Update on Proposed Use of
TCAP and 1602 funds for
California’s Multifamily
Affordable Developments
IPED June 5, 2009
Presented by:
Jeanne Peterson, Principal
jeanne.peterson@reznickgroup.com
“TCAP”
Tax Credit Assistance Program
• California will have $325,665,000 available in
TCAP funds and has submitted its Plan to HUD
for approval, including:
• its statement of intent to accept the funds
• a description of the competitive selection
criteria to be used in making awards
• its procedures to assure the timely committing
of funds
• transparency/accountability information
2
Distribution of Funds by Housing
Credit Agencies
• Funds must be distributed competitively.
• Funds must be distributed pursuant to QAP.
• Funds available to owners who either have
received or receive simultaneously an award of
tax credit under Section 42(h) of IRC (can be
either 9% or tax-exempt bond deals.)
• Funds do not result in reduced eligible basis.
3
Timing of Awards and Expenditures
• 75% of funds must be committed by housing
credit agencies within 1 year of enactment.
• 75% of funds must be expended by owners
within 2 years of enactment.
– Failure by an owner to expend within this
time frame will result in redistribution by the
credit agency to “a more deserving project”
in the state.
• 100% of funds must be expended within 3
years of enactment.
4
Eligibility to Receive Funds
• Any funds not expended after 3 years from
enactment will be redistributed by the Secretary
to states that have fully utilized their funds.
• States must give priority to projects expected to
be completed within 3 years of enactment.
• Projects awarded tax credits under Section
42(h) of the IRC during fiscal years 2007, 2008,
or 2009 are eligible to receive this gap
financing.
5
Requirements that Apply
• Some HOME (or “cross-cutting” restrictions
apply, including:
–
–
–
–
Fair Housing
Non-discrimination
Labor Standards
Environmental standards
All credit agency restrictions relating to the tax
credit award (rent, income, others) apply
6
Reporting to HUD
• HUD Secretary shall be given access to
information “related to the award of Federal
funds” after reasonable notice to state credit
agency.
• HUD must establish an Internet site identifying
projects selected to receive awards.
– Including the amount of the awards and with links to
the states’ QAPs describing the process used to
make the award decisions.
7
Exchange or Section 1602
Program
• Section 1602 authorizes the Treasury Secretary
to make a grant to each housing credit agency,
at the agency’s election, in the maximum
amount of 85% of the following amounts:
– 40% of the sum of the states’ annual per capita credit
amount (the greater of $2.30 per state resident for
2009 or $2,557,500) and
– any amount it received from the national pool times
10; PLUS
– 100% of 2009 credit ceiling attributable to a state’s
unused credit ceiling for 2008 and 100% of a state’s
credit ceiling returned in 2009 times 10.
8
Credit Exchange
40% of annual per capita credit for 2009
+ 40% of state’s share of national pool credit
+ 100% of unallocated 2008 credit
+ 100% of credit returned in 2009
X 10
X $.85
• Remember, any amount exchanged will reduce
the amount of credit available to allocate.
9
California’s Exchange
•
•
•
•
•
2009 per capita amount = $84,540,332
x 40% = $33,816,133
x 10 = $338,161,330
x $.85 = $287,437,129
This does not include any previous
year’s returned and exchanged credit
• TOTAL ARRA funds available (TCAP
and 1602) = $613,102,129 plus any
returned ‘07 and ‘08 credit
10
Rules Governing Exchanged
Credit
• Sub awards may be made for construction or
acquisition/rehab of qualified low-income
buildings, with or without an allocation of tax
credits.
• State agencies must establish a process by
which those allocated funds demonstrate “good
faith efforts” to obtain investment commitments
for credit before the agency makes an award
11
Awards Subject to LIHTC
Requirements
• Sub awards are subject to the same limitations
of rent, income, and use restrictions as
allocations made under Section 42, EXCEPT
that they are not limited to or otherwise affected
by the state’s housing credit ceiling.
• Funds will not reduce eligible basis. The
conference agreement indicates that the grants
are not taxable income.
12
Compliance and Asset Management
• State credit agencies must perform “asset
management” functions (or contract them out)
to ensure compliance with Section 42
requirements for any sub awards made with
these funds and may collect reasonable fees to
cover these expenses
• Agencies must impose a requirement for
recapture if noncompliance and any recapture
is payable to the U.S. Treasury
13
Return of Unused Funds
• If a housing credit agency does not use its
exchanged funds before January 1, 2011,
unused funds will be returned to the Treasury.
