99-23239 RESO
RESOLUTION NO.
99-23239
A RESOLUTION OF THE MAYOR AND CITY COMMISSION
OF THE CITY OF MIAMI BEACH, FLORIDA, DIRECTING
THE ADMINISTRATION TO MAINTAIN THE SECTION 108
LOAN APPLICATION APPROVED PURSUANT TO
RESOLUTION NO. 99-23147, TO APPLY TO PUBLIC
IMPROVEMENTS IN THE NORTH BEACH TARGET AREAS
OF THE CITY OF MIAMI BEACH.
WHEREAS, the U.S. Department of Housing and Urban Development Section 108 Loan
Program provides loans to eligible municipalities to undertake large scale projects that foster viable
economic development in urban communities; and
WHEREAS, local governments that borrow funds guaranteed by Section 108 loan, pledge
their current and future Community Development Block Grant (CDBG) allocations (up to the loan
amount) as security for the loan and the use ofCDBG funds to pay back the loan is acceptable to
HUD;and
WHEREAS, the City Commission on April 28, 1999 adopted Resolution No, 99-23147,
authorizing the City Manager to submit an application to HUD for a $1,000,000 Economic
Development Inititative (EDI) grant and a $4,000,000 Section 108 loan for projects that included
streetscape improvements in the North Beach area and completion of the North Shore Community
Center; and
WHEREAS, during its discussion of this item, the Commission directed the Administration
to explore similar sources of funding for projects in the South Beach area of Miami Beach; and
WHEREAS, in discussions with HUD, it has been recommended that the City consider one
Section 108 application for the proposed public improvements in North and South Beach; and
WHEREAS, after review by the City Administration, it is recommended that the scope of
the Section 108 loan application not be expanded not be expanded to include public improvements
in South Beach..
NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA that the Mayor and City
Commission direct the Administration to maintain the Section 108 Loan application approved
pursuant to Resolution No. 99-23147, to apply only to public improvements in the North Beach
target areas of the City of Miami Beach,
PASSED AND ADOPTED THIS 7th day of July, 1999.
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ATTEST:
APPROVED AS TO
FORM & LANGUAGE
& FOR EXECUTION
MAYOR
_~r f ~LLUA
CITY CLERK
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City A1torn 0aIIII
CITY OF MIAMI BEACH
SITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
http:\\ci.miami-beach.f1.us
COMMISSION MEMORANDUM NO. 505- cr..9
TO:
Mayor Neisen O. Kasdin and
Members of the City C
DATE: July 7,1999
FROM:
Sergio Rodriguez ,I
City Manager
SUBJECT:
A RESOL ION OF THE MAYOR AND CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA, DIRECTING THE
ADMINISTRATION TO MAINTAIN THE SECTION 108 LOAN
APPLICATION APPROVED PURSUANT TO RESOLUTION NO. 99-23147,
TO APPLY TO PUBLIC IMPROVEMENTS IN THE NORTH BEACH
TARGET AREAS OF THE CITY OF MIAMI BEACH.
ADMINISTRATION RECOMMENDATION
The Administration recommends that the Commission discuss the proposed amendment to
Resolution No, 99-23147, as adopted by the City Commission on April 28, 1999, and direct the
Administration to maintain the Section 108 loan application at the $4 million amount and applied
to North Beach only,
BACKGROUND
The U.S, Department of Housing and Urban Development Section 108 Loan program provides loans
to eligible municipalities to undertake large scale projects that foster viable economic development
in urban communities. Typical Section 108 activities include economic development projects whose
pay backs, in jobs or cash funds, are equal to or greater than the Section 108 loan pay back.
Examples include bridge fInancing to projects for the fIrst six months to fIve years, when permanent
financing sources can take over; and public facilities that have little or no pay back, but that have
alternative collateral and income streams from which to pay the Section 108 loan. Historically,
Section 108 loans have been used for economic development activities that include job creation with
jobs retention for low and moderate income persons. The regulations were amended to include the
acquisition, construction, reconstruction, rehabilitation or installation of public facilities, sidewalks,
public utilities and other site improvements,
Local governments that borrow funds through the Section 108 Loan Program, pledge their current
and future Community Development Block Grant (CDBG) allocations (up to the loan amount) as
security for the loan, To mitigate the impact on the CDBG funds, projects tend to either involve
activities that directly generate a cash flow or involve third parties who become responsible for the
pay back of loan funds, The use of CDBG funds as a repayment source for the loan is also
acceptab Ie to HUD,
AGENDA ITEM
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DATE
COMMISSION MEMORANDUM
JULY 7, 1999
PAGE 2
As with the CDBG program, all projects and activities must meet one of the three national CDBG
objectives, They must either: (a) principally benefit low and moderate income persons, (b) assist in
the prevention or elimination of slum and blight conditions, or (c) meet other urgent community
development needs. Section 108 financed projects and activities are also subject to the same rules
and regulations that govern the CDBG program.
