Cabot UDAG Plan
Procedures, Policies, and Regulations Handbook
Town of Cabot
Cabot UDAG Committee
2010
Cabot UDAG Committee
P.O. Box 125
Cabot, VT 05647
The current Cabot UDAG Committee members are:
Phone # e-email address
R.D. Eno, chair Appointed by Selectboard 563-2486 rdeno@fairpoint.net
Ann Cookson Appointed by School Board 563-2270 cabotgarage@aol.com
Chuck Talbert Appointed by Village Trustees 563-2127 wdchuck@fairpoint.net
Gary Katz Elected, 3 yr term expires 2011 563-2078 Prt@fairpoint.net
Cathleen Maine Elective term expires 2012 563-2757 Cathleen@womenscollective.org
Jeannie Johnson Elective term expires 2010 563-3147 JeannieJCabot@yahoo.com
If you have any questions regarding this document or the UDAG committee, contact any UDAG Committee member.
UDAG Committee meetings are held on the third Thursday of each month at 7:00 p.m. in the Select Board
meeting room of the Willey Building.
All meetings are open to the public.
Preamble to this Revision
In 2006, the Cabot Town Meeting adopted a revised UDAG Plan with the following goals:
1. Preserve the purchasing power of the Fund;
2. Broaden the impact of the Fund on the Cabot community;
3. Minimize the political component of the UDAG process;
4. Eliminate the risk of losing capital from defaulted loans; and
5. Institutionalize the UDAG process.
The 2006 Plan achieved the last three of these goals but failed to accomplish the first two. In proposing this new
Plan, the UDAG Committee hopes to preserve the successful parts of the previous plan and add modifications that
will move us toward realizing the first two.
The 2006 Plan created a partnership with the Union Bank to administer the funds and provide lending services.
The UDAG funds, of which there were at that time about $1.2 million in cash, were divided into a UDAG Trust,
consisting of about $1.1 million, and a Scholarship Endowment, consisting of about $100,000. Each part is
separately invested by the Union Bank through its investment manager, Granite Investment Advisors. The earnings
of these portfolios are paid into a UDAG checking account and a Scholarship checking account.
Under the 2006 Plan, the Committee awards higher education scholarships to Cabot students and adults each
year. These are one-time payments, and the amount available to be distributed among the successful applicants
varies according to a formula based on the earnings of the Scholarship Endowment. The more successful
applicants there are, the smaller is each share of the available scholarship money. Scholarships have averaged
$1,000 each.
The 2006 Plan created an Economic Development Loan (EDL)program, in partnership with the Union Bank, that
replaced the old UDAG loan program. Under the EDL, Cabot residents who successfully apply to the Union Bank for
loans to start or expand businesses in Cabot receive a discount on their interest of 2% for three to five years, the
discount to be paid out of the earnings of the UDAG Trust. The Union Bank does not lend UDAG’s money; it lends
only its own money. The subsidy is conditional upon the borrower’s faithful monthly payments and terminates upon
any default. The bank assumes all risk, with no risk to the UDAG Trust.
For services to both the UDAG Trust and the Scholarship Endowment, the Union Bank receives fees of between .
5% and 1% quarterly.
A portion of each year’s UDAG Trust earnings is made available for grants to community groups, as approved
by the Town Meeting.
In addition, the UDAG Committee continues to administer loans that had been made under the old plans and not
yet discharged. In 2007, with the approval of the Selectboard, the UDAG Committee undertook to keep its own
records and manage its own accounts independently of the Town office.
Unhappily, the UDAG EDL program never attracted much interest, and as this new proposal comes before the
Town Meeting, only three loans are being subsidized under the plan at a cost of about $6,000 a year. Moreover,
the recession has decreased the market value of the UDAG Trust and Scholarship Endowments. Hence, the cash
value of the funds is not being preserved, and the economic benefits to the Town are few and small.
In the view of the UDAG Committee, UDAG funds are most valuable when they are at work in the community,
supporting business, enhancing employment and broadening people’s opportunities. The changes in the UDAG
Plan represented by this proposal would put more of those funds to work by:
1. Making businesses located in Cabot eligible for EDL subsidies even if the owners or borrowers live elsewhere;
2. Creating an annual Development Fund of $10,000 from which the UDAG Committee may award grants to support
feasibility studies and grant-writing costs for public projects;
3. Requiring Community Grant recipients to purchase goods and services in Cabot as far as possible, to report
periodically to the UDAG Committee; but the new Plan would eliminate the 25% match;
4. Increasing the Scholarship Endowment’s share of UDAG assets to make more significant scholarship aid available
to Cabot residents.
In addition, the new proposal makes changes that affirm that Cabot voters, in Town Meeting, have final authority
over all UDAG assets and that they can modify or repeal the UDAG Plan by Australian Ballot vote at any Town
Meeting.
History & Background of UDAG
In 1987, the U.S. Department of Housing and Urban Development awarded the Town of Cabot a grant of
approximately $2 million to be loaned to the Cabot Farmers' Co-op to construct a warehouse and improve its
wastewater treatment facilities. The interest rate was set at 4%. The loan to the Co-op was closed in December
1988. The Creamery repaid the loan in 2003. As these funds were paid back, they were to be used to encourage
economic and social development in Cabot. In order to insure the wise stewardship of the funds and to provide for
their orderly use, by voice vote Town Meeting adopted the original UDAG Plan on March 3, 1992. This Plan was
subsequently amended by a motion of the Cabot UDAG Committee and a vote by Australian ballot at Town Meetings
in 1995, 1998, and 2001.
Mission Statement
The purpose of the Cabot UDAG Plan is to provide financial resources, through a fair and consistent process, to
local individuals and groups for activities and projects that serve to strengthen the economic, cultural, educational,
environmental, and social well-being of the Cabot community.
UDAG Goals
1. Protect and enhance the quality of life and the character of the town by:
a.preserving agriculture;
b.preserving and reusing historic and important buildings;
c.conserving open and farm land;
d.enhancing recreational opportunities;
e.providing local amenities and community activities, and
f.preserving and protecting the environment and abating pollution.
2. Promote commercial development that is consistent with the scale and character of the community by:
a.assisting existing small business, including agriculture;
b.providing incentives for new business development;
c.assisting in the promotion of local business;
d.creating and protecting local employment opportunities;
e.attracting public and private investment, and
f.encouraging the use indigenous, renewable raw materials.
3. Promote education by:
a.supporting the programs, activities and operations of the Cabot School;
b.assisting students who continue their education beyond high school, and
c.assisting adults who are pursuing continuing education and professional development that is intended to enhance
their job skills and advance their careers.
4. Improve community infrastructure, facilities and services by:
a.supporting local civic and community service organizations and groups, especially those that address the needs
of children, adolescents, the handicapped, or the elderly, and;
b.supporting public works projects in the Town and Village.
5. Enhance the local tax base by supporting projects and activities that serve to improve existing businesses
and attract new ones.
6. Preserve the fund so as to be able to continue to meet the needs of the community for many years to come.
THE UADG PLAN - SUMMARY
The Cabot UDAG Plan will
1. provide scholarships to residents of Cabot;
2. subsidize the interest rate on loans to Cabot residents, businesses, community organizations, and to the
Town and Village governments; and
3. make grants to community organizations in Cabot, and to the Town, and Village of Cabot and the Cabot
School.
To facilitate these programs, the Cabot UDAG Committee (the “Committee”) has selected the Union Bank to be its
financial partner to offer the loans which will have an interest rate subsidized by the UDAG Trust and to manage the
investment of the assets of the UDAG Trust and the Scholarship Endowment. In any given year, the total return (net
of inflation) on the investments of the UDAG Trust principal will pay for the loan interest rate subsidies, UDAG Plan
administrative expenses and grants. In any given year, the total return (net of inflation) on the Scholarship
Endowment will pay for scholarships offered to Cabot residents. Although the UDAG Trust and the Endowment are
both managed by the trust department of the UDAG Plan’s designated financial partner, the Scholarship Endowment
will be treated as a separate account. This will permit donations to be made to the Scholarship Endowment by
individuals and businesses, and allow these donations to be treated as tax deductible.
