Housing Bonds
What They Are
Housing Bonds
The Western Illinois Economic Development Authority (WIEDA) acts as the issuer of the bonds, passing its DOUBLE tax-exempt status on to a developer, either a private for-profit or not-for-profit, to finance low-income or senior housing projects. The bond can include the acquisition of fixed assets, including land, buildings, and equipment. Because the bond interest is not subject to state or federal income taxes, investors and lenders can offer a lower interest rate and achieve an equivalent after-tax return. Therefore, the borrower receives a preferential interest rate, generating substantial savings.
Eligibility
Major Requirements Include:
Affordable Housing
The Developer must agree to set aside a portion of a financed project’s units for tenants at a certain income level. A minimum of 20% of the units must be set aside for individuals earning no more than 50% of the area median income or the Developer can option to set aside 40% of the units for individuals earning 60% of the area median.
Housing Tax Credits
Housing bonds can assist in obtaining Low Income Housing Tax Credits (LIHTC) that can reduce the required equity.
60 Day Notice
Funds expended prior to sixty days before receiving initial approval from WIEDA may be eligible to be included in the bond financing.
Fund Usage
Funds can be used to build a facility, acquire necessary land and new equipment. Funds can be used to acquire an existing facility as long as 15% or more is used to rehab the structure.warehouse or office space.
Capital Improvements
The capital improvements must take place in the territory of WIEDA in the counties of Adams, Brown, Cass, Fulton, Hancock, Henderson, Mason, McDonough, Morgan, Pike, Schuyler, Scott and Warren.
Benefits
If Approved:
Lower Interest Rate
A WIEDA Double Tax-Exempt Bond is exempt from state and federal income taxes, making it an attractive investment for the bondholder. The interest rate available on these bonds is far lower than conventional financing, and a lender can expect an interest savings to range from 150 – 300 basis points lower than a conventional loan.
100% Financing
Finance up to 100% of the project cost – contingent upon meeting credit standards of a lender backing the bond.
Smooth Process
WIEDA has been described as a “Nimble Issuer” because of its flexible guidelines and an expedited approval process. We can assemble a team of IRB specialists who have a thorough understanding of all the legal and financial aspects of this type of transaction. We’ll work closely with you every step of the way, answering your questions, helping you avoid pitfalls, and making sure you get the financing that’s right for you.
