BEFORE THE DEPARTMENT OF COMMERCE
OF THE STATE OF MONTANA
In the matter of the amendment of ARM 8.99.917 pertaining to the implementation of the Big Sky Economic Development Trust Program
NOTICE OF AMENDMENT
TO: All Concerned Persons
1. On September 10, 2015, the Department of Commerce published MAR Notice No. 8-99-138 pertaining to the public hearing on the proposed amendment of the above-stated rule at page 1328 of the 2015 Montana Administrative Register, Issue Number 17.
2. The department has amended the above-stated rule as proposed.
3. The department has thoroughly considered the comments and testimony received. A summary of the comments received and the department's responses are as follows:
COMMENT #1: A comment was received regarding what is the Department of Commerce going to expect to have documented to make sure the business is meeting these qualifications/criteria.
RESPONSE #1: As part of the start-up activities after award is made, the business
will need to provide a written statement how they are meeting the program
COMMENT #2: A comment was received regarding page 5. Under New Eligible
Job – added "Priority is given to a: net new job created by the assisted business
which employs an individual…. This allows the department to consider other types
of jobs with varying levels of hours worked each week. What exactly is meant by
this, what other types of jobs would qualify? Is the definition of an "eligible job" just at
the discretion of Commerce?
RESPONSE #2: As per the guidelines, New Eligible Jobs – priority is given to a net new job created by the assisted business which employs an individual that is new to the company and has not been filled prior to the BSTF notice of the award effective date; is a permanent, full-time job, meaning a predominantly year-round position requiring an average of 35 hours of work each week, and the new job pays the BSTF required wage rate. The term does not include replacement (turnover) jobs, part-time jobs, seasonal jobs, temporary jobs, or contractors.
COMMENT #3: A comment was received regarding Page 6. Eligible Uses of Funds includes an option for wages of Net New Employees - 1. (d). Wages of Net New Employees are eligible expenses if jobs pay the higher of 170% of state current minimum wage, or the current average weekly wage of the county in which the employees are to be principally employed including the value of employee benefits. We are in favor of this change but as an administrator of the Category I grant funds, we do have some questions. How will the reimbursement work? Does the business turn their payroll into the state every pay period until they have reached the allowed grant amount or is it done in one lump sum after the employee has been paid the amount of the grant awarded/dedicated to that employee? Does it cover the benefits or just the hourly pay rate? Can the wages now be used to match the grant funds?
RESPONSE #3: If an application chooses to have wages reimbursed, the wage must meet the higher threshold (higher of 170% of minimum wage or county average wage). The assisted business would select the job for which it would want wage reimbursement. For reimbursement, the business would need to submit either the UI5 and/or payroll records. Disbursement will only be made once the job has a total wage that meets or exceeds the cost per job (typically $5,000 or $7,500). Reimbursement would be wages only. Eligible benefits under Employee Retirement Income Security Act of 1974 (ERISA) may be used in the calculation in meeting the required wage requirement. If proposed in the application, wages can be used for match.
COMMENT #4: A comment was received regarding Page 7. Administration Costs – there have been comments from the field about the department only allowing 5% for administration ($30,000 cap for job creation and $500 for planning). Should the % be raised and to what level? We do not believe the administration costs should be raised. The funds are meant to assist the private sector business in their expansion efforts.
RESPONSE #4: The administration costs shall not exceed 8%. Applicants are not required to include administration expenses in the proposed budget or to utilize the full 8%. The maximum ceiling will remain at $30,000.
COMMENT #5: A comment was received regarding Page 7. Under Planning Grant Projects: Added, "Preproduction costs for film or media." (This assists the film industry.)
RESPONSE #5: The program's legislative purpose is to assist in economic development for Montana. Films produced in Montana bring in an estimated 7 to 10 million dollars per year of new money to the state's economy.
COMMENT #6: A comment was received regarding Page 10. Language on submission of projections updated to include requirement for submittal of updated projections at the end of the first year of contract. In the case of the Job Creation Grant, the grant is not dependent on the financial stability of the company; it is dependent on job creation and is reimbursed for creating jobs. Funds are granted to a business and given as reimbursement when they create jobs, so why would a grant that does not provide up front capital require ongoing financial reporting? As grant administrators and economic development professionals who deal with businesses on a daily basis, we have been informed by businesses in the past that providing financial information is a concern because it can potentially be requested publicly. We assume that providing updated financials would also be a concern for these businesses as well as a possible burden in creating more reporting requirements for the business that the grant is meant to help. What is the purpose of collecting the financials? Will it affect the possibility of the businesses receiving the funds for creating jobs? Will the Department of Commerce pull the grant if the company's financials are poor?
