80R3112 KCR-D

By: Ellis S.B. No. 1753

A BILL TO BE ENTITLED

AN ACT

relating to the administration of the low income housing tax credit program.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 2306.6702(a)(10), Government Code, is amended to read as follows:

(10) "Qualified allocation plan" means a plan adopted by the board under this subchapter that:

(A) provides sets of [the] threshold[, scoring, and underwriting] criteria [based on housing priorities of the department] that are [appropriate to local conditions;

[(B)] consistent with this chapter [Section 2306.6710(e), gives preference in housing tax credit allocations to developments that, as compared to the other developments:

[(i) when practicable and feasible based on documented, committed, and available third-party funding sources, serve the lowest income tenants per housing tax credit; and

[(ii) produce for the longest economically feasible period the greatest number of high quality units committed to remaining affordable to any tenants who are income-eligible under the low income housing tax credit program]; and

(B) [(C)] provides a procedure for the department, the department's agent, or another private contractor of the department to use in monitoring compliance with the qualified allocation plan and this subchapter.

SECTION 2. Section 2306.67022, Government Code, is amended to read as follows:

Sec. 2306.67022. QUALIFIED ALLOCATION PLAN; THRESHOLD CRITERIA; MANUAL. (a) The board annually shall adopt a qualified allocation plan, including sets of threshold criteria described by Subsection (b), and a corresponding manual to provide information regarding the administration of and eligibility for the low income housing tax credit program.

(b) The qualified allocation plan adopted by the board under Subsection (a) must include separate sets of threshold criteria for each of the following types of developments:

(1) at-risk developments;

(2) developments in which a qualified nonprofit organization owns an interest in the development and materially participates in the operation of the development;

(3) developments receiving federal financial assistance through the Texas Rural Development Office of the United States Department of Agriculture; and

(4) all other developments not described by Subdivision (1), (2), or (3).

(c) For a development located in a county with a median income that is higher than the statewide median income, each set of threshold criteria adopted under Subsection (a) must require the development to reserve:

(1) 80 percent or more of the units for households that have median incomes that are equal to or less than 50 percent of the area median income adjusted for family size; or

(2) 10 percent or more of the units for households that have median incomes that are equal to or less than 30 percent of the area median income adjusted for family size.

(d) For a development located in a county with a median income that is equal to or less than the statewide median income, a set of threshold criteria adopted under Subsection (a) may not impose on an applicant requirements related to the income level of tenants in the proposed development other than those requirements necessary under 26 U.S.C. Section 42.

SECTION 3. Section 2306.6703, Government Code, is amended by adding Subsection (c) to read as follows:

(c) An application is ineligible for consideration under the low income housing tax credit program if the application is filed before the fifth anniversary of the most recent date, if any, that the applicant, including a principal of the applicant, a developer affiliated with the applicant, or another related party, has been removed from a loan document or a limited partnership agreement by a lender, equity provider, or limited partner due to failure to perform obligations under the loan document or limited partnership agreement, as applicable.

SECTION 4. Subchapter DD, Chapter 2306, Government Code, is amended by adding Section 2306.67031 to read as follows:

Sec. 2306.67031. CERTAIN APPLICATIONS AND COMBINATIONS OF APPLICATIONS PROHIBITED. (a) An applicant, including a principal of the applicant, a developer affiliated with the applicant, or another related party, whether acting alone or in concert with another, may not, in a single application round, submit multiple applications in which the combined amount of housing tax credits requested exceeds twice the amount of credits allowed under Section 2306.6711(b).

(b) Each of the applications is ineligible for consideration under the low income housing tax credit program unless before the application filing deadline one or more of the prohibited applications are withdrawn to conform to the requirements of Subsection (a).

SECTION 5. Section 2306.6704, Government Code, is amended by amending Subsections (c) and (d) and adding Subsection (e) to read as follows:

(c) The department shall reject and return to the applicant any application assessed by the department under this section that fails to satisfy the applicable set of threshold criteria required by the board in the qualified allocation plan.

(d) If feasible under Section 2306.67041, an application under this section may [must] be submitted electronically.

(e) The department shall specify the date for filing an application under this section. The last date for submitting an application under this section may not be earlier than February 1.

SECTION 6. Section 2306.67041(a), Government Code, is amended to read as follows:

(a) The department and the Department of Information Resources shall cooperate to evaluate the feasibility of an on-line application system for the low income housing tax credit program to provide the following functions:

(1) filing of preapplications and applications on-line;

(2) posting of on-line preapplication or application status and the application log detailing the status of, and department's evaluations [and scores] pertaining to, those applications; and

(3) posting of comments from applicants and the public regarding a preapplication or application.