Anyone seeking a subsidized loan must apply for that loan at the Union Bank. (The closest Union Bank branch is in
Hardwick.) A loan applicant does not apply to the Committee. The Committee will have no knowledge of who
applies for a subsidized loan or of the specifics of the loan application. It is the bank’s decision whether or not to
grant the loan. However, the bank must determine that the purpose of the loan meets the goals of the UDAG Plan
in order for the loan to qualify for a UDAG interest rate subsidy. It is the bank’s money that is loaned. No Cabot
UDAG assets will be at risk in any of these loans.
THE DETAILS
1. Scholarships –
A. In any given year, up to 4% of the trailing 6 quarters average balance to 3/31 of any year in the Scholarship
Endowment may be disbursed as scholarships to eligible Cabot residents Eligible recipients are residents pursuing
post-high school education/training, and/or continuing education or professional development, who have been
Cabot residents for at least twelve months as of the application deadline and who will be Cabot residents on the
award date.
B. Eligible activities that may be funded with these scholarships include the purchase of books and equipment
required in connection with educational activities and the payment of tuition and fees for degree programs, courses
and seminars.
C. Completed scholarship applications (see APPENDIX A) must be submitted by 5:00 p.m. May 1 (or following
business day, if May 1 falls on a weekend) to the Cabot School office, or mailed to Cabot UDAG Fund; P.O. Box
125; Cabot, VT 05647.
D. Recipients of scholarships are announced at Cabot High School graduation each year.
E. The amount and method of selecting recipients of these scholarships will be decided by the Cabot UDAG
Scholarship Subcommittee of the Cabot UDAG Committee (the “Subcommittee”).
i. The Chair of the Cabot UDAG Committee will appoint the Chair of the Subcommittee.
ii. The Chair of the Subcommittee will appoint at least three members to serve on this committee. One of the
members must be on the staff of Cabot School. The rest of the members must be residents of Cabot.
iii. The Chair of the Subcommittee will vote on decisions of the committee only in case of a tie vote of the
members.
iv. A minimum quorum of the Subcommittee consists of at least two residents of Cabot and the Chair of the
Subcommittee.
F. The Scholarship Endowment will be treated as a separate account managed by the trust department of the
UDAG Plan’s financial partner.
G. The assets of the Scholarship Endowment must be at least 10% of the sum of the assets of the UDAG Trust,
the principal owing on loans made prior to this Plan revision, and the Scholarship Endowment on 12/31 of any given
year.
i. If the assets of the Endowment are less than 10% of the sum of the above on 12/31 of any year, capital must
be contributed to the Endowment from the UDAG Fund.
ii. If the assets of the Endowment are more than 10% of the sum of the above on 12/31 of any year, no
rebalancing occurs.
2. Subsidized Interest Rate Loans –
A. The UDAG Trust will subsidize the interest paid on loans made by the Cabot UDAG Plan’s financial partner to
any business or commercial venture located in Cabot or to any Cabot community organization or Cabot
governmental agency. From the date of adoption of this Plan revision, the term of such subsidies shall be ten years.
B. Loans that do not qualify for the subsidy are:
i. mortgages on owner occupied homes;
ii. loans for improvement to owner occupied homes;
iii. loans to purchase personal property including loans for vehicles for personal use;
iv. loans for travel, vacations, or medical expenses;
v. loans for refinancing existing debt that do not increase the cash flow of an enterprise by at least 25%; and
vi. loans to Cabot community organizations or Cabot governmental agencies for operating expenses.
C. An applicant for such a subsidized loan must apply to the Committee’s financial partner for a loan – NOT to
the COMMITTEE.
