Neighborhood STAR Program Guidelines

PART 1 - Program Description

Purpose

Saint Paul’s neighborhoods are one of its greatest assets. With this in mind, state and local legislation was enacted in 1993 to allocate revenue from the city’s half-cent sales tax to the Neighborhood Sales Tax Revitalization (STAR) Program. Administered by the City’s Department of Planning and Economic Development (PED), Neighborhood STAR provides loans and grants for physical improvement projects which strengthen the vitality of our city’s neighborhoods. The STAR Program represents an extraordinary opportunity to revitalize our neighborhoods by spurring economic development opportunities.

Funding

An annual STAR budget is proposed by the Mayor as part of the City’s budget process, and upon review is approved by the City Council. The appropriation is based on a combination of sales tax revenue projections, loan repayments, and investment earnings. Over time, STAR funding strives for geographic and financial equity across all city neighborhoods.

Annual STAR Program Cycle

The Neighborhood STAR Program offers loans and grants to nonprofit, private, public and for-profit entities seeking $5,000 or more in financial assistance. Non-profit, public, private, and small for-profit entities may request loan and/or grant assistance. Large, for-profit businesses are eligible to apply for a loan or a loan-grant combination provided the grant portion is equal to or less than the amount of loan dollars being requested.

Neighborhood STAR is awarded through one (1) competitive application process each year. When funding is available, the STAR Year-Round Loan and Grant Program provides funding opportunities for initiatives that have a particular urgency and cannot meet the general program cycle.

Program Requirements

STAR proposals must be for capital improvement projects or programs located within the Saint Paul city limits. Projects and programs financed with STAR funds are expected to be used for their funded purpose for at least seven (7) years. If for any reason the STAR-funded initiative is discontinued or property is sold prior to seven years, the STAR award may be required to be returned to the City.

All STAR grant funds and loan awards over $50,000 must be matched on at least a 1:1 basis with non-city resources. City funds will be disbursed upon completion and approval of capital activities.

PART 2 - Eligibility

Applicants should determine if their capital improvement project meets Neighborhood STAR program eligibility goals and requirements:

• Contributes to community reinvestment (economic development, redevelopment)
• Contributes to Saint Paul’s tax base (property taxes, sales taxes)

If a project is ineligible for Neighborhood STAR funds, the applicant should seek other funds. City staff may direct the applicant to other public or private funding sources.

Eligible Applicants

Public, private, non-profit and for-profit entities located or doing business within the City of Saint Paul are eligible to apply for Neighborhood STAR funding.

City departments and quasi-governmental entities are eligible applicants when in partnership with a nonprofit or private neighborhood and/or community group.

Churches and religious organizations are eligible to apply when in partnership with a neighborhood and/or community group and only with respect to a project that: (i) is non-sectarian and whose primary effect neither advances nor inhibits religion; (ii) will make capital improvements for functions not associated with church-sponsored or religious type activities; and (iii) is open and available to the public at large on a regular basis.

Eligible Projects

The following types of projects are eligible for Neighborhood STAR funding:

• Rehabilitation and/or construction of commercial, residential or industrial property.
• Most fixed interior and exterior improvements to commercial structures including: walls, ceilings, floors, lighting, windows, doors, entrances, electrical, plumbing.
• HVAC, energy and security improvements, handicap accessibility, and building code corrections.
• Minor public improvements (extensive public improvement projects should be referred to the City’s Capital Improvement Budget (CIB) process).
• Beautification of public or private open space, including trees and shrubs, rain gardens, benches, bicycle parking, and lighting.
• Creative placemaking/placekeeping capital improvement activities including neighborhood identification/promotion, public art, and creative public infrastructure improvements.
• Non-profit neighborhood organizations providing a funding program to local businesses for capital improvement activities.

Ineligible Applicants

• Political parties and political action groups.
• Federal, state, and county agencies and departments.
• Individual homeowners, condominium or townhome owners and/or the association representing them.
• For-profit entities seeking 100% grant funds who do not qualify as a small business under MN Statute 645.445.

