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LIHTC Applications FAQ

NOTICE: Site control must be in the name of the Project Owner, if formed, or the General Partner or a managing member of the General Partner. The QAP anticipates that in many cases the legal entity that will ultimately be the Project Owner (the Limited Partnership) will not have been formed at the time that the Initial Application is submitted. The QAP, therefore, allows for site control in the name of a General Partner or managing member of a General Partner.



Cost and Fee Limits

The below FAQs are from prior years, but may answer questions still pertinent to the current QAP.

Q1: USDA-RD 515 projects require a lump-sum contract. RD doesn't lock in the Builder's Overhead, General Requirements, and Profit until there is a signed contract. When does MFA lock in the amount of Overhead, General Requirements, and Profit for a RD lump-sum contract?

A1: The maximum builder's fees, as well as developer fees, are locked in at Initial Application. For LIHTC purposes, any amount of fees that exceed the lesser of the limits established at Initial Application or the percentage limitations will be excluded from the Project's Eligible Basis when calculating the tax credit allocation.

Q2: Can we capitalize replacement reserves for the first 15 years? We understand this is a non-eligible basis project cost.

A2: Replacement reserves for the first 15 years may be capitalized in the development budget assuming that there is a source of funds that can be used to establish the reserve account. Keep in mind that establishing reserve accounts may not be an eligible expense for some MFA funding sources and that if the capitalization of the reserve account results in projected excess cashflow, MFA may reduce subsidy for the Project. The appropriate accounting treatment of capitalized reserve accounts should be determined by a qualified CPA or tax attorney.

Q3: The QAP requires the gross rents to be reduced “by a utility allowance that accurately reflects the cost of tenant-paid utilities by unit size.” The project owner is required to certify that it “has obtained accurate, allowable, current utility allowances for use in the calculation of rents for the Project, and acknowledges this to be an annual requirement for the duration of the Compliance Period.” Neither of these provisions appears to require that the applicant base the utility allowance upon local Section 8 utility allowances. May the applicant use utility allowances based upon an alternative, such as an energy consumption model prepared by an independent third-party engineer or energy rater? If so, does MFA have any specific requirements for what must be included or standards that must be met?

A3: Updated August 2019: New construction and existing projects that do not have rental assistance contracts may utilize one of the following methods for calculating utility allowances:

  • Local Housing Authority
  • HUD Utility Schedule Model
  • Utility Company Estimates
  • Energy Consumption Model 

MFA must review and approve that all utility allowance calculations, in advance, to ensure that they meet the regulations as per 26 CFR §1.42-10.

Please note, if the project is also using HOME funds, there may be additional rules that will apply to the utility allowances permitted during operations.


Scoring Criteria

Q1: We are working on a project that will be reserved for senior households.  We understand that MFA may allow substitution of enrichment services as deemed appropriate from requests submitted in writing one month before the application due date. Both enrichment services will be offered on-site at no additional charge. We request approval of the following enrichment services for our seniors for 1 point each.

  •  On-site semi-annual eligibility screenings and/or application assistance for Medicaid or Medicare. (1 point)  - At least 84% of our residents will have incomes at or below 60% of median income and many residents will be eligible or become eligible for Medicare while living in the community.  The program will provide on-site services to maximize enrollment.
  • On-site quarterly technology training. (1 point) – Examples of technology training include tutorials on setting up smart phones, tablet instruction, social media training, computer training, internet browsing, taking and sharing phots, downloading apps, or technology set-up assistance (connecting modems, etc.).

A1: The above enrichment services as outlined are eligible for one point each in the 2020 Tax Credit Allocation Round, for a total of two points, if all other requirements under the 2020 QAP Section III(E)8 are met. 

Q2: On the "Other Scoring Points Worksheet" criteria #1 states "...for which no federal assistance is existing."  However, the Other Scoring Points Available scoring criterion in the QAP states, ..."for which no federal assistance is existing or anticipated." Two questions: (1) Which language governs? (2) If the latter, please define "anticipated."

A2: The QAP governs, and if the assistance is anticipated, the documentation we would be looking for would be that which is required for the scoring Criteria 4: Sustaining Affordability. In other words, “anticipated” assistance would mean that there may not be a contract in place, but vouchers need to have been awarded to the project.

From the QAP: Anticipated federal rental subsidies (CoC, RD, NAHASDA etc.) must be similarly documented as fully secured to the project itself, including the number of project-based vouchers allocated to the project, in order to score under this criterion.

For example, anticipated federal rental assistance contracts from housing authorities must show they are adequately secured through the presentation of specific items:

  1. A copy of the PHA administrative plan which describes the selection procedures for owner submission of PBV and for PHA selection of PBV proposals
  2. A copy of the published public notice of the PBV proposal selected
  3. If the proposal selected is for PHA-owned units, a copy of the HUD field office or HUD-approved independent entity’s determination that the PHA-owned units were appropriately selected

(If the proposal is selected based on a previous competitive award, MFA would require documentation that the proposal meets the criteria for selection without additional competition.)

Q3: Can you please confirm if the gross square footage amount in the denominator(sum of each buildings gross square feet) includes the gross square footage of the adaptive reuse space (numerator) in the formula for calculating the percentage of the adaptive reuse space? I am assuming it does not.

A3: The “sum of each building’s gross square feet” (denominator) would be inclusive of the area that is being adapted. The “building’s gross square feet adapted” would be the amount of the overall gross square feet that will be adapted (numerator). This would give the “percentage of the building’s gross square footage that is being adapted/rehabilitated”.

For example, if there are 4 buildings a project, and the “sum of each building’s gross square feet” is 10,000, but only 1 of the buildings is being adapted for reuse and the others are new construction, then only 2,500 of the total gross square feet will be adapted, and therefore only 25% of the building’s gross square footage is adapted/rehabilitated.

For scoring under Criteria 21: Adaptive Reuse, at least 20% of the “building’s gross square footage” must be adapted.

Q4: The QAP states governmental contributions and third party contributions must be evidenced by formal resolutions by the state, local governmental entity, or local tribal governmental entity or tribal council, or third party's Board of Directors or controlling entity. I cannot find any place where the QAP, or the application checklist, indicates that formal resolutions are required for deferred developer fees or other General Partner contributions. Can you confirm that formal resolutions are not required for leveraging points for deferred developer fees or other General Partner contributions?

 A4: That is correct. For deferred developer fees or other GP contributions, we are looking for financing commitments documenting the amount deferred or contributed and any terms around that contribution. This should be included as item 28e on the Application Checklist.

Q5: For scoring criterion 18, in petitioning for reclassification from Tier 2 to Tier 1, can the request be made electronically?

A5: Yes, reclassification petitions may be submitted electronically.

Q6: Under Criterion 17 - Blighted Buildings and Brownfield Site Reuse, the blighted building must account for at least 10% of the sum of each buildings gross square footage.  Checklist item 33d refers to scattered sites only for the 10% calculation.  It appears that for single site new constructions, the calculation is not required under tab 33. Is this correct or should we include the square footage calculation showing the blighted building to be demolished accounts for at least 10% of the new construction in tab 33d?

A6: If it is a single blighted building, we would still need documentation that the 10% test is met, it is just that the 10% test is of the blighted square footage specific to that single building, and not of the collection of buildings. The language on the Application Attachments Checklist should be more inclusive of both situations, and we will make that change on the 2021 Application Attachments Checklist.

Q7: The appraised value of an acquisition property is $1M, exclusive of $200,000 of reserves that will be conveyed with the property. We are paying the seller the $1M appraised value for the property and no further remuneration. If the $200,000 of reserves (which exceeds the appraised value and is not included in the sale price) is contributed to the new project as a capital source, can this source be included in the point-scoring leveraging calculation?

 A7: There are two ways that this could potentially be counted as “Leverage” per the scoring criteria.

 MFA would require the following:

  • An attorney opinion documenting that the reserves are not required to stay with the property and that they can be withdrawn by the seller prior to a sale;
  • The accurate value of the reserve account in the form of a balance sheet; and
  • An LOI between the buyer and the seller that the reserves will be transferred to the new partnership (documentation of the transfer would be required at Carryover).

