Current Developments January 27, 2014 1 Table of Contents Legal - PowerPoint PPT Presentation

Miami Dade County Housing Finance Authority Current Developments January 27, 2014 1

Table of Contents Legal and Governance 3 Authority Funding 5 Private Activity Bonds 7 Tax Exempt Financing for Multifamily Developments 12 The Changing Municipal Bond Market 27 2

Legal and Governance 3

HFA of Miami-Dade Policy, Procedures and Processes Legal and Governance Federal Tax Code  Tax Exempt Bonds  Tax Credits Florida Statutes  Chapter 159, Part IV Miami Dade County Code Authority Policies 4

Authority Funding 5

Authority Funding  Equity from Single Family Mortgage Bonds: Series 1980 and 1981  Asset sales in connection to bond redemption   Authority Fees:  Single Family  Multifamily  Investment Income 6

Private Activity Bonds 7

Tax Exempt Bond Financing & Subsidies Private Activity Bonds  Housing Finance Authorities have the right to issue Tax Exempt Bonds to support affordable housing (a type of Minimum Set Asides Private Activity Bond). 20% of units  Tax exempt bonds essentially represent the ability to apply for a ―loan‖ at 50% of median  Bonds may be used to finance the or acquisition and rehabilitation, or new construction, of affordable housing by a for-profit or non-profit owner 40% of units at 60% of median  Issuance of Private Activity Bonds (―PAB’s‖) requires volume cap which is limited each year to $75 per capita 8

Tax Exempt Bond Financing & Subsidies Private Activity Bonds Allocation Private activity bonds are required to obtain an allocation from the Florida Division of Bond Finance PAB Allocation The first $97,500,000 (adjusted 25% of the remaining volume cap is annually) is allocated to the allocated to the Florida Housing Manufacturing Facility Pool Finance Corporation (―FHFC‖) for multi and single family bonds. 5% of volume cap is held in the State Pool until May 1. 50% of the remaining volume cap is 20% of the remaining volume cap allocated among 17 geographical is allocated to the Florida First Regional Pools Regional Pools (10 multi-county, 7 Business Allocation Pool. FHFC single county) on a per capita basis. State Pool FFB Pool 9

Tax Exempt Bond Financing & Subsidies Private Activity Bonds Allocation Types of Financings that require Private Activity Bond Allocation administered by the Division of Bond Finance (Under Section 146 of the Internal Revenue Code):  Mass commuting facilities  Hazardous waste facilities  Facilities for the furnishing of water  Intercity high speed rail facilities (25%  Sewage facilities of the project cost)  Solid waste disposal facilities  Single family housing bonds  Multi-family housing projects  Small issue (i.e. manufacturing) bonds  Local electric or gas generating facilities  Student loan bonds  Local district heating or cooling facilities  Redevelopment bonds Note: Certain other types of Private Activity Bonds either require no allocation or have a separate volume cap and allocation procedures. 10

Tax Exempt Bond Financing & Subsidies Private Activity Bonds Allocation  Requests are submitted beginning January 1 of each year  County HFA applications are not accepted unless TEFRA approval has been granted by the Board of County Commission (or Governor of Florida, as applicable)  If demand exceeds supply, a random drawing is held to determine priority  Unfilled applications are placed on a waiting list  Regional Pool allocations are subject to recapture by the Florida Division of Bond Finance after 155 days  Bonds must be issued in an amount of at least 90% of the allocation granted 11

Tax Exempt Financing for Multifamily Developments 12

Tax Exempt Bond Financing & Subsidies Tax Exempt Bonds for Rental Housing  HFA serves as ―conduit‖ allowing developer to apply for tax exempt bonds (The HFA does not pledge any of its assets to the repayment of the Bonds)  The Borrower agrees to repay the loan (Bonds). A party with financial strength provides guaranties: construction completion, operating deficit, etc.  The Bond Investor or Credit Enhancement Provider is the party accepting the construction and real estate risk of the development  The purchaser of the LIHTC is also accepting construction and real estate risk (If the development were foreclosed and converted to a market property, LIHTC investor may owe the IRS a Recapture penalty) 13

