for Community Resilience Part 1 of 2 August 2016 !bout the Section - - PowerPoint PPT Presentation

HUD’s Section 108 Loan Guarantee Program:

Financing Infrastructure for Community Resilience Part 1 of 2

August 2016

!bout the Section 108 Program…

• Provides loan guarantees, not grants
• Employs the framework of the Community Development Block

Grant (CDBG) Program

• Offers recipients (states, cities and counties, and insular areas)

a means of accessing the capital markets

Schmidt’s Piazza, Philadelphia, PA

!bout the Section 108 Program…

The program enables HUD to guarantee loans in three basic areas:

• Economic Development
• Public Facilities
• Housing Rehabilitation

Philadelphia Wholesale Produce Market, Philadelphia, PA

For More Information on Eligible Activities, see 24 CFR 570.703.

Using Section 108 maximizes the impact of grant funds

States and local governments may borrow up to five times their most recent annual CDBG award, enabling them to maximize impact of available public funds by leveraging grant resources into loans

Paseo Real de la Marina, Aguadilla, PR

Using Section 108 maximizes the

Average Annual CDBG Allocation (Section 108 Borrowers) over the last 20 years

< $4 million

impact of grant funds

Using Section 108 maximizes the

> $10 million

Combined CDBG + 108 Funding for Projects Average Annual CDBG Allocation (Section 108 Borrowers) over the last 20 years

< $4 million

impact of grant funds

Section 108 Program Statistics

Since the Initiation of Section 108: 1,900+ Commitments $9.4 Billion in Commitments $1.7 Billion Portfolio of Loans

• 119,000 Jobs Created or Retained

What makes Section 108 an attractive financing tool for resilience projects?

Range of Eligible Activities and Uses Cheap Money with Flexible Terms Acceptable Sources of Repayment + Collateral Availability

• f Funds

• Range of Eligible Activities and Uses
• Funds can be used:
• for a wide range of eligible activities
• for higher risk project components (e.g. pre-development costs), projects

in high risk areas where conventional lenders might not lend, or as gap financing

• At a regional scale (through consortium model or State-supported effort)

Pre development for Affordable Housing, High Point, NC

Range of Eligible Activities and Uses (Continued)

• One loan guarantee commitment can be used:
• To fund several project components (infrastructure, housing rehab, and

commercial development) or

• To finance several project phases over several years or
• To finance a loan fund targeting specific neighborhoods, communities (for

States), or certain types of activities

Cheap Money with Flexible Repayment Terms

• Gives States and local governments access to the capital market

while also:

• Providing a Federal loan guarantee to attract long-term (up to 20 years),

reasonably-priced debt.

• Saving them the transaction costs (e.g. bond counsel, administrative costs)

associated with going to the market directly.

• Eliminating the need for a general obligation debt that could affect their

bond rating.

• Enabling them to structure their repayment terms to meet project-specific
• needs. (e.g. delaying principal repayments until Year 3 when the project

will begin to generate revenue or front-loading cost of essential project to be repaid over extended term with annual grant funds)

Cheap Money with Flexible Repayment Terms (Continued)

• Interim financing is available at 3-month LIBOR + 20 basis points
• Current: Based on 8/22/16 LIBOR, 0.82 + 0.2 = 1.02% interest rate
• Permanent rates are determined through public offering
• Typically occurs every 12- to 18-months
• For most recent public offering (May 2015), all-in interest rate for a 20-

year loan with equal installments was 2.85%

• Option exists to pre-pay/defease and refinance loan, with

certain restrictions

Availability of Funds

• Non-competitive
• Rolling application process
• Funds can be accessed based on project or program needs.
• Advances can occur on a weekly basis.
• Unlike grant funds, there are no restrictions on drawing down funds in

advance of need.

• Conserves limited grant funds, to ensure that those funds will

be available for non-revenue generating uses (e.g. public services)

Acceptable Sources of Repayment + Collateral

• Applicants can elect to repay the loan with CDBG funds or with
• ther sources.
• HUD can accept less conventional sources of repayment and

collateral

• Section 108 funds guaranteed funds could be used as the upfront

capital used to launch Pay-for-Success projects (e.g. agreed upon

• utcome = long-term reduction in flood insurance premiums due

from LMI households)

Acceptable Sources of Repayment + Collateral (Continued)

• Current and future CDBG funds are required to be pledged as

collateral.

• While additional collateral is also required, HUD will work closely with

applicant to determine and underwrite potential sources.

