Dayton adopts policy to consider conduit financing for nonprofit projects, sets 1% fee

The Dayton City Council on April 22 approved a policy to allow the city to serve as a conduit issuer for tax-exempt (private-activity) bond financing for eligible projects, and set a baseline host/processing fee of 1% of the bond par amount.

Jason Arzvold of Ehlers briefed council on conduit bonds—municipal bonds issued on behalf of private or nonprofit borrowers so those borrowers can access tax-exempt rates. He said conduit issuance carries no repayment obligation for the city and that an issuing jurisdiction can charge a one-time fee ranging from roughly 0.125% to 1% of the bond amount to cover staff and administrative costs.

The request came after a developer asked whether Dayton would issue conduit debt for a project located outside Dayton (in nearby Andover) to preserve the applicant’s bank-qualification limits; the developer said some projects shop multiple jurisdictions to obtain conduit issuance and lower costs. The proposed policy includes an upfront 1% fee as a baseline and allows the council to negotiate lower fees for projects that the city wants to support, and it also contemplates a $2,500 host-approval fee for projects not located inside the city.

Council discussed the equity and policy implications: some members said they were wary of facilitating private tax savings, while others noted the city can set standards and use the fee revenue to cover administration. Council directed staff to adopt the policy as presented; the motion passed 4-1. Staff said a future specific request by an applicant would return to council for final approval and that bond counsel and city attorneys would review required documents.