D. The Committee requires that the purpose of a loan under this subsidy program will meet the goals of the
UDAG Plan and will exclude loans described in section B above.
E. The Committee’s financial partner will:
i. determine whether a loan qualifies for a UDAG subsidy and may consult with the Committee to reach such a
determination;
ii. determine if the loan makes financial sense for both itself and the applicant;
iii. supply the capital for the loan; and
iv. service the loan.
F. The UDAG Committee has set the current interest rate subsidy at 2%. For example, if the loan bears a
nominal interest rate of 7%, the interest rate on the loan would be reduced to 5%. If the nominal interest rate on
the loan is less than 4%, the interest subsidy will be ½ of the nominal interest rate. For example, if the nominal
interest rate is 3%, the interest rate after the subsidy would be 1.5%.
G. The interest subsidy will be paid directly to the financial partner from the UDAG Trust.
H. The Cabot UDAG Committee will continue to service the outstanding loans granted prior to the approval of
the Plan revision of 2006.
I. The money available for the interest rate subsidy program in any year will be no more than 4% of the trailing 6
quarters average balance of the UDAG Fund from 9/30 of any year. The Committee will formulate an investment
objective for these assets. The financial partner’s trust department will implement a strategy to achieve the
investment objective formulated by the Committee. The current investment objective of the Committee is to earn a
total return on its assets equal to the rate of inflation plus 4%.
J. The Committee will specify the total principal amount of loans it will subsidize for the coming calendar year
after the financial partner reports the total principal outstanding of subsidized loans at 12/31 of the prior year.
K. Applicants who live outside the Town of Cabot may be eligible for loan subsidies if the businesses for which they
seek the loans are located in Cabot; but the partner must consult the Committee before making subsidized loans to
out-of-town residents.
3. Grants –
A. The sum of money available to pay community grants voted on by Australian ballot at Town Meeting will be
the difference between
i. 4% of the average balance in the UDAG Trust and the UDAG Administrative Checking Account at the
calendar quarter end for the 6 quarters prior to 10/31.
ii. less Development Grants made since March 1 plus the expenses to administer the UDAG Plan in the 12
months prior to the calendar quarter end prior to 10/31.
iii. less the money used to subsidize the interest rate on loans (refer to section 2) for the 12 months prior to the
calendar quarter end prior to 10/31.
iv. any funds available for granting not used in any given year can be set aside and added to the grant funds
as determined in i – iii (above) in subsequent years, however, any such set aside funds will be excluded from the
calculation of the total assets of the UDAG Fund and the UDAG Administrative Checking Account from the quarter
end after Town Meeting when calculating 4% of the average balance available for subsequent grants.
B. This money can be granted to any Cabot community organization or Cabot governmental agency for capital
projects that meet the goals of the UDAG Plan.
C. Eligible applicants include community groups, non-profits, civic organizations, fraternal organizations, and
similarly organized groups in the Town of Cabot, as well as such other committees, agencies, organizations, or
commissions that are created by the Town of Cabot, Village of Cabot or the Cabot School District. Eligible
applicants include the Recreation Committee, the Conservation Committee, the Cemetery Commission, the Library
Trustees, the Cabot Historical Society, et. al. Individuals are not eligible to apply for these grants, and no assets
purchased with these grants may be owned by or distributed to any private party or be installed permanently on
private property.
D. An application for a Community Grant (see APPENDIX B) must be submitted to the UDAG Committee by the
3rd Thursday in October of each year. The application must be mailed to Cabot UDAG Committee, P.O. Box 125
Cabot, VT 05647.
E. The Committee will review grant proposals to determine whether a proposed grant meets the goals of the
UDAG Plan. Applicants will be notified at which upcoming UDAG meeting the application will be reviewed so they
may attend that meeting. Generally, applicants will be notified of the Committee decision within two weeks following
the UDAG meeting.