RESPONSE #6: The BSTF Program has always required financial statements, both historical and projections. Financial information submitted must demonstrate that the business to be assisted is or will be an ongoing viable company that can achieve and maintain the amount of employment projected. If the business is unable to demonstrate that they can create the proposed jobs, the department does reserve the right to not extend the contract another year.
COMMENT #7: A comment was received regarding Page 16. Job creation projects and planning grant projects will only withhold 10% of grant until all activities are completed. In the case of the Job Creation grant, the money is released when the business hires and shows proof of matching funds. Why would the grant withhold 10% in this case? It makes sense for planning grants while projects are in process, but not grants related to job creation that are on a reimbursement basis for actual expenses.
RESPONSE #7: The holdback is to ensure that the grantee submits all the required close-out documentation in a timely fashion.
COMMENT #8: A comment was received regarding Appendix C. Hiring and Training Plan include a form for businesses to set monthly hiring goals. Does this requirement create more of a burden for the business? The hiring plan is a projection for what the business foresees in the future. Through experience as administrators, businesses that meet the projected timeline for hiring 100% is rare and requiring more reporting will not solve this problem. The Job Creation Grant is meant to project jobs for a two-year period, not monthly. What will happen if they are not meeting their projections? Will the business lose the grant if monthly projections are not met? The business does not receive the funds until they create the jobs. Does it matter when those jobs are created if it falls within the two-year period for which they are receiving the grant? We understand the need to track the use of the funds, but monthly reporting may serve as a disincentive to use the program at all.
RESPONSE #8: In order to more closely estimate the funding obligation on behalf of the state, the department has deployed a strategy to ensure funds are utilized during the time period specified by the business. Part of the strategy includes monthly projections by the business and follow-up activities that will ensure job creation as a priority for all partners involved. The department will not be evaluating the business performance based on meeting the monthly projections; if the business is not meeting its overall hiring projections and there are not extenuating circumstances, the department reserves the right to not extend the contract.
The department is moving to one-year contracts. The department wants realistic hiring goals, which are established by the business. The Job Creation Report and/or Job Creation Certification will not be required monthly. We are looking for more general information such as total full-time employment, which would be accomplished via phone and/or e-mail. By reporting more frequently, MDOC and the grant administrator can deploy additional resources if needed.
COMMENT #9: A comment was received regarding the true "guidance" is that we all need to remember that the business community does not live in a world where things are predictable, ever. In asking them to predict what is going to happen in the next two years you are really asking them to look into their crystal balls and predict the best possible outcome. If it were easy, everyone would do it! They are working hard to do what they do and we don't ever want to make this harder or more time-consuming than it has to be. Things change and we need to be as flexible and nimble as any business that we are trying to assist.
RESPONSE #9: The revised guidelines are meant to provide additional flexibility to the program.
COMMENT #10: One comment stated we don't want to be solving problems that do not exist, so I hope that every change we make to this program happens after we ask ourselves "Why are we doing this?" and "Does this change make us more effective or more efficient?"
RESPONSE #10: We believe that the proposed changes will make the program more effective and more efficient in deploying the funds.
COMMENT #11: One comment stated it would be helpful to have a comprehensive checklist of items required for reports, requests for reimbursements, and closeouts. It would be helpful if this checklist did not change every six months. Perhaps on the web site with the guidelines?
RESPONSE #11: The BSTF contract already identifies all the required information for reporting and for reimbursement. We would be happy to develop a checklist for closeout. The online system will clearly identify the needed information.
COMMENT #12: One comment stated that there needs to be a contract template that is constant and not changing regularly so that we don't need an attorney to review every contract.
RESPONSE #12: Contract language is only changed as the need arises or as advised by our Office of Legal Affairs.
COMMENT #13: A comment was received regarding the department allowing wages as an eligible use of grant funds; BSTF will need to create a very clear process for documenting those as people are hired, not just at the end of the contract. It isn't like buying a piece of equipment where you just provide the invoice and proof of payment.