• HUD is able to accept sources of repayment and collateral that may

not be accepted by conventional lenders, such as:

• Unlike most conventional lenders, HUD can often accept a subordinate position.
• Revenues generated by special taxing districts (e.g. TIFs and single purpose

districts)

• Repayment of 3rd party loans financed with Section 108 loan (or other loan

portfolios)

• Liens on other types of revenue available (e.g. parking or casino revenues)

So, how much can grantees actually borrow?

Annual CDBG Allocation Max available borrowing capacity Outstanding 108 commitments Outstanding 108 loan balance Available borrowing capacity $3,000,000 x 5 = $15,000,000

• $800,000
• $2,000,000

= $12,200,000

Please contact HUD for assistance in figuring out your state’s or community’s available borrowing capacity.

Examples of Existing Section 108 Loan Funds

• State of Illinois – Economic Development Loan Fund, $40M available until Sept. 2018
• Cook County, IL – Broadening Urban Infrastructure Investment to Leverage Transportation

(BUILT) Loan Fund, $30M available until Sept. 2018

• State of Iowa – Community Revitalization Loan Fund, $30M available until Sept. 2020
• Tucson, AZ – Economic and Community Development Loan Pool, $20M available until Sept.

2017

• State of New Mexico – Economic Development Loan Fund , $42.2M available until Sept. 2018
• Atlantic City and Atlantic County – Business Loan Program, $2M (City) and $3.35M (County)

available until Sept. 2020

Section 108 Available Borrowing Capacity for Participants (based on FY15 grant amounts)

• State of Massachusetts – $140M
• State of Tennessee – $124M
• State of Louisiana – $99M
• State of California – $142M
• State of Iowa – $77M
• State of Missouri – $102M
• State of North Dakota – $18M
• City of Springfield, MA – $7.7M
• Dauphin Co., PA – $4M
• St. Tammany Parish, LA – $4.6M
• Cook County, IL – $15.2M
• Denver, CO – $15.2M
• Phoenix, AZ – $72.6M
• Augusta, GA – $8.4M
• Oklahoma City, OK - $10.7M

Application & Approval Process

Notify HUD Field Office (& HQ) Submit Application Concurrent review HUD FO and HQ Revise Application as needed HUD approves commitment to issue a Federal guarantee

Meriden, CT

• Projects: Factory H site (demolition and public

improvements) and 116 Cook Ave. rehabilitation

• Section 108 Assistance: $1.5 million
• Approved in September 2010
• National Objective: Benefit to low- and moderate-

income persons on an area basis

• Eligible Activity: Public Improvements
• Terms of Guaranteed Loan: 15-year term, level

repayment

ywvutsrqponmlkjihgfedcbaUTSRPLIHFEDCBA

Using Section 108 for Resiliency & Development

Juliet Burdelski Director of Economic Development City of Meriden, CT jburdelski@meridenct.gov (203) 630 4152 21

ywvutsrqponmlkjihgfedcbaUTSRPLIHFEDCBA Economic Development and Revitalization of a Low/Mod Income Area

• Economic Disinvestment
• High poverty, low incomes
• High concentration of minority residents
• Lack of job opportunities
• 140 Distressed Public Housing Units
• “Choice Neighborhood” planning grantee

(2013)

• 35+ Brownfield Sites identified (silver

manufacturing)

• History of Flooding

ywvutsrqponmlkjihgfedcbaUTSRPLIHFEDCBA

Harbor Brook Flood Control Plan

• Harbor Brook watershed

comprises 12.3 square miles & approximately 50% of Meriden’s total land area

• 3.5-mile Harbor Brook is subject

to chronic flooding

• FEMA 100-year floodplain

comprises 225 acres including

• ver 300 properties and

structures

• Harbor Brook runs through the

historic City Center, Hub and Factory H brownfield sites

ywvutsrqponmlkjihgfedcbaUTSRPLIHFEDCBA Harbor Brook Flood Control Plan

• City has experienced numerous 100-

year storm events that have led to significant financial harm to the City and disinvestment

• 11 major flooding incidents have
• ccurred since late 1800’s
• $26 million in damage in 1992 & 1996

led to development of local Flood Control Implementation Agency (FCIA) & Harbor Brook Flood Control & Linear Trail Master Plan

ywvutsrqponmlkjihgfedcbaUTSRPLIHFEDCBA Key Projects-Harbor Brook Flood Control Plan