• Recent guidance from Treasury has indicated
that funds must be “disbursed” by December
31, 2010 (although this does not appear to be
what the statute itself says and Congressman
Rangel has asked Treasury to change this date
to December 31, 2011.)
14
California’s Plan
• In an effort to get a jump start, TCAC
(California’s Tax Credit agency)
published proposed regulatory changes
that were adopted on April 30, 2009.
• Subsequently, guidance from HUD and
Treasury have necessitated some
changes – additional changes were
published on Tuesday of this week (June
2).
15
2007 and 2008
• 2007 and 2008 deals, both 9% and taxexempt bonds, without equity investors
were allowed to turn in their credit to be
exchanged under 1602. A total of 30
projects have done this (5 from ‘07 and
25 from ‘08) in the amount of
approximately $275 million, which could
be exchanged for a. $233.75 million
additional 1602 funds. These deals may
(or may not) receive either TCAP or
1602 funds.
16
• ‘07 and ‘08 deals may receive the
difference between the equity
amount in the original application,
up to $.85 for each federal tax
credit $ and up to $.10 for each
state credit $ up to $.65 if they are
seeking only gap financing and
keeping their credit. They must
adhere to the original placed in
service date. If seeking cash, must
return entire Reservation.
17
Possible use of funds
• $100 million for 4% projects needing gap
filler loans or cash in lieu of credit ($75
million for 2007-2009 awarded in July
and $25 million in the fall for same)
• $25 million for 2007 and 2008 9%
projects needing gap filler loans
• $100 million for HCD MHP and SHP
deals that have commitments but have
not yet begun construction
• Balance for 2009 9% gap-filler loans
18
• The ED may exchange a 2008
reservation for a 2009 one if the
delay was caused by
circumstances beyond control of
the sponsor.
• Competition will be based on a 250
point scale as follows:
• Up to 50 points for project type
• Up to 100 points for the amount of
cash requested
• Up to 100 points for deeper
targeting
19
2009 Projects
• 2009 Both 4% and 9% deals
receiving a credit Reservation by
9/30/09 are eligible for TCAP funds.
• 9% deals receiving a credit
Reservation in calendar 2009 may
receive 1602 funds.
• TCAC will set aside no more than
$100 million for MHP and/or SHP
deals that have not yet commenced
construction.
20
• 2009 deals may receive up to $.80
for each dollar and up to $.55 cents
per state credit dollar.
• Maximum award for 2009 projects
is $20 million or $25 million for Sp.
Needs, Homeless Assistance, and
SRO projects
• May receive up to $.12 per
reserved fed. dollar and $.09 per
state dollar
21
Procedures for 2009
• Single round with application
deadline June 9
• Some timing requirements
loosened and documents usually
required at application may be
submitted up to August 17
• Applicants may assume12 cents for
each fed dollar requested and 9
cents for each state dollar
requested.
22
• After Reservation, one has 90 days
to produce an LOI from equity
partner
• If after 60 days (was 45) and good
faith effort, no equity found, may
apply for cash by returning their
credit and competing in secondary
competition, EXCEPT for SRO,
Special Needs, and Homeless
deals which will get the money
subject to confirming feasibility.
23
•
•
•
•
•
•
Project type – max 50 pts
50 - Sp. Needs, Homeless, SRO
30 - Rural and At-risk
10 - Family and Senior
Amount requested – max 100 pts
% of cash requested in inverse
relation to total project costs
• Average affordability – max 100
5 pts for each % that average
affordability is below 60% AMI
24
Loans/Terms
• Loans for 55 year terms with Notes
and Deeds of Trust, deferred for full
term.
• Gap financing disbursed during
construction if no equity at 40% at
construction loan closing and after;
35% at C of Os; 25% (less a hold
back of up to $300,000) at 90%
occupancy, and holdback at TCAC
approval of PIS documents
25
• TCAC may charge up to $10,000
loan origination fee (proposed) and
CalHFA may also charge fee when
performing loan origination dutires.
• TCAC may charge asset
management fee either annually or
one time or a contracted entity may
charge directly
• TCAC may charge up to $1,000 to
oversee NEPA and $1,000 for Davis
Bacon (proposed)
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