OR  The reserves could be fully disbursed to the partnership, and then a GP contribution could be made. In that case MFA would just need an LOI for the GP contribution at the application stage, with further documentation of the contribution required at Carryover.

Q8: Which MFA gap funding sources can be used for leverage? Previously, the National Housing Trust Fund (NHTF) grant was allowed to be counted as leverage. Can projects continue to count NHFT and can projects also count soft debt such as HOME funds as well?

A8: The National Housing Trust Fund is the only MFA managed source that can be counted as leverage. New Mexico’s HOME funds are fully amortizing, require a monthly payment, and while they can have 0% interest, they are still a hard debt source.

Q9: The special needs section talks about 10 points for services provided outside the threshold services (on page 31), but the category shows only eight points are allowed in this category. Can you confirm the maximum points available under the special needs set-aside?

A9: This is a typo and is from left over text from the previous QAP. Only eight points are possible in the Households with Special Needs Housing Priority category.

Q10: Can a housing department provide service coordination for their sponsored special needs project and meet threshold as an experienced service provider by committing to hiring a coordinator with at least three years of case management experience? Or do they have to partner with a social service agency to meet the requirement for an experiences service provider?

A10: If the question is referring to a service coordinator, the project (or housing department) may hire a separate individual to perform service coordination, but not service delivery. If this is the case, that individual must be hired at least 30 days prior to the first lease-up. Documentation to MFA must be provided to prove the hire took place 30 days ahead of lease-up and a resume showing experience must also be provided. Case Management services may only be provided by an experienced service provider, and an MOU would still be required between the project and the service delivery provider at application.

Q11: Will NAHASDA funding committed for operating through a HAP contract meet threshold for the following special needs requirement: 20 percent of total units reserved for households with special housing needs (see definition in Glossary). To be eligible for points under this option, at least 10 percent of the total units in the Project must be rent restricted at 30 percent of Area Median Income (AMI) or have permanent rental subsidy support with a project-based federal rental assistance contract  that ensures residents do not pay rent in excess of 30 percent of their adjusted income.

A11: Yes. If the project commits 20% of the total units to households with special needs and the NAHASDA funding is in place for at least 10% of the total units, ensuring that residents did not pay more than 30% of their adjusted income in rent, that would satisfy Option A, and points would be eligible.

 

The below FAQs are from prior years, but may answer questions still pertinent to the current QAP.

Q1: If a municipality does not typically issue statements determining blight, what alternative documentation will be acceptable for the Blighted Buildings and Brownfield Site Reuse criteria?

A1: The application must include a letter from the Local Government Building Division stating the proposed site meets the requirements of the QAP for blight. In the event that the Local Government will not issue a determination of blight, the Applicant must provide a letter from the Local Government stating the Local Government’s policy, a third party report indicating that the site meets the QAP’s definition of blight, and the Applicant must provide documentary support such as notices of violation of: (1) Local Government’s codes or regulations or, (2) the recorded covenants, conditions and restrictions for the property or, (3) a condemnation notice from public record. The application must also include photos of the blighted structure, neighborhood, or area. MFA reserves the right to determine whether or not the site meets these requirements.

Q2: Can a project receive the 3 points under “Other Scoring Points Available” for being “located in a town or municipality with a population less than 16,000 people pursuant to data published by the 2016 US Census Bureau, and the MFA-ordered Market Study supports need for the project,” if the town is an unincorporated Census Designated Place (CDP), with their own zip code?

A2: Yes, a Census Designated Place (CDP) may be considered in the Small Town scoring criteria, if the edge of the CDP is separated by at least five straight miles from the border of the next town or CDP.

Q3: A requirement criterion 1 is that net worth/net assets of the nonprofit must be substantiated by reviewed or audited financial statements. The nonprofit was established recently, and while they currently have the asset requirements of the QAP, they will not have the audited financials by the submission deadline. The financials have been reviewed by a CPA and all returns per IRS requirements have been filed. 

A3: If a CPA has reviewed the nonprofit financials, that would suffice. As stated above, the requirement is to have the assets of the nonprofit substantiated by reviewed or audited financial statements.  In this case they would be substantiated by a CPA review.

Q4: I am curious if there is any guidance on what the resolution (from government partner) should include under the leverage section item 27b. Is there an example of a resolution or can it be general as long as it names the specific contribution and the receiving entity?

A4: The resolution must state terms, specific contribution being made, and clearly indicates the receiving entity. If you would like to see a past, approved resolution, please feel free to make a public records request.

Q5:  We would like to provide semi-annual CPR training as one of our enrichment services for a project prioritizing seniors. Would this approved as an MFA enrichment service and if so, for how many points?  We did notice that this is a listed service for Households with Children Housing Priority.

A5: The semi-annual CPR training as described for a senior project is eligible for 1 point.

Q6: Our proposed 2019 9% LIHTC project, which is in a 2019 QCT and in an area of very low income, is considering incorporating a community service facility as defined by Internal Revenue Code §42(d)(4)(C). This facility would be on the same site as the housing units. Is the square footage of a community service facility included in the efficient use of tax credits calculation in the LIHTC 9% application?

A6: The amount of credit for the community service facility cannot be more than 25% of the eligible basis up to $15,000,000 plus 10% of the remaining eligible basis of the project. In addition to the eligible basis limitations, to be included in project basis:

  • Project must be located in a QCT;
  • A facility must be designed to serve primarily individuals with an income no higher than 60% of AMI;
  • A comprehensive market study of the housing needs of low-income residents in the area must have been conducted prior to the awarding of the credits, and the need for the services should have been noted in the market study;
  • The facility must be used to provide services that will improve the quality of life for community residents;
  • The facility must be located on the same tract of land as one of the buildings of the qualified LIHTC project;
  • Any fees charged for services must be affordable to individuals at or below the 60% income level.
  • The square footage of any space meeting the above criteria is eligible to be included in the efficient use of tax credit calculation as long as there is no rent charged, which would designate the space as commercial.

Q7: For Leveraging points, the QAP says that construction permit fee waivers may count as a contribution provided applicant submits a signed letter from the local governmental entity confirming the legal basis for imposing the permit fee(s) and the amount of the permit fee(s) to be waived. Who exactly does this signed letter need to be from?  Is it the jurisdiction's planning/building department, the City/County Manager or Elected Officials?

A7: The letter needs to be from the entity imposing (or forgiving) the fee.

Q8: Please clarify the process for PBV that are applied  to the project through a Housing Authority utilizing the LIHTC process as a allowable competitive process per 24 CFR Part 983.51 (d) as public notice and sustaining affordability points.

A8: In order to be eligible for the Sustaining Affordability points, the application submission must include a copy of the Federal Rental Assistance Contract (if applicable) and a copy of Federally Approved Rent Schedule indicating Approved Rents and Utility Allowances documenting that the project will have a federal rental assistance contract covering at least 75% of the units.  In absence of the RAC and rent schedule, we will consider equal documentation from the issuing agency to confirm that the vouchers have already been allocated to the project.

Q9: Our proposed project is in the unincorporated area of a county adjacent to a city which has had recent LIHTC awards.  Although it is geographically near the City, it is not in its legal borders.  Our unincorporated area has not had an active LIHTC award since 1996, and it was a 4% project. Scoring item #22 of the 2019 QAP says: (iv) The Project is to be located in a town or municipality with no "active: LIHTC Project. "Active" is defined as a town or municipality for which a LIHTC award was made in the last five (5) calendar years an the MFA-ordered Market Study supports need for the project (3 points): Is it correct to conclude that our project would be eligible to receive points under this category?

A9: The intent of the scoring criterion described under Section III.E.22.iv of the QAP was to provide new affordable housing opportunities in areas where those opportunities do not exist.  “Municipalities” include cities, towns and villages.  Although counties are not mentioned in the criterion, if a county, including both incorporated and unincorporated areas, does not have an “active” project, then a proposed project could be eligible for points.    However, the project described above is within a county that has many “active” projects, and thus does not meet the intent of the scoring criterion of offering new affordable housing opportunities in areas where those opportunities do not exist and would not be eligible for points under scoring criterion III.E.22.iv.  

