Public Act 85-472 establishes a “community residential facility revolving loan fund”. The loan fund authorizes the Department of Developmental Services (DDS) to make loans (mortgages) to private non-profit organizations for the construction, purchase and renovation, or rehabilitation of community-based residential facilities for persons who are intellectually disabled. The fund may also be used to refinance indebtedness created in December, 1983.
Eligible facilities are residences for up to six intellectually disabled or autistic persons, providing food, shelter, personal guidance, and the required level of continuing health care. A facility housing more than six persons operating as of July 1, 1985 is also eligible for rehabilitation loans. Eligible facilities must be private non-profit corporations which are tax exempt under Section 501(c) (3) of the IRS code, and are qualified to do business in the State of Connecticut.
Use of Loans – Requirements/Restrictions
The loan principal for the construction or purchase and renovation of a community-based residential facility can be up to 100% of the total property development costs. However, the total property development cost cannot exceed the CLA development amount approved by Department of Social Services (DSS) and DDS.
“Total property development costs” are those costs which can be capitalized under generally accepted accounting principals. These costs include: the cost to purchase a property; the construction costs to build a new home; the cost of renovation or rehabilitation of an existing property; development costs associated with building or renovations. The total property development costs for any eligible facility financed through this fund can not exceed the amount approved by DSS and DDS.
The principal amount of a loan for the rehabilitation of a residential facility can be up to 100% of the total property development costs, but cannot exceed $60,000.
DDS adheres to lending guidelines which correspond to the Guidelines for Purchasing and/or Renovation of Privately Owned Community Living Arrangements, Department of Social Services – Department of Developmental Services. These guidelines establish the maximum fair rent recognized by DSS based on the bed size of the residence. Loans will not exceed the Fair Rent Guidelines established for a Community Living Arrangement, and will not exceed the amount approved by DDS and DSS through the CLA Capital Development process.
The portion of the property development costs, if any, to be paid by an organization applying for the loan may come from the organization’s cash and/or a loan secured by a mortgage on the property.
The Revolving Loan Fund cannot be used to refinance mortgages on existing CLAs except as provided in the statutes. The statutes allow refinancing of debt (mortgages) created in December, 1983.
The Revolving Loan Fund cannot be used to finance unlicensed facilities. This mortgage fund cannot be used to finance residences that will be owned by a private organization that leases the facility to the state, for a residential program operated and staffed by state employees.
Reports and Agreements Required by DDS
An organization seeking a loan must submit to DDS: an independent appraisal by a state certified real estate appraiser; a structural survey of the home by a state licensed engineer; and an approved Department of Developmental Services Community Living Arrangement Development proposal.
Loans will not be granted to purchase a facility for more than its appraised value. Rehabilitation loans will not exceed actual and reasonable costs as defined in DDS standards.
The borrower must sign a “capital loan agreement” in which it agrees to meet all DDS guidelines for loan usage and to use the loan funds only for the purchase of property, construction, renovation or rehabilitation of a community residential facility approved by DDS.
The borrower must maintain the facility as a licensed community residence for the intellectually disabled for a period equal to the amortization period of the loan (minimum = 5 years; maximum = 30 years).
Reservation of Bed Spaces
If an organization receives a loan equal to 100% of the total property development cost of a new facility, it shall agree to reserve 100% of the maximum number of beds in the funded facility for DDS referrals from state institutions and waiting lists until such time as DDS determines that this is no longer necessary.
If the loan is for less than 100% of the total property development cost, the organization must reserve at least 2/3 of the maximum number of beds in the funded facility for DDS referrals from state institutions and waiting list until DDS deems it is no longer necessary.
DDS may establish priorities for the development of new facilities serving persons with special needs and give preference to applications addressing such needs.
Loan Repayment Terms
Borrowers must provide DDS with a promissory note equal to the amount of the loan, and provide for the repayment of the principal and interest within a period not to exceed thirty (30) years. All loans must be secured with a mortgage deed.
The state’s mortgage may be subordinate to a first mortgage interest in the property given by the borrowing organization, but the total of both mortgages may not exceed the limit on the total property for which loan funds are expended.
The capital loan agreement requires borrowers make periodic monthly payments of principle and interest to DDS. These payments are deposited into the Revolving Loan Fund and can be used to issue additional mortgages.
If a default occurs, or the agreement is terminated prior to the borrower satisfying all obligations, DDS will require that the outstanding loan amount be returned to the Revolving Loan Fund. In the event of a default, DDS may foreclose on the mortgage.
Loss of License
If DDS terminates the borrower’s license to operate the facility for cause, it may (1) act to place the facility in receivership; (2) contract with a private non-profit corporation to operate the facility; or (3) operate it with DDS staff until the borrower’s license is restored. If the license is not restored within one (1) year, the facility shall be considered in default and DDS may pursue appropriate remedies.
Applications and Funding
Applications are on the DDS Web page, or may be obtained by contacting at the Department of Developmental Services. Loan applications should be sent to: