99-23147 RESO
RESOLUTION NO.
99-23147
A RESOLUTION OF THE MAYOR AND CITY COMMISSION
OF THE CITY OF MIAMI BEACH, FLORIDA,
AUTHORIZING THE CITY MANAGER, OR HIS DESIGNEE,
TO SUBMIT AN APPLICATION TO THE U.S. DEPARTMENT
OF HOUSING AND URBAN DEVELOPMENT (HUD) FOR A
SECTION 108 LOAN, IN THE AMOUNT OF $4,000,000, AND
AN ECONOMIC DEVELOPMENT INITIATIVE GRANT, IN
THE AMOUNT OF $1,000,000, FOR STREET
IMPROVEMENTS ON NORMANDY ISLE AND PUBLIC
FACILITIES IMPROVEMENTS FOR THE NORTH SHORE
YOUTH CENTER; AUTHORIZING THE MAYOR AND CITY
CLERK TO EXECUTE ANY AND ALL AGREEMENTS
RELATED TO THE LOAN AND THE GRANT, IF AWARDED;
AND APPROPRIATING SAID LOAN AND GRANT FUNDS, IF
AWARDED.
WHEREAS, the Mayor and City Commission recognize the urgent need for large-scale
street improvements on Normandy Island and for facility improvements to the North Shore Youth
Center; and
WHEREAS, Section 108 is the loan guarantee provision of the U.S. Department of Housing
and Urban Development (HUD) Community Development Block Grant (CDBG) Program that offers
local governments a source of financing for public facilities, economic development, housing
rehabilitation, and large scale physical development projects; and
WHEREAS, HUD allows local governments such as the City of Miami Beach to apply for
a Section 108 loan for financing improvements to public streets, sidewalks, and other site
improvements, as well as for public utilities, acquisition, construction, reconstruction, rehabilitation,
or installation of public facilities; and
WHEREAS, the City is eligible to apply for loan funds of up to a maximum of five times
the annual Community Development Block Grant allocation which, based on FY 1999/2000, is
approximately $13.8 million dollars; and
WHEREAS, the City's Community/Economic Development Department has put forth a
proposal to receive funding, in the amount of$525,000, from the annual entitlement ofCDBG funds
in order to pay back the principal and interest on the Section 108 loan; and
WHEREAS, the repayment period will be for a minimum of ten (10) years and will not
exceed the maximum allowable limit of twenty (20) years for repayment; and
WHEREAS, the City is eligible to apply for a HUD Economic Development Initiative Grant
and use said funds for initial payment of interest and subsequent payment of principal due for the
Section 108 loan; and
WHEREAS, the City intends to implement a comprehensive streetscape improvement
program for Normandy Island in the North Beach community development target area and complete
the necessary facility improvements at the North Shore Youth Center, thereby fostering a viable
environment for new or additional economic activity.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City
Commission herein authorize the City Manager, or his designee, to submit an application to the U.S.
Department of Housing and Urban Development (HUD) for a Section 108 loan, in the amount of
$4,000,000, and an Economic Development Initiative Grant, in the amount of $1 ,000,000, for street
improvements on Normandy Isle and public facilities improvements for the North Shore Youth
Center; authorize the Mayor and City Clerk to execute any and all agreements related to the loan
and the grant, if awarded; and appropriate said loan and grant funds, if awarded.
PASSED and ADOPTED, this 28th day of April , 1999.
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APPROVED p.S TO
FORM & LANGUAGE
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City Attorney Dote
F:\DDHPI$ALLVOHNISECT -1 08\RESOS 108.499
~ITY OF MIAMI BEACH
ITV HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
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TO:
FROM:
SUBJECT:
COMMISSION MEMORANDUM NO. 301-9 ~
Mayor Neisen O. Kasdin and
Members of the City C
DATE: April 28, 1999
Sergio Rodriguez
City Manager
A RESO ION OF THE MAYOR AND CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA, AUTHORIZING THE CITY
MANAGER, OR HIS DESIGNEE, TO SUBMIT AN APPLICATION TO THE
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD)
FOR A SECTION 108 LOAN, IN THE AMOUNT OF $4,000,000, AND AN
ECONOMIC DEVELOPMENT INITIATIVE GRANT, IN THE AlVIOUNT OF
$1,000,000, FOR STREET IMPROVEMENTS ON NORMANDY ISLE AND
PUBLIC FACILITIES IMPROVEMENTS FOR THE NORTH SHORE
YOUTH CENTER; AUTHORIZING THE MAYOR AND CITY CLERK TO
EXECUTE ANY AND ALL AGREEMENTS RELATED TO THE LOAN AND
THE GRANT, IF AWARDED; AND APPROPRIATING SAID LOAN AND
GRANT FUNDS, IF A WARDED.
