10 TAC §§50.1-50.16
The Texas Department of Housing and Community Affairs adopts
new §§50.1-50.16 concerning the Qualified Allocation Plan and Rules
(the Rules), with changes to the proposed text as published in the December
1, 2000, issue of the
Texas Register
(25 TexReg
11784). The adoption of these rules is contingent upon the Governor's approval,
rejection or modification and approval pursuant to §2306.671(c) of the
Texas Government Code, Title 10.
These rules are being adopted to provide procedures for the allocation,
by the Department, of low income housing tax credits available under federal
income tax laws to owners of qualified low income rental housing projects.
SUMMARY OF COMMENTS RECEIVED UPON PUBLICATION OF THE PROPOSED RULES IN
THE
TEXAS REGISTER
ON DECEMBER 1, 2000, AND
COMMENTS PROVIDED AT PUBLIC HEARINGS HELD BY THE DEPARTMENT
On December 1, 2000, the proposed 2001 Low Income Housing Tax Credit Program
Qualified Allocation Plan and Rules (QAP) was published in the
Texas Register
. The Comment period commenced on November 13, 2000,
and ended on December 27, 2000. In addition to publishing the document in
the
Texas Register
, a copy of the QAP was
published on the Department's web site and made available to the public upon
request. The Department held public hearings in Tyler, Plainview, Mercedes,
San Antonio, El Paso, Dallas, Austin and Houston. In addition to the Comments
received at the public hearings, the Department received a number of written
Comments.
The scope of public Comment concerning the QAP pertains to the following
sections:
§50.2(32) and (73) Definition for Highrise and Urban Infill Project
Comment: No definition for Highrise Urban Infill Project is provided, however
that term is used in §50.7(e)(3)(F) relating to density for elderly projects.
Department Response: The QAP had the definition for Highrise Project (32)
separate from the definition for Urban Infill Project (73). Because the definition
is used only in this one instance in the QAP, the definitions have been merged
under Highrise Urban Infill Project, (32) and the definition for Urban Infill
Project (73) has been deleted.
(32) Highrise Urban Infill Project--A project comprised of three or more
stories that is located within a Central Business District or its immediate
environs or in inner-city neighborhoods characterized by documented higher
than average land costs and higher density. For projects with more than three
stories, an elevator must be included in the construction of the Project.
Board Response: Department's response accepted.
§50.2 (38) Definition for Ineligible Building Types
Comment: Comment was received proposing the deletion of "Single family
detached housing" from subparagraph (B) because there are several examples
of good management practices existing in single family rental housing communities.
Single family tax credit units could (at the end of the compliance period)
provide an excellent option for low income first time home buyers. A request
was also made asking that clarification be included in subparagraph (A) of
this exhibit to confirm that a building formerly used as a hospital, nursing
home or dormitory can be eligible for credits if the building is going to
be converted to a non-transient Residential Development. These projects have
been successful in other states and are permissible, but our QAP is not clear
on this.
Department Response: Based on its previous experience with single family
developments in non-rural areas, the Department suggests that the restriction
remain as currently stated in the QAP unless the Project qualifies for the
exceptions stated in the QAP. While the QAP does not exclude hospital, nursing
home or dormitory conversions, the Department agrees that clarification on
this issue should be added to reduce misunderstanding.
(A) Hospitals, nursing homes, trailer parks and dormitories (or other buildings
that will be predominantly occupied by Students) or other facilities which
are usually classified as transient housing (other than certain specific types
of transitional housing for the homeless and single room occupancy units,
as provided in the Code, §42(i)(3)(B)(iii) and (iv)) are not eligible.
However, hospitals, nursing homes or dormitories are eligible for credits
if the project involves the conversion of the building to a non-transient
multifamily residential development.
Board Response: Department's response accepted.
§50.2(41) Definition for Material Deficiencies
Comment: Comments were made asking to return to the language in the 2000
QAP which allowed applicants to have five days to respond to deficiencies
prior to a point reduction (as opposed to the proposed three days) and ten
days to respond prior to termination of a project (as opposed to the proposed
five days). Comments were also made that subparagraph (B) of the material
deficiency definition needs to clarify that material deficiencies that are
for threshold items should be allowed to follow the same deficiency correction
process.
Department Response: The Department feels that any deficiency items being
requested should already be available to the developer and only have been
omitted through an oversight; therefore, a three day window for providing
required deficiency items is sufficient. A ten day response time (two business
weeks) is excessive for documents that should be readily accessible and makes
prompt review of applications by tax credit and underwriting staff more difficult.
The Department suggests leaving the limit on days as proposed. The Department
agrees that clarification of subparagraph (B) should be provided; however
the clarification is needed to ensure that Applicants know that only items
in subparagraph (A) can be remedied. Material Deficiencies addressed in subparagraph
(B) are ineligible for any remedy. The proposed revision is below.
(B) Deficiencies caused by the omission of Threshold Criteria documentation
specifically required by §50.7(d) of this title shall automatically be
considered Material Deficiencies and shall be cause for termination. These
items are not eligible to be remedied pursuant to subparagraph (A) of this
paragraph.
Board Response: Department's response accepted.
§50.2(45) Definition for Preservation Project
Comment: Comments were received regarding the Preservation Project Set-Aside
and Definition as discussed in greater detail at the public Comment summary
for §50.6(b).
Department Response: To coordinate a change in the definition with the
revisions made to §50.6(b) regarding the Preservation Project Set-Aside,
the revised definition for Preservation Project suggested is as follows:
(45) Preservation Project--A Project involving the rehabilitation of currently
occupied low-income housing developments continuing to receive funds from
a federal or state program that prove eligibility by providing evidence that
the projects will no longer serve low income families as supported by a market
study and that:
(A) currently has rent or income restrictions and is eligible for conversion
to market rate housing within the next three years; or
(B) is in danger of being lost as affordable housing due to the need for
substantial rehabilitation.
Board Response: Department's response accepted.
§50.2(56) Definition for Qualified Nonprofit Project
Comment: Comments were received that nonprofit organizations should be
required to have 51% control of the project as was the case in the 2000 QAP.
There were concerns that for-profit entities would use fledgling nonprofits
as a pass-through and that experienced nonprofit entities with the capacity
to develop without a joint venture will be at a disadvantage. The loss of
nonprofit control will dilute the nonprofit set-aside with projects in which
nonprofits play a very minor role.
Comment also included a suggestion that the Department develop objective
criteria which define the type of nonprofits eligible for the set-aside. Specifically,
the organization should have an all-volunteer Board which includes residents
and local members, should be mission-driven with a social service program,
should have several years of experience, and should qualify as a Community
Housing Development Organization.
Department Response: While the Department agrees that the element of control
and the structure of a nonprofit may be important, the Department does not
feel that it should limit the type of nonprofit entities that apply for the
tax credit program. However, language requiring control for nonprofit projects
applying for the Nonprofit Set-Aside has been added in §50.6(b).
Board Response: Department's response accepted.
§50.2 Proposed Definition for Qualified Elderly Housing Project
Comment: Many Comments were received that requested an elderly set-aside
as discussed in the public Comment summary for §50.6(b).
Department Response: To accompany revisions made to §50.6(b) regarding
an Elderly Set-Aside, a new definition for Qualified Elderly Project is proposed
below.
Qualified Elderly Project--A Project which meets the requirements of the
federal Fair Housing Act and is:
(A) intended for, and solely occupied by, Persons 62 years of age or older;
or
(B) intended and operated for occupancy by at least one person 55 years
of age or older per unit, where at least 80% of the total housing units are
occupied by at least one person who is 55 years of age or older; and where
the Project Owner publishes and adheres to policies and procedures which demonstrate
an intent by the owner and manager to provide housing for persons 55 years
of age or older.
Board Response: Department's response accepted.
§50.2(61) Definition for Rural Project
Comment: Comment was received suggesting that projects in booming bedroom
communities of larger cities are unduly limited by the existing Rural Project
definition. TxRD has a broad definition of rural and these projects often
fall into the TxRD definition. Since the QAP defines rural as an area that
is eligible for funding by TxRD, these projects are automatically Rural Projects,
and therefore limited to developing 76 units. It is proposed that the definition
be revised at subparagraph (C) to allow a developer to choose whether a project
is considered rural or not as it relates to the TxRD eligibility.
Department Response: The Department concurs with this revision and proposes
the following amendment to the definition of Rural Project in the proposed
QAP.
(61) Rural Project--A Project located within an area which:
(A) is situated outside the boundaries of a PMSA or MSA; or
(B) is situated within the boundaries of a PMSA or MSA if the area has
a population of not more than 20,000. If the area shares legal boundaries
with another urbanized area, then the combined population of the areas cannot
exceed 20,000; or
(C) is located in an area that is eligible for funding by TxRD-USDA, and
for which the Applicant applies for tax credits under the Rural Set Aside.
Board Response: Department's response accepted.
§50.2(69) Definition for Total Housing Development Cost
Comment: A Comment was made suggesting that due to significant variances
in statewide land costs, land acquisition costs relating to the purchase of
land should be removed from Total Development Cost.
Department Response: The Department disagrees. Land cost and location selection
are significant components of the development plan and should be considered
by the Department in its underwriting review. Moreover, the land cost can
become a factor in determining the credit amount when the gap method is used.
Thus, a high land cost could lead to more gap-calculated credits than would
otherwise be awarded. Excluding land costs could increase speculation on multifamily
sites in areas where such properly zoned sites are limited. Finally, the total
cost guideline serves only as a guideline, not as an absolute cap and therefore
a total cost in excess of the guideline could reasonably be explained by higher
than normal but otherwise acceptable land costs. No change to the definition
of Total Housing Development Cost is suggested.
Board Response: Department's response accepted.
§50.4(e) Proposed Notification Process
Comment: Comments were made that a procedure for accepting community support/opposition
letters should be established. The QAP could state that any opposition has
to be filed 30 days prior to the allocation of credits and then notification
sent to the developer. The developer would have three weeks to respond and
work with the community. Support was also made for requiring original signatures.
It was also suggested by one Commentator that public officials who are on
record in support of a project be notified of Comments made by their constituents
and that when a project is being rejected for concentration, the Department
should also notify the applicant so that the concentration issues could be
discussed and any inaccuracies corrected.
Department Response: The Department agrees with the suggestion for notifying
applicants of opposition and suggests the revised language below. However,
the Department feels that all public Comment, whether in opposition or support
of a project, should be handled in the same manner. Therefore, if public Comment
is "closed" thirty days prior to the allocations, this not only limits valid
public opposition, but would also limit the Department's ability to accept
support letters an applicant may have obtained by working with the public
to resolve public opposition.
As to requiring original signatures, establishing any process of verification
would be very difficult and could have the effect of eliminating valid facsimile
letters of support or opposition. In response to the notification of concentration,
the Department does support notification to Applicants of which Evaluation
Factors (which include concentration) are being considered for specific projects.
In §50.4(f), the QAP already indicates that the recommendations to the
Board will be made prior to the Board Meeting and that those recommendations
will include all Evaluation Factors listed in §50.7(b) used to make the
determination.
The Department already notifies public officials of applications submitted
in their jurisdictions and encourages public officials to seek feedback from
their constituents and to provide the Department with support or opposition.
The Department believes it is unnecessary to provide any further notification
and no changes to the QAP as proposed are suggested relating to this Comment.
Paragraph (4) is the proposed addition to §50.4(e).
(4) Approximately forty days prior to the date of the Board Meeting at
which the issuance of Commitment Notices or Determination Notices shall be
discussed, the Department will notify each Applicant of the receipt of any
opposition received by the Department relating to his or her project at that
time.
Board Response: Department's response accepted.
§50.4(f) Proposed Appeals Process/Early Release of Information
Comment: Comment was made that the Department needs to integrate an appeals
process so that developers know what the Department is recommending, have
an opportunity to discuss those recommendations (particularly regarding some
of the more subjective items such as site evaluation, market study interpretations,
proformas) and have a chance to appeal. It is suggested that this take place
at least one week prior to final selection. Several separate suggestions proposed
that the staff analysis and recommendations to the Board be made at the Board
meeting preceding the meeting where allocations are approved by the Board.
Department Response: The Department concurs that an appeals process could
be a valuable tool for applicants, the staff and the Board. To this end, the
Department will recommend that an advisory committee be established by the
Board to explore the implementation of an appeals process for all Department
programs including tax credits.
Board Response: Department's response accepted.
§50.4(f)(1) Board Waiver for Exceeding Cost Limits
Comment: Comment was made that language regarding the Board waiver for
exceeding cost limits should be deleted. Alternatively, it was suggested that
if the waiver language is not deleted, there should be greater clarification
regarding what information will be required and what the process will be for
obtaining the Board waiver for exceeding cost limits.
Department Response: Information regarding reasonableness of costs is summarized
in the underwriting report for individual projects. While no formal waiver
process exists, the Board may decide to make an allocation or not based on
a recommendation by staff to do so based upon a need to fulfill the goals
of the Program. Clarification is suggested as follows:
(1) A Commitment Notice shall not be issued with respect to any Project
where the cost for the total development, acquisition, construction or rehabilitation
exceeds the limitations established from time to time by the Department and
the Board as more specifically provided in the Application Submission Procedures
Manual, unless the Department staff make a recommendation to the Board based
on the need to fulfill the goals of the Program as expressed in this QAP and
Rules, and the Board accepts the recommendation. The Department's recommendation
to the Board shall be clearly documented.
Board Response: Department's response accepted.
§50.4(f)(2) Department Reduction of Developer and/or Contractor Fees
Comment: Comment was made that the QAP currently states that the Department
will reduce fees where fees are "excessive" to a level that the Department
deems "appropriate." If the QAP does not delete this language, then the terms
"excessive" and "appropriate" need to be defined.
Department Response: The Department concurs that greater clarification
to the QAP is needed. Revised language is provided below.
(2) The Department will reduce the Applicant's estimate of developer's
and/or Contractor fees in instances where these exceed the fee limits determined
by the Department and provided for within the Application Submission Procedures
Manual. In the instance where the Contractor is an Affiliate of the Project
Owner and both parties are claiming fees, Contractor's overhead, profit, and
general requirements, the Department will reduce the total fees estimated
to a level that does not exceed the fee limits. Further, the Department shall
deny or reduce the amount of low income housing tax credits on any portion
of costs which it deems excessive or unreasonable. The Department also may
require bids in support of the costs proposed by any Applicant.
Board Response: Department's response accepted.
§50.4(i) Waiting List
Comment: Comment was made asking for greater detail on how the waiting
list is issued and handled. A specific request was made that the QAP require
projects to come back to the Board for approval prior to moving off of the
waiting list.
Department Response: §50.4(i) of the QAP already gives specific information
as to how the waiting list is generated and how it is used by the Department.
As stated in the QAP, the Board approves the waiting list and when credits
become available, the Department allocates from that list in priority order
subject to the amount of returned credits and the 10% Nonprofit Set-Aside.
No revisions to the QAP are proposed.
Board Response: Department's response accepted.
§50.6(a) Regional Allocation Formula
Comment: A Comment was made that the statement in the proposed QAP that
the Department will "establish targeted tax credit amounts" for each of the
regions is not in accordance with Senate Bill 1112 because the bill mandates
the Department use the formulas, and the QAP instead only requires the Department
to use the formulas as a target. A Commentator also suggested that the regional
allocation formula be revised because it unfairly penalizes cities like San
Antonio which do not receive much benefit from tax-exempt bonds.
Many Comments were received stating that the allocation formula is unfair
as proposed and will favor rural poor over urban poor areas, specifically
areas along the Texas and Mexico border. Comment was made that the need in
many metropolitan areas is just as extreme as in the communities receiving
targeting via this formula. Concern was also made that the formula is going
to be revised in a way that will discount the direct federal funds received
by larger cities, which will provide metropolitan areas with even fewer dollars.
It was suggested by a Commentator that actual site visits by staff would provide
the knowledge of housing need in competing rural and urban regions.
Department Response: The regional allocation formula was proposed by the
Department at the September 2000 Board Meeting. Public hearings for the formula
were held in November and December 2000. The formula is being presented to
the Board for adoption at the January Board Meeting as part of the State Low
Income Housing Plan. Senate Bill 1112, which was passed into law and is now §2306.111
of the Texas Government Code states, in part, that "if the Department determines
under the formula that an insufficient number of eligible applications for
assistance ... are submitted to the department from a particular uniform State
Service region, the department shall use the unused funds or credits allocated
to that region for all other regions based on identified need and financial
feasibility." No revisions to the formula are currently being proposed by
the Department. No revisions to the QAP are proposed.
Board Response: Department's response accepted.
§50.6(b) Set Asides
Comment: Numerous Comments were received in support of the creation of
an elderly set-aside. Commentators argue that elderly projects are unable
to compete in the general set-aside because they score fewer points, receive
less rent and have considerably higher costs. Other states have successfully
designed an elderly set-aside.
Comment was also made that §50.6(b)(3) is unclear and inconsistent
as it references the preservation set-aside and how it is calculated. The
Commentator states that such provision calls for a 75% housing credit set-aside
for the general category and then states that an additional 10% of the housing
credit ceiling will be allocated to preservation projects. The argument is
that this language should not remain as part of paragraph (3), but it should
be separated out and clearly identified as to how it would be calculated.
It was also suggested that paragraph (3) be deleted because it has the effect
of "capping" the other set-asides.
Comment was also made that the preservation set-aside, as defined, merely
gives Department funds to units that are already affordable and is not creating
new units. Further, it was argued that the preservation set-aside also appears
to double dip by having both a set-aside and points awarded and having a preservation
set-aside depletes available credits for the creation of new affordable housing
units, which is what the state needs as suggested by the State Low Income
Housing Plan. If set-asides are able to overlap (preservation and rural, for
example), less affordable housing is created.
Comment was also received that no special preferences should be made for
preservation projects and that such projects should be scored on a level playing
field with all other projects. It was argued that adding preferences for such
projects implies they are inferior in some way and that should not be the
case. Conversely, Comment was received asking that priority be given to projects
that will refinance or rehabilitate existing USDA and HUD apartment developments
that have existing below market rents, and it was suggested that the value
of the below market rents should be a major factor in underwriting the project.
A Comment also requested that the preservation set-aside be made equal to
the amount of additional tax credits due to the increase in the tax credit
cap.
A number of Comments were received on the need to emphasize that the nonprofit
set-aside percentages are not maximum limitations. It was suggested that in §50.6(b)(3)
the words "at least" be changed to "up to" to ensure that a floor is established
of 10% for nonprofits and 15% for rural projects. It was suggested that applications
be able to compete in any set-aside based on their score; and only subsequent
to scoring project would the Department ensure that the set-asides had been
met. It was suggested that the nonprofit set-aside be increased to allow more
of the mission-driven nonprofits to be able to participate in the program.
It was suggested that text be changed from the 10% nonprofit set-aside being
allocated to "Qualified Nonprofit Projects" to "Qualified Nonprofit Organizations."
A separate suggestion asked that the nonprofit set-aside be increased to 20%.
Other Comments regarding set-asides included the suggestion that a rehabilitation
set-aside be established and a statement that the 15% rural set-aside is excessive
due to the large concentration of poor families in cities. It was also proposed
that rural projects allowed to exceed 76 units as discussed in §50.7(g)(2)
should not be allowed to participate in the rural set-aside.
Department Response: The Department concurs with the Comments requesting
an elderly set-aside and proposed language revising set-asides is suggested.
Additionally, a definition for "Qualified Elderly Project" has been added
at the public Comment summary for §50.2. In response to the many Comments
regarding the preservation set-aside, the set-aside language has been pulled
out of paragraph (3) and established in its own paragraph. While some Comments
relating to the preservation set-aside would suggest removing the set-aside,
other Comments support it. Furthermore, the Sunset Commission has recommended
a 10% preservation set-aside. Department staff concur that this set-aside
is valuable as an "overlapping" set-aside and should be included in order
to maintain affordability on Projects that are otherwise in danger of being
lost to market rate tenants. However, eligibility restrictions were added
to the definition of Preservation Project to ensure that projects that would
be lost as affordable housing are funded instead of those that would continue
to remain affordable and not in need of substantial rehabilitation. The revised
definition for Preservation Project is found at the public Comment summary
for §50.2(45). In response to the Comment regarding a rehabilitation
set-aside, the Department feels that the Preservation Set-Aside adequately
rewards the rehabilitation projects with the most need.
The Department believes that the current percentages for the rural and
nonprofit set-asides are sufficient to meet the goals of the program and the
nonprofit set-aside requirement established by code, but concurs with the
ineligibility for the rural set-aside for projects exceeding 76 units. That
language has been revised below. The language in §50.6(b)(1) already
indicates that "at least" 10% of the Ceiling will go to nonprofit Projects.
In §50.6(b)(4) the QAP indicates already that the Department may redistribute
the credits amongst the different regions and set-asides depending on the
quality of applications and the level of demand. This language ensures that
caps are not created for the nonprofit, rural and elderly set-asides. To have
all projects scored together as proposed and then adjust for set-asides would
be difficult to accomplish because, as many Comments indicated, elderly projects
need their own set-aside because they are unable to score higher points. The
set-asides are generated to protect those projects unable to score competitively
in the general set-aside and to maintain diversity among the types of tax
credit projects awarded.
In response to the suggestion to change text from the 10% nonprofit set-aside
being allocated to "Qualified Nonprofit Projects" to "Qualified Nonprofit
Organizations", the Department feels that due to joint ventures where the
allocation may actually be going to a partnership in which one member may
not be a nonprofit organization, the existing language is more appropriate.
The language relating to the nonprofit set-aside was revised to indicate that
projects qualifying for the nonprofit set-aside must have control of the project.
(b) Set-Asides. The regional credit distribution amounts are additionally
subject to the factors presented in paragraphs (1)-(6) of this subsection:
(1) At least 10% of the State Housing Credit Ceiling for each calendar
year shall be allocated to Qualified Nonprofit Projects which meet the requirements
of the Code, §42(h)(5). Qualified Nonprofit Organizations must have control
of the Qualified Nonprofit Project applying for this set-aside.
(2) At least 15% of the State Housing Credit Ceiling for each calendar
year shall be allocated to projects which meet the Rural Project definition.
Of this 15% allocation, 25% will be set-aside for projects financed through
Rural Development (TxRD-USDA). Projects financed through TxRD-USDA's 538 Guaranteed
Rural Rental Housing Program will not be considered under the 25% portion.
Should there not be sufficient qualified applications submitted for the TxRD-USDA
set-aside, then the credits would revert to projects that meet the Rural Project
definition. Rural Projects applying for greater than 76 Units will be ineligible
for the Rural Set-Aside.
(3) At least 10% of the State Housing Credit Ceiling for each calendar
year shall be allocated to Qualified Elderly Projects.
(4) At least 65% of the State Housing Credit Ceiling will be allocated
to General Set-Aside.
(5) At least 10% of the State Housing Credit Ceiling will be allocated
to Preservation Projects. Preservation Projects will not constitute an additional
exclusive set-aside, however at least 10% of Projects allocated through the
set-asides identified in paragraphs (1)-(4) of this subsection will also be
Preservation Projects.
(6) The Department may redistribute the credits amongst the different regions
and set asides depending on the quality of applications submitted as evaluated
under the factors described in §50.7(b) of this title and the level of
demand exhibited in the regions during the Allocation Round. However as described
in paragraph (2) of this subsection, no more than 90% of the State's Housing
Credit Ceiling for the calendar year may go to Projects which are not Qualified
Nonprofit Projects. If credits will be transferred from a region which does
not have enough qualified applications to meet its regional credit distribution
amount, then those credits will be apportioned to the other regions based
on their relative %age of the total amount available for allocation. If forward
commitments are approved by the Board, they shall be distributed with regard
to the relative regional %ages established by the regional distribution formula.
Board Response: Department's response accepted.
§50.7(a)(1) Threshold Criteria Review relating to Deficiencies
Comment: Comments indicated that the language relating to the handling
of Material Deficiencies during the Threshold Criteria Review needs to be
consistent with the definition by also using the word "shall" as it relates
to the applicant's opportunity to correct the deficiencies.
Department Response: Department agrees on the clarification of §50.7(a)(1).
Proposed revision is found below:
(1) Threshold Criteria Review. Applications will be initially evaluated
against the Threshold Criteria. Applications not meeting Threshold Criteria
will be terminated, unless the Department determines that the failure to meet
the Threshold Criteria is the result of correctable deficiencies, in which
event the Applicant shall be given an opportunity to correct such deficiencies.
Applications not meeting Threshold Criteria will be returned to the Applicant
without further review with a written notice to the effect that the Threshold
Criteria have not been met. The Department shall not be responsible for the
Applicant's failure to meet the Threshold Criteria, and any failure of the
Department's staff to notify the Applicant of such inability to satisfy the
Threshold Criteria shall not confer upon the Applicant any rights to which
it would not otherwise be entitled to which it would not otherwise be entitled.
Board Response: Department's response accepted.
§50.7(a)(3) Third Party Underwriting Evaluations
Comment: Third party underwriting evaluations should not be at the expense
of nonprofit applicants because this requirement places an unequal burden
upon smaller nonprofit organizations in rural areas and smaller communities.
Department Response: The Department does not recommend any change to the
QAP. So far, the Department has not required the applicant to pay for the
costs of third party underwriting; however, if the Department elects to employ
third party underwriting, the cost associated with underwriting will be borne
by the Applicant regardless of tax status.
Board Response: Department's response accepted.
§50.7(b) Evaluation Factors
Comment: Comment was submitted that discussed the language in this section
as it relates to the Area Ratios, §50.7(e)(1). A thorough discussion
is found at the public Comment summary for §50.7(e)(1)(A).
Support was also provided for the creation of more objective standards
for evaluating concentration of affordable housing. It was suggested that
this could be done by using the market study which is already required to
address demand and absorption. If the market study is not used, it is suggested
that the Department specifically define "concentration" by type of units and
number of units. Comment was made that basing evaluation on ratio of population
to existing tax credit units (B) and rental housing affordability trends (D)
disqualifies smaller areas. Comment was made that site acceptance needs to
be worked out before credits are awarded. No site should be in a preliminary
phase waiting for a determination.
A suggestion was made that included the revamping of all of §50.7
and involved removing all Evaluation Factors or objectively defining them
and integrating them into the Threshold Criteria.
Department Response: The Department makes determinations regarding concentration
based on a comparative analyses of two or more markets, and has identified,
under §50.7(b), the factors that will be utilized in determining concentration
of affordable housing developments within specific markets and submarkets.
These factors are widely used by real estate professionals in making lending
decisions and market evaluation. The Department utilizes them as guideposts
and does not believe that determining concentration by quantifying the exact
number of affordable units each market should have is feasible and would limits
its ability to develop projects in areas which show a strong demand for affordable
units. Therefore, smaller cities would not be adversely affected in determining
concentration.
Board Response: Department's response accepted.
§50.7(c) Tie Breaker Criteria
Comment: Comment suggested that Tie Breaker Criteria need to look at which
applications serve the clientele in a manner that is most conducive to a well-rounded
quality of life. A separate Comment suggested that items currently identified
as Tie Breaker Criteria should be integrated into Selection Criteria or eliminated
because they are currently meaningless. A tie has never occurred.
Department Response: The Tie Breaker is an integral part of the evaluation
process and as the new regional allocation formula is implemented in this
allocation round, it will be utilized more than in the past.
Board Response: Department's response accepted.
§50.7(d)(1)(C) Threshold Criteria relating to Persons with Disabilities
Comment: Many Comments supported the inclusion of Section 504 of the 1973
Rehabilitation Act as a design standard to be applied to all projects through
the Threshold Criteria instead of the currently proposed ANSI language. However,
multiple Comments were also received in support of ANSI as threshold, and
in opposition to Section 504 as threshold. Comments made opposing Section
504 indicate that these units require an enormous amount of marketing and
that the requirement does not increase the number of handicapped units. Comments
in support of §504 indicated that this would allow consistency with HOME,
CDBG, Housing Trust Fund and other federal funding. This item is particularly
important now because with the Olmstead decision more people are going to
be coming out of institutions and there will not be enough available units.
It was separately suggested that the proposed language in §50.7(d)(1)(C)
referring to ANSI be removed because it is federal law and is not something
the Department is "making" developers do.
Additional Comment was made supporting that for up to 5% of all LIHTC units,
the Owner shall provide reasonable accommodation(s) or modifications which
are needed and requested by the tenant with a disability. The Owner shall
incur the expenses for the accommodations or modifications.
Also Comment was made that for the units in townhome properties set aside
for the 7% requirement, the applicant should be able to place a unit above
the 7% accessible units with exterior stairs; it seems the ground floor access
criteria will have been answered and the space above these units can be developed
at a very reasonable cost. Also regarding the townhome language, it was Commented
that this violates fair housing because developers would, in essence, be setting
people with disabilities off to the side in different type of units and integration
is actually provided. It is suggested that Senate Bill 623 be adhered to,
which requires visitibility. It was also suggested that townhomes include
one bedroom and one bath on the first floor level.
Department Response: After considering sharply opposing views on these
issues, the Department is proposing a compromise as follows:
Board Response: Department's response accepted, with the clarification
"of all Units" added regarding the townhome requirement for a bedroom and
bathroom on the ground floor.
(C) For up to 5% of all LIHTC restricted units, the Project Owner shall
provide reasonable accommodation(s) or modification(s) on a one-time basis
in conformance with ANSI A117.1-1986 construction standards as requested by
the tenant with a disability. The Project Owner shall incur the related expense(s)
for the reasonable accommodation(s) and/or modification(s). For properties
that are designed as townhouse units, the Project Owner must include one bathroom
and one bedroom on the ground level of all Units and meet Fair Housing standards.
