172-94 RDA
RESOLUTION NO. 172-94
A RESOLUTION OF THE CHAIRMAN AND MEMBERS OF
THE MIAMI BEACH REDEVELOPMENT AGENCY
AUTHORIZING THE SUBMISSION OF AN APPLICATION
FOR A GRANT UNDER THE ECONOMIC DEVELOPMENT
INITIATIVE (EDI) AND A SECTION 108 LOAN FROM
THE U. S . DEPT OF HUD UNDER TITLE I OF THE
HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1974,
AS AMENDED, IN THE MAXIMUM AMOUNTS POSSIBLE
FOR EACH, IN ORDER TO ASSIST IN THE FINANCING
AND DEVELOPMENT OF THE HCF/SHERATON AND LOEWS
HOTEL PROPOSALS.
WHEREAS, The City has conducted an RFP process offering
to support the development of a hotel project sponsored and owned
by African-American individuals, corporations or entities; and
WHEREAS, the City has solicited proposals of less than
600 rooms involving new construction or restoration of existing
hotel rooms; and
WHEREAS, on July 21, 1994, the City Commission and the
Redevelopment Agency jointly designated the RFP response by the HCF
group on the property at the Royal Palm and Shorecrest Hotels as
the only responsive proposal for the African-American hotel
component; and
WHEREAS, A Notice of Funds Availability (NOFA) was
published for the Economic Development Initiative (EDI) from the
u.s. Department of HUD, announcing the availability of grants and
establishing a deadline of September 16, 1994 for submission; and
WHEREAS, the City is desirous of applying for a Section
108 Loan in the maximum amount permitted in order to assist in the
development of the hotel projects proposed by the HCF/Sheraton and
Loews Groups; and
WHEREAS, The Section 108 Loan has as collateral the
current and future CDBG program funds; and
WHEREAS, the EDI initiative provides grants that are
intended intended to mitigate the risk to current and future CDBG
funds on projects financed in whole or in part under the Section
108 Loan Guarantee program by providing grants to stenghten and
directly enhance the security of the guaranteed loan.
NOW TH~REFORE BE IT RESOLVED BY THE CHAIRMAN AND MEMBERS
OF THE MIAMI BEACH REDEVELOPMENT AGENCY that the Chairman and
Members hereby authorize the submission of an application for a
grant under the Economic Development Initiative (EDI) and a Section
108 Loan from the u.S. Dept of HUD under Title I of the Housing and
Community Development Act of 1974, as amended, in the maximum
amounts possible for each, in order to assist in the financing and
development of the above hotel proposals.
PASSED AND ADOPTED THIS
FORM APPROVED
REDEVElOPMENT AGENCY
GENERAL COUNSEL
~
By .j C ))
Date ...i:1:.:ii--
~~TTEST :
~ A~'~
c'/ ~, ' t;}.y()~,
SECRETARY
years.
. Repayment period - Twenty Years
. Financing Source - Section 108 obligations are financed through
underwritten public offerings.
Financing between public offerings IS provided through an interim lending facility
established the by HUO.
. Default - In the event of default requiring a payment, HUO would
continue to make payment on the loan in accordance with it's terms. The source of
payment to HUD by its guarantee would almost always be pledged CDBG funds. HUO
does have borrowing authority with the Treasury if the funds are insufficient.
Public Law 103-233 approved April 11, 1994 and entitled the" Multi-Family Housing
Property Deposition Reform Act of 1994" amends Section 203 of the Housmg and
Community Development Amendment of 1978. This Act specifically amends the
COBG Program to allow the Section 108 Program to include the acquisition,
construction, reconstruction of public facilities, public works improvements and site
or other improvements. The Act also includes a new sub-section entitled" Economic
Development Grants". This amendments permits Section 1 08 to be used for COSG
eligible economic development activities.
The final regulations for the Section 108 Program were published In the Federal
Register November 6, 1991. (A copy is attached.)
Application Req"uirements:
. Activities must be described in sufficient detail including the description
of the eligible activities and the COSG National Objective to be met, amount of loan
funds, location of activities, statement of expected program income, if applicable, and
a description of how citizens may obtain additional information on proposed activities.
. The application must contain the schedule for repayment of the loan
which identifies the sources of repayment.
. Required certifications
. Evidence of Citizen Participation
Citizen Participation Plan - The City must adopted and follow a detailed Citizen
Participation Plan to be made available prior to submission of the Section 108
application. The Plan may be the CP Plan required for the COSG Program - if it is
modified to include the Section 108 loan provisions. A minimum of two public
hearings must be held on the proposed application.
