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  • Next Year plan to implement the advance compliance training.


  • 1. Using ODMH and MR/DD Capital Funds with Low Income Housing Tax Credits April 24, 2007 HOUSING OHIO COHHIO’s Annual Statewide Conference
  • 2. Who we are… Ohio Capital Corporation for Housing
    • OCCH was created in 1989 by the Ohio Housing Finance Agency and is an independent nonprofit corporation with its own Board of Directors
    • OCCH’s mission is: “to cause the construction, rehabilitation, and preservation of affordable housing throughout Ohio”
    • Raised over $1,000,000,000 in tax credit equity and completed over 16,000 units in over 300 Projects
    • Establish equity funds of corporations doing business in Ohio
    • Provide technical assistance to nonprofit and for-profit developers in structuring and financing affordable housing tax credit transactions as well as property/asset management training
    • Manage assets of the equity funds for the 15-year life of the partnerships
  • 3. Who we are… Community Housing Network
    • Franklin County ADAMH contract housing provider
    • Own over 600 units of ODMH Housing
    • Develop, own, and manage 5 tax credit projects
  • 4. Recent Legislative Change
    • ORC Chapter 154 was amended to permit ODMH and MRDD capital funds to be issued under a section of the Constitution that allows the funds to be used by a for-profit tax credit company.
    • The amendment is retroactive so that projects already developed with ODMH or MRDD funds can benefit from tax credits.
  • 5. HOUSING OHIO COHHIO’s Annual Statewide Conference Overview of the Tax Credit Program
  • 6. LIHTC Program
    • Federal housing programs have traditionally taken the form of direct cash subsidies (e.g., HUD capital advance to project developer)
    • Tax Credits are indirect cash subsidies that attracts private investors who invest equity in low-income housing projects in exchange for tax credits that reduce their income tax obligation
    • Because only for-profit entities pay federal income taxes, only for-profit owners can take advantage of tax credit program.
  • 7. LIHTC Projects
    • Tax Credit Company :
      • Nonprofit and for profit owners partner with for-profit investors.
      • Companies form a for-profit tax credit company to own the property being developed or rehabilitated.
  • 8. LIHTC Projects
    • For-Profit Investors’ Role :
      • For-profit investors contribute cash (equity) to the project in exchange for receiving the tax credits.
      • For-profit investors are silent partners with limited power to provide day-to-day project management.
  • 9. LIHTC Projects
    • Nonprofit Company’s Role :
      • Nonprofit company uses equity and other gap financing to develop low-income housing.
      • Nonprofit company has sole management power and is required to operate the project for low-income individuals with disabilities for at least 30 years.
  • 10. Hypothetical Tax Credit Deal
  • 11. How LIHTC Credits Flow… State Housing Finance Agency Tax Credits $ $ $ $ $ $ $ $ $ $ $ $ $ Tax Credit Authority Tax Credit Allocation Cash Equity Investment US Treasury (IRS) Investors Rehabilitated MH Project LP
  • 12. 4% Tax Credit/Bond Deals
    • Finance Project by Using:
      • Tax Credits: Amount of Tax Credits: depends on value of project, but generally will cover 30% of project costs.
      • Tax Exempt Bonds
      • Available Grants (Rehab Projects: assumption of existing ODMH/MR/DD debt by project).
  • 13. Conventional vs. Tax Credit Deal
  • 14. Sample Development and Proforma Budget
  • 15. Sample Multi-Project Pool
  • 16. HOUSING OHIO COHHIO’s Annual Statewide Conference Overview of Bond Financed Projects
  • 17. What is the 50% Test? Must Finance “At least 50% Of Projects Aggregate Basis + Land” With Bonds Or …roughly ½ of total project costs.