Ineligible Projects

In general, any activity not of a physical, “bricks and mortar” nature, is ineligible for Neighborhood STAR funding. The following is a list of examples that do not meet the definition of a capital improvement:

• Planning or study activities.
• Costs associated with the preparation of a STAR proposal.
• Home-based businesses (i.e., in-home child-care, home offices).
• Public service programs (i.e., block nursing programs, etc.).
• Refinancing existing debt.
• Improvements that are not permanently affixed (i.e., office equipment, computers, furniture, appliances, vehicles, telephone systems, flags and banners, etc.).
• Improvements that will not be used for their funded purpose for seven or more years.
• General administrative expenses, including staff management, working capital, and general maintenance costs.
• Project/programs located outside of the city limits.
• Major public improvement projects (extensive public improvement projects should be referred to the city’s Capital Improvement Budget (CIB) process).
• Payment for the applicant's own labor and performance for construction or improvements.
• Duplication of an existing city program.
• Developer fees to persons receiving the benefit of the project/program.

Loan or Grant Eligibility

Nonprofit community organizations may apply to STAR for loan and/or grant funds.

For-profit entities that qualify as a small business under MN Statute 645.445 are eligible to apply for loan and/or grant assistance. Small, for-profit entities are defined as businesses with under $1 million in gross sales or fewer than 20 full time employees.

Large, for-profit businesses may apply for a loan or a loan/grant combination provided the grant portion is equal to or less than the amount of loan dollars being requested.

STAR Direct Project Costs

Up to twenty percent (20%) of STAR funds may be used for costs directly associated with the physical improvement, including: acquisition, environmental testing, legal fees, building permits, licensing and inspection fees, design and engineering fees, general contractor’s fees, or project management fees that are directly related to the STAR activity.

PART 3 - Application Procedure

Proposal Development

Sales tax funds are a valuable resource for Saint Paul neighborhood improvements. It is critical that the city is strategic in allocating these funds to maximize their benefit. When preparing a STAR proposal, applicants should consider the following:

• The Neighborhood STAR Program is designed to provide additional financing for worthwhile but underfunded capital projects that could not be accomplished solely through non-city funding sources. Interested applicants who have met with neighborhood organizations and community groups to identify needs and explore opportunities to share capacity and expertise are encouraged to meet with city staff to confirm eligibility.
• Applicants seeking to capitalize a funding program should consider collaborating with other entities to provide technical services (i.e. loan underwriting, loan servicing, and credit analysis) not available in their organization. STAR resources may not be used to develop or duplicate general administrative capacity.
• Applicants should seek out opportunities to implement existing neighborhood plans and strategies, such as small area plans. Likewise, proposals implemented in conjunction with other city-planned improvements will make the best use of scarce resources.
• Applicants will need to be able to demonstrate that they have, or will be able to get, site control over the project property.

City staff are available to provide technical assistance to applicants, if requested, to help ensure a complete and viable application.

Compliance

The following compliance requirements may apply to your proposal:

• Affirmative Action: Entities receiving $50,000 or more of city funds within a 12-month period.
• Business Subsidy: May apply to recipients of grants of $25,000 or more and loans of $75,000 and over.
• Federal Davis Bacon Requirements: Projects of $2,000 or more receiving at least one dollar of federal funds.
• Little Davis Bacon Requirements: Total project costs of $25,000 or more
• Living Wage: Entities receiving $100,000 or more of city funds.
• Project Labor Agreement: Entities receiving $250,000 or more of city funding.
• Section 3: Economic opportunities to low-income persons or business concerns residing close to a project’s location.
• PED/HRA Sustainability Initiative: May apply to projects of any size.
• Saint Paul Sustainable Building Policy: Projects receiving over $200,000 in public funds.
• Two Bid Policy: Projects receiving $20,000 or more of city funds.
• Vendor Outreach Program: Total project costs of $50,000 or more.

More information is available on the City's Contract Compliance and Business Development website.

Application Preparation

A STAR workshop will be held at the beginning of each annual funding cycle to provide program information to prospective applicants. Applications will be due four to seven weeks after the workshop.

The Neighborhood STAR application form will be available following the annual STAR workshop.

All applications must be submitted on a current STAR application form and be complete and on time to be considered for funding.

STAR applications also require the following financial information: a project proforma; sources of private lender financing; and a financial history which includes balance sheets, operating statements and/or tax returns.

Proposals requesting STAR funding for a sub-loan/sub-grant program must include detailed sub-program guidelines and program balances from previous STAR awards.

