HomeMy WebLinkAboutPR 19514: APPLICATION PROCESS FOR A SECTION 108 PROJECT LOAN , ROSE HILL (REQUESTED BY COUNCILMEMBER LEWIS) MEMORANDUM
To: Mayor, City Council, City Attorney and City Manager
From: Sherry Vital, Assistant City Attorney
Date: September 16, 2016
Subject: P.R. 19514 HUD Section 108 Loan - Rose Hill Manor
Background
The HUD Section 108 Loan Guarantee program has been proposed as
a source of funding the renovations of Rose Hill Manor.
The purpose of this memo is to provide a synopsis of the
program' s parameters to support discussion and deliberation for
the Council .
The information provided was acquired directly from HUD reports
and interviews of HUD personnel .
Summary of the HUD Section 108 Loan Program
Enacted by Congress in 1974 , the U. S . Department of Housing and
Urban Development' s (HUD) Section 108 Loan Guarantee program is
the loan guarantee provision of the Community Development Block
Grant (CDBG) program.
An entitlement grantee (a local government that receives CDBG
funds directly from HUD on a formula basis) can borrow up to
five times its annual approved CDBG entitlement amount .
Because Section 108-funded projects involve CDBG—even if not
intended as the primary repayment source—each activity must meet
one of CDBG' s three National Objectives :
• Principally benefit Low to Moderate Income "LMI" people.
• Assist in the elimination or prevention of slum and blight
conditions .
• Meet other community development needs that have a
particular urgency and are of very recent origin.
CDBG allocations are pledged as security for the loan to the
local government, enabling HUD to guarantee the loan. The
grantee can repay the loan with CDBG funds, program income,
and/or other revenues .
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• HUD emphasizes the importance of carefully vetting Section
108 projects within jurisdictions and structuring loans
properly so that repayment would not be an issue. There is
reluctance to leverage future CDBG funds on risky
investments .
Conclusion
If Council desires to use the HUD Section 108 Loan program to
fund Rose Hill Manor renovations, a confirmed source of funding
the debt to avoid default is necessary to eliminate the risk of
losing future CDBG allocations .
Reference:
HUD Section 108 Loan Guarantee Publication
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P.R. NO. 19514
9/14/16 vrt
RESOLUTION NO.
A RESOLUTION AUTHORIZING THE CITY MANAGER TO COMMENCE
THE APPLICATION PROCESS FOR A SECTION 108 PROJECT LOAN
PROGRAM WITH THE U.S. DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT FOR THE REHABILITATION OF ROSE HILL
(REQUESTED BY COUNCILMEMBER LEWIS)
WHEREAS, Councilmember Lewis has requested that the City of Port Arthur
consider applying for a Section 108 Loan Guarantee Program with the Department of
Housing and Urban Development ("HUD") for needed rehabilitation of Rose Hill (the
eligibility requirements are described in Exhibit "A"); and
WHEREAS, this program allows government entities to transform a portion of their
CDBG funds into federally guaranteed loans large enough to pursue physical and economic
revitalization projects capable of renewing entire neighborhoods; and
WHEREAS, Section 108 obligations are financed through underwritten public
offerings. Financing between public offerings is provided through an interim lending facility
established by HUD. The borrowers for Section 108 loan guarantees are local or state
governments. If approved, private lenders are incentivized by this security to lend funds to
the borrower; and
WHEREAS, the borrower will be required to secure the loan by pledging current or
future CDBG allocations to either repay the loan or secure it; and
WHEREAS, once HUD schedules a Section 108 public offering, state and local
government borrowers may request to participate and receive long-term, fixed rate
financing for approved community and economic development projects; and
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WHEREAS, it is deemed in the best interest of the City of Port Arthur to move
forward with the application process through HUD for the redevelopment of Rose Hill.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF PORT ARTHUR:
Section 1. That the facts and opinions in the preamble are true and correct.
Section 2. That City Council hereby authorizes the City Manager is authorized to
commence the application process for a Section 108 Project Loan for the rehabilitation of
Rose Hill.
Section 3. That a copy of the caption of this Resolution shall be spread upon the
Minutes of the City Council.
READ,ADOPTED,AND APPROVED,this_day of , 2016 AD, at
a Regular Meeting of the City Council of the City of Port Arthur, Texas by the following
vote: AYES:
Mayor: ,
Councilmembers: ,
NOES: .
Derrick Freeman, Mayor
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ATTEST:
Sherri Bellard, City Secretary
APPROVED AS TO FORM:
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Valecia R. izeno, City Attorney
APPROVED FOR ADMINISTRATION:
Brian McDougal, City Manager
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