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HomeMy WebLinkAboutItem 4: URA resolution authorizing HUD 108 Revenue Bonds EURA UGENE RBAN ENEWAL GENCY AIS GENDA TEM UMMARY Action: Resolution 1044 Authorizing Issuance of Urban Renewal Bonds for Projects Receiving Funding from HUD Section 108 Loan Proceeds Meeting Date: July 23, 2007 Agenda Item Number: 4 Department: Central Services Staff Contact: Sue Cutsogeorge www.eugene-or.gov Contact Telephone Number: 682-5589 ISSUE STATEMENT The City Council has put in place the ability for the City to use federal Housing and Urban Development (HUD) Section 108 Loan Guarantee Program (Section 108) funds in combination with the Brownfield Economic Development Initiative (BEDI) grant. The proposed project would use the funds to acquire property in downtown Eugene as part of the West Broadway Redevelopment Project. This resolution, as well as a City resolution on the same agenda, will allow the City to execute the Section 108 documents. See the Agenda Item Summary (AIS) regarding a resolution authorizing execution of a HUD Section 108 loan contract in the amount of $7,895,000 and notes in the amount of $7,895,000 for additional background information about the proposed project. BACKGROUND The full council and Urban Renewal Agency (URA) history on the West Broadway redevelopment effort, as well as the Section 108 and BEDI grant, can be found in Attachment A to the AIS on tonight’s agenda for a resolution authorizing execution of a HUD Section 108 loan contract in the amount of $7,895,000 and notes in the amount of $7,895,000. HUD Section 108 Loan Contract To borrow money under the Section 108 loan 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 is proposing to use the Section 108 funds to acquire property for the West Broadway Redevel- opment Project. A number of repayment sources have been authorized by the council previously in Ordinance 20376. However, the City anticipates that the loan will most likely be repaid from tax increment revenues of the downtown urban renewal district, although it is possible that the proceeds from the sale of the properties to developers may also be used to repay the loan. HUD requires that local governments that borrow Section 108 funds also pledge their current and future Community Development Block Grant (CDBG) allocations as a secondary source of repayment for the borrowing. The City does not anticipate utilizing future CDBG allocations as a source of repayment for this project because the City’s downtown urban renewal district has the financial capacity to make the payments on this borrowing. L:\CMO\2007 Council Agendas\M070723\S0707234.doc The mechanism for the City to access tax increment revenues to repay the Section 108 loan is through a bond of the URA. Under this approach, the agency would issue urban renewal bonds to the City in the same amount, and under the same terms as, the Section 108 loan with HUD. In the past, the City and the agency have handled this type of transaction between themselves through an intergovernmental agreement. (The library is one such example.) Bond counsel has advised, however, that a bond would be HUD’s preferred type of agreement. Attachment A includes the proposed agency resolution authorizing the urban renewal bonds to repay the Section 108. 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 would guide the creation of the final economic development finance plan, including the City’s debt policies. AGENCY OPTIONS The URA 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 tax increment funds to repay the Section 108 loan. As a result, the City may not have sufficient resources to repay the Section 108 loan and may not be able to access the $2 million BEDI grant for the purchase of property in the redevelopment area. AGENCY DIRECTOR’S RECOMMENDATION The agency director recommends approval of the resolution. SUGGESTED MOTION Move to adopt Resolution 1044 authorizin the issuance of urban renewal bonds for projects receiving g funding from HUD Section 108 loan proceeds. ATTACHMENT A.Proposed Resolution FOR MORE INFORMATION Staff Contact: Sue Cutsogeorge, Financial Analysis Manager Telephone: 682-5589 Staff E-Mail: sue.l.cutsogeorge@ci.eugene.or.us L:\CMO\2007 Council Agendas\M070723\S0707234.doc ATTACHMENT A RESOLUTION NO. ____ A RESOLUTION AUTHORIZING THE ISSUANCE OF URBAN RENEWAL BONDS FOR PROJECTS RECEIVING FUNDING FROM HUD SECTION 108 LOAN PROCEEDS. The Urban Renewal Agency of the City of Eugene finds as follows: A. The United States Department of Housing and Urban Development has issued a commitment to guarantee a loan to the City of Eugene (the “HUD Loans”) under Section 108 of Title I of the Housing