When Appropriating to a Trust, a Grant Agreement is a MUST!

May 21, 2013: Appropriating CPA funds to housing trusts and development corporations has become a popular way for Community Preservation Committees to meet the CPA 10% annual spending requirement for community housing. As of May 2013, over $180 million of CPA generated or leveraged funds have been appropriated to Municipal Affordable Housing Trusts, other housing trusts and community development corporations.

If your Community Preservation Committee (CPC) is considering appropriating funds to a housing trust or development corporation, or if your CPC is already appropriating funds to one of these entities, we strongly urge you to consider having your legal counsel draft a grant agreement between the Town (acting through the Community Preservation Committee) and the housing trust or corporation. Absent a grant agreement, it may be unclear which rules apply to housing trust expenditures; do the appropriated funds follow the rules set by CPA or are the funds subject only to the bylaws of the housing trust or corporation? For example, CPA requires that prospective community housing tenants have incomes at or below 100% of the Area Median Income (AMI), whereas a housing trust or corporation may follow different AMI guidelines for prospective tenants.

To avoid this type of conflict, your grant agreement should either detail the specific project or initiative that the CPA funds will go toward, or it should limit the use of the funds to CPA-eligible expenditures. If you decide to limit the grant agreement to a specific project or initiative, your agreement should detail:

  • The timeframe in which the funds will be used
  • What will happen to any excess funds
  • What reporting and accountability will be required (you will want to be able to show what the money was used for later on), and
  • Whether or not the trust will be able to pay for overhead with the funds or just direct project costs, etc.

If you decide to broaden the uses of the trust or corporation expenditures to all CPA-eligible projects, this sample draft agreement may be helpful.

If you spend the time to carefully outline all the details of the grant agreement up front, you will avoid potential problems down the road. Plus, you will have a blueprint to follow for future appropriations to housing trusts and development corporations.