The Texas Department of Housing and Community Affairs (the "Department") adopts new 10 TAC Chapter 50, §§50.1 - 50.17, concerning the 2012 Housing Tax Credit Program Qualified Allocation Plan (QAP). Sections 50.1 - 50.14, 50.16, and 50.17 are adopted with changes to the proposed text as published in the October 21, 2011, issue of the Texas Register (36 TexReg 7069). Section 50.15 is adopted without change and will not be republished.

The new sections are adopted in order to implement changes that will improve the 2012 Housing Tax Credit Program.

The Department accepted comments to the proposed new sections in writing and by email. This document provides the Department's response to all comments received and the comments and responses are presented in the order they appear in the QAP.

Public comments were accepted through October 28, 2011 with comments received from: (1) John Henneberger, Texas Low Income Housing Information Service; (2) Walter Moreau, Foundation Communities; (3) Elizabeth Glynn, Travois; (4) Brad Forslund, Churchill Residential; (5) Audrey Martin, Realtex Development Corporation; (6), Robin White, Gonzalez Newell Bender, Inc Architects; (7) Ben Medina, Director of Planning and Community Development of Brownsville; (8) Jason Holenbeck, Avenue Community Development Corporation; (9) Sarah Anderson; (10) Sarah Andre; (11) Texas Affiliation of Affordable Housing Providers (TAAHP); (12) George Littlejohn, Novogradac & Company LLP; (13) Bill Schlesinger, Project Vida; (14) Diana McIver, DMA Development Company, LLC; (15) Terry Coyne, Juniper Housing LLC; (16) Jim Lavery, Department of Veterans Affairs; (17) Belinda Carlton, Texas Council for Developmental Disabilities; (18) Scott Marks, Coats Rose; (19) Bob Coe, Affordable Housing Analysts; (20) Bobby Bowling, Tropicana Building Corporation; (21) Jerry Wright, Dougherty Mortgage, LLC; (22) Chris Porter, The Reliant Group; (23) Donna Rickenbacker, Marque Real Estate Consultants; (24) Michael Hartman, Roundstone Development; (25) Steve Ford, Resolution, Inc.; (26) Barry Kahn, Hettig-Kahn; (27) David Koogler, Mark-Dana Corporation; (28) Bill Wenson; (29) Ken Brinkley, KG Residential, LLC; (30) Deepak P. Sulakhe; (31) Walter Schellhase, Hill Country Veterans Council; (32) Cherno Njie, Songhai Development Company; and (33) Pres Kabacoff, HRI Properties.

The comments and responses include both administrative clarifications and corrections to the QAP recommended by Staff and substantive comments on the QAP and the corresponding Departmental responses. After each comment title, numbers are shown in parentheses. These numbers refer to the person or entity that made the comment as reflected in the previous paragraph. If comment resulted in recommended language changes to the Draft QAP as presented to the Board in October, such changes are indicated.

REASONED RESPONSE TO PUBLIC COMMENT ON THE PROPOSED ADOPTION OF 10 TAC CHAPTER 50, 2012 HOUSING TAX CREDIT PROGRAM QUALIFIED ALLOCATION PLAN

Chapter 50 - General - No specific part of the QAP referenced in comment. (1)

COMMENT SUMMARY: Commenter (1) suggested incentives be reduced for Qualified Elderly Developments, especially in High Opportunity Areas. Commenter stated that based on their research previous Allocation Rounds have yielded too many Qualified Elderly Applications being approved compared to General population. Commenter suggested that the Department's policy should be to encourage intergenerational Developments in all areas of the state and to accomplish this; Commenter suggested reducing incentives for Qualified Elderly segregated housing in the Qualified Allocation Plan and further suggested points be awarded to intergenerational or General population Developments in High Opportunity Areas to offset the higher community opposition in those areas.

STAFF RESPONSE: Staff understands the concern expressed by the Commenter and recommended the following language be added to the end of §50.9(b)(16)(A) relating to points for Development location: (A) Two (2) points for Qualified Elderly Developments or (4 points) for all other Developments."

BOARD RESPONSE: The Board directed Staff to modify this amendment by changing the point differential from (2 points) to (3 points) for Qualified Elderly Developments.

§50.2 - Definitions - Applicable Percentage. (4), (27)

COMMENT SUMMARY: Commenter (4) stated that if the full 9% credit is not extended by March 1, 2012, the current language would require Applications to be underwritten using the floating applicable percentage since no Development will be able to place in service by December 31, 2013. Commenter suggested that few Applications will be able to underwrite using the floating rate applicable percentage and Commenter suggested the due date for approval of the full 9% approval by Congress be moved to June 1, 2012, which would give Applicants additional time to re-submit their Applications if Congress doesn't extend the rate and allow the Department additional time to re-underwrite the Application given the change. Commenter (27) suggested, based on their understanding, there is a proposal before Congress to fix the Applicable Percentage for 30% present value credits at 4% and as a result the Department may want to include such provision in the QAP.

STAFF RESPONSE: In response to Commenter (4), the language does not require that Congress act by March 1, 2012 but enables the Department to use the 9% rate for application review and underwriting if deemed appropriate by the Department or if such fixed rate is extended by Congress. Applicants that provide documentation in the Application that placement in service by December 31, 2013 is achievable will be able to use the 9% rate even if it is not extended by Congress. Other Applications will be underwritten at the floating rate. The Real Estate Analysis Division may include conditions in the Commitment related to the timing of closing to ensure that Developments dependent on the 9% rate are able to place in service by the end of 2013. In response to Commenter (27), Staff agreed and proposed language in the definition that reflected the Application will be underwritten fifteen (15) basis points over the current applicable percentage for 30% present value credits, unless fixed by Congress.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.2 - Definitions - Central Business District. (2), (5), (9), (24), (30)

COMMENT SUMMARY: Commenter (2) supported this definition; a Central Business District should be the major, truly urban cities. Commenter (5) suggested an area can be a legitimate Central Business or Downtown District without having a ten-story building and suggested this requirement be deleted or a reduction in the number of stories. Commenter (9) suggested that if there is a ten-story building then the population number is arbitrary and suggested the Department require one or the other in order to meet the definition. Commenter (24) suggested the Department shouldn't discriminate against a city that doesn't have a ten-story building if they have a designated Central Business District (CBD). Commenter (30) requested clarification on whether the ten-story building needed to be located in the CBD itself or could such building be located outside the CBD but within the boundaries of the city.

STAFF RESPONSE: Developments in Central Business Districts may receive a 130% boost in eligible basis and also receive points for Development Location (§50.9(b)(16)). The minimum population and ten-story building are requirements to be inclusive of higher cost downtown areas in larger cities where job opportunities and amenities may be in proximity to the Development. While other cities may have central business districts, the definition in the QAP specifically targets Central Business Districts with these characteristics. Additionally, the ten-story building does have to be located within the boundaries of the CBD in order to meet this definition. Staff recommended no change based on these comments; however, the definition has been revised to clarify that both the minimum population and ten-story building criteria must be met to qualify as a Central Business District.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.2 - Definitions - High Opportunity Area. (2), (5), (11), (15), (17), (19), (20), (23), (27)

COMMENT SUMMARY: Commenter (2) supported the definition and believed that while the definition is tough, the concept is great. Commenter (5) supported the allowance for district-wide enrollment; however, suggested the requirement for only one elementary school within those districts be deleted. Commenter suggested that this undermines the allowance for open enrollment (open enrollment and one school is the same thing as an attendance zone). If the goal of the Department is to incentivize development in areas where children have access to better schools, this is achieved when children from the Development can go to a good school, regardless of whether the district has adopted attendance zones or has open enrollment. Commenter (15) suggested this definition is too broad and is biased against Rural Developments competing in the At-Risk set aside; specifically, that meeting this criteria is far more difficult in a Rural Area. Commenter further suggested that if a Rural Development targeting the general population is within an exemplary school attendance zone then this relative to other Rural Developments is a highly sought after location; this would be especially true if the Rural region, for example, has higher poverty than its urban counterparts. Commenter also suggested "a Rural Development competing in the At-Risk set-aside must be located in an area that includes any two (2) of subparagraphs (A) - (E)" be added to the end of the first sentence in the definition. Commenters (14) and (27) supported the inclusion of population growth as one of the elements in the definition; however, if the Department does not believe such data can be obtained in a satisfactory way then the test should be modified to require an Applicant to meet two of the four criteria in order to meet the definition. Commenter (11) suggested a Development be required to meet two of the five criteria (assuming the high growth criterion remains). Commenter (17) suggested this definition be modified to reflect a Development located near transportation that must be usable by the pedestrian and suggested that subparagraph (C) be changed to the following: "within a radius of one-quarter mile from an existing or proposed transit stop, designed to encourage pedestrian activities and maximize access to public transportation." Commenters (11), (19), (23), and (27) suggested the Department use the lesser of all people or families American Community Survey (2005-2009) data in determining qualification under subparagraph (B) relating to a census tract with less than 15% poverty. Commenters (19) and (23) suggested similar treatment for subparagraph (A) referring to the use of the greater of household income or family income in determining if the median income for the census tract is greater than the county median income, as long as the same data (household or family) is used for both the census tract and county. Additionally, Commenters (11), (19), (20) and (23), suggested an increase to the poverty percentage in subparagraph (B) for Developments proposed in Regions 11 and 13 and suggested a percentage between 35% and 40%.

STAFF RESPONSE: In response to Commenter (5), the purpose of generally limiting open enrollment districts is to encourage Development Sites located near schools with an "Exemplary" or "Recognized" rating. Allowing open enrollment districts may allow Development Sites that require travel across longer distances and there is no assurance that a student would have the ability to attend the school with the higher rating. However, Staff has found a school labeled a "magnet" school that has a clearly defined attendance zone which does not restrict attendance. Staff has clarified the definition to not specifically exclude other schools with the "magnet" label but that otherwise meet the definition with a clear attendance zone in which all students living in the zone have the right to attend. In response to Commenter (15), Staff acknowledged the issue presented by the Commenter but is recommending as an alternative that applications under the At-Risk Set-Aside not qualify for High Opportunity Area Development Location (§50.9(b)(16)) points. In response to Commenter (14), Staff agreed that the growth factor is difficult as a result of limited data and recommended elimination of the growth factor criterion. With the first two criteria still being required, Staff maintains that at least one of the remaining two criteria should be additionally required. With incentives in the form of both a 130% boost in eligible basis and scoring, Staff believes that such Developments should be located in targeted High Opportunity Areas meeting several of the criteria. Staff agreed with Commenters (19) and (23) regarding using the greater of household income or family income in determining if the median income for the census tract is greater than the county median income under subparagraph (A), as long as the same data (household or family) is used for both the census tract and county. Additionally, Staff agreed with suggestions provided by Commenters (11), (19), (20), (23) and (27) regarding using the lesser of all people or families American Community Survey (2005-2009) data in determining qualification under subparagraph (B) relating to a census tract with less than 15% poverty. With regard to an increase in the poverty percentage in this subparagraph for those Regions 11 and 13 Staff suggested a census tract with a less than 35% poverty rate. In response to these comments, Staff recommended the following revisions to the definition: "(as designated in the Housing Tax Credit Site Demographic Characteristics Report for the current Application Round)" be added to subparagraph (A); "according to the most recent census data" be deleted from subparagraph (B); "or, for Regions 1 and 13 with a 35% or less poverty rate" be added at the end of subparagraph (B); subparagraph (C) be revised to read "within a half-mile of an accessible transit stop for public transportation if such transportation is available in the municipality or county in which the Development is located; or"; subparagraph (D) be revised to read "An elementary attendance zone does not include elementary schools with district-wide possibility of enrollment or no defined attendance zones, sometimes known as magnet schools"; and Staff recommended deleting subparagraph (E) in its entirety.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.2 - Definitions - Single Room Occupancy. (17)

COMMENT SUMMARY: Commenter (17) suggested the Department should not limit Single Room Occupancy (SRO) to buildings comprised solely of SROs because such model does not promote integration, inclusion and economic opportunity, but rather such units should be encouraged and incorporated into integrated multifamily apartment units.

STAFF RESPONSE: Staff agreed with the Commenter and recommended the definition be revised to reflect the following: "An Efficiency Unit that meets all the requirements of a Unit except that it may, but is not required, to be rented on a month to month basis to facilitate Transitional Housing. Buildings with SRO Units have extensive living areas in common and are required to be Supportive Housing and include the provision for substantial supports from the Development Owner or its agent on site."

BOARD RESPONSE: Accepted Staff's recommendation.

§50.2 - Definitions - Supportive Housing. (17)

COMMENT SUMMARY: Commenter (17) suggested this definition is not consistent with current thinking and specifically suggested the definition be replaced with the Department's Housing and Health Services Coordinating Council (HHSCC) definition citing that individuals in supportive housing need medical and behavioral health services and supports in addition to non-medical services, such as employment readiness and job search.

STAFF RESPONSE: This definition was drafted in a way that reflects the types of Applications received in prior Application Rounds that would not violate IRS Revenue Ruling 98-47 regarding the continual or frequent nursing, medical or psychiatric services. Due to federal regulations that govern the Housing Tax Credit program, Staff is concerned that the definition adopted by the HHSCC could conflict with a Development's compliance with the federal regulations. Staff recommended no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.2 - Definitions - Transit Oriented District. (1), (17)

COMMENT SUMMARY: While Commenter (1) did not object to removing transit oriented districts as a qualifier for the 30% boost, they encouraged the Department maintain the definition and offer a point to Applications that meet such definition. Commenter (17) suggested that while an increase in eligible basis may not be necessary, the Department should still retain this definition in order to encourage, differentiate and favor transit oriented development.

STAFF RESPONSE: Location near public transit already receives incentives in scoring, specifically, in Site Characteristics (§50.9(b)(19)) and as a criterion in the definition of High Opportunity Area, which qualifies for the 130% boost and Development Location points (§50.9(b)(16)). Staff believes that access to public transportation generally is more important than location in designated transit oriented district. Additionally, Staff removed the definition when it was removed from consideration under the 130% boost in eligible basis and the Development Location scoring item. As a result, the term is not referred to anywhere in the QAP and Staff does not believe that simply having a definition promotes development in one area over another. Staff recommended no change based on these comments.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.2 - Definitions - Transitional Housing. (17)

COMMENT SUMMARY: Commenter (17) suggested the Department remove "more limited" in the definition as it relates to kitchen and bathroom facilities stating that units must meet accessibility requirements pursuant to the Fair Housing Act.

STAFF RESPONSE: Staff has allowed, based on the definition of Unit as defined in the Department's governing statute, to include limited facilities (i.e. a microwave oven in lieu of an oven/range). Typically, such accommodations are found in Efficiency Units in Supportive Housing Developments. As with all Developments funded by the Department, they would need to comply with all regulations governing accessibility. Staff removed the reference to limited bathroom facilities.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.3 - Program Calendar. (5), (27)

COMMENT SUMMARY: Commenter (5) requested this section include a date by which the Pre-application Submission Log must be posted and suggested the date of January 13. Commenter (27) requested this section be revised to reflect the Executive Director may extend a deadline not statutorily imposed for a period of not more than five business days instead of five calendar days due to weekends and holidays that may shorten the extension period. Commenter further suggested the time frame for amendment requests be shortened and requested clarification that Administrative Deficiencies be for five business days rather than five days.

STAFF RESPONSE: Staff will act expeditiously to post the Pre-application Submission Log and expects to post a log within three days of Application submission; however, offers no guarantee that issues won't arise that may prevent the posting of an accurate log within this time frame or that changes would not be necessary if posted within three days. In response to Commenter (27), Staff agreed with the suggested change for deadlines extended by the Executive Director. As with the amendment process, Staff will act expeditiously to review and take appropriate action whether the request is handled administratively or with Board consideration when such requests are submitted to the Department and Staff has clarified that the intent of the submission is forty-five (45) calendar days. Regarding Commenter (27) suggestion on Administrative Deficiencies, Staff did not propose changes to how this process has been handled in the past and intends to keep the five business day requirement.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.4(b) - Ineligible Applicants. (11), (27), (21)

COMMENT SUMMARY: Commenter (11) suggested the word "voluntarily" be removed. Commenter (27) asked why the voluntary removal from participation in a housing tax credit development should be grounds for ineligibility. Commenter (21) suggested paragraph (6) in this subsection be revised to mirror language in §2306.6703 regarding use of the word "and" between subparagraphs (A) and (B).

STAFF RESPONSE: The intent behind the voluntary or involuntary removal section is for the Applicant to provide full disclosure of any prior (or ongoing as of the date of Application submission) situations of such termination of ownership and to disclose the circumstances behind such event. It will only be after such matter is heard and action is taken by the Board will such circumstance deem the Applicant ineligible. In response to Commenter (21) the current language in §50.4(b)(6) reflects the intent of the legislation in §2306.6703. The intent is that an Applicant that proposes to replace in less than fifteen (15) years any private activity bond financing would be ineligible unless it meets criteria in subparagraph (A) and subparagraph (B) or subparagraph (C) or subparagraph (D). When this legislation was implemented in 2009 Staff drafted it in a way that merely separated the requirement for the one-third public housing/Section 8 units and 100% at 50% AMGI whereas statute included them as one item. Regardless, they would both have to be met if attempting to qualify under this criteria or an Applicant could qualify under items in subparagraph (C) or (D). Staff recommended no change based on these comments.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.4(c) - Ineligible Applications - Unit Cap on Credits Requested. (1), (2)

COMMENT SUMMARY: Commenters (1) and (2) supported the $13,000/Unit cap on the amount of housing tax credits requested and stated the limitation is a reasonable use of funds.