Miami Beach
Redevelopment Agency
1700 Convention Center Drive
Miami Beach, Florida 33139
Telephone: (305) 673-7193
Fax: (305) 673-7772
REDEVELOPMENT AGENCY MEMORANDUM NO. 94-30
September 8, 1994
TO:
Chairman and Members
of the Redevelopment
Board
FROM: Roger M. Carlton
Executive Director
SUBJECT: AUTHORIZATION TO APPLY FOR A GRANT UNDER THE ECONOMIC
DEVELOPMENT INITIATIVE (EDI) AND A SECTION 108 LOAN
FROM u. S. HOD UNDER TITLE I OF THE HOUSING AND COMMUNITY
DEVELOPMENT ACT OF 1974, AS AMENDED, IN THE MAXIMUM
AMOUNTS POSSIBLE FOR EACH, IN ORDER TO ASSIST IN THE
FINANCING AND DEVELOPMENT OF THE HCF/SHERATON AND LOEWS
HOTEL PROPOSALS.
RECOMMENDATION:
That the Chairman and Members of the Board of the Miami Beach
Redevelopment Agency adopt the attached Resolution authorizing the
preparation and submission of the documents necessary to obtain a
Section 108 Loan and a grant under the Economic Development
Initiative (EDI), to assist in the financing and development of
hotels by the HCF Group and Loews/Forest City Ratner in amounts
permitted (Section 108 @ $12,670,000 - EDI @ $1,900,000) by the
prescribed deadline of September 16, 1994, pursuant to Title I of
the Housing and Community Development Act of 1974, as amended.
BACKGROUND:
The City of Miami Beach has selected developers and has authorized
the Administration to begin negotiations for the development of two
hotels. The Request for Proposals has indicated that the City
could raise $50 million to $60 million from a variety of sources in
order to provide a level of financial assistance to both, including
up to $10 million in support of the development of a hotel project
owned by African-American individuals, corporations or entities.
Further clarification by the City Commission establishes that the
City amounts provided to the hotel projects will be limited to
demonstrable "gap" financing.
ANALYSIS:
The Administration has been researching various sources of funds
that may be available to assist in the hotel effort. A Notice of
Fund Availability (NOFA) was published for the Economic Development
Initiative (EDI) , from the U. S. Department of HUD, in the Federal
Register of 8/16/94 (see attached), indicating that applications
for economic development grants will be accepted until September
16, 1994. EDI grants are intended to stimulate the use of the
Section 108 Loan Guarantee Program, which is the loan guarantee
provision of the Community Development Block Grant (CDBG) Program.
EDI assistance is only available in conjunction with Section 108
Loan request. Applicants have the opportunity now to request EDI
funds based on a Section 108 loan application which will be
submitted within thirty (30) days of receiving the EDI award.
Therefore, if the City submits an application for EDI funds now, it
will not have to submit the Section 108 loan application until 30
days after we receive notice of the EDI award.
SVUTIi Vf)I~
l?edevel()pment VI
AGENDA
ITEM
2 - C
IT't' f:r:~l?
~I()pment Vlitrlct
DATE SEPTEMBER 8, 1994
Under the Section 108 Program, the cities that receive CDBG funds
can apply for a loan of up to five (5) times the CDBG grant amount.
Section 108 funds can be used for any CDBG eligible activity such
as acquisition, rehabilitation, clearance, demolition, site
preparation, installation of public improvements, and certain
economic development activities. The CDBG rules and regulations
apply. A synopsis of the Section 108 program, prepared by staff,
is attached.
Since the City currently receives $2,534,000 annually in CDBG
funds, the city can apply for a Section 108 Loan up to the amount
of $12,670,000. This loan must be repaid within 20 years (at a
maximum). Although a source of repayment is required, the pledge
of security for the loan is the City's current and future CDBG
program funds.
The Economic Development Initiative (EDI) is a grant that is
designed to mitigate the risk to future CDBG funds by providing
grant funds which can be used to strengthen the economic
feasibility of projects financed with the Section 108 Loan, or to
directly enhance the security of the guaranteed loan. The maximum
EDI grant is based on fifteen percent (15%) of the Section 108 Loan
Guarantee. Therefore, if the City receives a Section 108 Loan in
the maximum amount of $12,670,000 we could receive an EDI grant of
up to $1,900,000.
The EDI grant minimizes the potential loss of future CDBG
allocations by lowering the cost of borrowing under Section 108
thereby reducing the risk that the pledged annual CDBG allocation
would be required to fund repayment shortfall, and enhancing the
ability to leverage federal resources and private funds.
Specifically, EDI can reduce the risk to future CDBG funds by:
. Strengthening the economic feasibility of the project financed
with Section 108 Loan funds (and thereby increasing the
probability that the project will generate enough cash to
repay the guaranteed loan funds; or
. By directly enhancing the security of the guaranteed loan; or
. Through a combination of these risk mitigation techniques.