HFA of Miami-Dade Policy, Procedures and Processes Project Guidelines Architectural Design  Improve Design Aesthetics and Review  Improve Quality of Life Restrictions: Income Targeting  Type  Time Period  Environmental Indemnity  Completion Guaranty Financial Guaranties  Recourse Obligations Guaranty  Operations Deficits Guaranty 14

Considerations – Low Income Housing Policy Makers must take into account certain considerations when addressing Low Income Housing projects  Demographics (i.e. Elderly vs Family)  Geographic Targeting Elements  Income level of population being served (i.e. 60% AMI vs 50% AMI, 40% AMI, 30% AMI)  Mixed Income Communities vs Fully Affordable Communities (mixed income communities provide less units and require more subsidy)  Quantity vs Quality Should we strive to improve existing units or focus on adding additional units? 15

HFA of Miami-Dade Policy, Procedures and Processes Multifamily Approval Process  Inducement  ADRAC HFA  TEFRA Governmental  Financing Approval Approvals  Authorizing Resolution BCC Approval of TEFRA Findings   Lender Credit Review Financial Review  Authority Credit Underwriting Legal  Lender Documents Documentation  Authority Documents 16

HFA of Miami-Dade Policy, Procedures and Processes Fees Initial At Bond Closing Ongoing Application Fees Authority Fee Authority Fee  $15 per unit 0.25 % of Outstanding 0.25 % of Principal ($1,000 Minimum) Principal Amount of the Amount of the Bonds Bonds  Non-refundable Deposit  $2,000 Staff Bond Counsel Compliance Fee Compliance Fee  $2,500 Financial Advisor Credit Underwriting Fees $30 per Rental Unit in the Project $30 per Rental Unit  Approximately $12,000 in the Project  Cost of Third Party (subject to adjustment Other Costs of Issuance Reports (appraisal, etc.) from time to time)  Bond Counsel Financing Deposit  County Attorney 1 % of Bond Amount  Financial Advisor (applied to costs at closing) 17

Tax Exempt Bond Financing & Subsidies Rental Housing Programs Rental Housing Programs that may accompany Tax Exempt Bonds Subsidy Programs Low Project  Miami-Dade Surtax Income  GOB Based  SAIL Housing Section 8  HOME Tax and  SHIP Credits  HOPE VI Public  Property Tax Exemption (4%) Housing  NSP  HFA Funds 18

Tax Exempt Bond Financing & Subsidies Tax Exempt Bonds for Rental Housing Typical Sources and Structure of Subsidy Programs:  Neighborhood Stabilization Program 3 Loan – 0% interest loan with no prepayment as long as the project meets the affordable housing requirements. Authorized by Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. All NSP3 funds must be disbursed by March 5, 2014.  GOB – 0% interest loan with 50 year term and all principal payments deferred until maturity. Funded by Miami-Dade County General Obligation Bond , Better Communities Program.  Surtax – 30 Year loan with principal payments deferred until maturity. 0% interest for 17 years with 1% interest thereafter, subject to available cash flow. Funded by Miami-Dade County via a tax on non-residential real estate transfers. 19

Tax Exempt Bond Financing & Subsidies Tax Exempt Bonds for Rental Housing Typical Sources and Structure of Subsidy Programs  HOME – Federal Funding  SHIP – State Funding  Tax Credit – 4% Housing Tax Credit. Funded by US Treasury  Deferred Development Fee – Developer fees are not paid during construction and are deferred until certain timing or operating results have been achieved. 20

Tax Exempt Bond Financing & Subsidies Tax Exempt Bond Financing Options  Bank or Institutional Bond/Note Placement  Short term bond bridging payment of LIHTC equity  FHA 221(d)(4) loan paired with a cash collateralized short term bond  Credit Enhanced Bonds with following forms of Credit Enhancement:  FHA/GNMA  Freddie Mac  Fannie Mae  Bank Letter of Credit 21

Tax Exempt Bond Financing & Subsidies Factors Determining Bond Amount  Interest Rate  Term (length) of Loan  Amortization Schedule  Net Operating Income (―NOI‖)  Occupancy (and Vacancy) in a Market  Loan to Value Requirement of Lender (―LTV‖)  Debt Service Coverage Requirement of Lender (―DSC‖)  Rents in the applicable County which in turn impacts NOI  Income Set Aside (i.e. a development targeted to 60% AMI will support a higher loan than one targeted to 50% AMI etc.) 22