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Presentation, discussion, and possible action on an appeal of the cost certification underwriting analysis for Town Oaks (HTC #21164/22838/23963)
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RECOMMENDED ACTION
recommendation
WHEREAS, Town Oaks (Development) was approved for a 9% Housing Tax Credit (HTC) award in 2021, a reallocation of tax credits under Force Majeure in 2022, and Supplemental Credits in 2023 for the acquisition and rehabilitation of 48 units, all of which are designated as low-income units, in Kenedy, Karnes County;
WHEREAS, rehabilitation of the Development was completed in 2024, and the cost certification documentation for the Development has been submitted by the Owner and is under review the Department;
WHEREAS, staff’s underwriting analysis at cost certification reflects a year-one Debt Coverage Ratio (DCR) of 2.29 for the Development, which exceeds the maximum DCR threshold of 1.50 at cost certification as stated in 10 TAC §11.302(d)(4)(D), requiring an adjustment of the debt to bring the projected DCR to 1.50 for HTC sizing purposes, which resulted in a recommend annual HTC amount of $573,284, which is $53,466 lower than the allocated HTC amount after the Supplemental Credits;
WHEREAS, HVM 2021 Kenedy, LLC (Development Owner or Owner) requests that this recommended reduction to the HTC amount be reconsidered, as the Development is a Section 515 property financed and regulated by the United States Department of Agriculture Rural Development (USDA-RD), and because of that, excess project cash is not freely distributed to the Owner; and
WHEREAS, Section 42 of the Internal Revenue Code requires that the housing credit dollar amount allocated to a project shall not exceed the amount the housing credit agency determines is necessary for the financial feasibility of the project and its viability as a qualified low-income housing project throughout the credit period, and the maximum DCR threshold in the Qualified Allocation Plan is applied to determine that developments hav...
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