American Recovery and Reinvestment Act of 2009 Tax Credit Assistance Program (TCAP) Section 1602 Tax Credit Exchange Program July 10,

American Recovery and Reinvestment Act of 2009

Tax Credit Assistance Program (TCAP)

Section 1602 Tax Credit Exchange Program

www.in.gov/ihcda

July 10, 2009Webinar

http://www.in.gov/ihcda

Guidance

Department of Housing & Urban Development – TCAP

Department of the Treasury– Section 1602 Exchange Program

Released Frequently Asked Questions & Answers 7-9-09

*Policies & Procedures Are Subject To Revisions*

Announced in Multi-Family Notices

http://www.in.gov/ihcda/2520.htm

Located on theQAP Page

Availability of Funds

TCAP– $38 million– IHCDA must

commitment 75% by: February 16, 2010

– Draw 75% by:

February16, 2011– Draw 100% by:

February 16, 2012

Section 1602 Exchange– $164 million

100% of unused 2008 per capita credits

40% of 2009 per capita credits

– Draw 100% by:December 31, 2010

TCAP & 1602 Exchange

Timing– Application round is open

IHCDA will accept applications on a rolling basis IHCDA will respond within 30 days

– IHCDA Executive Director has received Board approval to award TCAP & 1602 Exchange Funds

Affordability Period– 30 years– Agree to waive Section 42 Qualified Contract

Provision

TCAP

Subject to Section 42 regulations, QAP, HUD’s CPD Notice 09-03, IHCDA legal agreements

Threshold Eligibility1. 9% credits from 2008, 2009, or 20102. Must be eligible and demonstrate ability to meet federal

requirements3. Expend 75% of TCAP funds by February 16, 2011 & 100%

by February16, 20124. Continue to meet QAP’s criteria

1. Market2. Financial feasibility3. Development team capacity4. Remain in Compliance

TCAP

Eligible Use of Funds– Capital Investment in eligible Section 42

Developments – Cost Must Be In Eligible Basis– Subject to same Section 42 rules– As required by IHCDA, including conditions to

receive the tax credit reservation Set-Aside Threshold Scoring

– All other requirements of the ARRA of 2009

TCAP

Application Process– Demonstrate achievable construction timing– TCAP Application

Amount requested Sources & Uses Cost estimates for federal compliance (Davis-Bacon) Anticipated closing date Construction & Completion schedule Development Status Report Explanation of request

– Written explanation of efforts to obtain equity Readiness to proceed criteria documentation

TCAP

Selection Criteria1. Meet Threshold Eligibility, Follow Application

Process, Demonstrate Eligible Use of Funds

2. Preference to Preservation & Elderly Set-Aside

3. Demonstrate ability to draw 75% before 12-31-10 & PIS by 12-31-2011

4. Demonstrate “Readiness Criteria” items 1-10

5. Demonstrate Readiness to secure competitive equity within 120 days of commitment

i. MUST CLOSE ON EQUITY BEFORE IHCDA WILL ENTER INTO AN AWARD AGREEMENT

TCAP

General Requirements– Underwriting

Recently accepted application will remain in force– Cost estimate to satisfy federal requirements (Davis

Bacon)– Other changes that are reasonable may be approved

– Post Awards Expend TCAP funds according to the Commitment Inability to meet ARRA expenditure requirements may

result in de-obligation IHCDA will exercise remedies for loan default or other

noncompliance issues

TCAP

Loan Terms1. Deferred loan with no interest or principal loan for

30 years

2. Construction loans

3. Bridge loans

4. Permanent loans

TCAP

Loan Terms Continued– Construction

Financing for construction or rehabilitation Interest rate at 0% Amortized over 30 years Term not to exceed 24 months Full recourse against the borrower Portion of construction may remain in as a Bridge loan

