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Low Income Housing Tax Credit (LIHTC) Program

Low Income Housing Tax Credit (LIHTC) Program. www.michigan.gov/mshda. LIHTC Staff. Christopher LaGrand, Acting General Counsel/Director of Legal Affairs Norm Harrod, Allocations Manager 517-335-2018 e-mail: harrodn@michigan.gov Andy Martin, Tax Credit Allocations Analyst

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Low Income Housing Tax Credit (LIHTC) Program

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  1. Low Income Housing Tax Credit (LIHTC) Program www.michigan.gov/mshda

  2. LIHTC Staff • Christopher LaGrand, Acting General Counsel/Director of Legal Affairs • Norm Harrod, Allocations Manager 517-335-2018 e-mail: harrodn@michigan.gov • Andy Martin, Tax Credit Allocations Analyst 517-241-0599 e-mail: martina4@michigan.gov • Vic Allison, Tax Credit Allocations Analyst 517-241-8350 e-mail: allisonv@michigan.gov • Chad Benson, Tax Credit Allocations Analyst 517-373-3433 e-mail: bensonc@michigan.gov • Bob Platte, Tax Credit Allocations Analyst 517-335-5174 email: platter@michigan.gov • Carol Thompson, Tax Credit Allocations Tech 517-335-7944 e-mail: thompsonc7@michigan.gov

  3. 2008 MichiganQualified Allocation Plan Key Changes/Topics of Note

  4. Funding Round Schedule(p.5 Sec. VI.A.) • 7/1/08 - Submission of Applications may begin. • 8/1/08 - Deadline for Applications; application close • 10/1/08 - Anticipated Award Date • Applications may also be submitted to MSHDA Detroit office

  5. LIHTC Allocation Limits(p.6 Sec. VI.B) • Project Award Limit = $1,000,000 • Maximum award to any one principle = $2,000,000 annually. • A "Principal" includes • (a) all persons or entities and their affiliates who are or who will become partners or members of the ownership entity and • (b) all persons or entities who earn at least $100,000 of the developer fee.

  6. Additional LIHTC(p.6 Sec. VI.C) • Must submit a standard final Cost Certification form. • Awards limited to the greater of… • $20,000 in annual credits or… • 10% of current allocation amount. • Project must Place in Service by December 31, 2008.

  7. Statutory Set-Asides(p.6 Sec. VII.A.) • Nonprofit = 10% • Rural Housing = 10% • Eligible Distressed Areas = 30% • Elderly = 10% • MSHDA will select the highest-scoring projects that qualify within the Set-Asides in the statutory order as listed above.

  8. Permanent Supportive Housing (Non-Statutory) Set-Aside (p.7 Sec. VII.B.) • Permanent Supportive Housing (non-statutory set-aside) • 25% Set-Aside • Must include at least 35% PSH units • Allocated under Addendum IIIa. • Allocations may be counted toward the statutory Set-Asides and the Target Percentages.

  9. Target Percentages(p.7 Sec. VII.C.) • After fulfilling the statutory set-asides and non-statuatory set-aside (PSH), MSHDA will evaluate Targeted Percentages in the order listed below… • Underserved Populations = 5% • Cool Cities or NDNI = 5% • Poverty Distressed Cities (PDC) = 15% • DHHP = 50% • Preservation = 30%

  10. The Administration of the Allocation Process • Additional Credits • Permanent Supportive Housing Set-Aside (25%) • Statutory Set-Asides(may only count towards one set-aside) • Nonprofit (10%) • Rural Housing (10%) • Eligible Distressed Areas (30%) • Elderly (10%) • Target Percentages(may count towards multiple percentages) • Underserved Populations (5%) • Cool Cities/NDNI (5%) • PDC (15%) • DHHP (50%) • Preservation (30%)

  11. Sample Funding Round Allocations • See example…

  12. New General Threshold Requirements • Permanent Supportive Housing (p.8 Sec. VIII.A.1) • 10% PSH Threshold Requirement • Potential Project Based Vouchers • MOU • Etc…more to come…

  13. New General Threshold Requirements • Affirmative Fair Housing Marketing Plan (p.9 Sec. VIII.A.3) • Must be consistent with MSHDA requirements. • Utilities (p.10 Sec. VIII.A.7) • Evidence from the municipality and/or utility companies regarding the availability of all utilities – electricity, gas, water and sewer.

  14. New General Threshold Requirements • Sources and Uses (p.11 Sec. VIII.A.11) • Submitted on a form and in a format prescribed by MSHDA. • Applicants must list all persons or entities who will receive more than $100,000 of the developer fee.

  15. New General Threshold Requirements • Financial Statements (p.11 Sec. VIII.A.12) • For Applicant and Contractor • Financial Statements must… • Comply with applicable MSHDA Policy Bulletin • Demonstrate adequate professional and financial capacity

  16. New General Threshold Requirements • Non-Profit Certification (p.11 Sec. VIII.A.14) • To qualify for non-profit Set-Aside, entity must… • be qualified under Section 501(c)(3) or (4) of the IRS Code, • materially participate, as defined under federal law, in the acquisition, development, ownership, and ongoing operation of the property for the entire compliance period, • have as one of its exempt purposes the fostering of low-income housing, and • be a managing member or general partner of the ownership entity.