Application Submission

A fee of $75.00 is required for each application of $5,000 to $25,000, and a $125.00 fee is required for each application in excess of $25,000. All fees are non-refundable. Upon request, copies of past STAR applications may be available to all interested parties.

PART 4 - Evaluation and Selection Process

The 21-member Neighborhood STAR Board serves as the formal review body for proposals requesting Neighborhood STAR funds. The Board is comprised of Saint Paul residents from all areas of the city who were recommended by the Mayor and approved by City Council.

Review and Input

Proposal review and input will be requested from the following:

• Neighborhood and community organizations where the proposed activity will be located;
• Planning and Economic Department staff for a review of the project’s financial feasibility;
• The Saint Paul Planning Commission for compliance with adopted plans and policies;
• The Capital Improvement Budget (CIB) committee to assist in coordinated decision making;
• Various city departments as appropriate.

Evaluation

Proposals will be initially reviewed by staff for the following eligibility and selection criteria:

• Proposed activities meet eligibility specifications as defined in STAR Guidelines;
• The proposal meets or exceeds STAR leverage requirements;
• The proposal is financially feasible; and
• The managing organization has the capacity to successfully implement and administer their project or program.

If a project is determined by city staff to be ineligible for Neighborhood STAR funds, the applicant should seek other available funds. City staff may direct the applicant to other public or private funding sources.

Review and Evaluation Process

The Neighborhood STAR Board will review and rate each proposal on its merit and provide a list of recommended proposals in ranking order to the Mayor and City Council. The Neighborhood STAR Board may take into consideration comments from the CIB Committee, Planning Commission, Neighborhood groups, and city staff as part of the recommendation process.

During the review process, applicants may be asked to provide additional information to the STAR Board and may be asked to consider a modification to their proposal.

The Mayor will review the recommendations of the Neighborhood STAR Board and forward his/her recommendations to the City Council.

The City Council, in turn, will review the Mayor’s recommendations and adopt by resolution a final list of Neighborhood STAR proposals.

Proposals may score higher during the review and evaluation process if:

• The proposal has a positive impact on the city’s tax base, neighborhood businesses, residential neighborhoods, and/or job creation;
• The proposal includes a loan component;
• Additional funds or resources are leveraged exceeding the required match;
• A percentage of the match is cash equity;
• Matching funds are from private (non-public) sources;
• All administrative expenses are funded through other resources;
• The proposal leads to filling vacant commercial storefront space within the city;
• The proposal advances climate-action, sustainability, and/or sustainability resilience goals as put forth in the Saint Paul Climate Action and Resilience Plan;
• The proposal celebrates and/or strengthens the city’s ethnic and cultural diversity and invest in the City’s cultural nodes;
• Activities are sufficiently concentrated within an identified geographic area to result in a high visual or economic impact;
• Sufficient planning or feasibility analysis indicates a high probability of success;
• Neighborhood support is documented with an appropriate mix of residents, property owners and/or businesses relevant to the project included in the planning, development and implementation of the proposal.

PART 5 - Leverage / Match Fund Requirements

Eligible Matching Contributions

Eligible matching contributions may include: private funds, foundation and corporate grants, local lender commitments, local contributions, funds raised from within the neighborhood, or operating assessments estimated over the life of the improvements.

A minimum of one non-city dollar for every STAR dollar is required for all grant requests;

Loan requests up to $50,000 do not require a match;

Any portion of a loan request over $50,000 requires a minimum $1 for $1 match with non-city resources.

Matching funds must be directly related to the applicant's proposal.

Although Federal, State, or County funds may be used as leverage, priority will be given to projects matched with private funds.

Project costs incurred after submission of a completed application form to STAR staff may be considered as matching dollars.

Applicants are encouraged to finance direct project management expenses with outside private resources (i.e. foundation grants, cash donations) and identify these funds as part of the match.

The value of sweat equity and/or volunteer labor is valued at $15.00 per hour and may not exceed 30% of the total project match amount.

If match is in the form of an operating assessment, no funding will be disbursed until after final ratification of the assessment.

Contributions from residents and businesses may include in-kind project-specific services such as: professional services, office space, supplies, volunteer labor, and sweat equity for physical improvements equaling up to 30% of the leveraged dollar amount.

