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

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on the loan to the satisfaction of the URA Director (City Manager). A reversionary clause also allows the URA to repurchase the property under certain conditions. Prior to commencement of construction and expenditure of construction loan funds, the URA has the right to repurchase the property for the purchase price plus any redevelopment costs incurred by Beam and approved by the Agency. After construction has commenced, Beam is required to make interest payments on the construction loan. If Beam fails to do so, the Agency has the right to foreclose on the property, or to work with Beam to rectify the situation. As part of the action approving the amendments, the council also directed the City Manager to place this resolution authorizing the use of HUD 108 loan funds for the Beam project on the consent calendar on January 11, 2010. On December 14, 2009, the council also held a public hearing on the proposed use of the BEDI/108 funds for the rehabilitation of the Centre Court building, as outlined in the Proposed HUD Section 108 Individual Project #2 Application (See Attachment B). Two individuals spoke at the hearing in favor of the application and proposed use of the BEDI/108 funds for this project. In addition to the public hear- ing, a 30-day public comment period began on November 30, and continued through December 31. Comments were submitted by two individuals (see Attachment C: Public Comments Received). The City’s Loan Advisory Committee reviewed the credit underwriting on December 7, 2009, and recommended approval for the proposed use of the BEDI/108 funds. The City’s CDBG Advisory Com- mittee reviewed and also recommended approval on December 8, 2009. This project is a cooperative effort between the City of Eugene and the Eugene Urban Renewal Agency (URA). The HUD funds are available to the City, which then passes the funds on to the URA to use for approved projects. The arrangement between the City and Agency is formalized in an Intergovern- mental Agreement. HUD 108 Loan Contract To borrow money under the HUD 108 program, HUD requires a two-step process. First, the City must enter into a loan contract with HUD. This is like a master loan agreement. Second, the City must draw down funds under a project note. The project notes are governed by the terms in the loan contract. The City entered into a loan contract (or master agreement) with HUD in June 2008, for acquisition of the Washburne and Centre Court buildings and adjacent vacant lot. The City executed a project note to purchase the properties. Those properties were subsequently sold by the City to Beam, and Beam financed the purchase largely through loans from the URA. A portion of the loan authorization ($2,706,000) was used for the acquisition, with $5,189,000 remaining to be used for rehabilitation of the Centre Court. This second HUD 108 may be executed as an amendment to the current loan contract with a second project note, or may be executed as a new loan contract and project note. The resolution allows either approach, depending on HUD’s determination about the form of the contract and note. Beam’s payments to the City would be the primary source of repayment for the proposed HUD 108 loan. To secure the loan to Beam, the City will have the only lien (first position trust deeds) on the Centre Court real property, the adjacent vacant parcel, and the Washburne Building real property. Additional security would include an ability to claim rent payments from tenants (assignment of leases) Z:\CMO\2010 Council Agendas\M100111\S1001113D.doc