CCP 06-15-1992 - Laserfiche WebLink

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b:l2-....::.,..2,..:.j.-._-:,.....:,t:...;:;~ '._.r-i_='.=,~_I.,..L_ 1 , "_'~ needs City approval for the issuance of tax exempt bonds, the . creation of a tax increment district and pledge of tax increment revenues. THE SUBSIDY The above described rents are achievable due to the following subsidies; 1 . Tax Exempt Bonds. The income restrictions and the mix of the units make the project eligible for tax exempt financing. A project of this type needs a bond allocation from the state of Minnesota. The congressional authorization for this type of program is expiring June 30, 1992. It does not appear that the program will be reauthorized before the end of June or possibly even this year. However, the state of Minnesota is planning to reserve $30 million of its existing 1992 allocation for low income multi-family housing projects. This project would qualify but it . would have to compete with other projects in the pool. The availability of this program needs to be monitored from month to month, if not week to week. AS of the date of this memo, it would appear that an allocation would be available. The effect of using tax exempt bonds is to lower the interest rate on the mortgage, AS you done previously, the City would act as a conduit in this bond issue and would not be responsible for the .payment of the debt. 2. Tax credits. The project will also qualify for the use of tax credits which are sold to investors. (Essentially the investors are paying the present value, substantially discounted, of credits against future taxes.) It is the sale of the tax credits that provides a necessary reserve for the Project as well as the Developer's equity. 3, Real Estate property Taxes. The project qualifies for reduced real estate taxes which are approximately one- third less than a non-qualifying project. The reduced real estate taxes provide an increased cash flow which, in turn, allows for a higher mortgage and better debt service coverage. . 2 .