At the construction loan closing a certification from an accredited architect
will be required stating that the Project was designed in conformance with
these standards. A similar certification will also be required after the Project
is completed.
§50.7(d)(2) Exhibit 102--Adding Per Unit and Per Square Foot Tax Credit
Limitation
Comment: Several suggestions were made that a cap of $65 per square foot
($75 for elderly projects) or $6,500 ($7,250 and $7,500 were both suggested
for border and rural projects) per unit should be implemented. This would
ensure that tax credit dollars are stretched further and that the Department
could increase the economic efficiency of the program by producing more units.
This could be added as subparagraph (D) of this exhibit. Conversely, Comment
was received in opposition to any mandatory minimums on the amount of credits
per square foot or per project.
Department Response: The Department does not currently employ a credit
cap per unit. Projects differ in costs based on cost of land, design of the
property and local zoning and development standards. The Department guidelines
take these variances into consideration to address cost differentials. Because
of each project's unique characteristics and needs, such a limitation could
adversely limit special purpose projects and/or cause the product being developed
to be too homogeneous.
Board Response: Department's response accepted.
§50.7(d)(4)(A) Public Notice
Comment: The 2000 QAP had language that required projects located in a
small area but near a metropolitan area to publish pubic notice in both cities
newspapers. The 2001 Draft QAP removed this language. Comment was made that
the language should be added back and that this requirement be reinstated.
Department Response: The Department revised this language to provide greater
flexibility in providing public notice. However, in response to pubic feedback
it will be reinstated to require publication in two papers.
(A) Exhibit 104A. A copy of the public notice published in a widely circulated
newspaper in the area in which the proposed development will be located. Such
notice must run at least twice within a thirty day period or three times within
a five day period. The notice should not run on holidays or weekends. Such
notice must be published prior to the submission of the Application to the
Department and can not be older than three months from the first day of the
Application Acceptance Period. In communities located in close proximity to
a larger metropolitan area and whose citizens may subscribe to a local newspaper
as well as a widely circulated metropolitan newspaper, the notice should be
published in both newspapers.
Board Response: Department's response accepted.
§50.7(d)(4)(B) Notification to State and Public Officials
Comment: A Comment was made that notifying elected officials injects politics
into the tax credit awards process which could hurt a much-needed project
if there is local opposition or the politician does not understand tax credits.
Department Response: The Department feels that it is very important to
provide the officials who have jurisdiction over an area with an opportunity
for input. This allows the officials to garner feedback from citizens. Both
state and federal law require notification of elected officials.
Board Response: Department's response accepted.
§50.7(d)(5)(B) Development Team
Comment: A Comment was made that the Department should require more complete
and accurate disclosure of development team members.
Department Response: The Department currently requires evidence of the
ownership structure in this exhibit and a listing of development team members
in Volume I of the Application. The Department feels that the existing requirements
are adequate for ensuring disclosure of development team members.
Board Response: Department's response accepted.
§50.7(d)(5)(B) Documentation of Entity Standing
Comment: Several Comments were received indicating that the requirements
for entities to be formed (at subclause (I) of clause (i)) are unnecessary.
Comment indicated that the attorney letter regarding the formation of the
partnership entity is an unreasonable expense. Many developers do their own
partnership documents without attorneys. Furthermore, partnership documents
should not have to be filed with the state prior to an award because many
partnerships draw them up, but do not pay the fee until after the award is
made because of filing costs. There is also a filing cost associated with
a name registration which should not be required until after the project is
awarded. It was suggested that just the partnership document (unfiled) should
be adequate.
Department Response: The Department concurs that the requirements for entities
to be formed add an additional cost to the projects that is not necessary
until the project is awarded. Proposed revisions to the QAP follow.
(B) The Applicant, General Partner and all Persons in Control of these
entities and sub-entities must also provide documentation of standing to include
items found in clauses (i) and (ii) of this subparagraph.
(i) the following documentation as applicable under subclause (I) and (II)
of this clause:
(I) For entities to be formed a fully executed copy of the statement of
partnership or partnership agreement.
(II) For existing entities:
(-a-) a copy of the Certificate of Good Standing from the State Comptroller
and a copy of the Certificate of Charter or Limited Partnership and Articles
of Incorporation filed of record; or
(-b-) a recorded copy of the local DBA Certificate for non-incorporated
or non-State Certified sub-entities.
(ii) the Applicant must provide evidence that the signor(s) of the Application
have the authority to sign on behalf of the Applicant in the form of a corporate
resolution or by-laws which indicate same from the sub-entity in Control of
the Applicant.
Board Response: Department's response accepted.
§50.7(d)(5)(F) Developer Experience
Comment: One Comment was made requesting a reduction in the minimum number
of units required for a non-rural project to apply individually from 100 to
70 so that developers having successfully completed one rural project will
be considered experienced for non-rural projects. Comment was also made that
experience with single family development, particularly affordable, should
qualify as experience.
Department Response: The Department believes that the current requirements
regarding developer experience are appropriate to meet Department goals and
proposes no revisions.
Board Response: Department's response accepted.
§50.7(d)(6)(B) Utility Allowances
Comment: The language in this subparagraph is unclear about whether the
Department would expect a utility company to set an allowance. Provide greater
clarification to this section, perhaps deleting the words "utility company".
The last two sentences in the section are confusing. Comment asked that the
Department provide clarification that applicants are allowed to use either
the Section 8 Utility Allowance Schedule or the utility company estimates
when determining allowances.
Department Response: Clarification to this language has been proposed to
eliminate confusion regarding utility allowances.
(B) Applicant must provide documentation from the source of the "Utility
Allowance" estimate used in completing the Rent Schedule provided in the Application.
This exhibit must clearly indicate which utility costs are included in the
estimate. If there is more than one entity (Section 8 administrator, pubic
housing authority) responsible for setting the utility allowance(s) in the
area of the Project location, then the Utility Allowance selected must be
the one which most closely reflects the actual utility costs in that project
area. In this case documentation from the local utility provider supporting
the selection must be provided.
Board Response: Department's response accepted.
§50.7(d)(7) Nonprofit Participation Threshold Criteria
Comment: The 2000 QAP had language that required a current list of directors
and officers of the nonprofit organization. A Comment was made that this language
should be reinserted because it is meant to ensure that the Board running
the nonprofit is independent from those earning financial fees from the project.
Department Response: The 2000 QAP was revised to integrate these requirements
into Exhibit 107A, Nonprofit Participation Exhibit, which will still require
the information listed above. This information was previously requested in
the Threshold Criteria and Volume I, Exhibit 2A. It has been condensed so
that all nonprofit information will be in one exhibit.
Board Response: Department's response accepted.
§50.7(d)(8)(C) Related Party Land Sales for Acquisition Projects
Comment: Comment was made that the requirement to show complete disclosure
and documentation of the acquisition and holding costs, exit taxes, etc.,
is excessive. The IRS only requires a third party appraisal to substantiate
market values and therefore anything beyond the IRS requirements is excessive.
Department Response: The Department believes that the proposed requirements
regarding related party land sales are necessary to properly underwrite the
projects and maintain the integrity of the program. However, the last several
sentences of the subparagraph are underwriting details that will be removed
from the QAP and integrated into the Underwriting Guidelines on the Application
Submission Procedures Manual.
(C) clear identification of the selling Persons or entities, and details
of any relationship between the seller and the Applicant or any Affiliation
with the Development Team, Qualified Market Analyst or any other professional
or other consultant performing services with respect to the Project. If any
such relationship exists, complete disclosure and documentation of the related
party's original acquisition and holding costs since acquisition to justify
the proposed sales price must also be provided.
Board Response: Department's response accepted.
§50.7(d)(11)(B) Market Study
Comment: Comment was received indicating that the language in this paragraph
appears to invalidate the findings of the certified market analyst. This lends
itself to subjective appraisals of market conditions around the state. If
the market study identifies a clear need for affordable housing in an area,
then the market study should be held accountable for its information and data
and allowed to stand on its own. The market study should not be dictated by
the Department's own opinion unless the Department is willing to hire a professional
market analyst.
Department Response: The Department has the means to verify data included
in the market study through independent real estate research firms. Any decision
made by the Department based on market data will be well documented.
Board Response: Department's response accepted.
§50.7(d)(12) Requirement for Survey
Comment: Numerous Comments were made indicating that the survey requirement
is an excessive and unnecessary cost at the application stage and would be
more appropriate at Carryover.
Department Response: The Department agrees that the survey is a costly
requirement that is not necessary in the application and has removed this
requirement from Exhibit 112 of the Threshold Criteria of the QAP. Language
requiring the Survey at Carryover has been added to §50.9(d) as paragraph
(1). See revised language for §50.9(d)(1) below.
(1) A current original plat of survey of the land, prepared by a duly licensed
Texas Registered Professional Land Surveyor. Such survey shall conform to
standards prescribed in the Manual of Practice for Land Surveying in Texas
as promulgated and amended from time to time by the Texas Surveyors Association
as more fully described in the Carryover Procedures Manual.
Board Response: Department's response accepted.
§50.7(e) Selection Criteria Proposed relating to Persons with Disabilities
Comment: Comment was received proposing that in addition to Section 504
as a threshold item, any developers who build accessible affordable housing
units beyond the minimum 5% required under Section 504, receive points (either
in the Selection Criteria or in the Tie Breaker Criteria in §50.7(c)).
Department Response: There are already adequate incentives for special
projects in the QAP. While the Department is committed to ensuring that the
needs of persons with disabilities are met, the allocation of points for additional
units may cause developers to add units for disabled persons where there is
not demand for those units, just so that points can be accrued. For projects
where the demand calls for more units for persons with disabilities, it is
most likely that the project would apply as a special project.
Board Response: Department's response accepted.
§50.7(e) Selection Criteria Proposed relating to Reduced Developer
Fees
Comment: It was proposed that developers who reduce their developer fee
to less than 10% of the eligible basis, as evidenced by a certification, should
be eligible for five points.
Department Response: The Department's developer fee norm is based on the
guidelines developed by the National Council of State Housing Agencies, the
umbrella organization for all tax credit allocating agencies. The fee structure
recognizes that developer fees are not the same as developer profit, which
is realized only after the project is completed and stabilized. The developer
fee is included in the eligible basis on which the credits are calculated.
Therefore, a reduction in the developer fee also reduces the credits to a
project and undermines a project's feasibility and Department's ability to
penetrate rural areas and other communities outside the major metropolitan
regions. No changes are proposed to the QAP.
Board Response: Department's response accepted.
§50.7(e) Selection Criteria Proposed relating to Community Support
Comment: It was suggested that a point system be developed to provide points,
and other incentives, for applicants who can demonstrate a high level of local
political and community support for the application. This would include points
for obtaining at least 5% of funding from the local government and/or the
collection of over 100 letters of support. Conversely, Comment was received
in opposition to any public support requirements aside from the notification
to chief executive officers of a local jurisdiction because they are discriminatory
to affordable housing.
Department Response: Evaluating and documenting community support for inclusion
as a scoring criteria would be extremely difficult. In documenting support,
the Department could not determine the validity of the signatures provided
without an extreme amount of administrative labor. Owners of existing tax
credit developments might be at a distinctive advantage in that they could
gather signatures from their existing tenants. Documentation might be encouraged
which would not indicate a level of support in the specific community. Furthermore,
a project may receive support, but also receive opposition, which would have
to be taken into account. With the high level of demand for affordable housing
across the state, it is felt that points for a "popularity contest" don't
need to be introduced into the process. It is felt that the current points
awarded to projects in communities that recognize the importance of affordable
housing via the provision of funds, special development zones and preferences
in consolidated plans are sufficient. In the past, public officials have been
known to change their minds about supporting a project because of public opinion.
Such change could cause projects to receive credits that would otherwise not
have been recommended.
Board Response: Department's response accepted.
§50.7(e)(1) Selection Criteria for Qualified Census Tracts
Comment: Comment was received asking that the points for Qualified Census
Tract's be restored.
Department Response: The Department believes that the advantage received
by Qualified Census Tracts in the 130% increase in Eligible Basis already
provides an adequate advantage for projects located in these areas and gives
them a greater opportunity to qualify for points in other categories. However,
in response to changes in federal law, the Department will add two bonus points
in §50.7(e)(8) for projects in a Qualified Census Tract for which the
development contributes to a concerted community revitalization effort.
Board Response: The Board agreed with the proposed language, but preferred
to see this item removed from the Bonus point section and integrated into
Exhibit 201 found at §50.7(e)(1) as subparagraph (E). At this time the
Board also opted to increase all points in Exhibit 201 to 7 points. This revision
also impacts the language found at §50.7(e)(1).
(1) Exhibit 201, Development Location. Evidence that the subject Property
is located within one of the geographical areas described in subparagraphs
(A)-(E) of this paragraph. Areas qualifying under any one of the subparagraphs
(A)-(E) of this paragraph will receive 7 points. A project may only receive
points under one of the subparagraphs (A)-(E) of this paragraph:
(E) Project is located in a QCT and contributes to a concerted community
revitalization plan. To qualify for these points, the Project Owner, in addition
to submitting Exhibit 102 (B), must also submit a letter from a city/county
official which verifies that the development is located in a Qualified Census
Tract, and provides a detailed description of the revitalization plan under
way in the community, including how the project contributes to such concerted
revitalization efforts.
§50.7(e)(1)(A) Area Ratios
Comment: Multiple Comments were received regarding this Selection Criteria.
As this proposed exhibit ties to §50.7(b), the issue will be discussed
as a whole. §50.7(b) includes a reference to "number of tax credit and
other affordable housing projects" as an Evaluation Factor for geographic
dispersion. Comment was made that the area ratio points should tie to the
Evaluation Factor and should consider not just tax credits projects, but all
affordable housing projects. This would demand a better explanation of "other
affordable housing" and how that housing will be identified. Comment was made
that the Department does not have the necessary data to score this exhibit
right now. While Comments did indicate that this could be a good idea, it
was emphasized that if the data is not yet available, implementation should
wait one more year because developers want to see the data immediately. Numerous
Comments supported the deletion of this exhibit for this year and requested
further review. It was also recommended that if this exhibit remains, the
number of points awarded be reduced.
Comment was made that this exhibit, as written, would not allow the ratios
to differentiate by age of project, special needs populations, or set asides;
thus older tax credit deals, most of which had minimal renovation efforts,
should not be counted with the newer tax credit units. There were also Comments
made about geographic size of areas, how to determine which ratios should
be used for cities within other incorporated areas, and how to handle crossing
boundary lines just for points when the area is the same. One example of this
is that Burleson is a different city from Crowley, and they are considered
separate; but Fort Worth is considered as one area, but is ten times the size
of Burleson and Crowley.
Comment was made suggesting that the analysis of the regional formula be
performed for 2001 prior to skewing so many points based on a non-needs based
criteria. Even though an area's ratio of tax credit units may be high, it
does not mean that there is also not a demand for affordable housing units.
Likewise, an area with no tax credit units may not be a good place to develop
because there may be limited demand. Inclusion of these points will result
in a migration to communities that have been previously rejected. These rejections
were the result of a developer's preliminary review indicating that the area
did not have adequate housing demand and would not be economically feasible
upon completion. If the ratios are kept in the QAP, then it is requested that
the ratio information be made available immediately (one Comment suggested
up to 9 months prior to the application period) and that the 2-mile radius
language used for limiting concentration be applied. With the radius test
the project should also be evaluated and compared by type (new vs. rehab).
Department Response: The Department concurs with many of the Comments regarding
the area ratios and supports the revision of this criteria. Over the next
year, the Department will further explore the development of meaningful ratios
for possible use in the future.
Board Response: Department's response accepted with the adjustment of points
to seven for consistency with Exhibit 201.
(A) A project that is located in a city or county with no comparable existing
LIHTC developments and is not within two miles of an existing tax credit development,
will receive seven points. Evidence will include a market study with a full
review of tax credit units within the two mile radius. The term comparable
for this exhibit means projects serving the same targeted population (ie.,
the elderly).
§50.7(e)(1)(E) Young v. Cuomo Points
Comment: Several Comments were received indicating support of this new
addition to the QAP. A Comment was made asking that the Department clarify
what a non-impacted tract is and ensure that the information will be available
as soon as possible in a format that developers can readily access. Define
"non-impacted census tract pursuant to the Young v. Cuomo judgement". Also
clarify why a non-HUD program is being used to rectify HUD issues.
Subsequent to the inclusion of this item in the draft QAP, the United States
Department of Housing and Urban Development (HUD) commenced a remapping of
this area which will change the blocks designated as impacted or non-impacted.
Accordingly, HUD has urged our program not to proceed with this issue until
its work is complete.
Department Response: Based on the feedback from HUD, the Department will
be unable to ensure that reliable information is available at the time of
the Application publication; therefore, the Department recommends deleting
this item from the 2001 QAP.
Board Response: Department's response accepted.
§50.7(e)(3)(B) Mortgage Prepayment Selection Criteria
Comment: The Department was asked to clarify the evidence requirements
for the regulatory agreement relating to the prepayment clause. Under law
any mortgage can be prepaid unless there is a specific prohibition, so the
language needs to say "that the current owner is precluded from prepaying
the mortgage." Also, Comment was made to delete the evidence requirement for
the opt-out notice or non-renewal notice because a property owner will not
typically elect for an opt-out notice without a firm commitment for the purchase
of the property.
Department Response: The Department concurs with the proposed changes.
The revised language follows.
(B) Exhibit 203. Evidence that the Project is a low income building with
mortgage prepayment eligibility as provided for in the Code, §42(d)(6)(C),
or that the Project has an expiring Section 8 contract, which the owner is
under no obligation to renew. Such evidence must be a copy of the HUD regulatory
agreement and/or mortgage which does not preclude the current owner from prepaying
the mortgage and a copy of the expiring Section 8 contract(s). Applicant shall
also provide a statement as to its willingness to maintain low-income use
restrictions for the period applicable to the type of HUD assistance involved,
and the actions taken or required by it in order to assure that the HUD assistance
will continue to be provided to the Project (8 points).
Board Response: Department's response accepted.
§50.7(e)(3)(H) Mixed Income Developments
Comment: Comment was received that Exhibit 203H discourages the use of
4-bedroom units because an applicant must show that the average rents for
comparable 4-bedroom units are at least 10% higher on a per net rentable square
foot basis. Most 4-bedroom units are in older developments and new development
don't build them generally, so it is difficult to find comparables that meet
this test. Delete 4-bedroom units from the 10% higher test. A separate Comment
was made that senior projects can't compete with family deals due to unit
costs and higher rent levels for three and four bedroom units that allow for
a market rate component.
Department Response: The mixed-income points were designed to facilitate
the development of additional units in submarkets where a significant rent
differential exists between the program rents and market rents. Areas that
do not meet this requirement will not qualify for those points. No revision
is proposed to the QAP. The development of four bedroom units also provides
housing opportunity for families with children, as required by the Code.
Board Response: Department's response accepted.
§50.7(e)(3)(J) Units for Households at or below 50% of AMGI
Comment: Comments were received suggesting a sliding scale of points be
integrated based on the %age of units at various %ages of AMGI. For example,
a development with 50% of the units at 30% of AMGI should score higher than
a development with 50% of the units at 50% of AMGI. This could be done by
starting with a base level of 100% at 60% of AMGI and then every %age point
you go on an average below that, you get a certain number of points.
Department Response: The LIHTC Program does not generally support units
at 30% rents without an infusion of additional subsidy. To structure points
based on 30% of AMGI will put lower income areas of the state at a greater
disadvantage even when they are competing on a regional basis. Projects in
Austin will compete better than Waco or Temple even though all cities are
in the same region.
Board Response: Department's response accepted.
§50.7(e)(3)(K) Fourplexes and Townhomes
Comment: Comment was received that the points awarded for fourplexes and
townhomes should also be awarded to eight-plexes. It was also suggested that
the density for these developments be increased to 20 units per acre instead
of 16 units per acre.
Department Response: The Department believes that the existing criteria
work well to provide low density developments that give the tenants a feeling
of "ownership." If eight-plexes are desired, then a townhome configuration
may be used. No revisions are proposed to the QAP.
Board Response: Department's response accepted.
§50.7(e)(3)(M) Consistency with Consolidated Plan
Comment: Comment was received suggesting the removal of the requirement
that a project obtain local support if no consolidated plan exists, and instead
supports that the project only show evidence that the project is supported
by the State Plan. To require project support would require city council action
and create potential for NIMBY issues.
Department Response: The Department feels that the city letter is not an
excessive requirement. No revisions are proposed to the QAP. The Department
of Justice has encouraged the Department to refer cases of apparent discrimination
under the Fair Housing Act to the Department of Justice.
Board Response: Department's response accepted.
§50.7(e)(4)(B) Joint Venture Selection Criteria
Comment: Comment was received specifically supporting this new exhibit.
Comments were also made recommending that 100% nonprofit applicants as well
as joint ventures should receive the three points. Comment was made asking
for clarification on whether the nonprofit general partner had to be in control
of the project to qualify. Comments were also received asking that the joint
venture points require 51% control by the nonprofit entity. A request was
also made that these points be awarded for projects in which a joint venture
is established between two nonprofit entities. A separate Comment suggested
that no points be allocated for joint ventures, but that the three points
only be allocated for all Qualified Nonprofit Projects, giving them equal
support to the scoring for HUB's.
Department Response: The proposed points for joint ventures were created
to encourage joint ventures between for profit entities and smaller nonprofits
unable to compete individually. Changes to the language awarding the points
to all nonprofits would detract from this intended purpose. The existing language
already states that as the general partner of the project, the nonprofit entity
must materially participate in the development and management of the project.
While the Department did revise the language relating to the Nonprofit Set
Aside to indicate that projects qualifying for the set aside must have control,
the Department feels that to help smaller nonprofit's organizations, points
in this exhibit should not rest on who has control.
(B) Exhibit 209. Joint Ventures with Qualified Nonprofit Organizations.
Evidence that the Project involves a joint venture between a for-profit organization
and a Qualified Nonprofit Organization. The Qualified Nonprofit Organization
must be materially participating in the Project as one of the General Partners,
but is not required to have Control, to receive these points. However, projects
without Control will not be eligible for the nonprofit set-aside. Such evidence
must be in the form of an executed partnership agreement between the organizations
participating in the joint venture. The partnership agreement must clearly
identify the percentage interest of each organization.(3 points)
Board Response: Department's response accepted.
§50.7(e)(5) Participation of Local Tax Exempt Organizations
Comment: Comment was received indicating that it appears redundant that
organizations registered or qualified to conduct business in Texas, also be
required to register to conduct business with a local unit of government.
Please clarify the reason for this additional requirement. Delete the language
stipulating that the Owner will not get a point if they do not pay for the
services, for example the Workforce Commission's job training programs, etc.
should qualify. Comment was also made that in many small towns agencies partner
to assist community residents, regardless of what development they live in
and are able to take advantage of nonprofit services. Applicants should not
be required to provide a service that is unique to only residents of the development,
as long as acceptable services are provided.
Department Response: In view of changes in federal law, the Department
has modified this provision to allow applicants to choose a for-profit or
nonprofit entity to provide supportive services. The revised language is provided
below. Subparagraph (B) of this paragraph has no proposed changes and is not
included below.
Board Response: The Board expanded the requirement that service providers
must be an existing organization registered to do business in Texas to reflect
that service providers must be an existing organization qualified by the Internal
Revenue Service or other governmental entity. For all other language for this
item, the Department Response was accepted.
(5) Exhibit 210. Project Provides Supportive Services to Tenants. Evidence
that the Project Owner has an executed agreement with a for profit organization
or a tax-exempt entity for the provision of special supportive services for
the tenants. The service provider must be an existing organization qualified
by the Internal Revenue Service or other governmental entity. The provision
of supportive services will be included in the LURA (up to 5 points, depending
upon the services committed in accordance with subparagraph (B) of this paragraph).
(A) Both documents described in clauses (i) and (ii) of this subparagraph
must be submitted for the service provider to be considered under this exhibit.
(i) A fully executed contract between the service provider and the Applicant
that establishes that the services offered provide a benefit that would not
be readily available to the tenants if they were not residing in the development.
(ii) A copy of the service provider's Articles of Incorporation or comparable
chartering document.
§50.7(e)(6)(A) Elderly Developments
Comment: Please clarify if the head of the household has to be 62 years
of age or older. The workgroup also suggests that adults with disabilities
be allowed to live in elderly projects if they choose so regardless of their
age. A Comment was also made that elderly developments should not be limited
to townhomes.
Department Response: The Comments made for elderly developments are now
addressed in the newly proposed definition for Qualified Elderly Project found
at the public Comment summary for §50.2. However, because that definition
has been added to reduce redundancy in the QAP, the language for §50.7(e)(6)(A)
has also been revised. The Fair Housing Act stipulates the age requirements
for disabled tenants in elderly projects. The Fair Housing Act provides an
exception to discrimination based on familial status and establishes the age
requirement for tenancy in an elderly project regardless of disability. All
tenants must abide by those requirements.
(A) This criterion applies to elderly Projects which provide significant
facilities and services specifically designed to meet the physical and social
needs of the residents. Significant services may include congregate dining
facilities, social and recreation programs, continuing education, welfare
information and counseling, referral services, transportation and recreation.
Other attributes of such Projects include providing hand rails along steps
and interior hallways, grab bars in bathrooms, routes that allow for barrier-free
travel, lever type doorknobs and single lever faucets. All multistory buildings
(two or more floors) must be served by an elevator. Individual Units shall
not be multistory. Elderly Projects must not contain any Units with three
or more bedrooms. Such a Project must conform to the Federal Fair Housing
Act and must be a Project which meets the definition of Qualified Elderly
Project.(10 points).
Board Response: Department's response accepted.
§50.7(e)(6)(B) Transitional Housing
Comment: The suggestion was made that the Department award points for projects
that integrate homeless units, but do not require that the project be 100%
transitional. To do 100% of the project as transitional is very difficult
and it is more beneficial to the homeless population to have a mixed complex
with role models and regular working families.
Department Response: The Code is set up so that the entire building must
be established for transitional housing and appropriate supportive services
must be offered to the tenants. While projects could accomplish this by concentrating
the transitional tenants in specific buildings, the Department suggests that
points should continue to be awarded only to developments which focus entirely
on providing transitional housing. No revisions are proposed to the QAP.
Board Response: Department's response accepted.
§50.7(e)(8)(B) Bonus Points for Early Submission
Comment: It was suggested that the points for early application submission
should be removed because it is merely a "contest for speed" and projects
should not be awarded extra points because of increased staff capacity to
complete an application.
Department Response: The bonus period allows the Department to expedite
an early review of applications. No revisions are proposed to the QAP.
Board Response: Department's response accepted.
§50.7(e)(8)(C) Bonus Points for Site Evaluation
Comment: A comment was made that the scoring sheet for site evaluation
should be published. Also we need to be sure it is very objective because
projects submitted in the hopes of revitalizing certain areas should not be
penalized for sites in proximity to drug dealing and prostitution.
Department Response: The Department will include as part of its Application
Submission Procedures Manual a copy of its site evaluation criteria and will
modify it to ensure that projects in low income areas which contribute to
community revitalization are not unduly penalized.
Board Response: The Board elected to remove these bonus points due to concerns
that the scoring of these points may conflict with the Department's efforts
for revitalization projects.
§50.7(f) Credit Amount Limitations
Comment: It was suggested that to encourage participation by a wide variety
of developers, the maximum credit award over a three year period should be
limited to $1.8 million per developer or development team member. It was also
suggested that a $1.2 million cap be set per year for the developer or development
team. Conversely, Comment was received in opposition to any caps per developer
or development team because it was seen as counter-productive, it eliminates
cost-saving efficiencies, and reduces the ability to propose quality projects.
Furthermore, Section 42 does not refer to restrictions in any way.
Department Response: The Department reduced the amount of credits allocated
to each developer from $2.4 million to $1.8 million per year in the 2000 QAP.
The Department feels that the current limit provides a prudent balance between
the need to reward experienced developers without creating undue concentration
of the credits in too few hands. Furthermore, the current limit allows applicants
to apply for developments that allow for economies of scale and does not prohibit
awards to highly competitive applicants who provide quality developments solely
because they may have received an award in previous years. The current cap
is only 6% of the anticipated allocation amount for 2001. No revisions are
proposed to the QAP.
Board Response: While the Board did not choose to change the limit, it
did revise language to indicate that limitations apply unless provided for
by the Board (as opposed to the Department).
(1) The Department shall issue tax credits only in the amount needed for
the financial feasibility and viability of a Project throughout the Compliance
Period. The issuance of tax credits or the determination of any allocation
amount in no way represents or purports to warrant the feasibility or viability
of the Project by the Department. The Department will limit the allocation
of tax credits to no more than $1.2 million per Project. The allocation of
tax credits shall also be limited to not more than $1.8 million per Applicant.
These limitations will apply to all Affiliates of any Applicant, developer,
Project Owner, general partner, sponsor or their Affiliates or related entities
unless otherwise provided for by the Board. Tax Exempt Bond Project Applications
are not subject to the per Project and per Applicant credit limitations, and
Tax Exempt Bond Projects will not count towards the total limit on tax credits
per Applicant.
§50.7(g)(2) Size Limitations for Rural Projects
Comment: The workgroup agrees with the allowance to exceed 76 units in
rural areas, however it is recommended that Rural Project applications with
greater than 76 units not be allowed to participate in the Rural Set-Aside.
It was separately suggested that if underwritten acceptably, and supported
by the market study, to exceed the 76 rural cap, then the project should get
points for exceeding the cap. Comment was also received suggesting that the
last sentence of the paragraph relating to second phase developments exists
solely to control the influx of tax credit units to avoid market oversaturation
and that this works against public housing revitalization efforts. An exception
to this should be when new construction is replacing previously existing affordable
multifamily housing on the same site.
