lis 217 stemming the tide - LISC

3. STATE AND LOCAL FUNDING INITIATIVES:MASSACHUSETTS, WASHINGTONIn direct response to local advocacy anddemonstration of need, both theCommonwealth of Massachusetts and the Stateof Washington have developed a set of flexiblefunding mechanisms for preservation, rangingfrom technical assistance and predevelopmentfunding through permanent financing.Case Study #7: Massachusetts Funding ToolsThe Commonwealth of Massachusetts hasdeveloped a broad array of financial tools toassist in the preservation of federally subsidizedhousing. These include:Community Economic Development AssistanceCorporation (CEDAC)CEDAC is a quasi-public intermediary establishedby the state legislature for the generalpurpose of furthering community economicdevelopment. Over the years, CEDAC has playeda unique role in the preservation field, providingpredevelopment loans and technical assistanceto community-based nonprofit purchasers of atrisk,federally subsidized housing. CEDAC alsoadvocates on preservation issues at the stateand local government level. This advocacy isinformed by the organization’s detailed involvementin, and sophisticated understanding of,transactional issues.Capital Improvement and Preservation Fund(CIPF)The CIPF provides direct capital funding forpreservation transactions. Under this program,the commonwealth floats general obligationbonds, which are repaid later from state appropriations.Unlike revenue bonds, which are paidfrom the projects themselves, this mechanismprovides projects with deferred loans or grants.The Massachusetts Department of Housing andCommunity Development administers the program,accepting rolling applications. The annualamount of CIPF funding is subject to an administrativecap on the state’s total bond issuance.CIPF funds are targeted specifically to federallyand state-subsidized projects with expiring userestrictions or subsidy contracts. A portion ofthe funds may be used as predevelopmentgrants or loans to nonprofit purchasers.Pending legislation will increase the original$20 million capitalization for the fund by anadditional $35 million.LIHTC Qualified Allocation Plan Set-AsideThe Commonwealth's Qualified Allocation Plan(QAP) for competitively allocated Low IncomeHousing Tax Credits includes a 40 percent setasidefor preservation. This category includesboth federally and state-assisted housing andother existing multifamily housing, as well asHOPE VI public housing projects. For subsidizeddevelopments, only at-risk projects with expiringuse restrictions or subsidy contracts are targetedfor funding.Massachusetts Housing Partnership Fund(MHP)The Massachusetts Housing Partnership Fund(MHP), another quasi-public lender, is capitalizedby fees generated from state bank mergerswith out-of-state banks. This source of fundingpermits considerable lending flexibility andenables MHP to make primary mortgage loanswith no additional credit enhancement. MHPhas financed a number of preservation transactions.MassHousingMassHousing (formerly the MassachusettsHousing Finance Agency) provides both taxableand tax-exempt bond financing for preservationtransactions. Under the Friendly PrepaymentProgram, the agency will also refinance existingHUD-subsidized mortgages with a minimumaffordability commitment: 20 percent of theunits must remain affordable to householdsearning less than 80 percent of AMI, or lessthan 50 percent of AMI if the HUD Risk Sharingmortgage insurance program is utilized for creditenhancement.Case Study #8: Washington State Section 8Local Response ProjectThe State of Washington provides some usefulmodels of community collaboration to developinnovative preservation financing strategies.These include the following:30chapter three: State and Local Preservation Tools and Strategies