TCAP

Loan Terms Continued– IHCDA will subordinate TCAP to first lien position– No prepayment will be allowed prior to 2-17-2012– Disburse at closing or construction upon evidence of

costs have been incurred

TCAP

Development Fee– Development Service Agreement– Inclusion of other fees to service providers must be

supported (actually performed & not duplicative)– Other fees will not be paid to entities related to GP

or Developer except for General Contractor Waiver request – demonstrate cost saving to the

development including third party cost comparison

TCAP

Development Fee Continued:– 50% of the fee will paid:

30% at closing of TCAP 10% during construction – prorata w/const. Completion 30% at Construction Completion 30% at Stabilization & Final Inspection

TCAP

Developer Fee Continued: Remaining 50% deposited into a controlled account Paid out 1/10th over the next 10 years

– Maintain 1.15:1.10 DCR– Remain in compliance with Section 42 & IHCDA

TCAP

Midwestern Disaster Credits– 2008 developments that received Midwestern

Disaster Credits must request to exchange a nominal amount of credits prior to September 1, 2009 to be eligible for TCAP

– 2009 developments will automatically receive a nominal amount of per capita credits

TCAP

Reporting & Compliance– Report due the day before the end of each quarter (October

1st)– IHCDA will collect data points with each draw

Completion status Jobs created & retained Other federal reporting requirements Subcontractor awards (pending guidance)

– Noncompliance is subject to recapture Required to register for a

– D-U-N-S number – www.grants.gov– Central Contractor Registration (CCR) – www.ccr.gov

TCAP

Loan Agreement– Will set-forth all TCAP requirements

Lien & Restrictive Covenant Agreement– Funds cannot be drawn in advance– Funds cannot be placed in escrow– Funds must be expended within 3 days

TCAP

Cross Cutting Federal RequirementsThis is not an all encompassing list

– Environmental & Historic Review– Construction Contract Requirements– Davis-Bacon Labor Standards– Affirmative Marketing– Site & Neighborhood Standards– Fair Housing Act– Anti-Lobbying Restrictions– The Drug-Fee Workplace Act of 1988– Lead Based Paint Requirements– Accessibility

QUESTIONS?

Questions and answers from today’s webinar will be posted on IHCDA’s website at:


Section 1602 Exchange Program

Subject to Section 42 regulations, QAP, Treasury “Terms and & Conditions”, IHCDA legal agreements

Threshold Eligibility1. 9% credits from 2008, 2009, or 2010

a. 08 developments located outside of a MDA county are eligible to exchange up to 100% of their credit awardi. List of MDA counties is located on page 2ii. Utilized IHCDA approved Financial Service Agent (FSA)

b. All other developments from 08, 09, & 10 must demonstrate equity investment has been securedi. Investor must agree to share asset management reports

2. Must be eligible and demonstrate ability to meet federal requirements


Threshold Continued:3. Owners must draw (expend) 100% before

December 31, 2010 Final claim is due to IHCDA by December 1, 2010 Owner is responsible for sources to cover any part not

drawn by December 1, 2010

4. Continue to meet QAP Criteria

5. Development has not been issued IRS Form 8609


Application Process– No Application Fee (Treasury Guidance in 7-9-09 Q &A, 5a)– Demonstrate achievable construction timing– Section 1602 Exchange Application

Amount requested Sources & Uses Construction & Completion schedule Development Status Report Explanation of request Readiness to proceed criteria documentation Written explanation of efforts to obtain equity Current/Updated Phase 1, Market Study, CNA, Site Control


Eligible Use of Funds– Capital Investment in eligible Section 42

Developments - cost must be in eligible basis – Subject to same Section 42 rules– As required by IHCDA, including conditions to

receive the tax credit reservation Set-Aside Threshold Scoring

– All other requirements of the ARRA of 2009


Eligible Use of Funds: Treasury FAQ: 7-9-09 – Question 4f: Which costs are eligible to be paid

w/Section 1602 funds?– Answer: Section 1602 follows the same

requirements as LIHTC. Section 1602 funds may pay for development costs to the same extent as allowed under Section 42 of the IRC. For example, the acquisition of land is ineligible under Section 1602, as it is under Section 42.


