Item 2F: Amendment to City of Eugene Debt Policies

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ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Amendment to City of Eugene Debt Policies Meeting Date: May 14, 2007 Agenda Item Number: 2F Department: Central Services Staff Contact: Sue Cutsogeorge www.eugene-or.gov Contact Telephone Number: 682-5589 ISSUE STATEMENT The City Council is requested to amend the City’s debt policies related to conduit financing in order to make the definition of conduit financing legally accurate. BACKGROUND In connection with City Council approval of an ordinance authorizing the HUD Section 108 Loan, the issue of the applicability of the City’s debt policies was raised. As a reminder, 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 guaranteed loan commitment (Section 108). The council approved an ordinance authorizing the Section 108 on February 26. When the City first reviewed use of a Section 108 loan as a way to finance economic development efforts in the downtown area in 2005, the issue of the conduit financing policy was raised and staff recommended that the council waive this policy when it approved a Section 108 loan. The council did not waive the policy when it approved the ordinance authorizing the Section 108 loan and asked that the issue of the debt policies be brought back for subsequent approval. In a memorandum dated April 9, 2007, Sue Cutsogeorge alerted the council that the issue of a debt policy amendment would be brought to the council as a consent calendar item on May 14. The body of this Agenda Item Summary restates the information included in that April 9 memorandum. Background on Conduit Financings The Internal Revenue Service (IRS) allows certain private entities to access tax-exempt financing through a governmental entity. These financings are called conduit financings, because the governmental entity acts as a “conduit” through which the private entity can receive lower-cost tax- exempt financing. Only a few types of private projects are eligible for conduit financing, including small manufacturing facilities, facilities owned and operated by qualified 501(c)(3) organizations, certain kinds of low- income housing projects, and other projects that can be financed with “qualified bonds” as defined in the Internal Revenue Code. Conduit financing is generally used for capital and construction-related projects. L:\CMO\2007 Council Agendas\M070514\S0705142F.doc