SECTION 7. Section 2306.6705, Government Code, is amended to read as follows:

Sec. 2306.6705. GENERAL APPLICATION REQUIREMENTS. An application must contain at a minimum the following written, detailed information in a form prescribed by the board:

(1) a description of:

(A) the financing plan for the development, including any nontraditional financing arrangements;

(B) the use of funds with respect to the development;

(C) the funding sources for the development, including:

(i) construction, permanent, and bridge loans; and

(ii) rents, operating subsidies, and replacement reserves; and

(D) the commitment status of the funding sources for the development;

(2) if syndication costs are included in the eligible basis, a justification of the syndication costs for each cost category by an attorney or accountant specializing in tax matters;

(3) from a syndicator or a financial consultant of the applicant, an estimate of the amount of equity dollars expected to be raised for the development in conjunction with the amount of housing tax credits requested for allocation to the applicant, including:

(A) pay-in schedules; and

(B) syndicator consulting fees and other syndication costs;

(4) if rental assistance, an operating subsidy, or an annuity is proposed for the development, any related contract or other agreement securing those funds and an identification of:

(A) the source and annual amount of the funds;

(B) the number of units receiving the funds; and

(C) the term and expiration date of the contract or other agreement;

(5) if the development is located within the boundaries of a political subdivision with a zoning ordinance, evidence in the form of a letter from the chief executive officer of the political subdivision or from another local official with jurisdiction over zoning matters that states that:

(A) the development is permitted under the provisions of the ordinance that apply to the location of the development; or

(B) the applicant is in the process of seeking the appropriate zoning and has signed and provided to the political subdivision a release agreeing to hold the political subdivision and all other parties harmless in the event that the appropriate zoning is denied;

(6) if an occupied development is proposed for rehabilitation:

(A) an explanation of the process used to notify and consult with the tenants in preparing the application;

(B) a relocation plan outlining:

(i) relocation requirements; and

(ii) a budget with an identified funding source; and

(C) if applicable, evidence that the relocation plan has been submitted to the appropriate local agency;

(7) a certification of the applicant's compliance with appropriate state and federal laws, as required by other state law or by the board;

(8) any other information required by the board in the qualified allocation plan; and

(9) evidence that the applicant has notified the following entities with respect to the filing of the application:

(A) [any neighborhood organizations on record with the state or county in which the development is to be located and whose boundaries contain the proposed development site;

[(B) the superintendent and the presiding officer of the board of trustees of the school district containing the development;

[(C)] the presiding officer of the governing body of any municipality containing the development [and all elected members of that body];

(B) [(D)] the presiding officer of the governing body of the county containing the development [and all elected members of that body]; and

(C) [(E)] the state senator and state representative of the district containing the development.

SECTION 8. Subchapter DD, Chapter 2306, Government Code, is amended by adding Section 2306.67071 to read as follows:

Sec. 2306.67071. ADDITIONAL APPLICATION REQUIREMENT: SPECIFICATION OF TYPE OF DEVELOPMENT. An application must specify the type of development provided by Section 2306.67022(b) that describes the proposed development.

SECTION 9. Section 2306.6709(b), Government Code, is amended to read as follows:

(b) The application log must contain at least the following information:

(1) the names of the applicant and related parties;

(2) the physical location of the development, including the relevant region of the state;

(3) the amount of housing tax credits requested for allocation by the department to the applicant;

(4) any set-aside category under which the application is filed;

(5) [the score of the application in each scoring category adopted by the department under the qualified allocation plan;

[(6)] any decision made by the department or board regarding the application, including [the department's decision regarding whether to underwrite the application and] the board's decision regarding whether to allocate housing tax credits to the development;

(6) [(7)] the names of persons making the decisions described by Subdivision (5) [(6)], including the names of department staff making those decisions [scoring and underwriting the application], to be recorded next to the description of the applicable decision;

(7) [(8)] the amount of housing tax credits allocated to the development; and

(8) [(9)] a dated record and summary of any contact between the department staff, the board, and the applicant or any related parties.

SECTION 10. The heading to Section 2306.6710, Government Code, is amended to read as follows:

Sec. 2306.6710. EVALUATION [AND UNDERWRITING] OF APPLICATIONS.

SECTION 11. Sections 2306.6710(a) and (b), Government Code, are amended to read as follows:

(a) In evaluating an application, the department shall determine whether the application satisfies the applicable set of threshold criteria adopted [required] by the board in the qualified allocation plan under Section 2306.67022(a). The department shall reject and return to the applicant any application that fails to satisfy the applicable set of threshold criteria.

