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8 <br /> 6 <br /> FOR-PROFIT DEVELOPMENT OF AFFORDABLE HOUSING <br /> The fact that Orange County has been willing to consider exempting or reimbursing the <br /> school impact fee for affordable housing, if it is developed by NON-PROFIT developers, <br /> suggests an assumption that either: (a) "non-profit" developers receive little or no <br /> compensation for their developer services (and, therefore, cannot afford the school impact <br /> fee); and/or (b) "for-profit" developers receive adequate or more than adequate <br /> compensation for their developer services (and, therefore, can afford the school impact <br /> fee). <br /> For MARKET PRICED housing, whether "for sale" or "for rent," BOTH (a) and (b) above are <br /> probably accurate. For AFFORDABLE housing, however, NEITHER (a) nor (b) is accurate. <br /> State housing agencies, including the North Carolina Housing and Finance Agency, allow <br /> "non-profit" developers AND "for-profit" developers EXACTLY THE SAME developer fees <br /> and EXACTLY THE SAME amount of tax credits for affordable housing. Furthermore, both <br /> "non-profit" developers and "for-profit" developers use their earned development fees for <br /> the same purposes - - to pay for salaries and other operating expenses, and to pursue more <br /> tax credit development opportunities in subsequent years. <br /> In affordable housing;whether you operate as a "for-profit" or as a "non-profit" has little to <br /> do with your PROFITS on a particular affordable housing project; it only relates to your <br /> form of incorporation for income tax purposes. <br /> The NCHFA does not allow a "for-profit" developer such as First Centrum Corporation any <br /> larger developer fee, as a percentage of total project cost, than a "non-profit" developer <br /> would be allowed on the same project. In fact, since "for-profit" developers frequently <br /> develop affordable apartments more efficiently (lower total cost per unit) than "non-profit" <br /> developers, while the "for profits" and "non-profits" are allowed the same percentage of <br /> total project cost as a developer fee, the "for-profit" frequently receives fewer dollars for <br /> developing the same amount of housing than a less efficient "non-profit" receives. <br /> The enclosed "Project Development Costs Description" of NCHFA indicates that the <br /> Developer Fee is allowed to be a MAXIMUM of 15% of total development cost (excluding <br /> some contractor, finance, and reserve costs), whether the developer is a "non-profit" or a <br /> "for-profit." Developer fees for MARKET RATE development are typically in the 15% to <br /> 20% range. For the Carolina Spring project, however, First Centrum Corporation is <br /> voluntarily REDUCING its proposed developer fee to ONLY 8% to do our fair share to make <br /> the total project cost as low as possible and the tax credit application as competitive as <br /> possible. We are confident that no other "for-profit" or "non-profit," is proposing a lower <br /> developer fee than First Centrum Corporation. <br /> The developer fee to First Centrum Corporation for Carolina Spring is $447,293. At the <br /> same time, First Centrum Corporation is investing $122,711 in the Carolina Spring project, <br /> even though our investment is considered unrecoverable. The "net" developer fee, <br /> therefore, is only $324,582;and most of that amount would not be received until 1999, <br />