  • 18. How Bonds Can Be Used Three Ways Bonds Can Be Used: Construction Financing Permanent Financing Both Construction & Permanent
  • 19. What Commitments Come With Bonds & 4% Credits Deed Restriction: 20/50 or 40/60 Set Aside Pretty Much The Same As LIHTC, One Caveat, Must Extend To Bond Term If Longer
  • 20. Credit Enhancement Two Types: FHA Insurance: Letter of Credit Un-Enhanced Bonds:
  • 21. Bond Rating Rated By One of Two Main Agencies: Standard & Poors OR Moodys OR Unrated: Bought By Direct Investor
  • 22. Costs Of Bonds A Lot… Participant List: Issuer, Bond Counsel, Underwriter, Underwriter’s Counsel, Owner, Owner’s Counsel, Lender, Lender Counsel, Credit Enhancer or Letter of Credit Bank, Rating Agency, Trustee, Tax Credit Syndicator, Syndicator’s Counsel Figure 7% Of The Bond Amount With Permanent Financing, Less For Construction Only
  • 23. Bond Pools Several Small Projects Can Be Pooled Into One Bond Issuance Can Be In Multiple Locations, Cities, Counties, Etc…
  • 24. Expected Timeline Forever…. Expect A Year To 18 Months
  • 25. Issues With Tax Exempt Bond Deal 1. Deals Are Very Complicated 2. Many Players Involved 3. Financing Can Be Very Expensive Get A Good & Knowledgeable Development Team!
  • 26. HOUSING OHIO COHHIO’s Annual Statewide Conference Sources of Gap Financing
  • 27. HOUSING OHIO COHHIO’s Annual Statewide Conference Other Considerations to Financing
  • 28. Tax Credits Compliance Overview
      • Income Restrictions
      • Rent Restrictions
      • Occupancy Restrictions
      • Lease Requirements
      • Recertification Requirements
      • Special Rules
        • Unit Transfer Rules
        • Next Available Unit
        • Vacant Unit Rules
        • Record Retention Requirements
  • 29. Income Restrictions
    • Minimum Requirements:
    • At least 40% of the property must be set aside for families earning below 60% of Area Median Income, or
    • At least 20% of the property must be set-aside for families earning below 50% of the Area Median Income
    • Cuyahoga County: Family of Four
    • 50% AMI=$30,700 60% AMI = $36,840
    • Cuyahoga County: One Person Household
    • 50% AMI=$21,500 60% AMI = $25,800
  • 30. Rent Restrictions
    • Rents are restricted by income group, bedroom size, and Area Median Income
    • Cuyahoga County
    • 1 Br 2 Br 3Br
    • 50% Area Median Income $575 $691 $798
    • 60% Area Median Income $690 $829 $957
    • Rents include tenant portion of rent, plus utility costs and all other costs that are required by owner
  • 31.
    • Property must remain as a low income property for at least 15 years and most properties will have an additional 15 year extended use period
    • Students - households consisting entirely of full-time students are not eligible for tax credit units
    Occupancy Restrictions
  • 32. Lease Agreement
    • Program does not permit transient occupancy
    • Initial Lease Term must be at least 6 months
      • Unless property is an SRO or transitional housing for the homeless
  • 33. Recertifications
    • Must be completed within 12 months from Lease start date
    • May sign Tenant Income Certification up to 60 days before effective date
  • 34. Rehab of Existing Properties
    • Relocation
      • HUD Handbook 1378.0
      • www.hudclips.org
      • www.fhwa.dot.gov
      • www.communitychange.org/issues/housing/
  • 35. Asset Management Overview
    • Role of Asset Management
    • Watchlist Criteria
    • Monitoring and Reporting
      • Monthly, Quarterly and Annual Requirements
  • 36. Key Players in Tax Credit Program
      • IRS
        • Responsible for allocating tax credits to the states & enforcing rules & regulations
      • State Allocation Agency
        • Responsible for awarding credits that have been allocated by IRS and monitoring & reporting non-compliance
      • Property Owner (GP)
        • Often hires a property manager to operate property, who is responsible for compliance .
