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Presentation, discussion, and possible action on a request for return and reallocation of tax credits for Sweetwater Station
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RECOMMENDED ACTION
recommendation
WHEREAS, Sweetwater Station was awarded 9% housing tax credits during the 2021 Competitive Housing Tax Credit cycle;
WHEREAS, the Development was previously approved for force majeure treatment in 2022, 2023, and 2024;
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 2021 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 |
Sweetwater Station |
|
Target Population |
Elderly |
|
HTC Award |
$900,000 |
|
City |
Sweetwater |
|
Total Units |
52 |
|
HTC Units |
52 |
|
Initial Year of Award |
2021 |
|
Extension Requested |
One year |
Sweetwater Station is a 52-unit development located in Sweetwater, Nolan County. The development received an award of 9% Housing Tax Credits in 2021, and was granted force majeure treatment in 2022, 2023, and 2024. As a result, the current deadline to place in service in December 31, 2026.
After receiving its award, the Development experienced cost increases that resulted in a funding gap. To fill this gap, the Developer applied for HOME funds from the Department in April 2024. These funds require environmental clearance, and the process of receiving that clearance necessitated an Innocent Operator certificate from the Texas Commission on Environmental Quality (TCEQ). That certificate was issued in October 2025, and the Developer is currently finalizing the environmental clearance process. Thus, the HOME funds are not currently under Contract. The Owner intends to complete construction shortly after clearance is received.
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 this request and determined that the cost increases and resulting need to seek additional funding constitute a force majeure event under the rules.
IMPACT OF BOARD DECISION
If the Board approves the request:
• The credits will be returned and reallocated, with the 2021 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, 2026.
• The new placed-in-service deadline will be December 31, 2027.
If the Board denies the request:
• The current 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, as the HOME funds are not yet under Contract and are not currently subject to a commitment deadline.
RECOMMENDATION
Staff recommends approval of the request to return and reallocate tax credits for Sweetwater Station under the force majeure provisions of 10 TAC §11.6(5).