PROGRAM: The HUD 108 Loan Program allows communities to borrow funds for CDBG-eligible activities.  (The funds are not part of Consolidated Plan resources.)  HUD sponsors the sale of deventures to the private financial market to raise capital for the loans.  However, a community's future CDBG allocation and other resources are pledged as security for the loan.  Funds can be borrowed by a community to pay for CDBG eligible expenditures, or to enable a grantee to make fully amortized loans to private entities undertaking CDBG-eligible activities.  The community is held responsible for repaying the HUD 108 Loan funds.

 

TYPE OF ASSISTANCE: Loans funded through the Community Development Block Grant (CDBG) program.

 

ELIGIBILITY: Must benefit low and moderate-income persons or aid in the elimination or prevention of slums or blight, or meet urgent needs of the community.  Must be a high priority community development project for which there are no other sources of funding available but which will result in exceptional community benefits.  The project owner and/or developer must show evidence of professional expertise and experience in undertaking similar projects, or retain the professional expertise relevant to the project.  Underwriting standards should require some equity participation from the owner and/or project developer, except in very unusual circumstances.  The project must show clear evidence that sufficient cash flow will be generated to cover the debt service on the loan so that future CDBG funds do not have to pay for debt service. 

 

ELIGIBLE/ INELIGIBLE USES: Economic development activities eligible under CDBG, acquisition of real property, rehabilitation of publicly owned real property, housing rehabilitation eligible under CDBG, construction, reconstruction or installation of public facilities (including street, sidewalk, and other site improvements), related relocation, clearance and site improvements, payment of interest on the guaranteed loan and issuance costs of public offerings, and debt service reserves.  Ineligible uses to be identified. 

 

RATES/TERMS: Interest rates subject to change.  Loan term must be consistent with the nature of the asset being financed (up to 20 years).  HUD has the ability to structure the principal amortization to match the needs of the project and borrower.  Each annual principal amount will have a separate interest rate associated with it.  The total outstanding 108 Loan balance in the aggregate may not exceed an amount equal to the most recent entitlement grant.  The total annual debt service on all outstanding 108 Loan balances may not exceed the revenue stream generated annually by CDBG program income.  The project must show clear evidence that sufficient cash flow will be generated to cover the debt service on the loan so that future CDBG funds do not have to pay for debt service.  Private lender participation and other sources of funding must be pursued to minimize public participation and to obtain a professional assessment for project feasibility.  Collateral must be required in the form of personal guarantees, mortgages, etc., from the project owners and/or developers.

 

APPROVAL: A formal internal review process organized among staff from the Departments of Finance, Law, and Community Development.  All loans require Community Development Advisory Board review, a public hearing and City Council approval.

 

PROGRAM EXAMPLES: Avondale Town Center

 

 

Contact: Bill Fischer, Business Development Manager

Phone: (513) 352-3785

Fax: (513) 352-6257