Q10: For the scoring criteria of Households with Special Housing Priority, option A allows for 15 points. Do these points include the additional points a project can go for or is that separate? If not, then where in the tax credit scoring worksheet can we indicate that we want an additional 10 points for this category?

A10: Projects electing to provide units for Households with Special Housing Needs may be eligible for up to either 10 or 15 points, depending on the percentage of set aside units provided in the project. A list of services the project can provide to tenants (and the corresponding points eligible) can be found in the QAP under that scoring criterion.

Q11: Can you please provide examples of acceptable Alternate Form(s) of Transportation and what documentation is required for Scoring Criterion 2: Locational Efficiency.

A11: MFA cannot provide examples as requested due to each project being different.  Thus, MFA must evaluate each situation individually.  MFA advises applicants to provide all information available at the time of initial application submission and recommends including a narrative to describe the alternate form proposed.

Q12: The leverage requirement states that "the commitment from a private third party, federal government, state, local government entity or tribal council may be made in the form of cash, land and/or buildings. If our project is receiving a commitment of project-based vouchers (cash over time) can we monetize this financial commitment and have it count towards our leverage requirement? It appears to fit this broad definition.

A12: Neither vouchers nor tax abatements can be counted in the leverage category, since the category requires contributions toward the total development cost and these contributions reduce operating expense.

Q13: We would like to apply for National Housing Trust Fund money for permanent funding only (not to be used during construction).  Will you verify that National Housing Trust Fund will qualify for leverage points, if only used as a permanent funding source.

A13: When using debt for leverage points, only soft debt contributions are eligible. Dependent on the structure of the National Housing Trust Fund dollars, they could count towards leverage as long as they remain part of the permanent financing of the project.

Q14: Must General Partner contributions be part of the construction funding or just as part of the permanent funding to be counted as contributions for leverage points?

A14:  Contributions counted at leverage points must be part of permanent funding, those funds do not have to enter into the project during the construction period, but they may.

Q15: Our team is looking at petitioning so that our county is a Tier 1 versus Tier 2 community. The guiding language says that at a minimum the town must meet vacancy rate and population growth thresholds. Where are these found? More importantly, if a community is doing a special needs project could they not use additional information to show need re. the local homeless population? Could a community also use data in its housing plan to demonstrate need? For rural communities, vacancy and growth are not always the best data points to measure need, especially for communities with higher education campuses and fluctuations in population because of the institution. In summary, would MFA consider additional information to change a community's tier 2 designation to tier 1 if the community's vacancy and growth rate were not within MFA's guidelines for a Tier 1 designation?

A15: The 2019 Areas of Statistically Demonstrated Need Selection Methodology can be found as a document on the MFA Website on the LIHTC page. This methodology is part of the QAP, as approved by the governor. Any petition to change tier status is required to provide MFA with specific verifiable and measurable data in support of the request, which data should address data for the particular town or municipality. MFA will consider measurable and verifiable data evidencing vacancy rates, population growth, waiting lists, and other applicable data regarding the market (e.g. market studies, PHA waiting lists) when making the determination whether to reclassify a town or municipality.

Q16:  In reference to Scoring Criterion 11) Leveraging Resources, for purposes in calculating the percentage of deferred developer fee as a contribution, please confirm what can be included in the total development costs. For example, are developer fees and reserves to be included in total development costs and if so what portion of the total developer fee is allowed to be included paid or deferred or both?

A16: Reserves and the total approved developer fee are included in the Total Development Costs (as are all costs listed on Schedule A). However, the only portion of the developer fee that can be counted as leverage is the portion that is deferred and will be repaid within 15 years.

Q17: The General Partner in our project is a housing authority that does not meet the 1 million dollar asset test for maximum points under the nonprofit entity category. Can this housing authority, who is partnering with their local county on their project, use the County's balance sheet to meet the 1 million dollar asset test? Secondly, could this County government also provide guarantees for the project? If yes, what kind of documentation would MFA need to see for evidence of this arrangement?

A17: Balance sheets from the non-profit partners holding ownership interest are the only ones able to be utilized in the calculation of assets. If the county held ownership interest in the project, their balance sheet would be able to be utilized in the calculation. We would accept a guaranty from a county government if the County has an ownership interest in the project. At application, we would need CPA-reviewed or audited financial statements for the County’s most recent two fiscal years. Prior to closing, we would need evidence of the County’s ownership interest in the project, and at closing, an authorized signatory for the County would need to execute the guaranty document.

Q18:  An eligible party is interested in donating land and building to qualify for "leveraging points". The value of the land and building has been established with a MAI appraisal.  The full value of the asset is not needed for maximum leveraging points.  Can a discounted sale price of the property be included in project Uses and the discounted value of the building included in eligible basis; and can the amount of the discount qualify as leveraging?

A18: Leverage points are awarded based on the value of the donation to the project. In the case of land and buildings, the maximum amount of value applicable towards leverage is the appraisal amount. Regarding eligible basis, includable costs are those outlined in IRS Section 42, Part III, Chapter 8 (Eligible Basis: Includable Costs), which excludes land costs, but includes building costs. All building costs includable in Eligible Basis must be proven as incurred or paid costs.

Q19: We are requesting to have Lea County moved from Tier 2 to a Tier 1 Area under Scoring Criteria #19 in the 2019 QAP, or an exception to be made for this area. We have provided the data requested.  

A19: Upon further analysis and examination of the data provided, we agree. Lea County has been reclassified as a Tier 1 Area of Statistically Demonstrated Need.

Q20: With respect to the Special Needs Housing Priority, does on demand curb to curb shuttle service (provided by the regional  transit system), costing $1 each way, and on a fixed schedule Monday - Friday meet the free transportation services to support medical & social service needs 5 point category?

A20: No, the QAP states that bus passes are not sufficient to satisfy this scoring item. As the regional transit system charges a fee, and operates on a schedule, it would be considered a bus.

Q21: Tribal projects create unique underwriting requirements for the investor. One of those items is that the majority of Tribal projects are required (by statute) to charge no more than 30% of a tenant’s income for rent. The Tribally Designated Housing Entity (TDHE) covers the difference with the HAP contract. It does cover rental assistance (in that all tenants pay rents based on their incomes), but it does so by recognizing that the tenant rental collection will not likely be enough to cover expenses, so the TDHE will be covering those expenses. The investor prefers this method, because they underwrite the project at essentially breakeven operation every year. Will this type of HAP contract be acceptable to receive points under Sustaining Affordability?

A21: In the above scenario, a TDHE-issued HAP contract as described and required by statute would suffice to meet the criteria for Sustaining Affordability.   

Q22: For Criterion 1, where a local non-profit’s net worth/net assets are below $250,000 (or below $1M), does the partnering entity with the net worth/net assets in excess of (or a combined net worth) $250k (or $1M) also have to be a nonprofit entity to qualify as a partnering entity to receive points?

A22: Nonprofits, NMHAs and TDHEs with net worth/net assets below $1,000,000 (or below $250,000) may partner with another entity to increase the General Partner’s combined net worth above this threshold. A for-profit partner entity’s reviewed financial statements may be used to achieve the net worth/net assets thresholds.

Q23: Projects which include the remediation and reuse of a brownfield site are eligible for points. Using the checklist, to qualify for these points, the applicant must provide a Phase II Environmental Site Assessment and a remediation budget. How recent must the Phase II Environmental Site Assessment be? Is a report that is several years old sufficient?

A23: The Phase II Environmental Site Assessment should be dated within 6 months of the application date.

Q24: In order for a project to be considered for the nonprofit set aside and points, the nonprofit must materially participate in the development and operation of the project throughout the compliance period. Which compliance period does this refer to? The IRS required compliance period or that which the applicant commits to as shown on the application? If the IRS required compliance period, is it 15 or 30 years?

A24: If a project is designated as part of the nonprofit set aside, the nonprofit must materially participate in the development and operation of the project throughout the Compliance Period as that term is defined in Section 42 of the IRS Code and the Qualified Allocation Plan (QAP). With regard to the scoring criterion, the QAP states that the Qualified Nonprofit Organization, NMHA, or TDHE must own at least 51% of the General Partner interest and be receiving a minimum of 10 percent of the developer fee as identified in the Project Application. The QAP does not provide for an expiration requirement that the Qualified Nonprofit Organization, NMHA, or TDHE own at least 51% of the General Partner interest.

