Community Affairs 
    Effective date: August 22, 1995 
 Expiration date: December 20, 1995 
 For further information, please call: (512) 475-3916