Item 3D: Adoption of Resolution on 108 Funds for Construction Funding

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ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Adoption of Resolution 4997 Authorizing the Execution of HUD Section 108 Notes in the Amount of $5,189,000 Meeting Date: January 11, 2010 Agenda Item Number: 3D Department: Central Services Staff Contact: Sue Cutsogeorge www.eugene-or.gov Contact Telephone Number: 682-5589 ISSUE STATEMENT The City has the ability to use Federal Housing and Urban Development Section 108 Loan Guarantee Program (HUD 108) funds in combination with the Brownfield Economic Development Initiative (BEDI) grant for certain redevelopment projects in downtown. This resolution would authorize the use of HUD 108 and BEDI funds to provide a loan to Beam Development (Beam) for rehabilitation of the Centre Court Building at the southwest corner of Willamette and Broadway in downtown Eugene. (See Attachment A for the resolution.) BACKGROUND In January 2006, the federal government awarded the City a $2 million BEDI grant to assist redevel- opment projects within the City's two urban renewal districts. BEDI grant funds must be used in con- junction with projects financed by HUD 108 funds. HUD 108 is the loan guarantee provision of the Federal Community Development Block Grant (CDBG) program. HUD 108 allows cities to borrow up to five times their annual allocation of CDBG funds. HUD authorized Eugene to borrow up to $7,895,000 in HUD 108 funds, which is the maximum amount allowed under the program. On February 26, 2007, the council approved Ordinance No. 20376 authorizing the use of HUD 108 loans as a financing tool. The ordinance established the City’s general ability to borrow for HUD 108 projects with the stipulation that individual projects be approved by council resolution after a public hearing conducted before council. In July 2008, the City utilized a combination of federal and local funds for the first step in the acquisi- tion and redevelopment of the three properties that are the footprint of the Beam redevelopment project. The City used $685,000 of BEDI grant funds and issued $2,706,000 of HUD 108 notes to acquire the Washburne and Centre Court buildings and adjacent vacant lot. This left $5,189,000 of HUD 108 loan funds authorized but unissued, and $1,315,000 of BEDI grant funds (together the “BEDI/108 funds”) available for rehabilitation of the Centre Court building. On December 14, 2009, the council approved amendments to the Purchase and Sale Agreement with Beam to allow phasing of the project, beginning with the rehabilitation of the Centre Court building. The amendment included provisions designed to protect the City in the proposed transaction. With regard to the HUD 108 loan, before drawing down any loan funds from HUD, the Purchase and Sale Agreement requires that Beam demonstrate tenant commitment sufficient to cover the interest payments Z:\CMO\2010 Council Agendas\M100111\S1001113D.doc