Item 6: Ordinance Authorizing HUD Section 108 Revenue Bonds

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anticipates following this procedure with respect to Section 108 borrowings. Each specific project funded under the BEDI grant and Section 108 loan funding will require an additional level of City Council approval before the City actually borrows HUD funds. Funds borrowed under the Section 108 program require the City’s security pledge of future CDBG allocations. However, the City does not anticipate utilizing future CDBG allocations as a source of repayment given the capacity of the City’s urban renewal districts to supplement project-specific cash flow and collateral. The BEDI grant is also intended to offset the risk of using Section 108 by utilizing the grant funds to create loan loss reserves or to make a direct loan of the grant funds. The ordinance sets out the revenues that would be pledged for the Section 108, including federal grant funds, revenues and rights the City obtains in connection with the redevelopment projects, repayments of loans and other assistance provided by the City pursuant to Section 108, payments from the Eugene Urban Renewal Agency (URA), and similar amounts. The Section 108 loans will not be secured by the City’s general fund or any other general resources. Projects that receive Section 108/BEDI funds must 1) meet a CDBG national objective of benefiting low- or moderate-income persons or eliminating conditions of slums or blight, 2) lead to economic revitalization in connection with brownfields, 3) be financially feasible, 4) be within reasonable risk, 5) be likely to be repaid, and 6) provide permanent, full-time employment for low- and moderate- income individuals. The six project preference criteria are designed to provide an objective evaluation of the applicant’s ability to produce an effective and timely outcome and of the impact of the project. Section 108/BEDI project loan recipients will be obligated to comply with all applicable local and State laws. Recipients will also be specifically bound by Federal requirements covering civil rights and equal opportunity, environmental review, flood plain insurance, labor standards (Federal Davis-Bacon wage rates), real property acquisition, relocation and displacement, and replacement of low-moderate income housing. Applicants will be encouraged to consider these requirements in the design of a project proposal and in preparation of an application, particularly if the proposal involves construction. There are two potential areas that might generate projects to be considered for use of the Section 108 loan. Those areas are West Broadway in the Downtown Urban Renewal District and the Courthouse area in the Riverfront Urban Renewal District. A public hearing on this ordinance was held on February 20. No public testimony was received. At that meeting, Councilor Bettman requested proposed amendments to this ordinance. Those proposed amendments will be sent to Councilor Bettman for review and then to the full council prior to the meeting. RELATED CITY POLICIES The Budget Committee approved a set of debt issuance guidelines in February 2004. The guidelines include a section on conduit financings, which are defined as bonds issued by the City to finance a project to be used primarily by a third party, usually a corporation engaged in a private enterprise. If the City decides to use Section 108 to borrow money to lend to a private developer, the council will need to waive several of the conduit financing policies. For instance, the City’s debt policies state that the City will not incur any moral or financial obligation under a conduit borrowing. Section 108 is set up for the purpose of using the City’s CDBG funds as the ultimate security on a loan; therefore, the City would L:\CMO\2007 Council Agendas\M070226\S0702267.doc