MEMORANDUM

TO: MFA Website

FROM: Dan Foster

DATE: October 17, 2012

SUBJECT: Summary of Public Comments

Background

The Low Income Housing Tax Credit Program was established 1986 under Section 42 of the Internal Revenue Code (The Code). The Code sets the general program parameters including the requirement that each state adopt its own Qualified Allocation Plan (QAP) which sets forth specific project selection criteria and delineates other program rules. MFA revises the QAP annually.

While stakeholder feedback is encouraged throughout the year, staff holds a “developer’s forum” focus group prior to beginning draft revisions and then presents a list of proposed changes to Policy Committee and Finance Committee for discussion. A draft QAP is then composed and posted (typically late August) on the MFA website kicking off a formal month-long public comment period during which a public hearing is held. After the public comment period is concludes, a final draft QAP is composed and presented to Policy Committee, Finance Committee, and then the Board for approval (October). After Board approval, the QAP is sent to the Governor for final approval.

Discussion

This year a developer’s forum was held on July 27th. Prior to the forum a list of potential changes and discussion topics was posted to MFA’s website. Stakeholder feedback received at the developer’s forum and by written comment was consideredby MFA in composing the draft 2013 QAP. The full draft 2013 QAP was posted,along with a memo summarizing changes made, on MFA’S website August 23rd kicking off the formal 30-day public comment period.

The following table summarizes comments received and MFA staff response to the comments. Please note that the table summarizes comments received and staff responses. The table is not a comprehensive list of all comments received or factors taken into account by staff but it is intended to provide a general summary of drafting considerations.

