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

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on the Centre Court and Washburne buildings, and a personal guarantee from the Beam owner. More details about the security for the loan can be found in the collateral section of Attachment B. In the event that the primary sources to repay the HUD 108 loan are not realized, there are some alterna- tive strategies. As part of the City’s agreement with Beam, failure to make a loan payment would enable the URA to reclaim the property. The URA could then address any tenanting issues and sell the building to a private party, or work with other institutions including the City to lease the space. (City occupancy would require repayment of the BEDI/108 funds.) HUD requires local governments that borrow HUD 108 funds to pledge their current and future CDBG allocations as a secondary source of repayment for the borrowing. In the event that all of the other collateral and other options open to the City to make payments on the loan were unsuccessful, HUD would withhold CDBG funds. The City does not anticipate utilizing future CDBG allocations as a source of repayment for this project because of the collateral pledged for this project and other avenues available to cure any shortfall in payments from Beam. In addition, $600,000 in Urban Renewal funds are reserved as a precautionary measure, to pay debt service during an interim period while other actions are taken to cure any default or to repurchase the property and either sell or reuse it for another purpose. After council approval of the resolution, staff will submit the application for the Centre Court building construction loan to HUD. HUD’s review is anticipated to take several weeks. Assuming favorable review, Beam should have access to construction financing through BEDI/108 funds by March. RELATED CITY POLICIES Downtown development is guided by policies in the Downtown Plan and the Growth Management Policies. With regard to financial tools to assist with development, the Downtown Plan includes policies that state that the City should: “Use downtown development tools and incentives to encourage development that provides character and density downtown.” A number of financial policies guide the creation of the final economic development finance plan, including the City’s debt policies. COUNCIL OPTIONS The council may adopt the resolution as proposed, suggest amendments to the resolution, or decline to authorize the resolution. If the resolution is not adopted, the City will not be able to use HUD 108 loan and BEDI grant funds to provide a loan to Beam for rehabilitation of the Centre Court building. As a result, the City will have to identify other funding sources to assist Beam in accomplishing the project, or discontinue the rehabilitation effort. CITY MANAGER’S RECOMMENDATION The City Manager recommends adoption of the resolution. SUGGESTED MOTION Move to adopt Resolution ___ authorizin the execution of HUD Section 108 Notes in the amount of g $5,189,000. Z:\CMO\2010 Council Agendas\M100111\S1001113D.doc