The URL can be used to link to this page

Home My WebLink AboutItem B: West Broadway Financing Plan EURA UGENE RBAN ENEWAL GENCY AIS GENDA TEM UMMARY Work Session: Finance Plan for Property Acquisition Meeting Date: February 27, 2008 Agenda Item Number: B Department: Central Services Staff Contact: Sue Cutsogeorge www.eugene-or.gov Contact Telephone Number: 682-5589 ISSUE STATEMENT The Urban Renewal Agency (URA) has directed the purchase of three properties within the West Broadway redevelopment area. The URA Board is asked to consider the finance plan for acquisition of the properties. BACKGROUND Agency Action History The URA secured purchase options on properties within the West Broadway redevelopment area between Willamette Street and Charnelton Street. The option terms and purchase prices associated with each of the purchase options were negotiated independently based on each property owner’s individual circumstances. On December 10, 2007, the URA provided direction to pursue a development agreement for the Beam Development project and to proceed with acquisition or assignment of the options on the Washburne building, Centre Court building and adjacent hole, within the financial constraints of the current $33 million urban renewal district spending limit. Also on December 10, 2007, the URA provided direction to proceed with acquisition of the Diamond property, also within the existing financial constraints of the urban renewal district spending limit. On February 11, 2008, the URA directed the Agency Director to … “bring back to the URA as soon as possible a methodology for soliciting offers from parties interested in assignment of the purchase options not being exercised by the URA with the first right to acquire the option to the tenant for the value that the URA paid for the option, and if the tenant was not interested, to solicit offers from others with some kind of provision that provides for a reasonable time frame for redevelopment after any demolition, with serious consequences if that redevelopment does not occur. In addition, the City th Council directed the City Manager to convey ownership of the City-owned parking lot at 12 & Oak to th Diamond Parking as partial compensation for the URA’s acquisition of the Diamond property on 10 & Olive Street. On March 10, 2008, the council will consider the supplemental budget action necessary to move forward with the purchase of the Centre Court building and adjacent hole ($2.8 million), the Washburne building ($1.9 million), and the Diamond property ($290,360). F:\CMO\2008 Council Agendas\M080227\S080227B.doc Financial Plan for Property Acquisition The financial plan for the acquisition of the three properties is set out in the chart below. The Centre Court and Washburne buildings would be purchased using a combination of a HUD Section 108 Loan, BEDI grant and urban renewal tax increment funds. The Diamond property would be purchased using tax increment funds. Finance Plan for Property Acquisition Sources of Funds Uses of Funds HUD Section 108 Loan $ 2,731,000 Acquire CC & Washburne $ 4,700,000 BEDI Grant 691,000 Acquire Diamond 291,000 Urban Renewal Cash 2,295,000 Costs of Acquisition 126,000 Debt Service Reserve* 600,000 Total Sources $ 5,717,000 Total Uses $ 5,717,000 *Only if needed. The URA is proposing to sell the Centre Court and Washburne properties to Beam and to finance Beam’s acquisition of the property. Repayment of the HUD Section 108 Loan is proposed to come from proceeds of a note associated with Beam’s purchase of the properties. Under this approach, HUD’s security from the City for the Section 108 loan would be provided primarily from a lien on the real estate, payments from Beam and additional guarantees from Beam. If necessary for HUD approval, the Agency could also provide a debt service reserve account from tax increment funds as security for the loan. (The chart above includes a placeholder for a $600,000 debt service reserve.) In the worst case, HUD may require even more security for the loan. At that point, it might be necessary to pledge tax increment funds to repay the loan. Until HUD receives the application and considers the finance plan, the Agency will not know what is needed to secure HUD approval. This finance plan allows for the Agency to use tax increment funds, if needed, to secure HUD approval. The finance plan includes additional costs of acquiring the properties and negotiating a development agreement with Beam. Costs of acquisition include a HUD fee for the Section 108 Loan, bank fees for the Section 108 Loan, real estate closing costs and City Attorney fees. Agreement with Beam Prior to purchasing the properties, the Agency expects to enter into a purchase and sale agreement with Beam. The agreement will set out the terms and conditions for redevelopment of the Centre Court and Washburne properties. Simultaneously with, or shortly after the Agency purchases the property, the Agency will sell the property on a note to Beam. Beam’s payments will cover repayment of the City’s HUD Section 108 Loan and possibly the BEDI grant. Because the terms of the agreement with Beam have not yet been determined, any estimates of the financial impact of the agreement are preliminary. Additionally, preliminary negotiations with Beam indicate a need for construction financing that could come from the remaining HUD Section 108 and BEDI funds. HUD 108/BEDI Grant Requirements The proposed use of HUD Section 108 and BEDI grant funds will qualify for compliance with HUD’s national objective to address slums and blight on an area basis. In accordance with HUD regulations, no more than $3,422,000 (30%) of the combined annual CDBG expenditures and HUD Section 108/BEDI funds may be spent on activities which aid in the elimination of slums or blight. The 30% limitation F:\CMO\2008 Council Agendas\M080227\S080227B.doc currently inhibits the City’s ability to purchase the Centre Court and Washburn properties solely with HUD Section 108 and BEDI funds. The City is in the process of exploring with HUD and the property owners scenarios that would allow for the use of a greater