STAFF RESPONSE: At the direction of the Board on October 4, 2011, Staff removed the $13,000 per unit cap in the proposed QAP. Therefore, it was not in the proposed rule as published in the October 21, 2011, issue of the Texas Register for public comment. Staff recommended no change based on these comments.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.4(c) - Ineligible Applications - Limit on Amount of Credits Requested as Available in Sub-region. (1), (2), (11), (20), (27)

COMMENT SUMMARY: Commenter (1) supported the cap identified on the credit amount available in the sub-region and indicated that it recognizes the intent of the RAF. Commenter further suggested that if this language is to be altered to incorporate a fixed regional minimum cap that over-allocates to smaller regions, then the RAF design should recognize and adjust for the multi-year impact of such over-allocation by decreasing the amount available in that region the following year. Commenter (2) suggested the percentage limitation on the credit amount available in the sub-region be revised from 150% to 120% and further stated that if a region gets any leftover credits from a prior year with a minimum of $500,000 and an Application can apply for 120% of that amount, this should be enough. Commenter (11) supported the limitation on the credits being requested but to ensure that Rural Area's are not unduly penalized suggested paragraph (10) be revised to read as follows: "for Applications submitted under the State Housing Credit Ceiling, if the Application exceeds a $1 million request in a sub-region where the allocation is less than $1 million. For purposes of determining the credit allocation for the sub-region, a date of January 1, 2012 will be used and any forward committed allocations will not be subtracted from the amount for purposes of determining this eligible amount." Commenters (20) and (27) similarly suggested placing a floor on Applications to the greater of $1 million or the set-aside in the Regional Allocation Formula (RAF); however, Commenter (20) was in agreement with using 150% of a region's RAF set-aside as another option to accomplish this.

STAFF RESPONSE: In response to Commenter (1), the QAP does not include specifics with regard to the Regional Allocation Formula. The over or under allocation of sub-regions is addressed in the reasoned response under the Regional Allocation Formula agenda item. The percentage limitation on the credit amount available in the sub-region, as referenced by Commenters (2), (11), (20) and (27) was revised from 120% to 150% based on public comment at the October 4, 2011 Board meeting and as directed by the Board. Therefore, it was amended prior to the publication in the October 21, 2011, issue of the Texas Register for public comment. Staff recommended no change based on these comments.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.4(d)(7) - Ineligible Developments. (2), (11), (18), (27)

COMMENT SUMMARY: Commenter (2) suggested there be an exception for Supportive Housing Developments located in a Central Business District that exceed the limitation allowed for the percentage of one-bedroom units. Commenter (27) requested clarification that paragraph (7) in this section would permit a Development with 100% one and two bedroom units in a Central Business District (i.e. Qualified Elderly Development). Commenters (11) and (18) suggested that the amendment to the tax credit statute in 2008 clarified that properties serving special needs do not violate the general public use requirement and thus should not be required to seek a private letter ruling. Commenter (18) further suggested that special needs groups can be served in tax credit Developments and the Department, not the IRS, should decide which special needs Development's qualify. Commenters (11) and (18) also recommended paragraph (12) be revised to read as follows: "Any Development that violates the general public use requirement under Treasury Regulation §1.42-9 unless the Applicant provides evidence that the Development will serve special needs." Commenter (11) suggested the negative site characteristics be a scoring item instead of an ineligibility item and further suggested that if such characteristics remain in ineligibility then the Department should outline a waiver process for Developments that may have extenuating circumstances.

STAFF RESPONSE: Staff agreed with Commenter (2) and clarified the implementation of this provision as noted in the following amendment: "any Development (excluding Supportive Housing Developments) proposed in a Central Business District with more than 70% one bedrooms and/or Efficiency Units or 70% two bedrooms or more than 20% three bedrooms. An Application may reflect a total of Units for a given bedroom size greater than these percentages to the extent that the increase is only to reach the next highest number divisible by four;..." In response to Commenter (27), Qualified Elderly Developments, whether in or outside of a Central Business District, would have to meet the requirements of both paragraphs (6) and (7) of this subsection. In response to Commenters (11) and (18), Staff has and will continue to take into account the changes to the tax credit statute regarding the general public use requirement before considering any Application ineligible based on the tenant population it proposes to serve. Staff believes that if a proposed Development does not appear to meet such requirement it would be prudent to seek a private letter ruling rather than risk awarding credits to a Development it believes is in violation of the regulations. With regards to the movement of the negative site characteristics to a scoring item in response to Commenter (11), Staff believes it is the intent of the Board for such characteristics to remain an ineligibility item. The QAP currently provides for a waiver process, should an Applicant elect to seek one; however, it is the Applicant's responsibility to submit such a request to the Department in advance of when it is actually needed so as to avoid unnecessary filing costs associated with the Application process. Additionally, Staff notes clarification to the Ineligible Development item relating to a Rehabilitation Development over 40 years old. Specifically, it was not the Department's intent to restrict this item to only those Developments that are occupied at the time of Application submission and recommended the first sentence in paragraph (9) be revised as follows for clarification "A proposed Rehabilitation (excluding Reconstruction) of an Existing Residential Development that is more than forty (40) years old unless the property is either...."

BOARD RESPONSE: Accepted Staff's recommendation.

§50.4(d)(14) - Ineligible Developments - Two Mile Same Year Rule.

GOVERNOR RESPONSE: This section was amended to remove references to forward commitments.

§50.4(d)(16) - Ineligible Developments - Mandatory Development Amenities. (20), (27)

COMMENT SUMMARY: Commenter (20) disagreed with the proposed revision regarding the requirement of fire sprinklers where no local code prevails and further stated that they know of no local building code that prohibits the use of fire sprinklers and believed the language would require fire sprinklers everywhere in the state, including single-family homes and other design types where almost no local building code requires them. Commenter (27) requested clarification on what is meant by RG-6/U in this section as opposed to RG-6 as specified in the 2011 QAP.

STAFF RESPONSE: Staff recommended a change to the fire sprinkler provision to confirm its requirement for all Units except for single family Units. Staff disagreed with Commenter (20) and has clarified and maintained this requirement due to concerns with health and safety. Fire sprinklers allow additional time for the occupants of a building to evacuate in the case of a fire. Staff recommended subparagraph (M) be revised to read as follows: "Fire sprinklers in all Units, except for single family Units; and..." With regards to the RG-6/U requirement, Staff believes this to be the most recent technology and believes the "U" to represent "universal." Additionally, Staff has clarified its intent in subparagraph (L) of this paragraph to only allow Packaged Terminal Air Conditioners on SRO Units in Supportive Housing Developments.

STAFF COMMENT: Staff made a technical change that removed the term Supportive Housing from subparagraph (E) and instead included subparagraph (E) as a carve-out for mandatory amenities in the opening paragraph of this section.

BOARD RESPONSE: The Board recommended removing subparagraph (M) concerning fire sprinklers as a mandatory Development amenity.

§50.5(c) - Credit Amount. (5), (11), (14), (23), (27), (33)

COMMENT SUMMARY: Commenters (5), (11), (23), (27), and (33) suggested the language in this section be updated to reflect the change implemented by the legislature; specifically, increasing the credit amount from $2 million to $3 million. Commenters (14), (23), and (27) suggested that in order to facilitate capacity building of inexperienced Applicants, as expressed by the Board and Staff, an Applicant that cannot otherwise meet the experience requirements in Threshold, may enter into a joint venture relationship (or in comparable legal structure involving multiple owners) with one or more experienced individuals or a business organization in which they are involved (such individuals or organization being referred to as the Experienced Venturor. Commenters (11) and (14) suggested that when working with an Experienced Venturor, an inexperienced Applicant may, by agreement, provide the Experienced Venturor with the ability to approve certain matters related to the Development but the Principal(s) of the inexperienced Applicant must retain Control. Additionally, the full credit request of the Application under this provision may not exceed $1 million in credits, the full amount of which will be attributed to both the inexperienced Applicant and the Experienced Venturor. Commenters (11) and (14) further suggested that the Experienced Venturor will be allowed to participate in such joint venture in excess of its $2 million cap, up to and not exceeding total requests of more than $3 million in annual tax credits.

STAFF RESPONSE: Statutory changes enable the Board to increase the overall per Applicant cap from $2 million to $3 million. Based on significant public comment requesting an increase in the cap to $3 million as allowed in statute, Staff recommended a change to increase the credit cap to $3 million. Staff proposed the $2 million be replaced with $3 million and that the last sentence be revised to reflect the following: "For purposes of determining the $3 million limitation of tax credits, a Person is not deemed to be an Applicant, Developer, Affiliate or Guarantor solely because it..." Staff also recommended paragraph (5) in this subsection be revised to read as follows "is acting as a General Contractor providing experience or is providing a required construction guarantee because of that role." These changes incorporate a few clarifications based on current practice.

BOARD RESPONSE: Accepted Staff's recommendation.

GOVERNOR RESPONSE: This section was amended to remove references to forward commitments.

§50.5(d)(4) - Limitations on the Size of Developments. (27)

COMMENT SUMMARY: Commenter (27) suggested this provision apply only to developments of the same type and recommended paragraph (4) be revised to read as follows: "For Applications that are proposing an additional phase to an existing tax credit Development of the same type; that are otherwise adjacent to an existing tax credit Development of the same type; or that are proposing a Development of the same type on a contiguous site to another Application awarded in the same program year, the combined Unit total for the existing and proposed Developments may not exceed the maximum allowable Development size set forth in this subsection unless:..."

STAFF RESPONSE: Staff agreed with the change and recommended language by the Commenter. Staff notes that the intent is for any additional phase to be approved subsequent to and apart from an existing or under construction phase.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.5(e) - Developments Proposing to Qualify for a 30% Increase in Eligible Basis. (5), (11), (14), (26), (27)

COMMENT SUMMARY: Commenter (5) suggested the language in this section needed clarification, specifically, regarding how the Department will measure infeasibility without the boost. Commenter further recommended the opening paragraph of this subsection be revised to read as follows: "Staff will evaluate Applications for a 30% increase in Eligible Basis provided they meet the criteria identified in paragraph (1) or (2) of this subsection and Staff will recommend a 30% increase in Eligible Basis unless a 30% increase in Eligible Basis would cause the development to be oversourced, as evaluated by the Real Estate Analysis division, in which case a credit amount necessary to fill the gap in financing will be recommended (paragraph (2) of this subsection does not apply to Tax-Exempt Bond Applications)." Commenters (11) and (14) suggested that "Difficult to Develop Areas (DDA's)" be added to the list of qualifiers for the 30% boost, similar to that for Qualified Census Tracts (QCT's). Commenters (11) and (26) suggested the following as an addition criterion to qualify for the 30% boost: "(E) A net boost not to exceed 130% less the adjustment for local funding is available where local HOME, CDBG or other funds distributed or administered by the local jurisdiction is provided to a non-elderly Development that is not in a QCT. Such amounts must be equal to at least $2,000 per unit ($1,000 for Rural Developments located in non-participating jurisdictions)." Commenters (11) and (27) suggested re-instating the provision for additional 30% units as a criterion for the 30% boost and believed it is good public policy and should not be deleted. With the increased requirement for deep rent targeting in the scoring criteria, the 30% boost will help with the associated increased costs.

STAFF RESPONSE: Staff agreed with the proposed change and language provided by Commenter (5). With regard to Commenters (11) and (14), while federal regulation allows for developments located in DDAs to receive the 30% boost, individual states have discretion to include it as a criterion in their Qualified Allocation Plans. The Department's Governing Board has not directed Staff to include developments located in such areas to qualify for the 30% boost. In response to Commenters (11) and (27), Staff seeks to target areas that result in higher development costs rather than creating the need for a boost by incentivizing slimmer operating margins through deeper rent targeting. In response to Commenters (11) and (26), Staff generally agreed with the proposed change except that the difference for rural Developments is not necessary since they already are eligible for the boost. Staff recommended the addition of the following language: "(E) any non-Qualified Elderly Development not located in a QCT that receives local HOME, CDBG or other funds distributed or administered by the local jurisdiction provided that such funding amounts are equal to at least $2,000 per Unit and is removed from Eligible Basis."

BOARD RESPONSE: Accepted Staff's recommendation.

§50.6(c) Allocation and Award Process - Allocation Set-Asides. (16), (31)

COMMENT SUMMARY: Commenters (16) and (31) suggested a special funding priority similar to the At-Risk and USDA Set-Asides be created for Enhanced Use Lease Developments located on Veterans Affairs Medical Center Campuses which have a specific designation (at least in part) to house at-risk Veterans.

STAFF RESPONSE: The Department's Governing Board has not directed Staff to create an additional set-aside specific to Veterans or any other specific Target Population. Additionally Staff is concerned that such a dramatic change may need additional public consideration. Staff recommended no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.6(f) Allocation and Award Process - Tie Breakers. (1), (2), (4), (5)

COMMENT SUMMARY: Commenter (1) supported using de-concentration as a tie-breaker. Commenter (2) suggested the current language for the second tie breaker is not fair to Developments with smaller unit sizes and further suggested the language be modified to credits per bedroom which seems to be the most fair among the different Target Populations. Commenter (4) suggested the first tie breaker be changed based on the lowest tax credits per capita per municipality or county (if not in a municipality). Commenter (5) suggested the census tract the Development is located in should be the sole tract used for evaluation and further suggested using contiguous census tracts could skew results and should not be considered.

STAFF RESPONSE: Staff agreed with Commenter (2) in respect to modifying the second tie breaker to be based on credits per bedroom instead of credits per square foot and recommended the following revised language: "(B) The amount of requested tax credits per Bedroom (Efficiency Units will be considered to have one Bedroom for the purposes of this provision) as of the date of Application submission. The lower credits per Bedroom will win this second tie breaker..." In response to Commenter (4), Staff believes that the first tie breaker is a better method of preventing concentration because it generally targets a smaller area as opposed to an entire municipality or county; therefore, Staff did not recommend the change as suggested. Staff agreed with Commenter (5) and recommended revising this tie breaker to consider only the census tract in which the Development is located.

BOARD RESPONSE: The Board recommended modifying the second tie breaker to the amount of housing tax credits requested per Bedroom, allowing for 1.5 people per Bedroom.

GOVERNOR RESPONSE: This section was amended to remove references to forward commitments.

§50.7 - Application Process - Administrative Deficiency Process.

Staff noted that for clarification purposes it has removed the following language that was not relative to how it will handle Application information during the review process: "Any exhibits or forms that are part of the Uniform Application and supporting documentation will not be accepted by Staff even if points were requested in the Applicant's Self-Scoring Form unless the Applicant provides an explanation satisfactory to Staff of why the item is missing and explaining how it was beyond their control."

BOARD RESPONSE: Accepted Staff's recommendation.

§50.7 - Application Process - Pre-application Submission.

Staff noted that for clarification purposes it has removed the paper certification accompanying the Pre-application; a signature on the Pre-application itself will suffice. A similar change was made to §50.7(f) pertaining to the Application submission. Specifically, in these sections the following sentence was deleted "The pre-application must be accompanied by a paper certification with an original signature in the form provided in the pre-application. Furthermore..."

BOARD RESPONSE: Accepted Staff's recommendation.

§50.7 - Application Process - Pre-application Threshold Criteria. (20)

COMMENT SUMMARY: Commenter (20) suggested the elimination of site control at the pre-application stage defeats the purpose of allowing for external assessment of competing applications and the absence of such document will not reflect true submitted Applications. Commenter further suggested reverting to 2010 language which would prevent multiple Developers from attempting to buy up competing sites for Applications and the elimination of competition by a single Developer. Commenter also suggested the notification requirements in this section be modified to exclude specificity relating to the proposed rents and stating that such specificity may create concern when actual rents are set 2 - 3 years later as program rents and utility allowances change on an annual basis.

STAFF RESPONSE: The elimination of site control as a requirement does not prohibit site control and Staff believes that the market will dictate that a prudent Developer will likely gain site control prior to Pre-application. Additionally, eliminating this requirement may provide additional flexibility to continue structuring the development plan between the date of Pre-application and Application. Staff agreed with the specificity required in the notification letters and recommended clauses (vii) - (ix) be removed in addition to the Target Population being served in clause (v).

BOARD RESPONSE: Accepted Staff's recommendation.

§50.7(j) - Application Process - Site Evaluation.

STAFF COMMENT: This section was modified to clarify that a site evaluation may be performed instead of shall be performed and references to a Site Evaluation form were removed.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8 - Threshold Criteria (General Comments) - Signage Requirement. (1), (5)

COMMENT SUMMARY: Commenter (1) and (5) supported the removal of this threshold requirement.