When deciding on an application for a Section 108 loan, HUD requires that the City follow its
Citizen Participation Plan. One ofthe requirements is that at least one public hearing takes place to
obtain citizen comments on the City's Section 108 loan application. In addition to these federal
requirements, the Administration wishes to receive specific direction from the City Commission that
directly identifies projects to be undertaken with a Section 108 loan. Once the Commission has
decided on these projects, the Administration will present the projects to the community at large at
a publicly-advertised hearing, and return to the Commission with a report on the public comments
for a final decision on the application. The application will be available for public comment during
this period.
Section 108 is an effective and important public investment tool that can allow the City of Miami
Beach to leverage its annual $2.7 million entitlement into, for example, $13.8 million, the maximum
amount the City could borrow. This kind of public investment involves financial risks, and could
represent the loss of the CDBG entitlement, if the repayment provisions are not met.
ANALYSIS
The City Commission on April 28, 1999 adopted Resolution No. 99-23147, authorizing the City
Manager to submit an application to HUD for a $1,000,000 EDI grant and a $4,000,000 Section 108
loan for projects that included streetscape improvements in the North Beach area and completion of
the North Shore Community Center. The proposed project is a comprehensive streetscape
improvement program and public facilities' improvements, including the renovation and construction
of the North Shore Community Center, Of the funding, approximately $3,000,000 is needed for
paving, sidewalks, drainage, curbs and gutters, storm drains, and landscaping in the Northern and
Southern target areas; approximately $1,000,000 is needed to complete extensive improvements to
expand construction of the North Shore Community Center. The $1,000,000 EDI grant, ifawarded,
could serve to reduce the debt service requirements by approximately $100,000 per year for 10 years.
Repayment terms for the Section 108 loan would be 10 years vs. the maximum of20 years permitted.
During its discussion of this item, the Commission directed the Administration to explore similar
sources of funding for projects in the South Beach area of Miami Beach. In discussions with HUD,
it has been recommended that the City submit one Section 108 application for the proposed
public improvements in North and South Beach. To that end, Resolution No. 99-23147 must be
amended to expand the scope, and if necessary, the amount of the Section 108 loan application to
be submitted, if the Commission decides to proceed with its directive of April 28th,
COMMISSION MEMORANDUM
JULY 7,1999
PAGE 3
On February 26, 1999, HUD solicited applications for grants under the Economic Development
Initiatives (EDI) Program; such applications were due, and the City submitted a $1 million
application, on June 11, 1999. (See attached Exhibit 1) The EDI program supports the viability of
economic development activities that create revitalized urban environments by funding projects to
create jobs, improve public facilities and/or infrastructure, and others. The EDI program enhances
the viability of Section 108-funded projects by helping to reduce the risks associated with such large
scale loans by providing additional cash flow,
In implementing the directive of the Commission from their April 28, 1999 meeting, and as a result
of the submission deadline for the EDI grant, the Administration expanded the scope of the
application for the EDI grant to allow for the inclusion of streetscape and infrastructure renovations
in both North Beach and South Beach, The resulting proposal to the EDI program was prepared with
the expansion in the scope to include street improvements for eligible areas of South Beach.
One of the conditions ofthe EDI program is that a Section 108 loan application must be submitted
either concurrently, or within 60 days of an EDI grant. The City is preparing its submittal of a
Section 108 loan application in accordance with Commission direction. The Administration's
application for a $1,000,000 EDI grant is intended to cover the debt service on a proposed
$4,000,000 Section 108 loan to provide public improvements. The EDI grant application was
expanded, pursuant to Commission direction, to include streetscape improvements in the North and
South Beach areas and to complete construction and renovations at the North Shore Community
Center, at 501-72nd Street. In accordance with RUD's recommendation to submit one Section 108
loan application, the City must now decide whether the Section 108 loan application should be for
$4 million, as originally approved or increased to provide additional funds for South Beach.
