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HomeMy WebLinkAboutItem 3C: Resolution Concerning Loan Guarantee Assistance ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Adoption of Resolution 4860 Authorizing Submission of an Application to United States Department of Housing and Urban Development for Loan Guarantee Assistance and Related Matters Meeting Date: March 13, 2006 Agenda Item Number: 3C Department: Planning and Development Staff Contact: Denny Braud www.eugene-or.gov Contact Telephone Number: 682-5536 ISSUE STATEMENT The proposed resolution will enable the City of Eugene to apply for a Section 108 Loan Guarantee and to be granted access to Brownfield Economic Development Initiative grant funds. BACKGROUND The City was recently awarded a $2 million Brownfield Economic Development Initiative grant (Brownfield Grant) through the U.S. Department of Housing and Urban Development (HUD) to assist redevelopment projects within the City's Downtown and Riverfront urban renewal districts. The City was one of only eleven communities nationwide to receive Brownfield Grant funding. The $2 million grant is the maximum award available under the Brownfield Grant program and must be used in conjunction with a HUD Section 108 Loan Guarantee. The Intergovernmental Relations Committee approved the Brownfield Grant application submission in May 2005. HUD’s Section 108 program allows cities to borrow up to five times their annual Community Development Block Grant (CDBG) allocation. Based on Eugene’s most recent annual CDBG allocation, the Section 108 borrowing capacity is $7,895,000. The Section 108 and Brownfield Grant programs must be used for projects that meet CDBG National Objectives, primarily low-income benefit and elimination of slums and blight. Brownfield Grant funds are typically used to enhance the security or improve the viability of projects financed with Section 108 proceeds. The proposal for the Brownfield Grant and Section 108 funds is the creation of a loan pool targeted for redevelopment projects that will have positive economic and community development benefits within the City’s Downtown and Riverfront urban renewal districts. Each project funded by the loan pool would require City Council review and approval of a formal resolution, followed by HUD approval. In addition to meeting a CDBG National Objective, projects would need to meet HUD’s Section 108 loan underwriting criteria. Although the City’s proposed Section 108 application will not include a request for funding a specific project, it will provide an overview of the City’s approach to selecting and funding projects. Projects considered may include economic development, affordable housing, and public facilities. Project L:\CMO\2006 Council Agendas\M060313\S0603133C.doc proposals would be selected for funding if they result in economic revitalization in connection with brownfields, are financially feasible, are within reasonable risk, are likely to be repaid, and clearly meet CDBG National Objectives. Project preference criteria, including project need and location, project effectiveness, and project impact, would also be used to review potential projects. The criteria would be designed to provide an objective evaluation of the applicant’s ability to produce an effective and timely outcome and of the project impact. There are two approaches to potential loan pool underwriting depending on the nature of the project. For projects where the City borrows money to lend to private developers, the City would maintain a six- step application process: 1) pre-application; 2) application; 3) administrative review; 4) Loan Advisory Committee review; 5) citizen participation; and 6) final review. Administrative review would include staff evaluation of evidence of site control, ability to repay, collateral, proposed costs, commitment of funds, need for public assistance, development team capacity/experience, and developer/owner commitment and character. Citizen participation would include a 30-day written public comment period and a public hearing before the CDBG Advisory Committee. Final review would include City Council review and resolution, followed by HUD approval. For public facility projects, the City would maintain a three step process: 1) administrative review; 2) citizen participation; and 3) final review. The process would be similar to when the City borrows money for a capital project. Following administrative review, the same citizen participation would be required as called for with private developer projects. Following a positive recommendation from the CDBG Advisory Committee, the application will follow the same final review as called for with private project applications. The council would review the project specific details and provide authorization for the borrowing. A major criterion in the Brownfield Grant award and the Section 108 application is project-readiness. Although no specific project funding request is being made at this time, there are several redevelopment opportunities that were highlighted in the City’s Brownfield Grant application, including the proposed Whole Foods redevelopment site, the Sears Building site being considered by the Oregon Research Institute, the industrial area proximate to the new federal courthouse, and the properties along West Broadway. In accordance with application requirements, the City’s CDBG Advisory Committee has held two public hearings, on February 1 and March 1, regarding the proposed Section 108 loan proposal. Opportunity for public comment was also made available during a 30-day written public comment period. On March 1, 2006, the CDBG Advisory Committee unanimously recommended submittal of the proposed $7,895,000 Section 108 application to HUD, with funding of future projects to be