Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Raymond Hodges, Director, Department of Housing
Subject: Section 108 Loan Repayment
RECOMMENDATION:
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Adopt a resolution authorizing the Director of the Department of Housing, or designee to:
A) Make an advanced payment of up to $1,369,072.28 from Community Development Block Grant (CDGB) funds to the Bank of New York in early repayment of the Section 108 loan guaranteed by the U.S. Department of Housing and Urban Development (HUD), which was utilized for the construction of Trestle Glen Apartments; and
B) Provide such additional information to the Bank of New York and HUD, and to execute such additional documentation, as may be required to confirm satisfaction of the Section 108 Loan.
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BACKGROUND:
On January 29, 2008, the Board of Supervisors adopted Resolution No. 069232, which authorized the Department of Housing (DOH) to apply to HUD for a loan guarantee through the Section 108 program in the amount of $7,145,000 (the Section 108 Loan). DOH has been repaying the Section 108 Loan from the annual Community Development Block Grant (CDBG) allocation in the amount of $450,000 per year plus accrued interest.
A number of factors have contributed to the DOH’s decision to make an advanced payment on the remaining balance on the Section 108 Loan. First, over the past few years developers’ interest in the use of federal CDBG funding, which is subject to various HUD regulatory requirements, has been dampened by the availability of Measure K funding through the County’s Affordable Housing Fund. Second, a number of projects funded in part by DOH with CDBG funding have cancelled the commitment and released the CDBG funds back to DOH. Third, DOH receives loan repayments from existing, CDBG-funded projects, logged as program income, which DOH is required to reuse as CDBG funding. Altogether, these factors have impaired DOH’s ability to comply with HUD’s “timeliness” requirements, which stipulate that each April entitlement jurisdictions have less than 1.5 times their annual CDBG allocation unspent. DOH has not met this target the past two years, but is working to ensure compliance in April 2026. The purpose of the Section 108 Loan repayment is to utilize whatever CDBG funding is needed, up to the entire outstanding loan balance, to ensure compliance in 2026 with HUD’s CDBG timeliness requirements.
DISCUSSION:
The Section 108 Loan Guarantee Program is an opportunity for participating jurisdictions to borrow from private lenders with repayment secured, in part, by future allocations from the CDBG program. HUD guarantees the loan, thus securing favorable interest rates for the entitlement jurisdictions. DOH utilized the program in 2008 to help fund the construction of the Trestle Glen Apartments in the City of Colma. DOH has been repaying the loan from CDBG allocations and has been receiving repayments from Bridge Housing, the owners of Trestle Glen. There are three principal payments remaining on DOH’s loan, as well as three remaining interest payments. The total remaining balance is $1,369,072.28.
In order to ensure DOH compliance with HUD’s CDBG timeliness requirements, DOH proposes to pay up to the entire remaining loan balance. The total repayment amount will depend on how much progress is made by projects with existing CDBG funding commitments. If these projects do not make adequate progress toward expending their CDBG funds, DOH will recapture and use these funds to make the Section 108 Loan repayment. DOH has identified at least $500,000 available in uncommitted CDGB funds, which would represent the smallest payment that would be made.
COMMUNITY IMPACT:
The CDBG program provides funding for a variety of activities in San Mateo County, including public services (meals on wheels, legal aid, food pantries), housing repairs (Rebuilding Together, Senior Coastsiders), homeless shelter support, and economic development. These programs target households and individuals earning less than 80 percent of the area median income. Failure to meet HUD’s timeliness requirements could jeopardize the County’s future CDBG funding. This repayment will facilitate the County’s compliance with HUD’s CDBG timeliness requirement.
FISCAL IMPACT:
The County’s repayment of the Section 108 Loan will be funded through existing federal CDBG funding allocations. There is no net County cost associated with expenditures under the federal entitlement programs.