Chapter 7: Downtown Revitalization Program

This chapter describes the Downtown Revitalization (DTR) program component of the Iowa CDBG program. Recipients should review this chapter carefully, as well as the sample documents in Appendix 7, to ensure program compliance. The various chapter components include: 

• Critical Components
• Contract Conditions
• CDBG Regulations & DTR
• Project Management

Critical Components

Overview

The CDBG Downtown Revitalization Fund provides grants to communities for activities contributing to comprehensive preservation/revitalization in historic city centers. The program has funded building façade improvements to primarily privately owned buildings that are often part of a larger downtown revitalization initiative.

All projects must:

• Meet the CDBG “slum and blight” national objective
• Be eligible under the CDBG program
• Positively impact the community
• Be ready to proceed and be completed in a timely fashion
• Include community support for a downtown revitalization effort
• Include other funding sources and documentation of applicant efforts to secure the maximum amount of local support for the activity
• Achieve a level of planning for comprehensive downtown revitalization efforts
• Be well thought out, organized, and capably administered

Meeting a National Objective

The Downtown Revitalization Fund meets HUD’s slum and blight national objective. To meet the slum and blight national objective, the applicant must address the documented building-by-building deterioration in the area to be assisted, illustrating that the proposed activity will alleviate or eliminate the conditions causing the deterioration.

Prior to going out for bid, as part of the 106 approval process, the scope of work for each project building must be reviewed by IEDA staff to assure that the majority of, and highest priority of, identified slum and blight items are being addressed.

Documenting meeting the Slum and Blight National Objective is a multi-step process, one that spans the length of the program from application to closeout. The application includes a City resolution identifying a blighted target area. It also provides photo and narrative description of blighted elements common to each building address proposed for funding. The final designs for each building indicate the proposed plan for addressing that blight. And the final “after” photos, contrasted with the initial “before” photos, demonstrate that the blight has indeed been resolved.

Contract Conditions

Administrative Plan

Recipients must submit a program administrative plan to IEDA. The submitted plan must be approved by IEDA prior to the first program draw. An administrative plan is an outline that describes what person or organization is responsible for all key management and communication functions associated with the operations of a Downtown Revitalization Fund project. General operational policies and procedures should also be included in the plan. A model administrative plan outline can be found in Appendix 7. All items cited in the outline must be addressed.

Easement Agreement

An easement agreement between the recipient and the respective property owners is a required document in the DTR Program. The agreement provides the legal means for city officials or parties authorized by the city to enter the property and to perform work. Furthermore, it may describe the process involved in the owner making changes to the facade following project completion. Finally, it requires the owner to maintain the property improvements funded through the DTR Program. The agreement must be signed by both the city and the owner with both signatures notarized. The easement must then be recorded at the county. A sample easement agreement document can be found in Appendix 7. The recipient’s legal counsel should review the document and may, with IEDA consent, edit or add provisions to suit local preferences. An easement agreement must be submitted and approved by IEDA prior to the first program construction draw.

Construction Terms

IEDA believes it is crucial that there be complete understanding and disclosure between the recipient and property owners receiving façade improvement funds. Accordingly, the relationship between the two parties during construction should be clearly defined to prevent problems from arising during the project. Accordingly, the recipient will enter into a construction terms agreement with each property owner participating in the DTR program. The construction terms agreement can also provide for a lien to be placed against the improved property by the recipient, if necessary, to recover costs. A sample Construction Terms Agreement form can be found in Appendix 7. A construction terms agreement needs to be submitted and approved by IEDA prior to the first construction draw.

Bid Solicitation

The contract between the recipient and IEDA stipulates projects must be out for public bid within one year of the contract effective date. As is noted in the IEDA Procurement Policy (see Appendix 2 of this Guide), all construction projects must default to following Iowa Code Chapter 26. However, as is also called out in the Procurement Policy, Recipients are still required to publish the bid notice in a newspaper of general circulation even though Chapter 26 does not require that. Thus, prior to the first construction draw, a copy of the bid notice and the publication affidavit must be submitted and approved by IEDA.

CDBG Regulations & DTR

Environmental & Historic Review

DTR utilizes a tiered environmental and historic review process. Tier I is a broad Environmental Review that encompasses the target area and the type of work to be done without going into building-specific detail. Most DTRs will fall under the “CEST” level of review. For more information on the CEST review process, please see Chapter 4 of this Guide.

After the local comment period and state comment period of the Environmental Review, IEDA will issue a “Release of Funds” letter. However, because DTR is a tiered review program, that Release of Funds Letter does not allow a Recipient to go out to bid. Rather, the Recipient must then complete the Tier II/106 approval process.

