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Presentation, discussion, and possible action regarding an increase to the Housing Tax Credit amount for Wildhorse Flats (HTC #20488)
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RECOMMENDED ACTION
recommendation
WHEREAS, Wildhorse Flats (the Development) received a 4% Housing Tax Credit (HTC) award in 2020 for the construction of 310 units for the general population in Austin, Travis County;
WHEREAS, construction of the Development has been completed, and ECG Wildhorse, LP (the Development Owner or Owner) requests, at cost certification, to increase the annual HTC amount from $2,781,346, the amount reflected in the Determination Notice, to $3,628,668, a difference of $847,322, which represents a 30.46% increase;
WHEREAS, §42(m)(2) of the Internal Revenue Code allows an increase of tax credits for a bond financed project when the increase is determined necessary as demonstrated through the submission of the cost certification package;
WHEREAS, 10 TAC §10.401(d) requires approval by the Board if an increase to the amount of tax credits exceeds 120% of the amount of credit reflected in the Determination Notice; and
WHEREAS, a review of the cost certification package submitted by the Development Owner supports the need for the additional tax credits requested, and staff has determined that the increase is necessary for the viability of the transaction;
NOW, therefore, it is hereby
RESOLVED, that the housing tax credit increase for Wildhorse Flats requested by the Development Owner is approved as presented to this meeting, and the Executive Director and his designees are each authorized, directed, and empowered to take all necessary action to effectuate the foregoing.
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BACKGROUND
Wildhorse Flats received a 4% HTC award in 2020 for new construction of 310 units for the general population in Austin, Travis County. On December 10, 2020, a Determination Notice was issued with an approved annual tax credit amount of $2,781,346. Construction of the Development is complete, and the final cost certification documentation is under review by the Department.
During the review of the cost certification, C. Hunter Nelson, the representative for the Development Owner, requested an annual HTC amount of $3,628,674, which was adjusted to $3,628,668 in the Department’s analysis. The adjusted annual HTC amount represents an increase of $847,322 (30.46%) from the amount reflected in the Determination Notice. Through the cost certification review process, the representative for the Development Owner explained that the Development incurred increased costs during construction, and furthermore, there was an increase in the applicable tax credit percentage for the calculation of the credit award.
A comparison of the development costs from the time of the Application, in 2020, to Cost Certification indicates that total development costs increased approximately $3 million (3.95%), from $76,341,256 to $79,354,965. The Owner further explained that, due to the Consolidated Appropriations Act of 2021, the tax credit percentage increased from 3.23% at application to 4.00% at the time of cost certification. This change in the tax credit percentage accounts for an increase of approximately 23.84% to the annual HTC amount. The remaining increase of 6.63% is attributed to the increased development costs.
Staff’s analysis of this transaction at cost certification has concluded that the Development supports an annual tax credit allocation of $3,628,668, and that this increase is necessary for the financial feasibility of the project and its viability as a qualified low-income housing project throughout the credit period. This results in a 30.46% increase from $2,781,346, the original annual HTC amount in the Determination Notice. In accordance with 10 TAC §10.401(d), Board approval is required because the requested tax credit amount exceeds 120% of the HTC amount reflected in the Determination Notice. The Development Owner will be required to submit the Tax-Exempt Bond Credit Increase Request Fee required in 10 TAC §11.901(8) for the increase to the HTC amount prior to issuance of Forms 8609. Additionally, all required pending documentation for the cost certification review must be provided for the issuance of 8609s.
Staff recommends approval of the increase in the tax credit award as presented herein.