Flood water brownfield site 6 Bridge Replacements etention at Hub d Harbor Brook Channel Property acquisition, downtown and 1 Bridge Improvements demolition and upstream Removal 2 Relief flood proofing Culverts

$35 million committed City/state/federal investment 2013-2018 Flood Control Plan was permitted and approved in 2013 by CT DEEP, FEMA, Army Corps of Engineers

ywvutsrqponmlkjihgfedcbaUTSRPLIHFEDCBA

2016

• Reduce 100-year

floodplain from 225 to 95 acres

• Remove over 150

properties from 100- year floodplain

• Reduce cost of flood

insurance to property

• wners
• Allows for new

commercial and housing development without risk of flooding and economic impacts in an economically distressed area 1996 2016

Reduces downtown flooding

Public Housing

ywvutsrqponmlkjihgfedcbaUTSRPLIHFEDCBA Key Benefit: Allows for New Downtown Transit Oriented Development

• Development of City-owned,

underutilized parcels and vacant lots can be pursued

• Downtown can be developed

without risk of economic damage from future floods

• Development in the heart of

downtown is now located

• utside the 100-year

floodplain

ywvutsrqponmlkjihgfedcbaUTSRPLIHFEDCBA

Section 108 Loan for Site Improvement-Factory H & 116 Cook Avenue

• 10 acre former silver manufacturing

located along Harbor Brook

• $2.4 million cleanup/ demo
• $1.5 million Section 108
• $600,000 USEPA
• $300,000 CT DECD
• Community engagement

Section 108 Loan for Site Improvement-Factory H & 116 Cook Avenue-Before

Section 108 Loan for Site Improvement-Factory H & 116 Cook Avenue-Before

Section 108 Loan for Site Improvement-Factory H & 116 Cook Avenue-After

Section 108 Loan for Site Improvement-Factory H & 116 Cook Avenue

• Demo of Factory building completed 2012
• Cleanup at 116 Cook Ave in process. Removal of selective

hazardous materials from inside building prior to redevelopment (asbestos, PCBs, lead)

• Future redevelopment by POKO Partners-mixed use residential

(20% affordable, 80% market rate)

Future Plans-Mixed Use Development POKO Partners

Conventional Debt CHAMP Funds DECO Brownfield Funds DECO Urban Act Funds HTC Equity Deferred Developer Fee ·-----------------------··-----------------------··-----------------------··-----------------------··-----------------------··-----------------------1

18,988,908 3,132,354 2,594,194 24,715,456 2,981,290 5,000,000 3,000,000 3,750,000 9,267,139 717,027 22,792,517 3,893,744 2,587,018 29,273,278 10,362,357 15,000,000 41,781,426 7,026,097 5,181,212 53,988,735 13,343,648 20,000,000 3,000,000 3.750,000 9,267,139 717,027

Redevelopment of Factory H & 116 Cook Ave.

ywvutsrqponmlkjihgfedcbaUTSRPLIHFEDCBA Takeaways

• Provided needed capital with 15-year repayment schedule: $1.5 m Section

108 Loan (15 year repayment) provided needed capital to advance critical demolition/ remediation project --part of citywide flood control. Allowed us to take on an “all or nothing” project: Section 108 Loan leveraged

• ther state & federal funds ($600,000 USEPA Brownfields Assessment and Cleanup,

$300,000 CTDECD Brownfields) that allowed City to complete project that could not be completed incrementally Addressed community needs: Demolition of blighted structure in low income area addressed critical community need and improved the neighborhood. HUD allowed us to reprogram unspent funds: Project ended up being under budget, but HUD allowed us to reprogram balance of Section 108 funds to advance cleanup at adjacent 116 Cook Avenue. Project advanced development of blighted/abandoned property: Developer selected to redevelop Factory H and 116 Cook Ave. site with reduced pre-development costs due to City’s use of Section 108 loan and other grants.

ywvutsrqponmlkjihgfedcbaUTSRPLIHFEDCBA

Thank you! For additional information, please contact:

Juliet Burdelski Director of Economic Development, jburdelski@meridenct.gov (203) 630 4152 36

Mount Vernon, WA

• Project: Phase II Downtown Flood Control

Protection Project

• Section 108 Assistance: $1 million
• Approved in November 2012
• National Objective: Benefit to low- and moderate-

income persons on an area basis

• Eligible Activity: public improvements
• Terms of Guaranteed Loan: 10-year term, level

repayment