2004 Housing Tax Credit Recommendations
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MULTIFAMILY FINANCE PRODUCTION DIVISION BOARD ACTION REQUEST July 28, 2004 Action Items Board Approval of Staff Recommendations of Final Commitments for the Allocation of Housing Tax Credits and Waiting List for the 2004 Housing Tax Credit Program Application Round. Required Action Approve, deny, or approve with amendments: the list of recommended applications for Final Commitments of Housing Tax Credits from the 2004 Housing Tax Credit Ceiling; and the 2004 Waiting List. Background and Recommendations The Board is required by §2306.6724(f) to “issue final commitments for allocations of housing tax credits each year in accordance with the qualified allocation plan not later than July 31.” Further, the Board is required by §2306.6711(c) to “establish a waiting list of additional applications ranked by score in descending order of priority based on set-aside categories and regional allocation goals” concurrently with the initial issuance of commitments for housing tax credits. This agenda item satisfies these two requirements for the 2004 Housing Tax Credit (HTC) cycle. The Housing Tax Credit recommendations for July 2004 are presented in a separate one-volume Board Book. The volume contains the following information that reflects the recommendations of the Executive Award and Review Advisory Committee: 1. Cumulative Recommendation List (only shows those applications recommended) 2. Recommendations for the Nonprofit Set-Aside (shows all active applications for the nonprofit set-aside) 3. Recommendation List by Region (shows all active applications) 4. Report on HTC Status and Recommendation Factors (lists all applications – including those withdrawn/terminated with their current status) 5. Summary Report for each Development (provided in Development number order for all active applications) 6. The Applicant Evaluations performed by the Portfolio Management and Compliance Division for recommended developments (provided in Development number order) Please note that no recommendations are being made at this time for 2005 Forward Commitments. At the direction of the Board, staff anticipates recommending for 2005 Forward Commitment at the September 2004 Board Meeting. 1 I. REGIONAL ALLOCATION FORMULA AND SET ASIDES For 2004, the Texas Department of Housing and Community Affairs’ (“the Department”) total Credit Ceiling is $40,366,280. As required by §2306.111 of the Texas Government Code, and further codified in §50.7(a) of the 2004 Qualified Allocation Plan and Rules (QAP), the Department utilizes a regional allocation formula to distribute credits from the Credit Ceiling. There are thirteen (13) state service regions which receive varying portions of the Credit Ceiling based on the need in those regions. A map of those regions follows this write-up. Each region is further divided into two allocations – a Rural Regional Allocation and an Urban/Exurban Regional Allocation. Based on the formula, each of these twenty-six (26) geographic areas is targeted to receive a specific amount of housing tax credits. As required by §50.7(b) of the QAP, several set-asides/allocations are also required to be met with the 2004 Housing Tax Credits. The only federally legislated set-aside is the Nonprofit Set- Aside, which requires that at least 10% of the Credit Ceiling be allocated to Qualified Nonprofit applications. This Nonprofit Set-Aside is evaluated on a statewide basis. An At-Risk Set-Aside, which is state legislated, also requires that at least 15% of every region’s allocation be awarded to existing developments that are at risk of losing their affordability. There is also a United States Department of Agriculture (USDA) Allocation which requires that at least 5% of every region’s allocation be awarded to developments that are also funded by the USDA. Both the At-Risk Set- Aside and the USDA Allocation are awarded on a regional basis, not statewide. Applicants were permitted to apply in all set-asides for which they were eligible. The table below reflects the Total Regional Allocation, the amount of credits dedicated to the Rural Allocation and the Urban/Exurban Allocation, as well as the proportional amount of each of those regions that needs to be allocated to the At-Risk Set-Aside and the USDA Allocation. Because the Nonprofit Set-Aside is evaluated on a statewide basis, it is not reflected here. Region Regional Rural Urban/Exurban USDA for At-Risk for Number Allocation Allocation Allocation Region Region 1 $1,704,279 $805,212 $899,067 $85,214 $255,642 2 $1,122,652 $511,597 $611,055 $56,132 $168,398 3 $7,362,180 $480,034 $6,882,146 $368,109 $1,104,327 4 $1,947,249 $1,201,626 $745,623 $97,362 $292,087 5 $1,562,356 $845,109 $717,247 $78,117 $234,353 6 $9,788,743 $894,228 $8,894,515 $489,437 $1,468,311 7 $2,036,696 $444,394 $1,592,302 $101,834 $305,504 8 $2,180,011 $457,956 $1,722,055 $109,000 $327,002 9 $3,156,143 $885,772 $2,270,371 $157,807 $473,421 10 $1,729,075 $723,114 $1,005,961 $86,453 $259,361 11 $4,725,727 $1,919,277 $2,806,450 $236,286 $708,859 12 $1,120,138 $377,861 $742,277 $56,006 $168,020 13 $1,931,031 $288,481 $1,642,550 $96,551 $289,654 2 II. APPLICATION SUBMISSIONS SUMMARY AS OF JULY 21, 2004 2004 was the third year that a pre-application process was utilized. There were 264 Pre- Applications submitted reflecting a total request for credits of $194,140,537. Subsequently there were 182 full applications submitted with a total request for credits of $100,182,732. At this time, 22 of those applications have been terminated and 14 applications were withdrawn by the applicant. Therefore, there are 146 applications currently competing for credits as of July 21, 2004. Additionally, five (5) developments were awarded 2004 funds as Forward Commitments last year. III. DEVELOPMENT EVALUATION The Board Book materials for June 28, 2004 outline for the Board the level of review applied to each application as well as some of the changes to the 2004 HTC Application cycle. While not restated here in detail, staff describes below the reviews and evaluations that have been made in the past few weeks in preparation for this Action Item. All Applications’ scores have been adjusted for consistency with the 2004 Emergency QAP as approved by the Board on July 8, 2004. All Applications’ scores have been adjusted for any applications that had successful appeals at either the Executive Director level or by the Board on July 8, 2004. Consistent with §50.6(h) of the QAP, “Developments will be ineligible if the Development is located on a site that is determined to be unacceptable by the Department.” All sites have been inspected utilizing the Department’s Application Site Inspection Report and none of the active applications were classified as “Unacceptable.” Consistent with §50.5(b)(3) and (4) of the QAP, regarding the compliance history on existing properties associated with 2004 HTC applicants, the Portfolio Management and Compliance Division has reviewed all recommended applications for instances of material non-compliance. The allocating agencies of other states were contacted to request comments on the applicants’ previous participation in their programs. No recommended applications have material non-compliance. Consistent with §50.5(a)(8) of the QAP, there are no existing violations of the “one mile – three year test.” Essentially this rule prohibits the award of any application within one mile of any existing tax credit property approved in the past three years within Dallas, Harris, Tarrant, and Bexar counties. Those applications originally identified as having a potential violation of this rule have resolved this issue either through termination or withdrawal of the application, or by the application satisfying one of the exemptions which include having HOPE VI funds, serving a different population (family rather than. elderly), or most commonly, having obtained a resolution from the local government which is a permitted exemption under the statute. Consistent with §50.6(f) of the QAP, staff is not making any recommendations that would cause a violation of the “one mile – one year test.” This rule prohibits the Department from allocating to an application with a proposed site that is within one mile of any other application’s proposed site awarded in the same calendar year. Any applications that might potentially violate this rule have been identified and duly noted in 3 the report provided. Staff has ensured that no recommendations are being made that would violate this rule. Consistent with §50.5(a)(7) of the QAP, the Department can not award credits to any development that is located in a municipality that has “more than twice the state average of units per capita supported by Housing Tax Credits or private activity bonds.” All potential violations of this rule have been resolved either through termination or withdrawal of the application, or by the applicant obtaining a resolution from the local government, which is the permitted exemption under the rule. Consistent with §50.6(d) of the QAP, the Department “shall not allocate more than $2 million of tax credits in any given Application Round to any Applicant, Developer, Related Party or Guarantor.” Staff has reviewed all documentation provided in the applications to monitor this credit cap and have ensured that no recommendations are being made that would violate this rule. Consistent with §50.5(b)(5) of the QAP, an applicant is ineligible if they have “failed to pay in full any fees billed by the Department after the due date has passed”. On July 14, 2004, the Department identified ten 2004 HTC applications that would be ineligible due to outstanding fees.