Eligible Use of Funds: Treasury FAQ: 7-9-09 – Question 4h: What is the maximum amount of a subward?– Answer: The amount of a subaward cannot exceed 85% of the

amount of a building’s eligible basis as determined at the end of the first year of the credit period (as defined in Sect(f)(1) of the IRC) and, also for this purpose, eligible basis includes any increase for buildings located in high cost areas under Sect 42(d)(5)(B). The subawardee must maintain sufficient documentation to demonstrate that the allowable construction, acquisition, and rehabilitation costs of a qualified low-income building equal or exceed the amount of the subaward.


Selection Criteria1. Meet Threshold Eligibility, Follow Application

Process, Demonstrate Eligible Use of Funds

2. Preference to Preservation & Elderly Set-Aside

3. Demonstrate competitive equity investment

4. Draw 100% before 12-31-10: Readiness Criteria


Underwriting– Request will be equal to anticipated equity

Increase as a result to fund additional reserves Ensure amount necessary for financial feasibility Award will be no more than the eligible basis


Development Fee– Development Service Agreement– Inclusion of other fees to service providers must be

supported (actually performed & no duplicative)– Other fees will not be paid to entities related to GP

or Developer except for General Contractor Waiver request – demonstrate cost saving to the

development including third party cost comparison


Development Fee Continued:– 50% of the fee will paid:

30% at closing of Section 1602 Exchange Funds 10% during construction – prorata w/const. Completion 30% at Construction Completion 30% at Stabilization & Final Inspection


Development Fee Continued:– No Equity Investor– Less than $300,000 developer fee

50% deposited into a controlled account Paid out 1/10th over the next 10 years


– Developer fee exceeds $300,000 50% is deferred and paid out of cash flow


Developer Fee Continued:– Development with an equity investor

50% deposited into a controlled account Paid out 1/10th over the next 10 years



Types of Financing– Awarded as a forgivable loan

30 year term with no interest or principal Subordinate to first lien holder Disburse funds upon evidence of incurred cost


Loan Agreement– Will set-forth all Section1602 requirements

Lien & Restrictive Covenant Agreement– Funds cannot be drawn in advance– Funds cannot be placed in escrow– Funds must be expended within 3 days


Reporting & Compliance– Report due the day before the end of each quarter (October

1st) Further guidance by Treasury in July (Q& A 8a)

– IHCDA will collect data points with each draw Completion status Jobs created & retained Other federal reporting requirements Subcontractor awards (pending guidance)

– Noncompliance is subject to recapture by Treasury– Does not trigger cross cutting federal rules (Davis-Bacon,

Environmental or Historic Review, URA) Treasury Q & A 4e (Section 504 does apply)

QUESTIONS?



The next section will cover the FSA component



Financial Service Agents (FSA)– Assigned to developments without an investor

Application submitted to IHCDA Owner request a FSA within application

– IHCDA assigns FSA & provides application

Approved FSAs:– City Real Estate Advisors, Inc.

Brian McDonnell

– Great Lakes Capital Fund Jack L. Brummett

– House Investments Doug Sylvester


FSA Continued– FSA Fee is equal to 4% of the total Exchange &

TCAP award, not to exceed $125,000– Partnership will pay legal fees & third party reports– Asset Management Fee will annually be the greater

of $5,000 or $100 per unit. Pre-funded reserve established at closing.


FSA Continued:– IHCDA will enter into a tri-party agreement with the

owner and FSA– Services will include:

Due Diligence Services Underwriting Services Closing Service

QUESTIONS?



Thank you

J. Jacob SipeMulti-Family Manager

[email protected]

Documents

American Recovery and Reinvestment Act of 2009 Tax Credit Assistance Program (TCAP) Section 1602 Tax Credit Exchange Program July 10,