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Presentation, discussion, and possible action on a request for return and reallocation of tax credits under 10 TAC §11.6(5) related to Credit Returns Resulting from Force Majeure Events for Stella Haven
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RECOMMENDED ACTION
recommendation
WHEREAS, Stella Haven was awarded 9% housing tax credits during the 2024 Competitive Housing Tax Credit cycle;
WHEREAS, the Development Owner executed a Carryover Allocation Agreement that included certifications stating each building receiving an allocation would be placed in service by December 31, 2026;
WHEREAS, the Development Owner has requested an extension to the placement in service deadline under 10 TAC §11.6(5), related to Credit Returns Resulting from Force Majeure Events;
WHEREAS, the Department lacks authority to extend federal placement in service deadlines and may only reset such deadlines by requiring the credits to be returned and immediately reallocated to the Development, as permitted solely under the force majeure provision of the Qualified Allocation Plan (QAP); and
WHEREAS, the Development Owner has submitted documentation demonstrating that a qualifying force majeure event has occurred;
NOW, therefore, it is hereby
RESOLVED, that the request to treat the matter under the force majeure provisions of 10 TAC §11.6(5) is approved, and that the 2024 Qualified Allocation Plan, Uniform Multifamily Rules, and the 2025 Program Calendar shall be applicable to the Development.
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BACKGROUND
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Development |
Stella Haven |
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Target Population |
General |
|
HTC Award |
$2,000,000 |
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City |
Denton |
|
Total Units |
88 |
|
HTC Units |
88 |
|
Initial Year of Award |
2024 |
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Extension Requested |
Six months |
Stella Haven is an 88-unit development located in Denton, Denton County. The development received an award of 9% Housing Tax Credits in 2024, and executed a Carryover Allocation Agreement requiring that the 10% Test be met by July 1, 2025, and that all buildings be placed in service by December 31, 2026.
Stella Haven received a 9% Housing Tax Credit award at the meeting held on July 25, 2024. The project has since experienced delays primarily related to the City of Denton’s prolonged permitting process. Despite the Development Owner’s timely submission of revised plans and ongoing efforts to meet municipal requirements, including preservation of tree canopy and compliance with unique site access standards, the City’s process has delayed the commencement of construction. As a result, the Applicant has requested a six-month extension to the placed in service deadline under the force majeure provision.
The Development Site has been purchased, and permits are expected within 30-45 days. The Applicant asserts that all development partners remain committed and that the requested extension is necessary to allow the project to proceed without jeopardizing its ability to meet federal and program deadlines.
APPLICABLE RULE
Under 10 TAC §11.6(5), a Development Owner may return credits and receive a reallocation outside the standard allocation process if the return is the result of a qualifying force majeure event occurring prior to issuance of IRS Form(s) 8609. Pursuant to 10 TAC §11.6(5), the Department’s Governing Board may approve execution of a Carryover Allocation Agreement for the current program year with the Development Owner that returned the credits, but only if the following conditions are met:
(A) The credits were returned as a result of "Force Majeure" events that occurred before issuance of Forms 8609. Force Majeure events are the following sudden and unforeseen circumstances outside the control of the Development Owner: acts of God such as fire, tornado, flooding, significant and unusual rainfall or subfreezing temperatures, or loss of access to necessary water or utilities as a direct result of significant weather events; explosion; vandalism; orders or acts of military authority; unrelated party litigation; changes in law, rules, or regulations; national emergency or insurrection; riot; acts of terrorism; supplier failures; or materials or labor shortages. If a Force Majeure event is also a presidentially declared disaster, the Department may treat the matter under the applicable federal provisions. Force Majeure events must make construction activity impossible or materially impede its progress.
Staff has reviewed the request and determined that the extensive delays related to permitting meet the criteria of a force majeure event under the rule.
IMPACT OF BOARD DECISION
If the Board approves the request:
• The credits will be returned and reallocated, with the 2024 Qualified Allocation Plan, Uniform Multifamily Rules, and the 2025 Program Calendar applicable to the Development
• A new Carryover Allocation Agreement will be executed.
• The new 10% Test deadline will be July 1, 2025.
• The new placed in service deadline will be June 30, 2027.
If the Board denies the request:
• The original placed in service deadline of December 31, 2026, remains in place.
• The Development Owner may either meet the existing deadline, return the credits, or have the award terminated for failing to meet the deadline.
• Returned credits will first be reallocated within the original subregion in accordance with 10 TAC §11.6(2). If no pending applications are eligible within the subregion, the credits will be added to the statewide collapse for reallocation.
This request has no impact on any funding source other than the Low Income Housing Tax Credit program, and if NHTF is approved by the Board at a later time, this action will not modify the Project Completion Date or the Development Period for that loan.
RECOMMENDATION
Staff recommends approval of the request to return and reallocate tax credits for Stella Haven under the force majeure provisions of 10 TAC §11.6(5).