STAFF RESPONSE: Staff appreciates the positive feedback. Staff recommended no change based on these comments.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8(2)(A) - Threshold - Governing Body Resolutions - Twice the State Average. (27)

COMMENT SUMMARY: Commenter (27) suggested the proposed changes make it unclear as to whether a Development located in an Extra Territorial Jurisdiction (ETJ) would require a resolution from both the city and the county in which it is located and requested clarification that a resolution from only one Governing Body is required. Additionally, Commenter suggested it does not seem appropriate to require a city resolution for an ETJ when there is no city council member that represents the ETJ and the residents of the ETJ have no right to vote in city elections.

STAFF RESPONSE: It is not Staff's intent to require a resolution from more than one Governing Body. Staff has also reviewed the statutory requirements and agreed with the comments. Staff suggested the section be read as follows: "Twice the State Average. If the Development is located in a municipality, or if located completely outside a municipality, a county, that has more than twice the state average of units per capita supported by Housing Tax Credits or private activity bonds at the time the Application Round begins (or for Tax-Exempt Bond Developments at the time the Certificate of Reservation is issued by the Texas Bond Review Board) the Applicant must obtain prior approval of the Development from the Governing Body of the appropriate municipality or county containing the Development. Such approval must reference this rule and authorize an allocation of Housing Tax Credits for the Development; (§2306.6703(a)(4))"

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8(3) - Rehabilitation Costs per Unit. (1), (2), (5), (18), (22), (27), (28)

COMMENT SUMMARY: Commenter (1) supported the changes made to this section and stated the reason for many failed Developments revolved around the inadequate level of rehabilitation at the time the Application was submitted and believed the requirement should be one that brings a Development up to near new standards. Commenters (2) and (22) suggested the minimum Rehabilitation costs per Unit should be lower for 4% HTC Applications. Commenter (18) agreed with Commenters (2) and (22) and stated that the types of Developments that would need the lower threshold include 9% HTC Developments initially funded in 1995-1997 that have completed their initial 15 year compliance period and are in need of repairs and replacements. Due to their age, Commenter (18) further suggested they do not need $25,000 per unit but would be feasible with $15,000 per unit and further suggested the $25,000 per unit requirement apply only to competitive housing tax credit Developments. Commenter (28) agreed with previous Commenters regarding the increased requirement in rehabilitation costs and suggested the Department reduce the amount or at least exempt 4% HTC Applications. Commenters (5) and (27) recommended the Hard Cost definition as currently defined by the Department (including off-sites and contingency) be the measure used to establish the minimum Rehabilitation costs per unit.

STAFF RESPONSE: In response to Commenters (5) and (27), Staff believes the best measure for rehabilitation costs should be based on the work performed that directly benefits the tenant and documented in the Property Condition Assessment (PCA). Therefore, off-sites, contingency and contractor fees are excluded and Staff suggested the paragraph be revised to read as follows to maintain consistency in terms used in the QAP but defined in other Department rules: "Threshold Criteria: Rehabilitation Costs. Developments involving Rehabilitation must establish a scope of work that will substantially improve the interiors of all Units and exterior deferred maintenance, at a minimum, and will involve at least $25,000 per Unit in direct construction cost, also referred to as building costs in §1.32(e)(4) of this title, and site work unless financed with TRDO-USDA in which case the minimum is $19,000." In response to Commenters (2), (18), (22) and (28), Staff did not believe there was a clear rational for treating 4% HTC transactions differently than 9% HTC transactions.

BOARD RESPONSE: The Board recommended the threshold per Unit be reduced from $25,000/Unit to $15,000/Unit for Developments less than 25 years old that are financed utilizing the 4% Housing Tax Credit (HTC). Developments submitted under the Competitive HTC Ceiling must meet the $25,000/Unit as well as 4% HTC Developments more than 25 years old.

§50.8(4) - Experience Certification. (1), (3), (6), (23), (27)

COMMENT SUMMARY: Commenter (1) supported the revisions to this section, specifically, that Texas specific experience is not required. Commenter (3) suggested the Department reduce the number of units necessary to prove experience stating that 150 units does not recognize the capacity and accomplishments of smaller housing authorities, particularly Native American housing authorities or departments. Because these tribes receive an annual allocation of funds through HUD based on housing need and demand, the Department should consider this demonstration of support from HUD as evidence that the developer is qualified to participate in the HTC program. Commenter (6) stated the American Institute of Architects (AIA) Document (A111) - Standard Form of Agreement between Owner and Contractor is a form the AIA has not used since 1967 for "cost plus" projects but instead uses the A102 - 2007 Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee with a Guaranteed maximum Price or the A103 - 2007 Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee without a Guaranteed Maximum Price. Commenters (23) and (27) suggested clarification in this section regarding whether the principal providing the experience needs to have a controlling interest in the Development and how this language would apply in a capacity building scenario.

STAFF RESPONSE: Staff believes the required number of units would not be a hindrance to an Applicant wanting to submit an Application; however, if such a hindrance would exist the Applicant would be allowed to include a Person who would meet such minimum requirement in their ownership structure or otherwise as part of the Development team. Staff agreed with the proposed change by Commenter (6) and recommended the removal of the AIA A111 Form and replacing it with the A102 or A103 2007 Form. Additionally, Staff has clarified that experience must be in the name of an individual, not an entity as noted in subparagraph (B). In response to Commenters (23) and (27) Staff suggested "with a controlling interest in the Development be removed in subparagraph (A).

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8(5)(D) - Threshold - Certifications. (5)

COMMENT SUMMARY: Commenter (5) suggested the words "and will remain" be removed from the first sentence of subparagraph (D) of this section citing the Applicant can only accurately certify to what is the case at the time the certification is made, not to future events.

STAFF RESPONSE: The laws and requirements cited in this provision must be adhered to beyond the present. Staff believes that it is the responsibility of the Applicant to understand that they must maintain compliance and certify based on this understanding. It is Staff's expectation that all Developments remain in compliance with state and federal laws and regulations. Staff recommended no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8(5)(A) - Threshold - Common Amenities. (22), (27)

COMMENT SUMMARY: Commenter (22) suggested the threshold for common amenities required for Tax Exempt Bond Applications should not be increased and stated that Developers are stuck with the properties' existing physical structure. Commenter further suggested that while it is possible to add amenities such as BBQ grills and gazebos, requiring more is not always better if it prevents new Developments from going forward. Commenter (27) suggested the 2011 QAP language awarding 1.5 times the point value for Rehabilitation Developments should remain, suggested the draft allows only 4% HTC Applications a 3 point preference and questioned why the Department increased the number of points required for larger Developments. Commenter (27) further questioned why previous drafts of the QAP included increased points for the fitness center, business center and secured entry; however, such increased points were not included in the published draft.

STAFF RESPONSE: While Staff acknowledged there may be some confines to the existing physical structure of a Rehabilitation Development, Staff believes the list of common amenities is extensive enough that such Developments, whether submitted as a 9% or 4% HTC Application, should not have difficulty meeting the minimum threshold requirements and further maintains that there should not be a 1.5 times point preference for common amenities for any Developments. Staff recommended no change based on these comments.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8(5)(A) - Threshold - Unit Amenities. (22)

COMMENT SUMMARY: Commenter (22) suggested the number of unit amenities required for threshold on Tax Exempt Bond Applications is too high for acquisition/rehabilitation Developments and stated that Developers are stuck with the present physical condition of the buildings being acquired. As such, it is not economically feasible to add some of the amenities noted on the list and the Commenter suggested the point threshold should be lowered by increasing the base score from 3 to 6 points.

STAFF RESPONSE: In consideration of the fact that Rehabilitation Developments may be limited within the confines of the Development's existing physical structure Staff has maintained a 3 point preference for such Developments. Staff recommended no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8(6)(B) - Threshold - Architectural Drawings. (5)

COMMENT SUMMARY: Commenter (5) suggested photographs of the current building exterior should be sufficient to meet the requirement of this section for the "before renovation" drawings. Commenter further recommended deleting the requirement for before renovation drawings where the exterior composition is being altered.

STAFF RESPONSE: Staff agreed and suggested this section be revised to only require "after renovation" drawings in instances where the exterior composition is being altered and photographs of the "before renovation" would be sufficient.

STAFF COMMENT: Staff amended this section to remove the requirement for the site plan to indicate the location of the required basic amenities since there are no required basic amenities referenced in the QAP.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8(7)(C) - Threshold - Development Costs. (11), (25), (27), (29)

COMMENT SUMMARY: Commenters (11), (25), (27) and (29) suggested this language revert back to 2011 language regarding the $9,000 per unit instead of the current 12% of the direct construction cost language and further stated the site work cost for a New Construction Development is a lot less than $9,000 in actuality.

STAFF RESPONSE: Staff agreed and revised this section to reflect the $9,000 per unit limitation. Additionally, Staff revised this section to reflect the term Hard Costs instead of construction costs to be consistent with defined terms in other Department rules.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8(8)(A)(iv) - Threshold - Identity of Interest. (5)

COMMENT SUMMARY: Commenter (5) suggested re-instating the identity of interest requirements in the QAP and such language should mirror the Real Estate Analysis Rules; however, Commenter further suggested the language should revert to that of 2011 where there is a 10% return on cost.

STAFF RESPONSE: The language in this section in previous years was identical to that in the Real Estate Analysis (REA) Rules. In an effort to streamline, the QAP requirements relating to identity of interest transactions were moved to the REA rules. The suggestion by Commenter (5) to revert to the 2011 language will be addressed in the REA rules reasoned response. Staff recommended no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8(8)(B) - Threshold - Zoning. (11), (19), (20), (25), (27), (29)

COMMENT SUMMARY: Commenters (11), (19), (20), (25), (27) and (29) suggested the requirement for a letter from the Unit of General Local Government stating there is no zoning ordinance and that the proposed Development is consistent with local requirements should be removed and stated that at the time of Application it is difficult for municipalities or Units of General Local Government to sign such a statement because the plats, plans, etc. are not yet completed or reviewed.

STAFF RESPONSE: Staff disagreed with the Commenters but recommended deleting "which does not have a zoning ordinance and that the proposed Development is consistent with local requirements" and replacing with "and that the Development will not be prohibited by any ordinance of that municipality regarding zoning or permitted land uses."

BOARD RESPONSE: The Board recommended the language be modified so that areas with no zoning ordinance will need to provide a letter from the municipality stating there is no zoning ordinance; however, for Developments located in Harris County the letter must state Development is not prohibited by any local housing policy adopted by that municipality.

§50.8(9)(A)(iii) - Threshold - Notifications. (20)

COMMENT SUMMARY: Commenter (20) suggested the notification requirements in this section be modified to exclude specificity relating to the proposed rents and stating that such specificity may create concern when actual rents are set 2 - 3 years later as program rents and utility allowances change on an annual basis.

STAFF RESPONSE: Staff agreed with the specificity required in the notification letters and recommended subclauses (VII) - (IX) be removed in addition to the Target Population being served in subclause (V).

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8(10)(B) - Threshold - Previous Participation. (5)

COMMENT SUMMARY: Commenter (5) suggested the authorization for national previous participation and non-compliance must be specific that includes only instances where IRS Forms 8823 remain uncorrected for 3 months or more within the past 5 years should be reported since not all states interpret noncompliance in a similar manner as the Department.

STAFF RESPONSE: This section in the QAP requires a list of developments in other states and provides the Department with the authorization to request information from other states, but does not dictate how this information will be used. The experience requirement in Threshold includes language similar to that requested by the Commenter. Staff recommended no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.8(8), (14) - Threshold - Property Condition Assessment. (5)

COMMENT SUMMARY: Commenter (5) supported the deletion of the requirement for the PCA for Reconstruction Developments.

STAFF RESPONSE: Staff appreciates the positive feedback. Staff recommended no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b) - Selection Criteria (General Comments) - Green Building Initiatives. (1), (2)

COMMENT SUMMARY: Commenter (1) suggested the removal of this scoring item reduces the Department's ability to differentiate between otherwise comparable applications. Allowing points for Developments constructed with such initiatives benefits tenants and the state overall and Commenter (1) suggested this scoring item remain. Commenter (2) supported the inclusion of Green Building Initiatives as a scoring item stating that utility bills are rising faster than inflation and Texas is getting hotter.

STAFF RESPONSE: Staff removed the Green Building Initiatives as a scoring item based on comments made by the Board at the September 15, 2011 Board meeting and subsequently upheld at October 4, 2011 Board meeting. Staff recommended no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b) - Selection Criteria (General Comments) - Development Size. (1), (8), (13)

COMMENT SUMMARY: Commenter (1) disagreed with the Department regarding the removal of this scoring item. The Commenter suggested that the Department should be encouraging smaller tax credit Developments that can be incorporated into the existing neighborhoods. Commenter further suggested if the Department is concerned with overly awarding At-Risk Developments with these points then such Developments should be excluded from obtaining them, rather than removing the scoring item completely. Commenter (8) suggested this scoring item be re-instated for Developments that may not qualify under the At-Risk set-aside in order to help them score points. Commenter (13) also disagreed with the removal of this scoring item and offered the following as justification for its re-instatement: smaller Developments take very little away from a regional allocation and allows for a better utilization of the allocation, encouraging smaller Developments opens up stronger competition as it encourages newer players to come into the process, smart growth development strategies call for placing housing within existing urban infrastructure and within existing communities and the availability of land is often limited to smaller plots within developed communities, and many of the smaller Developments have been developed by non-profits who return the developer fee to the community through additional programs and services.

STAFF RESPONSE: Staff recommended the removal of this scoring item consistent with Board direction at the October 4, 2011 Board meeting. Therefore, it was not in the proposed rule as published in the October 21, 2011, issue of the Texas Register for public comment. Staff does not have a specific rational for incentivizing a Development of one size over another and is therefore not including a scoring incentive specific to Development size. Staff recommended no change based on these comments.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(1) - Selection Criteria - Financial Feasibility.

STAFF COMMENT: Staff amended subparagraph (B) of this section to reflect that a term sheet, not a commitment letter, is required to be consistent with the financing requirements in the Threshold section of the QAP. Additionally, Staff clarified that the term sheet from the lender indicates that their assessment as based on considerations that included the Development's underwriting pro forma finds that the Development will be feasible for (fifteen) 15 years.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(2) - Selection Criteria - Quantifiable Community Participation. (1), (5), (8), (11), (20), (27)

COMMENT SUMMARY: Commenter (1) supported the formal identification of a process to evaluate the fair housing implications of Quantifiable Community Participation (QCP); however, finds it odd that the Department should outsource this process to the Texas Workforce Commission since the Department has more subject matter expertise useful to evaluating the fair housing implications of such input; however, the Commenter withheld the judgment of the Texas Workforce Commissions performance. Commenter also suggested the public and/or Applicants be allowed to request the formal evaluation of letters submitted under this scoring item. In addition Commenter suggested that this scoring item be revised to reflect that support be assumed unless a legally reasoned negative letter is submitted since higher-opportunity areas are less likely to provide a letter in support of an Application compared to an Application proposed in a lower scoring area. Commenter also supported providing points for areas with no Neighborhood Organizations; however, suggested the logic be extended to areas with Neighborhood Organizations that are not organized enough to submit written comments. Commenter (5) suggested the language in this section be modified to clarify that an Applicant may provide technical assistance in the formation of a Neighborhood Organization in instances where the Development Site is not located in the boundaries of any Neighborhood Organization. Commenter further suggested clause (vi) in this subparagraph read as follows: "for purposes of this section, if there is no Neighborhood Organization already on record whose boundaries include the proposed Development Site, the Applicant, Development Owner, or Developer is allowed to provide technical assistance in the creation of and/or placing on record of a Neighborhood Organization provided that no Neighborhood Organization whose boundaries include the proposed Development Site exists and that such assistance is limited to..." Commenter further suggested some of the language in this section should be clarified since it appears to be contradictory. Specifically, Commenter suggested the sentence "the organization needs to have as participating member's representatives of two or more separate households. The representatives actually need to be individuals who reside in the Neighborhood Organization's boundaries" in subparagraph (A)(viii) of this paragraph" should be deleted and stated that since the paragraph provides guidelines and not requirements; it is therefore inappropriate to include requirements for who is involved in an optional meeting. Commenter also suggested the scoring of QCP did not include the score for letters deemed ineligible and suggested subclause (II) of subparagraph (B) be amended to include the following clarification "letters that do not meet the requirements of this section and letters that do not provide a reason for support or opposition or that are unclear even after correspondence with the Department will receive a score of (14 points);..." Commenter (8) suggested this scoring item be revised to require the Neighborhood Organization to meet to discuss the Development if they were going to write a letter in support or opposition, rather than the current language which merely encourages the group meet. Commenters (11), (20) and (27) suggested this item is punitive for areas of the state that do not have registered Neighborhood Organizations and requested that points for which no Neighborhood Organizations exist be raised 2 points to 18 instead of the proposed 16 points. This change, coupled with the points available under Input other than QCP (§50.9(b)(13)) will give areas of the state without Neighborhood Organizations an opportunity to score as high as those with Neighborhood Organizations.

