The document discusses the Low-Income Housing Tax Credit (LIHTC) program, which provides tax credits to developers of affordable rental housing. It outlines key details of the program including eligibility requirements, maximum income and rent limits, types of credits, and how the tax credits are calculated and used to raise equity for development. It also discusses how the nonprofit Midwest Housing Equity Group assists with various aspects of the LIHTC process such as underwriting, identifying financing, and long-term compliance.

1. “ A Blueprint to Affordable Housing” The Low-Income Housing Tax Credit Program

2. The Facts: Tax Reform Act of 1986 Internal Revenue Code, Section 42 Owners receive a federal income tax credit Effective financing tool for “affordable” rental housing production

3. The Facts (continued): 2010 - Nebraska Investment Finance Authority (NIFA) will have approximately $4.1M of Low Income Housing Tax Credits (LIHTC) based on the Bureau of Census Current Population Report for Nebraska multiplied by $2.30 and approximately $9M of LIHTC for the Midwest Disaster Areas NIFA responsible for allocating credits Generally program over-subscribed: 3 to 4:1 Administration under the “Qualified Annual Plan” that is approved by the NIFA Board of Directors and the Governor

4. Program Requirements: Units must be rented to households making 60% or less of area median income Rents, including utilities, restricted to 30% of qualifying income. Minimum affordability Period (30 years)

5. 2009 Maximum Gross Income for Saunders County (Ceresco) 2 Bedroom Units – 2 residents 50% of AMI - $26,150 60% of AMI - $31,380

6. 2009 Maximum Gross Rent Limit for Saunders County (Ceresco) 2 Bedroom Units – 2 residents 50% AMI - $736 60% AMI - $883 *Market will determine rent charges

7. Types of Credits: 9% Construction (new/rehab) without federal subsidy Generally allocated over two rounds Most popular among developers 4% Construction (new/rehab) financed with tax exempt bonds Acquisition of existing building to be substantially rehabed Applications accepted monthly Least popular among developers

8. Ownership Structure: Tax Credit Project Limited Partnership General Partner (Sponsor/Developer) 1% Limited Partner (Tax Credit Investor) 99%

9. Responsibilities of General Partner/Managing Member: Oversee the daily activities of the development throughout the compliance period (15 years) to ensure the project preserves “affordability” status, has ample cash flow to service obligations and maintains the integrity of the premises (interior/exterior) to provide quality housing for the community.

10. Obligations of General Partner/Managing Member: Development Completion – Schedule & Cost Compliance - Credit Recapture Operating Deficits Environmental Indemnity

11. How Credits are Calculated: Total Development Costs $3,000,000 Eligible Basis (less land) $2,800,000 Applicable Tax Credit 9% Annual Tax Credits $252,000 Tax Credit Period (years) 10 Total Tax Credits $2,520,000 Equity Rate .65 LIHTC Sales Proceeds $1,638,000

12. Calculation of Debt Service & Loan (Simplified Example – 20 units) Annual Gross Rents $114,000 ($475/unit/mo) Annual Operating Expenses $80,000 (4,000/unit/mo) Net Operating Income (NOI) $34,000 Debt Service @ 1.20 DSCR $28,333 Loan Amount @ 8% for 30 yrs $319,000

13. Financing Summary Project Cost $3,000,000 Source of Funds LIHTC Sales Proceeds (55%) $1,638,000 First Mortgage (11%) $319,000 Funding Gap (41%) $1,242,000

14. Filling the Development Gap: Affordable Housing Program (HOME or Trust Funds from NDED) Historic Tax Credits Federal Home Loan Bank of Topeka (AHP) Tax Increment Financing (TIF) Community Development Block Grant (CDBG) USDA Rural Housing Service Developer Note or Capital Contribution Qualified Census Tracts (30% boost in credits)

15. Midwest Housing Equity Group, Inc. Created in 1993 (Equity Fund of Nebraska) Non-profit corporation In 2001 changed name to Midwest Housing Equity Group, Inc. (MHEG) to reflect expansion of business market Over $570M raised and invested in affordable housing Created over 240 housing developments and over 6,700 rental units

16. Mission Statement: Midwest Housing Equity Group, Inc. changes lives for a better tomorrow by promoting the development and sustainability of quality affordable housing

17. Nebraska 14 Funds $292M raised 131 projects closed 3,136 units created As of 12/31/2008: 40 Counties 51 cities/towns

18. Technical Assistance Provided by MHEG: Underwriting financial feasibility Identify sources of potential financing Assist with review of applications for funding Compliance with Section 42 and other financing sources Accounting for construction/rehab period and for compliance period Annual audit and tax return preparation Training for development and management Partnership with MHDF that provides a predevelopment loans and permanent loans for projects Preparation of carryover forms and cost certification

19. For further Information about MHEG: Visit our website at: www.mheginc.com Visit our office in Omaha at 13520 California Street, Suite 250 Phone: 402-334-8899 Email: [email_address] or [email_address]