and Community Development Act of 1974, as amended (the “Act”) to finance urban renewal projects that are located in the City of Eugene’s Urban Renewal Plan for the Central Eugene Project (“District”) and that are described in the urban renewal plan for the District. B. The Urban Renewal Agency of the City of Eugene (“Agency”) is willing to issue tax increment bonds to the City in which the Agency agrees to pay to the City amounts equal to the principal and interest due on the City’s HUD Loans for urban renewal projects in the District. C. The Agency adopts this resolution to authorize delivery of up to $7,895,000 of subordinate lien tax increment bonds to the City in connection with HUD Loans. NOW, THEREFORE, BE IT RESOLVED by the Urban Renewal Agency of the City of Eugene, as follows: Section 1. Definitions. Unless the context clearly requires otherwise the following terms shall have the following meanings: “Agency Official” means the Agency Director, or a person designated by the Agency Director to act as Agency Official under this Resolution. “Agency” means the Urban Renewal Agency of the City of Eugene. “City” means the City of Eugene, Oregon. “Code” means the United States Internal Revenue Code of 1986, as amended. “District” means the urban renewal district that is described in the Plan. “Plan” means the Agency's Urban Renewal Plan for the District which was originally approved by the Eugene Urban Renewal Agency by Resolution No. 257 on July 3, 1968, and by Resolution No. 1609 of the Eugene Common Council on December 19, 1968, as it has been amended and may be amended in the future. “Resolution” means this resolution. “Subordinate Bonds” means the obligations that are authorized by Section 2 of this resolution. “Tax Increment Revenues” means all of the following which may legally be pledged to pay the Subordinate Bonds: (i) the taxes which are divided based on the increase in value of property in the District and which are payable to the Agency under the provisions of Article XI, Section 1c of the Oregon Constitution and ORS Chapter 457, plus (ii) any city-wide property tax levy for the District which is authorized by Article XI, Section 11(16) of the Oregon Constitution and ORS 457.435(2)(c). Section 2. The Subordinate Bonds. 2.1 Authorization. The Agency hereby authorizes the delivery of the Subordinate Bonds to the City in accordance with this Resolution to repay HUD Loans made to the City to finance urban renewal projects in the District. The aggregate principal amount of the Subordinate Bonds issued under this Resolution shall not exceed $7,895,000 and Subordinate Bonds shall not be issued in an amount that would exceed the maximum indebtedness limit in the Plan at the time the Subordinate Bonds are issued. 2.2 Delegation. The Agency Official may, on behalf of the Agency: (A) Establish the final principal amounts, maturity schedules, interest rates, sale prices, redemption terms, payment terms and dates of each Subordinate Bond. (B) Issue, sell and deliver one or more Subordinate Bonds, subject to the limitations in the last sentence of Section 2.1 of this Resolution. (C) Determine which HUD Loans and urban renewal projects will be financed with each Subordinate Bond. (D) Determine that the Subordinate Bonds will bear interest that is includable in gross income under the Code. (E) Execute any documents and take any other actions which the Agency Official finds are desirable to allow the City to obtain financing under the Act for urban renewal projects in the District or to carry out this Resolution. 2.3 Form. Each Subordinate Bond shall be in substantially the form that is attached to this Resolution as Exhibit A, but with such changes as the Agency Official may approve. Each Subordinate Bond shall be executed on behalf of the Agency with the signature of the Agency Official. Section 3 Security for the Bonds. . 3.1 The Subordinate Bonds shall be special obligations of the Agency that are payable solely from the Tax Increment Revenues. 3.2 The Agency hereby pledges the Tax Increment Revenues to the payment of the Subordinate Bonds. Pursuant to ORS 288.594, the pledge of the Tax Increment Revenues made by this Resolution shall be valid and binding from the time of the adoption of this Resolution. All Tax Increment Revenues so pledged and hereafter received by the Agency shall immediately be subject to the lien of such pledge without any physical delivery or further act. The lien of the pledge that secures the Subordinate Bonds shall be subordinate to the lien of all currently outstanding indebtedness of the Agency, and also shall be subordinate to the lien of any indebtedness subsequently issued by the Agency to the extent provided in those subsequent obligations. 