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MICHIGAN DE P ARTMEN T OF AGRICULTURE AGRICULTURE DE VELOP MEN T DIVISION
RE GULATIO N NO. 351 J ULIAN STILL E VALUE -ADDED AGRICULTUR AL DE VELOP MEN T FUND
Filed with th e Secretar y of Stat e on
These ru les tak e effect 7 days after filing with th e Secretar y of Stat e.
(By auth ority conferr ed on th e dep artm ent of agricultur e by section 2 of 2000 PA 322 , MCL 285 .302
P ART 1. GENER AL P ROVISIONS
R 285 .351 De finitio ns .
Rule 1. (1) As used in th ese ru les:
(a) “Act” mean s sections 1 an d 2 of 2000 PA322 , MCL 285 .301 an d 285 .302 .
(b) “App licant ” mean s an y one of th e followin g ent it ies that does, or applies to do, value-
added agricultura l pr ocessi ng or relat ed agricultura l production operat ions, or both , in th e Stat e of Michigan
(i) An individua l.
(ii) A farm er -own ed coope rat ive.
(iii) A partn ership.
(iv) limited liability compan y.
(v) A privat e or public corporat ion.
(vi) A local un it of governm ent .
(c) “App licat ion instru ct ions” mean s th e docum ent , which is issued by th e dep artm ent to applicant s, an d which describes in format ion required to part icipat e in th e agricultura l development fun d program in th e given stat e fiscal year .
(d) “Creditworth iness ” mean s th e ability or capacity to borr ow money from a nonpublic sour ce.
(e) “Curr ent rat io” mean s curr ent asse t s divided by curr ent liabilities. This will be used as a measur e of short -term finan cial soun dness .
(f) “Dep artm ent ” mean s th e Michigan dep artm ent of agricultur e.
(g) “Director” mean s th e director of th e dep artm ent or his or her designee.
(h) “Equity position” mean s th e differ ence, expressed in percenta ge term s, between th e tota l value of th e asse t s of th e applicant an d th e tota l value of th e liabilities of th e applicant .
(i) “Expan d” mean s to provide for new facilities or an addition to existing facilities, new products, an d services.
(j) “Feasibili ty stu dy” mean s a writt en stu dy docum ent that con sists of an expe rt ana lysis of all of th e followin g element s of th e proposed ventur e:
(i) Economic feasibili ty.
(ii) Mark et feasibili ty.
(iii) Techn ical feasibili ty.
(iv) Finan cial feasibili ty.
(v) Mana gement feasibili ty.
The mean ing an d use of th ese element s sha ll be th e sam e as th ose of th e Un ited Stat es dep artm ent of agricultur e as defined in th e guide for com pletion of feasibili ty stu dies, rura l development instru ct ion 4279 -B, appe ndix A, adopted on December 23, 1996 . The dep artm ent sha ll a ccep t an d use a feasibili ty stu dy that ha s been approved by th e Un ited Stat es dep artm ent of agricultur e. A copy of th e guide for com pletion of feasibili ty stu dies is available at no cost from eith er th e Michigan Dep artm ent of Agricultur e, Agricultur e Devel opment Divisi on, 525 West Allegan , Lan sing, Michigan 48909 or th e Un ited Stat es Dep artm ent of Agricultur e, Rura l Devel opment Stat e Office, 3001 Coolidge Road, Suite 200 , Ea st Lan sing, Michigan 48823 .
(k) “Finan cial soun dness ” mean s th e ability of a business ent ity to operat e pr ofita bility or rema in susta ina ble over a reasona ble t ime period.
(l) “Grant ee” mean s an y applicant who th e director ha s awar ded a grant from th e agricultura l development fun d on th e pr oject proposal.
(m) “J ob” mean s a direct employment position with th e grant ee creat ed or reta ined as a result of th e com pletion of th e pr oject an d expressed in term s of a full-time equivalent as defined by th e Un ited Stat es dep artm ent of labor.