  17. New General Threshold Requirements • High Speed Internet (p.12 Sec. VIII.A.17) • Now a Threshold Requirement for ALL PROJECTS • The project will have an active internet connection between the project and a local internet service provider.

  18. New General Threshold Requirements • LIHTC equity investor pricing letter (p.12 Sec. VIII.A.18) • A non-binding letter of interest stating… • amount of credit including the price per dollar of credit • general terms and conditions of investment in the event the equity investor commits to the project.

  19. New General Threshold Requirements • Vouchers and Public Housing (p.12 Sec. VIII.A.21) • Written statement signed by applicant stating… • it will give priority to persons whose names are on appropriate Public Housing or Housing Choice Voucher waiting lists maintained by a Public Housing Commission (PHC) or Public Housing Authority (PHA) in the area in which the project is located, and • it will make ongoing efforts to request that the PHC and/or the PHA make referrals to the project, or place the relevant project information on any listing the PHC or PHA makes available to persons on their waiting lists. • A copy of the written statement and documentation of ongoing efforts as evidenced by a referral agreement or other appropriate memorandum of commitment must be kept on file at the development’s office and available for compliance inspection and review at all times.

  20. New General Threshold Requirements • MSHDA financing signage (p.13 Sec. VIII.A.22) • A statement of certification • Post signage at the project construction site listing MSHDA as a financing source.

  21. New General Threshold Requirements • Development team capacity (p.13 Sec.VIII.A.23) • The development team must demonstrate • professional and financialcapacity to plan, build, market, and operate the proposed development. • satisfactory prior experience on projects of similar scale and complexity; to have satisfactory professional references; and to devote sufficient staffing and resources, including financial resources, to complete the proposed development. • The Applicant and contractor will be evaluated for creditworthiness and financial capacity. The composition of a non-profit Applicant's Board of Directors and the tenure of its respective members will be given significant consideration. • A written plan must be submitted to outline how deficiencies in experience and financial capacity will be rectified.

  22. New Preservation Threshold Requirements • Eligible Preservation Projects (p.13 Sec. VIII.B.1) • Government Financed • HUD • Section 236 • Section 8 • HOPE VI • Section 202 • USDA RD (including 515) • MSHDA • Developments with a below market federal loan • Previous government funding of at least $100,000 • Year 15 LIHTCs, allocated in 1994 or earlier.

  23. New Preservation Threshold Requirements • Preservation Minimum Rehabilitation Threshold (p.13 Sec. VIII.B.1) • At least $10,000 per unit in rehabilitation hard costs.

  24. New Preservation Threshold Requirements • Real estate taxes (p.13 Sec. VIII.B.2) • Most recent tax bill (if no PILOT). • Properties Ineligible for Preservation (p.14 Sec. VIII.B.6) • Preservation projects are ineligible if they: • Are deteriorated to the point of requiring demolition (except HOPE VI or other redevelopment of public housing) , or • Have completed a full debt restructuring under the Mark to Market process within the last five (5) years.

  25. Tiebreakers(p.16 Sec. IX.C) • Order of Priority for Tiebreakers… • Greater Readiness to Proceed • Greater Number of Permanent Supportive Housing units • Lowest amount of LIHTC per unit

  26. Underwriting Standards(p.16 Sec. X) • All waiver requests of the HUD 221(d)(3) cost limits must be submitted prior to the application due date.

  27. Development Fees(p.16 Sec. X.A.) • Acquisition/rehabilitation or preservation projects: • Of 49 units or fewer • 15% of TDC minus "Exclusions" • Of 50 units or more • 10% of the total acquisition cost plus • 15% of the total development costs less total acquisition cost of land and building(s) and “Exclusions”. • New construction projects: • 15% of TDC minus “Exclusions”

  28. Development Fees(p.17 Sec. X.A.) • Deferred Developer Fees • Entire amount will be paid within fifteen (15) years. • No more than fifty percent (50%) of the total developer fee may be deferred.

  29. First Evaluation and Award of Reservations(p.18 Sec. XI) • Credit Rate • Will be based on the credit rate as of the due date of the application (no longer 9% and 4%) • Equity Pricing • Will be based on the credit dollar identified in the Applicant’s equity investor letter • Amount Requested • In no event will the credit awarded exceed the amount requested by the applicant

  30. Carryover Allocations(p.20 Sec. XIII.A) • New Carryover Requirement • Owners must also submit a letter of intent from an equity provider stating that review of the project has begun and the amount of equity to be paid. (formerly required at the time of Commitment)

  31. Final Evaluations(p.20 Sec. XIV.) • Site visit • if deemed necessary by MSHDA, • to ensure that all requirements outlined in the Combined Application, applicable Addenda, Policy Bulletins and QAP have been met.