3.3 The Subordinate Bonds do not constitute a debt or indebtedness of the City, Lane County, the State of Oregon or any political subdivision thereof other than the Agency. Section 4. Additional Obligations. The Agency may issue subsequent obligations that have a lien on the Tax Increment Revenues that is superior to, on parity with or subordinate to, the lien on the Tax Increment Revenues that secures the Subordinate Bonds. Section 5. Defaults and Remedies. 5.1 Failure to pay principal or interest on a Subordinate Bond shall constitute an “Event of Default” under this Resolution. 5.2 If an Event of Default occurs the City, as owner of the Subordinate Bonds, may exercise any remedy available at law or in equity. However, the Subordinate Bonds shall not be subject to acceleration. 5.3 Waivers of Default. The City may waive any Event of Default and its consequences. 5.4 Remedies Not Exclusive. No remedy provided in this Resolution is intended to be exclusive of any other remedy, and each remedy shall be cumulative and shall be in addition to every other remedy provided in this Resolution. Section 6. Amendment of Resolution. The Agency may amend this Resolution only with the consent of the City. Section 7.Rules of Construction. In determining the meaning of provisions of this Resolution, the following rules shall apply unless the context clearly requires application of a different meaning: 7.1 References to Section numbers shall be construed as references to this Resolution. 7.2 References to one gender shall include all genders. 7.3 References to the singular shall include the plural, and references to the plural shall include the singular. Section 8.Effective Date. This Resolution shall take effect on its date of adoption. rd The foregoing Resolution adopted on the 23 day of July, 2007. Director Exhibit A Form of Subordinate Bond No. R-1 $[amount] USA NITED TATES OF MERICA URACE RBAN ENEWAL GENCY OF THE ITY OF UGENE CL OUNTY OF ANE SO TATE OF REGON SURB UBORDINATE RBAN ENEWAL OND (HUDS108LP) ECTION OAN ROGRAM S_____ ERIES The Urban Renewal Agency of the City of Eugene, Oregon (the "Agency"), for value received, acknowledges itself indebted and hereby promises to pay, but solely from the Tax Increment Revenues, to the City of Eugene, Oregon (the “Owner”), the aggregate principal amount of $[amount] in installments with interest, that are equal to the amounts the City of Eugene is required to pay to the U.S. Department of Housing and Urban Development, or its Fiscal Agent/Trustee, under Section 108 Loan Guarantee Program Variable/Fixed Rate Note No. B-05-MC-41-0001 (the “City HUD Note”). This Subordinate Bond is issued pursuant to Agency Resolution No. ____ adopted on July 23, 2007 (the "Subordinate Bond Resolution"). Capitalized terms that are used but not defined in this Subordinate Bond have the meanings defined for such terms in the Subordinate Bond Resolution. This Subordinate Bond is issued by the Agency for the purpose of repaying HUD Loans obtained by the City of Eugene to finance the costs of urban renewal projects within the District in full and strict accordance and compliance with all of the provisions of the Constitution and Statutes of the State of Oregon. This Subordinate Bond is a special obligation of the Agency, payable solely from the Tax Increment Revenues of the District as defined and provided in the Subordinate Bond Resolution. The Agency has issued, and has reserved the right to issue in the future, obligations that are secured by a lien on the Tax Increment Revenues that is superior to or on parity with the lien securing this Subordinate Bond. THIS SUBORDINATE BOND IS NOT A GENERAL OBLIGATION OF THE AGENCY, THE CITY OF EUGENE, OR LANE COUNTY, OREGON AND IS PAYABLE SOLELY FROM THE TAX INCREMENT REVENUES AS PROVIDED IN THE SUBORDINATE BOND RESOLUTION. The Agency may prepay this Subordinate Bond only with the consent of the Owner. IT IS HEREBY CERTIFIED, RECITED, AND DECLARED that all conditions, acts, and things required to exist, to happen, and to be performed precedent to and in the issuance of this Subordinate Bond have existed, have happened, and have been performed in due time, form, and manner as required by the Constitution and Statutes of the State of Oregon; and that the issue of which this Subordinate Bond is a part, and all other obligations of such Agency, are within every debt limitation and other limit prescribed by such Constitution and Statutes. IN WITNESS WHEREOF, the Agency has caused this Subordinate Bond to be signed by the signature of the Agency Official as of this __ day of _______. Urban Renewal Agency of the City of Eugene Agency Official