(n) “Pu blic notificat ion” mean s 1 or more press releases sent to appropriat e Michigan news media out lets an d a public posting on th e dep artm ent ’s web site.
(o) “Pr oject ” mean s a ventur e or an activity, which is fun ded or proposed to be fun ded from th e agricultur e development fun d.
(p) “Risk mana gement ” mean s th e level at which th e applicant minimizes exposur e to finan cial r isk .
(2) Any finan cial term s or definitions sha ll be con sistent with genera lly a ccep ted a ccount ing principles, un less oth erwise defined in th ese ru les.
(3) The term s defined in th e act ha ve th e sam e mean ings when used in th ese ru les.
R 285 .352 App li cation , submitta l, se lec tio n crit e ri a, sco ri ng , and decision process .
Rule 2. (1) The dep artm ent ma y con duct a grant program using monies from th e agricultura l development fun d pur suant to th e pur poses an d provisions of th e act an d ma y ut ilize up to 5% of th e fun d for administrat ive support of grant pr ocessi ng an d com plian ce. The program sha ll be a com petitive grant program an d applicant s sha ll mak e an applicat ion for monies from th e fun d pur suant to th e act an d th ese ru les.
(2) An applicat ion for a grant from th e agricultura l development fun d sha ll be ma de on a form or format prescribed by th e dep artm ent for th e pur pose or pur poses described in th e act.
(3) Not less than 60 days befor e th e applicat ion deadline, as determ ined by th e director, th e dep artm ent sha ll mak e a public notificat ion of th e grant program , including in format ion on
th e applicat ion form an d applicat ion instru ct ions. The director ma y indicat e certa in priority program initiat ives or classes of agricultura l comm odities an d products in th e applicat ion instru ct ions based upon programmat ic or fun ding chan ges for each fiscal year .
(4) An applicat ion for a grant sha ll be directed int o 1 of th e followin g 4 program cat egories: (a) Mark et rese ar ch an d techn ical assistan ce for a specific product prepar ed by an industr y con sultant who ha s expe rt ise in th e field.
(b) Deta iled business plan development that in cor porat es a specific mark eting strat egy that is based upon a writt en feasibili ty stu dy an d specifically out lines th e work ing capita l an d finan cial needs , mana gement stru ctur e, con stru ct ion, production, mark eting, an d distr ibut ion needs .
(c) Applicat ion an d ut ilizat ion of inn ovat ive techn ology that will enhan ce an d support th e comm ercializat ion of value-added products.
(d) Fa cility pur cha se an d con stru ct ion, including lan d, site development , ut ility improvement s, tran sportat ion insta llat ions, telecommun icat ions, an d oth er infra stru ctur e improvement s, demolition, buildings, an d equipment . The dep artm ent ma y apport ion available grant fun ds in an y mann er for th e 4 program cat egories in th e applicat ion instru ctions.
(5) The dep artm ent ma y updat e th e applicat ion instru ct ions each fiscal year . The dep artm ent ma y also issue am ended or subseq uent applicat ion instru ct ions after th e initial applicat ion deadline based upon priority program initiat ives, programmat ic, or fun ding chan ges in a given fiscal year .
(6) The applicat ion review pr ocess will pr oceed as follows :
(b) The dep artm ent ’s determ inat ion to approve, modify, or reject a com pleted applicat ion sha ll be based on th e selection criteria an d scor ing system as set forth in subru les (9) an d
(10) of th is ru le. The director ma y appoint , on a fiscal year basis, an agricultura l development review comm itt ee for it s review an d scor ing of th e applicat ions an d advice on th e program . The review comm itt ee ma y divide int o subcomm itt ees . The review comm itt ee or subcomm itt ees sha ll evaluat e an d rank all applicat ions based on th e selection criteria an d scor ing system as set forth in subru les (9) an d (10) of th is ru le. The review comm itt ee sha ll be com prised of part ies specified in th e act. The part ies sha ll ha ve relevant business , mana gement , or pr ofessi ona l expe rt ise. A subcomm itt ee of th e review comm itt ee that is evaluat ing an d rank ing applicat ions based on th e selection criteria an d scor ing system sha ll be ma de up of nona pplicant s an d part ies who do not ha ve a con flict of int erest. Ea ch com plete applicat ion sha ll receive a scor e an d rank from th e review comm itt ee an d from th e dep artm ent togeth er with a recomm endat ion to approve, modify, or reject th e applicat ion.