STAFF RESPONSE: Staff agreed with the proposed change and language from Commenter (5) regarding clause (vi) of this subparagraph, clarifying the technical assistance allowed if there is no Neighborhood Organization already on record whose boundaries include the proposed Development Site. With regard to the meeting requirement comments from Commenters (5) and (8), the purpose of this provision is to encourage participation and transparency. Staff agreed that requiring a meeting that is optional to meet specific requirements if it is ultimately held is unnecessary and the language has been struck as suggested by Commenter (5) since this section already specifies the requirements of a Neighborhood Organization's support or opposition. Staff also agreed with the clarifying language provided by Commenter (5) that letters not meeting the requirements of this section be treated the same as letters not providing a reason for support or opposition and made this change accordingly as noted below. Staff also clarified that if no letters are received but a Neighborhood Organization does exist, such applications will receive 14 points. In response to Commenters (11), (20) and (27), Staff does not believe that in areas where no Neighborhood Organization exists such Applications should be allowed to maximize QCP points (including those allowed under the Input other than QCP scoring item). Such a change would put these Applications on a level playing field with those who do have Neighborhood Organizations and such Organizations submit a letter of support. Staff is concerned that this could cause a conflict with the statutory priorities for scoring. Staff recommended clause (i)(II) of subparagraph (B) be amended to read as follows: "letters that do not meet the requirements of this section, letters that do not provide a reason for support or opposition, letters that are unclear even after correspondence with the Department or Applications for which no letters are received will receive a score of (14 points).

BOARD RESPONSE: The Board recommended an increase in the point value for areas that do not have Neighborhood Organizations from 16 points to 18 points and the removal of the ability of the Applicant to provide limited technical assistance.

§50.9(b)(3) - Selection Criteria - Income Levels of the Tenants. (5), (10), (11), (14), (27)

COMMENT SUMMARY: Commenters (5) and (27) suggested the language of this section would require Developments located in some places that are defined as Rural to meet the same income targeting requirements as Developments located in the MSA's of Houston, Dallas, Fort Worth, San Antonio and Austin. This affects places that are within the boundaries of a MSA but which have populations less than 25,000 and that do not share a boundary with an area defined as urban. Commenter (5) suggested subparagraph (A) be revised to clarify Developments proposed to be located in "non-Rural Areas." Commenter (10) requested clarification on how the Department will determine if the Development is in a Metropolitan Statistical Area (MSA); whether it will be based on the income limits or the census definition. Commenters (11) and (14) suggested, similar to Commenter (5), that there are areas that qualify as rural that are also located in MSA's and requested subparagraph (A) be revised to clarify that it would be applicable to "urban" Developments.

STAFF RESPONSE: Staff agreed with Commenters (5), (10), (11), (14) and (27) that clarification for this scoring item is needed and proposed subparagraph (A) be revised to read as follows: "For Developments proposed to be located in an area of the MSA of Houston, Dallas, Fort Worth, San Antonio or Austin that is not in a Rural Area, an Application may qualify to receive:..."

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(4) - Selection Criteria - Quality of the Units (5), (27)

COMMENT SUMMARY: Commenter (5) disagreed with the movement of the list of unit amenities to the Definitions and Amenities for Housing Program Activities rule and requested that such list remain in the QAP. Commenter (27) suggested this section be revised to allow Rehabilitation Developments 1.5 times the point value for unit amenities listed in this section as was provided for in prior year QAP's and further stated that giving such Developments a 3 point preference is not quite enough.

STAFF RESPONSE: In an effort to streamline the QAP and provide consistency across multiple programs Staff maintains the list referenced by Commenter (5) be placed in a more centralized location in the Department's rules. In response to Commenter (27) Staff believes the large number of options for unit amenities with which to select and the proposed language to not allow Owners to have to disclose which amenities they are providing until later in the Development process, coupled with the 3 point preference would be sufficient for a Rehabilitation Development. Staff recommended no change based on these comments.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(5) - Selection Criteria - Commitment of Funding from a Unit of General Local Government or Governmental Instrumentality. (2), (5), (11), (20), (23), (24), (27), (32)

COMMENT SUMMARY: Commenter (2) supported the changes to this scoring item stating it is appropriate and reasonable. Commenter (5) suggested the language in this scoring item be clarified to reflect the Unit of General Local Government or Governmental Instrumentality must have a service area that is located within the same county or contiguous county and suggested the following revision in the opening paragraph: "Funding must be from a Unit of General Local Government or a Governmental Instrumentality whose service area is within the same county or contiguous county as the proposed Development." Commenter (11) requested clarification that multi-jurisdictional entities (such as COG's and HFC's) will be eligible as long as the proposed Development is within or in an adjacent county to their service area. Commenter (5) also suggested changes to the language in this section that relates to tax exemptions and abatements and recommended the following revision based on the belief that tax exemptions and abatements provide a tangible benefit to the financial structure of a Development for the entire period over which the exemption or abatement is received because of the reduction of operating expenses and subsequent increase in the amount of loan funds that can be supported. Commenter (5) suggested this section be revised to read as follows: "(iv) In-kind contributions such as donation of land, tax exemptions, or waivers of fees such as building permits, water and sewer tap fees, or similar contributions are only eligible for points if the in-kind contribution provides a tangible economic benefit that results in a quantifiable Total Housing Development Cost reduction to benefit the Development. The quantified value of the Total Housing Development Cost reduction may only include the value during the period the contribution or waiver is received and/or assessed. Donations of land must be under the control of the Applicant, pursuant to §50.8(8)(A) of this chapter to qualify. The value of in-kind contributions may only include the time period as of the beginning of the Application Acceptance Period and the Development's Placed in Service date, with the exception of contributions of land and tax exemptions. The full value of land contributions, as established by the appraisal required pursuant to clause (viii) of this subparagraph will be counted. The full value of tax exemptions over the period of the tax exemption will be counted. Contributions in the form of tax exemptions or abatements may only count for points if the contribution is in addition to any tax exemption or abatement required under statute." Commenter (5) suggested changes to the language in this scoring item as it relates to a rental subsidy as a qualifying source and stated the contribution of a rental subsidy should be allowed regardless of whether it is for 15 years or a shorter term. Commenter (5) suggested clause (vi) of subparagraph (A) be revised to read as follows: "Development based rental subsidies may qualify under this section if evidence of the remaining value of the contract remaining as of December 31st of the application year is submitted from the Governmental Instrumentality. The value of the contract does not include past subsidies. The funding must be provided directly (not merely as administrator) by the UGLG or an instrumentality thereof." Commenters (11), (20), (23), (24) and (27) suggested the Department define the term "current market rate" and that it be identified and published by the Department when the QAP is considered final and not subject to change until that Development is placed in service. Commenter (27) suggested the market rate be defined as the greater of the 10-year U.S. Treasury rate plus 500 basis points or 8.5%. Commenter (20) requested clarification on how a Development would be treated if the Unit of General Local Government who makes the commitment ceases to loan funds or can't live up to its obligation - events that are out of the Developer's control. Specifically, would the Development not be eligible to receive IRS Forms 8609 or without having received these points it would have resulted in another Development from the region receiving the award? Commenters (20) and (23) requested the calculation of the contribution be based on Low Income units and exclude market rate units in a Development since the Department should only be looking at encouraging the extra funding on the Low Income units. Commenter (27) suggested that at a minimum, origination fees should be "equal to" or less than 2% and requested clarification on whether the new provision in this scoring item is meant to exclude loans made by Housing Finance Agencies with an interlocal agreement with the local government entity. Commenter (27) further suggested this scoring item should just revert to the 2011 QAP language with reductions in the required amount of support for the various point levels as proposed in the 2012 Draft QAP and supported Staff's suggestion at the Board meeting that loan commitments and interlocal agreements be submitted at the time of the HTC Commitment. Commenter (32) suggested this scoring item be expanded to include criteria for Developments that do not need a commitment of funds from a Unit of General Local Government in order to encourage Developments that don't need the funds to be financially feasible from competing for limited local resources with those Developments that do need such funds. Commenter (32) suggested the following criteria be added for points under this scoring item "1. Projects not receiving financial assistance or in-kind contribution from a Local government entity and can demonstrate financial viability in deferring no more than 25% of the developer fee - 17 points and 2. Projects not receiving financial assistance or in-kind contribution from a local government entity and can demonstrate financial viability in deferring no more than 35% of the developer fee - 11 points."

STAFF RESPONSE: Staff agreed with Commenter (5) that clarification is necessary but believes that the suggested language may allow for much larger areas than intended. Therefore, Staff recommended the last sentence of the opening paragraph of this scoring item be revised as follows, which maintains the intention for the funding to be truly local: "Funding must be from a Unit of General Local Government or a Governmental Instrumentality with headquarters within the same county as or a contiguous county to the proposed Development." In response to the addition of language regarding tax exemptions suggested by Commenter (5), state law often provides for tax exemptions and tax exemptions not provided for under state law would be very difficult to calculate and would be very speculative; therefore Staff did not recommend the change. With regard to existing rental subsidies by Commenter (5), the purpose of this scoring item is to encourage new funding and support from the local government which is not provided by an existing subsidy agreement; therefore Staff did not recommend the change. In response to comments regarding the market rate, Staff intends to rely on the expertise of the funding entity to define the market rate and whether the committed rate meets this requirement. Market rates can fluctuate dramatically and believes that defining the market rate ahead of time would be overly restrictive. In response to whether 8609s could be issued if funding is not ultimately obtained, the Applicant is encouraged to notify the Department prior to closing to avoid any issues at the time of cost certification. The Board would have the ability to hear any extenuating circumstances. In response to limiting the calculation of funds per Unit to just include low income Units, the levels provided for are significantly reduced from the prior year and Staff believes that leveraging additional funds for the entire Development is a priority of the Board. Staff agreed with Commenter (27) regarding clarification of origination fees and modified the language to reflect the origination fees must be equal to or less than 2% of the loan amount. In response to Commenter (32) Staff believes the intent of this scoring item in statute is to incentivize Developments that need the additional local funding for financial feasibility and can secure such funding and believes the suggested change by the Commenter would violate the statutory provision.

BOARD RESPONSE: The Board recommended reducing the below market interest rate from 150 basis points to 100 basis points; modify the source of funds to apply only to low income units in the Development and not total units; and modify the language for the location of the Unit of General Local Government from "headquarters in the same county or a contiguous county" to the "jurisdiction as established in accordance with the statutory requirements."

§50.9(b)(6) - Selection Criteria - Community Support from State Representative or State Senator. (1)

COMMENT SUMMARY: Commenter (1) supported the formal identification of a process to evaluate the fair housing implications of Quantifiable Community Participation (QCP) and Input other than QCP; however, encouraged the Department to extend this process to this scoring item as well. Commenter (1) also suggested the public and/or Applicants be allowed to request the formal evaluation of letters submitted under this scoring item.

STAFF RESPONSE: Any information submitted to the Department regarding an Application is subject to an open records request and can be viewed by the public at any time upon request. Additionally, as part of the Application and Award process, the Department can receive challenges on information submitted as part of an Application which would be evaluated by the Department. Staff recommended no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(7) - Selection Criteria - The Rent Levels of the Units (1), (5), (10), (11), (14), (27)

COMMENT SUMMARY: Commenter (1) suggested that the proposed changes to this scoring item lowers the bar for points for 30% units outside the major cities when the Department should be raising the bar across the state. Commenter further suggested that if applications for smaller Developments are over-reaching just to claim the points then they should be determined to be infeasible during the underwriting evaluation and not rewarded with lower standards. Commenter offered that if the Department maintain this language, that it be modified to identify the excluded areas by AMI. Commenter (5) supported the change to allow a lesser percentage of units at 30% and 50% AMGI for Developments not located in the MSAs of Houston, Dallas, Fort Worth, San Antonio and Austin; however, the current language would require a Development located in a place designated as Rural, but within one of the MSAs listed to do a higher percentage of deep rent targeting in order to achieve the maximum points. Commenters (5) and (27) suggested that while the maximum point value for this scoring item has increased so has the number of 30% and 50% AMGI units and suggested that such change will ultimately affect the financial feasibility of the transaction. Commenters (5) and (27) suggested subparagraph (A) be revised to reflect Developments proposed to be located in non-Rural Areas in the MSA and that clause (ii) of subparagraph (A) be revised from 6 to 7 points. Commenter (10) suggested the current language does not reflect the intent of the Board, specifically; the language has been revised to reflect an additional 5% of the units at 50% AMGI in order to achieve the maximum points for this item. Commenter (11) suggested reverting back to the maximum of 12 points for this scoring item, as it was in the 2011 QAP. Commenters (11) and (14) suggested, similar to Commenter (5), that there are areas that qualify as rural that are also located in MSAs and requested subparagraph (A) be revised to reflect urban Developments located in the MSA.

STAFF RESPONSE: In regions of the state where deeper income targeting may prevent the Development from being financially feasible, lowering the levels of targeting for Rural Areas of the state may open up new areas of the state for development due to increased feasibility. Staff agreed with Commenters (5), (11) and (14) that clarification for this scoring item is needed and proposed subparagraph (A) be revised to read as follows: "For Developments proposed to be located in an area of the MSA of Houston, Dallas, Fort Worth, San Antonio or Austin that is not in a Rural Area, an Application may qualify to receive:..." With regards to Commenters (5), (10), (11) and (27) on the point increase and additional 50% AMGI units, this concern is only with regard to urban areas. While the maximum number of points has increased by 2 points, an Applicant can still achieve last year's maximum points by doing the same amount of deep rent targeting; therefore, Staff does not recommend the change.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(8) - Selection Criteria - Costs of the Development by Square Foot (2), (8), (11), (18), (20), (27)

COMMENT SUMMARY: Commenter (2) supported the changes made to this scoring item, specifically, for elevator served buildings with four or more stories; the interior qualifies for net rentable area. Commenter (8) suggested that historic preservation developments using historic tax credits be able to deduct the amount of historic tax credit proceeds shown in the development sources from the development's hard cost, prior to making the costs per square foot calculation. Commenter (18) suggested the points for this scoring item be awarded based on eligible basis costs rather than total hard costs and further suggested that while Staff has interpreted §2306.6710 to award points based on the cost of the development per square foot, the Texas Administrative Law provides agencies the discretion to interpret statutory language that is general and ambiguous. Commenter (18) stated that while the Department has never awarded points based on the total development cost (including soft costs) per square foot, one possible interpretation of statute is that all costs must be considered; however, the Department has reasonably exercised its discretion in interpreting this statutory provision to focus on hard costs in particular. Commenters (11) and (18) argued that the Department similarly has the discretion to focus on hard costs that are included in eligible basis and suggested the following sentence be added to this scoring item: "The calculation does not include costs excluded from Eligible Basis in the development cost schedule." Commenter (18) suggested that the Department release a database of historical cost certification data and cited §2306.6710 as the requirement to do so and further suggested the Department define Direct Hard Costs or use such a phrase as "total construction costs excluding site work" for the lower cost limits. Commenters (11), (20) and (27) had a similar comment regarding the defined term and suggested the Department use Direct Construction Costs.

STAFF RESPONSE: With regard to Commenter (8), the equity value of the historic tax credit is speculative because both the amount of cost eligible for the credit and the pricing of any credit purchased are just estimates. Additionally, the Department has limited resources to evaluate the costs specifically attributed to historic rehabilitation basis. In response to Commenter (18) and the database for historical cost certification data, the Real Estate Analysis division has historically examined direct construction cost comparisons to that of Staff's underwriting analysis in a given Application Round. Additionally, Staff compares costs on previous Developments that were similarly constructed as the proposed Application as well as previous Developments by the same Developer for cost comparison purposes. Staff believes that relying on a database for historical cost certification data for current Applications would not be reflective of true development costs and could yield skewed results since such database would be based on outdated data and to the amount of differentiation in architectural design. In underwriting Applications in this regard, Staff relies on Marshall & Swift for such analysis. However, Staff does attempt to identify and compare the costs of similar developments in the cost certification process when Marshall & Swift differs significantly from an Applicant's estimates. In response to the clarification requested by Commenters (11), (18), (20) and (27) on the undefined term "Direct Hard Costs" Staff made the following revision where appropriate in this section: "...ninety-five dollars ($95) per square foot (and direct construction cost, also referred to as building costs in §1.32(e)(4) of this title do not exceed $80 per square foot) for Qualified Elderly and Elevator Served Development, single family design, and Supportive Housing Developments and Developments located in a Central Business District unless located in a "First Tier County" in which case their costs do not exceed $97 per square foot (and direct construction cost, also referred to as building costs in §1.32(e)(4) of this title do not exceed $82 per square foot);..." With regard to only considering costs included in Eligible Basis, Staff has concerns that further restricting the cost per square foot to only include Eligible Basis is distinctly different than construction costs and may conflict with the statutory requirement for this scoring item.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(9) - Selection Criteria - Tenant Services (5), (11), (14), (27)

COMMENT SUMMARY: Commenter (5) disagreed with the movement of the list of tenant services from the QAP to the Definitions and Amenities for Housing Program Activities rule. Commenters (5), (11) and (27) suggested that the increase in the number of maximum points resulting in an increase in the number of services required will increase operating costs, particularly for smaller Developments. Commenters (5) and (27) recommended the maximum point value be reduced to 8 points and the number of services required to achieve these points be lowered on a sliding scale for smaller Developments based on the following: "total Units equal 16, (2 points) is required; total Units are 17 to 40, (3 points) are required; total Units are 41 to 76, (4 points) are required; total Units are 77 to 99, (5 points) are required; total Units are 100 to 149, (6 points) are required; total Units are 150 to 199, (7 points) are required; or total Units are 200 or more, (8 points) are required." Commenter (14) suggested that smaller Developments do not have the necessary volume of residents to be able to attract the same scope of services as larger Developments and suggested such Developments be treated on a sliding scale, similar to that of common amenities. Commenters (11) and (14) suggested the following language be added at the end of the paragraph for this scoring item: "...To provide for consistency with the Threshold requirements that create a sliding scale for amenities based on Development size, Developments with 60 or fewer Units will receive 2 points for each point item and Developments with 61 to 120 Units will receive 1.5 points for each point item." Commenter (11) suggested that, in addition to the proposed revision above, that Developments with 121 or more units will receive 1 point for each item.

