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Presentation, discussion, and possible action regarding an increase to the Housing Tax Credit amount for Bridge at Loyola (HTC #19418)
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RECOMMENDED ACTION
recommendation
WHEREAS, Bridge at Loyola (the Development) received a 4% Housing Tax Credit (HTC) award in 2019 and a Tax Credit Assistance Program (TCAP) loan for the construction of 204 units, of which 200 are low-income units, for the general population in Austin, Travis County;
WHEREAS, construction of the Development has been completed, and Bridge at Loyola Lofts, LP (the Development Owner or Owner) requests, at cost certification, to increase the annual HTC amount from $1,475,411, the amount reflected in the Determination Notice, to $1,882,292, which was adjusted to $1,874,395 in the Department’s analysis, and the adjusted amount represents an increase of 27.04% ($398,984) from the amount in the Determination Notice;
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, 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 Bridge at Loyola to $1,874,395 annually 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
Bridge at Loyola received a 4% HTC award in 2019 and a TCAP loan for new construction of 204 units, of which 200 are low-income units, for the general population in Austin, Travis County. On October 14, 2019, a Determination Notice was issued with an approved annual tax credit amount of $1,475,411. The residential buildings in the Development placed in service between May 31, 2022, and November 1, 2022, and the cost certification documentation is currently under review by the Department.
The cost certification documentation requests an annual tax credit amount of $1,882,292. However, the recommended annual HTC amount is $1,874,395, which represents an increase of $398,984 (27.04%) from the amount reflected in the Determination Notice, $1,475,411. Through the cost certification review process, George Currall, the representative for the Development Owner, explained that the Development incurred increased costs during construction.
A comparison of the development costs from the time of the Application in 2019 to Cost Certification indicates that total development costs increased approximately $4,673,484 (10.32%), from $45,298,917 to $49,972,401. The Owner indicated that the cost overruns stem primarily from a 14-month delay in unit delivery, driven by three major construction challenges: water line location and correction issues, delays in transformer delivery, installation, and inspection, and electric metering permit delays. Also, due to the Consolidated Appropriations Act of 2021 and a supplemental bond issuance for the Development, the tax credit percentage increased from 3.42% at application to 4.00% at the time of cost certification.
Staff’s analysis of this transaction at cost certification has concluded that the Development supports an annual tax credit allocation of $1,874,395, and that the 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 27.04% increase from $1,475,411, 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.