(c) The dep artm ent ma y modify or reject all or an y port ion of th e applicat ion if an y 1 of th e followin g situat ions occur s based upon th e recomm endat ions of th e review comm itt ee:
(i) An applicant fa ils to submit an applicat ion as out lined by th e applicat ion instru ct ions provided un der R285 .353 (1) or fails to com ply with th e requirement s prescribed in th e act.
(ii) The tota l estimat ed revenu es available for agricultura l development fun d pr oject s ar e exceeded by th e sum of all fun ding that is requested in th e applicat ions received for th e stat e fiscal year .
(iii) The dep artm ent an d agricultura l development review comm itt ee determ ines that a proposed pr oject requires furth er justificat ion.
(7) An applicant sha ll notify th e dep artm ent of a proposed chan ge in an initial or am endat ory applicat ion for fede ra l fun ds that would require an increase or decrease of th e stat e finan cial comm itm ent .
(8) The review an d approval pr ocess sha ll be com pleted with in 90 days of th e esta blished applicat ion deadline.
(9) An applicat ion for a grant sha ll be evaluat ed a ccor ding to all of th e followin g selection criteria:
(a) Demonstrat ed econ omic an d socia l benefits to in-stat e producers.
(b) Demonstrat ed econ omic an d socia l benefits to commun it ies in Michigan .
(c) Pr oject leader an d mana gement team expe rience an d expe rt ise.
(d) Demonstrat ion of a high level of inn ovat ion an d initiat ive to benefit producers in Michigan .
(e) Finan cial soun dness , credit-worth iness , an d r isk assess ment .
(f) Ana lysis of proposed pr oject in term s of business an d mark et plann ing.
(g) For facility grant s, com pletion of a feasibili ty stu dy, business plan , an d finan cial plan . (h) Clear pr oject proposal with specific, measura ble out com es.
(10) Applicat ions sha ll be rank ed a ccor ding to th e followin g scor ing or point system:
(a) A scor e of 0 to10 point s will be awar ded based on econ omic development resulting from th e pr oject that impacts in-stat e producers of specific comm odities involved in th e pr oject .
(b) A scor e of 0 to 10 point s will be awar ded based on assess ment of th e extent to which th e pr oject should lead to improvement s or retent ion with in th e reside nt /adjacent commun ity, such as higher wages, improved benefits, more jobs, higher ta x base, great er econ omic activity, an d use of higher level of sk ills not typically foun d in th e commun it y.
(c) A scor e of 0 to 10 point s will be awar ded based on th e level of cash mat ching fun ds or oth er writt en verificat ion of repayment capacity. In-kind contr ibut ions sha ll not be count ed as a cash mat ch.
Point a llocat ion:
Pr oposed pr oject provides more than a 50% mat ch 10 Pr oject provides a 33-50% mat ch 6
Pr oject provides a 25-33% mat ch 4 Pr oject provides a 10-25% mat ch 2
(Note: if pr oject fails to provide a 10% cash mat ch, it is ineligible for grant awar d.)
(d) A scor e of 0 to 25 point s will be awar ded based on th e level of expe rience, expe rt ise an d proven tra ck recor d th e mana gement team possesses .
