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Presentation, discussion, and possible action regarding an increase to the Housing Tax Credit amount for Riverstone Apartments (HTC #20465)
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RECOMMENDED ACTION
recommendation
WHEREAS, Riverstone Apartments (the Development) received a 4% Housing Tax Credit (HTC) award in 2020 for the construction of 336 units for the general population in San Marcos, Hays County;
WHEREAS, construction of the Development has been completed, and LDG Riverstone, LP (the Development Owner or Owner) requests, at cost certification, to increase the annual HTC amount from $2,349,942, the amount reflected in the Determination Notice, to $3,128,212, a difference of $778,270, which represents a 33.12% 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 Riverstone Apartments to $3,128,212 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
Riverstone Apartments received a 4% HTC award in 2020 for new construction of 336 units for the general population in San Marcos, Hays County. On March 23, 2020, a Determination Notice was issued with an approved annual tax credit amount of $2,349,942. The residential buildings in the Development placed in service between August 30, 2023, and May 13, 2024, and the cost certification documentation is currently under review by the Department.
During the review of the cost certification, Jason Trevino, the representative for the Development Owner, requested an annual tax credit award of $3,128,212, and this amount represents an increase of $778,270 (33.12%) from the amount reflected in the Determination Notice. 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 2020, to Cost Certification indicates that total development costs increased approximately $11,511,349 (17.16%), from $67,073,031 to $78,584,380. In a letter as of February 20, 2026, the Owner representative explained that direct construction costs were underestimated at the time of application as the applicant did not have actual construction bids at that time. Additionally, there were several change orders and material price escalations, which also increased the direct construction costs. A drainage issue related to a neighboring landowner resulted after construction began. Final construction clean-up and dumpster rentals were erroneously excluded from the costs in the original bid. Subcontractor price increases for paving, site concrete, and drywall added to increases in construction costs. There were delays with approvals from the City of San Marcos, and general conditions, overhead costs, and financing increased due to the lengthened construction schedule. The Owner also indicated that supplemental bonds were obtained, and some buildings were then eligible to receive the 4% applicable percentage, which resulted in additional tax credits.
Staff’s analysis of this transaction at cost certification has concluded that the Development supports an annual tax credit allocation of $3,128,212, and that the requested 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 33.12% increase from $2,349,942, 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.