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

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Miami Dade County Housing Finance Authority

Current Developments

January 27, 2014

Table of Contents

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

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Legal and Governance

Legal and Governance

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HFA of Miami-Dade Policy, Procedures and Processes

Federal Tax Code

• Tax Exempt Bonds
• Tax Credits

Miami Dade County Code Authority Policies Florida Statutes

• Chapter 159, Part IV

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Authority Funding

Authority Funding

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

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Private Activity Bonds

Private Activity Bonds

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Tax Exempt Bond Financing & Subsidies

• Housing Finance Authorities have the

right to issue Tax Exempt Bonds to support affordable housing (a type of Private Activity Bond).

• Tax exempt bonds essentially represent

the ability to apply for a ―loan‖

• Bonds may be used to finance the

acquisition and rehabilitation, or new construction, of affordable housing by a for-profit or non-profit owner

• Issuance of Private Activity Bonds

(―PAB’s‖) requires volume cap which is limited each year to $75 per capita

Minimum Set Asides 20% of units at 50% of median

• r

40% of units at 60% of median

Private Activity Bonds Allocation

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Tax Exempt Bond Financing & Subsidies Private activity bonds are required to obtain an allocation from the Florida Division of Bond Finance

PAB Allocation

Regional Pools FHFC State Pool FFB Pool

20% of the remaining volume cap

is allocated to the Florida First

Business Allocation Pool. 5% of volume cap is

held in the State Pool until May 1.

25% of the remaining volume cap is

allocated to the Florida Housing

Finance Corporation (―FHFC‖)

for multi and single family bonds.

50% of the remaining volume cap is

allocated among 17 geographical

Regional Pools (10 multi-county, 7

single county) on a per capita basis. The first $97,500,000 (adjusted annually) is allocated to the

Manufacturing Facility Pool

Private Activity Bonds Allocation

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Tax Exempt Bond Financing & Subsidies Types of Financings that require Private Activity Bond Allocation administered by the Division of Bond Finance

(Under Section 146 of the Internal Revenue Code):

Note: Certain other types of Private Activity Bonds either require no allocation or have a separate volume cap and allocation procedures.

• Mass commuting facilities
• Facilities for the furnishing of water
• Sewage facilities
• Solid waste disposal facilities
• Multi-family housing projects
• Local electric or gas generating facilities
• Local district heating or cooling facilities
• Hazardous waste facilities
• Intercity high speed rail facilities (25%
• f the project cost)
• Single family housing bonds
• Small issue (i.e. manufacturing) bonds
• Student loan bonds
• Redevelopment bonds

Private Activity Bonds Allocation

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Tax Exempt Bond Financing & Subsidies

• 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

• 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

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Tax Exempt Financing for Multifamily Developments

Tax Exempt Bonds for Rental Housing

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Tax Exempt Bond Financing & Subsidies

• 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)

Project Guidelines

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HFA of Miami-Dade Policy, Procedures and Processes

Restrictions:

• Type
• Time Period
• Environmental Indemnity
• Completion Guaranty
• Recourse Obligations Guaranty
• Operations Deficits Guaranty

Financial Guaranties Income Targeting

• Improve Design Aesthetics
• Improve Quality of Life

Architectural Design and Review

Considerations – Low Income Housing

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Policy Makers must take into account certain considerations when addressing Low Income Housing projects

• Quantity vs Quality

Should we strive to improve existing units or focus on adding additional units?

• Mixed Income Communities vs Fully Affordable Communities

(mixed income communities provide less units and require more subsidy)

• Income level of population being served

(i.e. 60% AMI vs 50% AMI, 40% AMI, 30% AMI)

• Demographics

(i.e. Elderly vs Family)

• Geographic Targeting Elements

Multifamily Approval Process

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HFA of Miami-Dade Policy, Procedures and Processes

• Lender Documents
• Authority Documents

Legal Documentation

• Lender Credit Review
• Authority Credit Underwriting

Financial Review

• Approval of TEFRA Findings
• Inducement
• ADRAC
• TEFRA
• Financing Approval
• Authorizing Resolution

