Albemarle County EDA adopts new fee schedule for taxable conduit bonds

The Economic Development Authority of Albemarle County on Tuesday adopted an amendment to its rules of procedure creating a separate fee schedule for taxable conduit bond issuances, establishing a $45,000 closing fee and an annual administrative fee of no less than 2.75 basis points on the declining outstanding principal.

The change is intended to make the EDA’s conduit issuance service competitive with national alternatives while generating upfront revenue for the authority. Staff and board members said the separate taxable-bond fee is likely to attract borrowers who would otherwise use out-of-state conduit issuers and to modestly increase the EDA’s revenue stream.

EDA staff presented background on the proposal and comparisons to the Wisconsin-based Public Finance Authority, a national conduit issuer sponsor by the National Association of Counties and the National League of Cities. The PFA structure shown to the board charges $40,000 at closing plus 3 basis points annually on a declining balance. The EDA currently uses a single fee for bond issuances — a $750 per $1 million annual fee structure tied to outstanding principal that does not explicitly distinguish taxable from tax-exempt deals.

Staff told the board a Virginia-based conduit issuer can deliver state-tax advantages for Virginia borrowers that an out-of-state issuer would not. "They'll they'll save 5.75% on the Virginia state income tax," said a staff attorney during the presentation, describing the potential tax benefit for a bank or holder that keeps the loan in Virginia. Board members and staff also cited non-tax advantages such as banks receiving regulatory credit for retaining community loans.

Avery Thompson, management analyst in the county’s economic development office, ran spreadsheet scenarios for the board that compared combinations of closing fees and annual basis-point charges and showed lifecycle fee totals over 20 years. "The fee structure is really pegged to the basis points on the principal that are billed annually as well as the closing fee," Thompson said.

Board members discussed competitive positioning, the benefit of receiving a larger closing fee upfront that could be invested, and the risk of "racing to the bottom" if the EDA undercuts other issuers. Several directors said being close to the PFA figures would help attract business while preserving local advantages for Virginia borrowers.

At the meeting, a director moved to adopt a resolution amending Article 4 of the EDA rules and procedures to add a taxable-bond fee schedule. The board agreed to specify a $45,000 closing fee and an annual administrative fee equal to no less than 2.75 basis points of the declining outstanding balance, with language allowing the board to revisit fees in the future. The motion passed on a roll call vote with Directors Long, Hood, Morrill, Johnson and Storm recorded as voting "aye." The board recorded the action as an adoption of the amended rules and procedures.

After the vote staff agreed to distribute an email and a chart summarizing the adopted fee schedule. Board members noted the EDA may revisit the fee levels if the authority begins to receive more conduit requests than anticipated. The EDA also noted this was the first taxable-bond request it has handled in recent history and that the change is intended to create a clear process for future taxable conduit financings.

Details not specified in the meeting transcript include an exact effective date in the rules text and any administrative procedures for waivers or scaled fees for very small issues. Staff indicated the rules can be revisited and adjusted in a future public meeting.