(1) If a Washington main street community fails to comply with these rules, the department may send that program a written initial warning. The initial warning will identify the noncompliance and place the local main street program on probationary status. The Washington main street community shall be reevaluated by the department ninety days following the initial warning. If the Washington main street community has failed to correct the noncompliance, the department may issue a final warning. If the Washington main street community is not in compliance within ninety days after the final warning is sent, the department may either:

(a) Terminate the Washington main street community's letter of agreement and Washington main street community designation, and discontinue all WSMSP services and activities; or

(b) At its sole discretion, the department will place the Washington main street community on continued probationary status for up to an additional ninety days. At the end of the ninety days, the department shall consider the facts and the circumstances underlying the noncompliance, and whether the Washington main street community has made substantial progress toward correcting the noncompliance.

(2) If Washington main street community designation is withdrawn, the local organization may receive reduced WSMSP services. The department of revenue will be notified when a Washington main street community status is withdrawn. However, an eligible organization may reapply for Washington main street community designation after one full calendar year has elapsed from the date of the letter of agreement termination. WSMSP services will resume upon reapplication and written approval by the department of the Washington main street community's designation. Any such reapplication for Washington main street community designation must include documentation that the previous noncompliance has been corrected, or that a change of condition has occurred such that the prior noncompliance is unlikely to reoccur.