Department Response: The Department concurs that rural projects with a
market study to substantiate exceeding the 76 units should be ineligible for
the Rural Set-Aside. The proposed revised language follows. The language regarding
the Rural Set-Aside was also revised based on this feedback to ensure clarity
within the QAP. Revisions were also made to ensure that the QAP does not exclude
efforts at revitalization on second phases of projects.
(2) Rural Projects involving new construction will be limited to 76 Units
unless the Market Study clearly documents that larger developments are consistent
with the comparables in the community and that there is a significant demand
for additional units. Rural Projects exceeding 76 Units based on the Market
Study will be ineligible for the Rural Set-Aside. All other Projects involving
new construction will be limited to 250 units. These maximum unit limitations
also apply to those Projects which involve a combination of rehabilitation
and new construction. Projects that consist solely of acquisition/rehabilitation
or rehabilitation only may exceed the maximum unit restrictions. For those
developments which are a second phase or are otherwise adjacent to an existing
tax credit development unless such proposed development is being constructed
to replace previously existing affordable multifamily units on its site, the
combined Unit total for the developments may not exceed the maximum allowable
project size, unless the first phase has been completed and stabilized for
at least six months.
Board Response: Department's response accepted.
§50.8 Statement of Policy/Specific Management Requirements and Restrictions
Comment: Two Comments were received indicating general concern that the
Specific Management Requirements and Restrictions suggested in the July 2000
Recommendations of the Section 8 Task Force to TDHCA were not incorporated
in the form or manner anticipated by members of such Task Force. It should
be noted that the two Comments came from members of the Task Force.
Department Response: Comments relating to specific subsections of proposed §50.8
are addressed below; and many Commentators suggestions have been accepted;
however, as a general matter the Department and other state housing agencies
have over the years sought guidance from the IRS on interpretation of the
requirements for occupancy in tax credit projects of Section 8 voucher or
certificate holders. From the inception of the low-income housing tax credit
program in 1987 until 1993 there were no requirements in the Internal Revenue
Code (IRC) as to Section 8 tenants. In August of 1993, the federal tax laws
were amended to add the requirement that no tax credit is allowable unless
the extended use agreement between the owner and the state housing agency
"prohibits the refusal to lease to a holder of voucher or certificate of eligibility
under Section 8 of the United States Housing Act of 1937 because of the status
of the prospective tenant as such a holder." (IRC §42(h)(6)(B)). The
legislative history of that amendment indicates that this provision was intended
"to provide that an applicant would not be denied admission to a low-income
housing tax credit project because the applicant holds a voucher or certificate
of eligibility under Section 8 of the Housing Act of 1937."
In August of 2000, the Internal Revenue Service, the lead agency for the
Department of Treasury (IRS), the Department of Housing and Urban Development
(HUD) and the Department of Justice entered into a Memorandum of Understanding
(MOU) designed to promote enhanced compliance with the Fair Housing Act for
the benefit of LIHTC projects and the public. The MOU specifically sets out
eight areas of responsibilities and duties of these federal agencies. (1)
coordination on notifying tax credit project owners about charges, lawsuits
and other actions; (2) designating contacts and interagency technical assistance
and training; (3) training for state housing finance agencies and others;
(4) HUD's pilot program to train architects on the Fair Housing Act's accessibility
requirements; (5) cooperation in research concerning low-income housing tax
credit properties; (6) cooperation to identify and remove unlawful barriers
to Section 8 tenants; (7) cooperation in assisting syndicators of low-income
housing tax credits; and (8) annual civil rights meeting among federal agencies
and participation in National Conference of State Housing Agencies.
In response to the specific responsibility under paragraph (3) of the MOU,
the three agencies will be asked to present a fair housing training to the
Department and its governing Board and Department contractors. Additionally,
the Department has begun a series of Fair Housing training workshops. Sixty-three
members of the multifamily housing program staff attended a full-day mandatory
seminar on Fair Housing and accessibility training.
In response to the specific responsibility under paragraph (6) of the MOU,
the IRS held a meeting on December 14, 2000. That meeting included two representatives
of Community Affairs for the Department of Treasury; the Director of Policy
in HUD's Fair Housing Office in Washington D. C.; a representative for HUD's
Section 8 division; a senior litigator for the Department of Justice-Fair
Housing litigation division; policy directors of two housing advocacy groups--the
Center on Budget and Policy Priorities and the National Low Income Housing
Coalition; a representative of the National Association of Homebuilders; a
representative of the National Council of State Housing Agencies; and representatives
from two state agencies-TDHCA and the New York Housing Agency. Included in
the agenda of the meeting was a presentation and discussion of the Statement
of Policy adopted by the Board and the recommended Specific Management Requirements
and Restrictions. Subsequent meetings will address other pertinent issues
associated with Section 8 on tax credit projects.
The Department believes deference should be given to the federal process
initiated by the MOU in anticipation of receiving written guidance from the
federal entities. Specifically, the Office of Chief Counsel for the IRS has
provided informal interpretation that the effective date for application of
the provisions of §42(h)(6)(B) is August 10, 1993.
Board Response: Department's response accepted.
§50.8 Section 8 Policies--Applicability to Existing Tax Credit Projects
Comment: Comment was made that the Board and the Sunset Commission specifically
asked the Department to draft regulations relating to all properties and therefore,
the Department needs to pass a rule ensuring that the Section 8 policies apply
to all existing tax credit developments, not just future developments. The
Comment suggested that this rule should also include the provision of an enforcement
remedy.
Department Response: The applicability of Section 8 admittance policies
for existing projects will depend on when the project was placed in service.
The IRS has informally notified the Department that the effective date for §42(h)(6)(B)
is August 10, 1993. Thus, for projects placed in service between August 10,
1993 and February 28, 2001, a clause already exists in the LURA that requires
owners not to deny occupancy solely because the household holds a Section
8 certificate or voucher.
The Department will rely on the MOU process for further guidance concerning
the effective date. Once guidance is issued, the Department will revise its
Compliance Manual for adherence to these policies. For project placed in service
after February 28, 2001, the revised policy will be included in the LURAs
when the projects are placed in service. No changes to the QAP are proposed.
Board Response: Department's response accepted.
§50.8 Use of Form 8823 for Section 8 violations
Comment: A Comment was made that the Board policy on Section 8 indicates
that if an Owner unfairly excludes a Section 8 voucher holder the Department
will issue an IRS Form 8823. The Comment suggested that issuance of an IRS
Form 8823 should have significant bearing on the consideration of future applications
for participation in various Department programs and that the QAP does not
include either of these Board policy provisions.
Department Response: To clarify, the Statement of Policy approved by the
Board does not reference issuance of IRS Form 8823. The Department would and
does report non-compliance with Section 8 requirements on IRS Form 8823. All
violations reported are included in a point scoring system detailed in the
Application Submission Procedures Manual (ASPM). The total points (presently
30) are totaled to determine whether an applicant is in Material Non-Compliance
as defined in §50.2(42). A finding of Material Non-Compliance results
in the disqualification of an applicant to participate in future tax credit
allocations and tax exempt bond programs. (See §50.5(b)(4)). The Department
agrees with the Comment that a reported violation should have a significant
bearing on participation in Department programs and to emphasize the importance
of noncompliance with the Section 8 requirements the number of points for
such violation has been increased from 10 to the maximum of 30 which would
result in Material Non-Compliance. In the future, violations of state imposed
Section 8 policies which are included in the LURA will receive points associated
with LURA violations. No revisions are proposed to the QAP.
Board Response: Department's response accepted.
§50.8(e)(1) Section 8 Exclusionary Language and Management Plan Requirement
Comment: A Comment was made that the Board policy prohibits screening criteria
that "have the effect of excluding applicants with Section 8 vouchers or certificates".
The Comment indicated that this language is left out of the draft QAP and
should be included in the QAP to ensure nondiscrimination.
Comment was made that there is a discrepancy between the language adopted
by the Board and the language of the QAP. The QAP requires that a project
owner maintain a management plan relating to adherence to fair housing laws,
but it does not requires compliance with the management plan. According to
the Comment there is no penalty for a tax credit owner who violates the management
plan and the language adopted by the Board regarding Section 8 discrimination
and access has been dropped in the draft QAP.
Department Response: The Department concurs that the provision as proposed
does not clearly require the Owner to follow the management plan. The Department
will include the monitoring of the management plan within the scope of its
review. Proposed language for the QAP applies to paragraph (1) and paragraph
(1)(C) and follows:
(1) maintain a written management plan that is available for review upon
request. Such management plan must state an intention of the Project Owner
to comply with state and federal fair housing and anti-discrimination laws.
Owners and managers of all tax credit projects placed in service after August
10, 1993, are prohibited from having policies, practices, procedures and/or
screening criteria which exclude applicants solely because they have a Section
8 voucher or certificate. Such management plan must also clearly state the
objectives identified in subparagraphs (A)-(C) of this paragraph. Failure
to have the required objectives set forth clearly in the management plan or
failure to follow such required objectives in the operation of the Project
will be treated by the Department as noncompliance with the LURA.
(C) all other screening criteria, including employment policies or procedures
and other leasing criteria (such as rental history, credit history, criminal
history, etc.) must be applied to applicants uniformly and in a manner consistent
with the Texas and Federal Fair Housing Acts and with Department and Code
requirements;
Board Response: Department's response accepted.
§50.8(e)(1)(B) Section 8 Income Limits and Applicable Ratio
Comment: Many Comments were received in opposition to the 2.5 ratio. Recommendations
were made that management companies should be able to require a basic minimum
income of any resident, regardless of whether or not it exceeds the applicable
ratio to ensure that tenants will be able to pay for general living expenses.
Suggestions received from numerous Comments include: a minimum income of $1,500
to $2,000 depending on local conditions; that Owners who do use a minimum
requirement must apply it fairly to all Section 8 voucher holders regardless
of their source of income; that Owners using a minimum requirement must apply
it to all applicants equally, whether Section 8 voucher holders or not; and
that the 2.5 ratio be applied to the market rate of the unit rather than the
tenant's portion because if you go with the tenant's portion only, community
standards will be lowered.
Conversely, several Comments were received supporting the 2.5 standard
and emphasizing that all of the members of the Section 8 Task Force to the
Department were able to reach a consensus that the 2.5 cap was a good policy.
One Comment suggested that any minimum income requirement is exclusionary
and the impact of minimum income policies on persons with disabilities violates
the tax credit LURAs and the Fair Housing Act. A separate Comment was also
made that rent limits are too high and the documentation needed to rent an
apartment is too extensive.
Several recommendations were made that the 2.5 be removed and the establishment
of minimum requirements concerning the ratio of income to rent or housing
expenses be postponed for one year in order for the MOU process to generate
guidance.
Department Response: As a clarification, the Statement of Policy approved
by the Board does not include the 2.5 ratio although as the Commentator points
out the Task Force did recommend that ratio. The Department agrees that minimum
requirements concerning the ratio of income to rent or housing expenses should
be deferred to the federal government guidance initiated by the MOU concerning
minimum income requirements. Therefore, the language in the QAP has been revised
to remove the 2.5 ratio, and also to clarify the words "minimum income requirements"
to "minimum requirements concerning the ratio of income to rent or housing
expenses." The Department believes that the immediate goal of assuring that
Section 8 tenants have expanded access to LIHTC units is still accomplished.
The following language is suggested.
Board Response: The Board chose to keep the proposed language in the first
sentence, but chose to use the language using the 2.5 multiplier in the second
sentence.
(B) any minimum income requirements for Section 8 voucher and certificate
holders will only be applied to the portion of the rent the prospective tenant
would pay, provided, however, that if Section 8 pays 100% of the rent for
the Unit, the Project Owner may establish other reasonable minimum income
requirements to ensure that the tenant has the financial resources to meet
daily living expenses. Minimum income requirements for Section 8 voucher and
certificate holders will not exceed 2.5 times the portion of rent the tenant
pays; and
§50.8(e)(2) Fair Housing Logo and Posters
Comment: Comment was made that the QAP does not indicate the requirement
that the Fair Housing Logo and Fair Housing Posters must be posted in the
office of every LIHTC property.
Department Response: §50.8(e)(2) of the QAP specifically states that
Project Owners must "post Fair Housing logos and the Fair Housing poster in
the leasing office." The Department will include this requirement in the LURA
for 2001.
Board Response: Department's response accepted.
§50.8(e)(3) Section 8 Policy regarding Affirmative Marketing Requirement
Comment: Comment was made that to ensure that Section 8 voucher holders
and members of minority groups have access to information about tax credit
properties, owners should be required to comply with the same affirmative
marketing regulations which apply to all TDHCA properties receiving HUD funds.
Department Response: The proposed QAP does require a written Affirmative
Marketing Plan and the Department is committed to monitoring the existence
of the Affirmative Marketing Plan and to ensuring that Owner's certify adherence
with the plan. Further, the Department will continue to post the inventory
of multifamily rental units on the web site.
Board Response: Department's response accepted.
§50.8(e)(4) Section 8--Communication with Local Administering Agency
Comment: Comment was made that the Board policy indicates that the Owner
be required annually to communicate with all of the local administering agencies
for the Section 8 program and dictates what that communication must include
and that the proposed QAP, in contrast, requires Owner to communicate with
"public housing authorities or local Section 8 administrators". According
to the Comment made, public housing authorities were purposely removed from
the board policy because that is the present method of communication and is
frequently ineffective because in many areas of the state there are separate
administrators of the Section 8 programs, so a project Owner may communicate
to a local public housing authority, but the word will not get out to Section
8 voucher holders if the PHA does not administer the Section 8 program. The
Comment suggested that the QAP needs to revise this language and also include
the specific nature of the communication required.
Department Response: The Department concurs with the proposed change regarding
Section 8 administrators to ensure that Section 8 voucher holders are properly
informed. Details regarding the specific nature of the communication were
already included in the QAP.
(4) communicate annually during the first quarter of each year in writing
with the director of each Section 8 program which has jurisdiction within
the geographic area where the Project is located. Such communication will
include information on the unit characteristics and rents and will advise
the administrating agency that the property accepts Section 8 vouchers and
certificates and will treat referrals in a fair and equal manner. Copies of
such correspondence must be available during on-site reviews conducted by
the Department.
Board Response: Department's response accepted.
§50.8(g)(1)(E) Section 8 Annual Certification regarding Discrimination
Comment: A Commentator stated that the proposed QAP is vague when it states
that the Owner Certification shall state that "all Units in the Project were
for use by the general public including the requirement that no finding of
discrimination under the Fair Housing Act occurred for the Project." The Comment
suggested that the clause "Fair Housing Act" should be modified to make clear
that this covers both the Texas and Federal Fair Housing Acts. The "finding
of discrimination" language should also be clarified to define what a finding
is.
Department Response: In the QAP, the Department has used the Owner Certification
which has been adopted by the National Council of State Housing Associations
membership. The Executive Directors of each state housing agency, including
Texas, voted to adopt language suggested by NCSHA. The Department feels that
this Certification is acceptable, however it will add the recommended reference
to the Texas Fair Housing Act.
(E) all Units in the Project were for use by the general public including
the requirement that no finding of discrimination under the Texas and federal
Fair Housing Acts occurred for the Project;
Board Response: Department's response accepted.
§50.8(g)(1)(K) Section 8 Annual Certification of Compliance
Comment: Comment was made that the Board policy recommends that in the
Annual Owner Certification of Program Compliance the owner certify that they
have complied with all provisions of the Section 8 discrimination policy adopted
by the Board and LURA requirements relative to Section 8 voucher holders.
The Comment suggested that the QAP only requires the Owner to certify that
they have not refused to lease a Unit to an applicant because of his or her
status as a Section 8 voucher holder and that the QAP does not require that
the owner certify compliance with new minimum income caps or reporting requirements
or to certify that they have remained in compliance with the other Section
8 and access provisions. Further, it is also unclear how the Department would
be able to enforce violations since they do not appear in the LURA. The QAP
should be revised to require that the new anti-discrimination and Section
8 access provisions appear in Section 6 of the LURA.
Department Response: As stated above, the Department will defer to the
federal process set out in the MOU before imposing these recommended specific
requirements. In the proposed QAP, the Department has used the Owner Certification
adopted by the National Council of State Housing Associations. The Executive
Directors of each state housing agency, including Texas, voted to accept this
Owner Certification. The Department feels that this Certification is acceptable.
No changes to the QAP are proposed.
Board Response: Department's response accepted.
§50.8(g)(1)(K) Inclusion of Section 8 Provisions in the LURA
Comment: Comment was made that the QAP should include all of the new Section
8 provisions in future LURAs. It was contested that all future LURAs should
provide an effective enforcement remedy for the Department and for low-income
persons to have the right to sue a tax credit owner and that any remedy adopted
should provide that the prevailing party can collect attorney's fees and that
such provision should be included in the LURA.
Department Response: A revision to the language of the QAP is not required
to make changes to the LURA. However, the Department concurs that the language
in the LURA should be specific and the LURA used for 2001 allocations will
include the changes made in §50.8 of the QAP. As to the suggestion regarding
collection of attorney's fees, the Department does not feel it is in the best
interest of the program to include this provision. No changes to the QAP are
proposed.
Board Response: Department's response accepted.
§50.8(g)(2) Section 8 Compliance Monitoring
Comment: Comment was made that the Board policy indicates that the Compliance
Division of TDHCA will undertake vigorous monitoring including all types of
efforts. The Department should therefore establish procedures, in rule, to
monitor and enforce compliance with fair housing laws. Additionally, it was
suggested that the QAP add a requirement for additional compliance monitoring
such as requiring Owners to annually submit the number of Section 8 voucher
holders admitted as new tenants over the year, the number of all new tenants
over the year, the number of Section 8 voucher holders rejected over the year,
and the number of all applicants rejected over the year. It was further suggested
that the QAP be amended to state that TDHCA will employ fair housing testing
to ensure compliance with the Fair Housing Act and Section 8 policies.
Department Response: As a clarification, the Statement of Policy approved
by the Board does not address specific compliance monitoring procedures, however
many of the Task Force's recommendations as to compliance monitoring have
been incorporated into §50.8(e). Regarding testing and responding to
individual complaints, the Department does not have the authority to act as
an investigative agency concerning compliance with federal Fair Housing laws.
That responsibility in Texas has been delegated to HUD through the Department
of Justice and to the Texas Commission on Human Rights. The Department recommends
no changes to the QAP.
Board Response: Department's response accepted.
PUBLIC COMMENT AND DEPARTMENTAL RESPONSE TO ITEMS THAT DO NOT SPECIFICALLY
RELATE TO THE QAP
This section discusses items that are not specifically addressed in the
version of the QAP submitted for public comment.
Application Acceptance Period
Comment: The end of the early application period is typically at the end
of the third week in March which is spring break week in Houston for applicants
who have children. It is proposed that the application period be extended
to the end of the last week in March.
Department Response: The QAP does not indicate a specific deadline date
for the early application period, it merely indicates that applications submitted
within the first ten working days of the application acceptance period will
be eligible for points. The Department believes that ten days is an appropriate
time frame for receiving bonus points. To push the early application deadline
back would involve delaying the Application Acceptance Period, which the Department
does not feel would be widely supported.
Board Response: Department's response accepted.
Applications for Public Viewing
Comment: Several comments were received suggesting that public access be
given to all tax credit applications. One proposal was that developers be
asked to submit one additional copy of the entire application to be put in
a separate viewing room for the public to ensure that the public has access
to all submitted documents. One comment proposed that the viewing availability
take place for the 30 days prior to Board action relating to the award of
credits, while other suggestions were for the applications to be available
within 1 day or within 30 days of the application deadline. Unwillingness
to open files to the public is a barrier to Freedom of Information. Conversely,
comment was received in opposition to any publication of application information
or early release. It was opined that it discloses private personal or corporate
financial information and could lead to anti-competitive behavior with other
developers or sponsoring teams seeking to discover their competitors proposed
location and costs.
Department Response: In the past, the Department has sought and received
an Attorney General's ruling that tax credit applications are excepted from
disclosure under §552.104 of the Public Information Act ("Act") (Chapter
522 of the Government Code) during the evaluation period because it is "information
that, if disclosed would give advantage to a competitor or bidder." The Department
agrees that publication of application information, particularly during the
scoring period, would disclose private personal and corporate financial information
that would lead to anti-competitive behavior with other applicants. This would
potentially harm the Department's ability to competitively and fairly award
credits. Furthermore, §552.305 of the Act requires the Department to
notify all third parties of request for disclosure of information that contain
proprietary information that may be subject to an exception under the Act.
The applications may contain financial and commercial information or trade
secrets that would require the Department to notify the third party before
that information can be disclosed to give the third party an opportunity to
argue an exception under the Act with the Attorney General. Because of the
competitive nature of the awards process, public opposition and reported fomenting
of opposition by applicants, such a disclosure would also potentially harm
the Department's ability to competitively award credits.
The Department already publishes applicants information on its web site
showing project location, set-aside, number of units, credits requested, score
requested, owner contact name and phone number and also notifies officials.
The Department believes that this level of disclosure is in keeping with open
government.
Board Response: The Board chose to add language to §50.4 relating
to the Availability of Applications and Confidential Information pursuant
to this comment.
(c) Availability of Application. Applications for tax credits are public
information and are available upon request after the Application Acceptance
Period closes. Exhibits to an Application will not be available for public
disclosure until after the Board approves the Allocation of tax credits, in
accordance with the Texas Public Information Act of the Government Code Chapter
552.
(d) Confidential Information. An Applicant shall mark each Exhibit or a
portion thereof that the Applicant considers confidential as to trade secrets
or commercial or financial information, in which the Applicant desires not
to be disclosed in accordance with Texas Public Information Act. A request
for such information shall be processed in accordance with 552.305 of the
Government Code.
Creation of Program Database
Comment: It was requested that the Department create a user-friendly database
on the web of all tax credit projects including photos, amenity lists, location
information, rent and income limits and the development team. It was also
suggested that TDHCA build a statewide database that will reflect the housing
stock available that meets Section 504 standards and have accessible units.
Department Response: This is an excellent suggestion. The Department is
currently working on an upgrade of its internal database and hopes to be able
to integrate these features in the database once it is completed.
Board Response: Department's response accepted.
Developer Performance
Comment: Comment was made that the agency should score applications based
on the previous TDHCA inspections (ones during construction) of sites run
by the general partner and look at their track record. The Department needs
to look carefully at how past projects of any developer are performing with
management issues, complaints with local housing authorities, etc.
Department Response: The Department currently inspects all projects throughout
the construction and operation of the development. Any problem developers
will be identified. No revisions are proposed for this item. Under the 2000
Allocation Plan, the Department revamped its compliance review process to
be more rigorous and objective in reviewing the applicants development history
in the program in Texas and other states.
Board Response: Department's response accepted.
Division of Responsibilities Among Staff
Comment: It was suggested that responsibilities be divided among staff
so that the staff allocating projects do not also oversee the projects to
ensure fiduciary control and to make sure that projects are built according
to the way they are scored.
Department Response: Currently the staff reviewing the applications also
process carryover and cost certification documents. Because of the limited
tax credit staff, and the "cycles" associated with the program, every staff
member of the Tax Credit Program is needed to participate in the review of
applications, carryovers and cost certifications within the proscribed time
limits. However, the staff of the Tax Credit Program do not underwrite projects
during the application period, nor do they monitor the projects for compliance
once the IRS Forms 8609 have been issued.
Board Response: Department's response accepted.
Ethics, Ex Parte Rule
Comment: It was recommended that persons with matters before the board
or the agency dealing with tax credits during the tax credit application cycle
should be prohibited from speaking with board members individually and should
speak only with staff or in an open meeting.
Department Response: The Department takes no position on this comment.
This is a matter for the Board to decide.
Board Response: The Board has elected to include ex parte communication
as a cause for Application ineligibility at §50.5(b).
(b) Additionally, the Department will disqualify an Application if it is
determined by the Department that:
(7) the Applicant or any Person, general partner, general contractor and
their respective principals or Affiliates active in the ownership or control
of the proposed tax credit property, or person employed as a lobbyist or in
another capacity on behalf of the Project, communicates with any Board member
with respect to the Project during the period of time starting with the time
an Application is submitted until the time the tax credits are approved by
the Board.
Ethics, Revolving Door Policy
Comment: It was recommended that the Board of Directors of the Department
establish a "revolving door" policy in which former members of the Board and
former senior staff are prohibited from receiving direct or indirect funds
by participating in the tax credit program for three years after service.
It was perceived that allowing former employees and Board members to participate
in or benefit from the program represents an appearance of impropriety and
should be avoided. It was suggested that this could be done via a certification
process or through adding language to §50.5, Ineligible and Disqualified
Applications.
Department Response: The Department will continue to adhere to the provisions
of Chapter 572 of the Texas Government Code which defines the revolving door
policy.
Board Response: Department's response accepted.
Public Education
Comment: It was suggested that the Department needs to make more of an
effort at educating neighborhood groups about tax credits. Department Response:
The Department has requested funding for additional employees who will serve
as Regional Development Coordinators and will go into the field to facilitate
partnerships, improve access to programs, and provide information about programs.
Board Response: Department's response accepted.
Review of Entire Award Process
Comment: It was suggested that the whole tax credit award process needs
to be looked at more holistically so that it is more objective instead of
subjective. It was proposed that the program take a year off or work all summer
and work closely with the Board to overhaul the whole process. Comment supported
an overhaul of §50.7, including the evaluation factors, tie breaker factors
and the threshold and selection criteria. This extensive proposal is made
to eliminate subjectivity and involves the basic process of reviewing Threshold
Criteria, scoring based on Selection Criteria and then sending all top scores
to Underwriting. It was also proposed that the results of each phase of the
evaluation process (Threshold, Selection, Underwriting and Evaluation Factors)
be released to the public as soon as they are completed by staff.
Department Response: The Department does not feel that it is in the best
interest of the low income populations being served to defer the program for
an entire year of credits in order to concentrate only on revisions. Much
of the improvement in the program came about through hands-on experience administering
it and making adjustments for changes in law, housing needs and public comment.
Decisions about real estate transactions like the tax credit awards process
is a balance between managing objective and subjective elements.
Board Response: Department's response accepted.
Rotation of Staff
Comment: Comment was made that if the QAP process remains subjective, then
key staff leadership should be rotated every few years. This would be an important
control reform to prevent too much power over the program in the hands of
a few.
Department Response: The Department feels that due to the technicality
of the tax credit program it is unwise to consistently remove those staff
who master and gain experience of the processes, rules and regulations associated
with the program. However, the Board and the Department will continue to make
every effort to reduce the subjectivity of the tax credit process.
Board Response: Department's response accepted.
Special Family Consideration
Comment: A comment was received that the QAP should give points for families
that are comprised of three generations. Department Response: The QAP awards
points to applications for entire developments, not for specific family compositions.
No revisions to the QAP are proposed.
Board Response: Department's response accepted.
Special Merit Projects
Comment: It was suggested that subjectivity should be allowed in the process,
but that subjectivity should be left solely to the Board in an open meeting
format. This format would allow the Board, at the public meeting, to award
up to five points for "Special Merit" projects or "Projects of Critical Importance."
Department Response: The Board already has authority to make allocation
decisions based on its review of staff recommendations, which includes making
discretionary decisions based on the relative merit of projects.
Board Response: Department's response accepted.
Streamlining of Inspections
Comment: Since syndicators and lenders also require inspections, the Department
should streamline the process and costs by coordinating the new inspections
and ADA inspections with the other entities.
Department Response: The Department will work towards this end, but will
ensure that the independence of its inspectors is not compromised.
Board Response: Department's response accepted.
Underwriting, Use of IRS Technical Advice Memoranda (TAMs)
Comment: The IRS has issued several new Technical Advice Memoranda which,
if applied to a proposed project's projected site costs, impact fees, and
development fees, may result in a significant reduction of eligible basis.
(The specific amount of any reduction will, of course, depend upon the extent
to which challengeable items are included in eligible basis, as well as the
owner's ability to document that particular costs are properly attributable
and capitalized to buildings rather than to non-basis items.) The development
industry is concerned about the application of the TAMs and the possibility
that syndicators will require developers either (i) to produce two pro-formas-one
including all costs the developer believes should be included and another
that with reduced basis if the TAMs are applied or (ii) to demonstrate that
a project will remain feasible even if items which are challengeable under
the TAMs are excluded from basis. They ask that the Department, in underwriting,
provide flexibility and cooperate with developers and syndicators in the underwriting
process in determining feasibility.
Department Response: The Department recognizes that in light of the issuance
of several recent Technical Advice Memoranda by the IRS, some revision in
the Department's cost certification and underwriting procedures may be warranted
to address the possibility of reductions to eligible basis; however, because
the ultimate responsibility for pro formas and establishing eligible basis
is that of the applicant for the tax credit, each applicant must rely on its
tax credit counsel and advisors as to effect of such TAMs on the representations
which applicants make to the Department with respect to eligible basis, beginning
with the application for the credits through cost certification and issuance
of IRS Form 8609. In reviewing an application and in making subsequent decisions
as to allocations with respect to a particular project, the Department reserves
the rights (i) to request an apportionment of various fees and expenses between
basis and non-basis items along lines suggested by the holdings in the IRS
TAMs and (ii) to take into account whether a portion of the credits sought
are likely to be disallowed and whether the project may not be viable if a
portion of the credit were to be disallowed in accordance with the positions
taken in the IRS TAMs, as well as in any subsequent evolution of the law in
this respect. The Department further reserves the right to request at any
time such legal opinions at to matters concerning eligible basis and such
showings as to project viability as it deems appropriate, based upon developments
in the law.
Board Response: Department's response accepted.