(b) If an application satisfies the threshold criteria, the application is eligible for the lottery selection procedure under Section 2306.6711 [department shall score and rank the application using a point system that:

[(1) prioritizes in descending order criteria regarding:

[(A) financial feasibility of the development based on the supporting financial data required in the application that will include a project underwriting pro forma from the permanent or construction lender;

[(B) quantifiable community participation with respect to the development, evaluated on the basis of written statements from any neighborhood organizations on record with the state or county in which the development is to be located and whose boundaries contain the proposed development site;

[(C) the income levels of tenants of the development;

[(D)the size and quality of the units;

[(E) the commitment of development funding by local political subdivisions;

[(F) the level of community support for the application, evaluated on the basis of written statements from state elected officials;

[(G)the rent levels of the units;

[(H) the cost of the development by square foot; and

[(I) the services to be provided to tenants of the development; and

[(2) uses criteria imposing penalties on applicants or affiliates who have requested extensions of department deadlines relating to developments supported by housing tax credit allocations made in the application round preceding the current round or a developer or principal of the applicant that has been removed by the lender, equity provider, or limited partners for its failure to perform its obligations under the loan documents or limited partnership agreement].

SECTION 12. Section 2306.6711, Government Code, is amended by amending Subsections (a), (b), and (c) and adding Subsections (a-1), (a-2), (a-3), (a-4), (b-1), and (b-2) to read as follows:

(a) The department [director] shall select applications to be allocated [provide the application scores to the board before the 30th day preceding the date the board begins to issue commitments for] housing tax credits through a lottery conducted at a board meeting that is open to the public [in the allocation round].

(a-1) The department by rule shall determine whether it is appropriate to conduct the selection lottery described by Subsection (a) for each type of development described by Section 2306.67022(b), for each uniform state service region, or for the entire state.

(a-2) Regardless of the manner in which the selection lottery is conducted, the department shall allocate housing tax credits to developments as follows:

(1) all developments that satisfy the applicable set of threshold criteria adopted under Section 2306.67022(a) and that also satisfy one or more of the preferences described by 26 U.S.C. Section 42(m)(1)(B)(ii); and

(2) after allocating tax credits under Subdivision (1), developments that satisfy only the applicable set of threshold criteria.

(a-3) If any housing tax credits remain after the department allocates tax credits under Subsection (a-2), the department shall conduct a second lottery in the same manner as the first lottery was conducted. Through the second lottery, the department shall allocate any remaining housing tax credits in the allocation order provided by Subsection (a-2).

(a-4) After the allocation of all housing tax credits under Subsections (a-2) and (a-3), the department shall conduct a third lottery in the same manner as the first two lotteries for the purpose of establishing a waiting list under Subsection (c) that is to be used in the event that applications selected in either of the first two lotteries become ineligible or otherwise fail to qualify for an allocation.

(b) Not later than the deadline specified in the qualified allocation plan, the board shall issue commitments for available housing tax credits based on the selection lotteries under Subsections (a)-(a-4) [application evaluation process provided by Section 2306.6710]. The board may not allocate to an applicant housing tax credits in any unnecessary amount, as determined by the department [department's underwriting policy] and by federal law, and, except as provided by Subsection (b-1), [in any event] may not allocate to any one person, in the person's capacity as an applicant or as a related party, [the applicant] housing tax credits in an amount greater than $2.4 [$2] million in a single application round. For purposes of this subsection, a housing tax credit allocated for a development that is financed with tax-exempt bonds may not be included in the $2.4 million limitation described by this subsection.

(b-1) The department may increase the possible allocation amount as necessary to adjust for inflation, as determined by the average over a calendar year of the Consumer Price Index for All Urban Consumers (CPI-U), U.S. City Average, published monthly by the United States Bureau of Labor Statistics, or its successor in function.

(b-2) The $2.4 million limitation described by Subsection (b) and any applicable increase in that amount apply to a person regardless of whether the person is involved in the development as an applicant or as a related party. The $2.4 million limitation and any applicable increase in that amount do not apply to:

(1) an entity that raises or provides equity for one or more developments, in that entity's capacity as an equity raiser or provider;

(2) an entity's provision of qualified commercial financing as that term is defined under Section 49(a)(1)(D)(ii), Internal Revenue Code of 1986; or

(3) a development consultant with respect to the provision of consulting services, provided that:

(A) the consultant:

(i) is not a related party with respect to the applicant; and

(ii) does not own an interest in the development; and

(B) the consultant fee received for the services provided does not exceed $150,000 or 10 percent of the developer fee, whichever is greater.