As indicated above, the EDI grant can be used to cover the cost of
providing enhanced security. An example of this is using the grant
funds to cover the cost of a standby letter of credit, issued in
favor of HUD. This letter of credit will be available to fund
amounts due on the Section 108 Loan if other sources fail to
materialize and will, thus, serve to protect the City's future CDBG
funds. Also, the EDI grant can make it possible for debt service
or operating reserves to be established in a way that does not
jeopardize the economic feasibility of the project.
Since the pre-submission requirements for the Section 108 Loan,
including the citizen participation process, are similar to the
CDBG program, the City Commission will have another opportunity to
be involved in the specifics of the Section 108 Loan Application as
will the CDAC Committee and the existing grant recipients. This
will give us time to properly plan for and prepare the Section 108
Loan application documents after the September 16th deadline.
CONCLUSION:
It is recommended that the Chairman and Members of the
Redevelopment Agency authorize the preparation and submission of
the documents necessary to obtain a Section 108 Loan and a grant
under the Economic Development Initiative (EDI) both in the maximum
amounts permitted to assist in the hotel development effort, by the
prescribed deadline of September 16, 1994, pursuant to Title I of
the Housing and Community Development Act of 1974, as amended.
RMC: STP: jph
Attachments
CITY OF MIAMI BEACH
MEMORANDUM
DATE:
August 11, 1994
FROM:
Harry S. Mavrogenes, Assistant Cjt.y-Manager
Shirley Taylor-Prakelt, Director( ~
Housing & Community Development
TO:
RE:
SECTION 108 lOAN
Pursuant to your request, I have obtained the attached information package from the
U.S. HUD office on the Section 108 Loan Guarantee Program. The following is a
synopsis of the program:
. Eligible applicants - Metropolitan and urban counties who are entitlement
recipients under the COSG Program. Non entitlement cities that participate in the
State administered COSG Program are also now eligible. Public entities may be the
borrower or may designate a public agency to receive the loan guarantee.
. Eligible activities - acquisition, rehabilitation of publicly owned real
property; housing rehabilitation eligible under CDBG; economic development activities
eligible under COBG; related relocation, clearance, demolition, site preparation and
installation of public improvements; payment of interest on the loan and debt service
reserves, and economic development activities as eligible under the COSG Program.
For the purpose of determining eligibility, the COBG rules and regulations apply. As
with the COSG Program all projects and activities must either principally benefit low
moderate income persons or aid in the elimination/prevention of slums and blight.
. Maximum loan amount - Amount cannot exceed five times the City's
COBG latest entitlement amount. Based on the City's current entitlement of
$2,534,000, the City could receive $12,670,000.
. Security - The principal security for the loan guarantee is a pledge by the
City of current and future COSG funds. HUO may also require additional security.
However, additional security is always required if the repayment exceeds ten (10)
. Publication - The City must publish the proposed application so as to
afford affected citizens an opportunity to examine the application contents and to
provide comments on the proposed application. The City must consider any such
comments received.
. The City must make the final application available to the public.
Final Statement -
. The City's CDBG Final Statement must be amended to include the
Section 108 loan.
. Applications are submitted to the field office of HUD (Jacksonville Office).
The application is then sent with their recommendations to HUD Headquarters in
Washington.
Economic Development Initiative - EDI provides commUnities with grants from
recaptured UDAG funds, to be used in tandem with Section 108 loans for economic
development projects. The grants can be used to reduce the interests rates charged
to businesses fund lost reserves or for purposes that would increase the likelihood that
the cash flow generated by the economic development authority will be sufficient to
cover debt service on the Section 108 loan. This will, in turn decrease the likelihood
that CDBG funds will have to be used for that purpose.
Summary:
The City must carefully consider the risk in committing current and future CDBG funds
as the collateral for any Section 108 Loan. The proposed method of repayment and
source of the repayment (other than CDBG), must be sufficient to ensure that the
provision of essential servicf'c; through the CDBG program is not jeopardized. If for
any reason the loan payment was delinquent, HUD would automatically reduce the
Letter of Credit to the CDBG Program by the Section 108 loan payment amount.
If the City were to consider a loan for acquisition and rehabilitation costs associated
with the development of a hotel, this could qualify as an economic development
activity under 24 CFR 570.203 "Special Economic Development Activities"; however,
the CDSG National Objective to be achieved must be evaluated.
As you recall, the CDBG Program must principally benefit (by a minimum of 70%) low
and moderate income persons. The criteria that a minimum of 70% of the funds
benefit low/moderate income persons is based on the total funds received in the form
of CDBG Entitlement Grants, loans guaranteed under Section 108, Urban Renewal
Surplus grant funds, and Program Income.
Therefore, the proposed Section 108 Loan for development of a hotel must benefit
low/moderate income individuals. The method of achieving low/moderate income
benefit would have to be either job creation and/or job retention. Extensive
documentation of these jobs is required.
Please advise me if your need any additional information on the Section 108 Loan
Prograrp.
STP/eej
Attachments