MINOR TECHNICAL CHANGES FOR QAP CONSISTENCY
§50.9(d)(1) Phase I Environmental Site Assessment
Explanation of Change: The QAP provided to the Board for approval erroneously
included language relating to the Phase I Environmental Site Assessment as
both a Threshold Criteria (§50.7(d)(10)) and a requirement at Carryover
(§50.9(d)(1). The Department intended for the requirement to be a Threshold
Criteria, not a Carryover requirement. In light of this error, the language
found at §50.9(d)(1) is proposed for deletion. The language at §50.9(d)(1)
was more extensive than the language in the Threshold Criteria Exhibit 110
because the extensive requirements associated with the Phase I will be integrated
into the Application Submission Procedures Manual.
Board Response: Department's response accepted.
§50.2(15) Definition of Carryover Allocation Document
Explanation of Change: The definition for Carryover Allocation Document
found at §50.2(15) references another section of the QAP. That reference
was not correct. The corrected reference is proposed.
(15) Carryover Allocation Document--A document issued by the Department
to a Project Owner pursuant to §50.4(i) of this title.
Board Response: Department's response accepted.
§50.7(d)(5)(F)(ii)(I) Certification of Successful Record of Construction
Explanation of Change: The draft QAP indicated that applicants can request
a certification of their experience at least 60 days prior to the beginning
of the Application Acceptance Period. With the Application Acceptance Period
beginning in March, this would entail all requests being in prior to the approval
of the QAP on January 26. As this oversight was not intended, it is proposed
that the number of days be changed.
(I) A certification from the Department that the Person with the experience
satisfies this exhibit. Applicants who have previously applied for a Tax Credit
Allocation must request this certification at least twenty-one days prior
to the beginning of the Application Acceptance Period. Applicants should ensure
that the individual whose name is on the certification appears in the organizational
chart provided in Exhibit 105A. If the certification is for the General Contractor,
then this should be clearly indicated on the document. Board Response: Department's
response accepted.
§50.7(e)(3)(E) and (F)
Explanation of Change: It appears that clarity is also needed on §50.7(e)(3)(E)
and (F) to ensure that the points are mutually exclusive and to remove an
overlap of qualifying points.
(E) Projects will be eligible for points under subparagraph (E) OR (F).
These points are mutually exclusive. The proposed development provides low
density housing of no more than 20 Units per acre or as follows:
(i) 16 Units or less per acre (6 points); or
(ii) 17 to 20 Units per acre (4 points).
(F) The proposed development is designed as a multistory elderly development
or a Highrise Urban Infill Project. Points are awarded as follows:
(i) 21 to 24 Units per acre (5 points); or
(ii) 25 to 28 Units per acre (3 points).
Board Response: Department's response accepted.
MODIFICAITONS TO THE QAP AS A RESULT OF CHANGES IN FEDERAL LAW
This section discusses items that are modifications to the QAP based on
recent changes in federal law that affect the tax credit program.
Increase in the Housing Credit Cap
Explanation: No change to the QAP is required. Staff will increase the
per capita component of the State Housing Credit Ceiling to $1.50 for 2001.
Board Response: Department's explanation accepted.
Reversal of the Housing Credit Stacking Rule
Explanation: No change to the QAP is required. Staff will calculate the
amount of credits available to be allocated and/or carried forward based on
the new Stacking Rules.
Board Response: Department's explanation accepted.
§50.7(e)(3)(A)
Explanation: Project Characteristics will be revised to include whether
the project includes the use of existing housing as part of a community revitalization
plan.
Exhibit 202. Evidence that the Project to be purchased qualifies as a federally
assisted building within the meaning of the Code, §42(d)(6)(B), and is
in danger of having the mortgage assigned to HUD, TxRD-USDA, or creating a
claim on a federal mortgage insurance fund (such evidence must be a letter
from the institution to which the development is in danger of being assigned);
OR evidence that the Applicant is purchasing(ed) a Property owned by HUD,
an insured depository institution in default, or a receiver or conservator
of such an institution, or is an REO Property or other existing property which
is being rehabilitated as part of a community revitalization plan. Such evidence
must be in the form of a binding contract to purchase from such federal or
other entity as described in this paragraph, closing statements, or recorded
warranty deed. For an existing Project which is part of a community revitalization
plan, documentation must include a letter from the city/county which verifies
that the Project is part of a community revitalization plan and provides a
detailed description of the contribution to the revitalization plan (5 points).
Board Response: Department's proposed language accepted.
§50.7(e)(5)
Explanation: The revised language is provided below. Subparagraph (B) of
this paragraph has no proposed changes and is not included below.
Board Response: The Board expanded the requirement that service providers
must be an existing organization registered to do business in Texas to reflect
that service providers must be an existing organization qualified by the Internal
Revenue Service or other governmental entity. For all other language for this
item, the Department response was accepted.
(5) Exhibit 210. Project Provides Supportive Services to Tenants. Evidence
that the Project Owner has an executed agreement with a for profit organization
or a tax-exempt entity for the provision of special supportive services for
the tenants. The service provider must be an existing organization qualified
by the Internal Revenue Service or other governmental entity. The provision
of supportive services will be included in the LURA (up to 5 points, depending
upon the services committed in accordance with subparagraph (B) of this paragraph).
(A) Both documents described in clauses (i) and (ii) of this subparagraph
must be submitted for the service provider to be considered under this exhibit.
(i) A fully executed contract between the service provider and the Applicant
that establishes that the services offered provide a benefit that would not
be readily available to the tenants if they were not residing in the development.
(ii) A copy of the service provider's Articles of Incorporation or comparable
chartering document.
§50.7(e)(3)(C) Tenant Populations of Individuals with Children
Explanation: The revised language is provided below.
(C)Project provides Units for housing individuals with children. To qualify
for these points, these Units must have no fewer than three bedrooms and at
least 1000 square feet of net rentable area for three bedrooms Units or 1200
square feet of net rentable area for four bedrooms Units. Unless the building
is served by an elevator, 3 or 4 bedroom Units located above the building's
second floor will not qualify for these points. If the Project is a mixed-income
development, only tax credit Units will be used in computing the percentage
of qualified Units for this selection item.
(i) 15% of the Units in the development are three or four bedrooms (5 points);
and
(ii) an additional point will be awarded for each additional 5% increment
of Units that are three or four bedrooms up to 30% of the Units (a maximum
of three points) (3 points).
Board Response: Department's proposed language accepted.
§50.7(e)(7)
Explanation: Project is Intended for Eventual Tenant Ownership. Language
existing at §50.7(e)(7) relating to Right of First Refusal has already
addressed this requirement. No change to the QAP is required.
Board Response: Department's explanation accepted.
§50.7(e)(8)(D) Bonus Points
Explanation: Preference for a Project in a Qualified Census Tract, the
development of which contributes to a concerted community revitalization plan.
Board Response: The Board agreed with the proposed language, but preferred
to see this item removed from the Bonus point section and integrated into
Exhibit 201 found at §50.7(e)(1) as subparagraph (E). At this time the
Board also opted to increase all points in Exhibit 201 to 7 points. This revision
also impacts the language found at §50.7(e)(1).
(1) Exhibit 201, Development Location. Evidence that the subject Property
is located within one of the geographical areas described in subparagraphs
(A)-(E) of this paragraph. Areas qualifying under any one of the subparagraphs
(A)-(E) of this paragraph will receive 7 points. A project may only receive
points under one of the subparagraphs (A)-(E) of this paragraph:
(E) Project is located in a QCT and contributes to a concerted community
revitalization plan. To qualify for these points, the Project Owner, in addition
to submitting Exhibit 102 (B), must also submit a letter from a city/county
official which verifies that the development is located in a Qualified Census
Tract, and provides a detailed description of the revitalization plan under
way in the community, including how the project contributes to such concerted
revitalization efforts.
§50.7(d)(11)
Explanation: Although the QAP currently requires a Market Study prepared
by an independent analyst who has no financial interest in the project, the
study is waived for Projects funded by Texas Rural Development. Also, while
the Department does not formally approve market analysts, it has developed
guidelines and minimum qualification which must be met by all analysts. The
following amendment is proposed to ensure that all Projects submit a Market
Study:
(11) Exhibit 111. A comprehensive Market Study prepared at the developer's
expense by a disinterested Qualified Market Analyst in accordance with the
Market Analysis and Appraisal Policy provided in the Application Submission
Procedures Manual. The Market Study should be prepared for and addressed to
the Department.
(A) The Department may determine from time to time that information not
requested in the Third Party Market Study Standards will be relevant to the
Department's evaluation of the need for the Project and the allocation of
the requested Housing Credit Allocation Amount. The Department may request
additional information from the Qualified Market Analyst to meet this need.
(B) All Applicants shall acknowledge by virtue of filing an Application
that the Department shall not be bound by any such opinion or the Market Study
itself, and may substitute its own analysis and underwriting conclusions for
those submitted by the Qualified Market Analyst.
§50.8(g)(2)(C), Site Monitoring Visits
Explanation: No change to the QAP is required. §50.8(g)(2)(C) states
that the Department will conduct site monitoring reviews (unless the Project
is required to have fewer than ten low income units) at least once every three
years on low income housing Projects.
Board Response: Department's explanation accepted.
§50.4(d) and §50.7(b) Documentation of Discretion
Explanation: §50.4(d) and §50.7(b) of the QAP already contain
language instructing the Department and the board to enumerate the reasons
for selecting a project for underwriting and allocation of credits. The Department
will provide more detailed explanation of each project's selection to the
board book, applicants, and the public. No change to the QAP is required.
Board Response: Department's explanation accepted.
Extension of time to Meet the 10 Percent Test
Explanation: The Department will continue to require that all 10% expenditures
for the Carryover Allocations for Commitment Notices issued at the July meeting
of the board should be met in October to ensure that the processing of Carryover
Allocation Forms is completed prior to the start of a new Application Round.
No change to the QAP is required.
Board Response: Department's explanation accepted.
Amendment to Eligible Basis Rules
Explanation: No change to the QAP is required. The Underwriting guidelines
will be amended to reflect the inclusion of a community service facility (not
in excess of 10 percent of the total eligible basis in the building) in eligible
basis.
Board Response: Department's explanation accepted.
§50.2(53) Change to Qualified Census Tract Definition
Explanation: The definition of QCT was changed in accordance with federal
law.
(53) Qualified Census Tract--Any census tract which is designated by the
Secretary of HUD and, for the most recent year for which census data are available
on household income in such tract, either in which 50% or more of the households
have an income which is less than 60% of the area median family income for
such year or which has a poverty rate of at least 25%.
Board Response: Department's proposed language accepted.
Eligibility of NAHASDA-Financed Developments for 9 Percent Credit
Explanation: No change to the QAP is proposed. The Department's underwriting
guidelines will be amended to reflect the fact that NAHASDA will receive the
same treatment as HOME financing.
Board Response: Department's explanation accepted.
The new sections are adopted pursuant the authority of the Texas
Government Code, Chapter 2306; Chapter 2001 and 2002, Texas Government Code,
V.T.C.A., and Section 42 of Internal Revenue Code of 1986, as amended, (26
U.S.C.A) which provides the Department with the authority to adopt rules governing
the administration of the Department and its programs; and Executive Order
AWR-91-4 (June 17, 1991), which provides this Department with the authority
to make housing credit allocations in the State of Texas.
Section 42 of Internal Revenue Code of 1986, as amended, (26 U.S.C.A),
provides for credits against federal income taxes for owners of qualified
low income rental housing projects. That section provides for the allocation
of available tax credit amount by state housing credit agencies. As required
by the Internal Revenue Code, Section 42 (m)(1), the Department developed
a Qualified Allocation Plan which was adopted by the governing board of the
Department and submitted to the Governor in accordance with Texas Government
Code §2306.671(b) and is contingent upon the Governor's approval in accordance
with Texas Government Code §2306.671(c).
§50.1.Scope.
(a)
Purpose. The Rules in this chapter apply to the allocation
by the Texas Department of Housing and Community Affairs (the Department)
of certain low income housing tax credits authorized by applicable federal
income tax laws. The Internal Revenue Code of 1986, §42, as amended,
provides for credits against federal income taxes for owners of qualified
low income rental housing Projects. That section provides for the allocation
of the available tax credit amount by state housing credit agencies. Pursuant
to Executive Order AWR-91-4 (June 17, 1991), the Department was authorized
to make housing credit allocations for the State of Texas. As required by
the Internal Revenue Code, §42(m)(1), the Department developed a Qualified
Allocation Plan (QAP) which is set forth in §50.3-§50.9 of this
title. Sections in this chapter establish procedures for applying for and
obtaining an allocation of the low income housing tax credit, along with ensuring
that the proper threshold criteria, selection criteria, priorities and preferences
are followed in making such allocations.
(b)
Allocation Goals. It shall be the goal of this Department
and the Board, through these provisions, to encourage diversity through broad
geographic allocation of tax credits within the state and to promote maximum
utilization of the available tax credit amount. The criteria utilized to realize
this goal is described in §50.7(b) of this title. Such criteria shall
be implemented to ensure that the tax credits are allocated to owners of Projects
that will serve the Department's public policy objectives and federal requirements
to provide housing to persons and families of very low and low income.
(c)
Utilization of Historically Underutilized Businesses. It
is the policy of the Department to encourage the use of Historically Underutilized
Businesses (HUBs) in the tax credit program as developers, general partners
and members of a development team. In response to this policy, all Applicants
are required to make a good faith effort to ensure maximum HUB participation
in the program. The Department will require the Applicant to identify the
HUBs that will be used in the development and/or continuous operation of the
Project. The Department will also request information pertaining to the use
of HUBs in the actual development of the Project at the time of final allocation
of tax credits, pursuant to §50.9(f) of this title.
(d)
The Rural Development services of the United States Department
of Agriculture serving the state of Texas (TxRD-USDA) Memorandum of Understanding
(MOU). Although not mandated to do so, the Department developed a MOU with
the TxRD-USDA to assure maximum utilization and optimum geographic distribution
of tax credits in rural areas. This MOU seeks to achieve increased sharing
of information, reduction of processing procedures, and fulfillment of project
compliance requirements involving existing, rehabilitated, and new construction
housing projects financed by TxRD-USDA.
(e)
Memorandum of Understanding (MOU) with the United States
Department of Housing and Urban Development (HUD) regarding the 911 Subsidiary
Layering Review. The Department and HUD shall enter into a MOU regarding the
Subsidy Layering Review of the sources and uses of funds in projects receiving
tax credits and HUD Housing Assistance.
§50.2.Definitions.
The following words and terms, when used in this chapter, shall have
the following meanings, unless the context clearly indicates otherwise.
(1)
Ad Hoc Tax Credit Committee--That Committee comprised of
members of the Board of the Department charged with the direct oversight of
the Low Income Housing Tax Credit Program, also referred to as the "Committee."
(2)
Affiliate--An individual, corporation, partnership, joint
venture, limited liability company, trust, estate, association, cooperative
or other organization or entity of any nature whatsoever that directly, or
indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with any other Person, and specifically shall include
parents or subsidiaries.
(3)
Agreement and Election Statement--A document in which the
Project Owner elects, irrevocably, to fix the applicable credit percentage
with respect to a building or buildings, as that in effect for the month in
which the Department and the Project Owner enter into a binding agreement
as to the housing credit dollar amount to be allocated to such building or
buildings.
(4)
Applicable Percentage--The percentage used to determine
the amount of the low income housing tax credit, as defined more fully in
the Code, §42(b). The Applicable Percentage in the Application will be
calculated using the formula provided in the Application Submission Procedures
Manual.
(5)
Applicant--Any Person and any Affiliate of such Person,
corporation, a partnership, joint venture, association, or other that submits
an Application to the Department requesting a tax credit allocation pursuant
to the Rules and the QAP. The Applicant is also the Project Owner unless the
Applicant transfers or assigns its interest in the Project (which assignment
can only occur with the consent of the Department). Each Project Owner, and
each of the Project Owner's successors in interest, shall be obligated to
carry out the commitments made to the Department by the Applicant.
(6)
Application--An Application in the form prescribed by the
Department, including any required exhibits or other supporting materials,
filed with the Department by a Project Owner requesting a Housing Tax Credit
Allocation from the State Housing Credit Ceiling or a Determination Notice.
(7)
Application Acceptance Period--That period of time during
which Applications for either a Housing Credit Allocation from the State Housing
Credit Ceiling or a Determination Notice for Tax Exempt Bond Projects may
be submitted to the Department as more fully described in §50.12 of this
title.
(8)
Application Round--The period beginning with the start
of the Application Acceptance Period and lasting until such time as all available
credits from the State Housing Credit Ceiling (as stipulated by the Department)
are allocated, provided that the Application Round not extend beyond the last
day of the calendar year.
(9)
Application Submission Procedures Manual--The manual produced
and amended from time to time by the Department which sets forth procedures,
forms, and guidelines for the filing of Applications for low income housing
tax credits.
(10)
Area Median Gross Income (AMGI)--The tenant income requirements
pursuant to the qualified low income housing project requirements of the Code, §42(g).
(11)
Applicable Fraction--The fraction used to determine the
Qualified Basis of the qualified low income building, which is the smaller
of the Unit fraction or the floor space fraction, as defined more fully in
the Code, §42(c)(1).
(12)
Beneficial Owner--A "Beneficial Owner" means:
(A)
Any Person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares;
(i)
voting power which includes the power to vote, or to direct
the voting as any other Person or the securities thereof; and/or
(ii)
investment power which includes the power to dispose,
or direct the disposition of, any Person or the securities thereof.
(B)
Any Person who, directly or indirectly, creates or uses
a trust, proxy, power of attorney, pooling arrangement or any other contract,
arrangement or device with the purpose or effect of divesting such Person
of Beneficial Ownership (as defined herein) of a security or preventing the
vesting of such Beneficial Ownership as part of a plan or scheme to evade
inclusion within the definitional terms contained herein; and
(C)
Any Person who has the right to acquire Beneficial Ownership
during the Compliance Period, including but not limited to any right to acquire
any such Beneficial Ownership;
(i)
through the exercise of any option warrant or right,
(ii)
through the conversion of a security,
(iii)
pursuant to the power to revoke a trust, discretionary
account or similar arrangement, or
(iv)
pursuant to the automatic termination of a trust, discretionary
account, or similar arrangement.
(D)
Provided, however, that any Person who acquires a security
or power specified in clauses (i), (ii) or (iii) of subparagraph (C) of this
paragraph, with the purpose or effect or changing or influencing the control
of any other Person, or in connection with or as a participant in any transaction
having such purpose or effect, immediately upon such acquisition is deemed
to be the Beneficial Owner of the securities which may be acquired through
the exercise or conversion of such security or power. Any securities not outstanding
which are subject to options, warrants, rights or conversion privileges as
deemed to be outstanding for the purpose of computing the percentage of outstanding
securities of the class owned by such Person but are not deemed to be outstanding
for the purpose of computing the percentage of the class by any other Person.
(13)
Board--The governing Board of Directors of the Department.
(14)
Carryover Allocation--An allocation of current year tax
credit authority by the Department pursuant to the provisions of the Code, §42(h)(1)(E)
and Treasury Regulations, §1.42-6.
(15)
Carryover Allocation Document--A document issued by the
Department to a Project Owner pursuant to §50.4(i) of this title.
(16)
Carryover Allocation Procedures Manual--The manual produced
and amended from time to time by the Department which sets forth procedures,
forms, and guidelines for filing Carryover Allocation requests.
(17)
Code--The Internal Revenue Code of 1986, as amended from
time to time, together with any applicable regulations, rules, rulings, revenue
procedures, information statements or other official pronouncements issued
thereunder by the United States Department of the Treasury or the Internal
Revenue Service.
(18)
Commitment Notice--A notice issued by the Department to
a Project Owner pursuant to §50.4(h) of this title and also referred
to as the "commitment."
(19)
Compliance Period--With respect to a building, the period
of 15 taxable years, beginning with the first taxable year of the Credit Period
pursuant to the Code, §42(i)(1).
(20)
Control--(including the terms "controlling," "controlled
by", and/or "under common control with") the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies
of any Person, whether through the ownership of voting securities, by contract
or otherwise, including specifically ownership of more than 50% of the general
partner interest in a limited partnership, or designation as a managing general
partner or the managing member of a limited liability company.
(21)
Cost Certification Procedures Manual--The manual produced
and amended from time to time by the Department which sets forth procedures,
forms, and guidelines for filing requests for IRS Form(s) 8609 for Projects
placed in service under the Low Income Housing Tax Credit Program.
(22)
Credit Period--With respect to a building within a Project,
the period of ten taxable years beginning with the taxable year the building
is placed in service or, at the election of the Project Owner, the succeeding
taxable year, as more fully defined in the Code, §42(f)(1).
(23)
Department--The Texas Department of Housing and Community
Affairs, a public and official governmental Department of the State of Texas
created and organized under the Texas Department of Housing and Community
Affairs Act, Texas Government Code, Chapter 2306 and Texas Civil Statutes,
Article 4413(501) as amended by the 73rd Legislature, Chapter 725 and 141.
(24)
Determination Notice--A notice issued by the Department
to the Owner of a Tax Exempt Bond Project which states that the Project may
be eligible to claim low income housing tax credits without receiving an allocation
of credits from the State Housing Credit Ceiling because it satisfies the
requirements of this QAP; sets forth conditions which must be met by the Project
before the Department will issue the IRS Form(s) 8609 to the Project Owner;
and specifies the amount of tax credits necessary for the financial feasibility
of the Project and its viability as a qualified low income housing project
throughout the Credit Period.
(25)
Development Team--All Persons or Affiliates thereof which
play(s) a material role in the development, construction, rehabilitation,
management and/or continuing operation of the subject Property, which will
include any consultant(s) hired by the Applicant for the purpose of the filing
of an Application for low income housing tax credits with the Department.
(26)
Eligible Basis--With respect to a building within a Project,
the building's Eligible Basis as defined in the Code, §42(d).
(27)
Extended Low Income Housing Commitment--An agreement between
the Department, the Project Owner and all successors in interest to the Project
Owner concerning the extended low income housing use of buildings within the
Project throughout the extended use period as provided in the Code, §42(h)(6).
The Extended Low Income Housing Commitment with respect to a Project is expressed
in the LURA applicable to the Project.
(28)
General Contractor--One who contracts for the construction,
or rehabilitation of an entire building or Project, rather than a portion
of the work. The General Contractor hires subcontractors, such as plumbing
contractors, electrical contractors, etc., coordinates all work, and is responsible
for payment to the said subcontractors. This party may also be referred to
as the "contractor."
(29)
General Projects--Any project which is not a Qualified
Nonprofit Project or is not under consideration in the Rural/Prison or Elderly
set-asides as such terms are defined by the Department.
(30)
General Pool--The pool of credits that have been returned
or recovered from prior years' allocations or the current year's Commitment
Notices after the Board has made its initial allocation of the current year's
available credit ceiling. General pool credits will be used to fund Applications
on the waiting list without regard to set-aside except for the 10% Nonprofit
Set-Aside allocation required under §42(h)(5) of the Code.
(31)
Governmental Entity--Includes federal or state agencies,
departments, boards, bureaus, commissions, authorities, and political subdivisions,
special districts and other similar entities.
(32)
Highrise Urban Infill Project--a project comprised of
three or more stories that is located within a Central Business District or
its immediate environs or in inner-city neighborhoods characterized by documented
higher than average land costs and higher density. For projects with more
than three stories, an elevator must be included in the construction of the
Project.
(33)
Historically Underutilized Businesses--Pursuant to Texas
Civil Statutes, Article 601b, §§1.02, 1.03, and 1.04, entitled State
Purchasing and General Services Act which is codified at Chapter 2161, Texas
Government Code, entitled Historically Underutilized Businesses, a business
created for the purpose of making a profit in the form of a corporation, partnership
or joint venture which is at least 51% owned, or a sole proprietorship which
is 100% owned by a person or persons who have been historically underutilized
due to their identification as a member of a certain group. The following
are the groups which will be considered pursuant to this definition:
(A)
African Americans--persons having origins in any of the
Black racial groups of Africa;
(B)
Hispanic Americans--persons of Mexican, Puerto Rican, Cuban,
Central or South American, or other Spanish or Portuguese culture or origin,
regardless of race;
(C)
Asian-Pacific Americans--persons whose origins are from
Japan, China, Taiwan, Korea, Vietnam, Laos, Cambodia, Philippines, Samoa,
Guam, U.S. Trust Territories of the Pacific and the Northern Marianas;
(D)
Native Americans--persons who are American Indians, Eskimos,
Aleuts, or Native Hawaiians; or
(E)
Women--includes all women of any ethnicity.
(34)
Housing Credit Agency--A Governmental Entity charged with
the responsibility of allocating low income housing tax credits pursuant to
the Code, §42. For the purposes of these Rules, the Department is the
sole "Housing Credit Agency" of the State of Texas.
(35)
Housing Credit Allocation--An allocation by the Department
to a Project Owner of low income housing tax credit in accordance with §50.9
of this title.
(36)
Housing Credit Allocation Amount--With respect to a Project
or a building within a Project, that amount the Department determines to be
necessary for the financial feasibility of the Project and its viability as
a qualified low income housing Project throughout the Compliance Period and
allocates to the Project.
(37)
HUD--The United States Department of Housing and Urban
Development, or its successor.
(38)
Ineligible Building Types--Those buildings or facilities
which are ineligible, pursuant to this QAP, for funding under the tax credit
program as follows:
(A)
Hospitals, nursing homes, trailer parks and dormitories
(or other buildings that will be predominantly occupied by Students) or other
facilities which are usually classified as transient housing (other than certain
specific types of transitional housing for the homeless and single room occupancy
units, as provided in the Code, §42(i)(3)(B)(iii) and (iv) are not eligible.
However, hospitals, nursing homes or dormitories are eligible for credits
if the project involves the conversion of the building to a non-transient
multifamily residential development.
(B)
Single family detached housing, duplexes, and triplexes
shall not be included in tax credit developments. The only exceptions to this
definition are:
(i)
Any project comprised of single family detached homes,
duplexes or triplexes, located on contiguous property under common ownership,
management and Control or dispersed within an existing residential subdivision
and satisfying either of the requirements listed in subclauses (I) and (II)
of this clause shall not be considered to include an Ineligible Building Type:
(I)
Projects with 36 units or less that are located within
a city or county with a population of not more than 20,000 or 50,000, respectively;
or
(II)
Projects receiving a financial contribution from the local
governing entity in an amount equal to or exceeding ten percent of the construction
hard costs. The financial contribution can be either a capital contribution,
in-kind services to the Project, or a combination of capital contribution
and in-kind services. The in-kind services must be above and beyond services
typically provided to similar developments.
(ii)
An existing Rural Project that is federally assisted within
the meaning of §42(d)(6)(B) of the Code and is under common ownership,
management and Control shall not be considered to include an Ineligible Building
Type. For qualifying federally assisted Rural Projects, construction cannot
include the construction of new residential units. Rural Projects purchased
from HUD will qualify as federally assisted.
(39)
IRS--The Internal Revenue Service, or its successor.
(40)
Land Use Restriction Agreement (LURA)--An agreement between
the Department, the Project Owner and all successors in interest in the Project
Owner which encumbers the Project with respect to provisions stipulated in
the Code, §42, and this chapter (relating to Low Income Housing Tax Credit
Qualified Allocation Plan and Rules), and the Texas Government Code, Chapter
2306 as may be amended from time to time. The LURA includes an Extended Low
Income Housing Commitment.
(41)
Material Deficiencies--The absence of information or documents
from the Application which are essential for the complete review and scoring
of the project and which remain uncorrected after notification of the Applicant
as further described in subparagraphs (A) and (B) of this paragraph.
(A)
If an Application contains deficiencies which, in the determination
of the Department staff, are either administrative in nature or are caused
by the need for clarification of information submitted at the time of the
Application, the Department staff shall request correction of such deficiencies.
The Department staff shall provide this request in the form of a facsimile
and a telephone call to the Applicant advising that such a request has been
transmitted. Potential Material Deficiencies which may be corrected include,
but are not limited to, incorrect calculation of the project's unit mix, gross
and net rentable areas or the submission of exhibits that contain incomplete
or conflicting information. If such deficiencies are not corrected to the
satisfaction of the Department within three business days of the deficiency
notice date, then five points shall be deducted from the Selection Criteria
score for each additional day the deficiency remains uncorrected. If such
deficiencies are not corrected within five business days from the deficiency
notice date, then the Application shall be terminated. The time period for
responding to a deficiency notice begins at the start of the business day
following the deficiency notice date. Deficiency notices may be sent to an
Applicant prior to or after the end of the Application Acceptance Period.
The correction of Material Deficiencies may not include changes in the Development
Team, the Project Configuration, or any other matters affecting the evaluation
of the Application under §50.7 of this title.
(B)
Deficiencies caused by the omission of Threshold Criteria
documentation specifically required by §50.7(d) of this title shall automatically
be considered Material Deficiencies and shall be cause for termination. These
items are not eligible to be remedied pursuant to subparagraph (A) of this
paragraph.
(42)
Material Non-Compliance--A property will be classified
by the Department as being in material non-compliance status so long as the
non-compliance score for such property is equal to or exceeds 30 points in
accordance with the methodology and point system set forth in the Application
Submission Procedures Manual.
(43)
Person--Means, without limitation, any natural person,
corporation, partnership, limited partnership, joint venture, limited liability
company, trust, estate, association, cooperative, government, political subdivision,
agency or instrumentality or other organization of any nature whatsoever and
shall include any group of Persons acting in concert toward a common goal.
(44)
Persons with Disabilities--A person who:
(A)
has a physical, mental or emotional impairment that;
(i)
is expected to be of a long, continued and indefinite duration,
(ii)
substantially impedes his or her ability to live independently,
and
(iii)
is of such a nature that the ability could be improved
by more suitable housing conditions, or
(B)
has a developmental disability, as defined in Section 102(7)
of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C.