Q25: I have someone who wants to submit a package, but couldn't make the QAP training. Is there anything we can do for them? Can they take Elizabeth Moreland's online class?

A25: In relation to scoring for “Nonprofit, New Mexico Housing Authority (NMHA), or Tribally Designated Housing Entity (TDHE) Participation,” online compliance courses are not an acceptable substitute to the MFA QAP training. Completion of training programs such as the site-based Housing Credit Certified Professional (HCCP) training, or equivalent training programs, may be acceptable. Actual acceptable substitutes, however, will be approved on a case-by-case basis by MFA’s Housing Tax Credit Program Officer based on a review of agenda or curriculum for the proposed course.

Q26: If a nonprofit has audited financials for their fiscal year-end, will they be required to obtain accountant reviews of their calendar year-end financial statements?

A26: Fiscal year-end audited financials are sufficient.

Q27: If the nonprofit shows assets in excess of $1,000,000 do the other general partners have to provide audited or accountant-reviewed calendar year-end financials?

A27: No, if the fiscal year-end audited financials for the nonprofit show net assets in excess of $1,000,000, the for-profit GP does not need to provide reviewed financials.

Q28: In determining the gross square footage for a project we want to make sure that we are correctly calculating the areas. We have heated space, mechanical and storage space, and exterior decks that are enclosed by railing and “covered” by the deck above. Are all of these areas calculated as part of the Gross building square footage? Decks require construction activity to create the space for use. We have typically used the BOMA calculation method from the outside of the wall in.

A28: The exterior decks should not be included in the calculation.

Q29: When calculating the efficient use of credits, low income square footage means the sum of each Building’s Gross Square Feet, so if a project has structured parking (on a subterranean level) that is part of the project’s eligible basis, would this square footage be included in this calculation? It seems as though this should be treated the same as garages and should be included, although this definition in the QAP is silent as to parking.

A29: For the purpose of calculating efficient use of credits, garages and structured parking will be treated the same as surface parking. It should not be included in the Building’s Gross Square Feet when calculating efficient use of credits. In mixed use or mixed income projects, the cost of the parking should be included in eligible basis proportional to the space specifically designated for low income resident use and provided to residents at no charge.

Q30: The Efficient Use of Tax Credits scoring criterion has tax credits per low income unit and tax credits per low income square foot benchmarks. Must the tax credits requested be below these benchmarks to be eligible for points or can it be equal to and be eligible points?

A30: For Efficient Use of Tax Credits scoring the tax credits per low income unit and tax credits per low income square foot must be less than the benchmarks to be eligible for the points.

Q31: Can an applicant request less tax credits than the project is otherwise eligible for in order to meet the benchmarks and obtain points for Efficient Use of Tax Credits?

A31: Yes, an applicant can request less tax credits than the project is otherwise eligible for in order to meet the benchmarks and obtain points for Efficient Use of Tax Credits. As stated in the QAP, however, all projects will be underwritten to ensure financial feasibility and applications which fail to demonstrated financial feasibility may be rejected. Also, projects awarded points for Efficient Use of Credits may not apply for additional credits if projects cost increase or if other anticipated funding sources are not obtained.

Q32: Should commercial space square footage be included in the sum of each Building’s Gross Square Feet for the purpose of calculating the Efficient Use of Credits?

A32: As indicated on the Efficient Use of Credits Worksheet, commercial space should be excluded from the sum of each Building’s Gross Square Feet for the purpose of calculating the Efficient Use of Credits.

Q33: When a city is contributing property and waiving permit/utility connection fees how should this be reflected on schedule A and schedule A-1?

A33: If the property, for example, is worth $300k and the fee waivers are worth $20k, the cost of the building of $300k and the cost of the fees of $20k should be shown on the Schedule A and then the same amounts on the schedule A-1 as a source of funds with the city listed as the contributor.

Q34: Can the cost of donated property or waived fees be included in eligible basis?

A34: Since the property is donated and the fees are waived they do not represent actual costs to the project and cannot be included in eligible basis.

Q35: When calculating the maximum allowable developer fee should applicants use the total development cost including donated property and waived fees?

A35: No, since the donated property and waived fees are not actual costs, they will not be included in total development cost when calculating the maximum allowable developer fee.

Q36: We would like to request that Community Gardens be included as an additional Social Service scoring criteria for the Families with Children set aside. 12 to 15 8'x8' raised garden beds will be provided with instructional classes being provided during the growing season by a qualified educational entity.

A36: The delivery of at least four monthly gardening classes per year during the growing season by a qualified instructor is eligible for one point as an additional enrichment service for Families with Children or Seniors. In addition to the standard requirement of all enrichment services of being delivered on-site, at no charge to all residents, and actively linked to the Project, to be eligible for the additional point for this activity the Project must include gardening space of at least three square feet per unit for at least 50 percent of the units in the Project.

Q37: Our project will be serving seniors. We would like the following services approved for one point each: 1) semi-annual Medicaid eligibility screening and application assistance, 2) quarterly job training, search assistance, and/or placement, and 3) quarterly computer training. All services would be provided on-site by qualified service providers at no cost to residents.

A37: The services as described are eligible for 1 point each.

Q38: The enrichment service that we are asking you to approve for 2 points is a maintenance/homeownership training provided by a qualified organization. This training will be offered quarterly at no charge to the residents and be conducted on-site at the proposed community building and/or at the agency’s the maintenance department located ¼ of a mile away from the development. A description of the services is as follows: the owners recognize the need to educate the residents of the tax credit development in maintenance and homeownership training. Although the residents will be tenants, the owner wants to empower them with the tools they need by providing them with tips on living in a home for the long term. As a “homeowner” the residents will be taught to be observant, understand what to look for, and develop skills. With this program, the low-income tenants could be set on a path to eventually purchase their first home and also be successful at taking care of the home. The following is not meant to be an all-inclusive list, but is to help MFA understand the level of detail the owner will commit to teaching the residents of the tax credit development: 1) Living greener items: turn the lights off when not needed, understand phantom energy use and prevention, and water conservation measures. Keep the bathroom exhaust fan on while the shower is in use to prevent mold/mildew and enhance indoor air quality. 2) Mechanical items include: teach how to properly change the air filters at the proper intervals, including the dryer filter. Show how to clean the bathroom exhaust fans regularly, properly set the programmable thermostat, and clean the range hood regularly to prevent grease build-up. 3) Plumbing items: teach how to identify small plumbing repairs before they become big ones, how to properly plunge a toilet, and understand what should and shouldn’t be flushed. 4) Electrical items: how to reset a tripped breaker, change light bulbs, change the smoke detector batteries, and prevent circuit overloading.

A38: The maintenance/homeownership training as described is eligible for 1 point.

Q39: Regarding Projects Receiving a Local Contribution, what type of documentation is required if the resolution from the municipality does not state financing terms?

A39: If the resolution from the municipality does not state financing terms a copy of an executed development agreement or similar document must be included with the application.

Q40: The application checklist indicates that applications must include a “Municipality’s certification to MFA, or a copy thereof, that the project and contribution has been analyzed by the Governmental Entity and the contribution meets the requirements of the Affordable Housing Act and Rules Section 5.4.” How do we determine if this certification has been provided to MFA and is there a template for this certification?

A40: There is no template for this certification. Each certification will be unique and correspond to requirements enumerated in the specific municipality’s Affordable Housing Plan and Affordable Housing Ordinance. Please contact the MFA Community Liaison (505.843.6880) for questions regarding a municipality’s certification to MFA.

Q41: Would a finding of asbestos in an existing building make the project eligible for points under the Blighted Buildings and Brownfield Site Reuse criterion as a Brownfield site?

A41: A finding of asbestos, or lead-based paint, in an existing building would not make the project eligible for points under the Blighted Buildings and Brownfield Site Reuse criterion as a Brownfield site. The hazardous substance, pollutant, or contaminant must be attributable to the site (e.g. land) in order for the property to be considered a Brownfield site by MFA.

