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Presentation, discussion, and possible action regarding an increase to the Housing Tax Credit amount for Vintage Ranch (HTC #22453)
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RECOMMENDED ACTION
recommendation
WHEREAS, Vintage Ranch (the Development) received a 4% Housing Tax Credit (HTC) award in 2022 for the construction of 207 units for the general population in Argyle, Denton County;
WHEREAS, construction of the Development has been completed, and LDG Vintage Ranch, LP (the Development Owner or Owner) requests, at cost certification, to increase the annual HTC amount from $2,425,895, the amount reflected in the Determination Notice, to $3,200,458, a difference of $774,563, which represents a 31.93% 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 Vintage Ranch 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
Vintage Ranch received a 4% HTC award in 2022 for the construction of 207 units for the general population in Argyle, Denton County. On July 15, 2022, a Determination Notice was issued with an approved annual tax credit amount of $2,425,895. The residential buildings in the Development placed in service between January 23, 2025, and June 17, 2025, 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 to $3,200,458, and this amount represents an increase of $774,563 (31.93%) 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 2022, to Cost Certification indicates that total development costs increased approximately $14,562,809 (26.31%), from $55,348,328 to $69,911,137. The Owner representative indicated that direct construction costs were underestimated at the time of Application, as they 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. Per request of the City of Denton (City), the building plans were changed to modify the building exteriors from siding to stucco in several areas. Additional cost increases included: a gazebo replacement, drywall plan changes, gas plan changes, and additional light poles throughout the property. Subcontractor price increases for paving, site concrete, and drywall added to increases in construction costs. After permits were received, the City changed easements on the project from private to public, which required new easement agreements and halted any work until all revised easements were executed. Rain and storms caused delays in several aspects of development such as the foundation pouring and sitework phases. Construction delays resulted in an increase to financing costs, such as construction interest and financing fees, and general conditions and overhead costs also increased due to the lengthened construction schedule. The developer fee also increased and is within the limits in the Department’s underwriting rules.
Staff’s analysis of this transaction at cost certification has concluded that the Development supports an annual tax credit allocation of $3,200,458, 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 31.93% increase from $2,425,895, 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.