01-0100R

RESOLUTION AMENDING THE PROFESSIONAL SERVICES AGREEMENT WITH THE HOUSING AND REDEVELOPMENT AUTHORITY OF DULUTH, MINNESOTA (HRA) FOR LOW-INCOME HOUSING TAX CREDIT COMPLIANCE MONITORING.

BY COUNCILOR GILBERT:

        RESOLVED, that the proper city officials are hereby authorized to enter into an amendment, substantially in the form of the copy on file in the office of the city clerk as Public Document No. _______________________ to city Contract No. ____________ with HRA.


STATEMENT OF PURPOSE:  The purpose of this resolution is to authorize an amendment to the low income housing tax credit compliance monitoring agreement with the HRA. Under the agreement, HRA monitors rental housing units which have received city of Duluth housing tax credits. The IRS requires housing projects that were acquired, rehabilitated or constructed using housing tax credits to be monitored for 15 years. Owners of these projects pay an annual fee directly to the HRA for monitoring services.

Since the commencement of this agreement, IRS compliance monitoring regulations have changed. Formerly, on site audits of records related to tenants and rents were required once every five years, now on site audits are required every three years, therefore significantly increasing the monitoring workload. As a result, the monitoring fee will be increased from $15 to $30 per unit. The Minnesota housing finance agency (MHFA) must monitor projects receiving state housing tax credits, and similarly intends to raise its monitoring fees. Additionally, owners have had to certify tenant incomes each year using third party verifications, e.g. independently checking information with employers and banks and maintaining written documentation. The IRS now allows a waiver of having to use third party verifications, if the owner requests a special audit and the project shows 100% compliance with all regulations. The HRA will perform these special "certification audits" for a flat fee of $500 per project. Finally, the amendment deletes the one time setup fee for new tax credit projects.