130 W.

New Circle Road, Suite 110

Lexington, KY 40505
(859) 227-5422




June 3, 2014

Mayor Jim Gray and LFUCG Council Members:

This coming Thursday (June 5) the City Council is scheduled to vote on the
financing package for developing a 21C luxury hotel here in Lexington. This letter
requests that the City Council reconsider utilizing HUD's Section 108 loan
program as part of the financing package for this project.

As you know, the Section 108 loan program allows communities to use
Community Development Block Grant (CDBG) funding as collateral to provide
low interest loans to develop larger projects serving low and moderate income
households. The 21C financing plan proposes to use this resource to provide a $6
million loan.

We have a number of concerns regarding this use of the Section 108 loan
program, including:
1. The maximum amount that Lexington may borrow under this program is
approximately $10 million so the proposed loan will obligate the majority
of the borrowing capacity of this program for as long as 20 years, making it
unavailable for other uses.
2. If the Section 108 loan ever goes into default the loan is repaid by city
forfeiture of its annual CDBG funding until the debt is repaid. That annual
allocation is approximately $2 million. Any default would mean the loss of
three years of CDBG funding to the city.
3. All federal CDBG funding is targeted to serve "low and moderate income
households". The 21C luxury hotel project proposes to meet this obligation
by promising that at least 51% of the staff at the luxury hotel will be from
low or moderate income households. Is this the best use for our CDBG
funds? Is 21C management making any commitments to pay these workers
a decent wage above the minimum wage?
4. According to the recent czb report (Lexington's Affordable Housing
Challenge) we have a severe affordable housing crisis here in Lexington.
The report specifically recommends the use of CDBG funds and programs
130 W. New Circle Road, Suite 110
Lexington, KY 40505
(859) 227-5422


to help address this crisis suggesting that funding in excess of $35 million
each year for up to 20 years is needed. Would not the Section 108 loan
program better benefit low and moderate income households if utilized to
build more affordable housing in Lexington? In fact, those same low wage
21C employees supposedly benefiting through the 21C project will do much
better if they lived in affordable housing where rents are based on their
incomes. These are just the type of rental housing developments that HUD
envisioned when it created the Section 108 program.

There are more appropriate investments in our community that really need
funding from sources like CDBG than building luxury hotels. We urge the City
Council to reject the use of the HUD Section 108 loan program as part of the
financing package for the 21C project.

Thank you for everything that you do for this community and thank you for your
time and attention to this matter.

Sincerely,

The Board of the Central Kentucky Housing and Homeless Initiative