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Presentation, discussion, and possible action regarding an increase to the Housing Tax Credit amount for Spring Villas (HTC #20459)
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RECOMMENDED ACTION
recommendation
WHEREAS, Spring Villas (the Development) received a 4% Housing Tax Credit (HTC) award in 2020 for the new construction of 304 units for the general population in Austin, Travis County;
WHEREAS, construction of the Development has been completed, and AMTEX Spring Villas Fund, LP (the Development Owner or Owner) requests, at cost certification, to increase the annual HTC amount from $2,295,524, the amount reflected in the Determination Notice, to $2,812,693, a difference of $517,169, which represents a 22.53% 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 Spring Villas 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
Spring Villas received a 4% HTC award in 2020 for new construction of 304 units for the general population in Austin, Travis County. On June 26, 2020, a Determination Notice was issued reflecting an annual tax credit amount of $2,295,524. The buildings in the Development placed in service in 2023, and the cost certification documentation for the Development is currently under review by the Department.
In a letter dated October 15, 2024, Lisa M. Davis, representative for the Development Owner, requested an annual tax credit award of $2,812,693, and this amount represents an increase of $517,169 (22.53%) from the amount reflected in the Determination Notice. The representative for the Development Owner explained that the Development incurred increased costs during construction and construction delays.
A comparison of the development costs from the time of the Application, in 2020, to Cost Certification indicates that total development costs increased approximately $13.2 million (21.47%), from $61,511,161 to $74,715,470. The Owner explained that the City of Austin and Travis County made changes during the construction process to the impervious and pervious cover calculations on the site. This resulted in having to make changes to the paving, sidewalks and parking designs. In addition to the City and County changes, there were difficulties with the neighbor next to the site related to the drainage and pervious/impervious cover issue, and a stop work order was placed on the project, costing additional time and expenses. This increased construction costs significantly, as well as architectural and engineering cost. Additionally, Austin Energy had supply issues related to transformers and meters, which caused significant delays in obtaining certificates of occupancy, thereby extending the lease-up time and causing the construction team to remain on the site for an extended period. Subsequently, this delay prevented the conversion to permanent financing, which led to additional construction general requirements, increased construction loan interest as well as multiple expensive course of construction insurance extensions.
Staff’s analysis of this transaction at cost certification has concluded that the Development supports an annual tax credit allocation of $2,812,693, and that the recommended 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 22.53% increase from $2,295,524, 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.