Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Housing Jefferson Lofts topic
No spam. Unsubscribe anytime.
Council allows nonrecourse language after construction for Jefferson School Lofts loan
Summary
The Oskaloosa City Council authorized promissory-note language that keeps the loan recourse during construction but shifts to nonrecourse after substantial completion, aiming to preserve low-income housing tax-credit financing while protecting the city during construction risks.
Oskaloosa — The City Council on Nov. 17 authorized a compromise on loan language for the Jefferson School Lofts senior housing project that makes the promissory note recourse during construction and nonrecourse after substantial completion.
Developers told council investors required nonrecourse language to preserve their ability to syndicate low-income housing tax credits. John Cronin, part of the development team, said the project faced a funding gap after the market price for tax-credit syndication fell and that the investor’s legal counsel needed nonrecourse debt "as a requirement from the Internal Revenue Code" for allocating credits. Cronin said the developer has been advancing construction at its own risk and expects to be reimbursed at financial closing.
Jake, the developer’s attorney, explained the tax mechanics to the council: nonrecourse debt can generate "partnership minimum gain," a concept that helps investors continue to receive tax credits over the compliance period. The council considered three options: require recourse (no nonrecourse), authorize nonrecourse immediately, or authorize nonrecourse after substantial completion and rehabilitation. Council members expressed concern for city protections during the construction phase and for ensuring project completion.
After discussion, a motion to adopt the third option — recourse during construction, then nonrecourse after substantial completion — passed by roll call. Proponents argued the approach balances the city’s interest in being protected while construction risks remain with the borrower and the developer’s investor needs to achieve tax-credit viability once the project is in service.
Council members also noted alternative costs to the city if the project were abandoned, including potential demolition and neighborhood deterioration, and cited the importance of getting the building completed as a key public interest. The council’s vote authorized staff to proceed with the promissory note using the agreed approach and to finalize terms with investor counsel.
Next steps: staff will work with legal counsel and the developer’s representatives to finalize the promissory note language under the parameters authorized by council.