Q42: One of the buildings in the project we are working on contains a foot-print of 4,200 gross square feet. Because of its height, the building will accommodate 2 floors of 4,200 square feet. Can we count the 8,400 square feet as adapted space for the 20% adaptive reuse calculation.

A42: As long as you do not have to modify the building envelope to accommodate the 2nd floor, you can count the gross square footage of each floor.

Q43: PH PBRA commitments. Can you elaborate on requirements in the checklist for TDHEs? In the case of new construction projects, what evidence is acceptable that then Project is eligible to receive a HAP request or otherwise will have a HAP in place at the appropriate time (and where the LP is not formed at application)? Secondly, beyond having a Plan that spells out how the funds would be used for PBRA consistent with NAHASDA, there is no requirement for public notice or HUD review and determination that the TDHE owned units are selected.

A43: TDHE must provide two items to evidence the commitment to provide project based rental assistance contract: 1) a copy of the TDHE’s administrative plan indicating their intent to use their NAHASDA funding to provide project-based vouchers, and 2) a resolution from the tribal council or the TDHE indicating their intent to use their NAHASDA funding to provide project-based vouchers to the proposed project.

Q44: For the Leveraging Resources scoring criteria, are contributions in the form of cash which comprise 5% of the TCD, and therefore 5 points in scoring, would be eligible to be added to the 5 points for contributions of Native American Trust Land, for a total of 10 points. Is that correct?

A44: That is correct. A donation of Native American Trust Land automatically receives 5 points for the Leveraging Resources scoring criteria. Cash contributions made in addition to the donation of land are eligible for additional points. So, a project that receives a donation of Native American Trust Land and a cash contribution of 4.75% of total development cost would be eligible for 9 points (5 points for the donation of land plus 4 points for the cash contribution).

Q45: Please verify that for purposes of determining efficient use of credits, that the tax credit request amount (Schedule F) would be used to calculate the per unit and per square foot amount.

A45: Schedule F actually calculates the maximum tax credit request. Applicants may, however, request less tax credits than the project is otherwise eligible for in order to obtain points for Efficient Use of Credits. Consequently, MFA will use the amount of tax credits requested as listed on page 1 of the application form when calculating scoring for Efficient Use of Credits.

Q46: Can you please clarify the types of documentation that will satisfy the requirement to demonstrate exempt purpose to foster the production of affordable housing?

A46: The Articles of Incorporation should reference the production of affordable housing as one of the purposes of the organization.

Q47: Is there a template available for the certification that the nonprofit is not affiliated with, or controlled by a for-profit? If not can you please clarify the minimum required information, signatories and whether it needs to be notarized?

A47: The certification can be as simple as the following statement signed by an authorized representative: “I hereby certify that [your organizations name] is not affiliated with, or controlled by a for-profit entity.” The certification does not need to be notarized.

Q48: Is there a template for the certification that the nonprofit owns 51% of the General Partnership? If not can you please clarify the minimum required information to be contained in that certification, signatories and whether it needs to be notarized?

A48: The certification can be as simple as the following statement signed by an authorized representative of each General Partner: “I hereby certify that [the name of the nonprofit] will own not less than 51% of the General Partnership.” The certification does not need to be notarized.

Q49: I have several different plans for our community and I am unsure as to how to label them. One is a housing plan and one is a long term community plan. I am having a hard time deciphering the specific definition of a concerted community revitalization plan. Could you clarify what this means?

A49: “Concerted Community Revitalization Plan” means a Metropolitan Redevelopment Plan as defined in NMSA 1978 Section 3-60A-4 prepared and enacted by a local, county or tribal government at least six months prior to the application deadline. For Projects located on sovereign tribal lands, “Concerted Community Revitalization Plan” means a written plan similar in content and affect to a Metropolitan Redevelopment Plan as defined in NMSA 1978 Section 3-60A-4, prepared and enacted by a tribal government at least six months prior to the application deadline, which identifies barriers to community vitality and promotes specific concerted revitalization activities within an area having distinct geographic boundaries.

Q50: Are manager's units included in total units for the purposes of determining 20% set aside and other applicable set asides based on total units?

A50: Units set aside for fulltime Project employees (property managers, maintenance staff, etc) require MFA approval as “exempt units” and are removed from the applicable fraction but remain in eligible basis.  Once the unit has been approved as a “reasonably required unit” for the project, the unit will be considered exempt and will not be included for any of the project set aside requirements.

Q51: Should requests for approval of additional enrichment services be requested in writing through the portal or via letter to MFA or both?

A51: Either method of submitting a request for approval of alternate services will be accepted. Often the description of proposed services can be lengthy and it is appropriate to send request for approval via email. If, however, the description if fairly short it is appropriate to send the request via the portal.

Q52: For sustaining affordability points, please confirm that "a copy of the public notice of the PBV proposal selected" only applies to projects which are allocated PBVs through an RFP process administered by a Housing Authority. Said another way, if a project is awarded a competitive source of financing from a federal, state or local source and subsequently the local Housing Authority commits PBVs to the project, a public notice of the PBV proposal selected is not applicable.

A52: 24 CFR Part 983.51(d) requires public notice of the PBV proposal selected regardless of the selection process used.  Please see PIH Notice 2017-21 (HA) – a HUD approval letter is required for utilizing PBVs in sustaining affordability points.

Q53: We are working on a project within a jurisdiction that has a Downtown Master Plan. The project site is within 1/2 mile of the designated Main Street district as identified in the plan, however, the district is not listed as a designated New Mexico MainStreet area. Can we provide a copy of the plan and radius map to qualify for the points under criterion 17?

A53: In order for a proposed project to be eligible for points for being in proximity to a designated New Mexico MainStreet area, the area must be designated as either a Certified New Mexico MainStreet Program or a Start-Up New Mexico MainStreet Program by New Mexico MainStreet.

Q54: The municipality that we are working with intends to make a contribution to our project as an economic development activity pursuant to the Local Economic Development Act [5-10-1 to 5-10-13 NMSA1978] (LEDA). What items are required for the project to be eligible points under project selection criteria “Project Receiving a Local Contributions” for this contribution?

A54: The application must include all of the items on the checklist for the scoring criterion with one exception. In lieu of the municipality's certification to MFA that the project and contribution has been analyzed by the Governmental Entity and the contribution meets the requirements of the Affordable Housing Act and Rules Section 5.4., the application will need to include a certification from the state of New Mexico Economic Development Department stating that the contributions proposed by the municipality are lawful under LEDA.


Miscellaneous

Q1: There appears to be a discrepancy between the QAP and Mandatory Design Standards for required HERS ratings for new construction projects. The Property Standards on page 46 list a required HERS score of 65 or better whereas the Mandatory Design Standards states a requirement of 55 or better.There is a large difference between achieving 55 and 65. Please clarify.

A1: The QAP states: "all newly constructed Projects must obtain a Home Energy Rating System (HERS) score of 65 or better and all rehabilitation Projects must obtain a HERS score of 75 or better" (Sec III E.I.).   The QAP will take presidence over the Mandatory Design Standards.  The 2021 QAP and Mandatory Design Standards will have HERS scores of 55 and 65 for newly constructed projects and rehabilitation projects, respectively.

Q2: Is it acceptable to submit double sided copies?

A2: Yes, double-sided pages are acceptable in the application.

Q3: There is no resume for the general partner because it is a newly formed LLC. It is a single member LLC (disregarded entity) and the sole member is the developer. What would you prefer us to place in that tab (17b)? A slip sheet with this explanation?

 A3: If the sole member is the developer, then that entity’s resume should be submitted under 17a and an explanation should be provided under 17b.


The below FAQs are from prior years, but may answer questions still pertinent to the current QAP.

Q1: Does MFA provide substantive feedback or input to Applicants after receiving the Pre-Application and/or meeting with applicant? Or are those processes informational for the MFA, e.g., a way for MFA to understand its own likely review pipeline?

A1: The meetings are more informational on both ends.  While the meetings are required for every 4% deal, we encourage them for 9% deals. It provides opportunities for MFA to identify any red flags and provides an opportunity to make sure everyone is on the same page regarding the tax credit (and/or bond) process. 