Recipients should refer to Chapter 3 of this Guide for instructions concerning the Section 106 Historic Review. However, two things should be of particular note as it concerns DTR. First, DTR requires that the City/County has conducted a historical survey within the past five years. If the Recipient’s most recent historical survey is older than five years at the onset of the award, a new one will need to be completed as the first step to the 106 process. Second, Recipients should include a final design rendering with the 106 submission in IowaGrants. This rendering forms the basis of the plan to address blight (i.e., meet a National Objective), and as such it is reviewed closely by IEDA staff prior to issuing 106 approval. If IEDA has questions or comments as to the degree to which the proposal will adequately address blight, the forms will be put into Correcting status for further information, clarity, and for possible changes to the design.

Finally, Recipients should be aware that deviations from the approved scope of work may have costly and detrimental ramifications to the DTR project if not first discussed with, and approved by, IEDA staff. Although change orders are common and most will not be problematic, the two areas to watch out for concern the historic nature of the building and the slum and blight national objective.

For example, if a change order were to modify an historic element of a building in a way that was not previously detailed and approved in the 106 submission, the Recipient must bring the change order to IEDA for review before authorizing it. If IEDA approves the change order, documentation will be added to the 106 file and the work may proceed. However, if that work is undertaken without IEDA prior approval, it will likely be considered an “adverse effect,” which could, if severe enough, prematurely end that building’s participation in the DTR program. Please note that documentation added after the work was completed is not sufficient in this instance; IEDA would have needed to give approval before the work took place. This is quite serious.

In a similar vein, changing how slum and blight will be addressed on a building must also be reviewed and approved by IEDA. If a change order were to remove from the scope some work that would have fixed a blighted element, the building runs the risk of no longer meeting a HUD National Objective. Alternatively, if a change order proposes an addition to the scope of work which does not address blight and also uses funding that would have dealt with a blighted element of the building such that that element is never repaired/replaced, then that too might result in not meeting a National Objective. Without a National Objective, IEDA would need to recoup funds from the Recipient and return them to HUD.

When in doubt, Recipients are encouraged to reach out to IEDA staff to discuss change orders as they are proposed prior to authorizing them to ensure that a particular change order will not trigger either of these unfortunate scenarios.

Lead Based Paint

Buildings participating in a CDBG-funded Downtown Revitalization that include a residential component must comply with the Lead Safe Housing regulations (24 CFR 35). A copy of the full regulations can be found in Appendix 6 of this Guide. This includes any occupied or currently unoccupied residential space. Currently unoccupied residential space will be considered as residential if the residential unit is ready, or nearly ready, for occupancy (i.e., it has an operable kitchen, functioning bath, code required egress, etc.). For more information on these regulations and the use of interim controls please reference Chapter 6 and Appendix 6 of this Guide. Please note that any building that contains any space utilized for residential purposes on the first or ground floor is not eligible to receive CDBG DTR funds.

In order to document lead compliance, assess each property by asking, “Does the building have a residential use?”

• If no – this is a non-residential building and is exempt from the lead safe housing regs. 

• If yes – Lead safe work practices (interim controls) are required for all areas where painted surfaces will be disturbed. Projects will be capped at $24,999 per residential unit, for all construction hard costs attributed to that component of the building, unless the building has been determined eligible for or is listed in the National Register of Historic Places either individually or as contributing to an historic district. If historic, the property is still required to comply with lead safe work practices and interim controls, but is not limited to the $24,999 per unit cap. If construction hard costs exceed $24,999, full lead abatement will be required.

  Example: a non-historic 2-story mixed-use building is participating in a façade project. The first floor is a commercial retail space and the upper story has two occupied residential units. The scope of work calls for replacement of the commercial storefront and entrance ($20,000), commercial awning ($2,000), tuck-pointing the upper story brick ($15,000), parapet repair ($8,000) and repair of the upper-story windows ($10,000) for a total building rehab of $55,000. If the commercial storefront and awning along with ½ the cost of the parapet repair are removed, the residential rehabilitation costs are $29,000 divided by 2 units = $14,500/unit and therefore under $24,999 and in compliance with the use of interim controls. All necessary testing, treatment and cleaning must be conducted in accordance with 24 CFR 35.900.

It is acceptable to subtract out costs that are specifically for commercial improvements such as storefronts and awning, and a proportionate amount of roof/parapet; however, any entryways, doors, common spaces, stairwells that are shared use or for the residential use must be included in the calculation of hard costs.

Project Management

Grant Administration

Recipients must work with an IEDA certified grant administrator with prior training in the CDBG program. DTR recipients should plan to contract for grant administration services. Please note that there is no competitive procurement process required if the recipient chooses to contract for general administrative services with their applicable Regional Planning Commission/Council of Government.

