Item 5: PH: Use of 108 Funds for Construction Financing

Home Browse Search

The City has focused use of the HUD 108/BEDI funds on the Beam Development project at the heart of downtown. The City has an agreement with Beam Development to transform the important intersection of Willamette and Broadway into a vital area with restaurants, retailers, and office space. The project assumes the use of HUD 108/BEDI funds in two stages: loan #1 for acquisition of the properties and loan #2 for rehabilitation of the Centre Court building. Individual Project #1 The Urban Renewal Agency (URA) acting on behalf of the City of Eugene utilized a combination of federal and local funds for acquisition of properties at Willamette and Broadway (the Centre Court building, adjacent vacant lot, and Washburne Building). The City received approval from HUD in August 2007, to acquire up to five downtown properties along West Broadway as the first individual Section 108 project. Due to unanticipated changes in the development financing and plan for the West Broadway redevelopment area, the City revised the individual project application in March 2008, and received field office approval in June 2008. In July 2008, t he City acquired two properties with $2.5 million in Section 108 loan funds and $685,000 in BEDI grant funds. Beam purchased the properties from the URA with financing provided by the URA. (See the December 14 Agenda Item Summary (AIS) on Beam The national objective for loan #1 was the Development for more information on the financing.) elimination of slums and blight. Benefit is determined by the ultimate development and use of the property acquired with HUD 108 funds; the loan for acquisition of the properties met this objective. Proposed Individual Project #2 The proposed individual project #2 loan would draw down the remaining HUD 108/BEDI funds to provide construction financing for Beam to use on the Centre Court Building. The proposed rehabilitation would cost approximately $9.5 million. The financing is proposed to consist of $5,189,000 HUD 108 and $1,315,000 BEDI. The remainder would be financed with a combination of other funds, including tax credits and private investment. A summary of the financing sources and uses is included as Attachment B; a copy of the Proposed Individual Project #2 application is included as Attachment C. Section 108 is a loan guarantee program that generally follows the same regulations as the CDBG program. Public benefit is determined by the ultimate development and use of the property acquired or rehabilitated with Section 108 funds. The majority of the funds for the proposed project would be used to benefit low-income persons through job creation. Potential end uses for the property acquisition would include retail and office, consistent with the signed Purchase and Sale Agreement between the URA and Beam Development. Based on industry employment standards for office and retail, an estimated 234 permanent jobs will occupy the completed building. This amount is more than adequate to meet the public benefit requirement ratio of one job per $35,000, with a total of 186 jobs. Consistent with CDBG requirements, a minimum of 51% of the jobs will be available to low- or moderate-income individuals. Brownfields are vacant and underutilized properties whereredevelopment is complicated by actual or perceived environmental contamination. The Centre Court building has been vacant for years and is located along a two-block stretch of West Broadway that has been characterized by high vacancy rates and depressed market conditions for over 20 years. The building was most recently used as commercial office, but was vacated in advance of a planned-housing development project. However, significant asbestos contamination and seismic-related structural problems halted redevelopment of the site for that project. The building currently has environmental issues including mold and asbestos. Given the long- term vacancy and history of asbestos the project meets the brownfield requirement. Z:\CMO\2009 Council Agendas\M091214\S0912145.doc