Governmental Approvals

HFA BCC

Fees

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HFA of Miami-Dade Policy, Procedures and Processes

$30 per Rental Unit in the Project (subject to adjustment from time to time) 0.25 % of Principal Amount of the Bonds $30 per Rental Unit in the Project

• Bond Counsel
• County Attorney
• Financial Advisor
• $15 per unit

($1,000 Minimum)

• Non-refundable Deposit
• $2,000 Staff Bond Counsel
• $2,500 Financial Advisor
• Approximately $12,000
• Cost of Third Party

Reports (appraisal, etc.) 1 % of Bond Amount (applied to costs at closing)

Credit Underwriting Fees Application Fees Financing Deposit

Initial

Compliance Fee Authority Fee Other Costs of Issuance

At Bond Closing

Compliance Fee Authority Fee

0.25 % of Outstanding Principal Amount of the Bonds

Ongoing

Rental Housing Programs

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Tax Exempt Bond Financing & Subsidies

Rental Housing Programs that may accompany Tax Exempt Bonds Low Income Housing Tax Credits (4%) Project Based Section 8 and Public Housing Subsidy Programs

• Miami-Dade Surtax
• GOB
• SAIL
• HOME
• SHIP
• HOPE VI
• Property Tax Exemption
• NSP
• HFA Funds

Tax Exempt Bonds for Rental Housing

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Tax Exempt Bond Financing & Subsidies

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.

Tax Exempt Bonds for Rental Housing

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Tax Exempt Bond Financing & Subsidies

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.

Tax Exempt Bond Financing Options

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Tax Exempt Bond Financing & Subsidies

• 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

Factors Determining Bond Amount

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Tax Exempt Bond Financing & Subsidies

• Interest Rate
• Term (length) of Loan
• Amortization Schedule
• Net Operating Income (―NOI‖)
• Loan to Value Requirement of Lender (―LTV‖)
• Occupancy (and Vacancy) in a Market
• 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.)

Funding Examples

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Multifamily Affordable Housing Development

La Joya Apartments Northside Transit Village Regency Point Apartments

Developer

RS Development Corp APC Northside Property I Development, LLC CGS Construction, LLC

Address

SW 268th Street, Naraja NW 77th Street & NW 31st Ave (Adjacent to the Northside Metrorail Station) 1919-1921 NW 79th Street

Units

150 one, two and three bedroom units 100 two and three bedroom units 104 one and two bedroom units

Source

Provider Construction Permanent Provider Construction Permanent Provider Construction Permanent

Tax-Exempt Bond Loan

MDFHA / JP Morgan Chase $12,000,000 $6,000,000 Wells Fargo- HFA $14,500,000 $2,551,000 HFAMDC— JPMorgan Chase $9,750,000 $3,650,000

NSP3

NA NA NA Miami-Dade $7,500,000 $7,500,000 NA NA NA

GOB Bonds

NA NA NA Miami-Dade $0 $4,000,000 Miami-Dade 6,500,000 6,500,000

Surtax

Miami-Dade/ RS Development Corp. $3,067,042 $3,067,042 Miami-Dade $0 $2,750,000 Miami-Dade 2,500,000 2,500,000

HOME

Miami-Dade County $4,531,433 $4,531,433 NA NA NA NA NA NA

Tax Credit Equity

SunTrust

• Comm. Capital

$1,889,060 $7,556,239 Wells Fargo $4,506,613 $11,482,920 Regis Group Limited 999,000 6,659,000

Deferred Developer Fee

Developer. $1,628,710 $1,961,531 Developer $1,549,073 $192,465 Developer 1,164,771 1,604,771

Total

$23,116,245 $23,116,245 $28,055,686 $28,476,385 $20,913,771 $20,913,771

Funding Examples

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Multifamily Affordable Housing Development Sources

La Joya Apartments 150 one, two and three bedroom units SW 268th Street, Naranja Developer: RS Development Corp.