STAFF RESPONSE: In response to Commenter (5) on the movement of the list of services, the list was moved to a general section of the rules to provide for use by all multifamily Department programs. With regards to the change in point value, the maximum points for this item must be higher than those available for the next scoring item in order to comply with statute. Therefore, Staff recommended no change based on these comments. In response to Commenters (5), (11), (14) and (27) regarding the sliding scale of services for smaller Developments, the services list has been expanded and clarified and Applicants can choose from a wide array of services to fit the size of the Development, Target Population, and budget. Additionally, while the maximum point value has been increased, it is entirely up to the Applicant which services, taking into account the corresponding point values, could be offered at the Development. Staff recommended no change based on these comments. However, Staff modified the language in this section slightly to reflect that by electing points for this item the Applicant is certifying that the Development will provide the services, appropriate for the tenants, and that adequate space will be available for the services.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(11)(C) - Selection Criteria - Additional Evidence of Preparation to Proceed (1), (2), (4), (5), (11), (14), (23), (24), (27), (30)

COMMENT SUMMARY: Commenters (1), (11) and (30) disagreed with the proposed language in this section, specifically, that the worst-scoring applications from prior Application Rounds be rewarded merely for aging. The Commenter suggested this punishes new entrants into the program and hampers the Department's ability to identify the best Application for an award. Between the time the application was not competitive enough for an award to when they re-submit, the Applicant can utilize the time to work on the Application in order to score additional points in the process. Similarly, Commenters (23) and (27) requested the removal of this paragraph in this section. Commenter (2) suggested that instead of 2 points for Applications submitted in prior Application Rounds, such points should be awarded to Applications that were tied in their subregion in the prior Application Round. Commenter (4) suggested the maximum number of points for this scoring item be reduced from 7 points to 5 points which would allow new Applicants to compete equitably with Applications submitting in prior years. Commenter (4) believed the current language penalizes new Applicants who spend time and money to submit an Application for the first time on viable transactions. Commenter (5) supported the addition of the scoring item; however, requested requirements be added that addresses what features of an Application must be the same as previously submitted in order to qualify for the points, for example, number of units is the same, site is the same as the previous Application, etc. Commenters (11), (23) and (24) requested the same clarification regarding what characteristics of the site may change, including whether the same Applicant must re-submit the Application. Commenters (11) and (14) requested clarification to this scoring item relating to the definition of prior Application Rounds; specifically, whether this is any two rounds since the beginning of the program or does it need to be the most recent two rounds. Commenter (11) also requested clarification on whether this includes Pre-application or only Application submittals. Commenter (30) requested clarification on what should be included in a Civil Engineering Study.

STAFF RESPONSE: Staff understands the concern that a new Application cannot achieve the highest score and recommended subparagraph (B) be revised to allow up to 4 points instead of 2 points to address the Commenter's concern. In response to Commenter (1), Staff believes that a Development that made it through a prior round without getting an award would have the ability to improve their score on their own; however, in many instances they are blocked by economic issues affecting their score. Moreover, transactions that are able to resubmit have the greatest chance of being more fully formed and have had to keep their transaction intact particularly with regard to acquisition and support. In response to Commenters (5), (11), (23) and (24) regarding characteristics of the site, Staff believes that generally as long as there is some overlap of the original Development Site, the same number of Units and at least one Affiliate of the previous Applicant is an Affiliate of the current Applicant then such Application would be eligible for the points under this item. Staff incorporated such requirements accordingly. In response to Commenter (30), the minimum requirements of the Civil Engineering Study are included in this section. Additionally, Staff has limited the re-submission of the Application to those submitted in the preceding 3 Application Rounds and furthermore believes it should be limited to only Application re-submittals and recommended the scoring item has been clarified accordingly.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(12) - Selection Criteria - Leveraging of Private, State and Federal Resources (1), (2), (4), (5), (9), (10), (11), (18), (20), (24), (26), (27)

COMMENT SUMMARY: Commenters (1) and (2) suggested that while this scoring item requires 30% AMGI units in order to qualify for the points, it doesn't specify a minimum number of such units. Commenter (1) suggested a minimum of 5% of the units at 30% AMGI in order to qualify for the points. Commenter (2) suggested this scoring item be revised to read as follows: "The purpose of this scoring item is to provide an incentive for the leveraging of financial resources, when economically feasible, for a Development that proposes to serve a specified percentage of households at or below 30% of AMGI. Applications may qualify to receive 7 points for a Development located outside a Qualified Census Tract and 6 points for a Development located inside a Qualified Census Tract. To receive points under this item, the Development must have at least 10% of the total Units restricted for occupancy by households at or below 30% AMGI. Funding sources used for points under paragraph (5) of this subsection may not be used for this point item. Division of the same funds that originate from a local government source into separate loans or grants does not result in eligibility under this paragraph and paragraph (5) of this subsection. Funding sources must be part of the permanent sources of funds for the Development. (A) If in the form of a long term loan (greater than 10 years), or grant funds that are structured as a long term loan to the Development Owner, must bear an annual interest rate of 1% or less. Funding must be provided by one or more Third Parties; (B) If total subsidy funding from private, state and federal resources for the Development are greater than 10% of Total Housing Development Costs and at least 10% of the units are restricted for occupancy by households at or below 30% AMGI, then 4 points will be awarded; (C) If total subsidy funding from private, state and federal resources for the Development are greater than 15% of Total Housing Development Costs and at least 15% of the units are restricted for occupancy by households at or below 30% AMGI, then 6 points will be awarded for a Development located inside a Qualified Census Tract, and 7 points for a Development located outside a Qualified Census Tract; (D) Examples of sources of funds that may qualify include federal HOME or CDBG funds awarded by the State or a local government, Federal Home Loan Bank Affordable Housing Program grants, TIF or TERZ funding allocated for affordable housing, and private foundation grants; (E) Funding to support ongoing operations, including rental subsidies, or other sources not directly offsetting the Total Housing Development Cost are not eligible for points under this paragraph. Qualifying funds awarded through local entities may qualify for points if the original source of the funds is from a private, state or federal source. If qualifying funds awarded through local entities are used for this item, a statement from the local entity must be provided that identifies the original source of funds; (F) The Development must have already applied for funding from the funding entity(ies). Evidence to be submitted with the Application must include a copy of a letter from the funding entity indicating that the application was received and that the terms for available funding meet the requirements of subparagraph (A) of this paragraph; (G) At the time the executed Commitment is required to be submitted, the Applicant or Development Owner must provide evidence of a commitment approved by the Governing Body of the entity for the sufficient financing to the Development." Commenters (4), (20) and (24) requested that the market interest rate be defined in the final QAP so that Applicants can move forward with underwriting and site acquisition and further requested this be set at a reasonable level (i.e. 8%) where the conventional banks could meet the requirement and not just a few lenders. Commenter (11) similarly requested the market interest rate be defined and suggested the following: "Market Interest Rate shall be the greater of the 10 year U.S. Treasury rate plus 500 basis points as of the Application date or 8.5%. This rate will be published and fixed by the Department prior to the opening of the Application Round." Commenter (5) suggested the same funding source be allowed to qualify under Unit of General Local Government funding scoring item and this scoring item as well stating those Developments that are able to secure substantial sources of financing other than housing tax credit equity and conventional debt should be allowed access to both scoring items related to leveraging of funding. Commenters (9) and (11) requested a definition of primary funding source and whether it requires a majority percentage of the total funding. Commenters (9), (10) and (11) requested clarification on the number of 30% units required in order to clarify for points under this scoring item. Commenters (9), (10) and (11) suggested the first lien language is problematic and that if the definition of primary funding source is met, the lien position should not be dictated by the Department. Commenter (2) also suggested the first lien language is going to be difficult, specifically when there's no hard debt on a Development. In this situation the first lien will most likely be city funds which if you're already using for the Commitment of Funding from a Unit of General Local Government scoring item will not qualify additionally under this scoring item. Commenter (2) further suggested that the grants on Developments with no hard debt will always be made to the sponsor and then sponsor will loan them to the partnership which will make the first lien position difficult to achieve. Commenter (9) also suggested that at the time of the HTC Commitment the requirement to provide a commitment for this funding should be a conditional commitment based on final underwriting. According to Commenters (2) and (9) timing will make it impossible to get through underwriting with the Federal Home Loan Bank until there is a HTC Commitment in hand and given their cycle(s) for funding. Commenter (9) further suggested that if there is concern over whether the Applicant will ultimately receive the funding then the commitment could be required at 10% test. Commenter (10) suggested that the Federal Home Loan Bank had eliminated their fall round of funding which would make achieving this as a funding source for this item difficult. Commenter (9) requested that CDBG disaster funding also be added to the list as an eligible source and Commenters (11) and (18) requested that HUD-insured 221(d)(4) new construction and 223(f) acquisition/rehabilitation loan products be added. Commenters (11) and (20) suggested the points associated with this item revert back to 1 point and stated it has been revised into a more confusing item with more variables and subjective language that will take time to determine how Applicants will meet the criteria as proposed. Commenter (26) suggested this section be revised to reflect the due date for the commitment of such funds to the time of Carryover and further stated that public testimony was provided from an active lender requesting more time for their commitment. Similarly, Commenter (27) expressed concerns over the ability to secure a commitment from the funding entity by the time the HTC Commitment is submitted to the Department and further stated there simply is not enough time for lenders to complete their due diligence and go to loan committee in order to be in a position to submit a commitment simultaneously with the HTC Commitment. Commenter (11) requested clarification that sources may be substituted from Application to Commitment.

STAFF RESPONSE: In response to Commenters (1), (2), (9), (10) and (11), Staff recommended minimum of 5% of the total units at 30% of AMFI. Staff has also made other clarifying changes; some of which were suggested by various Commenters and recommended this scoring item be revised to read as follows: "The purpose of this scoring item is to provide an incentive for the leveraging of financial resources, when economically feasible, for a Development that proposes to serve a specified percentage of households at or below 30% of AMGI. Applications may qualify to receive 7 points for a Development located outside of a Qualified Census Tract and 6 points for a Development located inside a Qualified Census Tract. To receive points under this item, the Development must have at least 5% of the total Units restricted for occupancy by households at or below 30% of AMGI. Funding sources used for points under paragraph (5) of this subsection may not be used for this point item. Division of the same source into separate loans or grants does not result in eligibility under this paragraph and paragraph (5) of this subsection. Multiple sources may be combined to qualify under this item. "(A) If in the form of a loan, funding must be the primary source of debt with a first lien position and a minimum loan term of fifteen (15) years. Loans that are not first lien but are the largest source(s) of funding, not including equity generated from Housing Tax Credits, other federal tax credits, or funds used under paragraph (5) of this subsection also qualify. Origination fees cannot exceed 2% of the loan amount(s). Funding must be provided by a Third Party except when the funds are federally sourced and passed-through a Government Instrumentality. All loan funds qualifying for consideration under this section must provide an economic benefit over a market rate transaction (i.e. cannot buy down the rate by increasing upfront interest costs)."; "(B) Permanent grant funding not secured by a deed of trust may be used, provided the grant funding is the largest source of funding not including equity generated from Housing Tax Credits, or other federal tax credits, or funds used under paragraph (5) of this subsection. Funding must be provided by a Third Party except when the funds are federally sourced and passed-through a Government Instrumentality."; "(C) Examples of sources of funds that may qualify include those listed under clauses (i) - (vi) of this subparagraph. A Certification from the lender as of the date of such certification that the loan would meet this provision is required. (i) HOPE VI; (ii) Capital Grant Funds; (iii) Community Investment Program (Federal Home Loan Bank); (iv) Affordable Housing Program (Federal Home Loan Bank); (v) HOME Investment Partnerships Program; (vi) Community Development Block Grant (CDBG); (vii) HUD-insured mortgage loans; or (viii) other sources of grants or loans that provide for a 150 basis point savings over the market interest rate for comparable terms."; "(D) Funding for ongoing operations, including rental subsidies, or other sources not directly offsetting the Total Housing Development Cost are not eligible for points under this paragraph. Qualifying funds awarded through local entities may qualify for points if the original source of the funds is from a private, state or federal source. If qualifying funds awarded through local entities are used for this item, a statement from the local entity must be provided that identifies the original source of funds."; "(E) The Development must have already applied for funding from the funding entity. Evidence to be submitted with the Application must include a copy of the commitment of funds with terms meeting the requirements of subparagraphs (A) - (C) of this paragraph or a letter from the funding entity indicating that the application was received and that the terms for available funding meet the requirements of subparagraphs (A) - (C) of this paragraph." "(F) At the time of the Carryover Documentation Delivery Date, the Applicant or Development Owner must provide evidence of a commitment approved by the funding entity for the sufficient financing to the Department. An Applicant may substitute the qualifying source under this item between the time of Application and Carryover." In response to Commenters (4), (11), (20) and (24) regarding the market rate, Staff intends to rely on the expertise of the funding entity to define the market rate and whether the committed rate meets this requirement. Market rates can fluctuate dramatically and believes that defining the market rate ahead of time would be overly restrictive. In response to Commenter (5) regarding use of the same funds counted under paragraph (5), Staff believes that counting the same source under both of these scoring items would violate the statutory scoring priorities. In response to Commenters (11), (26) and (27) Staff recommended language requiring a commitment at the time of Carryover and clarifies that substitutions of the funding source from Application to Carryover is allowed. Additionally, Staff would like to clarify that the purpose of the point differential for Developments located outside a QCT as opposed to inside a QCT is to prevent concentration of HTC units within a QCT.

BOARD RESPONSE: The Board recommended reducing the below market interest rate from 150 basis points to 100 basis points.

§50.9(b)(13) - Selection Criteria - Community Input other than Quantifiable Community Participation (1)

COMMENT SUMMARY: Commenter (1) supported the formal identification of a process to evaluate the fair housing implications of Input other than QCP; however, finds it odd that the Department should outsource this process to the Texas Workforce Commission since the Department has more subject matter expertise useful to evaluating the fair housing implications of such input; however, the Commenter withholds the judgment of the Texas Workforce Commissions performance. Commenter (1) also suggested the public and/or Applicants be allowed to request the formal evaluation of letters submitted under this scoring item.

STAFF RESPONSE: The Texas Workforce Commission is the designated state agency to deal with the US Department of Housing and Urban Development on Fair Housing complaints. Any information submitted to the Department regarding an Application is subject to an open records request and can be viewed by the public at any time upon request. Additionally, as part of the Application and Award process, the Department can receive challenges on information submitted as part of an Application which would be evaluated by the Department. Staff recommended no changes based on this comment.

STAFF COMMENT: Staff made a technical change to this section and modified the points referenced from 16 points to 18 points to be consistent with Board action in modifying the point structure for scoring paragraph (2) for Quantifiable Community Participation.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(14) - Selection Criteria - Pre-application Participation Incentive Points (11), (27)

COMMENT SUMMARY: Commenter (27) questioned why Staff changed the 5% point variance to 7 points which appears to be a reduction in the amount of difference permitted in the score variation from Pre-application to Application. Commenters (11) and (27) requested that should the number remain, it should be changed to 9 points which is more comparable to the 5% methodology.

STAFF RESPONSE: Staff agreed and recommended a change to 9 points.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(15) - Selection Criteria - Developments in Census Tracts with Limited Existing HTC Developments (1)

COMMENT SUMMARY: Commenter (1) supported the Department's intent to de-concentrating tax credit Developments; however, believed the proposed language is overly broad and suggested that some census tracts don't have tax credit Developments because it's a bad idea to build housing there. Commenter (1) suggested the following alternative language for this scoring item: "(A) If the proposed Development is located in a census tract in which, if the Development was placed in service, the percentage of HTC Units per occupied housing unit would be below 2% (4 points); or (B) If the proposed Development is located in a census tract in which, if the Development was placed in service, the percentage of HTC Units per occupied housing unit would be below 2% and the proposed Development is located in a census tract in which there are no other existing HTC Developments that serve the same Target Population (6 points)."