amount of Section 108 and BEDI funds for the purchases. The BEDI grant money must be used in conjunction with a HUD Section 108 loan. The City may access $1 of BEDI grant funds for every $3.95 drawn down in HUD 108 loan proceeds. Other Requirements The Urban Renewal Plan for the Downtown District requires that any project over $250,000 receive approval from the URA Board. The URA Board gave approval for acquisition of the Diamond property on December 10, 2007. The URA Board will give approval for the Beam project when the development agreement parameters are presented in April. In addition to these approvals, the URA Board will need to approve the budget for these acquisitions on March 10. URA Financial Capacity for Other Projects At the council meeting on December 10, staff presented rough estimates of the potential financial capacity remaining for downtown development projects. The funding sources available for the projects were urban renewal tax increment funds, the HUD Section 108 Loan, the BEDI grant and the Urban Renewal Downtown Loan Program. The remaining amount of urban renewal tax increment funds was based on an estimate of the remaining amount available under the “maximum indebtedness” cap (the spending limit). The Section HUD 108 Loan is only an additional amount of funding to the extent that urban renewal tax increment funds are NOT used as a source of security or repayment for the loan. If urban renewal tax increment funds are used in connection with the HUD Section 108 loan, then that amount would be subtracted from the total available for downtown projects. Since the December update, one additional potential source of funding has been identified. If the sale of purchase options on the West Broadway properties net any proceeds, then those proceeds would be available for additional financial participation in any downtown redevelopment projects. The proposed property acquisitions (Centre Court and hole, Washburne and Diamond) would have the following effect on the amount available for downtown redevelopment: Downtown Redevelopment Financial Capacity Approximate Property Amount Funding Source Amount Available Acquisitions Remaining Urban Renewal Tax Increment Funds $4,000,000 $(2,295,000) $1,705,000 HUD 108 Loan 7,895,000 (2,731,000) 5,164,000 BEDI Grant 2,000,000 (691,000) 1,309,000 Urban Renewal Loan Program 2,000,000 ?2,000,000 Proceeds from Sale of Purchase Options 230,000 ?230,000 Total Sources $16,125,0000 $(5,717,000) $10,408,000 F:\CMO\2008 Council Agendas\M080227\S080227B.doc Preliminary negotiations with Beam Development indicate a need for URA financial participation. The th undefined project for the10 and Charnelton site may also entail URA financial participation. Any costs for these projects would have to come out of the remaining amount shown in this chart, or the City would have to find additional funds from other sources. Timeline As set out at the February 11 meeting, there are several steps to go through prior to closing on any property acquisition, which is expected to occur by June 24. The timeline from the February 11 presentation is included as Attachment A. RELATED CITY POLICIES Future redevelopment of the West Broadway Redevelopment Area is consistent with the policies and implementation strategies included in the Downtown Plan, including: ? Downtown development shall support the urban qualities of density, vitality, livability and diversity to create a downtown, urban environment. ? Actively pursue public/private development opportunities to achieve the vision for an active, vital, growing downtown. ? Use downtown development tools and incentives to encourage development that provides character and density downtown. ? Promote multi-story, mixed-use structures downtown through financial incentives or code amendments. ? Stimulate multi-unit housing in the downtown core and on the edges of downtown for a variety of income levels and ownership opportunities. ? Provide and promote development and community events that reinforce downtown’s role as the cultural center for the city and region. ? Reinforce the creative, distinctive culture of downtown as the arts and entertainment center of the city. In addition, the future development of the West Broadway Redevelopment Area is responsive to the following Growth Management policies: Policy 1: Support the existing Eugene Urban Growth Boundary by taking actions to increase density and use existing vacant and under-used land within the boundary more efficiently. Policy 2: Encourage in-fill, mixed-use, redevelopment, and higher density development. Policy 3: Encourage a mix of business and residential uses downtown using incentives and zoning. Policy 10: Encourage the creation of transportation-efficient land use patterns and implementation of nodal development concepts. Policy 14: Development shall be required to pay the full cost of extending infrastructure and services, except that the City will examine ways to subsidize the costs of providing infrastructure or offer other incentives that support higher-density infill, mixed use, and redevelopment. F:\CMO\2008 Council Agendas\M080227\S080227B.doc – This item is also related to one of the 2007-2008 Council Goals: Downtown InitiativeFacilitate significant revitalization of downtown core. URA OPTIONS The URA Board can accept the finance plan as presented in this material, or propose an alternate finance plan. AGENCY DIRECTOR’S RECOMMENDATION The Agency Director recommends including the necessary budget transactions to accomplish the property acquisitions on Supplemental Budget #2 to be considered on March 10, 2008. SUGGESTED MOTION Move to direct the Agency Director to include the budget transactions necessary to accomplish the property acquisitions in the Supplemental Budget to be considered on March 10, 2008. ATTACHMENTS A.Timeline from 2/11/08 work session FOR MORE INFORMATION Staff Contact: Sue Cutsogeorge Telephone: 682-5589 Staff E-Mail: sue.l.cutsogeorge@ci.eugene.or.us Staff Contact: Denny Braud Telephone: 682-5536 Staff E-Mail: denny.braud@ci.eugene.or.us F:\CMO\2008 Council Agendas\M080227\S080227B.doc