Multi-Family Project Bond Financing
Program Overview
The Housing Division is the designated issuer of tax exempt housing revenue
bonds in Nevada. Bond financing for affordable housing projects is a method
of financing in which tax exempt and taxable mortgage revenue bonds are utilized to
fund permanent mortgages for affordable housing projects. Application
Multi-Family Housing Bonds
Bond financing requires both regulatory approvals as well as outside
credit enhancement. The benefit of bond financing, for an affordable housing
project, is the lower cost of capital versus conventional financing methods.
Additionally, an eligible project may be entitled to non-competitive
4% (approximate) tax credits for the qualifying projects. Projects that
are smaller than $5,000,000 in size may not realize the lower cost of capital
do to the high front end cash requirements of completing a bond financing.
For more details on bond financing of multifamily projects, see:
The Multi Family Bond Financing
Program:
The bond financing program for multifamily projects was created under Nevada
Revised Statutes 319. Historically, the program saw its heaviest use in
the early 1980's and again after 1994. The program is designed to provide
a method for financing medium to large scale affordable housing projects. . Almost all affordable housing projects that utilize bond financing are
greater than $5,000,000 in size. The Housing Division encourages credit
worthy projects of all sizes. However, in order to achieve the lower cost
of capital benefits, that can be derived from bond financing, sizable developer
paid upfront cash requirements are needed to get a bond issue completed.
Bond financing for an affordable housing project begins at the local
government level. Time Line for Bond Financing
All bond financing applicants must obtain local government endorsement
(via council resolution) of their project prior to applying to the State.
Additionally, all bond financed projects are required to obtain 50% or
more of the needed bond issuance authority from the local government. Each
local government has its own methods and time frames for allocation of
private bond authority. You must check with the local city and county governments,
where your planned projects will be, in order to obtain further details.
Once local governmental endorsement and transfer of 50% or more of the
needed bonding authority have been obtained, project sponsors are ready
to apply to the Housing Division. State law requires credit enhancement
on bond financed projects. See the List
of Credit Enhancers who have done bond financings with the Housing
Division. Thus, developers are advised to get their credit enhancement
(must be Aa/AA or Aaa/AAA long term rating) lined up simultaneously with
their application to the Housing Division.
Upon completion of the application review and underwriting process,
successful applicants will be required to provide both a binding letter
of commitment, from an approved credit enhancer, as well as a deposit on
costs of issuance for completing the bond financing. The deposit is a "down
payment" toward completing the financing transaction. The costs of legal
and tax counsel review, bond rating and Official Statement preparation
consume the entirety of the deposit. In the event that the legal and tax
review uncover insurmountable legal problems, which the developer is unable
to resolve, any unexpended portion of the deposit is promptly returned.
Following completion of the underwriting, legal and tax review, approved
applications will be forwarded to the State Director of Business and Industry's
Ad Hoc Private Activity Bond Authority Allocation Committee. If available,
the Committee will be asked to transfer both the initial 50% of bonding
authority from the local government as well as the remaining amount needed
to complete the
financing. If available and approved, the complete amount
of bonding authority and the Housing Division's "Findings of Facts" are
forwarded to the State Board of Finance. The Board of Finance must approve
all debt issuances for the Housing Division. If final authority is obtained,
the bond issue may be completed.
Preparation of the Preliminary Official Statement, bond and Regulatory
Agreements, real estate documents and Letters of Credit are done prior
to the marketing and closing of the bonds and the obtaining of funds.
For additional details on the Multi-Family Bond Program see the following
links.