STAFF RESPONSE: While Staff understands the Commenter's concerns, Staff believes that natural market limitations and the Department's underwriting process will discourage Applications in areas that are not appropriate for development. Additionally, Staff believes that this language is overly complicated and the intent of the item is to be a pure gage of concentration. Staff recommended no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(16) - Development Location (11), (26)

COMMENT SUMMARY: Commenter (11) suggested the Application be allowed to qualify under subparagraph (E) if they are also receiving points under paragraph (5) of this subsection. Commenter (26) suggested this scoring item be reduced to 1 point and suggested the point structure of the QAP dictates the location of a Development over jurisdictional or area needs. Because General Population Developments are excluded in certain jurisdictions due to higher income tests yet obtaining neighborhood support, the suggested change would still get High Opportunity Areas the recognition but General Population Developments, particularly for larger families where a severe need exists, are not overly penalized.

STAFF RESPONSE: An Application that reflects points under Unit of General Local Government Funding, it would appear, would automatically qualify for points under this scoring item which Staff believes would violate the statutory scoring priorities. In response to Commenter (26), providing additional incentives for High Opportunity Areas is a priority for the Department. Additionally, Staff has clarified that Applications submitted under the At-Risk Set-Aside are not eligible for points under this item. The priority for At-Risk is preservation of existing affordability rather than location.

STAFF COMMENT: Staff made a technical change to this section that clarifies the former names of the Growth Zones in that such areas might have previously been known as Empowerment Zones, Enterprise Communities or Renewal Communities. Additionally, Staff clarified that the designations of the Economically Distressed Areas comes from the Water Development Board and not the Secretary of HUD.

BOARD RESPONSE: The Board recommended modifying the point differential for Qualified Elderly Developments in a High Opportunity Area from 2 points to 3 points and maintained the 4 points for all other Developments.

§50.9(b)(18) - Length of Affordability Period (2), (30)

COMMENT SUMMARY: Commenter (2) supported the language that Rehabilitation Developments do not qualify for these points and stated because they qualify under a new scoring item Repositioning of Existing Developments (worth 3 points) they would have a major scoring advantage over New Construction Developments. Commenter (30) suggested Staff should rely on the Property Condition Assessment (PCA) to determine the extent to which a Rehabilitation Development would qualify for points under this scoring item and stated the PCA is responsible for determining the Effective Age of the Product and the Remaining Useful Life of the Product. If the Remaining Useful Life is indicated to outlast the compliance and the extended use period and if lenders/investors are requiring extensive studies to determine if the Development will last through the financing term provided (which typically exceeds the compliance and extended use periods) then such Development should be eligible for these points.

STAFF RESPONSE: Staff does not agree with Commenter (30). The expectation that the Rehabilitation of an existing Development will be sufficient to extend the useful life for more than 30 years is not realistic, particularly given that many of the applications for Rehabilitation are for developments already more than 30 years old. Staff recommended no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(19) - Selection Criteria - Site Characteristics (3), (5), (8), (27)

COMMENT SUMMARY: Commenter (3) suggested an alternative scoring item be established for rural and American Indian HTC Developments. Encouraging development in proximity to services makes sense in urban areas; however, it punishes Native American tribes in particular that are not located in an already developed area. Commenter (3) further stated that many Native American tribes believe in the sacredness of land and they do not want to live in proximity to one another, but prefer to live in scattered site developments near community gathering places. Commenter (5) suggested that while increasing the number of services is an acceptable change, the requirement that only one amenity from each section is allowed should be deleted. Commenter (5) recommended that the Development must have one amenity from three different categories after which more than one amenity in each category may be counted and suggested "only one service of each type listed in subparagraphs (A) - (O) of this paragraph will count towards the points" be deleted and replaced with "Applicants must score one (1) point in three (3) different categories listed in subparagraphs (A) - (O) before they can receive points in a duplicate category." Commenter (5) further suggested that since a hospital is more favorable than a medical facility and is a different amenity than a physician office, language should be changed that makes these two separate options. Commenter (8) suggested the language for proximity to public transportation be changed back to one-quarter mile rather than the proposed one-half mile and cited the increase wasn't necessary since the one-quarter mile wasn't difficult to meet. Commenter (27) suggested the minimum number of amenities should be 4 instead of 6 and stated that communities and neighborhoods support tax credit developments not only for the housing and jobs that they provide, but also to promote the development of retail facilities and other economic development. Commenter (27) further suggested that the closer to the amenities a Development is, the more expensive the land and suggested that perhaps being near 6 amenities should qualify the Development as a High Opportunity Area.

STAFF RESPONSE: In response to Commenters (5), (8), and (27), in prior years, the amenities were required to be within one quarter mile of the Development Site. Staff has increased this distance to one-half mile but believes that an increase in the number of amenities should be required as well. Staff recommended the one-half mile remain in this scoring item to be consistent with other distance requirements relating to public transportation in the QAP, specifically, that of High Opportunity Area. In response to Commenter (3), the Board has not established a priority to provide specific incentives for Developments located on tribal land. Additionally, Developments under the Rural Set-Aside compete against other Developments in Rural Areas. Therefore, developments in Rural Areas are not at a scoring disadvantage to Developments in urban areas. Staff recommended no changes based on these comments.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(20) - Selection Criteria - Repositioning of Existing Developments (9), (27), (30)

COMMENT SUMMARY: Commenter (9) suggested that the introduction of this new scoring item, along with the exclusion of Rehabilitation Developments from qualifying under the Length of the Affordability Period, will result in Rehabilitation Developments not scoring as well as New Construction Developments. Commenter (9) also suggested it is bad policy to exclude Rehabilitation Developments from selecting points for extending the affordability period. Commenter (27) questioned why this scoring item is limited to Developments originally built between 1980 and 1990 and suggested it should apply to any market rate development that can feasibly be rehabilitated to increase the stock of good, quality affordable housing and should not be limited to Developments built within a ten year window. Commenter (30) similarly suggested that instead of arbitrarily going by the age of the Development, the Remaining Useful Life of the Product should be considered especially since the market analysis is used to project rents, an appraiser to project expenses and rents and an environmental consultant to confirm environmental conditions. Commenter (27) questioned why the scoring item requires an intentional lease-down or relocation to another property and stated that significant rehabilitations can be accomplished without such requirements.

STAFF RESPONSE: Staff believes that incentivizing Applications proposing Rehabilitation to extend the affordability period beyond 30 years is overly ambitious and places additional burden for future funding for capital needs throughout the affordability period. In response to Commenters (27) and (30), this item was contemplated to address existing housing stock that was created during a relative boom in the apartment industry in Texas, though many of those units were affordable by market conditions rather than government regulation. This scoring criterion provides incentive to rehabilitate and reposition these boom era developments. Staff recommended no changes based on this comment; however, Staff removed the word "Rehabilitation" in subparagraph (C) which was redundant.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(23) - Selection Criteria - Community Revitalization or Historic Preservation. (23), (27), (33)

COMMENT SUMMARY: Commenters (23) and (33) suggested clarification regarding when the proof of historic designation is required in order to qualify for this scoring item and requested the following revision to this section: "The Applicant will be required to show proof of the Historic designation and Historic Tax Credits at Cost Certification." Commenter (27) questioned why Consolidated Plans and Economic Development Plans or city-wide plans do not qualify for points under this item. Such plans do indicate how and where a community wants to target funds for improvements or revitalization.

STAFF RESPONSE: Staff agreed with the proposed revision by Commenter (23) and made the suggested change. In response to Commenter (27), Staff did not believe Consolidated Plans or other city-wide plans target a specific geographical area with respect to the needs of the community in which the proposed Development is located, but rather speaks to where they would generally encourage federal funding be invested. Staff recommended no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(b)(24) - Selection Criteria - Right of First Refusal. (12)

COMMENT SUMMARY: Commenter (12) suggested paragraphs (A) - (F) are duplicative and not necessary for inclusion in the QAP and suggested this section be amended to remove references to specific dates and to whom the Right of First Refusal may be given since the Department already has Right of First Refusal provisions in its Qualified Contract Policy which is designed to account for these requirements. Commenter (12) recommended the last sentence in the opening paragraph of this section be revised to reflect the following: "Development Owner may qualify for this point by providing the right of first refusal in accordance with the Housing Tax Credit (HTC) Program Qualified Contract Policy as described in Title 10, Part 1, Chapter 1, Subchapter A, Section 1.9 of the Texas Administrative Code."

STAFF RESPONSE: Staff agreed with Commenter (12) and recommended this scoring item be revised and reduced to the following: "Applications may qualify to receive 1 point for this item. (§2306.6725(b)(1); §42(m)(1)(C)(viii)) The purpose of this scoring item is to allow for consideration for tenant or nonprofit ownership at the end of the Compliance Period. Evidence that Development Owner agreed to provide a right of first refusal to purchase the Development upon or following the end of the Compliance Period in accordance with §2306.6726 and the Department's rules related to Right of First Refusal and Qualified Contract in §1.9 of this title."

BOARD RESPONSE: Accepted Staff's recommendation.

§50.9(c) - Selection Criteria - Penalties. (5)

COMMENT SUMMARY: Commenter (5) suggested that since a penalty is assessed regardless of whether an extension was requested the language referencing a subsequent request for an extension is unnecessary. Commenter (5) believed the language almost suggested that if you miss the deadline but do not subsequently ask for an extension the penalty points are not assessed.

STAFF RESPONSE: Staff agreed with the comment and recommended paragraph (1) read as follows: "If the Applicant or Affiliate failed to meet the original Carryover submission or 10% Test deadline(s) or has requested an extension of the Carryover submission deadline, the 10% Test deadline (relating to either submission or expenditure)...."

BOARD RESPONSE: Accepted Staff's recommendation.

§50.10(c) - Board Decisions - Forward Commitments. (1)

COMMENT SUMMARY: Commenter (1) expressed concern that the Board has begun a tradition of regularly circumnavigating the formal QAP process as it relates to forward commitments. While Board discretion is needed in this program, Commenter (1) encouraged the Board recognize the slippery slope and subjective appearance of heavy use of the forward commitment process and reserve such process for limited, isolated cases not address in the structure of the Qualified Allocation Plan.

STAFF RESPONSE: While a specific language change was not provided by the Commenter, the Department recognizes the limited and extraordinary circumstances justifying the use of forward commitments and that such use is solely at the discretion of the Board. Staff recommended no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

GOVERNOR RESPONSE: Paragraph (2) of this section regarding the Board's discretionary factors for Board decisions was removed as well as paragraph (c) relating to forward commitments.

§50.10(e) - Board Decisions - Challenges Regarding Applications. (5)

COMMENT SUMMARY: Commenter (5) suggested the language in this section, specifically, the date by which the Department will post challenges to the website and by which it will notify Applicants has been pushed back and requested the 2011 language be reinstated citing that such change could delay the finalization of Application scores and create additional difficulty for Staff to make their determinations so late in the Application Round.

STAFF RESPONSE: While Staff appreciates the consideration for its review process, it believes the change as reflected in the published draft will create an easier tracking mechanism relating to the posting of the various challenges based on when they were received. Staff recommended no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.11 - Tax Exempt Bond Developments.

STAFF COMMENT: Technical corrections were made to this section which clarified that the application is assembled based on parts and not volumes of documentation.

§50.12 - Post Award Activities.

GOVERNOR'S RESPONSE: This section was modified to remove references to forward commitments.

§50.13(b) - Application Reevaluation - Amendment of Application (27)

COMMENT SUMMARY: Commenter (27) questioned the purpose of the change which appears to be a very significant change and suggested there should be a point at which Developments should not be subject to being re-underwritten.

STAFF RESPONSE: Section 42 of the Code requires that an Application be underwritten at the time of Application, carryover, and cost certification. The prior language was not consistent with this federal requirement. Additionally, given the need to address the sizing of credit at cost certification, Staff believes it is prudent to allow significant changes to be addressed prior to cost certification. Staff clarified that changes to the Developer, Guarantor, or Person used for experience require the Department's approval. This is a clarification in line with existing practice to review these changes for issues including previous participation and compliance with the credit limit in §50.5(c). Staff recommended the following sentence be added to the end of paragraph (1) "Changes to the Developer, Guarantor, or Person used for experience constitute a change requiring an amendment and may be approved by the Executive Director."

BOARD RESPONSE: Accepted Staff's recommendation.

§50.13(d) - Application Reevaluation - Ownership Transfers. (20), (27)

COMMENT SUMMARY: Commenter (20) suggested this section be modified to reflect that approval for a transfer be limited to the Developer only and not the Development specifically and stated that this clarity will ensure that any Development ownership can be transferred to a qualified ownership entity regardless of what state the Development may be in relative to the QAP or other Department rules. Commenter (27) stated the sufficiency of the transferee's experience seems to have been deleted from this section and suggested that if such requirement isn't covered elsewhere then it seems to be conflict with the experience requirements in Threshold for new Applications.

STAFF RESPONSE: In response to Commenters (20) and (27), Staff added language describing the sections of the QAP that must be complied with in order to transfer a property which includes the eligibility and experience of the transferee and specifically includes §§50.4(a), 50.5(c), and 50.8(4). The Development itself is not required to be in compliance with all sections of the current QAP. However, Staff believes the Department has a responsibility to ensure that a transferee has the capacity and experience to bring any noncompliant tax credit property into compliance upon transfer and in a timely manner.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.13(e) - Application Reevaluation - Sale of Certain Tax Credit Properties. (12)

COMMENT SUMMARY: Commenter (12) suggested this section is not necessary given the standards for implementation for a Right of First Refusal are identified in the Qualified Contract Policy and recommended the following revision to the language in the opening paragraph of this section. The suggested language, according to the Commenter, would remove undue complexity in the QAP and allow the Department more flexibility in dealing with subsequent sales and transfers at the end of the Compliance Period. The Commenter recommended the section read as follows: "The Development Owner may qualify for this point by providing the Right of First Refusal in accordance with the Housing Tax Credit (HTC) Program Qualified Contract Policy as described in Title 10, Part 1, Chapter 1, Subchapter A, §1.9 of the Texas Administrative Code."

STAFF RESPONSE: Staff agreed with the commenter and deleted this section in its entirety since it is addressed in 10 TAC Chapter 1, Subchapter A, §1.9.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.13(h) - Application Reevaluation - Compliance Monitoring and Material Noncompliance.

STAFF COMMENT: This section was removed as it is addressed in other Department rules.

BOARD RESPONSE: Accepted Staff's recommendation.

§50.17(c) - Department Responsibilities (5)

COMMENT SUMMARY: Commenter (5) supported the language related to the availability of site demographics data 4 months prior to the opening of the Application Acceptance Period and the use of prior year data.

STAFF RESPONSE: Staff appreciates the positive feedback. Staff recommended no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

The Board approved the final order adopting the new sections on November 10, 2011.

As provided for in §2306.6724(c) of the Texas Government Code, the Governor has modified and approved the 2012 QAP. The modifications to the QAP as approved by the Governing Board of the Department for submittal to the Governor include deletion of the discretionary factors the Board may consider in their decision-making of low income housing tax credit allocations as set forth in §50.10(a)(2), deletion of the provision for the granting of forward commitments of low income housing tax credits set forth in §50.10(c) and conforming deletion of references to forward commitments, and refinements to §50.16 to provide that when taking action to grant a waiver of any provision of the QAP the Board must act unanimously and must have information to enable it to assess the impact of any such waiver(s) on the score of the requestor vis á vis competing applicants. The 2012 QAP, as submitted, reflects all modifications by the Governor and the 2012 QAP, as modified, has been approved in its entirety by the Governor in accordance with §2306.6724(c) of the Texas Government Code.

The new sections are adopted pursuant to the authority of Chapter 2306 of the Texas Government Code, which provides the Department with the authority to adopt rules governing the administration of the Department and its programs.

§50.1.General Program Information.

(a) Purpose and Authority. The rules in this chapter apply to the allocation by the Texas Department of Housing and Community Affairs (the "Department") of Housing Tax Credits authorized by applicable federal income tax laws. Pursuant to Chapter 2306, Subchapter DD, of the Texas Government Code, the Department is authorized to make Housing Tax Credit Allocations for the State of Texas. As required by §42(m)(1) of the Code, the Department developed this Qualified Allocation Plan (QAP) which is set forth in this chapter. Sections in this chapter establish procedures for applying for and obtaining an allocation of Housing Tax Credits, along with ensuring that the proper Threshold Criteria, Selection Criteria, priorities and preferences are followed in making such allocations. Notwithstanding the fact that these rules may not contemplate unforeseen situations that may arise, the Department would expect to apply a reasonableness standard to the evaluation of Applications for Housing Tax Credits.

(b) General Rule of Construction. Any requirement to meet code, ordinance, etc. is deemed to be met if an appropriate waiver has been lawfully obtained and is being met.

(c) Unless the context indicates otherwise, a reference to a Development Owner, Developer, General Contractor or Guarantor includes all Persons controlled by or under common Control with any such Person.

§50.2.Definitions.

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise. Any capitalized terms not specifically mentioned in this section shall have the meaning as defined in Chapter 2306 of the Texas Government Code, §42 of the Internal Revenue Code, §1.1 of this title (relating to Definitions and Amenities for Housing Program Activities), and repeated in the Tax Credit (Procedures) Manual.