Downtown Revitalization Fund recipients may also utilize an existing staff person to handle a portion of the day-to-day management of their project. If this person is assigned the DTR management task without receiving any corresponding increase in salary or wages, federal procurement will not be required. Alternatively, in rare cases, recipients may contract with or engage a third party for this role. If that were to occur, the recipient must follow federal procurement requirements when selecting a project manager.

Pre-Construction

In addition to the general CDBG instruction found in the earlier chapters of this Guide, the following outlines the steps a DTR Recipient will need to go through to prepare for construction:

1. Write the DTR Admin Plan and upload to IowaGrants, identifying who will be the individuals responsible for the various aspects of the project.
2. Communicate with building owners early and often, ensuring that they understand the nuances of the DTR program requirements, especially the necessity of addressing slum and blight before any other proposed work and the prohibition of performing any other non-DTR work on site from the time of application submission through grant closeout.
3. Complete the Tier I Environmental Review, bearing in mind that the Release of Funds letter does not greenlight going out to bid since this is a tiered review.
4. Submit the Section 106 Historic Review forms in IowaGrants, including the final design renderings that will provide the basis for meeting the slum and blight National Objective.
5. If necessary, revise the 106 submissions based on IEDA consultation, remembering to keep the building owners up to date regarding any adjustments to the design, scope of work, and/or estimated costs.
6. Once the tiered environmental/historic review is complete, have the architect create the construction bid documents, incorporating the IEDA approved scope of work and final design.
7. Draft, but do not yet sign, building owner easements and construction terms agreements, explaining again what the owners will be required to agree to for the duration of the program.
8. Go out to bid for construction, publishing the bid notice in a newspaper of general circulation, as well as complying with the process outlined in Iowa Code Chapter 26, uploading the publication affidavit to IowaGrants when you have it.
9. After the bid is selected but before construction begins, have building owners sign the easements and construction terms agreements, recording the easements with the County and uploading all documents to IowaGrants.
10. Notify IEDA at any point during this pre-construction period if a particular building owner decides to drop out of the project or new ones are added in, documenting these changes so that they can eventually be submitted as a contract amendment, and providing slum and blight assessments and 106 forms for any new buildings to IEDA for review/approval.

During Construction

While construction is underway, the Recipient and/or grant administrator will do the following:

• Set up consistent communication channels. Best practice would be to have regular meetings with building owners and other stakeholders (e.g., Admin Plan members) to ensure that the program is moving smoothly and expectations are being met all the way around.
• Monitor to ensure that no additional non-DTR construction work is taking place in the various participating buildings.
• Remember that Davis Bacon applies to DTR: grant administrators need to be reviewing payrolls weekly and visiting the project site to perform interviews. The expectation is that there is at least one interview per subcontractor on the project.
• Review proposed change orders carefully, involve IEDA when necessary, and ensure that all parties are on the same page with any agreed upon changes.
• Take photos throughout the project so that we have a collection of before, during, and after photos for each participating address.
• Alert IEDA of any buildings dropping or adding, or of any changes to the budget overall or amount of local funds. These types of modifications usually result in contract amendments.
• Submit claims and don’t forget to complete the “Status Detail” page which will list every participating address and the percentage complete of construction (this is true even before construction begins; the percentage will remain at 0% until it starts).
• Schedule the Status of Funded Activities (SOFA) hearing; suggested timeframe would be to hold that hearing after the grant funds reach 30% expended so that the public has an opportunity to give comment on the project before it is substantially completed.
• Prepare for IEDA to monitor the project when it reaches halfway. This will likely be a hybrid desktop review and on site monitoring. See Chapter 2 of this Guide for more information.

Closing Out

As the project nears its end, review this list of tasks to facilitate a successful close out process. 

Please note that the last claim requesting any activity dollars will not be processed for payment until this closeout task list is completed.

• Prepare any final contract amendments to capture changes to scope or budget.
• Submit Section 3 compliance forms in IowaGrants. Most commonly these forms will simply be marking that Section 3 does not apply; on rare occasion DTR is subject to Section 3 – talk with IEDA if you have questions about this.
• Send IEDA any outstanding missing components from the site monitoring.
• Upload a PDF to IowaGrants with “before” and “after” photos for each participating address. At a minimum the photos should show the full façade, but additional close-up photos of particularly noteworthy features are also welcomed. All photos must be labeled.
• Incur all costs prior to the IEDA contract end date and ensure that there are no further costs to come before submitting the final claim (e.g., punch list items). The final claim may be submitted up to 60 days after the IEDA contract end date, so long as the expenses were incurred prior to that date.