6001-6007).
(45)
Preservation Project--A Project involving the rehabilitation
of currently occupied low-income housing developments continuing to receive
funds from a federal or state program that prove eligibility by providing
evidence that the projects will no longer serve low income families as supported
by a market study and that:
(A)
currently has rent or income restrictions and is eligible
for conversion to market rate housing within the next three years; or
(B)
is in danger of being lost as affordable housing due to
the need for substantial rehabilitation.
(46)
Prison Community--A city or town which is located outside
of a Metropolitan Statistical Area (MSA) or Primary Metropolitan Statistical
Area (PMSA) and was awarded a state prison as set forth in the Reference Manual.
(47)
Project--A low income rental housing Property the owner
of which represents that it is or will be a qualified low income housing Project
within the meaning of the Code, §42(g). With regards to this definition,
the "Project" is that Property which is the basis for the Application for
low income housing tax credits.
(48)
Project Consultant--Any Person (without ownership interest
in the Project) who provides professional services relating to the filing
of an Application, Carryover Allocation Document, and/or cost certification
documents.
(49)
Project Owner--Any Person or Affiliate thereof that owns
or proposes to develop the Project or expects to acquire Control of the Project
pursuant to a purchase contract satisfactory to the Department.
(50)
Property--The real estate and all improvements thereon
which are the subject of the Application (including all items of personal
property affixed or related thereto), whether currently existing or proposed
to be built thereon in connection with the Application.
(51)
Qualified Allocation Plan (QAP)--An allocation plan executed
by the Governor of the State of Texas which sets forth the threshold criteria,
selection criteria, priorities, preferences, and compliance and monitoring
as provided in the Code, §42(m)(1) and as further provided in §50.3-§50.9
of this title.
(52)
Qualified Basis--With respect to a building within a Project,
the building's Eligible Basis multiplied by the Applicable Fraction, within
the meaning of the Code, §42(c)(1).
(53)
Qualified Census Tract--Any census tract which is so designated
by the Secretary of HUD and, for the most recent year for which census data
are available on household income in such tract, either in which 50% or more
of the households have an income which is less than 60% of the area median
family income for such year or which has a poverty rate of at least 25%.
(54)
Qualified Elderly Project--A Project which meets the requirements
of the federal Fair Housing Act and is:
(A)
intended for, and solely occupied by, Persons 62 years
of age or older; or
(B)
intended and operated for occupancy by at least one person
55 years of age or older per Unit, where at least 80% of the total housing
Units are occupied by at least one person who is 55 years of age or older;
and where the Project Owner publishes and adheres to policies and procedures
which demonstrate an intent by the owner and manager to provide housing for
persons 55 years of age or older.
(55)
Qualified Market Analyst--A real estate appraiser certified
or licensed by the Texas Appraiser or Licensing and Certification Board or
a real estate consultant or other professional currently active in the subject
property's market area who demonstrates competency, expertise, and the ability
to render a high quality written report. The individual's experience and educational
background will provide the general basis for determining competency as a
Market Analyst. Such determination will be at the sole discretion of the Department.
The Qualified Market Analyst must not be related to or an Affiliate of the
Project Owner, Project Consultant, or the CPA which provides documentation
required for the Carryover Allocation Procedures Manual or Cost Certification
Procedures Manual.
(56)
Qualified Nonprofit Organization--An organization that
is described in the Code, §501(c)(3) or (4), as these cited provisions
may be amended from time to time, that is exempt from federal income taxation
under the Code, §501(a), that is not Affiliated with or Controlled by
a for profit organization, and includes as one of its exempt purposes the
fostering of low income housing within the meaning of the Code, §42(h)(5)(C).
(57)
Qualified Nonprofit Project--A Project in which a Qualified
Nonprofit Organization (directly or through a partnership or wholly-owned
subsidiary) holds an ownership interest and materially participates (within
the meaning of the Code, §469(h), as may be amended from time to time)
in its development and operation throughout the Compliance Period.
(58)
Real Estate Owned (REO) Projects--Any existing Residential
Development that is owned or that is being sold by an insured depository institution
in default, or by a receiver or conservator of such an institution, or is
a property owned by HUD, Federal National Mortgage Association (Fannie Mae),
Federal Home Loan Mortgage Corporation (Freddie Mac), federally chartered
bank, savings bank, savings and loan association, Federal Home Loan Bank or
a federally approved mortgage company or any other federal agency.
(59)
Reference Manual--That certain manual, and any amendments
thereto, produced by the Department which sets forth reference material pertaining
to the Low Income Housing Tax Credit Program.
(60)
Residential Development--Any Project that is comprised
of at least one "Unit" as such term is defined in paragraph (73) of this section.
(61)
Rules--The Department's low income housing tax credit
Rules as presented in this title excluding §§50.3-50.9 of this title.
(62)
Rural Project--A Project located within an area which:
(A)
is situated outside the boundaries of a PMSA or MSA; or
(B)
is situated within the boundaries of a PMSA or MSA if the
area has a population of not more than 20,000. If the area shares legal boundaries
with another urbanized area, then the combined population of the areas cannot
exceed 20,000; or
(C)
is located in an area that is eligible for funding by TxRD-USDA,
and for which the Applicant applies for tax credits under the Rural Set Aside.
(63)
Selection Criteria--Criteria used to determine housing
priorities of the State under the Low Income Housing Tax Credit Program as
specifically defined in §50.7(e) of this title.
(64)
Special Housing Project--Any Project developed specifically
for Special Housing Need Groups, including mental health/mental retardation
Projects, group homes, housing for the homeless, transitional housing, elderly
Projects, congregate care facilities, projects for persons with HIV/AIDS,
or as otherwise defined in the State Consolidated Plan.
(65)
State Housing Credit Ceiling--The limitation imposed by
the Code, §42(h), on the aggregate amount of housing credit allocations
that may be made by the Department during any calendar year, as determined
from time to time by the Department in accordance with the Code, §42(h)(3).
(66)
Student--Per the Code §42(I)(3)(D), "A unit shall
not fail to be treated as a low-income unit merely because it is occupied:
(A)
by an individual who is:
(i)
a student and receiving assistance under title IV of the
Social Security Act (42 U.S.C. §§601 et seq.), or
(ii)
enrolled in a job training program receiving assistance
under the Job Training Partnership Act (29 USCS §§1501 et seq.,
generally; for full classification, consult USCS Tables volumes) or under
other similar Federal, State, or local laws, or
(B)
entirely by full-time students if such students are:
(i)
single parents and their children and such parents and
children are not dependents (as defined in section 152) of another individual,
or
(ii)
married and file a joint return."
(67)
Sustaining Occupancy--The figure at which occupancy income
is equal to all operating expenses and mandatory debt service requirements
for a Project.
(68)
Tax Exempt Bond Project--A Project which receives a portion
of its financing from the proceeds of Tax Exempt bonds which are subject to
the state volume cap as described in the Code, §42(h)(4)(B).
(69)
Threshold Criteria--Criteria used to determine the Project's
qualifications which are the minimum level of acceptability for consideration
under the Low Income Housing Tax Credit Program as defined in §50.7(d)
of this title.
(70)
Total Housing Development Cost--The total of all costs
incurred or to be incurred by the Project Owner in acquiring, constructing,
rehabilitating and financing a Project, as determined by the Department based
on the information contained in the Applicant's Application. Such costs include
reserves and any expenses attributable to commercial areas. Costs associated
with the sale or use of tax credits to raise equity capital shall also be
included in the Total Housing Development Cost. Such costs include but are
not limited to syndication and partnership organization costs and fees, filing
fees, broker commissions, related attorney and accounting fees, appraisal,
engineering, and the environmental site assessment. Projects which include
commercial space must allocate the relative portion of all applicable expenses
to the commercial space and exclude the same from Total Housing Development
Costs. To determine the difference between the Project's total sources of
financing and the total Project costs to be filled with the proceeds of the
credit, the Department will not deduct the amount of financing associated
with the commercial use from the Project's sources of funds, unless such financing
specifically identifies in its terms that it is being provided for the commercial
use.
(71)
Town Home--Each Town Home living unit is one of a group
of no less than four units that are adjoined by common walls. Town Homes shall
not have more than two walls in common with adjacent units. Town Homes shall
not have other units above or below another unit. Town Homes shall not share
a common back wall. Town Homes shall have individual exterior entries.
(72)
TxRD-USDA--The Rural Development (RD) services of the
United States Department of Agriculture (USDA) serving the State of Texas
(formerly known as TxFmHA) or its successor.
(73)
Unit--Any residential rental unit in a Project consisting
of an accommodation containing separate and complete physical facilities and
fixtures for living, sleeping, eating, cooking and sanitation. The term "Unit"
may also include a single room occupancy housing unit used on a non-transient
basis so long as separate facilities exist as above described.
§50.3.State Housing Credit Ceiling.
(a)
The Department shall determine the State Housing Credit
Ceiling for each calendar year as provided in the Code, §42(h)(3)(C).
(b)
The Department shall publish each such determination in
the
Texas Register
within 30 days after notification
by the Internal Revenue Service.
(c)
The aggregate amount of Housing Credit Allocations made
by the Department during any calendar year shall not exceed the State Housing
Credit Ceiling for such year as provided in the Code, §42. Housing Credit
Allocations made to Tax Exempt Bond Developments are not included in the State
Housing Credit Ceiling.
§50.4.Application Submission; Unacceptable Applications; Availability of Application; Confidential Information; Required Application Notifications and Receipt of Public Comment; Board Recommendations; Board Decisions; Commitment Notices and Determination Notices; Waiting List; Agreements and Election Statement; Cost Certification and Carryover Filings; LURA.
(a)
Application Submission. Any Applicant requesting a Housing
Credit Allocation or a Determination Notice must submit an Application to
the Department during the Application Acceptance Period. Only one Application
may be submitted for each site. While the Application Acceptance Period is
open, Applicants may withdraw their Application and subsequently file a new
Application along with the required Application fee. The Department is authorized
to request the Applicant to provide additional information it deems relevant
to clarify information contained in the Application or to submit documentation
for items it considers to be a deficiency.
(b)
Unacceptable Applications. Applications involving Ineligible
Building Types will not be considered for allocation of tax credits under
this QAP and the Rules. Applications that show Material Deficiencies (which
are not corrected within the applicable correction period) will be terminated,
and the Applicant may only re-apply if the Application Acceptance Period is
still open. An Application that does not fulfill the requirements of this
Qualified Allocation Plan and Rules and the current Application Submission
Procedures Manual will be deemed not to have been timely filed and the Department
shall not be deemed to have accepted the Application.
(c)
Availability of Application. Applications for tax credits
are public information and are available upon request after the Application
Acceptance Period closes. Exhibits to an Application will not be available
for public disclosure until after the Board approves the Allocation of tax
credits, in accordance with the Texas Public Information Act of the Government
Code Chapter 552.
(d)
Confidential Information. An Applicant shall mark each
Exhibit or a portion thereof that the Applicant considers confidential as
to trade secrets or commercial or financial information, in which the Applicant
desires not to be disclosed in accordance with Texas Public Information Act.
A request for such information shall be processed in accordance with §552.305
of the Government Code.
(e)
Required Application Notifications and Receipt of Public
Comment.
(1)
Approximately 15 business days prior to the opening of
the Application Acceptance Period, the Department shall publish a Pre-Application
Notification Submission Log on its web site. Such log shall contain the: Project
name, address, city, zip code, household type and the estimated number of
total units, program units, and credit request amount for those Applicants
that provide this information per §50.7(e)(8)(A) of this title.
(2)
Within approximately 15 business days of the close of the
Application Acceptance Period, the Department shall:
(A)
publish an Application submission log on its web site.
Such log shall contain the Project's name, address, set-aside, number of units,
requested credits, requested selection criteria score and the owner contact
name and phone number.
(B)
give notice of a proposed Project in writing to the:
(i)
mayor or other equivalent chief executive officer of the
municipality, if the Project or a part thereof is located in a municipality;
otherwise the Department shall notify the chief executive officer of the county
in which the Project or a part thereof is located, to advise such individual
that the Project or a part thereof will be located in his/her jurisdiction
and request any comments which such individual may have concerning such Project.
If the local municipal authority expresses opposition to the Project, the
Department will give consideration to the objections raised and will visit
the proposed site or Project within 30 days of notification.
(ii)
state representative and state senator representing the
area where a project would be located. The state representative or senator
may hold a community meeting at which the Department shall provide appropriate
representation.
(3)
The Department shall hold at least three public hearings
in metropolitan areas across the state to gather comment on the submitted
Applications.
(4)
Approximately forty days prior to the date of the Board
Meeting at which the issuance of Commitment Notices or Determination Notices
shall be discussed, the Department will notify each Applicant of the receipt
of any opposition received by the Department relating to his or her project
at that time.
(5)
A summary of comments received by the Department on specific
Applications shall be part of the documents required to be reviewed by the
Board under this subsection if it is received 15 business days prior to the
date of the Board Meeting at which the issuance of Commitment Notices or Determination
Notices shall be discussed. If comments are received by the Department after
this deadline, then they may be reviewed at the discretion of the Board.
(6)
Notice of Selection Criteria Scoring. When all Applications
have been scored, the Department shall publish the results of the scoring
on its web site.
(f)
Board Recommendations. After eligible Applications have
been evaluated, ranked and underwritten in accordance with the QAP and the
Rules, the Department staff shall make its recommendations to the Committee
and the Board. Such recommendation and supporting documentation shall be made
in advance of the meeting at which the issuance of Commitment Notices or Determination
Notices shall be discussed. The recommendations to the Board will include
a list of all submitted Applications which enumerates the reason(s) for the
Project's proposed selection or denial, including all evaluation factors provided
in §50.7(b) of this title that were used in making this determination.
(1)
A Commitment Notice shall not be issued with respect to
any Project where the cost for the total development, acquisition, construction
or rehabilitation exceeds the limitations established from time to time by
the Department and the Board as more specifically provided in the Application
Submission Procedures Manual, unless the Department staff make a recommendation
to the Board based on the need to fulfill the goals of the Program as expressed
in this QAP and Rules, and the Board accepts the recommendation. The Department's
recommendation to the Board shall be clearly documented.
(2)
The Department will reduce the Applicant's estimate of
developer's and/or Contractor fees in instances where these exceed the fee
limits determined by the Department and provided for within the Application
Submission Procedures Manual. In the instance where the Contractor is an Affiliate
of the Project Owner and both parties are claiming fees, Contractor's overhead,
profit, and general requirements, the Department will reduce the total fees
estimated to a level that does not exceed the fee limits. Further, the Department
shall deny or reduce the amount of low income housing tax credits on any portion
of costs which it deems excessive or unreasonable. The Department also may
require bids in support of the costs proposed by any Applicant.
(g)
Board's Decisions. The Board's decisions shall be based
upon its evaluation of the Project's consistency with the criteria and requirements
set forth in the QAP and the Rules. In making a determination to allocate
tax credits, the Department staff and Board shall be authorized not to rely
solely on the number of points scored by an Applicant. They shall in addition,
be entitled to take into account, as appropriate, the evaluation factors described
in §50.7(b) of this title. If the Board disapproves or fails to act upon
the Application, the Department shall issue to the Project Owner a written
notice stating the reason(s) for the Board's disapproval or failure to act.
(h)
Commitment Notices and Determination Notices. If the Board
approves the Application, the Department will:
(1)
if the Application is for a Housing Credit Allocation,
issue a Commitment Notice to the Project Owner which shall:
(A)
confirm that the Board has approved the Application; and
(B)
state the Department's commitment to make a Housing Credit
Allocation to the Applicant in a specified amount, subject to the feasibility
determination described at §50.9(b) of this title, compliance by the
Project Owner with the remaining requirements of this chapter, and any other
conditions set forth therein by the Department. This commitment shall expire
on the date specified therein unless the Project Owner indicates acceptance
of the commitment by executing the Commitment Notice or Determination Notice,
pays the required fee specified in §50.11 of this title, and satisfies
any other conditions set forth therein by the Department. A Project Owner
may request an extension of the Commitment Notice expiration date by submitting
extension request and associated extension fee as described in §50.11(h)
of this title. In no event shall the expiration date of a Commitment Notice
be extended beyond the last business day of the applicable calendar year.
(2)
if the Application is with respect to a Tax Exempt Bond
Project, issue a Determination Notice to the Project Owner which shall:
(A)
confirm the Board's determination that the Project satisfies
the requirements of this QAP; and
(B)
state the Department's commitment to issue IRS Form(s)
8609 to the Applicant in a specified amount, subject to the requirements set
forth at §50.7(h) of this title, compliance by the Project Owner with
all applicable requirements of this chapter, and any other conditions set
forth therein by the Department. The Determination Notice shall expire on
the date specified therein unless the Project Owner indicates acceptance by
executing the Determination Notice and paying the required fee specified in §50.11
of this title. The Determination Notice shall also expire unless the Project
Owner satisfies any conditions set forth therein by the Department within
the applicable time period.
(3)
notify, in writing, the mayor or other equivalent chief
executive officer of the municipality in which the Property is located informing
him/her of the Board's issuance of a Commitment Notice or Determination Notice,
as applicable.
(i)
Waiting List. If the entire State Housing Credit Ceiling
for the applicable calendar year has been committed or allocated in accordance
with this chapter, the Department shall place all remaining Applications which
have satisfied all Threshold Criteria on a waiting list. All such waiting
list Applications will be weighed one against the other and a priority list
shall be developed by the Department staff and approved by the Ad Hoc Tax
Credit Committee. If at any time prior to the end of the Application Round,
one or more Commitment Notices expire and a sufficient amount of the State
Housing Credit Ceiling becomes available, the Department shall issue a Commitment
Notice to Applications on the waiting list in order of priority subject to
the amount of returned credits and the 10% Nonprofit Set-Aside allocation
required under §42(h)(5) of the Code. In the event that the Department
makes a Commitment Notice or offers a commitment within the last month of
the calendar year, it will require immediate action by the Applicant to assure
that an allocation or Carryover Allocation can be issued before the end of
that same calendar year. At the end of each calendar year, all Applications
which have not received a Commitment Notice shall be deemed terminated, unless
the Department shall determine to retain or act upon such Applications as
provided in §50.15 of this title. The Applicant may re-apply to the Department
during the next Application Acceptance Period.
(j)
Agreement and Election Statement. Together with or following
the Project Owner's acceptance of the commitment or determination, the Project
Owner may execute an Agreement and Election Statement, in the form prescribed
by the Department, for the purpose of fixing the applicable credit percentage
for the Project as that for the month in which the commitment was accepted
(or the month the bonds were issued for Tax Exempt Bond Projects), as provided
in the Code, §42(b)(2). For non Tax Exempt Bond Projects, the Agreement
and Election Statement shall be executed by the Project Owner no later than
five days after the end of the month in which the offer of commitment was
accepted. Current Treasury Regulations, §1.42-8(a)(1)(v), suggest that
in order to permit a Project Owner to make an effective election to fix the
applicable credit percentage for a Project, the Commitment Notice must be
executed by the Department and the Project Owner in the same month. The Department
staff will cooperate with a Project Owner, as needed, to assure that the Commitment
Notice can be so executed.
(k)
Cost Certification or Carryover Filings. Projects that
will be placed in service and request IRS Forms 8609 in the year the Commitment
Notice was issued must submit the required Cost Certification documentation
and compliance and monitoring fee to the Department by the second Friday in
November of that same year. All other Projects which received a Commitment
Notice, must submit the Carryover documentation to the Department no later
than the second Friday in October of the year in which the Commitment Notice
is issued. The Carryover Allocation must be properly completed and delivered
to the Department as prescribed by the Carryover Allocation Procedures Manual.
(l)
Land Use Restriction Agreement (LURA). Prior to the Department's
issuance of the IRS Form 8609 declaring that the Project has been placed in
service for purposes of the Code, §42, Project Owners must date, sign
and acknowledge before a notary public a LURA and send the original to the
Department for execution. The Project Owner shall then record said LURA, along
with any and all exhibits attached thereto, in the real Property records of
the county where the Project is located and return the original document,
duly certified as to recordation by the appropriate county official, to the
Department. If any liens (other than mechanics' or materialmen's liens) shall
have been recorded against the Project and/or the Property prior to the recording
of the LURA, the Project Owner shall obtain the subordination of the rights
of any such lienholder, or other effective consent, to the survival of certain
obligations contained in the LURA following the foreclosure of any such lien.
Receipt of such certified recorded original LURA by the Department is required
prior to issuance of IRS Form 8609. A representative of the Department shall
physically inspect the Project for compliance with the Application and the
representatives, warranties, covenants, agreements and undertakings contained
therein before the IRS Form 8609 is issued, but in no event later than the
end of the second calendar year following the year the last building in the
project is placed in service. The Project Owner for Tax Exempt Bond Projects
shall obtain a subordination agreement wherein the lien of the mortgage is
subordinated to the LURA.
§50.5.Ineligible and Disqualified Applications.
(a)
An Application will be ineligible if a member of the Development
Team has been or is:
(1)
Barred, suspended, or terminated from procurement in a
state or federal program or listed in the List of Parties Excluded from Federal
Procurement or Non-Procurement Programs; or,
(2)
convicted of, under indictment for, or on probation for
a state or federal crime involving fraud, bribery, theft, misrepresentations
of material facts, misappropriation of funds, or other similar criminal offenses;
or,
(3)
subject to enforcement action under state or federal securities
law, or is the subject of an enforcement proceeding with any Governmental
Entity unless such action has been concluded and no adverse action or finding
(or entry into a consent order) has been taken with respect to such member.
(b)
Additionally, the Department will disqualify an Application
if it is determined by the Department that:
(1)
fraudulent information, knowingly false documentation or
other material misrepresentation has been provided in the Application or other
information submitted to the Department. The aforementioned policy will apply
at any stage of the evaluation or approval process; or,
(2)
the Applicant or any Person, general partner, general contractor
and their respective principals or Affiliates active in the ownership or control
of other low income housing tax credit property in the state of Texas who
received an allocation of tax credits in the 2000 Application Round but did
not close the construction loan as required under the Carryover Allocation
(including any extension period granted by the Committee) except for reasons
beyond the control of the Applicant as determined by the Department; or,
(3)
the Applicant or any Person, general partner, general contractor
and their respective principals or Affiliates active in the ownership or control
of other low income housing tax credit property has failed to place in service
buildings or removed from service buildings for which credits were allocated
(either Carryover Allocation or issuance of 8609s). The Department may consider
the facts and circumstances on a case-by-case basis, including whether the
credits were returned prior to the expiration date for re-issuance of the
credits, in its sole determination of Applicant eligibility; or,
(4)
the Applicant or any Person, general partner, general contractor
and their respective principals or Affiliates active in the ownership or control
of other low income rental housing property in the state of Texas funded by
the Department that is in Material Non-Compliance with the LURA (or any other
document containing an Extended Low Income Housing Commitment) or the program
rules in effect for such property on the closing date of the Application Acceptance
Period or upon the date of filing Volume I of the Application for a Tax Exempt
Bond Project. The Department may take into consideration the representations
of the Applicant regarding compliance violations described in §50.7(d)(5)(C)
and (D) of this title; however, the records of the Department are controlling;
or,
(5)
the Applicant or any Person, general partner, general contractor
and their respective principals or Affiliates active in the ownership or control
of other low income rental housing tax credit property outside of the state
of Texas has incidence of non-compliance with the LURA or the program rules
in effect for such tax credit property as reported on Exhibits 105C and 105D
and/or as determined by the state regulatory authority for such state and
such non-compliance is determined to be Material Non-Compliance by the Department;
or,
(6)
the Project is located on a site that has been determined
to be "unacceptable" by the Department staff; or
(7)
the Applicant or any Person, general partner, general contractor
and their respective principals or Affiliates active in the ownership or control
of the proposed tax credit property, or person employed as a lobbyist or in
another capacity on behalf of the Project, communicates with any Board member
with respect to the Project during the period of time starting with the time
an Application is submitted until the time the tax credits are approved by
the Board.
§50.6.Regional Allocation Formula and Set-Asides.
(a)
Regional Allocation Formula. As required by §2306.111
of the Texas Government Code, the Department will use a regional distribution
formula to distribute credits from the State Housing Credit Ceiling. This
formula will establish targeted tax credit amounts for each of the state service
regions. Each region's targeted tax credit amount will be published in the Texas Register
and on the Department's web site
concurrently with the publication of the QAP. The formula will be published
in the Application Submission Procedures Manual and may be amended from time
to time by the Department.
(b)
Set-Asides. The regional credit distribution amounts are
additionally subject to the factors presented in paragraphs (1)-(6) of this
subsection:
(1)
At least 10% of the State Housing Credit Ceiling for each
calendar year shall be allocated to Qualified Nonprofit Projects which meet
the requirements of the Code, §42(h)(5). Qualified Nonprofit Organizations
must have control of the Qualified Nonprofit Project applying for this set-aside.
(2)
At least 15% of the State Housing Credit Ceiling for each
calendar year shall be allocated to projects which meet the Rural Project
definition. Of this 15% allocation, 25% will be set-aside for projects financed
through Rural Development (TxRD-USDA). Projects financed through TxRD-USDA's
538 Guaranteed Rural Rental Housing Program will not be considered under the
25% portion. Should there not be sufficient qualified applications submitted
for the TxRD-USDA set-aside, then the credits would revert to projects that
meet the Rural Project definition. Rural Projects applying for greater than
76 Units will be ineligible for the Rural Set-Aside.
(3)
At least 10% of the State Housing Credit Ceiling for each
calendar year shall be allocated to Qualified Elderly Projects.
(4)
At least 65% of the State Housing Credit Ceiling will be
allocated to General Set-Aside.
(5)
At least 10% of the State Housing Credit Ceiling will be
allocated to Preservation Projects. Preservation Projects will not constitute
an additional exclusive set-aside, however at least 10% of Projects allocated
through the set-asides identified in paragraphs (1)-(4) of this subsection
will also be Preservation Projects.
(6)
The Department may redistribute the credits amongst the
different regions and set asides depending on the quality of applications
submitted as evaluated under the factors described in §50.7(b) of this
title and the level of demand exhibited in the regions during the Allocation
Round. However as described in paragraph (1) of this subsection, no more than
90% of the State's Housing Credit Ceiling for the calendar year may go to
Projects which are not Qualified Nonprofit Projects. If credits will be transferred
from a region which does not have enough qualified applications to meet its
regional credit distribution amount, then those credits will be apportioned
to the other regions based on their relative percentage of the total amount
available for allocation. If forward commitments are approved by the Board,
they shall be distributed with regard to the relative regional percentages
established by the regional distribution formula.
§50.7.Evaluation Process; Evaluation Factors; Tie Breaker Criteria; Threshold Criteria; Selection Criteria; Credit Amount; Limitations on the Size of Projects; Tax Exempt Bond Financed Projects; Adherence to Obligations.
(a)
Evaluation Process. After eligible Applications have been
evaluated, ranked and underwritten in accordance with this section of the
QAP and the Rules, an application may be eligible for a recommendation to
the Board as described in §50.4(d) of this title.
(1)
Threshold Criteria Review. Applications will be initially
evaluated against the Threshold Criteria. Applications not meeting Threshold
Criteria will be terminated, unless the Department determines that the failure
to meet the Threshold Criteria is the result of correctable deficiencies,
in which event the Applicant shall be given an opportunity to correct such
deficiencies. Applications not meeting Threshold Criteria will be returned
to the Applicant without further review with a written notice to the effect
that the Threshold Criteria have not been met. The Department shall not be
responsible for the Applicant's failure to meet the Threshold Criteria, and
any failure of the Department's staff to notify the Applicant of such inability
to satisfy the Threshold Criteria shall not confer upon the Applicant any
rights to which it would not otherwise be entitled.
(2)
Selection Criteria Review. For an Application to be considered
under the Selection Criteria, the Applicant must demonstrate that the Project
meets all of the Threshold Criteria requirements set forth in subsection (d)
of this section. Applications that satisfy the Threshold Criteria will then
be ranked according to the points scored under the Selection Criteria in accordance
with the Selection Criteria listed in subsection (e) of this section. Applications
not scored by the Department's staff shall be deemed to have the points allocated
through self-scoring by the Applicants until actually scored. This shall apply
only for ranking purposes.
(3)
Underwriting Evaluation. After the Application is scored
under the Selection Criteria, the Department will determine to assign the
Project for evaluation of financial feasibility by the Department's credit
underwriting division based on the evaluation factors outlined in subsection
(b)(2)-(8) of this section. The reasons for recommending or not recommending
a project for underwriting shall be documented by the Department. The Department
may have an outside third party perform the underwriting evaluation to the
extent it determines appropriate. The expense of any third party underwriting
evaluation shall be paid by the Applicant prior to the commencement of the
aforementioned evaluation.
(b)
Evaluation Factors. The Department staff, Committee, and
Board shall evaluate an Application for recommendation of a Commitment Notice
or Determination Notice on the basis of additional factors beyond scoring
criteria. These additional factors include the items described in paragraphs
(1)-(8) of this subsection; provided, however, that Tax Exempt Bond Project
Applications will be evaluated only under paragraphs (1), (3), (4), and (7)
of this subsection.
(1)
Project Feasibility. A determination by the Department,
pursuant to §42 of the Code, that the amount of credits recommended for
allocation to a project is necessary for the financial feasibility of the
project and its long-term viability as a qualified low income housing property.
In making this determination, the Department will take into account:
(A)
the project's total development costs;
(B)
actual or projected operating expenses and reserves for
replacement;
(C)
project's sources of financing;
(D)
proceeds from the syndication of the tax credits;
(E)
the project's debt coverage ratio and break-even occupancy;
and
(F)
the project's overall conformance with the Department's
underwriting guidelines as stated in the Application Submission Procedures
Manual.