      • Equity Investors (LP)
        • Responsible for financial & regulatory compliance oversight
      • Management Agent
        • Responsible for setting up systems & procedures to ensure on-site staff are equipped to comply with the program requirements.
      • On-Site Management Staff
        • Responsible for renting to qualified households, and for ensuring that the leasing, documentation & other management aspects are in compliance with the requirements of the program
  • 37.
    • Assists sponsors and managers in maintaining the quality of housing for residents and preserving the value of Fund investments
        • Monitors to assure that our performance standards and expectations are being met regarding:
            • financial condition;
            • physical condition;
            • regulatory and statutory compliance; and
            • Reporting
    Asset Management
  • 38. Watchlist Criteria - Financial
  • 39. Watchlist Criteria - Physical
  • 40. Reporting Reports more than 30-days late Watchlist Criteria Compliance & Other CRITERIA DEFINITION INFORMATION SOURCE Compliance Issues  Any qualified unit out of compliance for more than 60 days  Non-compliance with 10% or more of qualified units (rent levels, tenant income , certification)  No receipt of Annual Owner’s Certification  IRS Form 8823 issued  Notice of IRS claim or audit  Quarterly Status Report  Annual Owner’s Certification  Annual Site Visit  Monthly & Quarterly Report Transfers of Ownership/Reorganization of Project Sponsor Any change Annual Owner’s Certification Strength of Sponsor/Management Company  Decline in sponsor’s financial condition  Deterioration of its asset management capability  Annual Site Visit Default under Partnership agreement, mortgage or loan agreement Litigation Any litigation Quarterly report
  • 41.
    • Data Collection
    • Construction Reports
    • Weekly Leasing Reports
    • Monthly Reports
    • Quarterly Reports
    • Compliance Reports
    • Property Inspections
    • Annual Audit
    • Evaluation
    • AHIC Criteria
    • Risk Rating
    OCCH Project Reporting
  • 42. Training Opportunities
    • Basic Compliance & Intermediate Compliance
      • www.homebuyerohio.com/compliance_tc/training.htm
    • MAHMA State Meeting
      • www.mahma.com/mahma_training.htm
    • TheoPro Compliance & Consulting
      • www.icomply42.com
    • Elizabeth Moreland Consulting, Inc.
      • www.housingcreditcollege.com
    • Annual Ohio Housing Conference
  • 43. Websites
    • OHFA: www.homebuyerohio.com
    • OCCH: www.occh.org
  • 44. HOUSING OHIO COHHIO’s Annual Statewide Conference Technical Assistance
  • 45. NAMI Ohio 747 East Broad Street Columbus, Ohio 43205 Phone 614-224-2700 Fax 624-224-5400 Tollfree 800-686-2646 [email_address] NAMI Ohio
  • 46. Housing Assistance Websites COHHIO (Coalition Homeless+Housing) www.cohhio.org Corporation for Supportive Housing www.csh.org Dataplace www.dataplace.org / NAMI Ohio www.namiohio.org Ohio Capital Corp for Housing www.occh.org Ohio Department of Development www.odod.state.oh.us Ohio Department of Mental Health www.mh.state.oh.us / Ohio Housing Finance Agency www.ohiohome.org SAMSHA www.mentalhealth.samhsa.gov Substance Abuse and Mental Health Services Administration Technical Assistance Collaborative http:// tacinc.org / HUD www.hud.gov
  • 47. www.namiohio.org/assets/images/housingtoolkit.pdf
  • 48. Ohio Capital Finance Corporation
  • 49. Purpose and Background
    • Purpose
    • To establish a flexible source of funds that can be utilized by development partners of Ohio Capital Corporation for Housing for use as predevelopment funding, acquisition financing, bridge financing and homeownership development.