Point a llocat ion:
Mana gement team ha s demonstrat ed prior su ccesses in relevant field 8
Mana gement team includes oth er partn ering ent it ies that bring proven expe rience to th e pr oject 8
Mana gement team possesses su fficient mark eting an d finan ce expe rt ise 9
Point a llocat ion:
Pr oject tar gets a specific niche, value-added , or oth er mark et segment 5 Pr oject ut ilize s inn ovat ive techn ology to increase pr ofita bility 5
Pr oject ha s a closer conn ection to th e end consum er rath er than just tar geting an oth er agricultura l comm odity mark et 5
(f) A scor e of 0 to10 point s will be awar ded for th e finan cial soun dness of th e pr oject an d th e minimizat ion of r isk .
Point a llocat ion:
Equity position of th e applicant is 60% or great er 10 Equity position of th e applicant is 50% - 60% 7
Equity position of th e applicant is 33% to 50% 5
Equity position of th e applicant is less than 33% 2
(g) A scor e of 0 to10 point s will be awar ded based on th e pr oject 's clear description of pur pose.
(h) A scor e of 0 to 10 will be awar ded based on a determ inat ion of a priority for th e agricultura l industr y based on th e director’s determ inat ion.
(i) If th e grant request is for facility pur cha se, equipment , an d con stru ct ion cat egory, point s will be ded ucted from th e proposal’s scor e if it is determ ined that th e followin g ha ve not been su fficient ly com pleted:
(i) ) A deta iled mark eting plan based on verifiable an d useful mark et rese ar ch for th e product or products ha s not been com pleted by a pr ofessi ona l mark et rese ar cher. -20
(ii) A deta iled, well-docum ent ed an d realistic business plan ha s not been com pleted. -20
(11) The director of th e dep artm ent sha ll ha ve fina l approval of grant s ma de un der th e act an d th e dep artm ent sha ll provide grant s for reimbur sement of approved expe nses incurr ed by th e grant ee which ma y be divided int o part ia l payment s.
R 285 .353 Eligibility and documentation re qu ired .
Rule 3.(1) An applicant for fun ding sha ll com plete an applicat ion conta ining all of th e following:
(a) A clear description of a proposed pr oject or pr oject s stat ing how th e pr oject is designed to esta blish, reta in, expan d, attra ct , or develop value-added agricultura l pr ocessi ng an d relat ed agricultura l production operat ions in th is stat e.
(b) Docum entat ion that th e applicant or it s des ignat ed business ventur e ha s been esta blished a ccor ding to stat e law, is in good stan ding, an d is not in defau lt of an y fede ra l, stat e, or loca l ta xes.
(c) Adopted bylaws an d art icles of in cor porat ion or oth er art icles of organ izat ion as appropriat e for business stru ctur e that indicat ed th e specific dut ies, fun ctions, an d powers of th e applicant .
(d) A stat ement of econ omic an d socia l benefits to th e Michigan producers, th e loca l commun ity, an d th e stat e of Michigan .
(e) A deta iled proposal for specific use of th e fun ds con sistent with program focu s an d a deta iled budget including capita l cost s, work ing capita l, operat ing expe nses , an d revenu es.
(f)Measura ble out com es of th e pr oject . All jobs that ar e creat ed or reta ined sha ll be clear ly a direct result of th e pr oject . The num ber of jobs creat ed or reta ined sha ll be evide nced by a writt en comm itm ent from th e business to be assisted or oth ers directly impacted.
(g) Docum entat ion of guarant eed 10% mat ching fun ds sha ll be provided from nonstat e cash fun ds.
(h) Ana lysis of th e proposed pr oject in term s of, an d relat ive to, r isk , business an d mark et plann ing, finan cial soun dness , an d creditworth iness .
(i) Tra de secrets, comm ercial, or finan cial in format ion voluntar ily provided to th e dep artm ent sha ll be provided to th e dep artm ent upon a promise of con fident ia lity as auth orized by th e director, an d ar e exempt from disclosur e un der 1976 PA442 , MCL 15.321 et seq.
