The requirements and rules of this Section IV.C relate to cost certifications undertaken for the purposes of the Act, only.
1. General
a. Review by Subsidizing Agency
Developer fees, profit, overhead, dividends and any other amounts paid to the owner will be reviewed by the Subsidizing Agency and any limitations on such amount(s) shall be as determined by the Subsidizing Agency.
Revised December 2014 Subsidizing Agency Allowable Costs/Profits/Distributions
IV - 9 b. Phased Projects - “Look- Back”
If a Developer undertakes separate cost examinations for phases of a project and the developer profit or fee made in any phase is either less than or more than the maximum permitted hereunder, then any amount owing to the Subsidizing Agency or municipality may be determined at the completion of the final phase as follows:
(1) Accruing Deficiency -- the Developer may accrue the deficiency from any phase and cumulative deficiencies may be paid as fee out of later phases in accordance with the provisions herein.
(2) Reserved Excess – the Developer may retain funds that exceed the maximum permitted for profit and fee until the cost certifications for every phase are complete, and carry forward such funds to pay any deficiencies in developer profit or fee that may occur in later phases provided that:
(a) The surety for the phase from which funds are reserved remains in force; and (b) The comprehensive permit does not lapse.
2. Homeownership and CCRCs
Profit to Limited Dividend Organizations, including all partners, shall be limited to no more than 20% of total allowable development costs, and such other sums as the Subsidizing Agency may determine constitute a Developer’s contribution to the project, provided that calculation of total allowable development costs shall not include any fee paid to the Developer. Profits accrued in excess of 20%, as defined herein, shall be distributed to the municipality for the purpose of developing and/or preserving Affordable Housing.
3. Rental Projects and ALPs
Developer fees, overhead, profits, dividends and any other distributions to Developers, including development consultants, partners or legal or beneficial owners, shall be subject to limitation as follows:
a. Distributions from Capital Sources
In the absence of applicable standards established by the Subsidizing Agency, payment of fees and profits to Limited Dividend Organizations will be limited to no more than 10% of total development costs net of (i) such fees and profits; and (ii) any working capital or reserves intended for property operations.
Developer fees and overhead, and any other amounts paid to the Developer will be reviewed by the Subsidizing Agency and any limitations on such amount(s) shall be as determined by the Subsidizing Agency.
b. Distributions from Operations
(1) For Limited Dividend Organizations, commencing upon the Project's initial occupancy and each year thereafter, annual dividend distributions will be limited to 10% of the Owner's equity in the project.
Owner's equity, which may be revised from time to time pursuant to terms of the Subsidizing Agency’s regulatory documents, shall consist of the difference between the appraised as-built value of the Project and the sum of any public funds and secured debt on the property. Public funds includes HOME, CDBG, linkage, or other public funds, whether structured as a grant or soft loan and exclude state and federal tax credit capital. Alternately, the Subsidizing Agency may allow Owners to opt to have Owner’s Equity calculated based on actual project costs as determined by the Subsidizing Agency.
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(2) Distributions shall be permitted with respect to each fiscal year of the project commencing on the date of initial occupancy only after all current and owed-to-date project expenses have been paid and reserves, then due and owing, have been funded. A determination of the amounts available for distribution shall further be subject to the terms of the Subsidizing Agency’s regulatory documents provided that, in any event, cash available for distribution in any year in excess of 20% of owner’s equity, subject to payment of cumulative deficiencies as provided below, shall be distributed to the municipality for the purpose of developing and/or preserving Affordable Housing, except as may be otherwise required by law.
(3) In the event that distributions made in any year are less than the maximum percentage of equity permitted with respect to any such year, subject to the provisions governing contributions to the Distribution Account set forth in the regulatory documents, the Developer may accrue the deficiency with interest at the rate of 5% per annum, and cumulative deficiencies may be distributed in accordance with the provisions herein up to the maximum distribution allowed by law.
Revised December 2014 Subsidizing Agency Cost Examination
IV - 11 D. Cost Examination
The requirements and rules of this Section IV.D relate to cost certifications undertaken for the purposes of the Act, only.
1. Requirement
a. Limited Dividend Organizations are required to submit cost examinations to the Subsidizing Agency that issued Final Approval or has otherwise assumed the role of Subsidizing Agency at the point in time that the cost examination is undertaken. Such cost examinations shall conform to requirements of IV.B of these Guidelines as well as the materials and forms referenced below.
b. Non-profit or government entity owners are required to submit cost examinations satisfactory to the Subsidizing Agency.
