Tax-Exempt Bond financing for multifamily housing is available through the State's Private Activity Bond (PAB) authority. The federal government empowers the State to allocate $239 million in PABs. The PAB is designed to provide local units of government the ability to issue tax-exempt bonds for a number of purposes including, but not limited to: facility and equipment financing for qualified manufacturers and processors, Beginning Farmers Program, waste treatment facilities, Mortgage Credit Certificates (MCC), Mortgage Revenue Bonds (MRB), and financing for residential rental developments.

PABs provide lower interest and longer term financing than typical conventional loans, thus reducing the financing costs to users of the program. The reduced financing cost, in turn, allows rents to be made more affordable for households who have been unable to find adequate housing. Investors benefit as they are not required to pay federal income tax on their earnings from the purchase of the bonds.

At least 95 percent of the net proceeds from the bonds must be used to finance a "qualified development." If 50 percent or more of a development’s aggregate basis of buildings and land are financed with the bonds, a four percent annual Housing Tax Credit may be received on the qualified basis of the development. This tax credit is similar, but in addition to, the nine percent Housing Tax Credit.

If Housing Tax Credits are used with the tax-exempt financing, the rules and regulations of that program apply. At least 20 percent of the units must be set aside for residents who earn 50 percent or less of the area median gross income or 40 percent of the units must be set aside for residents who earn 60 percent or less of the area median gross income.

The PAB Program has an open funding cycle beginning January 1 of each year. Applicants must provide a bond inducement resolution and an application for the PAB allocation.

For-profit and non-profit developers and businesses are eligible to apply.