(2)
Geographic Dispersion. The dispersion of credits within
each region shall be evaluated under one or more of subparagraphs (A)-(D)
of this paragraph:
(A)
number of tax credit and other affordable housing projects
within a city and county and the number of units attributable to such projects;
(B)
population of a city and county in relation to the number
of existing tax credit and affordable units created;
(C)
city and county population and employment growth trends;
and
(D)
rental housing affordability trends.
(3)
Concentration of Affordable Housing Developments. The concentration
of tax credit developments and other affordable housing developments within
specific markets and submarkets shall be evaluated under one or more of subparagraphs
(A)-(D) of this paragraph.
(A)
occupancy levels projected for the proposed project and
the occupancy level of existing projects;
(B)
market and submarket absorption levels;
(C)
the percentage of comparable affordable housing projects
and units in the submarket; and
(D)
any other information (such as employer relocation) that
could have an impact on the submarket.
(4)
Site Conditions. Site conditions shall be evaluated through
a physical site inspection by Department staff. Such inspection will evaluate
the site based on the Site Evaluation form provided in the Application Submission
Procedures Manual and provide a site evaluation of "Excellent," "Acceptable,"
"Poor" or "Unacceptable". The evaluations shall be based on condition of the
surrounding neighborhood and proximity to retail, medical, recreational, and
educational facilities, and employment centers. The site's visibility to prospective
tenants and accessibility of the site via the existing transportation infrastructure
and public transportation systems shall be considered. "Unacceptable" sites
would include a non-mitigable environmental factor that would impact the health
and safety of the residents.
(5)
Experience of the Development Team. The Development Team's
experience as it relates to the ability to successfully complete the Project
will be considered, based on the prior development experience of members of
the team.
(6)
Housing Type. The type of housing provided may be considered
in order to serve a broad segment of the population.
(7)
Program's Goals and Consistency with Local Need. The Project's
impact on the Low Income Housing Tax Credit Program's goals and objectives
including, but not limited to, the project's inconsistency with local needs
or its impact as part of a revitalization or preservation plan.
(8)
Allocation to Multiple Entities. The goal of allocating
credits among as many different entities as practicable without diminishing
the quality of the housing that is built as required under the Texas General
Appropriations Act applicable to the Department.
(c)
Tie Breaker Criteria. In the event that two or more Applications
receive the same number of points in any given set-aside category and compare
equally under the factors described in subsection (b) of this section, the
Department will utilize the factors in paragraphs (1)-(6) of this subsection,
in the order they are presented, to determine which Project will receive a
preference in consideration for a tax credit commitment. As described by these
paragraphs, preference will be given to projects which:
(1)
serve the lowest income tenants;
(2)
serve low income tenants for the longest period of time,
in the form of a longer Compliance Period and/or extended low income use period
(as set forth in the LURA);
(3)
is a Special Housing Project as defined in §50.2 of
this title (relating to Definitions);
(4)
have substantial community support as evidenced by the
commitment of local public funds toward the construction, rehabilitation and
acquisition and subsequent rehabilitation of the Project;
(5)
provide for the most efficient usage of the low income
housing tax credit on a per Unit basis; and
(6)
have a Unit composition provides the highest percentage
of three bedrooms or greater sized Units.
(d)
Threshold Criteria. The following Threshold Criteria listed
in paragraphs (1)-(11) of this subsection are mandatory requirements at the
time of Application submission:
(1)
Exhibit 101. The "Design Certification Form" provided in
the Application Submission Procedures Manual and supporting documents. This
exhibit will provide:
(A)
A description of the type of amenities proposed for the
development. If fees in addition to rent are charged for amenities reserved
for an individual tenant's use (i.e. covered parking, storage, etc.), then
the amenity may not be included among those provided to complete this exhibit.
Projects with more than 36 units must provide at least four of the amenities
provided in clauses (i)-(x) of this subparagraph. Projects with 36 Units or
less, Special Housing Projects and Preservation Projects must provide at least
two of the amenities provided in clauses (i)-(x) of this subparagraph.
(i)
full perimeter fencing with controlled gate access;
(ii)
designated playground and equipment;
(iii)
community laundry room/laundry hook-up in Units;
(iv)
furnished community room;
(v)
recreation facilities;
(vi)
public telephone(s) available to tenants 24 hours a day;
(vii)
on-site day care, senior center, or community meals room;
(viii)
storage areas;
(ix)
computer facilities; or
(x)
covered parking.
(B)
A certification that the Project will adhere to the Texas
Property Code relating to security devices and other applicable requirements
for residential tenancies.
(C)
For up to 5% of all LIHTC restricted units, the Project
Owner shall provide reasonable accommodation(s) or modification(s) on a one-time
basis in conformance with ANSI A117.1-1986 construction standards as requested
by the tenant with a disability. The Project Owner shall incur the related
expense(s) for the reasonable accommodation(s) and/or modification(s). For
properties that are designed as townhouse units, the Project Owner must include
one bathroom and one bedroom on the ground level of all Units and meet Fair
Housing standards. At the construction loan closing a certification from an
accredited architect will be required stating that the Project was designed
in conformance with these standards. A similar certification will also be
required after the Project is completed.
(D)
A certification that the Project will be built by a General
Contractor that satisfies the requirements of the Seventy-fifth Legislature
in House Bill 1 of the General Appropriation Act, Article VII, Rider 11(c).
This bill requires that the General Contractor hired by the Project Owner
or the Applicant, if the Applicant serves as General Contractor, must demonstrate
a history of constructing similar types of housing without the use of federal
tax credits.
(E)
All of the architectural drawings identified in clauses
(i)-(v) of this subparagraph. While full size design or construction documents
are not required, the drawings must have a scale and/or show the dimensions.
(i)
a site plan which:
(I)
is consistent with the number of units specified in the
"Rent Schedule" provided in the Application;
(II)
identifies all residential, common buildings and proposed
amenities; and
(III)
clearly delineates the flood plain boundary lines and
other easements shown in the site survey;
(ii)
floor plans and elevations for each type of residential
building;
(iii)
floor plans and elevations for each type of common area
building;
(iv)
unit floor plans for each type of unit. The net rentable
areas these unit floor plans represent should tie with those shown in the
"Rent Schedule" provided in the application; and
(v)
elevations of residential and common area buildings which
include a percentage estimate of the exterior composition, i.e. 50% brick,
50% siding.
(F)
Rehabilitation Projects must submit photographs of the
existing signage, typical building elevations and interiors, existing project
amenities, and site work. These photos should clearly document the typical
areas and building components which exemplify the need for rehabilitation.
(2)
Exhibit 102. Evidence of the Project's development costs
and corresponding credit request as described in subparagraphs (A)-(C) of
this paragraph.
(A)
All projects must submit the "Project Cost Schedule" provided
in the Application Submission Procedures Manual. Rehabilitation developments
must establish that the rehabilitation will be substantial and will involve
at least $6,000 per unit in direct hard costs.
(B)
For projects located in a Qualified Census Tract (QCT)
as defined by the Secretary of HUD and qualifying for a 30% increase in Eligible
Basis, pursuant to the Code, §42(d)(5)(C), Applicants must submit a copy
of the census map clearly showing that the proposed development is located
within a QCT. Census tract numbers must be clearly marked on the map, and
must be identical to the QCT number stated in the Department's Reference Manual.
(C)
Rehabilitation Projects must also submit the "Proposed
Work Write Up for Rehabilitation Projects" provided in the Application Submission
Procedures Manual. This form must be prepared and certified by a third party
registered architect, professional engineer or general Contractor.
(3)
Exhibit 103. Evidence of readiness to proceed as evidenced
by at least one of the items under each of subparagraphs (A)-(E) of this paragraph:
(A)
Exhibit 103A. Evidence of site control in the name of the
ownership entity, or entities which comprise the Applicant. If the evidence
is not in the name of the Project Owner, then the documentation should reflect
an expressed ability to transfer the rights to the Project Owner. One of the
following items described in clauses (i)-(iii) of this subparagraph must be
provided:
(i)
a recorded warranty deed; or
(ii)
a contract for sale or lease (the minimum term of the
lease must be at least 45 years) which is valid for the entire period the
development is under consideration for tax credits or at least 90 days, whichever
is greater; or
(iii)
an exclusive option to purchase which is valid for the
entire period the development is under consideration for tax credits or at
least 90 days, whichever is greater.
(B)
Exhibit 103B. Evidence from the appropriate local municipal
authority that satisfies one of clauses (i)-(iii) of this subparagraph:
(i)
a letter stating that the property is appropriately zoned
for the Project or that zoning is not required in that municipality;
(ii)
if the property is not appropriately zoned, a letter confirming
that a rezoning request has been filed. This letter should also provide a
timeline for completion of the rezoning process. Any commitment of tax credits
to the Applicant will be contingent upon proper rezoning prior to the Carryover
Allocation.
(iii)
In the case of a rehabilitation project, if the property
is currently a non-conforming use as presently zoned, a letter which discuss
the items in subclauses (I)-(IV) of this clause:
(I)
a detailed narrative of the nature of non-conformance;
(II)
the applicable destruction threshold;
(III)
owner's rights to reconstruct in the event of damage;
and
(IV)
penalties for noncompliance.
(C)
Exhibit 103C. Evidence of the availability of all necessary
utilities/services to the development site. Necessary utilities include natural
gas (if it will be utilized by the project), electric, trash, water, and sewer.
Such evidence must be a letter or a monthly utility bill from the appropriate
municipal/local service provider. If utilities are not already accessible,
then the letter must clearly state: an estimated time frame for provision
of the utilities, an estimate of the infrastructure cost, and an estimate
of any portion of that cost that will be borne by the developer. Letters must
be from an authorized individual representing the organization which actually
provides the services. Such documentation should clearly indicate the address
of the proposed site. If utilities are already accessible, then the documentation
must not be older than 12 months from the first day of the Application Acceptance
Period. If utilities are not already accessible (undeveloped areas), then
the letter should not be older than three months from the first day of the
Application Acceptance Period.
(D)
Exhibit 103D. Evidence of permanent financing sufficient
to fund the proposed Total Housing Development Cost less any other funds requested
from the Department. Such evidence must be consistent with the sources and
uses of funds represented in the Application and shall be provided in one
or more of the following forms described in clauses (i)-(iv) of this subparagraph:
(i)
bona fide permanent financing in place as evidenced by
a valid and binding loan agreement and a deed(s) of trust in the name of the
ownership entity which identifies the mortgagor as the Applicant or entities
which comprise the general partner and/or expressly allows the transfer to
the Proposed Project Owner; or,
(ii)
bona fide commitment or term sheet issued by a lending
institution or mortgage company that is actively and regularly engaged in
the business of lending money which is addressed to the ownership entity,
or entities which comprise the Applicant and which has been executed and accepted
by both parties (the term of the loan must be for a minimum of 15 years with
at least a 30 year amortization). Such a commitment may be conditional upon
the completion of due diligence by the lender; or,
(iii)
any Federal, State or locally subsidized gap financing
of soft debt must be identified at the time of application. At a minimum,
evidence from the lending agency that an application for funding has been
made and a term sheet which clearly describes the amount and terms of the
funding must submitted. While evidence of application for funding from another
TDHCA program is not required (as these funds will be presented to the Board
concurrently with the recommendation for tax credits), the Applicant must
clearly indicate that such an application has been filed as required by the
Application Submission Procedures Manual. If the necessary financing has not
been committed by the applicable lending agency, the Commitment Notice, Housing
Credit Allocation or Determination Notice, as the case may be, will be conditioned
upon Applicant obtaining a commitment for the required financing by a date
certain; or
(iv)
if the development will be financed through Project Owner
contributions, provide a letter from an independent CPA verifying the capacity
of the Applicant to provide the proposed financing with funds that are not
otherwise committed together with a letter from the Applicant's bank or banks
confirming that sufficient funds are available to the Applicant.
(E)
Exhibit 103E. A copy of the full legal description and
either of the documents described in clauses (i) and (ii) of this subparagraph:
(i)
a copy of the current title policy which shows that the
ownership (or leasehold) of the land/Project is vested in the exact name of
the Applicant, or entities which comprise the Applicant; or
(ii)
a copy of a current title commitment with the proposed
insured matching exactly the name of the Applicant or entities which comprise
the Applicant and the title of the land/Project vested in the name of the
exact name of the seller or lessor as indicated on the sales contract or lease,
as applicable.
(4)
Exhibit 104. Evidence of all of the notifications described
in subparagraphs (A)-(D) of this paragraph. Such notices must be prepared
in accordance with "Exhibit 104, Pre-Application Public Notifications" provided
in the Application Submission Procedures Manual.
(A)
Exhibit 104A. A copy of the public notice published in
a widely circulated newspaper in the area in which the proposed development
will be located. Such notice must run at least twice within a thirty day period
or three times within a five day period. The notice should not run on holidays
or weekends. Such notice must be published prior to the submission of the
Application to the Department and can not be older than three months from
the first day of the Application Acceptance Period. In communities located
in close proximity to a larger metropolitan area and whose citizens may subscribe
to a local newspaper as well as a widely circulated metropolitan newspaper,
the notice should be published in both newspapers.
(B)
Exhibit 104B. Evidence of notification of the local chief
executive officer(s) (i.e., mayor and county judge), state senator, and state
representative of the locality of the development. Evidence of such notification
shall include a letter which at a minimum contains a copy of the public notice
sent to the official and proof of delivery in the form of a certified mail
receipt, overnight mail receipt, or confirmation letter from said official.
Proof of notification should not be older than three months from the first
day of the Application Acceptance Period.
(C)
Exhibit 104C. If any of the units in the Project are occupied
at the time of application, then the Applicant must post a copy of the public
notice in a prominent location at the Project throughout the period of time
the Application is under review by the Department. When the Department's public
hearing schedule for comment on submitted applications becomes available,
a copy of the schedule must also be posted until such hearings are completed.
Compliance with these requirements shall be confirmed during the Department's
site inspection.
(D)
Exhibit 104D. Public Housing Waiting List. Evidence that
the Project Owner has committed in writing to the local public housing authority
(PHA) the availability of Units and that the Project Owner agrees to consider
households on the PHA's waiting list as potential tenants and that the Property
is available to Section 8 certificate or voucher holders. Evidence of this
commitment must include a copy of the Project Owner's letter to the PHA and
proof of delivery in the form of a certified mail receipt, overnight mail
receipt, or confirmation letter from said PHA. Proof of notification should
not be older than three months from the first day of the Application Acceptance
Period. If no PHA is within the locality of the development, the Project Owner
must utilize the nearest authority or office responsible for administering
Section 8 programs.
(5)
Exhibit 105. Evidence of the Project's ownership structure
and the Applicant's previous experience as described in subparagraphs (A)-(F)
of this paragraph.
(A)
a chart which clearly illustrates the complete organizational
structure of the Project Owner. This chart should provide the names and ownership
percentages of Persons with an ownership interest in the development. The
percentage ownership of all Persons in Control of these entities and sub-entities
must also be clearly defined.
(B)
The Applicant, General Partner and all Persons in Control
of these entities and sub-entities must also provide documentation of standing
to include items found in clauses (i) and (ii) of this subparagraph.
(i)
the following documentation as applicable under subclauses
(I) and (II) of this clause:
(I)
For entities to be formed a fully executed copy of the
statement of partnership or partnership agreement.
(II)
For existing entities:
(-a-)
a copy of the Certificate of Good Standing from the State
Comptroller and a copy of the Certificate of Charter or Limited Partnership
and Articles of Incorporation filed of record; or
(-b-)
a recorded copy of the local DBA Certificate for non-incorporated
or non-State Certified sub-entities.
(ii)
the Applicant must provide evidence that the signor(s)
of the Application have the authority to sign on behalf of the Applicant in
the form of a corporate resolution or by-laws which indicate same from the
sub-entity in Control of the Applicant.
(C)
A copy of the completed and executed "Exhibit 105C, Previous
Participation and Background Certification Form," which is provided in the
Application Submission Procedures Manual. This form must be completed with
respect to each Person owning an interest in the general partner (or if Applicant
is to be a Limited Liability Company, the managing member) of the Applicant.
(D)
Evidence that each Person owning an interest in the general
partner (or if Applicant is to be a Limited Liability Company, the managing
member) of the Applicant has sent "Exhibit 105D, National Previous Participation
and Background Certification Form," to the appropriate Housing Credit Agency
for each state in which they have developed or operated affordable housing.
Evidence of such notification shall be a copy of the form sent to the agency
and proof of delivery in the form of a certified mail receipt, overnight mail
receipt, or confirmation letter from said agency.
(E)
Submission of IRS Form 8821, Tax Information Authorization
signed and executed on behalf of the Applicant for the release of tax information
relating to non-disclosure or recapture issues.
(F)
Evidence that the Project Owner's general partner, partner
(or if Applicant is to be a Limited Liability Company, the managing member)
General Contractor or their principals have a record of successfully constructing
or developing residential units or comparable commercial property (i.e. dormitory
and hotel/motel) in the capacity of owner, general partner, managing member
or General Contractor. If the General Contractor's experience is being claimed
for this exhibit, then the Project Owner must request the Department's approval
prior to replacing the General Contractor. If rehabilitation experience is
being claimed to qualify for an Application involving new construction, then
the rehabilitation must have been substantial and involved at least $6,000
of direct hard cost per unit.
(i)
The term "successfully" is defined as acting in a capacity
as the general contractor or developer of:
(I)
at least 100 residential units or comparable commercial
property; or
(II)
at least 36 residential units or comparable commercial
property if the project applying for credits is a Rural Project.
(ii)
Evidence must be one of the following documents:
(I)
A certification from the Department that the Person with
the experience satisfies this exhibit. Applicants who have previously applied
for a Tax Credit Allocation must request this certification at least twenty-one
days prior to the beginning of the Application Acceptance Period. Applicants
should ensure that the individual whose name is on the certification appears
in the organizational chart provided in Exhibit 105A. If the certification
is for the General Contractor, then this should be clearly indicated on the
document.
(II)
If the Department has not previously certified that the
experience of the Project Owner, general partner, managing member or General
Contractor qualifies for this exhibit, then one of the following documents
must be submitted: American Institute of Architects (AIA) Document A111--Standard
Form of Agreement Between Owner & Contractor, AIA Document G704--Certificate
of Substantial Completion, IRS Form 8609, HUD Form 9822, development agreements,
partnership agreements, or other appropriate documentation verifying that
the general partner, General Contractor or their principals have the required
experience. If submitting the IRS Form 8609, only one form per project is
required. The evidence must clearly indicate:
(-a-)
that the project has been completed (i.e. Development
Agreements, Partnership Agreements, etc. must be accompanied by certificates
of completion.);
(-b-)
that the names on the forms and agreements tie back to
the ownership entity, general partner, general contractor and their respective
principals as listed in the Application; and
(-c-)
the number of units completed or substantially completed.
(6)
Exhibit 106. Evidence of the Project's projected income
and operating expenses as described in subparagraphs (A)-(C) of this paragraph:
(A)
All developments must provide a 15-year proforma estimate
of operating expenses and supporting documentation used to generate projections
(excerpts from the market study, operating statements from comparable properties,
etc).
(B)
Applicant must provide documentation from the source of
the "Utility Allowance" estimate used in completing the Rent Schedule provided
in the Application. This exhibit must clearly indicate which utility costs
are included in the estimate. If there is more than one entity (Section 8
administrator, public housing authority) responsible for setting the utility
allowance(s) in the area of the Project location, then the Utility Allowance
selected must be the one which most closely reflects the actual utility costs
in that project area. In this case, documentation from the local utility provider
supporting the selection must be provided.
(C)
Occupied projects undergoing rehabilitation must also submit
both items described in clauses (i) and (ii) of the subparagraph. If the current
property owner is unwilling to provide the required documentation, then a
signed statement as to their unwillingness to do so is required.
(i)
historical monthly operating statements of the subject
development for 12 consecutive months ending not more than 45 days prior to
the first day of the Application Acceptance Period. In lieu of the monthly
operating statements, two annual operating statement summaries may be provided.
If 12 months of operating statements or two annual operating summaries can
not be obtained, then the monthly operating statements since the date of acquisition
of the development and any other supporting documentation used to generate
projections may be provided; and
(ii)
a current rent roll that discloses the terms and rate
of the lease, rental rates offered at the date of the rent roll, Unit mix,
tenant names or vacancy, and dates of first occupancy and expiration of lease.
(7)
Exhibit 107. All Applicants involving a nonprofit general
partner regardless of the set-aside applied under must submit all of the documents
described in subparagraph (A)-(E) of this paragraph which confirm that the
Applicant is a Qualified Nonprofit Organization pursuant to Code, §42(h)(5)(C):
(A)
an IRS determination letter which states that the Qualified
Nonprofit Organization is a 501(c)(3) or (4) entity;
(B)
if the Project involves a joint-venture between a Qualified
Nonprofit Organization and a for-profit entity, an agreement which shows that
the nonprofit organization will hold an ownership interest in and materially
participate (within the meaning of the Code §469(h)) in the development
and operation of the Project throughout the Compliance Period;
(C)
a copy of the articles of incorporation of the nonprofit
organization which specifically states that the fostering of affordable housing
is one of the entity's exempt purposes;
(D)
"Exhibit 107A, Nonprofit Participation Exhibit"; and
(E)
Exhibit 107B, Attorney Opinion Letter for Nonprofit Organizations.
(8)
Exhibit 108. Applicants applying for acquisition credits
or affiliated with the seller must provide all of the documentation described
in subparagraphs (A)-(C) of this paragraph. Applicants applying for acquisition
credits must also provide the items described in subparagraphs (D) and (E)
of this paragraph and as provided in the Application Submission Procedures
Manual.
(A)
an appraisal which complies with the Uniform Standards
of Professional Appraisal Practice and the Department's Market Analysis and
Appraisal Policy. This appraisal of the Property must separately state the
as-is, pre-acquisition or transfer value of the land and the improvements
where applicable;
(B)
a valuation report from the county tax appraisal district;
(C)
clear identification of the selling Persons or entities,
and details of any relationship between the seller and the Applicant or any
Affiliation with the Development Team, Qualified Market Analyst or any other
professional or other consultant performing services with respect to the Project.
If any such relationship exists, complete disclosure and documentation of
the related party's original acquisition and holding costs since acquisition
to justify the proposed sales price must also be provided;
(D)
"Exhibit 108, Acquisition of Existing Buildings Form";
and
(E)
"Exhibit 108, Attorney Opinion Letter for Projects Requesting
Acquisition and Rehabilitation Credits."
(9)
Exhibit 109. Evidence of the Applicant's financial status
as provided by both documents described in subparagraphs (A) and (B) of this
paragraph and as provided in the Application Submission Procedures Manual.
Such evidence must be filed separately from the volume containing the Threshold
Criteria and placed in a large envelope labeled as Exhibit 109, as instructed
in the Application Submission Procedures Manual.
(A)
Exhibit 109A. A Personal Financial and Credit Statement
completed and signed by each Person with a general partner (or if Applicant
is to be a Limited Liability Company, managing member) interest in the Applicant.
Applicant's statement must not be older than 90 days from the first day of
the Application Acceptance Period. If submitting partnership and corporate
financials in addition to the individual statements, the certified financial
statements should not be older than 12 months.
(B)
Exhibit 109B. Authorization to Release Credit Information
must be completed by all Persons with an ownership interest in the Applicant.
(10)
Exhibit 110. A Phase I Environmental Site Assessment (ESA)
on the subject Property, dated not more than 12 months prior to the first
day of the Application Acceptance Period. In the event that a Phase I Environmental
Site Assessment on the Project is older than 12 months, the Project Owner
must supply the Department with an update letter from the Person or organization
which prepared the initial assessment; provided however, that the Department
will not accept any Phase I Environmental Site Assessment which is more than
24 months old. The ESA must be prepared in accordance with the policies provided
in the Application Submission Procedures Manual.
(11)
Exhibit 111. A comprehensive Market Study prepared at
the developer's expense by a disinterested Qualified Market Analyst in accordance
with the Market Analysis and Appraisal Policy provided in the Application
Submission Procedures Manual. The Market Study should be prepared for and
addressed to the Department.
(A)
The Department may determine from time to time that information
not requested in the Third Party Market Study Standards will be relevant to
the Department's evaluation of the need for the Project and the allocation
of the requested Housing Credit Allocation Amount. The Department may request
additional information from the Qualified Market Analyst to meet this need.
(B)
All Applicants shall acknowledge by virtue of filing an
Application that the Department shall not be bound by any such opinion or
the Market Study itself, and may substitute its own analysis and underwriting
conclusions for those submitted by the Qualified Market Analyst.
(e)
Selection Criteria. All Applications will be ranked according
to the Selection Criteria listed in paragraphs (1)-(8) of this subsection.
(1)
Exhibit 201, Development Location. Evidence that the subject
Property is located within one of the geographical areas described in subparagraphs
(A)-(E) of this paragraph. Areas qualifying under any one of the subparagraphs
(A)-(E) of this paragraph will receive 7 points. A project may only receive
points under one of the subparagraphs (A)-(E) of this paragraph:
(A)
A project that is located in a city or county with no comparable
existing LIHTC developments and is not within two miles of an existing tax
credit development. Evidence will include a market study with a full review
of tax credit units within the two mile radius. The term comparable for this
exhibit means projects serving the same targeted population (ie., the elderly).
(B)
A geographical area which is:
(i)
a "Difficult Development Area" as specifically designated
by the Secretary of HUD. These are areas which have high construction, land,
and utility costs relative to area median family income; or
(ii)
a Targeted Texas County (TTC) as designated by the Department
in the Application Submission Procedures Manual;
(C)
a designated state or federal empowerment/enterprise zone.
Such developments must submit a letter and a map from a city/county official
verifying that the proposed development is located within such a designated
zone. Letter should be no older than 90 days from the first day of Application
Acceptance Period; or
(D)
a city-sponsored Tax Increment Financing Zone (TIF), Public
Improvement District (PIDs), or other area or zone where a city or county
has, through a local government initiative, specifically encouraged or channeled
growth, neighborhood preservation or redevelopment. Significant incentives
or benefits must be received from the local government which amount to at
least 5% of the Total Development Costs. Such developments must submit all
of the following documentation: a letter from a city/county official verifying
that the proposed development is located within the city sponsored zone or
district; a map from the city/county official which clearly delineates the
boundaries of the district; and a certified copy of the appropriate resolution
or documentation from the mayor, local city council, county judge, or county
commissioners court which documents that the designated area was:
(i)
created by the local city council/county commission,
(ii)
targets a specific geographic area which was not created
solely for the benefit of the Applicant, and
(iii)
offers tangible and significant area-specific incentives
or benefit over and above those normally provided by the city or county.
(E)
Project is located in a QCT and contributes to a concerted
community revitalization plan. To qualify for these points, the Project Owner,
in addition to submitting Exhibit 102 (B), must also submit a letter from
a city/county official which verifies that the development is located in a
Qualified Census Tract, and provides a detailed description of the revitalization
plan under way in the community, including how the project contributes to
such concerted revitalization efforts.
(2)
Housing Needs Characteristics.
(A)
The proposed development is located in a county in which
10% or more of the households are below the poverty level as set forth in
the Department's "County Data Elements Guide" incorporated into the Reference
Manual. Utilize the percentages in clauses (i)-(iv) of this subparagraph to
assess the appropriate score:
(i)
10% to 20% of households are below the poverty level (3
points);
(ii)
21% to 31% of households are below the poverty level (5
points);
(iii)
32% to 42% of households are below the poverty level
(7 points); or
(iv)
43% or more of households are below the poverty level
(9 points).
(B)
The proposed development is located in a county in which
20% or more of the rental units have a cost burden as set forth in the County
Data Elements guide. Utilize the following percentages to assess the appropriate
score:
(i)
20% to 30% of rental units have a cost burden (4 points);
(ii)
31% to 41% of rental units have a cost burden (6 points);
or
(iii)
42% or more of rental units have a cost burden (8 points).
(3)
Project Characteristics. Projects may receive points under
as many of the following subparagraphs as are applicable.
(A)
Exhibit 202. Evidence that the Project to be purchased
qualifies as a federally assisted building within the meaning of the Code, §42(d)(6)(B),
and is in danger of having the mortgage assigned to HUD, TxRD-USDA, or creating
a claim on a federal mortgage insurance fund (such evidence must be a letter
from the institution to which the development is in danger of being assigned);
OR evidence that the Applicant is purchasing(ed) a Property owned by HUD,
an insured depository institution in default, or a receiver or conservator
of such an institution, or is an REO Property or other existing Property which
is being rehabilitated as part of a community revitalization plan. Such evidence
must be in the form of a binding contract to purchase from such federal or
other entity as described in this subparagraph, closing statements, or recorded
warranty deed. For an existing Project which is part of a community revitalization
plan, documentation must include a letter from the city/county which verifies
that the Project is part of a community revitalization plan and provides a
detailed description of the contribution to the revitalization plan (5 points).
(B)
Exhibit 203. Evidence that the Project is a low income
building with mortgage prepayment eligibility as provided for in the Code, §42(d)(6)(C),
or that the Project has an expiring Section 8 contract, which the owner is
under no obligation to renew. Such evidence must be a copy of the HUD regulatory
agreement and/or mortgage which does not preclude the current owner from prepaying
the mortgage and a copy of the expiring Section 8 contract(s). Applicant shall
also provide a statement as to its willingness to maintain low-income use
restrictions for the period applicable to the type of HUD assistance involved,
and the actions taken or required by it in order to assure that the HUD assistance
will continue to be provided to the Project (8 points).
(C)
Project provides Units for housing individuals with children.
