Title
RESOLUTION AUTHORIZING A CONTRACT FOR GUARANTEE OF A PROMISSORY NOTE UNDER THE SECTION 108 LOAN GUARANTEE ASSISTANCE PROGRAM AND TO EXECUTE A VARIABLE/FIXED RATE NOTE FOR A PRINCIPAL AMOUNT OF $2,521,000
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CITY PROPOSAL:
WHEREAS, the city of Duluth, by Resolution 03-0600R, authorized the proper city officials to apply loan guarantee assistance under Section 108 of the Housing and Community Development Act of 1974, as amended 42 U.S.C. § 5308 (the “Act”) with the United States Department of Housing and Urban Development (“HUD”); and
WHEREAS, the city of Duluth, by Resolution 05-0429R, authorized the proper city officials to enter into a contract with HUD for loan guarantee assistance under Section 108 dated August 15, 2005 and the city did execute that certain variable/fixed rate note number B-03-MC-27-0002 (the “Note”) in connection with the Village Place Apartments; and
WHEREAS, the city, by Resolution 18-0849R, authorized the proper city officials to execute documents as necessary relating to participation in a public offering by HUD through the Section 108 loan guarantee assistance program under the Act to refinance the obligation under the Note in the original principal amount of $10,000,000 at such rates available at the time of the public offering, and the city did accept HUD’s guarantee of the Note for a maximum principal amount of $2,636,000 under a Section 108 contract for loan guarantee assistance dated January 18, 2019; and
WHEREAS, Village Place Apartments requested an extension of its repayment to the city of its loan with the city and the city desires to provide such extension provided that HUD grants the city relief of payment of principal under the Note for one year.
NOW, THEREFORE, BE IT RESOLVED, that the mayor and city clerk are hereby authorized to enter into a contract with HUD for loan guarantee assistance under Section 108 and to execute a variable/fixed rate note substantially in the form attached hereto as Exhibit A, in the maximum commitment amount of $2,521,000, relating to seeking relief from principal payment of the Note,
FURTHER RESOLVED, that the proper city officials are hereby authorized to execute any additional documents necessary to effectuate the Section 108 loan guarantee program transaction with HUD to effectuate the relief from payment of the principal of the Note.
Statement of Purpose
STATEMENT OF PURPOSE: The Section 108 Loan Guarantee Program allows Community Development Block Grant (CDBG) recipients to leverage their annual grant allocation for low-cost, flexible financing. In 2005, the City received a Section 108 Loan for the Village Place project. Village Place, a housing project located at 602 E 5th Street, Duluth, MN, is a mixed income 55-unit building that includes 52 affordable housing units.
This resolution authorizes the city to seek relief from the payment of $2,521,000 in principal of its Section 108 repayment obligations for one year. This extension will provide the City, developer, and community partners the time needed to explore options of extending the affordability of the units beyond 2025.