(1) Applicable Percentage--The percentage used to determine the amount of the Housing Tax Credit for any Development (New Construction, Reconstruction, and/or Rehabilitation), as defined more fully in the Code, §42(b).

(A) For purposes of the Application, the Applicable Percentage will be projected at:

(i) nine percent (9%) if the Development is proposed to be placed in service prior to December 31, 2013 and such timing is deemed appropriate by the Department or if the ability to claim the full 9% credit is extended by the U.S. Congress;

(ii) forty (40) basis points over the current applicable percentage for 70% present value credits, pursuant to §42(b) of the Code for the month in which the Application is submitted to the Department; or

(iii) fifteen (15) basis points over the current applicable percentage for 30% present value credits, unless fixed by Congress, pursuant to §42(b) of the Code for the month in which the Application is submitted to the Department.

(B) For purposes of making a credit recommendation at any other time, the Applicable Percentage will be based in order of priority on:

(i) the percentage indicated in the Agreement and Election Statement, if executed; or

(ii) the actual applicable percentage as determined by the Code, §42(b), if all or part of the Development has been placed in service and for any buildings not placed in service the percentage will be the actual percentage as determined by the Code, §42(b) for the most current month; or

(iii) the percentage as calculated in subparagraph (A) of this paragraph if the Agreement and Election Statement has not been executed and no buildings have been placed in service.

(2) Application Acceptance Period--That period of time during which Applications may be submitted to the Department.

(3) Area Median Gross Income (AMGI)--Area median gross household income, as determined for all purposes under and in accordance with the requirements of §42 of the Code.

(4) Carryover Allocation--An allocation of current year tax credit authority by the Department pursuant to the provisions of §42(h)(1)(C) of the Code and U.S. Treasury Regulations, §1.42-6.

(5) Carryover Allocation Document--A document issued by the Department, and executed by the Development Owner, pursuant to §50.12(e) of this chapter (relating to Post Award Activities).

(6) Certificate of Reservation--The notice given by the Texas Bond Review Board (TBRB) to an issuer reserving a specific amount of the state ceiling for a specific issue of bonds.

(7) Central Business District or Downtown District--The area designated by a city with a population of 50,000 or more as that city's Central Business District or Downtown Area and which includes one or more commercial buildings of ten (10) stories or more.

(8) Code--The Internal Revenue Code of 1986, as amended from time to time, together with any applicable regulations, rules, rulings, revenue procedures, information statements or other official pronouncements issued thereunder by the U.S. Department of the Treasury or the Internal Revenue Service (IRS).

(9) Competitive Housing Tax Credits--Tax credits available from the State Housing Credit Ceiling.

(10) Determination Notice--A notice issued by the Department to the Development Owner of a Tax-Exempt Bond Development which specifies the Department's determination as to the amount of tax credits that the Development may be eligible to claim pursuant to §42(m)(1)(D) of the Code.

(11) Development Site--The area, or if scattered site, areas, on which the Development is proposed to be located.

(12) Economically Distressed Area--A county that contains an area that meets the criteria for an economically distressed area under §17.92(1), Texas Water Code, and has adopted and enforces the model rules under §16.343, Texas Water Code.

(13) Eligible Basis--With respect to a building within a Development, the building's Eligible Basis pursuant to §42(d) of the Code.

(14) Existing Residential Development--Any Development Site which contains existing residential Units at the time the Application is submitted to the Department.

(15) High Opportunity Area--A Development that is proposed to be located in an area that includes, at a minimum, subparagraphs (A) and (B) of this paragraph along with either subparagraph (C) or (D) of this paragraph:

(A) in a census tract which has a median income that is above median for that county (as designated in the Housing Tax Credit Site Demographic Characteristics Report for the current Application Round) as of the first day of the Application Acceptance Period; and

(B) in a census tract that has a 15% or less poverty rate (as designated in the Housing Tax Credit Site Demographic Characteristics Report for the current Application Round) or, for Regions 11 and 13 with a 35% or less poverty rate;

(C) within a half-mile of an accessible transit stop for public transportation if such transportation is available in the municipality or county in which the Development is located; or

(D) in an elementary school attendance zone that has an academic rating, as of the beginning of the Application Acceptance Period, of "Exemplary" or "Recognized," or comparable rating if the rating system changes by the same date as determined by the Texas Education Agency. An elementary attendance zone does not include elementary schools with district-wide possibility of enrollment or no defined attendance zones, sometimes known as magnet schools. However, districts with district-wide enrollment and only one elementary school are acceptable.

(16) Housing Credit Allocation--An allocation by the Department to a Development Owner for a specific Application of Housing Tax Credits in accordance with the provisions of this chapter.

(17) Housing Credit Allocation Amount--With respect to a Development or a building within a Development, the amount the Department determines to be necessary for the financial feasibility of the Development and its viability as a Development throughout the affordability period which the Board allocates to the Development.

(18) Qualified Nonprofit Organization--An organization that meets the requirements of §2306.6706 and §2306.6729 of the Texas Government Code.

(19) Qualified Nonprofit Development--A Development in which a Qualified Nonprofit Organization is to own an interest in the Development directly or through a partnership and materially participate (within the meaning of §469(h) of the Code) in the development and operation of the Development throughout the Compliance Period.

(20) Single Room Occupancy (SRO)--An Efficiency Unit that meets all the requirements of a Unit except that it may, but is not required, to be rented on a month to month basis to facilitate Transitional Housing. Buildings with SRO Units have extensive living areas in common and are required to be Supportive Housing and include the provision for substantial supports from the Development Owner or its agent on site.

(21) State Housing Credit Ceiling--The aggregate amount of Housing Credit Allocations that may be made by the Department during any calendar year, as determined from time to time by the Department in accordance with applicable federal law, including §42(h)(3)(C) of the Code.

(22) Supportive Housing--Residential rental developments intended for occupancy by individuals or households in need of specialized and specific non-medical services in order to maintain independent living. Supportive housing developments generally require established funding sources outside of project cash flow and are expected to be debt free or have no foreclosable or noncash flow debt. The services offered generally address special attributes of such populations as Transitional Housing for homeless and at risk of homelessness, persons who have experienced domestic violence or single parents or guardians with minor children.

(23) Target Population--For purposes of this Qualified Allocation Plan, the designation of types of housing populations shall include those Developments that are entirely Qualified Elderly and those that are entirely Supportive Housing. All others will be considered to serve general populations without regard to any subpopulations.

(24) Tax Credit (Procedures) Manual--The manual produced and amended from time to time by the Department which reiterates the rules and provides guidance for the filing of tax credit related documents.

(25) Tax-Exempt Bond Development--A Development requesting or having been awarded Housing Tax Credits and which receives a portion of its financing from the proceeds of tax-exempt bonds which are subject to the state volume cap as described in §42(h)(4) of the Code, such that the Development does not receive an allocation of tax credit authority from the State Housing Credit Ceiling.

(26) Transitional Housing--A Supportive Housing development that includes living Units with more limited individual kitchen facilities and is:

(A) used exclusively to facilitate the transition of homeless individuals and those at-risk of becoming homeless, to independent living within 24 months; and

(B) is owned by a governmental entity or a qualified non-profit which provides temporary housing and supportive services to assist such individuals in, among other things, locating and retaining permanent housing. The limited kitchen facilities in individual Units must be appropriately augmented by suitable, accessible shared or common facilities.

§50.3.Program Calendar.

All documentation noted in this section must be submitted to the Department offices located at 221 E. 11th Street, Austin, TX 78701, by 5:00 p.m. (CST) by the date indicated. Any deadline not imposed by statute and including those not specifically listed in the Program Calendar may be extended for good cause by the Executive Director for a period of not more than five (5) business days provided; however, that the Applicant requests an extension of the deadline prior to the date of the original deadline. Any extension of non-statutory deadlines made after the original deadline or for longer than five (5) days must be requested pursuant to §50.16(a) of this chapter (relating to Waiver and Amendment of Rules). Extensions for 10% Test, Carryover and Cost Certification shall be made in accordance with §50.13(c) of this chapter (relating to Application Reevaluation).

Figure: 10 TAC §50.3

§50.4.Ineligible Applicants, Applications, and Developments.

(a) The purpose of this section is to identify those situations, in which an Applicant, Application or Development would be considered to be ineligible under the Housing Tax Credit program based on, but not limited to, requirements in §42 of the Internal Revenue Code, Texas Government Code Chapter 2306 and other criteria considered important by the Department. If an Applicant or Application is determined by Staff to be ineligible based on subsections (b) and (c) of this section the Applicant will be sent a notice stating such ineligibility and will be given the opportunity to explain how they believe they are not ineligible. If while the Application is under review the General Contractor or Guarantor is determined by Staff or the Applicant to be ineligible under subsection (b) of this section, the Applicant will be allowed to replace the General Contractor or Guarantor provided such replacement is immediately identified and in place prior to the date by which a Commitment or Determination Notice would be issued provided that the request is made in sufficient time to allow Department Staff to conduct its previous participation review and any other necessary analysis. A proposed replacement and each Principal is required to provide the required previous participation forms.

(b) Ineligible Applicants. An Applicant is ineligible if any Applicant, Development Owner, Developer, General Contractor, Guarantor involved with the Application:

(1) has been or is barred, suspended, or terminated from procurement in a state or Federal program or listed in the List of Parties Excluded from Federal Procurement or Non-Procurement Programs; or (§2306.6721(c)(2))

(2) has been convicted of a state or federal felony crime involving fraud, bribery, theft, misrepresentation of material fact, misappropriation of funds, or other similar criminal offenses within fifteen (15) years preceding the Application deadline; or

(3) at the time of Application is subject to an enforcement or disciplinary action under state or federal securities law or by the NASD; is subject to a federal tax lien; or is the subject of a proceeding in which a Governmental Entity has issued an order to impose penalties, suspend funding, or take adverse action based on an allegation of:

(A) financial misconduct; or

(B) uncured violation of material laws, rules, or other legal requirements governing activities considered relevant by the Governmental Entity; or

(4) has any past due audits and has not submitted those past due audits to the Department in a satisfactory format. A Person is not eligible to receive a Commitment of Housing Tax Credits from the Department if any audit finding or questioned or disallowed cost is unresolved as of June 1 of each year, or for Tax-Exempt Bond Developments or other Applications applying only under other Multifamily Programs (HOME, Housing Trust Fund, etc.) no later than thirty (30) days after Parts 5 and 6 of the Application are submitted; or (§2306.6703(a)(1))

(5) at the time of Application or at any time during the two-year period preceding the date the Application Round begins (or for Tax-Exempt Bond Developments any time during the two-year period preceding the date the Application is submitted to the Department), the Applicant or a Related Party is or has been:

(A) a member of the Board; or

(B) the Executive Director, Chief of Staff, General Counsel, a Deputy Executive Director, the Director of Housing Tax Credits, the Chief of Compliance and Asset Oversight, the Director of Real Estate Analysis, or a manager over Housing Tax Credits employed by the Department or any person exercising such responsibilities regardless of job title; (§2306.6703(a)(2))

(6) the Applicant proposes to replace in less than fifteen (15) years any private activity bond financing of the Development described by the Application, unless:

(A) the Applicant proposes to maintain for a period of thirty (30) years or more 100% of the Development Units supported by Housing Tax Credits as rent-restricted and exclusively for occupancy by individuals and families earning not more than 50% of the Area Median Gross Income, adjusted for family size; and

(B) at least one-third of all the Units in the Development are public housing units or Section 8 Development-based Units; or

(C) the applicable private activity bonds will be redeemed only in an amount consistent with their proportionate amortization; or

(D) if the redemption of the applicable private activity bonds will occur in the first five years of the operation of the Development and complies with §429(h)(4), Internal Revenue Code of 1986:

(i) on the date the Certificate of Reservation is issued, the Texas Bond Review Board determines that there is not a waiting list for private activity bonds in the same priority level established under §1372.0321 of the Texas Government Code or, if applicable, in the same uniform state service region, as referenced in §1372.0231 of the Texas Government Code, that is served by the proposed Development; and

(ii) the applicable private activity bonds will be redeemed according to underwriting, if any, established by the Department; (§2306.6703)

(7) is on the Department's debarred list, including any parts of that list that are derived from the debarred list of the United States Department of Housing and Urban Development (§2306.6721(c)(2)); or

(8) has breached a contract with a public agency and failed to cure that breach; or

(9) misrepresented to a subcontractor the extent to which the Developer has benefited from contracts or financial assistance that has been awarded by a public agency, including the scope of the Developer's participation in contracts with the agency and the amount of financial assistance awarded to the Developer by the agency; or

(10) there is, involving the Application or Applicant, a violation of §2306.6733 of the Texas Government Code; or

(11) has been found by the Board, after holding a hearing before the Board, to warrant ineligibility because of the circumstances surrounding a voluntary or involuntary termination of involvement in a rent or income restricted multifamily Development by a lender, equity provider, or any other owners or investors as a Principal during the previous ten (10) years, however designated, or any combination thereof or having had any litigation to effectuate such exit instituted, and continuing at the time of Application. The Department shall be promptly notified by the Applicant of any such circumstances. The Applicant will provide the Department Staff with such information as it may reasonably request to evaluate the facts and circumstances surrounding such actual or threatened exit and prepare a report to the Executive Director. The information considered and addressed in the report will include, but not be limited to those identified in subparagraphs (A) - (E) of this paragraph. The Executive Director will make a determination, based on the report, whether facts and circumstances are present that would support the institution of formal proceedings to determine eligibility. Any determination of ineligibility under this provision shall be for a period that will not exceed five (5) years. No person shall be made ineligible under this provision except by formal action taken by the Department's Governing Board. Any such matter to be presented for final determination of ineligibility by the Board must include notice from the Department to the affected party not less than fourteen (14) days prior to the scheduled Board meeting. The Executive Director may, but is not required, to issue a formal notice after disclosure if it is determined that the matter does not warrant ineligibility. The Executive Director's report and the Board's decision shall take into account all relevant factors including, but not limited to:

(A) whether the Developer or Principal has invested more of its financial resources in the Development than it has received from or in connection with the Development;

(B) whether such Developer or Principal had the ability to address the facts and circumstances that ultimately led to the actual or threatened exit by other means or whether uncooperative parties or other facts and circumstances beyond its control prevented any other such resolution;

(C) the contributing or causative effect of circumstances beyond such Applicant's, Development Owner's, Developer's or Guarantor's control, such as significant changes in market conditions or a natural disaster;

(D) the compliance history of the Development during the time of the Applicant's, Development Owner's, Developer's or Guarantor's involvement; and

(E) whether such Developer or Principal disclosed to the Department the event of exit as part of the Certification in the current Application.

(c) Ineligible Applications. The Department will terminate an Application for those issues identified in paragraphs (1) - (10) of this subsection. In addition to termination, the Department may debar a Person for one (1) year from the date of debarment, or until the violation causing the debarment has been remedied, whichever term is longer, if the Department determines that any of the issues identified in paragraphs (1) - (8) of this subsection exist and the facts warrant debarment:

(1) the provision of fraudulent information, knowingly falsified documentation, or other intentional or negligent material misrepresentation or omission in the Application or other information submitted to the Department at any stage of the evaluation or approval process; or

(2) the Applicant, Development Owner, Developer, General Contractor, or Guarantor or anyone that exercises common Control in the Development Owner, Developer, General Contractor or Guarantor, or any Affiliate that Controls one or more other rent restricted rental housing properties in the state of Texas administered by the Department is in Material Noncompliance with or has repeatedly violated the LURA or if such Material Noncompliance or repeated violation is identified during the Application review or the program rules in effect for such property as further described in Chapter 60 of this title (relating to Compliance Administration); or (§2306.6721(c)(3))

(3) the Applicant, Development Owner, Developer, General Contractor, or Guarantor or anyone that exercises common Control in the Development Owner, Developer, General Contractor, or Guarantor, or any Affiliate of such entity that is active in the ownership or Control has been a Principal of any entity that failed to make all loan payments to the Department in accordance with the terms of the loan, as amended, or was otherwise in default with any provisions of any loans from the Department; or

(4) the Applicant or the Development Owner that exercises common Control of one or more tax credit properties in the state of Texas has failed to cure any fees described in §50.14 of this chapter (relating to Program Related Fees) seven (7) days prior to the Board meeting at which the decision for the Application is to be made; or

(5) an Applicant or a Related Party and any Person who is active in the construction, Rehabilitation, ownership, or exercises common Control of the proposed Development, including a General Partner or contractor, and a Principal or Affiliate of a General Partner or contractor, or an individual employed as a consultant, lobbyist or attorney by an Applicant or a Related Party, violates §2306.1113 of the Texas Government Code relating to Ex Parte Communication as further described in §50.7 of this chapter (relating to Application Process); or

(6) it is determined by the Department's Executive Director that there is evidence that establishes probable cause to believe that an Applicant, Development Owner, Developer, or any of their employees or agents has violated a state revolving door or other standard of conduct or conflict of interest statute, including §2306.6733 of the Texas Government Code, or a section of Chapter 572 of the Texas Government Code, in making, advancing, or supporting the Application; or

(7) the Applicant, Development Owner, Developer, Guarantor, General Contractor, or any Affiliate of such entity whose previous funding contracts or commitments have been partially or fully deobligated during the twelve (12) months prior to the submission of the Application and through the date of final allocation due to a failure to meet contractual obligations; or

(8) the Applicant, Development Owner, Developer, Guarantor, General Contractor, or any Affiliate of such entity whose pre-development award of non-tax credit funds from the Department has not been repaid in accordance with the terms of repayment for the Development at the time of Carryover Allocation or Bond closing; or

(9) the Application is submitted after the Application submission deadline (time or date); has multiple Parts of the Application missing; is not bookmarked in accordance with the instructions in the Tax Credit (Procedures) Manual; or has a Material Deficiency as defined under §1.1 of this title (relating to Definitions and Amenities for Housing Program Activities); or

(10) for Applications submitted under the State Housing Credit Ceiling, if more than 150% of the credit amount available in the sub-region is requested at the time of the original submission of the Application based on estimates released by the Department on December 1. The Department will consider the amount in the Funding Request of the Application to be the amount of housing tax credits requested.