To qualify for these points, these Units must have no fewer than three bedrooms
and at least 1000 square feet of net rentable area for three bedroom Units
or 1200 square feet of net rentable area for four bedroom Units. Unless the
building is served by an elevator, 3 or 4 bedroom Units located above the
building's second floor will not qualify for these points. If the Project
is a mixed-income development, only tax credit Units will be used in computing
the percentage of qualified Units for this selection item.
(i)
15% of the Units in the development are three or four bedrooms
(5 points); and
(ii)
an additional point will be awarded for each additional
5% increment of Units that are three or four bedrooms up to 30% of the Units
(a maximum of three points) (3 points).
(D)
The Project will utilize at least four of the following
energy saving devices in the construction of each tax credit Unit. The devices
selected must be certified by the project architect as being included in the
design of each tax credit Unit prior to the closing of the construction loan
and in actual construction upon Cost Certification. (4 Points):
(i)
ceiling fans in living room and each bedroom;
(ii)
insulation of at least R-15 for walls and R-30 for ceilings;
(iii)
roof radiant barrier;
(iv)
gas heating system with an energy factor of 0.59;
(v)
energy efficient air conditioning system with a 12 SEER
or above rating;
(vi)
a shading coefficient for windows of 0.4 provided in the
form of solar screens; or dual pane insulating, low-e windows;
(vii)
evaporative cooling system; or
(viii)
utilization of appliances and residential light fixtures
that qualify for the United States Environmental Protection Agency (EPA) and
the United States Department of Energy's Energy Star Label. At a minimum,
this shall include the installation of programmable thermostats, water heaters,
refrigerators and dishwashers in each unit.
(E)
The proposed development provides low density housing of
no more than 20 Units per acre or as follows:
(i)
16 Units or less per acre (6 points); or
(ii)
17 to 20 Units per acre (4 points).
(F)
The proposed development is designed as a multistory elderly
development or a Highrise Urban Infill Project. Points are awarded as follows:
(i)
21 to 24 Units per acre (5 points); or
(ii)
25 to 28 Units per acre (3 points).
(G)
The Project is an existing Residential Development without
maximum rent limitations or set-asides for affordable housing. If maximum
rent limitations had existed previously, then the restrictions must have expired
at least one year prior to the date of Application to the Department (8 points).
(H)
The Project is a mixed-income development comprised of
both market rate Units and qualified tax credit Units. To qualify for these
points, the project must be located in a submarket where the average rents
based on the number of bedrooms for comparable market rate units are at least
10% higher on a per net rentable square foot basis than the maximum allowable
rents under the Program. Additionally, the proposed rents for the market rate
units in the project must be at least 5% higher on a per net rentable square
foot basis than the maximum allowable rents under the Program. The Market
Study required by subsection (d)(11) of this section must provide an analysis
of these requirements for each bedroom type shown in proposed unit mix. Points
will be awarded to Project's with a Unit based Applicable Fraction which is
no greater than:
(i)
60% (10 points); or,
(ii)
75% (6 points); or,
(iii)
85% (3 points).
(I)
Exhibit 204. Evidence that the proposed historic Residential
Development has received an historic property designation by a federal, state
or local Governmental Entity. Such evidence must be in the form of a letter
from the designating entity identifying the development by name and address
and stating that the project is:
(i)
listed in the National Register of Historic Places under
the United States Department of the Interior in accordance with the National
Historic Preservation Act of 1966;
(ii)
located in a registered historic district and certified
by the United States Department of the Interior as being of historic significance
to that district;
(iii)
identified in a city, county, or state historic preservation
list; or
(iv)
designated as a state landmark (6 points).
(J)
Project Owner will set-aside Units for households with
incomes at 50% or less of Area Median Gross Income (AMGI). The rents for these
Units must not be higher than the allowable tax credit rents at the 50% AMGI
level. The Project Owner will set aside Units at 50% AMGI and will maintain
the percentage of such Units continuously over the compliance and extended
use period as specified in the LURA. For the purposes of this subparagraph
(maintaining the promised percentage of set aside 50% AMGI Units), if at re-certification
the tenant's household income exceeds 140% of the 50% AMGI level, then the
Unit remains a 50% AMGI Unit until the next available Unit of comparable or
smaller size is designated to replace this Unit. Once the over 50% AMGI Unit
is replaced, then the rent for the previously qualified 50% AMGI Unit may
be increased over the LIHTC requirements. Rent increases, if any, should comply
with lease provisions and local tenant-landlord laws. If the Project is a
mixed-income development, only tax credit Units should be used in computing
the percentage of qualified Units for this selection item. Utilize the percentages
in clause (i)-(ii) of this subparagraph to assess the appropriate score.
(i)
four points will be awarded for the first 10% of the Units
in the development that are set-aside for tenants with incomes at 50% or less
of AMGI (4 points);and
(ii)
an additional point will be awarded for every 5% of additional
Units set-aside for tenants with incomes at 50% or less of AMGI up to a maximum
of eight points (8 points).
(K)
The Project is comprised entirely of fourplexes and Town
Homes. To qualify for these points the development must be on contiguous property
under common ownership, management, and Control and must have a density of
no more than 16 Units per acre. None of the residential buildings may share
common roofs with other buildings. None of the residential buildings may have
an exterior door that opens onto a breezeway or hallway that serves other
units or buildings (5 points).
(L)
Exhibit 205. For developments which involve rehabilitation
of existing units, evidence that a majority of the development's residential
Units are vacant and uninhabitable at the time the Application is submitted.
Such evidence must be in the form of a letter and report from the local municipal
authority citing substantial code violations. To qualify for these points,
the Applicant or its Affiliates must not have owned a significant interest
in, or have had Control of the Project during the period in which such Units
were rendered uninhabitable (4 points).
(M)
Exhibit 206. Evidence from the local municipal authority
stating that the Project fulfills a need for additional affordable rental
housing as evidenced in a local Consolidated Plan, Comprehensive Plan, other
or local planning document. If the municipality does not have such a planning
document, then a letter from the local municipal authority stating that there
is no local plan and that the city supports the Project must be submitted
(5 points).
(N)
The Project consists of not more than 36 Units and is not
a part of, or contiguous to, a larger Project. A Project may not receive points
for this characteristic if it would otherwise qualify as a Rural Project (5
points).
(O)
Exhibit 207. Evidence that the proposed Project is partially
funded by a HOPE VI grant from HUD. The Project must have already received
the commitment from HUD. Submission of a HOPE VI application to HUD does not
qualify a Project for these points. Evidence shall include a copy of the commitment
letter from HUD indicating the HOPE VI grant terms and grant award amount
(5 points).
(4)
Sponsor Characteristics. Projects may only receive points
for one of the two criteria listed in subparagraphs (A) and (B) of this paragraph:
(A)
Exhibit 208. Evidence that a HUB, as certified by the General
Services Commission, is the Project Owner or Controls the Project Owner. With
respect to the filing of an Application and the development, operation and
ownership of a Project, the historically underutilized person or persons whose
ownership interests comprise a majority of a corporation, partnership, joint
venture or other business entity, must maintain this majority and must demonstrate
regular, continuous, and substantial participation in the operation and management
activities of the entity. Likewise, with regard to a sole proprietorship,
the individual who comprises the sole proprietorship must demonstrate regular,
continuous, and substantial participation in the development, operation and
ownership of the Project. The Department shall, during and after the Application
Round, monitor those individuals whose purported ownership interest(s) and
participation form the basis upon which the designation of HUB is being claimed
and may require the submission of additional documentation as required to
verify said evidence. The Department's goal is to have substantive participation
by those individuals whose purported ownership interest(s) and participation
form the basis which the designation as a HUB is claimed. A determination
by the Department that there has been a material misrepresentation as to such
participation or that insufficient evidence has been provided to substantiate
such participation will be final and points awarded for HUB participation
will be withdrawn accordingly. The following documentation must be provided
to qualify for these points:
(i)
certification from the General Services Commission that
the Person is a HUB; and
(ii)
evidence of regular, continuous and substantial participation.
This evidence shall include, but not be limited to, the agreement to personally
guarantee the interim construction loan secured relative to the development
of a Project (and to personally provide all other guarantees to the equity
investor) by the person or persons whose purported ownership interest(s) and
participation form the basis upon which the designation of a HUB is being
claimed. Any such guarantee wherein an Affiliate, partner and or Beneficial
Owner of the guarantor agrees to indemnify, in whole or in part, the guarantor
from the liability arising from the guarantee, shall not constitute said evidence
(3 points).
(B)
Exhibit 209. Joint Ventures with Qualified Nonprofit Organizations.
Evidence that the Project involves a joint venture between a forprofit organization
and a Qualified Nonprofit Organization. The Qualified Nonprofit Organization
must be materially participating in the Project as one of the General Partners,
but is not required to have Control, to receive these points. However, projects
without Control will not be eligible for the nonprofit set-aside. Such evidence
must be in the form of an executed partnership agreement between the organizations
participating in the joint venture. The partnership agreement must clearly
identify the percentage interest of each organization.(3 points)
(5)
Exhibit 210. Project Provides Supportive Services to Tenants.
Evidence that the Project Owner has an executed agreement with a for profit
organization or a tax-exempt entity for the provision of special supportive
services for the tenants. The service provider must be an existing organization
qualified by the Internal Revenue Service or other governmental entity. The
provision of supportive services will be included in the LURA (up to 5 points,
depending upon the services committed in accordance with subparagraph (B)
of this paragraph).
(A)
Both documents described in clauses (i) and (ii) of this
subparagraph must be submitted for the service provider to be considered under
this exhibit.
(i)
A fully executed contract between the service provider
and the Applicant that establishes that the services offered provide a benefit
that would not be readily available to the tenants if they were not residing
in the development.
(ii)
A copy of the service provider's Articles of Incorporation
or comparable chartering document.
(B)
The supportive services contract will be evaluated using
the criteria described in clauses (i)-(v) of this subparagraph. The contract
must clearly state the:
(i)
Cost of Services to the Project Owner. The cost shown in
the contract must also be included in the Project's operating budget and proforma.
The costs must be reasonable for the benefit derived by the tenants. Services
for which the Project Owner does not pay, will not receive a point for this
item (1 point).
(ii)
Availability of Services--The services must be provided
on site or with transportation provided to offsite locations. (1 point).
(iii)
Duration of Contract--A commitment to provide the services
for not less than five years or an option to renew the contract annually for
not less than five years must be provided (1 point).
(iv)
Experience of Service Provider--The Department will evaluate
the experience of the organization as well as the professional and educational
qualifications of the individuals delivering the services (1 point).
(v)
Appropriateness--Services must be appropriate and provide
a tangible benefit in enhancing the standard of living of a majority of low-income
tenants (1 point).
(6)
Tenant Populations With Special Housing Needs. Projects
may receive points under as many of the subparagraphs as apply, in accordance
with the terms of those subparagraphs.
(A)
This criterion applies to elderly Projects which provide
significant facilities and services specifically designed to meet the physical
and social needs of the residents. Significant services may include congregate
dining facilities, social and recreation programs, continuing education, welfare
information and counseling, referral services, transportation and recreation.
Other attributes of such Projects include providing hand rails along steps
and interior hallways, grab bars in bathrooms, routes that allow for barrier-free
travel, lever type doorknobs and single lever faucets. All multistory buildings
(two or more floors) must be served by an elevator. Individual Units shall
not be multistory. Elderly Projects must not contain any Units with three
or more bedrooms. Such a Project must conform to the Federal Fair Housing
Act and must be a Project which meets the definition of Qualified Elderly
Project (10 points).
(B)
Exhibit 211. Evidence that the Project is designed solely
for transitional housing for homeless persons on a non-transient basis, with
supportive services designed to assist tenants in locating and retaining permanent
housing. For the purpose of this exhibit, homeless persons are individuals
or families that lack a fixed, regular, and adequate nighttime residence as
more fully defined in 24 Code of Federal Regulations, §91.5, and as may
be amended from time to time. All of the items described in clauses (i)-(v)
of this subparagraph must be submitted:
(i)
a detailed narrative describing the type of proposed housing;
(ii)
a referral agreement with an established organization
which provides services to the homeless;
(iii)
a marketing plan designed to attract qualified tenants
and housing providers;
(iv)
a list of supportive services; and
(v)
adequate additional income source and executed guarantee
to supplement any anticipated operating and funding gaps (15 points).
(7)
Exhibit 212. Evidence that Project Owner agrees to provide
a right of first refusal to purchase the Project upon or following the end
of the Compliance Period for the minimum purchase price provided in, and in
accordance with the requirements of, §42(i)(7) of the Code (the "Minimum
Purchase Price"), to a Qualified Nonprofit Organization, the Department; and
either an individual tenant with respect to a single family building; or a
tenant cooperative, a resident management corporation in the Project or other
association of tenants in the Project with respect to multifamily developments
(together, in all such cases, including the tenants of a single family building,
a "Tenant Organization"). Project Owner may qualify for these points by providing
the right of first refusal in the following terms (5 points).
(A)
Upon the earlier to occur of:
(i)
the Project Owner's determination to sell the Project,
or
(ii)
the Project Owner's request to the Department, pursuant
to §42(h)(6)(I) of the Code, to find a buyer who will purchase the Project
pursuant to a "qualified contract" within the meaning of §42(h)(6)(F)
of the Code, the Project Owner shall provide a notice of intent to sell the
Project ("Notice of Intent") to the Department and to such other parties as
the Department may direct at that time. If the Project Owner determines that
it will sell the Project at the end of the Compliance Period, the Notice of
Intent shall be given no later than two years prior to expiration of the Compliance
Period. If the Project Owner determines that it will sell the Project at some
point later than the end of the Compliance Period, the Notice of Intent shall
be given no later than two years prior to date upon which the Project Owner
intends to sell the Project.
(B)
During the two years following the giving of Notice of
Intent, the Sponsor may enter into an agreement to sell the Project only in
accordance with a right of first refusal for sale at the Minimum Purchase
Price with parties in the following order of priority:
(i)
during the first six-month period after the Notice of Intent,
only with a Qualified Nonprofit Organization that is also a community housing
development organization, as defined for purposes of the federal HOME Investment
Partnerships Program at 24 C.F.R. §92.1 (a "CHDO") and is approved by
the Department,
(ii)
during the second six-month period after the Notice of
Intent, only with a Qualified Nonprofit Organization or a Tenant Organization;
and
(iii)
during the second year after the Notice of Intent, only
with the Department or with a Qualified Nonprofit Organization approved by
the Department or a Tenant Organization approved by the Department.
(iv)
If, during such two-year period, the Project Owner shall
receive an offer to purchase the Project at the Minimum Purchase Price from
one of the organizations designated in clauses (i), (ii), and (iii) of this
subparagraph (within the period(s) appropriate to such organization), the
Project Owner shall sell the Project at the Minimum Purchase Price to such
organization. If, during such period, the Project Owner shall receive more
than one offer to purchase the Project at the Minimum Purchase Price from
one or more of the organizations designated in clauses (i), (ii), and (iii)
of this subparagraph (within the period(s) appropriate to such organizations),
the Project Owner shall sell the Project at the Minimum Purchase Price to
whichever of such organizations it shall choose.
(C)
After the later to occur of:
(i)
the end of the Compliance Period; or
(ii)
two years from delivery of a Notice of Intent, the Project
Owner may sell the Project without regard to any right of first refusal established
by the LURA if no offer to purchase the Project at or above the Minimum Purchase
Price has been made by a Qualified Nonprofit Organization, a Tenant Organization
or the Department, or a period of 120 days has expired from the date of acceptance
of all such offers as shall have been received without the sale having occurred,
provided that the failure(s) to close within any such 120-day period shall
not have been caused by the Project Owner or matters related to the title
for the Project.
(D)
At any time prior to the giving of the Notice of Intent,
the Project Owner may enter into an agreement with one or more specific Qualified
Nonprofit Organizations and/or Tenant Organizations to provide a right of
first refusal to purchase the Project for the Minimum Purchase Price, but
any such agreement shall only permit purchase of the Project by such organization
in accordance with and subject to the priorities set forth in subparagraph
(B) of this paragraph.
(E)
The Department shall, at the request of the Project Owner,
identify in the LURA a Qualified Nonprofit Organization or Tenant Organization
which shall hold a limited priority in exercising a right of first refusal
to purchase the Project at the Minimum Purchase Price, in accordance with
and subject to the priorities set forth in subparagraph (B) of this paragraph.
(F)
The Department shall have the right to enforce the Project
Owner's obligation to sell the Project as herein contemplated by obtaining
a power-of-attorney from the Project Owner to execute such a sale or by obtaining
an order for specific performance of such obligation or by such other means
or remedy as shall be, in the Department's discretion, appropriate.
(8)
Bonus Points.
(A)
Projects included on a list of proposed Applications submitted
to the Department by the Applicant at least 20 business days prior to the
beginning of the Application Acceptance Period shall receive two points. This
list must include the following information about the proposed development(s):
Project name, address, city, zip code, household type ("family", "elderly",
or "transitional") and the estimated number of total units, program units,
and credit request amount. (2 points).
(B)
Applications received within the first ten working days
of the Application Acceptance Period shall receive two points (2 points).
(f)
Credit Amount.
(1)
The Department shall issue tax credits only in the amount
needed for the financial feasibility and viability of a Project throughout
the Compliance Period. The issuance of tax credits or the determination of
any allocation amount in no way represents or purports to warrant the feasibility
or viability of the Project by the Department. The Department will limit the
allocation of tax credits to no more than $1.2 million per Project. The allocation
of tax credits shall also be limited to not more than $1.8 million per Applicant.
These limitations will apply to all Affiliates of any Applicant, developer,
Project Owner, general partner, sponsor or their Affiliates or related entities
unless otherwise provided for by the Board. Tax Exempt Bond Project Applications
are not subject to the per Project and per Applicant credit limitations, and
Tax Exempt Bond Projects will not count towards the total limit on tax credits
per Applicant.
(2)
In making determinations with respect to the limitation
the Department may take into account such factors as the percentage of interest
held by a particular individual or any Affiliate thereof in a Project, the
amount of fees or other compensations paid to a particular individual or any
Affiliate thereof with respect to a Project, any other financial benefits,
either directly or indirectly, through Beneficial Ownership received by a
particular individual or any Affiliate thereof with respect to a Project.
The limitation does not apply:
(A)
to an entity which raises or provides equity for one or
more Projects, solely with respect to its actions in raising or providing
equity for such Projects (including syndication related activities as agent
on behalf of investors);
(B)
to the provision by an entity of "qualified commercial
financing" within the meaning of the Code, §49(a)(1)(D)(ii) (without
regard to the 80% limitation thereof);
(C)
to a Qualified Nonprofit Organization or other not-for-profit
entity, to the extent that the participation in a Project by such organization
consists only of the provision of loan funds or grants; and
(D)
to a Project Consultant with respect to the provision of
consulting services.
(g)
Limitations on the Size of Projects.
(1)
The minimum Project size will be limited to 16 units unless
otherwise provided for under the Ineligible Building Types definition.
(2)
Rural Projects involving new construction will be limited
to 76 Units unless the Market Study clearly documents that larger developments
are consistent with the comparables in the community and that there is a significant
demand for additional units. Rural Projects exceeding 76 Units based on the
Market Study will be ineligible for the Rural Set-Aside. All other Projects
involving new construction will be limited to 250 units. These maximum unit
limitations also apply to those Projects which involve a combination of rehabilitation
and new construction. Projects that consist solely of acquisition/rehabilitation
or rehabilitation only may exceed the maximum unit restrictions. For those
developments which are a second phase or are otherwise adjacent to an existing
tax credit development unless such proposed development is being constructed
to replace previously existing affordable multifamily units on its site, the
combined Unit total for the developments may not exceed the maximum allowable
project size, unless the first phase has been completed and stabilized for
at least six months.
(3)
Tax Exempt Bond Projects will be limited to 280 Units.
(h)
Tax Exempt Bond Financed Projects.
(1)
Tax Exempt Bond Project Applications are also subject to
evaluation under the QAP and Rules and the requirements and underwriting review
criteria described in the Application Submission Procedures Manual. Such projects
requesting a Determination Notice in the current calendar year must meet all
Threshold Criteria requirements stipulated in subsection (d) of this section.
Such projects which received a Determination Notice in a prior calendar year
must meet all Threshold Criteria requirements stipulated in the QAP and Rules
in effect for the calendar year in which the Determination Notice was issued;
provided, however, that such projects shall comply with all procedural requirements
for obtaining Department action in the current QAP and Rules; and such other
requirements of the QAP and Rules as the Department determines applicable.
Tax Exempt Bond Financed Projects are not subject to the Selection Criteria
set forth in subsection (e) of this section and are not required to submit
documentation relating thereto.
(2)
Tax Exempt Bond Project Applications will be evaluated
under the factors set forth at subsection (b)(1), (3), (4) and (7) of this
section. With respect to subsection (b)(1) of this section, Projects determined
to be infeasible by the Department will not receive a Determination Notice.
With respect to subsection (b)(3) of this section, Projects determined by
the Department to result in an excessive concentration of affordable housing
developments within a particular market area will not receive a Determination
Notice. With respect to subsection (b)(4) of this section, Projects determined
by the Department to be located on an "Unacceptable" site will not receive
a Determination Notice. For purposes of subsection (b)(7) of this section,
Projects must demonstrate the Project's consistency with the bond issuer's
consolidated plan or other similar planning document. Consistency with the
local municipality's consolidated plan or similar planning document must also
be demonstrated in those instances where the city or county has a consolidated
plan.
(3)
Tax Exempt Bond Projects may not include Ineligible Building
Types unless the Department determines that it is in the best interests of
the particular Project, its market area and the tax credit program to permit
a particular building type to be included in the Project.
(4)
Tax Exempt Bond Projects are subject to the requirements
and restrictions set forth in §50.5 of this title.
(5)
Tax Exempt Bond Project Applications are not subject to
the limitations on amount of tax credits per Applicant or per Project set
forth in paragraph (1) of this subsection.
(6)
Tax Exempt Bond Project Applications must provide an executed
agreement with a qualified service provider for the provision of special supportive
services that would otherwise not be available for the tenants. The provision
of these services will be included in the LURA. Acceptable services as described
in subparagraphs (A)-(C) of this paragraph include:
(A)
the services must be in one of the following categories:
child care, transportation, basic adult education, legal assistance, counseling
services, GED preparation, English as a second language classes, vocational
training, home buyer education, credit counseling, financial planning assistance
or courses, health screening services, health and nutritional courses, youth
programs, scholastic tutoring, social events and activities, community gardens
or computer facilities; or
(B)
any other program described under Title IV-A of the Social
Security Act (42 U.S.C. §§601 et seq.) which enables children to
be cared for in their homes or the homes of relatives; ends the dependence
of needy families on government benefits by promoting job preparation, work
and marriage; prevents and reduces the incidence of out-of wedlock pregnancies;
and encourages the formation and maintenance of two-parent families, or
(C)
any other services approved in writing by the Issuer. The
plan for tenant supportive services submitted for review and approval of the
Issuer must contain a plan for coordination of services with state workforce
development and welfare programs. The coordinated effort will vary depending
upon the needs of the tenant profile at any given time as outlined in the
plan.
(7)
Code §42(m)(2)(D) required the bond issuer (if other
than the Department) to make sure that a Tax Exempt Bond Project does not
receive more tax credits than the amount needed for the financial feasibility
and viability of a Project throughout the Compliance Period. Treasury Regulations
prescribe the occasions upon which this determination must be made. In light
of the requirement, issuers may either elect to underwrite the Project for
this purpose in accordance with the QAP and the Department's underwriting
guidelines; or delegate, by agreement, that function to the Department. If
the issuer underwrites the Project, the Department will, nonetheless, review
the underwriting report and may make such changes in the amount of credits
which the Project may be allowed as are appropriate under the Department's
guidelines. The Determination Notice issued by the Department and any subsequent
IRS Form(s) 8609 will reflect the amount of tax credits for which the Project
is determined to be eligible in accordance with this paragraph, and the amount
of tax credits reflected in the IRS Form 8609 may be greater or less than
the amount set forth in the Determination Notice, based upon the Department's
and the bond issuer's determination as of each building's placement in service.
(8)
If the Department staff determines that all requirements
of this subsection (h) of this section have been met, the Ad Hoc Tax Credit
Committee, without further action, shall authorize the Department to issue
a Determination Notice to the Applicant that the Project satisfies the requirements
of the QAP and Rules in accordance with the Code, §42(m)(1)(D).
(i)
Adherence to Obligations. All representations, undertakings
and commitments made by an Applicant in the applications process for a Project,
whether with respect to Threshold Criteria, Selection Criteria or otherwise,
shall be deemed to be a condition to any Commitment Notice, Determination
Notice, or Carryover Allocation for such Project, the violation of which shall
be cause for cancellation of such Commitment Notice, Determination Notice,
or Carryover Allocation by the Department, and if concerning the ongoing features
or operation of the Project, shall be reflected in the LURA. All such representations
are enforceable by the Department, including enforcement by administrative
penalties for failure to perform as stated in the representation and enforcement
by inclusion in deed restrictions to which the Department is a party.
§50.8.Compliance Monitoring.
(a)
The Code, §42(m)(1)(B)(iii), requires the Department
as the housing credit agency to include in its QAP a procedure that the Department
will follow in monitoring Projects for noncompliance with the provisions of
the Code, §42 and in notifying the IRS of such noncompliance of which
the Department becomes aware. Such procedure is set out in this QAP and in
the Owner's Compliance Manual prepared by the Department's Compliance Division,
as amended from time to time. Such procedure only addresses forms and records
that may be required by the Department to enable the Department to monitor
a Project for violations of the Code and the LURA and to notify the IRS of
any such non-compliance. This procedure does not address forms and other records
that may be required of Project Owners by the IRS more generally, whether
for purposes of filing annual returns or supporting Project Owner tax positions
during an IRS audit.
(b)
The Department will monitor compliance with all covenants
made by the Project Owner in the Application and in the LURA, whether required
by the Code, Treasury Regulations or other rulings of the IRS, or undertaken
by the Project Owner in response to Department requirements or criteria.
(c)
The Project Owner must keep records for each qualified
low income building in the Project, showing on a monthly basis (with respect
to the first year of a building's Credit Period and on an annual basis, thereafter):
(1)
the total number of residential rental Units in the building
(including the number of bedrooms and the size in square feet of each residential
rental Unit);
(2)
the percentage of residential rental Units in the building
that are low income Units;
(3)
the rent charged for each residential rental Unit in the
building including, with respect to low income Units, documentation to support
the utility allowance applicable to such Unit;
(4)
the number of occupants in each low income Unit;
(5)
the low income Unit vacancies in the building and information
that shows when, and to whom, all available Units were rented;
(6)
the annual income certification of each tenant of a low
income Unit, in the form designated by the Department in the Compliance Manual,
as may be modified from time to time;
(7)
documentation to support each low income tenant's income
certification, consistent with the verification procedures required by HUD
under Section 8 of the United States Housing Act of 1937 ("Section 8"). In
the case of a tenant receiving housing assistance payments under Section 8,
the documentation requirement is satisfied if the public housing authority
provides a statement to the Project Owner declaring that the tenant's income
does not exceed the applicable income limit under the Code, §42(g) as
described in the Compliance Manual;
(8)
the Eligible Basis and Qualified Basis of the building
at the end of the first year of the Credit Period;
(9)
the character and use of the nonresidential portion of
the building included in the building's Eligible Basis under the Code, §42(d),
(e.g. whether tenant facilities are available on a comparable basis to all
tenants; whether any fee is charged for use of the facilities; whether facilities
are reasonably required by the Project); and
(10)
any additional information as required by the Department.
(d)
The Project Owner will deliver to the Department within
90 days after the end of each calendar year, the current financial statements,
in form and content satisfactory to the Department, itemizing the income and
expenses of the Project.
(e)
Specifically, to evidence compliance with the requirements
of the Code, §42(h)(6)(B)(iv) which requires that the LURA prohibit Project
Owners of all tax credit projects placed in service after August 10, 1993
from refusing to lease to persons holding Section 8 vouchers or certificates
because of their status as holders of such Section 8 voucher or certificate,
Project Owners must:
(1)
maintain a written management plan that is available for
review upon request. Such management plan must state an intention of the Project
Owner to comply with state and federal fair housing and anti-discrimination
laws. Owners and managers of all tax credit Projects placed in service after
August 10, 1993, are prohibited from having policies, practices, procedures
and/or screening criteria which exclude applicants solely because they have
a Section 8 voucher or certificate. Such management plan must also clearly
state the objectives identified in subparagraphs (A)-(C) of this paragraph.
Failure to have the required objectives set forth clearly in the management
plan or failure to follow such required objectives in the operation of the
Project will be treated by the Department as noncompliance with the LURA.
(A)
prospective applicants who hold Section 8 vouchers or certificates
are welcome to apply and will be provided the same consideration for occupancy
as any other applicant;
(B)
any minimum income requirements for Section 8 voucher and
certificate holders will only be applied to the portion of the rent the prospective
tenant would pay, provided, however, that if Section 8 pays 100% of the rent
for the Unit, the Project Owner may establish other reasonable minimum income
requirements to ensure that the tenant has the financial resources to meet
daily living expenses. Minimum income requirements for Section 8 voucher and
certificate holders will not exceed 2.5 times the portion of rent the tenant
pays; and
(C)
all other screening criteria, including employment policies
or procedures and other leasing criteria (such as rental history, credit history,
criminal history, etc.) must be applied to applicants uniformly and in a manner
consistent with the Texas and federal Fair Housing Acts and with Department
and Code requirements;
(2)
post Fair Housing logos and the Fair Housing poster in
the leasing office;
(3)
approve and distribute a written Affirmative Marketing
Plan to the property management and on-site staff.