Q2: Is part B of the Design Standards outlining what documentation is required for the initial application, while Part A is for finishing up the preliminary plans and designs that are drafted from the Part B requirements?

A2: Yes, Part A goes through what specific Design Standards MFA holds all projects to, and Part B fully outlines the requirements for submittal.

Q3: We are trying to understand when the timeline for the market study results so that they can be incorporated into the final underwriting for the application.

A3: As described in the QAP, Section IV. C. 8, projects passing the threshold review in a 9 percent tax credit allocation round and ranking among the top scoring Projects and/or wherein MFA determines a study is warranted, MFA may commission a standardized market study by outside professionals chosen pursuant to the requirements of MFA’s procurement policy and having no financial interest in any of the Projects. For all tax-exempt bond financed Projects, MFA shall commission or cause to be commissioned, a standardized market study by outside professionals chosen pursuant to the requirements of MFA’s procurement policy and having no financial interest in any of the Projects. A deposit is required with each Application. Any additional cost of these studies will be charged to Applicant and failure to pay any additional costs within 20 calendar days of the billing will result in rejection of the Application.

In other words, MFA-ordered Market Studies are ordered during the application scoring/processing phase if warranted, and that Market Study will remain part of the application and final underwriting.

Q4: Is it acceptable in the hard copy of the application to not include tabs dividers that are not relevant to the specific application and contain no documents?

A4: No, all tabs must be present, even if they contain no documents.

Q5: Can you provide the actual product name, manufacturer and specifications of the "Brown Classification Folder" you are requiring and where to purchase it?

A5: 2020 QAP Update: MFA no longer requires the use of the "Brown Classification Folders". 

Q6: In reference to the brown classification folder, is there an order or sequence in which the contents of the application should be organized within the folder?

A6:  2020 QAP Update:  The brown classification folders are no longer required; however, the binder must be organized and tabbed, utilizing the same method as previously noted in the 2018 response with reasonable adjustments for binders.   2018 Response:  Please organize the material from left to right starting with Tab 1. Fill each section of the classification folder with as many tabs as reasonable before continuing to the next. It is ok if the last section of the folder is empty (doubtful). Conversely, if the application will not reasonably fit into a single classification folder, please place the remaining tabs in a second folder.

Q7: I somehow misplaced my Certificate of Completion for the QAP Training and it is a required document in the LIHTC application. How can I get a duplicate copy?

A7: Please contact Martha Armijo at marmijo@housingnm.org for a duplicate.


Application Requirements

Q1: Should the current document for tab 35- Non-Smoking Property Certification be updated before we complete? It references ALA, but AANM has since taken over the Smoke-Free at Home program

A1: Yes! This Certification document has been updated and is in the Application Package Zip file now. 

Q2: Is a CNA required at application for adaptive reuse projects?

A2: From the QAP, “for rehabilitation and adaptive reuse Projects, a CNA will be required subsequent to the initial Application (prior to the issuance of the letter of determination for tax-exempt bond finance Projects and at carryover application for all other Projects) and this assessment will be reviewed by MFA for completeness, consistency with the Application and compliance with the Design Standards.”

Q3: The tab name "CF Projection (C-1)" in the file "3.a. 2020 Universal_Rental_Schedules_A-I.xlsx" appears to be calculating DSCR incorrectly.  Specifically, tab B35 gets a #DIV/0! error or an inaccurate result if something is put in cell B29. Will you be distributing a new version of this spreadsheet?

A3:  The excel spreadsheet has been corrected and is available on the website as of 1/23/2020.

Q4: In order to meet Scoring Criterion 12, can you please clarify which signatures in the application need to be originals as the QAP is not entirely clear when it states that "All Application documents that require signatures must be included and bear the original signatures in blue ink from all general partners." Are original signatures needed just for the General Partners or are all original signatures required from all parties even though they are not General Partners? For example, in prior years, I have lost points for this criteria when the Architect's Certification was not an original signature?

A4: All signatures on MFA application documents should be original, inclusive of signatures from architects, contractors, management agents, etc. As a rule of thumb, if the document came from the MFA application package and requires a signature, the signature should be original and in blue ink. The Architect’s Certification is an MFA form, so it should have an original signature.

Q5: In regards to the Related Party Affidavit, does the Architect have to complete this form also or do just the general partners complete the form and state if any identity of interests exist with any members of the development team?

A5: Per the 2020 QAP, Section III. C. 4., “All members of the development team (i.e. Developer, Project Owner, architect, general contractor, etc.) are required to sign an affidavit affirming they have no related party relationships; or, that all related party relationships have been properly disclosed.  The form of this affidavit can be found on MFA’s website.  Additionally, a visual diagram of the relationship of the related parties must be submitted, if applicable.”

Q6: We received our letter from the local zoning official but it is not signed in blue ink.  Per the QAP instructions under complete application, all signatures from general partners or on forms are required to be in blue ink.  Will a letter from an outside source not signed in blue ink be acceptable?

A6: As the local zoning official letter is not an MFA form or document, black ink is acceptable.

 

The below FAQs are from prior years, but may answer questions still pertinent to the current QAP.

Q1: Will you confirm a previous FAQ which said that only federal financing needs to be listed on Schedule H? Also, would you confirm that Board members need to sign compliance affidavits, but they do not need to sign a Schedule H unless they have interests in restricted properties that do not appear on the nonprofit’s Schedule H. Assuming board members do not have interests in restricted properties other than nonprofit’s, only the executive director needs to sign schedule H on behalf of the organization. The executive director also needs to sign Schedule H.

A1: Schedule H only applies to federally financed projects. If a board member does not have interest in a restricted property other than the nonprofit’s, they do not need to fill out a separate schedule H. Only the executive director needs to sign the nonprofit’s schedule H.

Q2: This question is in regards to application submission 20c "IRS Certificate of Good Standing." We have been informed by the IRS that they do have any document called a "Certificate of Good Standing." They can reissues a letter affirming tax exempt status, which is the same as the letter used to evidence 501C3 status for item 20b. The reissue of this letter typically takes a minimum of three weeks to process and to be mailed once requested. The NM Secretary of State does offer a "Certificate of Good Standing" for nonprofits organizations, will this document satisfy the requirement for item 20c?

A2: The NM Certificate of Good Standing is the document that will satisfy item 20c.

Q3: The application checklist requires location and linkages map in addition to color photos of the project site. What is a linkages map? What photos are needed? Overhead or Ground level?

A3: Please see “Site Information” items 3 through 5 under Part B: MFA 2019 Submission Instructions for Preliminary Architectural Documentation for Multifamily Housing  of the 2019 Design Standards (page 12). This section goes into detail as to the expectations for the linkages map and photos.

Q4: If one of our partners who is providing financial guarantees does not want their financials to be available to the public can they send them to MFA under separate cover? Or is there another way to handle this partner providing financial statements while protecting this information from the public?

A4: There are very few instances where personal financial statements would be required, in the event of a personal guarantee of an MFA loan, or in the case where the general partner or managing member was an individual, and not an entity. Documents will be subject to the New Mexico Inspection of Public Records Act (IPRA). Every effort will be made by MFA to maintain the confidentiality of the above information, however; if a Request for Public Records is received MFA must comply.

Q5: This question is in regards to form 1j Related Party Affidavit. In a project where the same entity is serving as a Developer and Managing General Partner of the Owner entity (but neither the Developer nor Owner has any relationship with the builder/general contractor, design professionals, or subcontractors) would this relationship between the Developer and Owner be considered an Identity of Interest that needs to be disclosed on the form? Also please confirm that in the scenario described above, the normal 6% cap on builder profit is applicable.

A5: If there is no relationship between the Developer or Owner and the other team members, MFA would not require an Identity of Interest disclosure. In this scenario, there also would not be a change to the builder profit cap.

Q6: Can you confirm that when a project has 100% owner-paid utilities, no utility allowance documentation is required?

A6: If there are no utilities to be paid by the tenant, no utility allowance documentation would be required.

Q7: Checklist item #24b asks for a copy of the published public notice of the PBV proposal selected. However, your FAQ says:

Q8: Please clarify the process for PBV that are applied to the project through a Housing Authority utilizing the LIHTC process as a allowable competitive process per 24 CFR Part 983.51 (d) as public notice and sustaining affordability points.

