Does the use of CDBG funds to pay for construction loan interest trigger Davis-Bacon? By this I do not mean using CDBG assistance to write down the interest rate charged on a construction loan.
Date Published: May 2015
Federal labor standards provisions apply to construction work financed in whole or in part with CDBG funds of more than $2,000. “Financing" is not limited to the act of paying for construction work directly. "Financing" can mean, for example, using CDBG assistance to pay the interest charged to reduce the interest rate on a construction loan (including certain collateral accounts). Generally, "financing" also means using CDBG funds to provide permanent financing following construction. This question suggests that CDBG funds will make payments on the construction financing; Davis-Bacon applies in this case. Where CDBG funds are used to finance only a portion of the construction work, labor standards are applicable to the entire construction work.