(4)
communicate annually during the first quarter of each year
in writing with the director of each Section 8 program which has jurisdiction
within the geographic area where the Project is located. Such communication
will include information on the unit characteristics and rents and will advise
the administrating agency that the property accepts Section 8 vouchers and
certificates and will treat referrals in a fair and equal manner. Copies of
such correspondence must be available during on-site reviews conducted by
the Department.
(f)
Record retention provision. The Project Owner is required
to retain the records described in subsection (c) of this section for at least
six years after the due date (with extensions) for filing the federal income
tax return for that year; however, the records for the first year of the Credit
Period must be retained for at least six years beyond the due date (with extensions)
for filing the federal income tax return for the last year of the Compliance
Period of the building.
(g)
Certification and Review.
(1)
On or before February 1st of each year, the Department
will send each Project Owner of a completed Project an Owner's Certification
of Program Compliance (form provided by the Department) to be completed by
the Owner and returned to the Department on or before the first day of March
of each year in the Compliance Period. Any Project for which the certification
is not received by the Department, is received past due, or is incomplete,
improperly completed or not signed by the Project Owner, will be considered
not in compliance with the provisions of §42 of the Code and reported
to the IRS on Form 8823, Low Income Housing Credit Agencies Report of Non
Compliance. The Owner Certification of Program Compliance shall cover the
proceeding calendar year and shall include at a minimum the following statements
of the Project Owner:
(A)
the Project met the minimum set-aside test which was applicable
to the Project;
(B)
there was no change in the Applicable Fraction of any building
in the Project, or that there was a change, and a description of the change;
(C)
the owner has received an annual income certification from
each low income tenant and documentation to support that certification;
(D)
each low income Unit in the Project was rent-restricted
under the Code, §42(g)(2) and Treasury Regulation §1.42-10 regarding
utility allowances;
(E)
all Units in the Project were for use by the general public
including the requirement that no finding of discrimination under the Texas
and federal Fair Housing Acts occurred for the Project;
(F)
each building in the Project was suitable for occupancy,
taking into account local health, safety, and building codes, and the state
or local government unit responsible for making building code inspections
did not issue a report of a violation for any building or low income Unit
in the Project. If a violation report or notice was issued by the governmental
unit, the Project Owner must attach either a statement summarizing the violation
report or notice or a copy of the violation report or notice, and in addition,
the Project Owner must state whether the violation has been corrected;
(G)
either there was no change in the Eligible Basis (as defined
in the Code, §42(d)) of any building in the Project, or that there has
been a change, and the nature of the change;
(H)
all tenant facilities included in the Eligible Basis under
the Code, §42(d), of any building in the Project, such as swimming pools,
other recreational facilities, and parking areas, were provided on a comparable
basis without charge to all tenants in the building;
(I)
if a low income Unit in the Project became vacant during
the year, reasonable attempts were, or are being, made to rent that Unit or
the next available Unit of comparable or smaller size to tenants having a
qualifying income before any other Units in the Project were, or will be,
rented to tenants not having a qualifying income;
(J)
if the income of tenants of a low income Unit in the Project
increased above the limit allowed in the Code, §42(g)(2)(D)(ii), the
next available Unit of comparable or smaller size in the Project was, or will
be, rented to tenants having a qualifying income;
(K)
a LURA including an Extended Low Income Housing Commitment
as described in the Code, §42(h)(6)(B), was in effect for buildings subject
to the Revenue Reconciliation Act of 1989, §7106(c)(1) (generally any
building receiving an allocation after 1989), including the requirement under
Code, §42(h)(6)(B)(iv) that a Project Owner cannot refuse to lease a
Unit in the Project to an applicant because the applicant holds a voucher
or certificate of eligibility under Section 8, and the Project Owner has not
refused to lease a Unit to an applicant because of his or her status as a
holder of a Section 8 voucher nor is the Project out of compliance with the
provisions, including any special provisions, outlined in the Extended Low
Income Housing Commitment;
(L)
no change in the ownership of a Project has occurred during
the reporting period;
(M)
the Project Owner has not been notified by IRS that the
Project is no longer "a qualified low income housing project" within the meaning
of the Code, §42;
(N)
the Project met all terms and conditions which were recorded
in the LURA, or if no LURA was required to be recorded, the Project met all
representations of the Project Owner in the Application for credits;
(O)
if the Project Owner received its Housing Credit Allocation
from the portion of the state ceiling set-aside for Projects involving Qualified
Nonprofit Organizations under Code, §42(h)(5), a Qualified Nonprofit
Organization owned an interest in and materially participated in the operation
of the Project within the meaning of the Code, §469(h);
(P)
all low income Units in the Project were used on a nontransient
basis (except for transitional housing for the homeless provided under §42(i)(3)(B)(iii)
of the Code or single-room-occupancy units rented on a month-by-month basis
under §42(i)(3)(B)(iv) of the Code; and
(Q)
no low income Units in the Project were occupied by households
in which all members were Students.
(2)
Review.
(A)
The Department staff will review each Owner's Certification
of Program Compliance for compliance with the requirements of the Code, §42.
(B)
The Department will perform on-site inspections of all
buildings in each low income housing Project by the end of the second calendar
year following the year the last building in the Project is placed in service
and, for at least 20% of the low income Units in each Project, inspect the
Units and review the low income certifications, the documentation the Project
Owner has received to support the certifications, the rent records for each
low income tenant in those Units, and any additional information that the
Department deems necessary.
(C)
The Department will perform on site monitoring reviews
(unless the Project is required to have fewer than ten low income Units) at
least once every three years on low income housing Projects. A monitoring
review will include an inspection of the income certification, the documentation
the Project Owner has received to support that certification, the rent record
for each low income tenant, and a property inspection including individual
Units and any additional information that the Department deems necessary,
for at least 20% of the low income Units in those Projects.
(D)
The Department may, at the time and in the form designated
by the Department, require the Project Owners to submit for compliance review,
information on tenant income and rent for each low income Unit, and may require
a Project Owner to submit for compliance review copies of the tenant files,
including copies of the income certification, the documentation the Project
Owner has received to support that certification and the rent record for any
low income tenant.
(E)
The Department will randomly select which low income Units
and tenant records are to be inspected and reviewed by it. The Department
may determine to review tenant records wherever they are stored, whether on-site
or off-site. Units and tenant records to be inspected and reviewed will be
selected in a manner that will not give Project Owners advance notice that
a particular Unit and tenant records for a particular year will or will not
be inspected or reviewed. However, the Department will give reasonable notice
to the Project Owner that an on-site inspection or a tenant record review
will occur, so that the Project Owner may notify tenants of the inspection
or assemble tenant records for review.
(3)
Exception. The Department may, at its discretion, enter
into a Memorandum of Understanding with the TxRD-USDA, whereby the TxRD-USDA
agrees to provide to the Department information concerning the income and
rent of the tenants in buildings financed by the TxRD-USDA under its §515
program. Owners of such buildings may be excepted from the review procedures
of subparagraph (B) or (C) of this paragraph or both; however, if the information
provided by TxRD-USDA is not sufficient for the Department to make a determination
that the income limitation and rent restrictions of the Code, §42(g)(1)
and (2), are met, the Project Owner must provide the Department with additional
information.
(h)
Inspection provision. The Department retains the right
to perform an on site inspection of any low income housing Project including
all books and record pertaining thereto through either the end of the Compliance
Period or the end of the period covered by any Extended Low Income Housing
Commitment, whichever is later. An inspection under this subsection may be
in addition to any review under subsection (g)(2) of this section.
(i)
Notices to Owner. The Department will provide prompt written
notice to the Project Owner if the Department does not receive the certification
described in subsection (g)(1) of this section or discovers through audit,
inspection, review or any other manner, that the Project is not in compliance
with the provisions of the Code, §42 or the LURA. The notice will specify
a correction period which will not exceed 90 days, during which the Project
Owner may respond to the Department's findings, bring the Project into compliance,
or supply any missing certifications. The Department may extend the correction
period for up to six months if it determines there is good cause for granting
an extension. If any communication to the Project Owner under this section
is returned to the Department as unclaimed or undeliverable, the Project may
be considered not in compliance without further notice to the Project Owner.
(j)
Notice to the IRS.
(1)
Regardless of whether the noncompliance is corrected, the
Department is required to file IRS Form 8823 with the IRS. IRS Form 8823 will
be filed not later than 45 days after the end of the correction period specified
in the Notice to Owner, but will not be filed before the end of the correction
period. The Department will explain on IRS Form 8823 the nature of the noncompliance
and will indicate whether the Project Owner has corrected the noncompliance
or has otherwise responded to the Department's findings.
(2)
The Department will retain records of noncompliance or
failure to certify for six years beyond the Department's filing of the respective
IRS Form 8823. In all other cases, the Department will retain the certification
and records described in this section for three years from the end of the
calendar year the Department receives the certifications and records.
(k)
Notices to the Department. A Project Owner must notify
the Department in writing of the events listed in paragraphs (1)-(3) of this
subsection.
(1)
prior to any sale, transfer, exchange, or renaming of the
Project or any portion of the Project. For Rural Projects that are federally
assisted or purchased from HUD, the Department shall not authorize the sale
of any portion of the Project;
(2)
any change of address to which subsequent notices or communications
shall be sent; or
(3)
within thirty days of the placement in service of each
building, the Department must be provided the in service date of each building.
(l)
Liability. Compliance with the requirements of the Code, §42
is the sole responsibility of the Project Owner of the building for which
the credit is allowable. By monitoring for compliance, the Department in no
way assumes any liability whatsoever for any action or failure to act by the
Project Owner including the Project Owner's noncompliance with the Code, §42.
(m)
These provisions apply to all buildings for which a low
income housing credit is, or has been, allowable at any time. The Department
is not required to monitor whether a building or Project was in compliance
with the requirements of the Code, §42, prior to January 1, 1992. However,
if the Department becomes aware of noncompliance that occurred prior to January
1, 1992, the Department is required to notify the IRS in a manner consistent
with subsection (j) of this section.
§50.9.Housing Credit Allocations.
(a)
In making a Housing Credit Allocation under this chapter,
the Department shall rely upon information contained in the Applicant's Application
to determine whether a building is eligible for the credit under the Code, §42.
The Applicant shall bear full responsibility for claiming the credit and assuring
that the Project complies with the requirements of the Code, §42. The
Department shall have no responsibility for ensuring that an Applicant who
receives a housing credit allocation from the Department will qualify for
the housing credit.
(b)
The Housing Credit Allocation Amount shall not exceed the
dollar amount the Department determines is necessary for the financial feasibility
and the long term viability of the Project throughout the Compliance Period.
Such determination shall be made by the Department at the time of issuance
of the Commitment Notice or Determination Notice; at the time the Department
makes a Housing Credit Allocation; and/or the date the building is placed
in service. Any Housing Credit Allocation Amount specified in a Commitment
Notice, Determination Notice or Carryover Allocation Document is subject to
change by the Department dependent upon such determination. Such a determination
shall be made by the Department based on its evaluation and procedures, considering
the items specified in the Code, §42(m)(2)(B), and the department in
no way or manner represents or warrants to any applicant, sponsor, investor,
lender or other entity that the project is, in fact, feasible or viable.
(c)
The General Contractor hired by the Applicant must meet
specific criteria as defined by the Seventy-fifth Legislature. A general contractor
hired by an applicant or an applicant, if the applicant serves as general
contractor must demonstrate a history of constructing similar types of housings
without the use of federal tax credits. Evidence must be submitted to the
Department which sufficiently documents that the general contractor has constructed
some housing without the use of low income housing credits. This documentation
will be required as a condition of the commitment notice or carryover agreement,
and must be complied with prior to commencement of construction and at cost
certification and final allocation of credits.
(d)
All Carryover Allocations will be contingent upon the following:
(1)
A current original plat of survey of the land, prepared
by a duly licensed Texas Registered Professional Land Surveyor. Such survey
shall conform to standards prescribed in the Manual of Practice for Land Surveying
in Texas as promulgated and amended from time to time by the Texas Surveyors
Association as more fully described in the Carryover Procedures Manual.
(2)
the Project Owner's closing of the construction loan shall
occur not later than the second Friday in June of the year after the execution
of the Carryover Allocation Document with the possibility of a one-time 30
day extension as described in §50.11 of this title. Copies of the closing
documents must be submitted to the Department within two weeks after the closing.
The Carryover Allocation will automatically be revoked if the Project Owner
fails to meet the aforementioned closing deadline, and all credits previously
allocated to that Project will be returned to the general pool for reallocation.
(3)
the Project Owner must commence and continue substantial
construction activities not later than the second Friday in November of the
year after the execution of the Carryover Allocation Document with the possibility
of an extension as described in §50.11(h) of this title. Substantial
construction activities for new projects will generally be defined as post
foundation construction activities. Evidence of such activity shall be provided
in a format prescribed by the Department in the LIHTC Progress Report--Commencement
of Construction which will document progress towards placing the Project in
service in an expeditious manner.
(e)
An allocation will be made in the name of the Applicant
identified in the related Commitment Notice or Determination Notice. If an
allocation is made in the name of the party expected to be the general partner
in an eventual owner partnership, the Department may, upon request, approve
a transfer of allocation to such owner partnership in which such party is
the sole general partner. Any other transfer of an allocation will be subject
to review and approval by the Department. The approval of any such transfer
does not constitute a representation to the effect that such transfer is permissible
under §42 of the Code or without adverse consequences thereunder, and
the Department may condition its approval upon receipt and approval of complete
documentation regarding the new owner including all the criteria for scoring,
evaluation and underwriting, among others, which were applicable to the original
Applicant.
(f)
The Department shall make a Housing Credit Allocation,
either in the form of IRS Form 8609, with respect to current year allocations
for buildings placed in service, or in the Carryover Allocation Document,
for buildings not yet placed in service, to any Project Owner who holds a
Commitment Notice which has not expired, and for which all fees as specified
in §50.11 of this title, have been received by the Department. For Tax
Exempt Bond Projects, the Housing Credit Allocation shall be made in the form
of a Determination Notice. For an IRS Form 8609 to be issued with respect
to a building in a Project with a Housing Credit Allocation, satisfactory
evidence must be received by the Department that such building is completed
and has been placed in service in accordance with the provisions of the Department's
Cost Certification Procedures Manual. The Department shall mail or deliver
IRS Form 8609 (or any successor form adopted by the Internal Revenue Service)
to the Project Owner, with Part I thereof completed in all respects and signed
by an authorized official of the Department. The delivery of the IRS Form
8609 will occur only after the Project Owner has complied with all procedures
and requirements listed within the Cost Certification Procedures Manual. Regardless
of the year of Application to the Department for low income housing tax credits,
the current year's Cost Certification Procedures Manual must be utilized when
filing all cost certification requests. A separate housing credit allocation
shall be made with respect to each building within a Project which is eligible
for a housing credit; provided, however, that where an allocation is made
pursuant to a Carryover Allocation Document on a project basis in accordance
with the Code, §42(h)(1)(F), a housing credit dollar amount shall not
be assigned to particular buildings in the Project until the issuance of IRS
Form 8609s with respect to such buildings.
(g)
In making a Housing Credit Allocation, the Department shall
specify a maximum Applicable Percentage, not to exceed the Applicable Percentage
for the building permitted by the Code, §42(b), and a maximum Qualified
Basis amount. In specifying the maximum applicable percentage and the maximum
Qualified Basis amount, the Department shall disregard the first-year conventions
described in the Code, §42(f)(2)(A) and §42(f)(3)(B). The housing
credit allocation made by the Department shall not exceed the amount necessary
to support the extended low income housing commitment as required by the Code, §42(h)(6)(C)(i).
(h)
Project inspections shall be required to show that the
Project is built or rehabilitated according to required plans and specifications.
At a minimum, all Project inspections must include an inspection for quality
during the construction process while defects can reasonably be corrected
and a final inspection at the time the Project is placed in service. All such
Project inspections shall be performed by the Department or by an independent,
third party inspector acceptable to the Department. The Project Owner shall
pay all fees and costs of said inspections as described in §50.11(e)
of this title.
(i)
After the entire Project is placed in service, which must
occur prior to the deadline specified in the Carryover Allocation Document,
the Project Owner shall be responsible for furnishing the Department with
documentation which satisfies the requirements set forth in the Cost Certification
Procedures Manual. A newly constructed or rehabilitated building is not placed
in service until all units in such building have been completed and certified
by the appropriate local authority or registered architect as ready for occupancy.
The Cost Certification must be submitted for the entire project, therefore
partial Cost Certifications are not allowed. The Department may require copies
of invoices and receipts and statements for materials and labor utilized for
the new construction or rehabilitation and, if applicable, a closing statement
for the acquisition of the Project as well as for the closing of all interim
and permanent financing for the Project. If the Applicant does not fulfill
all representations made in the Application, the Department may make reasonable
reductions to the tax credit amount allocated via the IRS Form 8609 or may
withhold issuance of the IRS Form 8609s until these representations are met.
§50.10.Department Records; Certain Required Filings.
(a)
At all times during each calendar year the Department shall
maintain a record of the following:
(1)
the cumulative amount of the State Housing Credit Ceiling
that has been reserved pursuant to reservation notices during such calendar
year;
(2)
the cumulative amount of the State Housing Credit Ceiling
that has been committed pursuant to Commitment Notices during such calendar
year;
(3)
the cumulative amount of the State Housing Credit Ceiling
that has been committed pursuant to Carryover Allocation Documents during
such calendar year;
(4)
the cumulative amount of housing credit allocations made
during such calendar year; and
(5)
the remaining unused portion of the State Housing Credit
Ceiling for such calendar year.
(b)
The Department shall mail to the Internal Revenue Service,
not later than the 28th day of the second calendar month after the close of
each calendar year during which the Department makes housing credit allocations,
the original of each completed (as to Part I) IRS Form 8609, a copy of which
was mailed or delivered by the Department to a Project Owner during such calendar
year, along with a single completed IRS Form 8610, Annual Low Income Housing
Credit Agencies Report. When a Carryover Allocation is made by the Department,
a copy of IRS Form 8609 will be mailed or delivered to the Project Owner by
the Department in the year in which the building(s) is placed in service,
and thereafter the original will be mailed to the Internal Revenue Service
in the time sequence in this subsection. The original of the Carryover Allocation
Document will be filed by the Department with IRS Form 8610 for the year in
which the allocation is made. The original of all executed Agreement and Election
Statements shall be filed by the Department with the Department's IRS Form
8610 for the year a housing credit allocation is made as provided in this
section. The Department shall be authorized to vary from the requirements
of this section to the extent required to adapt to changes in IRS requirements.
§50.11.Program Fees and Extensions.
(a)
Application Fee. Each Applicant that submits an Application
shall submit to the Department, along with such Application, a non refundable
Application fee, as set forth in the Application Submission Procedures Manual.
(b)
Third Party Underwriting Fee. Applicants will be notified
in writing prior to the evaluation of a Project by an independent third party
underwriter in accordance with §50.7(a)(3) of this title if such a review
is required. The cost for the third party underwriting will be set forth in
the Application Submission Procedures Manual, and must be received by the
Department prior to the engagement of the underwriter. The fees paid by the
Project Owner to the Department for the third party underwriting will be credited
against the commitment fee established in subsection (c) of this section,
in the event that a Commitment Notice or Determination Notice is issued by
the Department to the Project Owner.
(c)
Commitment or Determination Notice Fee. Each Project Owner
that receives a Commitment Notice or Determination Notice shall submit to
the Department, not later than the expiration date on the commitment billing
notice, a non refundable commitment fee, as set forth in the Application Submission
Procedures Manual. The commitment fee shall be paid by cashier's check. Projects
located within one of the targeted Texas counties, as indicated in the Reference
Manual, will be exempt from the requirement to pay a commitment fee, in the
event that Commitment Notice is issued.
(d)
Compliance Monitoring Fee. Upon the Project being placed
in service, the Project Owner will pay a compliance monitoring fee in the
form of a cashier's check, as set forth in the Application Submission Procedures
Manual. The compliance monitoring fee must be received by the Department prior
to the release of the IRS Form 8609 on the Project.
(e)
Building Inspection Fee. Project Owners must pay for any
inspections that the Department requires, whether during construction or after
completion, and estimated charges for all such inspections may be aggregated
and distributed among the projects according to project size, cost or other
criteria. All outstanding building inspection fees must be received by the
Department prior to the release of the IRS Form 8609.
(f)
Public Information Requests. Public information requests
are processed by the Department in accordance with the provisions of the Government
Code, Chapter 552. The General Services Commission determines the cost of
copying, and other costs of production.
(g)
Amendment of Fees by the Department. All fees charged by
the Department in the administration of the tax credit program will be revised
by the Department from time to time as necessary to ensure that such fees
compensate the Department for its administrative costs and expenses.
(h)
Extension Requests. All extension requests relating to
the Commitment Notice, Carryover, Closing of Construction Loan, Substantial
Construction Commencement, Placed in Service or Cost Certification requirements
shall be submitted to the Department in writing and be accompanied by a non
refundable extension fee. Such requests must be submitted to the Department
at least ten business days prior to the date for which an extension is being
requested. The extension fee amount shall be set forth in the Application
Submission Procedures Manual. The extension request shall specify a requested
extension date and the reason why such an extension is required. The Department,
in its sole discretion, may consider and grant such extension requests for
all items except for the Closing of Construction Loan and Substantial Construction
Commencement. The Committee may grant extensions, in its sole discretion,
for the Closing of Construction Loan and Substantial Construction Commencement.
The Committee may, in its sole discretion, waive related fees.
§50.12.Manner and Place of Filing Applications and Other Required Documentation.
(a)
An Application for a Housing Credit Allocation from the
State Housing Credit Ceiling and the required Application fee as described
in §50.11(a) of this title must be filed during the Application Acceptance
Periods published periodically in the
Texas Register
.
(b)
Applications for a Determination Notice for a Tax Exempt
Bond Project may be submitted to the Department as described in paragraphs
(1) and (2) of this subsection:
(1)
Applicants which receive advance notice of a Program Year
2001 reservation as a result of the Texas Bond Review Board's (TBRB) lottery
for the private activity volume cap must file a complete Application per the
requirements of §50.7(h) of this title not later than 60 days after the
date of the TBRB lottery. Such filing must be accompanied by the Application
fee described in §50.11(a) of this title.
(2)
Applicants which receive advance notice of a Program Year
2001 reservation after being placed on the waiting list as a result of the
TBRB lottery for private activity volume cap must submit Volume 1 of the Application
prior to the Applicant's bond reservation date as assigned by the TBRB. The
Application fee described in §50.11(a) of this title and any outstanding
documentation required under §50.7(h) of this title must be submitted
to the Department at least 45 days prior to the Ad Hoc Tax Credit Committee
meeting at which the decision to issue a Determination Notice would be made.
(c)
All Applications, letters, documents, or other papers filed
with the Department will be received only between the hours of 8:00 a.m. and
5:00 p.m. on any day which is not a Saturday, Sunday or a holiday established
by law for state employees.
(d)
All Applications and related documents submitted to the
Department shall be mailed to the Low Income Housing Tax Credit Program, Texas
Department of Housing and Community Affairs, P.O. Box 13941, Austin, TX 78711-3941
or be delivered by hand or courier to 507 Sabine, Suite 300, Austin, Texas
78701.
§50.13.Withdrawals, Cancellations, Amendments.
(a)
An Applicant may withdraw an Application prior to receiving
a Commitment Notice, Determination Notice, Carryover Allocation Document or
Housing Credit Allocation, or may cancel a Commitment Notice or Determination
Notice by submitting to the Department a notice, as applicable, of withdrawal
or cancellation.
(b)
The Committee, in its sole discretion, may allocate credits
to a Project Owner in addition to those awarded at the time of the initial
Carryover Allocation in instances where there is bona fide substantiation
of cost overruns and the Department has made a determination that the allocation
is needed to maintain the Project's financial viability as a qualified low
income Project.
(c)
The Department may, at any time and without additional
administrative process, determine to award credits to projects previously
evaluated and awarded credits if it determines that such previously awarded
credits are or may be invalid and the owner was not responsible for such invalidity.
The Department may also consider an amendment to a Commitment Notice, Determination
Notice or Carryover Allocation or other requirement with respect to a Project
if the revisions:
(1)
are consistent with the Code and the tax credit program;
(2)
do not occur while the Project is under consideration for
tax credits;
(3)
do not involve a change in the number of points scored
(unless the Project's ranking is adjusted because of such change);
(4)
do not involve a change in the Project's site; or
(5)
do not involve a change in the set-aside election.
(d)
The Department may cancel a Commitment Notice, Determination
Notice or Carryover Allocation prior to the issuance of IRS Form 8609 with
respect to a Project if:
(1)
the Project Owner or any member of the Development Team,
or the Project, as applicable, fails to meet any of the conditions of such
Commitment Notice or Carryover Allocation or any of the undertakings and commitments
made by the Project Owner in the applications process for the Project;
(2)
any statement or representation made by the Project Owner
or made with respect to the Project Owner, the Development Team or the Project
is untrue or misleading;
(3)
an event occurs with respect to any member of the Development
Team which would have made the Project's Application ineligible for funding
pursuant to §50.5 of this title if such event had occurred prior to issuance
of the Commitment Notice or Carryover Allocation; or
(4)
the Project Owner, any member of the Development Team,
or the Project, as applicable, fails to comply with these Rules or the procedures
or requirements of the Department.
§50.14.Waiver and Amendment of Rules.
(a)
The Board, in its discretion, may waive any one or more
of these Rules in cases of natural disasters such as fires, hurricanes, tornadoes,
earthquakes, or other acts of nature as declared by Federal or State authorities.
(b)
The Department may amend this chapter and the Rules contained
herein at any time in accordance with the Government Code, Chapter 2001, as
may be amended from time to time.
§50.15.Forward Reservations; Binding Commitments.
(a)
Anything in §50.4 of this title or elsewhere in this
chapter to the contrary notwithstanding, the Department with approval of the
Board may determine to issue commitments of tax credit authority with respect
to Projects from the State Housing Credit Ceiling for the calendar year following
the year of issuance (each a "forward commitment"). The Department may make
such forward commitments:
(1)
with respect to Projects placed on a waiting list in any
previous Application Round during the year; or
(2)
pursuant to an additional Application Round.
(b)
If the Department determines to make forward commitments
pursuant to a new Application Round, it shall provide information concerning
such round in the
Texas Register
. In inviting
and evaluating Applications pursuant to an additional Allocation Round, the
Department may waive or modify any of the set-asides set forth in §50.6
of this title and make such modifications as it determines appropriate in
the Threshold Criteria, evaluation factors and Selection Criteria set forth
in §50.7 of this title and in the dates and times by which actions are
required to be performed under this chapter. The Department may also, in an
additional Application Round, include Projects previously evaluated within
the calendar year and rank such Projects together with those for which Applications
are newly received.
(c)
Unless otherwise provided in the Commitment Notice with
respect to a Project selected to receive a forward commitment or in the announcement
of an Application Round for Projects seeking a forward commitment, actions
which are required to be performed under this chapter by a particular date
within a calendar year shall be performed by such date in the calendar year
of the anticipated allocation rather than in the calendar year of the forward
commitment.
(d)
Any forward commitment made pursuant to this section shall
be made subject to the availability of State Housing Credit Ceiling in the
calendar year with respect to which the forward commitment is made. No more
than 15% of the per capita component of State Housing Credit Ceiling anticipated
to be available in the State of Texas in a particular year shall be allocated
pursuant to forward commitments to Project Applications carried forward without
being ranked in the new Application Round pursuant to subsection (f) of this
section. If a forward commitment shall be made with respect to a Project placed
in service in the year of such commitment, the forward commitment shall be
a "binding commitment" to allocate the applicable credit dollar amount within
the meaning of the Code, §42(h)(1)(C).
(e)
If tax credit authority shall become available to the Department
later in a calendar year in which forward commitments have been awarded, the
Department may allocate such tax credit authority to any eligible Project
which received a forward commitment, in which event the forward commitment
shall be canceled with respect to such Project.
(f)
In addition to or in lieu of making forward commitments
pursuant to subsection (a) of this section, the Department may determine to
carry forward Project Applications on a waiting list or otherwise received
and ranked in any Application Round within a calendar year to the subsequent
calendar year, requiring such additional information, Applications and/or
fees, if any, as it determines appropriate. Project Applications carried forward
may, within the discretion of the Department, either be awarded credits in
a separate allocation round on the basis of rankings previously assigned or
may be ranked together with Project Applications invited and received in a
new Application Round. The Department may determine in a particular calendar
year to carry forward some Project Applications under the authority provided
in this subsection, while issuing forward commitments pursuant to subsection
(a) of this section with respect to others.
§50.16.Deadlines for Allocation of Low Income Housing Tax Credits.
(a)
Not later than November 15 of each year, the Department
shall prepare and submit to the Board for adoption the draft Qualified Allocation
Plan required by federal law for use by the Department in setting criteria
and priorities for the allocation of tax credits under the low income housing
tax credit program.
(b)
The Board shall adopt and submit to the Governor the Qualified
Allocation Plan not later than January 31 of each year.
(c)
The Governor shall approve, reject, or modify and approve
the Qualified Allocation Plan not later than February 28.
(d)
An Applicant for a low income housing tax credit to be
issued a Commitment Notice during the initial Application Round in a calendar
year must submit an Application to the Department not later than May 15.
(e)
The Board shall authorize the Department to issue a Commitment
Notice for allocation for the initial Application Round of low income housing
tax credits each year in accordance with the Qualified Allocation Plan not
later than July 31.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on January 29, 2001.
TRD-200100529
Daisy A. Stiner
Executive Director
Texas Department of Housing and Community Affairs
Effective date: February 18, 2001
Proposal publication date: December 1, 2000
For further information, please call: (512) 475-3726