A8: In order to be eligible for the Sustaining Affordability points, the application submission must include a copy of the Federal Rental Assistance Contract (if applicable) and a copy of Federally Approved Rent Schedule indicating Approved Rents and Utility Allowances documenting that the project will have a federal rental assistance contract covering at least 75% of the units.  In absence of the RAC and rent schedule, we will consider equal documentation from the issuing agency to confirm that the vouchers have already been allocated to the project.

May we show N/A in the checklist item #24b?

A7: The checklist item #24b is required in order to ensure that the process of Owner proposal selection procedures (per 24 CFR Part 983.51) has been adhered to. That HUD requirement includes a list of guidelines (a) – (g) to follow, of which (d) “PHA notice of owner selection” is required, regardless of which manner the PHA uses to satisfy item (b) “Selection of PBV proposals”.  

Q8: For the threshold site control requirement, will it be sufficient for a non-profit sponsor/applicant that owns the proposed LIHTC project thru an LLC subsidiary to provide the deed under the LLC name and LLC organizational docs showing that the non-profit is the sole member to satisfy this requirement? 

A8: Yes, proof that the nonprofit is the sole member of the LLC that is listed on the deed to the project would be sufficient to prove threshold site control. However, if awarded, the project or project owner must submit evidence that they have taken ownership of the land or depreciable real property or has executed a lease for the land (and buildings if applicable) with a term extending at least three years beyond that of any agreed upon Affordability Period.

Q9: Does an Identity of Interest exist and will the developer fee be decreased when a non-profit owner/sponsor/developer of the property to be submitted for the LIHTC round holds ownership thru an LLC subsidiary, of which they are the sole member? 

A9: The above scenario does present an Identity of Interest, and must be reported, however that designation does not automatically result in a decreased developer fee unless another relationship exists.  For example when an identity of interest exists between the developer and the owner, or between the seller and purchaser in an acquisition, a reduction in developer fee may apply.  In these types of cases, the Identity of Interest relationship will be evaluated on a case-by-case basis as noted in the QAP.

Q10: a) For Schedule H and Compliance Affidavit submittals, is it correct that only the President or CEO of the General Partner (s) is required to submit two Schedule Hs/Affidavits? One as General Partner, CEO or President and one as an individual. This is assuming that the CEO and President is also not a Principal in another entity with other federally financing. 2) Is Types of Financing to be listed on Schedule H federal financing only?

A10: a) The President or CEO of the General Partner(s) is no longer automatically required to submit two Schedule Hs/Affidavits. Only one Schedule H is required for an entity providing that none of the Principals of that entity have any interests in federally subsidized Projects other than those listed on Schedule H. If any Principal has an interest in a federally subsidized Project, they must complete a Schedule H disclosing those interests. All Principal must provide a Compliance Affidavit. b) Only federal financing needs to be listed on Schedule H.

Q11: If the LLLP has already been established, should the initial tax credit application be under the LLLP or non-profit GP of the LLLP?

A11: The initial tax credit application should be under the LLLP if the LLLP has already been established.

Q12: How long are zoning letters good for?

A12: Zoning letters should be dated within 6 months of the Application Deadline so your zoning letter should be acceptable provided it meets the requirements listed in the QAP.

Q13: On a project that consists of SRO, efficiency, 1-2-3 bedroom units with more than one income/rent tier, do the income/rent tiers have to be distributed throughout, including the SRO units? Can we maintain all the SRO units at the 30% AMI?

A13: Income/rent tiers must be distributed throughout all unit types proportionally. Projects may not maintain all SRO units at the 30% AMI tier.

Q14: I see from the application checklist that the contractor resume does not have to be submitted until carryover. Schedule D requires a contractor signature. Do I need to have a contractor signature on Schedule D at the time of application even though the resume is not required?

A14: If a contractor has not been selected, then the resume is not required and schedule D does not need to be signed by a contractor for the initial application.

Q15: If the LLLP has not been established what entity should be listed as the legal name of the project owner on Schedule J?

A15: The legal name should be listed as TBD if the LLLP has not been established and the signatories should sign as General Partner(s).

Q16: Can you clarify if non-profit board members need to sign a compliance affidavit and complete a schedule H and also that only executive director needs to complete a compliance affidavit and schedule H on behalf of the non-profit?

A16: Board members need to sign compliance affidavits but they do not need to sign a Schedule H unless they have interests in restricted properties that do not appear on the non-profit’s Schedule H. Assuming board members do not have interests in restricted properties other than non-profit’s, only the executive director needs to sign schedule H on behalf of the organization. The executive director also needs to sign Schedule H.

Q17: Schedule I has an information requirement of "On-site Manager". What is MFA's definition of "On-site Manager"? Does that mean a manager that resides on the premises, or does it mean the manager has an office on the premises? Please clarify...

A17: For Schedule I, on-site manager means a manager that resides at the property.

Q18: Can you please direct me to the drawing package submittal requirements for the standard LIHTC application submittals?

A18: Please see Part B: MFA Submission Instructions for Preliminary Architectural Documentation for Multifamily Housing Applications within the Mandatory Design Standards for Multifamily Housing (Item 16 of the Application.)

Q19: Can the site plan and landscaping plan be combined on one sheet?

A19: The site plan and landscaping plan may be combined on one sheet provided you can get all of the information on one sheet and still have it clearly legible.

Q20: What alternate document would be acceptable to show lack of encumbrances on Native American Trust Land?

A20: Lack on encumbrances on Native American Trust Land should be shown with a certified or uncertified Title Status Report from the Bureau of Indian Affairs.

Q21: For the purpose of the Compliance Affidavit, are Principals considered all board members and executive staff?

A21: For the purpose of the Compliance Affidavit, Principals are considered all board members and executive staff of a General Partner as well as any person or entity receiving a portion of the developer fee. Each of these individuals should complete and provide a Compliance Affidavit. Please see the definition of Principal in the glossary section of the QAP for more clarification.

Q22: Square foot calculations: The Gross Square Feet (as defined in the QAP) is used for the calculation of the Efficient Use of Tax Credits. a) How should schedule B and F be reconciled with the Application Page 3 and the Efficient Use of Tax Credits EUC, if schedule B and F are interior dimensions? b) Relatedly, how is schedule B reconciled with other Schedule F and the application if dimensions are interior dimensions of units (heated sq ft in floor plan) and not exterior and not inclusive of common hallways, etc.

A22: Schedule F is based on Gross Square Feet of the Units. Schedule F should reconcile with square feet of Low Income Units and Market Rate Units listed on page 3 of the application. The sum of Each Building's Gross Square Feet listed on the Efficient Use of Credits Worksheet must reconcile with the total square feet (minus commercial space) indicated on page 3 of the application form. Since Schedule B is the only form that uses net square feet (interior dimensions) it will not reconcile with the other forms.

Q23: You've clarified that Board members that do not have interests in other restricted properties do not have to submit separate Schedule H's. Are you referring to personal interests in other restricted properties? Would Board members sitting on multiple Boards be required to submit Schedule H's for properties owned by the secondary entity?

A23: A Board member that serves on multiple Boards has an interest in the properties owned by each of the organizations, so the Schedule H for that Board member should list all of the properties owned by each of the organizations.

Q24: Does or can MFA cc the Letter to the local government official to that official's administrator or deputy staff if that information is provided in the application?

A24: MFA will only provide notice to the local government official. 


Feasibility and Underwriting

Q1: The QAP fundamentals training had a slide that indicated that the Debt Service Coverage Ratio (DSCR) that MFA underwrites to is 1.15, but the Underwriting Supplement says that number is 1.20. Can you clarify?

A1: Unfortunately, the slide at the training was incorrect. The minimum DSCR MFA will underwrite to is 1.20.

Q2: Our project will have rental assistance contracts that pay higher than the LIHTC maximums.  Where do we document those higher rents in the Universal Rental Schedules A-I?  Instructions for Tab 4.a. – Schedule B: Unit Type and Rent Summary are unclear.  Instructions indicate that the fields are, “Not to exceed rent limits for program applied for.”  However, if we put in the maximum LIHTC limits in this spreadsheet, an incorrect expected rent flows to Schedules C and C-1. Can we put the approved rent payments from our Rental Assistance contract in Schedule B, even though they are greater than the LIHTC limits?