2013 Draft Qualified Allocation Plan – Summary of Comments
Topic / Comment / Staff Response
General
QAP Drafting Process / Process is not complete or transparent. Developers should have more time to comment on drafts. / Comments on the QAP are solicited and accepted on an on-going basis. In addition, each year before revising the QAP MFA holds a “Developer Forum” to discuss potential changes, posts a list of potential changes for comment, then holds a public hearing to discuss changes made to the draft QAP, and has a formal 30-day public comment period following the posting of the draft QAP.
USDA-RD Set Aside / Restructuring of existing debt and new financing may not be needed to make a deal financially feasible. Adding these requirements is excessive and unrealistic.
Requiring projects to be within 15% of the highest scoring project is too high of a benchmark. Much higher than previous requirement.
It is impossible for USDA-RD obtain final approval prior to the date at which reservation fees and contracts are due. / Requirements revised so that restructuring of debt and requirement for new RD financing only need to be submitted if they are required for financial feasibility.
Scoring threshold changed to 20% of highest scoring project.
USDA-RD has confirmed that they can place a project on the docket for final approval in May based on the receipt of the preliminary award letters in April.
Participant Eligibility / MFA should prohibit board members from participating in MFA programs. / Such a policy would require MFA to have a Board of Directors which is not active in the development of affordable housing. MFA does not control the selection or appointment of individuals to the Board of Directors. MFA has disclosure policies in place so that any conflict of interest is disclosed and the member with the conflict does not participate in the discussions or votes related to program guidelines or project selection.
Topic / Comment / Staff Response
General
Cost Limits / MFA should cap unit cost at a reasonable limit / MFA has a Cost Limit relative to the actual cost of proposed Projects submitted in a given application round.
Limit Tax Credit Awards made in any community / Set a maximum LIHTC award amount per community such as 30% of the annual allocation / Each Project is evaluated on its own merits in relation to selection criteria. Market studies are completed to ensure that there is sufficient demand in the market area to fill all proposed units. Limiting awards by community could negatively impact ability to address significant demand for additional rental housing.
Leverage / LIHTC award should be reduced dollar-for-dollar for the amount of local donations made to a project / Such a policy would be detrimental to feasibility and a disincentive to obtain a local contribution.
Project Selection Criteria
Selection Criteria #2. Design Competition / Design competition should be eliminated. Process is not transparent, adds little value and increases cost.
Criteria should be based on affordability rather than aesthetics
Points should be carried forward a year for projects that won points but did not receive an allocation / The selection criteria are stated in the submission material and summaries of why the awardees’ projects were selected are posted on the MFA website.Cost containment is achieved through the cost limits. Other factors seem to correlate more strongly with cost than the design competition.
Design Competition Committee members will be posted on the MFA website.
Topic / Comment / Staff Response
Project Selection Criteria
Selection Criteria #4. Locational Efficiency / Good criteria. Well adapted to rural and tribal areas. Access to goods, service, and transportation provide a tangible benefit to low income households. Should have more point value than 2 points.
It is not clear what problem MFA is trying to solve with this category. It is duplicative of what is already required by other green building programs and it is confusing. Criterion should be eliminated. / Criterion overlaps with green building programs and 2 points is meaningful so MFA is not increasing points.
While there is overlap with most other green building programs, projects can obtain certification without implementing these locational criteria by earning points in other criteria.
Good site selection as promoted in this criterion serves a number of objectives. First and foremost, access to goods, services and transportation options effectively increases the affordability for residents because they are required to spend less time and money accessing services or purchasing goods. Secondly, building in locations that have access to existing utilities is more cost effective in terms of overall public investment in infrastructure. Lastly, as fuel prices increase, potential residents are more sensitive to location and likely to elect to live in a place located near goods, services, and transportation options.
Selection Criteria #5. [Rehabilitation or] Adaptive Reuse / Converting non-residential space to residential space is expensive compared to rehabilitation of existing affordable or market rate housing. / Adaptive reuse adds needed new affordable housing units to a community typically at a cost lower than new construction units.
Selection Criteria #6. Conversion Plus Rehabilitation / Criterion should be increased to 15 points. / Conversion points can be combined with Rehabilitation or Adaptive Reuse giving Conversion projects the ability to achieve 20 points more than new construction. The preservation of projects with subsidy should receive priority over conversion.
Selection Criteria #8/9. AGMI/AGMR / Projects with units restricted at 80% of AMI should not be treated as market rate units for calculating AGMI/AGMR / Units which are income restricted at 80% of area median income enjoy treatment as market rate units for Projects that Incorporate Market Rate Units making them eligible for additional points under that criterion. Restricting rents at 80% AMI offers very little tangible benefit to residents. For most areas in NM, 60% rents are within 10% of market rate rents. 80% AMI rents would likely be more than what is achievable in the market.
Topic / Comment / Staff Response
Project Selection Criteria
Selection Criteria #12. Projects in Which Units are Reserved for Special Needs / Increase point value to 35 points for Projects committing to 20% set aside
Define what is required in terms of additional space or private space. / More developers have already shifted to targeting special needs. In 2012, 50% of all applications received committed to the 20% special needs set aside. The other 50% set aside 5% of units for special needs. Requested point increase would lead to no senior of family units being produced.
Lack of subsidy for additional extremely low income units or support services can be detrimental to financial feasibility of Projects.
Added, “Projects must include appropriate space reserved for the delivery of counseling services, such as a private office with secure file storage space (if client files are to be stored on-site), in order to be eligible for points under this criterion.”
Selection Criteria #16. Projects Receiving a Local Contribution / Add additional tiering or scaling proportional to the percentage of the contribution. / Done.
Selection Criteria #13/14.Services / MFA should provide a method for developers to know what services will be accepted before an application is turned in. Existing acceptable services should be published. Previously accepted services that are no longer accepted should be published. / Acceptable services are defined in the QAP. Only services that have written approval, either in the QAP or on MFA’s website, will be accepted.
Significant changes made in QAP to increase flexibility in selection of service providers and simplified application requirements.
Topic / Comment / Staff Response
Project Selection Criteria
Selection Criteria #25. Failure to Meet Development Deadline / Criterion should be removed. Deadlines may be missed due to no fault of the developer.
Failure to meet deadlines is a good and objective way to identify principals that have not performed well. / Category removed.
Stakeholder Proposed Selection Criteria / Other
Efficient Use of Credits / Award additional points to projects with lowest cost per unit / Prior attempt at scoring based on lowest construction costs resulted initial cost estimates included in some applications being much lower actual costs. Benefitted applicants located in communities where gap financing is available to replace credits lost by reduced basis.
Give additional points to communities with the lowest median income / Communities with incomes below $50,000 are eligible for more points for AGMI scoring
Preservation Set Aside / Create a set aside for preservation / MFA believes that in order to ensure the highest quality projects are selected selection should be based on the merits of each project. Set aside can allow projects that are of lesser quality or serve few public policy objectives to be selected over higher quality or projects which serve more policy objectives. 2013 QAP contains strong scoring incentives for preservation.
Rehabilitation versus New Construction / Selection criteria should be neutral in regards to whether a project is new construction, or adaptive reuse
Project selection criteria should promote rehabilitation/preservation / NM has a very large number of existing properties that are aging and deteriorating. Low income families are already residing in these existing properties and unless the physical needs of the properties are addressed, these families will be forced to remain in substandard housing. This is particularly true in rural areas where there is not a strong enough market to support new construction. In addition, a significant number of these properties have rental assistance contracts. If these properties are not rehabilitated, the rental assistance contracts could be terminated.