    • Background
    • From 2000-2004 OCCH lent out over $3.6M in predevelopment loans
    • Loans limited to $50,000
    • Used for Short Term and Predevelopment Costs
    • In 2002 the Ohio Capital Finance Corporation received CDFI Fund Certification
    • In 2004 the Ohio Affordable Housing Loan Fund was created - $10,000,000
    • In 2006 over $10,000,000 in loans have closed and the Fund has begun to revolve
    • The Loan Fund has experienced no write-offs or loans at risk
    • Continued demand for existing loan products
    • Borrowers appreciate new source of capital that understands the tax credit marketplace
  • 50. Products, Rate and Term
    • Tax Credit Products
    • Predevelopment Loan – Maximum $150,000
    • Acquisition Loan - Maximum $1,000,000
    • Year 15 Bridge Loan - Maximum $1,000,000
    • Non Tax Credit Products
    • Predevelopment Loan – Maximum $100,000
    • Acquisition Loan - Maximum $1,000,000
    • Homeownership Loan - Maximum $500,000
    • Interest Rate
    • Prime minus ½ (8.25% - ½ % = 7.75%)
    • Interest accrues for life of loan
    • Variable rate
    • Term
    • Up to 18-24 Months
    • Principal & Interest repaid at construction loan closing
  • 51. Lending Guidelines
    • All Tax Credit Predevelopment and Acquisition Loan projects must have a valid reservation of tax credits
    • 80% of units must be affordable to 60% of AMI
    • All projects will entail either multifamily or single family properties
    • The minimum loan amount is $10,000
    • Borrowers may be nonprofit, public housing authority or for-profit entities
    • The maximum lending limit per loan is $1,000,000
    • The maximum lending limit per borrower is $3,000,000
    • There are no prepayment penalties with any loan
    • Developer Fees and Operating Costs are not eligible for funding
  • 52. Predevelopment Loan (tax credit)
    • Maximum Loan Amount: $150,000
    • Uses: architectural drawings, zoning, permitting, legal fees, phase I environmental report, engineering, real estate taxes, soils report, carryover costs, etc.
    • Collateral: full recourse guarantee and/or first mortgage if available
  • 53. Acquisition Loan (tax credit)
    • Maximum Acquisition Loan - $1,000,000
    • Uses: To assist in acquiring land and/or buildings
    • Limited to 100% loan to value (as is)
    • Collateral: full recourse guarantee and first mortgage
  • 54. How to Apply
    • For an Application and Closing Checklist Contact:
      • Jon Welty
      • An OCCH Development Officer
      • www.occh.org/predevelopment lending
    • Return completed signed Application along with documents from the Closing Checklist to begin the application process.
  • 55. Frequently Asked Questions
    • Can I borrow the loan fees? Yes
    • Can I borrow funds twice, once for predevelopment and once for acquisition? –Yes
    • Who is the borrower? – The tax credit partnership for tax credit loans or developer for non tax credit loan
    • Does the Partnership (borrower) have to be formed? - Yes
    • Can funds be wired to the General Partner or Developer’s bank account? – No, the funds need to be transferred to the borrower’s checking account
    • Can you accept a mortgage instead of a guarantee? – No
    • Can I payoff the loan in installments? – No
    • Will you accept a check or do you prefer a wire? – A wire is preferred
    • Can the loan be extended? – Yes, please provide notice to the fund for an extension – there are no extension fees
  • 56. Additional Information
    • Community Housing Network
      • Susan Weaver – 614.251.1700 x106
      • Samantha Shuler – 614.251.1700 x114
    • Ohio Capital Corporation for Housing - 614.224.8446
      • Doug Klingensmith
      • Melanie Shapiro
      • Jon Welty
    • Ohio Housing Finance Agency
      • Kevin Clark – 614.752.4550
    • Federal Home Loan Bank
      • Mary Hernandez – 513.852.7604
    • NAMI Ohio
      • Ron Rett – 614.224.2700
  • 57. HOUSING OHIO COHHIO’s Annual Statewide Conference Discussion Questions???