The Los Angeles County Development Authority (LACDA) issues tax-exempt and taxable multifamily housing bonds for qualified developments located in Los Angeles County. The LACDA may issue either tax-exempt or taxable bonds. Taxable bonds would generally be issued only in combination with tax-exempt bonds. Taxable bonds do not require an allocation of bond authority from the California Debt Limit Allocation Committee (CDLAC).
The LACDA has an approved list of bond counsel firms.
Finance Team Approval
The LACDA has an approved list of financial advisory firms.
The LACDA reserves the right to require an independent study of any proposed project.
Tax-Exempt Private Activity Bonds
Private activity bonds
Private activity bonds require an allocation of bond authority from CDLAC. To get the allocation, the LACDA must submit an application to CDLAC on behalf of the developer. Submittal of the application is at the discretion of the LACDA, not the developer. The developer must pay all required CDLAC fees in advance of application submittal.
501(c)(3) private activity bonds
The LACDA may issue 501(c)(3) bonds on behalf of qualified not-for-profit organizations. 501(c)(3) bonds are tax-exempt, but do not require an allocation from CDLAC. 501(c)(3) bonds cannot be used with the Low-Income Housing Tax Credit Program (LIHTC).
The interest on taxable bonds is not exempt from either Federal or State taxation. These bonds are not subject to Federal volume "cap" limitations, and therefore, do not require an allocation from CDLAC. Taxable bonds can be used in combination with LIHTC. Taxable bond issues must meet all applicable requirements of these Policies and Procedures (including rating requirements) and any such added regulations which may, from time to time, be promulgated by the LACDA.
Bond Rating and Credit Enhancement Requirements
The LACDA requires that bonds for which it acts as issuer be both credit enhanced and have a minimum rating in the “A” category by Standard and Poor’s (equivalent Moody’s or other bona fide agency rating also acceptable), except as noted below, OR the bonds be privately placed with a “sophisticated investor” as defined by the LACDA. The LACDA reserves the right to impose these minimum requirements on bond issues for which the LACDA issues bonds or the LACDA holds a TEFRA hearing.
Credit enhancement may take any number of forms, including a letter of credit (LOC), mortgage backed security (MBS), collateral pledge, bond insurance, etc. The form of credit enhancement must be enough for a minimum rating in the “A” category by Standard and Poor’s (or the equivalent). The bond rating must be obtained by the closing of the bond issue.
Developers must pay all costs of issuance at bond closing, including, but not limited to, bond counsel, county counsel, underwriter, trustee and financial advisor fees, as well as rating agency fees. Any deposits will be credited toward the cost of issuance at closing.
Only 2% of the proceeds of a tax-exempt bond issue may be used to pay costs of issuance. Costs over 2% must be paid from other sources secured by the developer including, potentially, the proceeds of taxable bonds.
The initial issuer fee of 25 basis points (0.25%) on the bond amount and the first year of the annual administrative fee the greater of either 12.5 basis points (0.125%) of the outstanding bond amount or $6,000 are both paid at bond closing. Developers will also pay an annual administrative fee of the greater of either 12.5 basis points (0.125%) of the outstanding bond amount or $6,000 to the LACDA, for the qualified project period to cover the LACDA's ongoing administration and monitoring costs for the project.
Each applicant must provide the following to the LACDA as a part of bond documentation an indemnity to the LACDA, its members, officers, agents, and employees for all costs, expenses and attorney fees, as well as any judgment or settlement costs arising out of or involved in the financing, or in any of the documentation related thereto.
The LACDA reserves the right to make exceptions, at its sole discretion when deemed necessary. The LACDA guidelines and policies are subject to change.