HomeMy WebLinkAbout1998-04-07 - AGENDA REPORTS - CDBG SECTION 108 LOAN (2)AGENDA REPORT
City Manager Approv
Item to be presented
Dennis Luppens
UNFINISHED BUSINESS
DATE: April 7, 1998
SUBJECT: CDBG SECTION 108 LOAN AND ITS MONETARY IMPACT TO WEST
NEWHALL
DEPARTMENT: Administrative Services
RECOMMENDED. ACTION
To receive and file.
BACKGROUND
At the March 24, 1998 City Council meeting, staff presented four (4) funding utilization options
for the 1998-99 Action Plan. The Council chose to adopt Option Three A (3A) for the Action
Plan. This option directs staff to pursue a Section 108 CDBG loan in the amount of $2.3 million
for capital projects in West Newhall, fully fund the Handyworker program, and fund CDBG
grantees at their 1997-98 levels. Since Council's selection of Option 3A, staff has had the
opportunity to work with the Washington, D.C. headquarters of HUD to better determine the
loan rates and modify the allocation amounts in Option 3A. Essentially, interest rates are
currently 5.8%, as opposed to the 7% originally presented to the Council. This reduces
estimated annual payments by nearly $40,000, and interest by nearly $441,000, over a 15 -year
period.
Staff has inquired into the Council's question on the impact the Improvements Loan will have
on the property value in West Newhall when completed. This is difficult to measure precisely
in the time available for this report. Determining property values is a science/art unto itself.
To quickly respond to this question, staff provides the following information from the Report
to City Council for the Newhall Redevelopment Project and takes the average sale price of
homes in the West Newhall CDBG Project area (Phases I-V). The report states that for every
one million dollar increase in property value, the City receives $600 (six hundred) in increased
revenue. Staff believes the aggregate value in the project area to be $64,286,250. This is
calculated by multiplying the number or SFU's in the project area (474) by the average recent
sales price ($135,625). Clearly, the decision to improve the project area using a Section 108
Loan is motivated by benefits far outweighing monetary concerns alone.
ppp�,���D Agenda Item:
CDBG SECTION 108 LOAN
April 7, 1998 — Page 2
Given the Council's direction, staff will pursue securing the Section 108 Loan. Staff has already
contacted the Newhall County Water District staff to inform them of the City's desire to speed
up improvements in the West Newhall Area. Staff is also working with the Southern California
Gas Company, as.their lines may be in the project area. City staff will need to work closely
with both these utilities when planning the next phase of improvements so we identify utility
relocations and their associated costs early on in the planning process.
ALTERNATIVE ACTION
None.
FISCAL IMPACT
None.
DEL:hds
grants\se1mdo.dm