Source Lender Construction Permanent 1st Mortgage Tax-Exempt Bond Loan MDFHA / JP Morgan Chase $12,000,000 $6,000,000 Surtax 2009 Miami-Dade County $1,212,042 $1,212,042 HOME 2011 Miami-Dade County $1,041,000 $1,041,000 HOME 2012 Miami-Dade County $2,644,736 $2,644,736 HOME 2012 Miami-Dade County $845,697 $845,697 Equity / Seller Note / 2014 Surtax Miami-Dade County / RS Development Corp. $1,855,000 $1,855,000 Housing Credit Equity SunTrust Comm. Capital $1,889,060 $7,556,239 Deferred Developer Fee RS Development Corp. $1,628,710 $1,961,531 Total $23,116,245 $23,116,245

Uses

Funding Examples

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Multifamily Affordable Housing Development

Northside Transit Village 100 two and three bedroom units NW 77th Street & NW 31st Ave, Adjacent to the Northside Metrorail Developer: APC Northside Property I Development, LLC

Source Lender Construction Permanent First Mortgage – Bonds Wells Fargo-HFA $14,500,000 $2,551,000 Second Mortgage Miami-Dade NSP3 $7,500,000 $7,500,000 Third Mortgage Miami-Dade GOB $0 $4,000,000 Fourth Mortgage Miami-Dade Surtax $0 $2,750,000 HC Equity Wells Fargo $4,506,613 $11,482,920 Deferred Developer Fee Atlantic Pacific $1,549,073 $192,465 Operating Deficit Reserve Atlantic Pacific $420,699 $0 Additional Equity Atlantic Pacific $0 $0 TOTAL $28,476,385 $28,476,385

Sources Uses

Funding Examples

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Multifamily Affordable Housing Development Sources Uses

Regency Point Apartments 1919-1921 NW 79th Street 5 three-story garden style residential buildings 104 one and two bedroom units Developer: CGS Construction, LLC

Source Lender Construction Permanent 1st Mortgage Tax- Exempt Bond Loan HFAMDC— JPMorgan Chase $9,750,000 $3,650,000 2nd Mortgage-GOB Bonds Program Miami-Dade County 6,500,000 6,500,000 3rd Mortgage-Surtax Program Miami-Dade County 2,500,000 2,500,000 Housing Credit Equity Regis Group Limited 999,000 6,659,000 Deferred Developer Fee Developer 1,164,771 1,604,771 Total $20,913,771 $20,913,771

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The Changing Municipal Bond Market

The Changing Municipal Bond Market

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Dodd-Frank Act

• Dodd Frank Act
• Market Disruption
• Bankruptcies
• Pension Liabilities
• Financial Market Activity

The Changing Municipal Bond Market

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Regulation These regulations aim to provide protections to municipal

• issuers. PRAG is registered with the SEC and the MSRB.

Three sets of distinct but interrelated regulations impact the Municipal Bonds Market:

• Section 975 of Title IX of the Dodd-Frank Wall Street Reform and

Consumer Protection Act (―Dodd-Frank Act‖), enacted in 2010

• The Securities and Exchange Commission Municipal Advisor

Rule (―SEC MA Rule‖), adopted in 2013

• MSRB Regulations and Code of Conduct for Municipal

Advisors, recently released to further clarify the Dodd-Frank Act and the SEC MA Rule

Impact on the Municipal Bond Market

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SEC MA Rule

Impact on Communication Between Bond Underwriters and the Authority

• Implications for the ability of underwriters to

provide tailored recommendations to issuers, without qualifying as municipal advisors

• Under the MA Rule, underwriters may only

provide tailored recommendations under three general exemptions.

Impact on the Municipal Bond Market

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Municipal Disruption Bankruptcies

• Puerto Rico
• Detroit, Michigan
• Jefferson County, Alabama
• Pension Liabilities

Financial Market Activity

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Municipal Disruption Bankruptcies

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1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Interest Rate

Interest Rates Comparison

30 year MMD vs. 1 year Treasury vs. 30 year Treasury

AAA GO 30 yr Treasury 1 yr Treasury 30 yr

Discussion

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