State’s MERLE loan fund explained to Bend committee; staff flag city liability and administrative costs
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Summary
Representatives from Oregon Housing and Community Services outlined MERLE, a $75 million revolving loan program for moderate‑income housing; committee members raised concerns about program timing, city liability, administration and which project types best fit the fund.
Megan Ellertson of Oregon Housing and Community Services told Bend’s housing committee that the MERLE program (authorized by the 2024 legislative session, Senate Bill 1537) is a $75 million revolving loan fund designed to provide gap financing for housing sold or rented at 120% AMI and below.
Ellertson described the program flow: a city or county adopts a local MERLE program and accepts project applications; if the sponsoring jurisdiction approves a project, OHCS performs a completeness check and issues a zero‑interest loan to the city; the city provides a grant to the developer to fill the project gap; upon occupancy a program fee (structured to resemble property‑tax repayment) is paid and used to repay the state loan over time.
Key financial mechanics Ellertson cited include a 10‑year loan term (with limited jurisdiction flexibility), a small inflation factor on repayments, and administrative fee allowances (staff noted OHCS guidance anticipates roughly 5% of grant amount for sponsoring jurisdictions and 1% for county tax assessor administration). Ellertson said 50 million of the total fund is initially available in the first two years with a $10 million set‑aside provision.
City staff and committee members raised practical concerns. Several developers and staff said the statutory timing and the current program design can leave developers far into design and permitting before they can obtain certainty on eligibility, complicating underwriting and lender commitments. City staff warned that because the state issues the loan to the city, the city bears an unconditional promise to repay the state if a sponsored project fails to complete: that obligation creates a contingent liability on the city’s books and requires careful local program design, creditworthiness screening and, where feasible, security interests.
Why this matters: MERLE offers a new source of gap financing that can make certain middle‑income projects feasible, but its utility depends on local program rules, staffing capacity and the city’s appetite for contingent liabilities. Committee members asked staff to prioritize MERLE in the near‑term evaluation while also identifying program designs that limit city downside.
What’s next: staff will include MERLE in the December recommendations to Council and outline potential local guardrails (creditworthiness criteria, security interests, and administrative capacity needs) for any adoption recommendation.
