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AGENDA RECOMMENDATION |
Item No: 4.G.
Economic Development Authority
- Meeting Date:
- 05/11/2026
Agenda Item:
Resolution approving Housing Trust Fund Rental Assistance Demonstration (RAD) Conversion Cashflow Loan for BEC RAD Conversion.
Recommendation/Action(s):
Adoption of the attached resolution.
Summary:
This is a request for a Housing Trust Fund loan in an amount not to exceed $600,000 to support the conversion of the Blue Earth County Economic Development Authority (BECEDA) public housing portfolio under the Rental Assistance Demonstration (RAD)/Section 18 Small PHA Blend program to Project-Based Vouchers (PBVs). This conversion is a critical component of the EDA’s broader strategy to preserve affordable housing, improve property conditions, ensure long-term financial sustainability, and create future affordable housing.
As part of the conversion process, the BECEDA completed a Physical Needs Assessment (PNA) and comprehensive financial analysis to evaluate the capital and operational requirements of the portfolio. The PNA identified necessary rehabilitation work to address existing deficiencies and bring units into compliance with applicable standards, including Housing Quality Standards (HQS). In addition, the conversion requires the establishment of an Initial Deposit to Replacement Reserves (IDRR) to ensure adequate funding for ongoing capital needs.
The BECEDA has committed available Public Housing Capital Funds and Program Reserve Funds to support these efforts. These sources, combined with projected operating revenues under the PBV platform, provide a strong financial foundation for the conversion. However, despite these commitments, a funding gap remains due to the scale of rehabilitation needs and the requirement to adequately capitalize reserves and stabilize operations during the transition period.
Current project financials reflect a deficit of $596,310. This shortfall has an impact on the EDA’s ability to fully maintain sufficient operating reserves to support stable cash flow during the initial years following conversion. A five-year operating pro forma indicates that additional upfront support is necessary to ensure the projects achieve and maintain positive cash flow.
To address this gap, we are requesting access to Housing Trust Fund dollars in the form of a repayable, zero-interest cashflow loan with a term of five years. These funds will be used to complete critical rehabilitation work; fund required reserves and provide short-term operating support to ensure a successful transition to the PBV platform.
The requested loan will serve as a vital bridge, allowing the EDA to complete the conversion in a financially sound manner while preserving affordability and improving housing quality for residents. The EDA can anticipate repayment of the loan within the five-year term through stabilized operating revenues and improved financial performance resulting from the conversion. Approval of this request will directly support the long-term viability of the housing portfolio and ensure the successful implementation of the RAD/Section 18 Small PHA Blend program.
Currently the Housing Trust Fund has a balance of $1,902,887. The EDAs have allocated $835,000 to the Partnership Community Land Trust and $135,283 to the Connections Shelter summer expansion totaling $970,283. With this $600,000 (in a repayable loan) the balance of the Housing Trust Fund will be $332,604.
The requested action is to approve the resolution authorizing Housing Trust Fund dollars in the form of a repayable loan not to exceed $600,000 to support the Blue Earth County RAD/Section 18 Small PHA blend Program conversion to project-based vouchers.
As part of the conversion process, the BECEDA completed a Physical Needs Assessment (PNA) and comprehensive financial analysis to evaluate the capital and operational requirements of the portfolio. The PNA identified necessary rehabilitation work to address existing deficiencies and bring units into compliance with applicable standards, including Housing Quality Standards (HQS). In addition, the conversion requires the establishment of an Initial Deposit to Replacement Reserves (IDRR) to ensure adequate funding for ongoing capital needs.
The BECEDA has committed available Public Housing Capital Funds and Program Reserve Funds to support these efforts. These sources, combined with projected operating revenues under the PBV platform, provide a strong financial foundation for the conversion. However, despite these commitments, a funding gap remains due to the scale of rehabilitation needs and the requirement to adequately capitalize reserves and stabilize operations during the transition period.
Current project financials reflect a deficit of $596,310. This shortfall has an impact on the EDA’s ability to fully maintain sufficient operating reserves to support stable cash flow during the initial years following conversion. A five-year operating pro forma indicates that additional upfront support is necessary to ensure the projects achieve and maintain positive cash flow.
To address this gap, we are requesting access to Housing Trust Fund dollars in the form of a repayable, zero-interest cashflow loan with a term of five years. These funds will be used to complete critical rehabilitation work; fund required reserves and provide short-term operating support to ensure a successful transition to the PBV platform.
The requested loan will serve as a vital bridge, allowing the EDA to complete the conversion in a financially sound manner while preserving affordability and improving housing quality for residents. The EDA can anticipate repayment of the loan within the five-year term through stabilized operating revenues and improved financial performance resulting from the conversion. Approval of this request will directly support the long-term viability of the housing portfolio and ensure the successful implementation of the RAD/Section 18 Small PHA Blend program.
Currently the Housing Trust Fund has a balance of $1,902,887. The EDAs have allocated $835,000 to the Partnership Community Land Trust and $135,283 to the Connections Shelter summer expansion totaling $970,283. With this $600,000 (in a repayable loan) the balance of the Housing Trust Fund will be $332,604.
The requested action is to approve the resolution authorizing Housing Trust Fund dollars in the form of a repayable loan not to exceed $600,000 to support the Blue Earth County RAD/Section 18 Small PHA blend Program conversion to project-based vouchers.