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… Schmidt’s Piazza, Philadelphia, PA • 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

!bout the Section 108 Program… The program enables HUD to guarantee loans in three basic areas: Philadelphia Wholesale Produce Market, Philadelphia, PA • Economic Development • Public Facilities • Housing Rehabilitation 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 impact of grant funds < $4 million Average Annual CDBG Allocation (Section 108 Borrowers) over the last 20 years

Using Section 108 maximizes the impact of grant funds > $10 million Combined CDBG + 108 Funding for Projects < $4 million Average Annual CDBG Allocation (Section 108 Borrowers) over the last 20 years

Section 108 Program Statistics Since the Initiation of Section 108: $1.7 Billion 1,900+ $9.4 Billion in Portfolio of Commitments Commitments Loans • 119,000 Jobs Created or Retained

What makes Section 108 an attractive financing tool for resilience projects ? Range of Cheap Eligible Money with Activities Flexible and Uses Terms Acceptable Sources of Availability Repayment of Funds + Collateral

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 other 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 outcome = 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 3 rd 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 $3,000,000 x 5 = $15,000,000 Max available borrowing capacity Outstanding 108 commitments - $800,000 Outstanding 108 loan balance - $2,000,000 Available borrowing capacity = $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) • City of Springfield, MA – $7.7M • State of Massachusetts – $140M • Dauphin Co., PA – $4M • State of Tennessee – $124M • St. Tammany Parish, LA – $4.6M • State of Louisiana – $99M • Cook County, IL – $15.2M • State of California – $142M • Denver, CO – $15.2M • State of Iowa – $77M • Phoenix, AZ – $72.6M • State of Missouri – $102M • Augusta, GA – $8.4M • State of North Dakota – $18M • Oklahoma City, OK - $10.7M

Application & Approval Process Notify HUD Field Concurrent review Submit Application Office (& HQ) HUD FO and HQ HUD approves Revise Application commitment to as needed 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 21 Using Section 108 for Resiliency & Development Juliet Burdelski Director of Economic Development City of Meriden, CT jburdelski@meridenct.gov (203) 630 4152

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

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 ywvutsrqponmlkjihgfedcbaUTSRPLIHFEDCBA comprises 225 acres including over 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  occurred 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