reviewed by the CDBG Advisory Committee and the City Council. It is important to note that the proposed submittal of this initial Section 108 application does not include a pledge of future CDBG funds at this time. The purpose of this application is to reserve the City’s ability to use the $2 million Brownfield Grant along with Section 108 funds for future redevelopment projects. Each project would need to go through a specific underwriting and approval process, as described above. L:\CMO\2006 Council Agendas\M060313\S0603133C.doc FINANCIAL AND/OR RESOURCE CONSIDERATIONS Funds borrowed under the Section 108 program require the City’s security pledge of future CDBG allocations. However, it is anticipated that the repayment of Section 108 funds would be supported by project-specific cash flow and collateral. Additional collateral pledges could include tax-increment revenue generated within the Downtown and Riverfront urban renewal districts. The Brownfield Grant is also intended to offset the risk of using Section 108 by utilizing the grant funds to over-collateralize a project via loan loss reserves or direct lending of the grant funds. Although future CDBG allocations could be called upon to repay Section 108 borrowings, the City would not anticipate utilizing future CDBG allocations as a source of repayment given the capacity of the City’s urban renewal resources to supplement project-specific cash flow and collateral, and the availability of the Brownfield Grant funds. The loans would not be secured by the City’s general fund or any other general resources. TIMING The Brownfield Grant award requires the submission of the proposed Section 108 application no later than March 31, 2006. The Brownfield Grant must be used within three years of the award. RELATED CITY POLICIES The proposed project is consistent with the policies and implementation strategies included in the Eugene 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. ? In addition, the proposed project is responsive to the following Growth Management objectives: Policy 1: Support the existing Eugene Urban Growth Boundary by taking actions to increase density and use existing vacant land 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 4: Improve the appearance of buildings and landscapes. 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. Policy 16: Focus efforts to diversify the local economy and provide family-wage jobs principally by supporting local and environmentally-sensitive businesses. Direct available financial and regulatory incentives to support these efforts L:\CMO\2006 Council Agendas\M060313\S0603133C.doc Policy 17: Protect and improve air and water quality and protect natural areas of good habitat value through a variety of means such as better enforcement of existing regulations, new or revised regulations, or other practices. The City’s debt policies govern the issuance of any kind of borrowing. The conduit financing portion of the policy is included as Attachment B. If the City decides to use a Section 108 Loan Guarantee to borrow money to lend to a private developer, the council will need to waive several of the conduit financing policies. For instance, the City’s debt policies state that the City will not incur any moral or financial obligation under a conduit borrowing. A HUD Section 108 Loan Guarantee is set up for the purpose of using the City’s CDBG funds as the ultimate security on a loan; therefore, the City would incur a possible financial obligation under this financing structure. When the council considers a specific financing resolution for a future project, waiver of any appropriate debt policies would be part of that approval process. The waiver is not necessary at this time. COUNCIL OPTIONS The council can choose to take action in support of the Section 108 Loan Guarantee application by approving the proposed resolution, or can decline to support the application as proposed. CITY MANAGER’S RECOMMENDATION The City Manager recommends that the council approve the proposed resolution in support of the Section 108 Loan Guarantee application. SUGGESTED MOTION Move to adopt Resolution No. 4860 authorizing submission of an application to United States Department of Housing and Urban Development for loan guarantee assistance and related matters. ATTACHMENTS A. Proposed Resolution B. Debt Policy Excerpt – Conduit Financings C. Brownfield Grant Award Letter FOR MORE INFORMATION Staff Contact: Denny Braud Telephone: 682-5536 Staff E-Mail: denny.braud@ci.eugene.or.us L:\CMO\2006 Council Agendas\M060313\S0603133C.doc TTACHMENT A A RESOLUTION NO. ___ A RESOLUTION AUTHORIZING SUBMISSION OF AN APPLICATION TO UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FOR LOAN GUARANTEE ASSISTANCE AND RELATED MATTERS. The City Council of the City of Eugene, Oregon (the "City") finds that: A. The City of Eugene is one of only eleven communities in the United States to be approved for a Brownfields Economic Development Initiative grant from the United States Department of Housing and Urban Development (“HUD”). The grant is in the amount of $2,000,000. B. To obtain the grant the City must also apply for and receive loan guarantee assistance from HUD under 24 CFR 570.700 to 570.710 and the related laws and regulations (the “HUD Loan Guarantee Assistance Rules”). The guaranteed loan is expected to be in the amount of approximately $7,895,000. C. The City adopts this resolution to approve and authorize submission of an application for loan guarantee assistance under the HUD Loan Guarantee Assistance Rules. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF EUGENE, a Municipal Corporation of the State of Oregon, as follows: Section 1. Official Representative Designated. The City Manager or the person designated in writing by the City Manager to act under this Resolution (the "City Official") is hereby authorized to serve as the official representative of the City of Eugene in connection with the application for and receipt of loan guarantee assistance from HUD under the HUD Loan Guarantee Assistance Rules in an amount of not more than $8,000,000. Section 2. Application and Related Actions Authorized. On behalf of the City and without further action by the City Council, the City Official is hereby: A. Authorized to submit an application for loan guarantee assistance and any and all amendments thereto and all understandings and assurances contained therein. B. Directed and authorized to act in connection with the application to provide such additional information as may be required. L:\CMO\2006 Council Agendas\M060313\S0603133C.doc 3. Effective Date. Section This Resolution shall take effect on the date of its adoption. The foregoing Resolution adopted this __ day of March, 2006. City Recorder L:\CMO\2006 Council Agendas\M060313\S0603133C.doc ATTACHMENT B Debt Policy Excerpt – Conduit Financings Conduit Financings 1. Conduit financings are defined as bonds issued by the City to finance a project to be used primarily by a third party, usually a corporation engaged in a private enterprise. 2. Recognizing that the City is able to issue debt for broad purposes, it may be appropriate to enter into a conduit financing on behalf of another party when the City Council determines that the proposed project will provide a general benefit to City residents and/or the City economy. 3. Conduit financing will be considered only when a project is consistent with the City’s overall service and policy objectives. 4. The City should not incur any moral or financial obligation under a conduit borrowing. 5. The City will only consider conduit financings that will insulate the City from any credit risk. 6. Any financing issued through the City must qualify for an investment grade rating by one of the nationally recognized statistical rating agencies or provide alternative credit enhancement from a third party satisfactory to the City or a corporate guaranty if the corporation carries an investment grade rating. 7. All expenses related to conduit financing will be borne by the third-party applicant for whom the debt is being issued. 8. The City will establish review procedures of the requesting party for projects, including adherence to public contracting requirements, development of a financial feasibility study of the project, and submission of annual financial statements to ensure the ability to repay the debt. L:\CMO\2006 Council Agendas\M060313\S0603133C.doc J~~'~~~O~+o ~" JUIUilu~ * \ \ 111111 j '9.61 o~ -4~OE~.\": U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, DC 20410-7000 ATTACHMENT C ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT February 24,2006 Mr. Dennis Taylor City Manager City of Eugene 99 W. 1 oth Avenue Eugene, OR 97401 Dear Mr. Taylor: Congratulations! I am pleased to inform you that the city of Eugene has been awarded a Brownfields Economic Development Initiative (BED!) grant in the amount of $2,000,000 based on your application submitted pursuant to the BEDI Notification of Funding Availability (NOFA) published on March 21, 2005, at 70 FR 13951, and on July 26,2005, at 70 FR 43171. Today's brownfields were once vital sources of economic growth for communities, and when cleaned up and redeveloped, can again be thriving centers of economic activity. The U.S. Department of Housing and Urban Development (HUD) is pleased to assist Eugene in working to transform these abandoned sites into new developments that will create jobs, increase tax revenues and help revitalize communities. This BEDI grant award is conditioned upon the submission and HUD approval of a complete Section 108 Loan Guarantee application for not less than $7,895,000 followed by the execution and funding of a Section 108 Note and Contract for Loan Guarantee Assistance for the same project. The enclosed Instructions and Conditions for Award provide further details on the Section 108 application as well as about the Section 108 Note and Contract for Loan Guarantee Assistance. If you accept the conditions of the BEDI grant award as stated herein, in the enclosed ',' Instructions and Conditions for Award, and in the 2005 BEDI NOF A, please acknowledge your , ',acceptance by signing in the space provided below. Please return this letter only - the other ': enclosures are for your records --with your signature of acceptance on or before March 13, 2006 to: Donald P. Mains Deputy Assistant Secretary for Economic Development Department of Housing and Urban Development 451 ih Street S.W., Room 7136 Washington, DC 20410 In order for HUD to obligate funds for the approved BEDI project, this office must receive your executed acceptance below no later than March 13, 2006. The executed acceptance, when countersigned on behalf of the Department, shall constitute an agreement between the city of Eugene and HUD obligating BEDI funds for the project described in the approved 2005 BEDI application submitted by Eugene and assigned Grant Number B-05-BD-41-0029. A more detailed BEDI Grant Agreement will be sent to you for execution, along with a Section 108 Note and Contract for Loan Guarantee Assistance, after approval of the Section 108 Loan Guarantee application. A draft form of that subsequent Grant Agreement is also enclosed for your information. If you or members of your staff have any questions concerning this matter, please contact Mr. Mains at (202) 708-4091. I look forward to working with you in the redevelopment of brownfields and in the return of these sites to productive use for the community. Sincerely, Y\ et.... ~..~, ~.m--r , L.o~".:' ~.~ ~ 1 Nelson R. Breg6n General Deputy Assistant Secretary