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Presentation, discussion, and possible action on a request for return and reallocation of tax credits under 10 TAC §11.6(5) related to Credit Returns Resulting from Force Majeure Events for Georgian Oaks
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RECOMMENDED ACTION
recommendation
WHEREAS, Georgian Oaks was awarded 9% housing tax credits during the 2024 Competitive Housing Tax Credit cycle;
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 2024 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 |
Georgian Oaks |
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Target Population |
Elderly |
|
HTC Award |
$2,000,000 |
|
City |
Fort Worth |
|
Total Units |
95 |
|
HTC Units |
95 |
|
Initial Year of Award |
2024 |
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Extension Requested |
Six months |
Georgian Oaks is a 95-unit development located in Fort Worth, Tarrant County that proposes the adaptive reuse of a historic building. The development received an award of 9% Housing Tax Credits in 2024, and executed a Carryover Allocation Agreement requiring that the 10% Test be met by July 1, 2025, and that all buildings be placed in service by December 31, 2026.
Georgian Oaks received a 9% Housing Tax Credit award at the meeting held on July 25, 2024. While the permitting process moved swiftly due to the city's streamlined procedures, construction has been delayed by the building’s historic nature and the need for extensive environmental abatement related to asbestos and lead-based paint. The following factors have affected the project timeline:
• Extensive demolition and abatement are required before construction can begin, and must be performed by licensed, specialized contractors;
• The general contractor estimates a 17.5-month construction period, not including the months of abatement, due to the complexity of high-rise rehabilitation;
• Construction closing is expected in July 2025, with mobilization shortly thereafter;
• The project closed on its construction loan on June 5, 2025, and abatement is underway.
The Applicant asserts that these delays were unforeseeable and outside their control. They are requesting a six-month extension to the placed in service deadline under the QAP’s force majeure provision to ensure the project remains in compliance and can be completed successfully.
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 the request and determined that the delays caused by the abatement of lead-based paint and asbestos meet the criteria of a force majeure event under the rule.
IMPACT OF BOARD DECISION
If the Board approves the request:
• The credits will be returned and reallocated, with the 2024 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, 2025.
• The new placed in service deadline will be June 30, 2027.
If the Board denies the request:
• The original 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 does not change any deadline for any funding source other than the Low Income Housing Tax Credit program.
RECOMMENDATION
Staff recommends approval of the request to return and reallocate tax credits for Georgian Oaks under the force majeure provisions of 10 TAC §11.6(5).