  32. Final Evaluations(p.21 Sec. XIV #10) • At the time of 8609 request… • Must submit a copy of the owner’s final title insurance policy evidencing that the Extended Use Agreement has been recorded as first priority over all other encumbrances evidencing or securing the financing of the property

  33. Fees(p.22 Sec. XVIII.) • Application Fee • $40 per low income unit • Up to a maximum of $2,000 • Compliance Fee • $450 per low income unit

  34. Changes to Scoring Summary

  35. Community Revitalization Plan • Definition: • A published document, approved and adopted by the local governing body by ordinance or resolution, that targets specific geographic areas for low-income residential developments serving residents at or below 60% of the area median income.

  36. Community Revitalization – Adaptive Re-use • For a development to qualify as an adaptive re-use development, it must: • Be different from its original or previous use • Involve conversion to either 100% affordable housing, or some mix of affordable housing and other compatible uses

  37. Community Revitalization – New Economy/Downtown • To qualify as a New Economy/Downtown development, the development must be: • Mixed-use • Pedestrian friendly • Limited to no more than 50 or fewer housing units (including a manager’s unit) • Located in a traditional downtown or commercial center of densely built buildings.

  38. Community Revitalization – DHHP & Targeted Housing Initiative • Projects that are a) in DHHP and b) are located in neighborhoods that are part of a targeted housing initiative by a local, state, or federal government agency.

  39. Tax Abatement (PILOT) • This has been changed to also award points to acq/rehab/preservation projects for which tax abatement has previously been in place, and the municipality has extended.

  40. Changed in two areas: Loan Guarantees will now qualify for points Projects will now receive 5 points under each of the funding categories, for any of the sources of funds listed that are greater than 10% of the total development costs, for a possible total of 15 points. EXAMPLE: Federal, State, or Local Funding

  41. Low Income Targeting • Will now be calculated by Area Median Income (AMI). This was previously calculated by Statewide Median Income (SMI). • Still a potential for 50 points to be attained. • No conversion necessary/easier to calculate points

  42. Affordability Commitment • Projects that agree to commit to an extended use period longer than the 15 minimum years (15 years compliance period + 15 year extended use = 30 years) may receive up to 5 points. • Each additional year agreed to equals 0.34 of a point. • Fractional points must be rounded down.

  43. Sponsor & Management Agent Characteristics • Points for General Partner & Management Agent being a Michigan-based business. • Organized or incorporated and actively doing business in Michigan for at least 1 year from the application date. • 2 points can be attained for both the General Partner and the Management Agent, for a total of 4 points.

  44. Nonprofit Participation • The nonprofit must now have at least 3 years of experience in the business of fostering low-income housing in its geographic area of operation, or fostering housing for the population it serves. (This was previously 1 year) • The nonprofit must demonstrate the financial capacity to undertake the development of the project. • Financials must be submitted that are completed in accordance with the applicable policy bulletin.

  45. Preservation Points • Preserving existing project-based tenant subsidies for 5 years beyond the compliance period.* • Preserving existing project-based tenant subsidies for 10 or more years beyond the compliance period.* * A project may not receive points under both of these categories.

  46. Preservation Points (cont.) • Acquisition cost less than 60% of Total Development Costs. • Project lacks sufficient unrestricted capital to address replacement of items that have already exhausted their useful life. • Project is a high risk or distressed property as determined by MSHDA (but not beyond the point of requiring demolition).

  47. Preservation Points (cont.) • Project requires rehab in excess of $15,000/unit as supported by a CNA satisfactory to MSHDA* • Project a) meets the Preservation threshold requirements, b) needs rehab expenses of at least $30,000/unit as supported by a CNA satisfactory to MSHDA, and c) has an acquisition cost no more than 60% of the total development cost.* * A project may not receive points under both of these categories.

  48. Preservation Points (cont.) • Project has (a) a commitment of funds from a local government of at least $5,000/unit and proof of being part of a community revitalization effort; or (b) previously existing federal project-based rental assistance remains in place for at least 30% of the total units. • Project involves replacement or redevelopment of public housing units.

  49. Summary of Other Scoring Changes • Location in Central City – deleted • Locality/Neighborhood – deleted some items, added some new ones • Walkable Community – deleted • Sewer/water lines – no points – mandatory for all projects • Tax Abatement – points grid was revised • Bedrooms for Families w/children & Community Space for Elderly – points increased from 5 to 10

  50. Summary of Other Scoring Changes (cont.) • Lease/purchase – points increased 3 to 8 • MI Products – points increased from 2 to 3 • High Speed Internet – no points – mandatory for all projects • Mgmt. Experience – increased points from 5 to 10 • Mgmt. Poor Participation – • Increased points to -20 • Increased penalty period from 2 to 3 years • AFHMP – no points – mandatory for all projects

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