2. Municipal Review
Prior to approving any cost examination, Subsidizing Agencies shall require that send a copy of the cost examination is sent to the affected municipality, accompanied by the Subsidizing Agency’s report on the cost examination, for review by the municipality, and shall consider any written, responsive comments from the municipality.
3. Noncompliance
Subsidizing Agencies shall notify DHCD in the event of noncompliance with 760 CMR 56.04(8) and requirements of this section IV. In consultation with the Subsidizing Agencies, DHCD will determine the appropriate recourse, which may include suspending or disqualifying a developer from participation in programs administered by Subsidizing Agencies.
4. Procedures and Forms
See the guidance and forms posted at http://www.mass.gov/hed/economic/eohed/dhcd/legal/comprehensive-permit-guidelines.html.
NOTE: Owners should confirm with the appropriate Subsidizing Agency that they are using the most up-to-date instructions and forms.
5. Mixed Tenure Projects
Projects comprised of a mix of tenure types shall undertake separate cost examinations for each tenure component.
The method for allocating of projects costs among the components shall be approved by the Subsidizing Agency prior to the cost examination.
Revised December 2014 Subsidizing Agency Cost Examination
IV - 12 6. Financial Surety
Effective for all Projects that have not received Final Project Approval as of April 1, 2008 AND for projects developed in phases, to all such phases commenced after January 1, 2012.
a. General
Limited Dividend Organizations shall provide financial surety to ensure completion of the cost examination to the satisfaction of the Subsidizing Agency and the distribution of excess fees and profits as required at 760 CMR 56.04(8)(e). The Final Approval issued by a Subsidizing Agency shall establish the timing for delivery of the financial surety, which shall not be later than construction closing. The surety shall be provided through a letter of credit, bond, or cash account, in a form satisfactory to the Subsidizing Agency, or in the case of a project involving low income housing tax credits, the authority of the Subsidizing Agency to withhold IRS Form 8609 shall satisfy the requirement of financial surety. The amount of the surety shall be as follows:
For Projects: Up to and including 25 units: $ 25,000 Up to and including 50 units: $ 50,000 Up to and including 100 units: $ 75,000 More than 100 units: $ 100,000 b. Mixed Tenure Projects
In the case of Projects that are comprised of components of differing tenure, a surety shall be provided for each such component as if it were an independent project.
7. Prequalification of Certified Public Accountants
Effective for all Projects that have not achieved substantial completion by May 1, 2008 and for projects developed in phases and for which the cost examination is undertaken separately for one or more phases, for all phases of such projects that commenced construction later than January 1, 2012.
a. Prequalification Criteria
DHCD requires the prequalification of certified public accountants (CPAs) hired by a Developer to carry out cost certifications in connection with Comprehensive Permit projects. In order to be prequalified by DHCD, CPAs must:
(1) Be licensed by, and in good standing with, the Commonwealth of Massachusetts Board of Public Accountancy;
(2) Meet the independence standards of the AICPA;
(3) Have been subjected to a quality control (peer) review, within the most recent time period as required by the AICPA and received an unqualified report; and
(4) Have current insurance policies that cover errors and omissions.
b. Submission Requirements
(1) CPAs interested in being prequalified by DHCD should submit the following information to DHCD:
(a) A Letter of Interest providing the name, firm name (if applicable), address, telephone and fax numbers, and license number for the CPA;
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(b) An original Certificate of Good Standing issued by the Massachusetts Division of Licensure within thirty (30) days of the submission to DHCD;;
(c) A copy of the relevant quality control (peer review) report; and (d) A copy of the relevant insurance policy.
(2) Submit required letter and documentation to:
Office of General Counsel DHCD
100 Cambridge Street, Room 300 Boston, MA 02114
c. Term
Prequalification by DHCD will be good for a period of two (2) years from the date that DHCD notifies a CPA that it has met the standards set forth below, provided that the CPA maintains compliance with such standards.
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Than a State Agency
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V. HOUSING PROGRAMS IN WHICH FUNDING IS PROVIDED BY OTHER THAN A STATE AGENCY
A. Introduction
These Guidelines apply to Projects for which the Subsidy will be provided by other than a state agency (for instance, HUD), including funding provided by a non-governmental entity such as a Federal Home Loan Bank. For such projects, the Department shall authorize a public or quasi-public entity to act as the Subsidizing Agency (formerly, “Project Administrator”) including but not limited to review and approval of Project Eligibility and Final Project Approval.