F. This determination will be made no later than the 3rd Thursday in October each year.
G. When such a determination is made for all grants proposed, a warned information meeting on the grants the
Committee considers consistent with the UDAG Plan will be hosted by the Committee at its regularly scheduled
meeting on the 3rd Thursday of December.
H. The grant proposals determined by the Committee to be consistent with the UDAG Plan will be voted on by
Australian ballot on Town Meeting Day.
I. The submission of the grant proposal to the voters does not constitute an endorsement of any grant proposal
by the Committee. Each voter must decide if a particular grant proposal is a worthwhile use of UDAG funds, and
cast their vote accordingly.
i. Each voter must indicate a YES or NO for each grant proposal.
ii. All proposals receiving more NO votes than YES will not receive a grant at that time.
iii. If money is available, all grants that receive more YES votes than NO will be funded.
iii. If there is not enough money available to fund all approved grants, grants will be awarded in the following way:
a. of the grants approved (more YES votes than NO votes), the grant receiving the most YES votes will be
funded first;
b. then the grant receiving the next most YES votes will be funded, etc., until funds left for granting are not
sufficient to cover the total cost of the grant being considered.
c. If there are not sufficient funds for an approved grant, that grant and all others receiving fewer YES votes will
not be funded at all. NO PARTIAL FUNDING WILL BE MADE.
Funds may be used only for the purposes specified in the grant proposal as submitted by the Committee to the
voters prior to the vote. These proposals will be on file at the Town Office.
J. Grant recipients are responsible for obtaining all necessary permits and approvals prior to payout, and no
payouts will be made before all necessary permits or permissions are obtained. Grants are awarded up to a specific
amount for the purpose of fulfilling the objectives of the proposal. No further payments will be made once those
objectives have been met.
K. Grant projects will have a maximum term of 18 months, commencing on the date the Australian ballot
approves the grant. After 18 months, any unclaimed money in a grant will revert to the UDAG Fund.
L. In any given year, any money not granted on Town Meeting Day by Australian ballot from the available funds
will revert to the UDAG Fund.
M. Grantees are expected to purchase goods and services for their projects from Cabot vendors as far as
possible and are encouraged to show estimates and bid documents from local vendors on their applications; and
the Committee may request such information if it is not shown on the application, and the Committee may find that
an application does not meet the goals of the Plan if it fails to include local vendors; and the Committee may request
progress reports for granted projects and may withhold payment of granted funds if the project deviates significantly
from its application description.
N. Grant payments will be made by authorization of the Committee after receipt of dated invoice(s) from grantee
showing vendor, vendor address and phone and goods and/or services purchased. Neither in-kind donations nor
volunteer hours are eligible for reimbursement.
Development Grants
The Committee is authorized to grant up to $10,000 each year at its discretion to such groups as are eligible for
Town Meeting grants, for the cost of engaging outside vendors such as grant-writers and consultants to write grants
or conduct feasibility or planning studies for projects the Committee deems would advance the goals of this plan and
be of substantial public benefit. Eligible projects need not meet the criteria for Town Meeting grant eligibility, but no
single grant shall exceed $2,500. Grant payments shall be made only upon presentation of invoice from outside
vendors, and payment shall be made only to such vendors, up to the amount of the grant. Development Grant
applications may be submitted between March 1 and September 1, and the Committee shall act upon such
applications before September 30.
ADMINISTRATION OF THE UDAG PLAN
The Committee –
1. In 1992, the Town Meeting established a committee of Cabot residents to formulate and implement the Cabot
UDAG Plan. This is referred to as the Cabot UDAG Committee (the “Committee”).
2. The Cabot Select Board appoints a Cabot resident as Chair of the Committee.
3. Besides the Chair of the Committee, there is a member appointed by the Cabot School Board, a member
appointed by the Cabot Village Trustees, and three members elected at Town Meeting Day.
4. The elected members of the Committee serve three year terms. The terms end on three successive years
so that only one member is elected at each Town Meeting.
5. The Cabot Select Board can appoint a Cabot resident to replace any elected member of the Committee who
is unable to complete his/her term. Such an appointed member will complete the term of the member he/she
replaced.
