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Source version current through Sep 15, 2021
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(a)While the rents as fixed by a local agency for the project proper should result in no profit from operation, there may accrue a net deficit or income during the early stages of operation when interest, taxes, etc., are being charged to account 1420. The early stages of operation of the project proper have been designated as the initial operating period, defined in paragraph 102* as meaning “the period beginning with the first day of the month in which income is first derived from rentals from the project proper and ending with the date of substantial completion”. The initial operating period therefore falls within the development period and it is provided that the net operating deficit of the project proper, if any, incurred during this period shall be considered a development cost and charged to account 1470.3, Net Deficit or (Income), and that, if there should be net income during the period, it will be credited to account 1470.3 and serve to reduce development cost.
(b)Procedures applicable to the initial operating period have been described in other parts of this Subchapter, particularly in Part 1641, Account Classification, and in Part 1642, Basic Instructions. The purpose of the following sections is to supplement these procedures and assemble them for ready reference.
(c)Generally speaking, it will be necessary, during the initial operating period, to distinguish between expenditures which are properly chargeable to initial operating period expense and payable out of the administration fund, as hereinafter described, and other expenditures, such as for direct costs (1410 group), carrying charges, and tenant selection costs (account 1470.1), which, to the extent set forth in the respective account definitions, do not constitute expenses of the initial operating period and are payable out of the development fund directly.