2012 Annual Report
Total Page:16
File Type:pdf, Size:1020Kb
CALIFORNIA TAX CREDIT ALLOCATION COMMITTEE 2012 Annual Report Bill Lockyer Treasurer State of California CALIFORNIA TAX CREDIT ALLOCATION COMMITTEE 2012 Annual Report Report on the Allocation of Federal and State Low Income Housing Tax Credits in California April 2013 The State Treasurer’s Office and the California Tax Credit Allocation Committee comply with the Americans With Disabilities Act (ADA). If you need additional information or assistance, please contact the California Tax Credit Allocation Committee at (916) 654-6340 or TDD (916) 654-9922. CALIFORNIA TAX CREDIT ALLOCATION COMMITTEE Voting Committee Members: Bill Lockyer, Chair State Treasurer Ana J. Matosantos, Director of Finance John Chiang, State Controller Advisory Committee Members: Claudia Cappio, Executive Director California Housing Finance Agency Laura Whittall-Scherfee, Deputy Director of the Division of Financial Assistance Department of Housing and Community Development Lois Starr County Representative Vacant City Representative Committee Staff: William J. Pavão, Executive Director Lisa Vergolini, Deputy Executive Director Rose Guerrero, Chief Compliance Section Ammer Singh, Compliance Program Manager Shannon Nardinelli, Compliance Program Manager Elizabeth Gutierrez, Compliance Program Manager Anthony Zeto, Development Program Manager Gina Ferguson, Development Program Manager (Specialist) Tiffani Armstrong Mayra Lozano Angel Barragan Kelly Luu Stephen Bellotti Tina Miller Phyllis Blanton David Navarrette Bruce Cager Connie Osorio Richard Chinakwe Georgene Palmerin Emilio Contreras Marisol Parks Generoso Deguzman Adam Sartain Carol Douglas Benjamin Schwartz Frank Harper Kole Tefft Diana Hester Toby Threlfall Nicola Hil Nicole Valenzuela Noemy Iniguez Jack Waegell Elaine Johnson Biu Wong Quang Le Carl Yeager TABLE OF CONTENTS EXECUTIVE SUMMARY – 2012 Program Highlights 1 I. RESULTS OF THE 2012 PROGRAM 5 II. KEY EVENTS DURING 2012 12 III. CUMULATIVE PROGRAM RESULTS: 1987 - 2012 20 IV. MONITORING – PROJECT PERFORMANCE AND PROGRAM COMPLIANCE 37 APPENDICES 42 A. 2012 9% PROGRAM ALLOCATION INFORMATION B. 2012 4% PROGRAM ALLOCATION INFORMATION C. 1987 – 2012 COMPLIANCE REPORT D. PROGRAM COSTS, CREDITS AND UNIT PRODUCTION TRENDS E. PROGRAM DESCRIPTION EXECUTIVE SUMMARY – 2012 Program Highlights Tax Credit Units in California Exceed 275,000 In 2012, the California Tax Credit Allocation Committee (“TCAC” or “the Committee”) awarded $87.3 million in competitive nine percent (9%) annual federal Low Income Housing Tax Credits (“LIHTCs”) to 102 proposed housing projects. In addition, TCAC awarded $85.5 million in state tax credits to 28 of those competitive 9% projects, and $26.3 million in state credit to 13 projects receiving four percent (4%) tax credits with tax-exempt bonds. Recipients will develop a total of 6,246 affordable housing units using 2012 9% tax credit awards, funded with $927 million in tax credit equity investments. This brings California’s total 9% credit projects awarded since the program’s inception in 1987 to more than 2,000 housing projects with 130,000 units.1 Including tax-exempt bond financed projects (“4%” projects), TCAC has assisted approximately 300,000 affordable units with tax credit awards since the program’s inception.2 Including newly awarded projects, the existing active portfolio of 9% and 4% affordable units exceeds 275,000. Demand for 9% Tax Credits Applicants submitted a total of 236 applications for competitive 9% tax credits in 2012 (compared to 175 in 2011) with 102 projects, or 43%, receiving a tax credit allocation. The success rate in 2012 decreased from the previous year with the increase in applicants. The total applications received in 2011 were notably less than in previous years, and the applicant success rate was higher in 2011 than the recent historical average (refer to Chart 2 below, page 6.) Over the past five years application success rates have ranged from 28% (in 2010) to 60% (in 2011). 1 Historical data presented in this report represents the awards made within each calendar year, and so includes a small number of awards made to the same project in multiple years; in addition this data does not account for projects returning unused credit. Occasionally a project will receive a credit allocation in one year, return the allocation and reapply in a later year. This practice was more common in the early years of the program, and to some extent has resulted in a slight overstatement of the number of projects and units awarded in these years. The Federal Credit Available in Table 12 (page 35) does include an accounting of the credit returned in each calendar year and can be used as a more accurate representation of the total credit allocated since 1987. 