The STAR Board may, at their discretion, recommend approval of other matching contributions on a case-by-case basis.    

Ineligible Matching Contributions

Ineligible matching contributions include:

• Volunteer meeting time;
• In-kind service donations from the STAR applicant;
• Volunteer labor, sweat equity or in-kind contributions exceeding 30% of the total match amount;
• General operating expenses of an organization;
• Donations/expenditures not directly related to the STAR project;
• City forgivable loans and\or grants;
• Unrelated improvements in the general area of the project;
• Improvements made prior to submission of a STAR application.

PART 6 - Awards and Implementation Process

Program/Project Implementation

Upon selection by the Mayor and City Council, the STAR applicant will be notified in writing of their funding commitment.

City staff will hold a post award meeting to provide a general review of city regulations applicable to all Neighborhood STAR activities. STAR recipients are cautioned not to make any financial commitments until the compliance and funding requirements are fully understood and agreed to by all parties.

Awardees have until the end of the calendar year following the year funding was approved to close on their STAR financing and begin construction on their STAR activity.

STAR project funds must be used by the end of the second calendar year following the year funding was approved.

Failure to execute an agreement in the allowed time frame may result in a cancellation of the city’s funding commitment.

Proposals are selected based upon the information contained in the application and may not be significantly changed during project implementation.

Awardees must include recognition of STAR grant support in all public communications.

Contract Execution

Prior to entering into a formal agreement with the City of Saint Paul, an individual pre-construction compliance meeting will be held with the STAR recipient, their contractor and key city staff to review project-specific compliance issues which may include: Affirmative Action; Business Subsidy; Energy Audit; Labor Standards; Living Wage; Section 3; and the Vendor Outreach Program.

Items contained in the Neighborhood STAR loan and/or grant agreement includes:

• Statement of Work form detailing the work to be performed, the source of leverage, total project budget and implementation timeline;
• Valid insurance certificate with appropriate liability coverage with the City of Saint Paul listed as an additional insured;
• Public purpose statement;
• Conflict-of-interest statement; and
• Appropriate attachments pertaining to the use of funds to adhere to applicable federal, state and local regulations.

An origination fee equal to 1% of the amount of STAR loan or grant dollars awarded will be due at the time of finance closing.

STAR Fund Distribution

Individualized STAR forms will be generated by city staff for each project after the execution of a contract.

Neighborhood STAR funds can be disbursed for eligible activities that:

1. were completed after STAR funding was approved by the Mayor and City Council;
2. have been properly invoiced;
3. include documentation of matching dollars spent on the project (if required); and
4. receive approval by Human Rights & Equal Economic Opportunity (HREEO) staff as meeting compliance requirements.

Neighborhood STAR loan funds with a mortgage and/or security agreement may also require a lien waiver and/or the use of a title company for disbursements.

STAR loan and STAR grant disbursements are, when feasible, to be made simultaneously.

Nonprofit Sub-Loan/Sub-Grant Programs

The following applies to nonprofit entities that are seeking STAR funding to operate a sub- loan and/or sub-grant program:

• Detailed sub-loan/sub-grant guidelines must be included in the STAR application and agreement.
• Nonprofit entities will be allowed up to three years to disburse STAR funds, and one year after final disbursement to begin loan repayments (if any).
• STAR loan funds awarded to a nonprofit entity for a sub-loan program will require a dollar for dollar match only when a sub-loan award to a sub-borrower exceeds $50,000.
• STAR sub-grant funds, when awarded in conjunction with a STAR sub-loan, should be disbursed at the same rate when feasible.
• Nonprofit organizations are not eligible to apply to their own sub-loan/sub-grant program.

PART 7 - Loan Standards

Standard STAR loan terms are as follows:

• STAR loans will have a standard eight-year term. There will be no interest accrued nor payments due for the first year after the loan is executed. STAR loans will be amortized over a seven-year period beginning one year after the loan is executed.
• STAR loans will have a standard interest rate of 3%.
• Applicants seeking terms different from the standard STAR loan terms shall provide appropriate documentation to demonstrate financial need.
• A fee-based alternative financing structure is available upon request.
• All borrowers will be asked to provide collateral, including mortgage, security agreement, and/or personal guaranty as appropriate.
• All loan requests will be analyzed by city staff for credit worthiness and may be modified.

