Community Disaster Loan Program – Frequently Asked Questions

WHAT IS IT AND WHO CAN PARTICIPATE?

The Community Disaster Loan (CDL) Program provides operational funding to help local governments (or other political subdivisions of the state, territories and federally recognized Indian Tribes) that have incurred significant loss in revenue, due to major disaster, that has or will adversely affect their ability to provide essential municipal services.

WHAT ESSENTIAL INFORMATION DO YOU NEED TO DECIDE?

Local governments must show a substantial loss (greater than 5 percent) of tax or other revenues has occurred during the current or following year, as a result of a major disaster, that has or will adversely affect their ability to perform government functions.

TIMEFRAME/ACTIVATION:

Eligible from the beginning of the incident period, August 23, 2017, through the end of the following fiscal year. The CDL Program follows the applicant’s fiscal year. The request to participate is submitted to the state of Texas.

DECISION-MAKER:

FEMA Assistant Administrator for Recovery

STAKEHOLDERS:

Local eligible applicants, state/territory/tribe, FEMA

WHEN SHOULD IT BE USED?

When a local government’s ability to provide essential municipal services is adversely impacted by a disaster.

HOW DO YOU PARTICIPATE IN THE PROGRAM?

  • If the local government (applicant) decides to apply, they should follow the included checklist and submit a completed “Certificate of Eligibility” form to
  • FEMA program staff will contact the interested community to perform a financialevaluation, explain the process and eligibility requirements.
  • If an applicant meets program requirements, a financial analysis and application packet are prepared based on thefindings.
  • The local government must submit the application packet for CDL to the Assistant Administrator for Recovery through the Governor’s Authorized Representative (Texas Division of Emergency Management) and FEMA Region 6 during the fiscal year of the disaster or the following fiscalyear.
  • The FEMA Assistant Administrator or his/her designee will review the application to determine whether the local government’s revenue base has been impacted to the extent that the jurisdiction is eligible for the CDL Program.
  • If you need more information, you may attend an upcoming webinar or call the program contact number 202-394-5141 to answer any questions.

HOW IS IT IMPLEMENTED?

THREE PHASES: APPLICATION, MAINTENANCE and CANCELLATION

APPLICATION

Upon receipt of the local government’s application, the Assistant Administrator or his/her designee will review for eligibility. If approved:

  • The amount of the loan shall not exceed 25 percent of the annual operating budget of the locality for the fiscal year in which the major disaster occurs or following fiscal year, notto exceed $5,000,000.
  • If the loss of tax and other revenue reaches 75 percent of the operating budget for the fiscal year in which the major disaster occurs or the following year, the amount of the loan shall not exceed 50percent ,not to exceed$5,000,000.
  • FEMA will issue a promissory note to the applicant co-signed by the state. If the state cannot legally co-sign the note, the local government must pledge collateral security. Funds will be dispersed in accordance with the terms of thenote.
  • The term of the loan is five years, and can be extended to ten years, with the applicant selecting the repaymentschedule.
  • Interest is the rate for five year maturities as determined by the U.S. Secretary of the Treasury on the date the promissory note is executed, adjusted to the nearest 1/8th percent. Interest accrues only on portion of funds drawn byapplicant.The current interest rate can be found at:
  • Funds must be used to carry on existing local government essential functions or to expand such essential functions to meet disaster-relatedneeds.
  • A SmartLink account is created and managed by Health and Human Services (HHS). Funds are uploaded to a holding account according to the disbursement schedule on the Promissory Note.

MAINTENANCE

  • Duringyearstwoandthree,the applicantprovidesauditedfinancialstatements. Theseareusedto assess current needs for further disbursements. If need is proven, applicant fills out “Disbursement Request” forms and funds are uploaded to their SmartLink account.

CANCELLATION

  • Based on the audited financial statements for the full three fiscal years post disaster (or 36 months if the applicant modified their fiscal year), if applicants had a cumulative operating deficit, their loan can be cancelled to the extent of the lesser of loan amount drawn, cumulative operating deficit or combined revenue losses and unreimbursed disaster-related expenses (UDRE).

WHEN SHOULD IT NOT BE USED?

  • When local government revenue has not decreased by at least 5 percent, or,
  • When the local government can reasonably continue providing government functions using reserve funds or projectedsurpluses.
  • When state/tribe/territory laws prohibits local government to go into indebtedness.

AUTHORITY:

  • Section 417 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended.
  • 44 CFR Part 206, SubpartK