CC Minutes - 02/27/08 Work Session

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Mayor Piercy adjourned the meeting of the City Council at 12:27 p.m. and convened the meeting of the Eugene Urban Renewal Agency. B. WORK SESSION: Finance Plan for Property Acquisition Senior Development Analyst for the Community Development Division, Denny Braud, explained that the purpose for the presentation was to review the financing strategy for the Centre Court, the Washburn, and the Diamond lot properties. He intended to talk about the proposed use of the Department of Housing and Urban Development (HUD) 108 loan and the Brownfields Economic Development Initiative (BEDI) grant for the acquisition of the properties. He provided a power point presentation entitled West Broadway Acquisitions Financing Plan, hard copies of which were provided to everyone present. th Mr. Clark asked staff to remind him of the appraised value of the lot at 12 Avenue and Oak Street. Mr. Braud replied that they had assumed a cost of approximately $30 per square foot. Mr. Braud explained that the HUD 108 program would allow the City to borrow up to five times the amount held for its annual federal Community Development Block Grant (CDBG) allocation; in this case the City had received approval for just under $8 million. He said the City had also been approved for a $2 million BEDI grant that was required to be used with 108 funds on a prorated basis. He stated that the City could draw down $1 in grant funds for every $3.95 borrowed under the 108 program. He stressed that these were federal funds and must meet national objectives. He indicated that these projects would meet the objectives of eliminating slums and blight and creating jobs. Mr. Braud summarized the required Transactions for Beam Acquisitions. He stressed that Beam Development would pay the acquisition costs over time and not up front, because it would not be feasible for Beam to obtain conventional financing for the acquisition within the option period. He explained that the Urban Renewal Agency (URA) would use the proceeds from Beam’s repayment of the note to repay the 108 loan. He further explained that because the City ultimately pledged future CDBG allocations as security for the HUD 108 loan, it was essential that the City’s borrowing provided enough security that future CDBG funds would not be jeopardized. Sue Cutsogeorge, Financial Analysis Manager for the Central Services Department, reviewed the details of the preferred funding plan for the acquisitions, a plan that would maximize the use of the HUD 108 loan and the BEDI grant funds. She underscored that this depended on HUD agreeing that this was “the way to go.” She stated that the budget request, scheduled for March 10, was based on a conservative funding scenario in which HUD did not approve the maximum amount the City hoped to get. She said this would mean the City would have to utilize $3 million in URA funds, rather than the $800,000 included in the preferred funding strategy. She explained that if the City Council and the Eugene Urban Renewal Agency approved this request, staff would present HUD with an application that would maximize the use of 108 funds. She stressed that in either scenario the total cost for the acquisition was the same, the only difference lay in funding sources. Ms. Cutsogeorge discussed the URA Financial Capacity given the failure of the City ballot measure. She said if HUD did not approve the use of the 108 loan without urban renewal backing the City would only have approximately $2 million left. She explained that any remaining money would be used first to meet any obligations left from the Beam project, noting that those costs were being negotiated. She stated that MINUTES—Eugene City Council February 27, 2008 Page 5 Work Session