Item 6: Ordinance Authorizing HUD Section 108 Revenue Bonds

Home Browse Search

ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Action: Ordinance Authorizing HUD Section 108 Revenue Bonds Meeting Date: February 26, 2007 Agenda Item Number: 7 Department: Central Services Staff Contact: Sue Cutsogeorge www.eugene-or.gov Contact Telephone Number: 682-5589 ISSUE STATEMENT This is an ordinance to authorize the use of the HUD Section 108 loan through the Uniform Revenue Bond Act (URBA) process. The HUD Section 108 loan would be used as a downtown redevelopment tool. There are no specific projects being authorized for this financing tool at this time. BACKGROUND In February, 2006, the City received notice of award of a $2 million Brownfield Economic Development Initiative (BEDI) grant to assist redevelopment projects within the City's two urban renewal districts. BEDI funds must be used in conjunction with, and for projects financed by, a HUD Section 108 guaran- teed loan commitment (Section 108). Section 108 is the loan guarantee provision of the federal Community Development Block Grant (CDBG) program. Section 108 allows cities to borrow up to five times their annual CDBG allocation. HUD has authorized a borrowing of up to $7,895,000 for Eugene. Section 108 provides communities with a source of financing economic development, housing rehabilitation, and public facility projects. It allows communities to leverage their limited CDBG funds into federally guaranteed loans sufficient to pursue large-scale projects. Projects funded with Section 108 proceeds must meet HUD underwriting criteria, including project cash flow and collateral sufficient to repay the Section 108 borrowing and provision of a public benefit. Local governments that borrow Section 108 funds must pledge their current and future CDBG allocations as a secondary source of repayment for the borrowing. At this time, there is no specific project proposed for use of the Section 108 loan and BEDI grant funding. To initiate the approval process for the use of a Section 108 loan under state statutes, staff has prepared this draft ordinance that would give the City the authority to borrow money under the Section 108 program. State law requires that the City obtain this authority through a non-emergency ordinance, which requires a public hearing. Following the public hearing and approval of the ordinance by the council, the City will be authorized to act once the council approves a specific project for Section 108 loan funding. Passage of this ordinance will not authorize the City to borrow any money, nor will it approve a specific project. Those acts will require subsequent approval by the council. To draw down the Section 108 and BEDI grant funds, HUD requires that the specific project funding request be approved by the council following a public comment process and a public hearing. It is customary to hold public hearings related to CDBG funds before the CDBG Advisory Committee. Staff L:\CMO\2007 Council Agendas\M070226\S0702267.doc