The Administration proposes the City Commission consider two alternatives for a Section 108 loan
application:
Option A Maintain loan application at $4 million for North Beach Streetscape and Youth Center,
as originally presented on April 28, 1999.
Opiion B Increase the loan application to $5.2 million, allocating $4 million for North Beach and
$1.2 million for South Beach. Increasing the Section 108 loan application to $5.2
million would provide full funding for both the North Beach and South Beach public
improvements.
COMMISSION MEMORANDUM
JULY 7,1999
PAGE 4
Before making a recommendation or decision with respect to which option to pursue, the following
information is important to consider:
Loan Amount and Repayment Terms Option A OptionB
Loan Amount $4,000,000 $5,200,000
CDBG Repayment $525,000 $682,000
CDBG Repayment ifEDI Grant is $425,000 $582,000
approved
As presented on April 28, 1999, the Section 108 loan will be repaid from future CDBG allocations.
The annual repayment requirement for the $4,000,000 was estimated to be $525,000 and if awarded
the EDI grant, could be reduced to $425,000 annually. The repayment amount was based on a 10-
year amortization schedule. Increasing the Section 108 loan to $5,200,000 would increase the
repayment requirements to $682,000 or $582,000 if awarded the EDI grant.
The proposed uses for funding under each option is as follows:
Proposed..ID1proveD1~nts il...../..d.> J ......d__i
>>.. > ...... F I" . ........ ... ........ ........
NORTH BEACH
North Shore Community Center $1,000,000 $1,000,000
Tatum Waterwayl77th $163,000 $163,000
Marseille Drive $600,000 $600,000
77th Street $600,000 $600,000
Bay Drive and Biarritz $1,000,000 $1,000,000
Other North Beach Improvements $637,000 $637,000
SOUTH BEACH
Bay Road South of Lincoln Road $0 $425,000
Cultural Campus Streetscape $0 $775,000
Total Section 108 Loan $4,000,000 $5,200,000
COMMISSION MEMORANDUM
JULY 7,1999
PAGE 5
The City has just completed its 25th year One-Year Action Plan and the recommendations for awards
are presented at today's Commission meeting. In the City's funding recommendations, $200,000 for
initial repayment requirements for the Section 108 loan is included. As a result of the initial
$200,000 allocation for the Section 108 loan, organizations such as NBDC and MBCDC were
impacted by the reduced funding availability for their projects, Said reduction caused concern
among the local community-based organizations. Subsequent years will require a higher funding
allocation (ranging from $425,000 to $525,000) to repay the Section 108 loan, as previously
described, and will therefore reduce funding availability to the other non-public service
activities. Therefore, the Administration is concerned with any significant increase to the
proposed Section 108 loan application, as is proposed in Option B, that would further the
reduction in funding availability for these and other organizations.
Next year's (26th year) funding allocations must include full funding for the Section 108 loan and
therefore, NBDC, MBCDC, and other community organizations will receive reduced funding
allocations, which impacts their continued delivery of services to the community. During this year's
funding allocation process, NBDC and MBCDC expressed serious concerns over the proposed and
future reductions in CDBG funding and, therefore the Administration is striving to maintain an
equitable distribution of funding from CDBG in the proposed Section 108 loan recommendation.
Additionally, City staff is conferring with HUD on the possibility of amending the EDI application
to increase the amount to $2,000,000 million. Albeit, HUD recommended and supported a
$1,000,000 application in light of the City's proposed $4 million loan request.
The annual entitlement ofCDBG funds appropriated to the City of Miami Beach is not sufficient to
address many ofthe urgent needs in the community, Therefore it is important to identify the priority
needs ofthe community and continue to support the vital services provided by the local community-
based organizations, The City has identified other potential sources of funding for the proposed
South Beach Improvements, including future CDBG entitlement allocations, General Obligation
Bond, Road Impact Fees or Tax Increment funding or bonds. North Beach has been identified as the
top priority and therefore, Option A, to maintain the Section 108 loan application at its original $4
million amount, is recommended.
Because the City Commission will recess during the month of August, and the Administration
desires to submit the Section 108 loan application to HUD as soon as possible, the Administration
requests that the City Commission approve the submittal of a $4 million application for a Section
108 loan.
CONCLUSION
The Administration recommends that the Mayor and City Commission discuss the proposed
amendment to Resolution No. 99-23147, as adopted by the City COnlmission on Apn128, 1999, and
direct the Administration to maintain the Section 108 loan application at the $4 million amount and
applied to North Beach only.
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SR/CMC/RM/JR/lrc
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