RESPONSE #13: If an application chooses to have wages reimbursed, the wage must meet the higher threshold (higher of 170% of minimum wage or county average wage). The assisted business would select the job for which it would want wage reimbursement. For reimbursement, the business would need to submit either the UI5 and/or payroll records. Disbursement will only be made once the job has a total wage that meets or exceeds the cost per job (typically $7,500 or $5,000). Reimbursement would be wages only. Eligible benefits under Employee Retirement Income Security Act of 1974 (ERISA) may be used in the calculation in meeting the wage requirement.
COMMENT #14: A comment was received regarding posting the application deadline on the web site, but the review committee meeting date and the date of award decisions are much more important in the planning and crystal-ball-gazing process that is part of putting an application together and are really necessary in order for the company to plan when they will begin hiring and purchasing equipment, etc. If the process is more than two months for applying and then waiting for the award, many companies will decide not to wait. Two or three months are a long time in the life of a fast-growing company. And fast-growing is who this program appeals to.
RESPONSE #14: The Grant Review meetings are dependent on the number of applications and committee members' and staff's schedules. Our goal is to shorten the time frame between submittal of an application to approval.
COMMENT #15: A comment was received regarding BSTF allowing benefits as part of the calculation of compensation. Could you provide a spreadsheet template (not a Word document) that calculates the per hour value by inputting each type of benefit eligible and then adding it to the hourly wage so I can consistently calculate that number? Also a clear list of which benefits to include is necessary.
RESPONSE #15: As per the statute, ERISA benefits can be included in the
calculation of meeting the minimum wage requirement. ERISA is a very complex law. Besides the actual benefits, the implementation of the plan must comply with the ERISA law. We recommend that businesses contact their plan provider to verify that their individual plan meets the ERISA requirements.
COMMENT #16: A comment was received regarding page 11 and states that businesses may be required to report job creation on a monthly basis in addition to monthly progress reports. This is too much and the opposite of streamlining. The current system is working well.
RESPONSE #16: The Job Creation Report and or Job Creation Certification will not be required monthly. We are looking for more general information such as total full-time employment, which would be accomplished via phone and or e-mail. This will help us deploy other types of assistance that business may need.
COMMENT #17: A comment was received regarding page 13 that has a note that state contracts will be executed for one year and then renewed. Why would you do this? It is more work for every entity involved for no definable benefit. It makes the planning/predicting process even more complex and appears to be trying to solve a problem that does not exist.
RESPONSE #17: In order to more closely estimate the funding obligation on behalf of the state, the department has deployed a strategy to ensure funds are utilized during the time period specified by the business. By overstating the employment number, MDOC is obligating the BSTF funds, which could potentially restrict other applicants from receiving BSTF funds. In 2014, the spend-down rate for those grants was less than 15%.
COMMENT #18: A comment was received regarding the Application Checklist that isn't particularly helpful. It should either be a table of contents as the first page or just be a checklist to be used by the applicant for their convenience and not included in the application. Perhaps that will go away when we return to the online application process? In that case it would be helpful to have a checklist online with the other checklists suggested in #3.
RESPONSE #18: The application checklist will be eliminated once the program migrates to the online system.
COMMENT #19: A comment was received regarding section A.1. Statement of Purpose. Why was Manufacturing ammunition components a qualified economic development purpose?
RESPONSE #19: With the passage of SB 122 during the 2015 Legislative Session, this language was added to this section.
COMMENT #20: A comment was received regarding section I.3.a. If the business receives reimbursement for 25 jobs. At the next reporting period, the business is down by three jobs, will the contract be withdrawn?
RESPONSE #20: Unless there are extenuating circumstances, the department would not typically withdraw a contract. The department will review the assisted business' compliance with their hiring plan and financial statement before deciding if the one-year contract will be extended another year. Contract extensions will be reviewed prior to the expiration date.
COMMENT #21: A comment was received regarding the definition of "Ready to
RESPONSE #21: "Ready to proceed" means when all the start-up requirements have been completed and submitted to the department. Once this occurs, the department will issue a "Release of Funds."
COMMENT #22: A comment was received regarding section J.2. Planning Grants Award withdrawal. What does executed contract mean?
RESPONSE #22: Executed contract means the contract has been executed by all parties.
COMMENT #23: A comment was received regarding section K.5. Project updates for three-year requirements. Could this be defined and identified in the contract?
RESPONSE #23: The requirement to provide annual project updates for three years after the close of the contract is already included in the contract.
/s/ G. Martin Tuttle /s/ Douglas Mitchell
G. MARTIN TUTTLE DOUGLAS MITCHELL
Rule Reviewer Deputy Director
Department of Commerce
Certified to the Secretary of State October 19, 2015.