Agenda - Council Work Session - 01/10/2012

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Chapter 5 —Development Standards All applications to Minnesota Housing for Housing Tax Credits will be evaluated according to the following standards (Small projects, local redevelopment or revitalization projects, and projects developed in difficult -to -develop areas may be considered eligible for variances from these standards, if justified.): A. Project Cost Reasonableness Minnesota Housing will evaluate the costs of each proposed project in comparison to current comparable projects to determine whether the proposed costs are reasonable taking into consideration unique characteristics of the project and its comparability to similar projects. Additional documentation will be required if the proposed costs are not comparable or reasonable. Current Minnesota Housing tax credit project comparables will continue to be the driving factor in approving project costs. B. Minimum Underwriting Standards for Amortizing Debt and Maintenance and Operating Expenses Benchmarks Minnesota Housing has established Minimum Underwriting Standards and Management and Operating Expenses (M&O) Benchmarks based upon Minnesota Housing's existing portfolio of developments and the recommended Best Practices for HTC Underwriting adopted by the National Council of State Housing Agencies (NCSHA) in 1998. These Minnesota Housing Minimum Underwriting Standards are described in the Multifamily Consolidated Request for Proposal Guide. Comparisons will be made to M&O data available from Minnesota Housing's maintenance data based on comparable projects. Determinations on whether proposed budgets are reasonable will also be based upon Minnesota Housing's management, maintenance and operating experience. M&O numbers will be evaluated on an expense per room/per year basis; the M&O number will not include reserves, taxes and other tax assessments. Minnesota Housing requires all first mortgage lenders to use minimum underwriting standards including; maintenance and operating expense estimates, which are not less than the benchmarks contained in Maintenance and Operating Expense Review & Underwriting Certification (HTC 29) in their underwriting calculations. Written lender certification and supporting documentation is required. C. Eligible Basis Tax Credit Fees Developer Fees: Include developer overhead, developer processing fees, developer profit, and any other amounts received by the Developer. Minnesota Housing will limit the amount of developer fees for the purposes of calculating eligible basis to determine the amount of tax credit. The developer fee is calculated by Minnesota Housing as follows: The maximum allowable developer fee is calculated on a percentage of the total development cost less the developer fee. In some instances, the developer may want to delegate some of the responsibilities to a third party, such as a processing agent or consultant. In such cases, the delegated responsibilities must be thoroughly understood by all parties involved and the fee paid to the third party shall be included as part of the developer fee. The limits are subject to Minnesota Housing review. The following limits will be used by Minnesota Housing: Project Type Development Limits Maximum Developer Fee New Construction or Substantial Rehabilitation First 50 Units 15% 25 12012 Housing Tax Credit Procedural Manual Rev. 04/2011