011-1999 LTC
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
http:\\ci.miami-beach.fl.us
L.T.C. No. 11-1999
LETTER TO COMMISSION
January 14, 1999
TO: Mayor Neisen O. Kasdin and
Members of the City Commission
SUBJECT: Section 108 Loan Guarantee Program - Applicability for Street Improvements
FROM: Sergio Rodriguez
City Manager
Section 108 is the loan guarantee provision of the Community Development Block Grant (CDBG)
program that offers local governments a source of financing for economic development, housing
rehabilitation, public facilities, and large scale physical development projects. The U.S. Department
of Housing and Urban Development (HUD) sells bonds on the private market and uses the proceeds
to fund Section 108 loans to local governments. The local government may loan the funds to third
parties to undertake eligible CDBG activities or use the funds directly for eligible CDBG activities.
Local governments borrowing funds guaranteed by Section 108 must pledge their current and future
CDBG allocations (up to the loan amount) as security for the loan. Loan guarantees generally
require additional security requirements to assure repayment of the guaranteed obligations and are
determined on a case-by-case basis. Local governments can borrow up to five times the annual
CDBG allocation and the maximum repayment period is twenty years. For the City of Miami Beach,
with an annual CDBG allocation of approximately $2.7 million dollars, the maximum amount the
City could borrow would be $13.5 million dollars.
Section 108 financing may be used for public streets, sidewalks, and other site improvements, as
well as for public utilities, acquisition, construction, reconstruction, rehabilitation, or installation of
public facilities. Historically, Section 108 has been used for economic development activities that
include job creation with jobs retention for low and moderate income persons. However, other
eligible uses ofthe 108 Loan Program include: acquisition of real property; rehabilitation of publicly
owned real property; housing rehabilitation; related relocation, clearance and site improvements;
payment of interest on the guaranteed loan and issuance costs of public offerings; and debt service
reserves.
While most Section 108 loan funded projects generate enough cash flow to support loan payments,
the maximum 20-year term repayment period means that projects 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.
As with the CDBG program, all projects and activities must meet one of the national CDBG
objectives, and are subject to other applicable federal rules and regulations. The national objectives
of the Community Development Block Grant program are to 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.
I\dCMI/"
er- IlL~ .
SRlCMC/ /J JQ
cc: Christina M. Cuervo, Assistant City Manager
Randolph Marks, Assistant Director, Community/Economic Development
F:\DDHP\$ALLVOHNISECT -I 08\L TC 1-98WPD