6. The Committee meets the third Thursdays of each month at 7pm in the Select Board meeting room in the
Willey Building.
7. The Chairman of the Committee votes only in the event of a tie.
8. A minimum quorum of the Committee consists of two members and the Chairman.
Expenses -
1. Up to .5% of the total assets of the UDAG Trust and the Scholarship Endowment, but excluding the principal
on loans receivable, at 12/31 of any year may be used to pay expenses for the following calendar year. Excluded
from administrative fees would be any fee paid for trust services of managing UDAG assets.
Checking Accounts –
1. All UDAG expenses, including Town Meeting and Development Grants, will be paid using the Cabot UDAG
Administrative Checking Account. Any joint expenses of the Scholarship Endowment and the UDAG Trust will be
paid through the Cabot UDAG Administrative Checking Account. Signing authority for this account will be held by
the Chair of the UDAG Committee, the Town Treasurer and the Assistant Town Treasurer.
2. All scholarships will be paid from the Cabot Scholarship Endowment Checking Account. Any expenses strictly
related to the Scholarship Endowment will be paid with the Cabot Scholarship Endowment Checking Account.
Signing authority for this account will be held by the Chair of the UDAG Committee, the Town Treasurer and the
Assistant Town Treasurer.
3. No payment of UDAG funds shall be made except by authorization of the UDAG Committee, and all payments
so authorized shall be made.
Reporting –
1. Committee approved minutes of each Committee meeting must be filed with the Town Clerk within 60 days of
the meeting.
2. The UDAG Fund and Endowment must be audited by a CPA every year. This audit must be published in the
first Town Report after the close of the calendar year audited.
3. The Chairman of the Committee must write a report highlighting progress in implementing the Cabot UDAG
Plan each calendar year. This must be published in the first Town Report after the close of the calendar year
reported. These reports should include, but are not limited to the following:
a. a statement of earnings of the assets of the UDAG Trust and Scholarship Endowment;
b. a statement of earnings of the assets of the UDAG Trust and Scholarship Endowment, net of inflation;
c. the amount of interest subsidized;
d. the principal amount of loans outstanding in the subsidized interest program at 12/31 of the reported year;
e. the principal amount of loans outstanding made before the adoption of this plan revision;
f. the amount of money available for grants to be considered by Australian ballot on Town Meeting Day;
g. a list of applicants for grants, the purpose of the grants, and the amount sought for consideration by voters
in the upcoming Australian ballot on Town Meeting Day;
h. the grants approved by voters on the previous Town Meeting Day;
i. the amount of scholarships awarded in the reported year;
j. the size of the Scholarship Endowment at 12/31 of the reported year;
k. the size of the Scholarship Endowment as a percent of total UDAG Trust and Scholarship Endowment assets
(including loans receivable); and
l. the amount of money available for scholarships in coming year.
Criteria for a Financial Partner -
The financial partner is a local financial institution selected by the Committee with the approval of the Select Board.
In determining a financial partner, the Committee must consider:
1. ease of accessibility of the local branch offices of the financial partner to Cabot residents;
2. the extent to which the financial partner would market the existence of the loan subsidy program to Cabot
residents and businesses;
3. the relevance and effectiveness of the financial partner’s community reinvestment program to/for Cabot
residents and businesses; and
4. the track record of the financial partner’s trust department in outperforming its peers and fulfilling the
investment objectives of its clients.
If the financial partner has a change of ownership, the Committee reserves the right to select a new financial partner.
This Plan shall be in effect until amended, repealed or revised by the Cabot Town Meeting, and shall be binding
upon all public officials, elected or appointed, and shall be deemed to have been reaffirmed by any Town Meeting
that does not repeal it. But the Town Meeting, annual or special, may amend, repeal or revise the Plan by
Australian ballot.
APPENDIX A
Scholarship Application
APPENDIX B
Application for UDAG Town Meeting Grant