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Presentation, discussion, and possible action regarding an increase to the Housing Tax Credit amount for Bridge at Canyon View (HTC #19411)
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RECOMMENDED ACTION
recommendation
WHEREAS, Bridge at Canyon View (the Development) received a 4% Housing Tax Credit (HTC) award in 2019 for the new construction of 215 units for the general population in Austin, Travis County;
WHEREAS, construction of the Development has been completed, and Bridges at Canyon View, LP (the Development Owner or Owner) requests, at cost certification, to increase the annual HTC amount from $1,620,343, the amount reflected in the Determination Notice, to $3,021,497, a difference of $1,401,154, which represents a 86.47% 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 Bridge at Canyon View 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
Bridge at Canyon View received a 4% HTC award in 2019 for new construction of 215 units for the general population in Austin, Travis County. On November 12, 2019, a Determination Notice was issued with an approved annual tax credit amount of $1,620,343. The residential buildings in the Development placed in service in 2023 and 2024, and the cost certification documentation was received by the Department on July 16, 2024.
In a letter dated September 24, 2024, Jason Trevino, the representative for the Development Owner, requested an annual tax credit award of $3,021,497, and this amount represents an increase of $1,401,154 (86.47%) 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 2019, to Cost Certification indicates that total development costs increased approximately $19.7MM (42.84%), from $45,891,321 to $65,551,071. The Owner explained that direct construction costs were underestimated at the time of application, as the applicant did not have actual construction bids at that time. Therefore, Building Costs and Site Works Costs had significant variances form the time of initial application. Additionally, there were several change orders and material price escalations, which also increased the direct construction costs. Lumber had a significant price escalation during this timeframe. There was also a new soil stabilization redesign utilizing shotcrete that increased design costs and delayed construction. Additional insulation to meet AEGB requirements added to materials and labor costs. Non-prototype buildings mandated by the City of Austin significantly increased the materials and labor costs. Mitigation for a water infiltration issue in the garages increased materials and labor costs. General Conditions and Overhead costs increased due to the lengthened schedule caused by construction delays. Construction delays caused an increase to financing costs such as construction interest. Developer fees increased 24.03%, but did not go up to the limit of 15% of the project’s eligible costs.
In addition, the credit calculation at application was based on an applicable percentage of 3.42%, whereas at cost certification the percentage was adjusted due to the enactment of the Consolidated Appropriations Act of 2021. In this instance, a supplemental bond was funded on May 1, 2023, allowing the Owner to take advantage of the new 4% floor rather than the applicable percentage based on the placed in service date of each building. All else held equal, without this change to the applicable tax credit percentage, the increase to the annual HTC amount would have been 60.70% using the applicable tax credit percentages based on the placed in service date of each building.
Staff’s analysis of this transaction at cost certification has concluded that the Development supports an annual tax credit allocation of $3,021,497 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 an 86.47% increase from $1,620,343, 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.