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CDA pre-authorizes acceptance of WHEDA tax-credit reservation and a reservation-fee payment up to $100,000
Summary
The CDA authorized staff to accept a housing tax-credit reservation and to pay the required reservation fee up to $100,000 to cover differing interpretations of WHEDA fee language; staff estimates the fee will likely be near $35,000 plus a possible bond-fee component, but capped the authorization to avoid missing a 10-day signature window.
The DeForest Community Development Authority on July 9 voted to authorize the executive director to accept a reservation of housing tax credits and tax-exempt bond volume from the Wisconsin Housing and Economic Development Authority (WHEDA) and to pay a reservation fee not to exceed $100,000.
Staff explained the CDA submitted an application in WHEDA's noncompetitive round and that the project passed WHEDA's thresholds and has moved to underwriting. Staff said WHEDA requires a signed reservation agreement within 10 days of notification and that a reservation fee is due when the agreement is signed. Staff described two components of the fee calculation: 5% of the annual tax credit award (staff said the application listed approximately $702,000 in annual credits, making 5% about $35,000) and a quoted bond-volume cap fee that WHEDA's materials describe as a quarter of a percent of tax-exempt bond volume, with wording on WHEDA's site that staff read to imply a cap at $40,000. Staff said Baker Tilly offered a different interpretation that would yield a lower bond fee (about $14,000). To avoid missing the 10-day signature window, staff asked the CDA to preauthorize payment "not to exceed $100,000" to cover either interpretation and any timing issues.
A commissioner asked for clarification about adding the components together; staff confirmed the $35,000 (5% of credits) plus up to $40,000 (bond fee cap) could reach roughly $75,000 under one reading, and staff set the authorization to $100,000 as a conservative ceiling. A motion to authorize executing and effectuating the reservation agreement and to make the reservation fee payment passed on a verbal vote; the chair announced the motion carries.
Next steps: staff will execute the reservation agreement if and when WHEDA issues the allocation and will return to the board if additional clarity or a different fee is required.
