N.J. Admin. Code § 5:80-6.5

Current through Register Vol. 56, No. 24, December 18, 2024

Section 5:80-6.5 - Use of funds with regard to projects subsidized under Section 236 Interest Reduction Program

(a) This section is promulgated to recognize the essential difference between the Section 236 and Section 8 Programs. In projects subsidized through interest reductions, tenants must bear the full responsibility for all other operating costs. Accordingly, after certain required payments, all proceeds of the sales of Section 236 projects were primarily pledged to easing the burden on the tenants by subsidizing repair and maintenance or operating costs. If, however, the housing sponsor of a Section 236 project can demonstrate that the project is in sound physical and financial condition and will likely remain so for the foreseeable future, a portion of the proceeds or investment income on the proceeds may be deposited into a CDE.

(b) The income and principal of a Project Subsidy Reserve may be utilized in the following manner:

1. First to pay any existing operating deficits, including debt service arrearages, of the project;

2. To fund any capital improvements or repairs that are required for the viable operation of the project and cannot be funded out of other reserves at the project;

3. To provide an additional source of operating revenue to assist in financing the normal operations of the project, including debt service, so that future rent increases can be moderated or so that rents may be maintained, to the extent feasible, at a level that is appropriate to the tenant population for which the development is intended;

4. After the project sponsor has demonstrated to the satisfaction of the Agency, based on information required under (b)4i through iv below, that the funds in the PSR are not required for any of the purposes listed in (b)1, 2, or 3 above and will not be so required for the foreseeable future and after payment of the annual administrative fee to the Agency has been funded, a portion of these funds or the investment income thereon may, at the request of the sponsor, be deposited into a CDE. If such a request is made, the project sponsor shall submit, and the Agency shall consider, the following information:

i. Operating revenue and expense projections for the project for the next five years;

ii. The rents expected to be charged at the project assuming reasonable annual increases for five years;

iii. The rents charged and expected to be charged at comparable projects; and

iv. The effect of the requested action on (b)4i and ii above.

N.J. Admin. Code § 5:80-6.5

Amended by 50 N.J.R. 1479(a), effective 7/2/2018