PART 8 - Year-Round STAR Program

Eligible applicants include any private, nonprofit or for-profit entity located in or doing business in Saint Paul. Applications for STAR loan and grant funds will be accepted throughout the year, when funding is available, under the following conditions:

• The applicant demonstrates a definite need to forgo the annual STAR process;
• All applications are submitted on the STAR Year-Round Program application form;
• A minimum of one non-city (private) dollar to match every STAR dollar is required for all grant requests;
• Any portion of a loan request over $50,000 requires a minimum $1 for $1 match with non-city resources;
• Matching funds must be directly related to the applicant's proposal;
• An application fee of $75 is required for proposals requesting $25,000 or less and $125.00 fee is required for each application requesting more than $25,000 (all fees are non-refundable).

Application and Evaluation Process

Review and ranking of Neighborhood STAR Year-Round proposals is performed by the Neighborhood STAR Board with input (upon request) from neighborhood organizations, PED staff, Planning Commission, CIB Committee and City departments as appropriate.

STAR Board funding recommendations and rankings are submitted to the Mayor and City Council for final approval.

PART 9 – Project Monitoring and Reporting

STAR awardees will provide documentation of project expenditures and progress toward meeting expected project outcomes. Project Managers within the Department of Planning and Economic Development will monitor STAR disbursements and required match activity for both progress and contract compliance.

A final evaluation of each project to determine the extent to which the project has been successful should be submitted prior to final disbursement of STAR funds. Project success will be measured against expected project outcomes and the overall objectives of the Neighborhood STAR Program.

At the completion of all agreement activities, or upon expiration of the agreement, remaining project fund balances will be returned to the Neighborhood STAR fund.

Annual Report to the Mayor and City Council

City staff shall provide an annual report on the program and financial activities of the STAR Program to the Mayor and City Council.

Annual Review of Priorities

Priorities for the use of sales tax funds are reviewed on an annual basis. The STAR Board and/or city staff will review and forward comments and recommendations to interested parties.

Audits and Quality Control

It will be the responsibility of funded entities to provide all necessary documentation, as determined by the city, for purposes of determining program eligibility and ongoing program compliance.

Acronyms

CIB – Capital Improvement Budget, the City's bi-annual budget for capital improvements

HRA – Housing and Redevelopment Authority, the legal entity that undertakes redevelopment activities on behalf of the City of Saint Paul. The HRA Board members are also members of the City Council.

PED – Planning and Economic Development is the city department responsible for housing and economic development initiatives. PED staff administers the STAR program.

STAR – Sales Tax Revitalization Program

Definitions

Administrative Expenses – General overhead costs necessary to run an organization, including payroll, office space, supplies, rent, utilities, etc.

Affirmative Action – A City policy which requires entities receiving City financial assistance to develop a plan for the recruitment and integration of women and minorities into their businesses

Annual Report – A written document completed once a year on activities and accomplishments of the Neighborhood STAR and Year Round STAR Programs

Applicant – An entity applying for a loan and/or grant from the STAR program

Audit – An examination of an organization's financial and administrative records to ensure compliance with financial and program standards

Borrower – A person or entity that takes out a loan

Business Subsidy – A state law requiring that certain businesses receiving state or local government assistance must have a defined public purpose and recipients must set goals for job creation, wages and benefits to be achieved within two years of receiving the assistance

Capital Improvement – A physical improvement of property

Collateral – Property that can be assigned as security to ensure recovery of a loan, should a borrower default

Proposal – An application to fund a project or program

Section 3 – Provides economic opportunities to low and very-low income persons and businesses

Site Control – Authority to perform capital improvements to a site through ownership, long- term lease or signed purchase agreement

Small Business – An entity with under $1 million in gross sales or fewer than 20 full-time employees

Small Area Plan – A plan adopted by City Council for the redevelopment or improvement of a defined geographic area within the city.

Statement of Work/Scope of Services – A description of the activities that will be performed in the implementation of a project or program, including person(s) responsible, a timeline, and detailed budget

Sweat Equity – Work a property owner performs to complete a capital improvement on their own property. The value of this work may be used as a partial match for STAR funds.

Vendor Outreach Program – A City program designed to ensure a percentage of goods and services purchased by the City or by City-funded entities is provided by small, minority-owned and/or women-owned businesses