(j) Ide nt ificat ion of pr oject leaders, mana gement , an d mark eting team an d th eir expe rt ise an d expe rience in th is type of pr oject .
(k) Writt en support from th e loca l commun ity, suppliers, represe ntat ives of th e Michigan food an d agricultura l industr y, an d oth ers.
(l) In format ion on previously com pleted feasibili ty stu dies.
(m) An applicant seek ing fun ds for lan d or propert y acquisition an d asse mbly, building con stru ct ion or expan sion, demotion, pur cha se of equipment or relat ed facilities an d oth er improvement s sha ll include a deta iled mark eting strat egy backed by soun d mark et rese ar ch, a deta iled business development plan , an d ident ificat ion of su fficient capita l an d operat ing fun ds prepar ed by a recogn ized finan cial institut ion which is in good stan ding in Michigan an d which is nat iona lly regulat ed.
(2) A cash mat ch of not less than 10% of th e grant by th e applicant or oth er repayment guarant ee with a ded icat ed fun ding sour ce such as a cert ificat e of deposit is required befor e a grant can be awar ded .
(3) The director sha ll auth orize dep artm ent sta ff an d members of th e agricultura l development review comm itt ee to sign an d abide by con fident ia lity stat ement s for tra de secrets or comm ercial or finan cial in format ion voluntar ily provided to th e dep artm ent by applicant s upon a promise of con fident ia lity as auth orized by th e director, an d is exempt from disclosur e un der 1976 PA442 , MCL 15.231 et seq.
P ART 2. RE P ORTING AND COMP LIANCE RE QUIRE MEN TS
R 285 .354 Financia l repo rti ng and comp li ance re qu iremen ts .
Rule 4. (1) The director of th e dep artm ent ma y impose fiduciar y obligat ions upon a recipient of a grant , including per forman ce bonding, an d ma y impose con ditions upon th e receipt an d expe nditur e of th e grant money based on th e finan cial sta bility of th e recipient . A contra ctua l grant agreement sha ll be ent ered int o between th e grant ee an d th e departm ent .
(2) A grant ee sha ll provide to th e dep artm ent an annua l finan cial an d complian ce au dit report an d mana gement lett er with in 120 calendar days from th e end of th e grant ee’s fiscal
year . The report sha ll include a resp onse cert ified by an indepe ndent , cert ified public a ccountant in a ccor dan ce with th e dep artm ent ’s an d Michigan dep artm ent of tr easur y’s au dit guides . The dep artm ent ma y grant an extension of up to 60 days upon receipt of a writt en request if th e dep artm ent determ ines th e grant ee ha s ma de a good faith effort to provide th e necess ar y docum entat ion. The grant ee sha ll be required to provide th e annua l report for 2 year s after th e com pletion of th e pr oject .
(3) Fa ilur e to com ply with th e au dit section of th ese ru les ma y result in th e withh olding of agricultur e development fun d grant s for an y pur pose or oth er con ditions th e director ma y impose upon th e receipt an d expe nditur e of grant money as stat ed in Section 2(6) of th e act.
(4) The dep artm ent ma y au dit a recipient of fun ds in a ccor dan ce with th e contra ctua l grant agreement ent ered int o by th e grant ee an d th e dep artm ent .
(5) For th e durat ion of an y fun ded pr oject t ime period, th e grant ee sha ll provide semiannua l progress report s. A report sha ll out line all of th e followin g:
(a) Stat ed goals that ha ve been a ccom plished.
(b) Docum entat ion of all mat ching fun ds used.
(c) Any pr oject modificat ions that ha ve been ma de dur ing th e fun ding period.
