5:80-6.6 Use of funds with regard to projects subsidizedunder Section 236 Interest Reduction Program
(a) These regulations 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 payments required by N.J.A.C. 5:80-6.4, all proceeds of the sale of the project will be primarily pledged to easing the burden on the tenants by subsidizing repair and maintenance or operating costs. If, however, the nonprofit 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) All cash proceeds received on the sale of a project subsidized under Section 236 shall, after payment of the amounts required under N.J.A.C. 5:80-6.4, be deposited into a Project Subsidy Reserve (PSR). The income and principal of the PSR 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 nonprofit has demonstrated, based on information required under N.J.A.C. 5:80-6.4(a)6, that the funds in the PSR are not required for any of the purposes listed in (b)1-3 above and will not be required for the foreseeable future, it may request that a portion of these funds or the investment income on these funds be deposited into a CDE as described in N.J.A.C. 5:80-6.5.
Amended by R. 1989 d. 524, effective October 2, 1989. See: 21 N.J.R. 1509(b), 21 N.J.R. 3090(a). In (b): deleted "of the fees" in regard to payments. Amended by R. 2005 d. 219, effective July 5, 2005. See: 37 N.J.R. 970(a), 37 N.J.R. 2476(a). In (b), inserted "of the amounts" following "after payment" and substituted "of for "on" in the introductory paragraph; substituted "project" for "development" throughout.