A2: Yes, you may enter the higher rents into Schedule B, please be sure to include the approved rent schedule and/or a note about the higher rents. Per the 2020 QAP, Section IV. D. Feasibility Analysis and Financial Considerations:

Exceptions may be made for Projects with project-based subsidies when the program governing the project-based subsidy allows higher rents. See MFA underwriting policy - LIHTC and project-based rental assistance for additional requirements. Note that in order to underwrite to such rents, a copy of a federally-approved rent schedule must be provided to MFA, e.g. HUD, USDA. If project-based vouchers are awarded, but a federally-approved rent schedule is unavailable, proof of the award is required, and MFA will underwrite to HUD FMR.

 

The below FAQs are from prior years, but may answer questions still pertinent to the current QAP.

Q1: If a market study shows a lower vacancy rate than 7 percent (or 5 percent for senior properties), can the lower rate be used in the proforma?

A1: No, 7 percent (or 5 percent for a senior project) is the lowest vacancy rate allowable in the proforma.

Q2: Since our application for the 2018 9% LIHTC round did not receive an allocation, we are planning to submit an application for the 2019 9% LIHTC round for the same project. The HUD field office notified us that the letter is still valid. Do we need to request a new letter dated within the last six months of the 2019 round deadline?

A2: A letter or written statement from HUD (within six months of the 2019 round deadline) indicating that the previous letter is still valid would suffice.

Q3: Per the MFA 2019 Low Income Housing Tax Credit (LIHTC) Initial Underwriting Supplement, "For projects with at least 90% of all units covered by a federal rental assistance contract MFA will use the market study vacancy factor but not less than 5%." By this, it would seem that we can underwrite 5% vacancy for our project. However, your excel file has a locked cell on the 7% vacancy figure.  Will you accept a 5% vacancy rate in this circumstance?  If so, how would we adjust the pro forma?

A3: If you look in the 3.a Universal Rental Schedules A-I, under tab C-1, there is an unlocked cell for the vacancy rate (highlighted in yellow) at the top of the page. 

Q4: What are the cash flow requirements for projects without hard debt? Will this be in the underwriting supplement?

A4: Determinations regarding the cash flow requirements for projects with no hard debt will be made a case-by-case basis and therefore will not be covered in the underwriting supplement. Generally speaking, MFA has two obligations to consider when analyzing the cash flow of a project. First, MFA must ensure that the projected income of the project is sufficient to cover all operating expenses and all required (hard) debt payments with a reasonable cushion. Second, MFA must reasonably ensure that a project has only enough subsidy to be financially viable. Therefore, if a proposed project has no debt (hard or cash flow contingent) but financial projections indicate that the project could support a reasonable mortgage payment, MFA may reduce the tax credits allocated to the project and require the owners to secure a commercial loan or other funding to make the project financially whole. Alternately, if a project has no debt (hard or cash flow contingent) and the financial projects indicate that the project will have minimal or negative cash flow during the compliance period, MFA may reject the application as being not financially feasible.

Q5: How should a cash flow only loan be shown on Schedule C-1 (Cash Flow Projection)? Should cash flow only loans show any amount in the Payment Column (Column G) in Schedule A-1 (Sources of Funds)?

A5: Payments on cash flow loans do not need to be shown on the Cash Flow Projection or on Schedule A-1.


Set-Asides

The below FAQs are from prior years, but may answer questions still pertinent to the current QAP.

Q1: If a project applies for credits out of the USDA set-aside or nonprofit pool, and qualifies for more than what is in the set-aside, would credits be made available from the general pool before any general pool projects are allocated?

A1Yes, if the scoring and ranking process, without regard to the nonprofit set-aside, does not result in awards to qualified nonprofits sufficient to fulfill the 10% set-aside, the next highest scoring, qualified-nonprofit-eligible projects will receive awards sufficient to fulfill the 10% set-aside requirement ahead of the lowest scoring projects that would have otherwise received an award.  If there are not enough qualified-nonprofit-eligible projects to use the entire 10% set-aside, the balance of the set-aside funds may NOT be made available to other projects. 

Similarly if the scoring and ranking process, without regard to the USDA set-aside, does not result in awards to USDA projects sufficient to fulfill the 10% set-aside, the next highest scoring, USDA-eligible project will receive an award sufficient to fulfill the 10% set-aside requirement ahead of the lowest scoring projects that would have otherwise received an award.  However if the highest scoring USDA project does not fulfill the entire 10% USDA set-aside, but there are insufficient tax credits remaining in the set-aside to fully fund a second USDA project, only the top scoring USDA project will be awarded credits under the set-aside.  In this case, the balance of the USDA set-aside funds MAY be made available to other projects. 

Q2: What are the documentation requirements to qualify for the USDA Set-aside?

A2: Projects may qualify for the USDA Set-aside with EITHER: 1) A financing commitment for the direct USDA-RD financing; financing commitments and evidence of USDA-RD debt restructuring must include loan interest rate, term and repayment requirements; OR 2) A letter from an authorized officer of the New Mexico USDA-RD office stating preliminary terms and that the Project has been reviewed, USDA-RD favorably considers the proposed transaction, and that upon approval of a complete Application to Rural Development and an award of tax credits, USDA-RD will submit the file to its national office in Washington, DC and recommend final approval of the transaction; in addition, this letter shall also include the likely interest rate, term and repayment requirements.

Q3:  To be eligible to apply under the non-profit set-aside, must the non-profit control 100 percent of the general partner, or would a non-profit that controls 51% of the general partner be eligible to apply under the non-profit set-aside.

A3:  A non-profit that controls 51 percent of a general partnership is eligible to apply under the non-profit set-aside.

Q4:  It mentions in the QAP, under the non-profit set-aside that “qualified non-profit organizations may also apply for tax credits in excess of these set-asides.”  Does this mean that if there was $500,000 available in the non-profit set-aside and the non-profit applicant needed an award of $800,000 to make their project viable that due to their high request they would not be able to apply in the non-profit set-aside, or that they could apply under the non-profit set-side and if awarded $500,000 would come out of the non-profit set-aside and the remaining $300,000 would come out of the general pool?

A4The latter portion of your question is correct.

Q5:  The Ten Year Rule does not apply to federally assisted buildings.  If our project falls under this exception, is there anything in the application that we should submit to confirm that we fall under this exception?  Would we need to provide a copy of the Section 8 contract or a letter from our attorney stating that we are exempt from the 10-year rule?

A5:  Either is acceptable.

Q6:  May the LIHTC ownership entity and general partner be an LLC?

A6Yes, it is acceptable for the LIHTC ownership entity and general partner be an LLC.

Q7:  Does a non-profit’s mission to foster affordable housing have to be documented in their article of incorporation or can it just be by a board signed resolution?

A7:  The non-profit’s mission to foster affordable housing should appear in either their articles of incorporation, by-laws or any other document which constitutes an “Organizing Document” as defined by the IRS.  On the IRS website (https://www. irs.gov/Charities-&-Non-Profits/Organizing-Documents), there is a definition of “Organizing Documents” and it includes the trust instrument, corporate charter, articles of incorporation, articles of association or other written instrument by which the organization is created under state law.  A board signed resolution would not fall within the definition of an Organizing Document.

Q8:  How does a governmental entity that is willing to donate a parcel of property for a potential project demonstrate site control prior to actually handing over the deed?

A8See Section III. C.1. of the QAP.  This section provides, in part, that site control for all of the property needed for the Project must be evidenced by: 1) a fully executed and legally enforceable purchase contract or purchase option, and/or a written governmental commitment to transfer or convey the property to the Applicant by deed or lease that demonstrates the Applicant will possess a qualified leasehold interest upon execution of the lease, or 2) a recorded deed or recorded lease demonstrating that the Applicant possesses a qualified leasehold interest.

LIHTC Archives

Qualified Allocation Plans (QAP's)

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Design Competition Winners

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LIHTC Income and Rent Limits

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