ADMINISTRATION RECOMMENDATION:
Adopt the Resolution.
BACKGROUND:
Section 108 is the loan guarantee provision of the Community Development Block Grant (CDBG)
program that offers local governments a source of financing for public facilities, economic
development, housing rehabilitation, and large scale physical development projects. Typical Section
l08 activities include: economic development projects with pay backs equal to or greater than the
Section 108 loan pay back; bridge financing with commitments from permanent financing sources
within 6 months to 5 years; and public facilities that have little or no pay back but have alternative
collateral and income streams from which to pay the Section 108 Loan. Historically, Section 108
has been used for economic development activities that include job creation with jobs retention for
low and moderate income persons.
Local governments that borrow funds guaranteed by Section 108 must pledge their current and future
CDBG allocations (up to the loan amount) as security for the loan. Local governments can borrow
up to five times the annual CDBG allocation and the maximum repayment period of the loan is
twenty years. For the City of Miami Beach, with an annual CDBG allocation of approximately $2.7
AGENDA ITEM
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DATE
COMMISSION MEMORANDUM
APRIL 28,1999
PAGE 2
million dollars, the maximum amount the City could borrow ~ould be approximately $13.8 million
dollars.
Activities eligible for Section 108 financing include:
. Economic development activities, such as job creation/jobs retention;
. Rehabilitation of publicly owned real property;
. Construction, reconstruction or installation of public facilities, streets, sidewalks, and other
improvements;
. Payment of interest on the guaranteed loan and issuance costs of public offerings;
. Oebt service reserves;
. Acquisition of real property;
. Housing rehabilitation;
. Related relocation, clearance and site improvements.
Statutory amendments in 1994 expanded the list of eligible activities to include public facilities,
which generally do not yield cash flow.
As with the CDBG program, all projects and activities must meet one of the national CDBG
objectives, and are subject to the rules and regulations governing the COBG program. They must
either principally benefit low and moderate income people, assist in the prevention or elimination
of slum and blight conditions, or meet other urgent community development needs. The proposed
Section 108 loan application for North Beach Street Improvements and the North Beach Youth
Center meets the primary objective of providing an area benefit for low and moderate income
persons in the designated CDBG target areas of North Beach.
SECTION 108 PROPOSAL FOR NORTH BEACH
Section 108 is one of the most potent and important public investment tools that HUD offers local
governments. For example, it can allow the City of Miami Beach to leverage a small portion of their
COBG funds into a substantial amount of funding large enough to undertake large scale
revitalization projects that can assist in renewing entire neighborhoods such as the North Beach area.
One of the intents of such a public investment is to spur additional economic activity and provide
additional incentives for retaining existing businesses and attracting new businesses to the area.
Over the last eight years, COBG funds have been used to implement street improvement projects in
those sections of eligible community development target areas where the condition and appearance
of neighborhood streets were the worst. While there have been many portions of neighborhood city
blocks improved with COBG funds, the limited funds available from the COBG Program has
prevented a full-scale comprehensive streets improvements strategy for Normandy Isle. The Section
108 Loan application in the amount of $4,000,000 would allow the City to undertake a
comprehensive and systematic strategy for streets improvements on Normandy Isle where there is
a 75% population of low and moderate income persons.
COMMISSION MEMORANDUM
APRIL 28,1999
PAGE 3
Included in the $4 million dollar request for a Section 108. Loan is $1 million to complete the
renovation and construction of the North Shore Youth Center. The total amount of funds already
allocated towards this project is $3,979,032. However, there is a budget shortfall of$1 million to
complete the renovation and construction for this facility. The Section 108 Loan would enable the
City to undertake and complete this facility as designed and envisioned.
The Department of Community/Economic Development made an initial presentation to the
Community Development Advisory Committee (CDAC) on April 20, 1999 regarding the City's
intent to apply to HUD for Section 108 loan, and reviewed with CDAC the repayment schedule of
the loan were it were to be awarded. CDAC is in the process of planning and reviewing all eligible
CDBG activities for FY 1999/2000. CDAC will make its final CDBG funding recommendations
in mid-May and include those recommendations in the draft Action Plan which will be available for
public review and comment beginning in early June. Once the 30 day public comment period
expires, the final draft of the Action Plan will be presented to the City Commission.