(c) Concurrently with the initial issuance of commitments for housing tax credits under Subsection (b), the board shall establish a waiting list of additional applications ranked by the results of the lottery conducted under Subsection (a-4) [score in descending order of priority based on set-aside categories and regional allocation goals].

SECTION 13. Section 2306.6712(b), Government Code, is amended to read as follows:

(b) The director shall require [the] department staff [assigned to underwrite applications] to evaluate the amendment and provide an analysis and written recommendation to the board. The appropriate monitor under Section 2306.6719 shall also provide to the board an analysis and written recommendation regarding the amendment.

SECTION 14. Section 2306.6715(a), Government Code, is amended to read as follows:

(a) In a form prescribed by the department in the qualified allocation plan, an applicant may appeal the following decisions made by the department in the application evaluation process provided by Section 2306.6710:

(1) a determination regarding the application's satisfaction of the appropriate threshold [and underwriting] criteria; and

(2) [the scoring of the application; and

[(3)] a recommendation as to the amount of housing tax credits to be allocated to the application.

SECTION 15. Sections 2306.6717(a) and (b), Government Code, are amended to read as follows:

(a) Subject to Section 2306.67041, the department shall make the following items available on the department's website:

(1) as soon as practicable, any proposed application submitted through the preapplication process established by this subchapter;

(2) before the 30th day preceding the date of the relevant board allocation decision, except as provided by Subdivision (3), the entire application, including all supporting documents and exhibits, the application log, [a scoring sheet providing details of the application score,] and any other document relating to the processing of the application;

(3) not later than the third working day after the date of the relevant determination, the results of each stage of the application process, including the results of [the application scoring and underwriting phases and] the allocation phase;

(4) before the 15th day preceding the date of board action on the amendment, notice of an amendment under Section 2306.6712 and the recommendation of the director and monitor regarding the amendment; and

(5) an appeal filed with the department or board under Section 2306.6715 or 2306.6721 and any other document relating to the processing of the appeal.

(b) The department shall make available on the department's website information regarding the low income housing tax credit program, including notice regarding public hearings, meetings, the opening and closing dates for applications, submitted applications, and applications [approved for underwriting and] recommended to the board, and shall provide that information to:

(1) locally affected community groups;

(2) local and state elected officials;

(3) local housing departments;

(4) any appropriate newspapers of general or limited circulation that serve the community in which the development is to be located;

(5) nonprofit and for-profit organizations;

(6) on-site property managers of occupied developments that are the subject of applications for posting in prominent locations in those developments; and

(7) any other interested persons and community groups that request the information.

SECTION 16. Section 2306.6718(d), Government Code, is amended to read as follows:

(d) If the department receives written notice from the mayor or county judge of an affected municipality or county opposing an application, the department must contact the mayor or county judge and offer to conduct a physical inspection of the development site and consult with the mayor or county judge before the application is evaluated [scored].

SECTION 17. Section 2306.6723(b), Government Code, is amended to read as follows:

(b) The rural development agency shall assist in developing sets of [all] threshold[, scoring, and underwriting] criteria applied to applications eligible for the rural area set-aside. The criteria must be approved by that agency.

SECTION 18. The following provisions of the Government Code are repealed:

(1) Section 2306.565(i);

(2) Section 2306.6701;

(3) Sections 2306.6702(5) and (12);

(4) Sections 2306.6704(b) and (b-1);

(5) Sections 2306.6710(c), (d), (e), (f), and (g);

(6) Section 2306.6711(e);

(7) Section 2306.6712(e);

(8) Section 2306.6725; and

(9) Section 2306.6726.

SECTION 19. It is the intent of the legislature that the passage by the 80th Legislature, Regular Session, 2007, of another bill that amends Chapter 2306, Government Code, and the amendments made by this Act shall be harmonized, if possible, as provided by Section 311.025(b), Government Code, so that effect may be given to each. If the amendments made by this Act to Chapter 2306, Government Code, and the amendments made to Chapter 2306, Government Code, by any other bill are irreconcilable, it is the intent of the legislature that this Act prevail, regardless of the relative dates of enactment of this Act and the other bill or bills, but only to the extent that any differences are irreconcilable.

SECTION 20. The changes in law made by this Act relating to the evaluation of applications for the allocation of low income housing tax credits by the Texas Department of Housing and Community Affairs apply only to an application submitted on or after the effective date of this Act. An application submitted before the effective date of this Act is governed by the law in effect when the application was submitted, and the former law is continued in effect for that purpose.

SECTION 21. This Act takes effect September 1, 2007.