2 Separate data for 9% credit ceiling allocations and 4% projects with tax-exempt bond financing in the earliest program years is not entirely reliable. Staff has utilized available historical program data. 1 The total annual federal 9% tax credit requested in 2012 was $227.5 million,3 while the amount available to allocate was nearly $86.7 million, 38% of the requested amount. Geographic Apportionments Affect Credit Distribution In 1997 the Committee created geographic apportionments and updated them in 2004 to align the distribution of tax credits with statewide population and housing needs. The target percentages establish the credits available to each area after funding the non-profit, rural, at-risk, special needs/SRO, and supplemental set-asides. Beginning in 2011, TCAC staff began studying the apportionment formula in anticipation of updating the geographic apportionments. In 2012 after reviewing available data and conducting public forums with program stakeholders, the apportionment formula was revised and updated apportionments were proposed for adoption in TCAC regulations. The updated percentages will become effective in 2014 (see below, page 31 for additional information). Table 1 below shows federal and state tax credit distribution in relation to the target geographic apportionments in effect in 2012. This data includes only those projects receiving funding from the geographic apportionments, and does not include projects funded in these geographic regions under the set-asides; for discussion of the program’s set-asides, please refer to page 9. The Target Apportionment of Table 1 does not account for prior years’ results and their effect on available tax credit in 2012. That is, those areas receiving more credits than they were apportioned in 2011 had their 2012 apportionments discounted by the overage amount. The Allocation Percentages shown below, however, do reflect these discounts. 3 This amount includes second round reapplications. 2 Table 1 2012 Federal and State Apportionments versus Allocations Target Allocation Allocation Geographic Area4 Apportionment Percentage Amount Los Angeles County 33% 32.51% $193,413,246 Central Valley Region 10% 9.05% $53,856,687 North and East Bay Region 10% 10.46% $62,264,153 San Diego County 10% 13.66% $81,258,320 Inland Empire Region 8% 7.67% $45,615,114 Orange County 8% 5.67% $33,712,550 South and West Bay Region 6% 5.70% $33,930,983 Capital and Northern Region 6% 7.56% $44,981,839 Central Coast Region 5% 4.47% $26,572,402 San Francisco County 4% 3.26% $19,937,000 TOTAL 100% 100.00% $594,975,294 Decrease in the Number of Projects Financed with Tax-exempt Bonds In 2012 the Committee received 112 applications for projects financed with tax-exempt bond proceeds (4%) and reserved tax credits for 96 projects, a 23% decrease from the 125 projects reserving tax credits in 2011. The number of 4% applications and awards has varied in recent years with the national economic environment (see Chart 1 below). Tax-exempt bond programs available in 2011 (including privately placed bonds in Community Reinvestment Act eligible areas, the U.S. Treasury’s New Issue Bond Program, and Fannie Mae and Freddie Mac Forward Commitment programs) contributed to the increase in 4% tax credits awards made. The decrease in other available public funding due to the closure of local redevelopment agencies is also considered a factor in the 2012 decrease in 4% applications and awards (see page 19 for additional redevelopment agency funding information). The 96 projects received $69,902,808 in annual federal tax credit and will produce 9,021 low-income units. Of the 96 projects awarded 4% federal tax credits in 2012, 13 also received allocations of state credits totaling $26,322,456.5 4 The following counties are within each region: Central Valley: Fresno, Kern, Kings, Madera, Merced, San Joaquin, Stanislaus, Tulare; North and East Bay: Alameda, Contra Costa, Marin, Napa, Solano, Sonoma; Inland Empire: San Bernardino, Riverside, Imperial; South and West Bay: San Mateo, Santa Clara; Capital and Northern: Butte, El Dorado, Placer, Sacramento, Shasta, Sutter, Yuba, Yolo; Central Coast: Monterey, San Luis Obispo, Santa Barbara, Santa Cruz, Ventura. 5 Tax-exempt bond applicants requesting both federal and state tax credit for a project must apply for state credit through the credit ceiling competition. The federal tax credit awards for these projects are not made from the federal credit ceiling. 3 Chart 1 4% Application Submissions and Awards 2006 - 2012 Monitoring Activities In 2012, the Committee conducted monitoring activities at 783 tax credit projects to fulfill the IRS requirement that all completed tax credit developments be inspected at least once every three years. Monitoring activities included site inspection visits to review files and physically inspect the units and common areas. At least 20% of the files and units at each development were inspected. Of the 783 developments inspected, 705, or 90%, had some incident of non- compliance, with a large majority of the non-compliance issues being remedied. However 78, or 10%, of the developments had at least one incident of non-compliance that was reportable to the IRS. In most cases the non-compliance was due to over-charging rents, inadequately documenting files, or failing to perform timely income re-certifications. Of the 15,566 tenant files inspected, 15,511 or 99.6% were found in compliance with income restriction requirements.