ANALYSIS:
The annual entitlement of CDBG funds appropriated to the City of Miami Beach is not sufficient
to address many of the urgent needs in the community. Among these needs are street improvements
on Normandy Isle and public facility improvements to the North Shore Youth Center. Applying for
a HUD Section 108 Loan will allow the City of Miami Beach to implement a comprehensive
streetscape improvement program for Normandy Isle in the North Beach community development
target area and complete the necessary public facility improvements at the North Shore Youth
Center. Approximately $3,000,000 is needed for paving, sidewalks, drainage, curbs and gutters,
storm drains, and landscaping on Normandy Isle, and approximately $1,000,000 is needed to
complete extensive improvements to the North Shore Youth Center.
The City proposes the following term sheet for the overall Section 108 for North Beach street
improvements and rehabilitation/construction costs for the North Beach Youth Center:
Term Sheet for the North Beach Street Improvements and the North Beach Youth Center
Section 108 Loan Amount: $4,000,000
EDI Grant: $1,000,000
Term: 10 years
Interest Rate: Based on 5.5%
Collateral: $525,000 from future years' CDBG Entitlement
Uses of Funds:
Section 108:
$3,000,000 North Beach Streetscape Improvements
$1,000,000 North Beach Youth Center
$1,000,000 Utilized to fund $100,000 of Annual Debt Service
$ 425,000 Future Years' CDBG Entitlement
ED I Grant:
Repayment Source:
While most Section 108 Loan funded projects generate enough cash flow to support loan payments,
COMMISSION MEMORANDUM
APRIL 28,1999
PAGE 4
the maximum 20-year term repayment period means that proj~cts do not necessarily need to support
repayment immediately. Furthermore, projects which include public facilities improvements
generally do not yield cash flow. Usually, these types of projects will have alternative collateral and
income streams from which to repay the Section 108 Loan.
The City of Miami Beach Community/Economic Development Department has put forth a proposal
to receive CDBG funding in the amount of $525,000 from the FY 1999/2000 in order to pay back
the principal on the Section 108 Loan with a projected repayment period of ten years. Additionally,
the City proposes to submit an application for a $1, 000,000 Economic Development Initiative (EDI)
grant to help defray the costs of the project and reduce the future impact on annual CDBG funding
required to sustain this project. The EDI is intended to complement the Section 108 Loan Program
by enhancing the security of the guaranteed loan and strengthening the economic feasibility of the
projects financed with Section 108 funds. HUD views the EDI grant as an incentive to the Section
108 Loan Program which can be used to repay debt, as interest reserve, or for project costs. The
intent of applying for an EDI Grant will be for the payment of interest and principal due on the
Section 108 Loan. The City proposes to utilize these grant funds to reduce future CDBG allocations
needed to service the debt over the ten year period. If awarded, the EDI could serve to reduce the
debt service requirement by up to $100,000 per year. Thereby, the future CDBG allocations would
be reduced from $525,000 to $425,000.
HUD permits Section 108 loans to be amortized over a maximum 20 year term to better assist
projects that do not necessarily support repayment ability. However, the City has proposed an
aggressive repayment schedule over ten years. To further reduce the impact on future CDBG
allocations, the repayment term can be extended to the maximum allowed of 20 years which will
result in an annual debt service payment of $330,000 compared to $525,000. This would result in
a net reduction of nearly $200,000. However, the shorter amortization term was proposed for
conservative purposes.
There are inherent advantages and disadvantages associated with the Section 108 Loan Program:
. A large, significant impact in a designated target area with pre-identified needs will generate
greater efficiencies and cost savings as part of an integrated project implementation budget
and work schedule.
. The City's CDBG entitlement funds will be used to repay the outstanding debt and will
reduce the funding available for other CDBG eligible projects (notwithstanding the Public
Services category).
RECOMMENDA TION:
The Administration seeks approval of the attached Resolution of the Mayor and City Commission
of the City of Miami Beach, Florida, authorizing the City Manager, or his designee, to submit an
application to the U.S. Department of Housing and Urban Development (HUD) for a Section 108
Loan, in the amount of $4,000,000, and an Economic Development Initiative Grant, in the amount
COMMISSION MEMORANDUM
APRIL 28,1999
PAGE 5
of$l,OOO,OOO, for street improvements on Normandy Isle and public facilities improvements for the
North Shore Youth Center: authorizing the Mayor and City Clerk to execute any and all agreements
related to the loan and grant, if awarded; and appropriating said loan and grant funds. if awarded.
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