The report sha ll be submitt ed with in 6 month s of grant awar d notificat ion an d every 6 month s th ereafter. Based on th e natur e of th e grant , th e director ha s discretion to allow annua l report s instead of semiannua l report s. Un less oth erwise designat ed by th e director, th e grant ee sha ll be required to provide th e report s for 2 year s after com pletion of th e pr oject . The director ma y waive th e 2-year report requirement an d ma y instead request 1 fina l com pletion report if th e pr oject ha s been com pleted an d th e director determ ines that th e stat ed goals ha ve been a ccom plished.
(6) Upon com pletion of a fun ded pr oject , a grant recipient sha ll provide a com plete pr oject summar y including per forman ce criteria met an d additiona l pert inent in format ion. A report sha ll be submitt ed with in 45 days of pr oject com pletion.
(7) Upon com pletion of a fun ded pr oject , a grant recipient sha ll provide a com plete finan cial summar y, of th e pr oject . An itemized list of expe nses an d in com e from th e pr oject as well as verificat ion of mat ching fun ds is required in th e report . The report sha ll be submitt ed with in 45 days of pr oject com pletion.
(8) If semiannua l report s or annua l report s ar e not provided to th e dep artm ent , th en th e director, after reasona ble notice to th e grant recipient , ma y withh old an y rema ining port ion of th e grant unt il th e report ha s been provided . If th e recipient fa ils to provide th e required report s, th en th e director, in th e int erest of ma inta ining th e int egrity of th e grant program , ma y term inat e an y rema ining port ion of th e grant awar d. Grant reimbur sement ma y be required if fina l summar y or finan cial report s ar e not provided an d th e director determ ines that th e stat ed goals of th e grant ha ve not been a ccom plished or th ere ha s not been docum entat ion on how grant fun ds ha ve been used .
R 285 .355 P rocedu res for ad jus ti ng or w it hho lding funds .
Rule 5. (1) The dep artm ent ma y adjust or withh old pr oject fun ds that ar e awar ded un der th e act or ma y adjust pr oject element s or alter th e pr oject scope un der an y of th e followin g circum stan ces:
(a) Mat ching fun ds from governm enta l un it s or oth er persons that ar e necess ar y for th e com pletion of th e pr oject ar e not awar ded to th e recipient by th e end of th e followin g fiscal year in which th e pr oject was approved.
(b) The actua l fun ds available in th e act ar e below th e estimat ed fun ds available upon which th e grant was approved.
(c) The actua l cost of th e pr oject var ies from th e estimat ed cost s on which a pr oject was approved.
(d) A recipient fails to com ply with th e act, th ese ru les, or orders of th e director.
(2) The dep artm ent sha ll notify a grant ee, by cert ified ma il, of a dep artm ent -initiat ed action to withh old fun ds for non com plian ce. The notice sha ll clear ly set forth th e reasons for th e proposed action. The recipient sha ll ha ve 30 days from th e dat e of issuan ce of th e notice to resp ond or un dertak e corr ective action. The dep artm ent ma y grant an extension if th e recipient files a writt en appe al with th e dep artm ent .
(3) If, with in 45 days after th e dat e that th e notice of int ent to withh old was issued, th e recipient ha s not corr ected th e reason for th e withh olding an d notified th e dep artm ent of that corr ection; th e recipient ha s not been grant ed an extension, or ha s not appe aled th e action, in writing, to th e dep artm ent an d been grant ed a waiver, th en th e dep artm ent sha ll send th e applicant , by cert ified ma il, a notificat ion that fun ds ar e being withh eld. Withh olding of fun ds sha ll occur aut omat ically after th e notice of withh olding is ma iled.
R 285 .356 Cont ractua l ag reemen ts .
Rule 6. A contra ctua l grant agreement between th e dep artm ent an d th e grant ee is required for pr oject s auth orized un der th e act. Based on th e finan cial sta bility of th e recipient , th e director of th e dep artm ent ma y impose fiduciar y obligat ions upon a recipient of a grant with in th e contra ct , including per forman ce bonding, an d ma y impose con ditions upon th e receipt an d expe nditur e of th e grant money.