(d) Ineligible Developments. Those Developments identified in paragraphs (1) - (16) of this subsection are considered ineligible for funding under the Housing Tax Credit Program:

(1) Hospitals, nursing homes, trailer parks, dormitories (or other buildings that will be predominantly occupied by students) or other facilities which are usually classified as transient housing (as provided in the §42(i)(3)(B)(iii) and (iv) of the Code) are not eligible. However, structures formerly used as hospitals, nursing homes or dormitories are eligible for Housing Tax Credits if the Development involves the conversion of the building to a non-transient multifamily residential Development;

(2) A property that provides continual or frequent nursing, medical or psychiatric services. Refer to IRS Revenue Ruling 98-47 for clarification of assisted living;

(3) Any Qualified Elderly Development of two stories or more that does not include elevator service for any Units or living space above the first floor;

(4) Any Qualified Elderly Development with any Units having more than two bedrooms with the exception of up to three employee Units reserved for the use of the manager, maintenance, and/or security officer. These employee Units must be specifically designated as such;

(5) Any Development with any building(s) with four or more stories that does not include an elevator;

(6) Any Qualified Elderly Development proposing more than 70% two-bedroom Units;

(7) Any Development (excluding Supportive Housing Developments) proposed in a Central Business District with more than 70% one bedrooms and/or Efficiency Units or 70% two bedrooms or more than 20% three bedrooms. An Application may reflect a total of Units for a given bedroom size greater than these percentages to the extent that the increase is only to reach the next highest number divisible by four;

(8) Any Development that violates §1.15 of this title (relating to Integrated Housing Rule);

(9) A proposed Rehabilitation (excluding Reconstruction) of an Existing Residential Development that is more than forty (40) years old unless the property is either:

(A) to be rehabilitated with support of historic tax credits;

(B) to be done as adaptive reuse; or

(C) a Development that includes an architect's or engineer's statement confirming that the proposed rehabilitation will be structurally viable for its required affordability period, assuming customary ongoing maintenance;

(10) Any Development located in an Urban Area involving New Construction, Reconstruction or Adaptive Reuse of Units (except for a Qualified Elderly Development, a Development proposed in a Central Business District, a Development composed entirely of single family dwellings, or Supportive Housing Developments) in which any of the designs in subparagraphs (A) - (D) of this paragraph are proposed. For Applications involving a combination of single family detached dwellings and multifamily dwellings, the percentages in this subparagraph do not apply to the single family detached dwellings, but they do apply to the multifamily dwellings. An Application may reflect a total of Units for a given bedroom size greater than the percentages in subparagraphs (A) - (D) of this paragraph to the extent that the increase is only to reach the next highest number divisible by four:

(A) more than 30% of the total Units are one bedroom and/or Efficiency Units; or

(B) more than 55% of the total Units are two bedroom Units; or

(C) more than 40% of the total Units are three bedroom Units; or

(D) more than 5% of the total Units in the Development with four or more bedrooms;

(11) Any Development which is intended to house seniors that is not consistent with the definition of a Qualified Elderly Development;

(12) Any Development that is reasonably believed by Staff not to clearly meet the general public use requirement under Treasury Regulation §1.42-9 unless the Applicant has obtained a private letter ruling that the proposed Development is permitted;

(13) Development Sites with negative characteristics in subparagraphs (A) - (G) of this paragraph will be considered ineligible. If Staff identifies what it believes would constitute an unacceptable negative site feature not covered by the those identified in subparagraphs (A) - (G) of this paragraph Staff may seek Board clarification and, after holding a hearing before the Board, the Board may make a final determination as to whether that feature is unacceptable. Rehabilitation (excluding Reconstruction) Developments with ongoing and existing federal assistance from HUD or TRDO-USDA are exempt. For purposes of this exhibit, the term 'adjacent' is interpreted as sharing a boundary with the Development Site. The distances are to be measured from the nearest boundary of the Development Site to the boundary of the negative characteristic. If none of these negative characteristics exist, the Applicant must sign a certification to that effect. The negative characteristics include:

(A) developments located adjacent to or within 300 feet of junkyards;

(B) developments located adjacent to or within 300 feet of active railroad tracks, unless the Applicant provides evidence that the city/community has adopted a Railroad Quiet Zone or the railroad in question is commuter or light rail (Developments located in a Central Business District are exempt);

(C) developments located adjacent to or within 300 feet of heavy industrial uses such as manufacturing plants, refinery blast zones, etc.;

(D) developments located adjacent to or within 300 feet of a solid waste or sanitary landfills;

(E) developments where the buildings are located within the easement of any overhead high voltage transmission line or inside the engineered fall distance of any support structure for high voltage transmission lines, radio antennae, satellite towers, etc. This does not apply to local service electric lines and poles;

(F) developments where the buildings are located within the accident zones or clear zones for commercial or military airports; or

(G) development is located adjacent to or within 300 feet of a sexually-oriented business. For purposes of this paragraph, a sexually-oriented business shall be defined as stated in §243.002 of the Texas Government Code.

(14) Two Mile Same Year Rule. Staff will not recommend an allocation in the same Application Round if the Developments are, or will be, located less than two linear miles apart as determined by the Department. This limitation applies only to communities contained within counties with populations exceeding one million. For purposes of this chapter, any two sites not more than two linear miles apart are deemed to be "in a single community." (§2306.6711(f)) This restriction does not apply to the allocation of Housing Tax Credits to Developments financed through the Tax-Exempt Bond program, including the Tax-Exempt Bond Development Applications under review and existing Tax-Exempt Bond Developments in the Department's portfolio. (§2306.67021)

(15) Unacceptable Sites. Developments will be ineligible if the Development is located on a site that is determined to be unacceptable by the Department, based on the evaluation factors identified in the Site Evaluation form, augmented by any other inspections or other documented findings of the Department. The Department will advise the Applicant if it makes an initial finding that a proposed site is unacceptable and provide the applicant with a reasonable opportunity to address any identified concerns. If in the Department's reasonable judgment the Applicant is not able to address adequately the Department's concerns regarding the site, the Department Staff will issue a determination that the site is unacceptable. If not appealed in accordance with §50.10(c) of this chapter (relating to Board Decisions), this determination becomes final.

(16) Mandatory Development Amenities. All New Construction, Reconstruction or Adaptive Reuse Units must provide each and all of the amenities in subparagraphs (A) - (M) of this paragraph. Rehabilitation Developments must provide the amenities in subparagraphs (C) - (M) of this paragraph unless expressly identified as not required. (§2306.187) Supportive Housing Developments are not required to provide the amenities in subparagraph (B), (E), (F) or (G) of this paragraph; however, access must be provided to a comparable amenity in a common area. Deviations for good cause, by which one or more of the foregoing will not be provided, must be approved prior to award and the request for such deviation must be included in the Application. The Executive Director may issue such approvals. Requests not approved may be appealed to the Board in accordance with §50.10(c) of this chapter. These amenities must be at no charge to the tenants.

(A) All New Construction Units must be wired with RG-6/U COAX or better and CAT3 phone cable or better, wired to each bedroom, dining room and living room;

(B) Laundry Connections;

(C) Blinds or window coverings for all windows;

(D) Screens on all operable windows;

(E) Disposal and Energy-Star rated dishwasher (not required for TRDO-USDA; Rehabilitation Developments exempt from dishwasher if one was not originally in the Unit);

(F) Energy-Star rated refrigerator;

(G) Oven/Range;

(H) Exhaust/vent fans (vented to the outside) in bathrooms;

(I) At least one Energy-Star rated ceiling fan per Unit;

(J) Energy-Star rated lighting in all Units which may include compact fluorescent bulbs;

(K) Plumbing fixtures (toilets and faucets) must meet design standards at 30 TAC §290.252 (relating to Design Standards);

(L) All Units must have central heating and air-conditioning (Packaged Terminal Air Conditioners meet this requirement for SRO Units in Supportive Housing Developments only); and

(M) Adequate parking spaces consistent with local code, unless there is no local code, in which case the requirement would be 1.5 spaces per Unit for non-Qualified Elderly Developments and one (1) space per Unit for Qualified Elderly.

§50.5.Site and Development Restrictions.

(a) The purpose of this section is to identify specific restrictions on a proposed Development submitted under the State Housing Credit Ceiling or Tax Exempt Bond Developments, as applicable.

(b) Floodplain. Any Development proposing New Construction or Reconstruction and located within the one-hundred (100) year floodplain as identified by the Federal Emergency Management Agency (FEMA) Flood Insurance Rate Maps must develop the site so that all finished ground floor elevations are at least one foot above the flood plain and parking and drive areas are no lower than six inches below the floodplain, subject to more stringent local requirements. If no FEMA Flood Insurance Rate Maps are available for the proposed Development, flood zone documentation must be provided from the local government with jurisdiction identifying the one-hundred (100) year floodplain. No buildings or roads that are part of a Development proposing Rehabilitation (excluding Reconstruction) with the exception of Developments with existing and ongoing federal funding assistance from HUD or TRDO-USDA, will be permitted in the one-hundred (100) year floodplain unless they already meet the requirements established in this subsection for New Construction, or if the Unit of General Local Government has undertaken mitigation efforts and can establish that the property is no longer within the one-hundred (100) year floodplain.

(c) Credit Amount. (§2306.6711(b)) An Applicant may not request more than $2 million in annual tax credits for any given Application. The Department shall not allocate more than $3 million of tax credits in any given Application Round to any Applicant, Developer, Affiliate or Guarantor (unless the Guarantor is also the General Contractor, and is not a Principal of the Applicant, Developer or Affiliate of the Development Owner). Tax-Exempt Bond Development Applications are not subject to this limitation and Tax-Exempt Bond Development Applications will not count towards the total limit on tax credits per Applicant. Competitive Housing Tax Credits approved by the Board during the current calendar year are applied to the credit cap limitation for the current Application Round. In order to evaluate this $3 million limitation, nonprofit entities, public housing authorities, publicly traded corporations, individual board members, and executive directors must provide the documentation required in the Application with regard to this requirement. All entities that share a Principal are Affiliates. For purposes of determining the $3 million limitation of tax credits, a Person is not deemed to be an Applicant, Developer, Affiliate or Guarantor solely because it:

(1) raises or provides equity;

(2) provides "qualified commercial financing";

(3) is a Qualified Nonprofit Organization or other not-for-profit entity that is providing solely loan funds, grant funds or social services;

(4) receives fees as a Development Consultant or Developer that do not exceed 10% of the Developer Fee (or 20% for Qualified Nonprofit Developments) to be paid or $150,000, whichever is greater; or

(5) is acting as a General Contractor providing experience or is providing a required construction guarantee because of that role.

(d) Limitations on the Size of Developments.

(1) The minimum Development size will be 16 Units.

(2) Developments in Rural Areas involving any New Construction or Adaptive Reuse (excluding New Construction of non-residential buildings) will be limited to 80 Units. Rehabilitation Developments (excluding Reconstruction) do not have a limitation as to the number of Units.

(3) Urban Developments involving any New Construction or Adaptive Reuse (excluding New Construction of non-residential buildings), in the Competitive Housing Tax Credit Application Round will be limited to 252 total Units, wherein the maximum Department administered Units will be limited to 200 Units. Tax-Exempt Bond Developments will be limited to 252 restricted and total Units. These maximum Unit limitations also apply to those Developments which involve a combination of Rehabilitation, Reconstruction, and New Construction. Only Developments that consist solely of acquisition/Rehabilitation or Rehabilitation may exceed the maximum Unit restrictions.

(4) For Applications that are proposing an additional phase to an existing tax credit Development of the same type; that are otherwise adjacent to an existing tax credit Development of the same type; or that are proposing a Development of the same type on a contiguous site to another Application awarded in the same program year, the combined Unit total for the existing and proposed Developments may not exceed the maximum allowable Development size set forth in this subsection unless:

(A) the first phase of the Development has been completed and has maintained occupancy of at least 90% for a minimum six (6) month period as reflected in the submitted rent roll; or

(B) a resolution from the Governing Body of the city or county, in which the proposed Development is located, dated no more than one (1) year old from the date the Application is submitted. Such resolution must state that the Governing Body has reviewed a market study which supports the need for additional Units. The resolution must be submitted to the Department by the Resolution Delivery Date as indicated in §50.3 of this chapter (relating to Program Calendar); or

(C) the proposed Development is intended to provide replacement of previously existing affordable Units on the Development Site or that were originally located within a one mile radius from the Development Site; provided, however, the combined number of Units in the proposed Development may not exceed the number of Units being replaced. Documentation of such replacement units must be provided.

(e) Developments Proposing to Qualify for a 30% increase in Eligible Basis. Staff will evaluate Applications for a 30% increase in Eligible Basis provided they meet the criteria identified in paragraph (1) or (2) of this subsection and Staff will recommend a 30% increase in Eligible Basis unless a 30% increase in Eligible Basis would cause the development to be over sourced, as evaluated by the Real Estate Analysis division, in which case a credit amount necessary to fill the gap in financing will be recommended (paragraph (2) of this subsection does not apply to Tax-Exempt Bond Applications).

(1) The Development is located in a Qualified Census Tract (QCT) (as determined by the Secretary of HUD) that has less than 30% Housing Tax Credit Units per households in the tract as established by the U.S. Census Bureau for the most recent Decennial Census. Developments located in a QCT that has in excess of 30% Housing Tax Credit Units per households in the tract are not eligible to qualify for a 30% increase in Eligible Basis, which would otherwise be available for the Development Site pursuant to §42(d)(5)(C) of the Code, unless the Development is proposing only Reconstruction or Rehabilitation (excluding New Construction of non-residential buildings). Applicants must submit a copy of the census map clearly showing that the proposed Development is located within a QCT. The 11 digit census tract number must be clearly marked on the map. These ineligible Qualified Census Tracts are outlined in the Housing Tax Credit Site Demographic Characteristics Report for the current Application Round; or

(2) The Development meets one of the criteria described in subparagraphs (A) - (E) of this paragraph (pursuant to the authority granted by H.R. 3221):

(A) any Rural Development;

(B) developments proposing entirely Supportive Housing and that such Development is expected to be debt free or have no foreclosable or non-cash flow debt;

(C) developments proposed to be located in a Central Business District as defined in §50.2(7) of this chapter (relating to Definitions);

(D) Developments proposed in a High Opportunity Area as defined in §50.2(15) of this chapter; or

(E) any non-Qualified Elderly Development not located in a QCT that receives local HOME, CDBG or other funds distributed or administered by the local jurisdiction provided that such funding amounts are equal to at least $2,000 per Unit and is removed from Eligible Basis.

§50.6.Allocation and Award Process.

(a) The purpose of this section is to identify the statutory set-asides for Applications competing under the State Housing Credit Ceiling, the methodology by which awards under the Ceiling are made as well as the general process for Housing Tax Credit Allocations.

(b) Regional Allocation Formula. This formula, developed by the Department, establishes separate targeted tax credit amounts for Rural Areas and Urban Areas within each of the Uniform State Service Regions. Each Uniform State Service Region's targeted tax credit amount will be published on the Department's website. The regional allocation for Rural Areas is referred to as the Rural Regional Allocation and the regional allocation for Urban Areas is referred to as the Urban Regional Allocation. Developments qualifying for the Rural Regional Allocation must meet the Rural Development definition. The Regional Allocation target will reflect that at least 20% of the State Housing Credit Ceiling for each calendar year shall be allocated to Developments in Rural Areas with a minimum of $500,000 for each Uniform State Service Region. (§2306.111(d)(3) and §2306.1115)

(c) Allocation Set-Asides. An Applicant may elect to compete in as many of the following Set-Asides for which the proposed Development qualifies: (§2306.111(d))

(1) Nonprofit Set-Aside. At least 10% of the State Housing Credit Ceiling for each calendar year shall be allocated to Qualified Nonprofit Developments which meet the requirements of §42(h)(5) of the Code. Qualified Nonprofit Organizations must have the Controlling interest in the Development Owner applying for this Set-Aside. If the Application is filed on behalf of a limited partnership, the Qualified Nonprofit Organization must be the Managing General Partner. If the Application is filed on behalf of a limited liability company, the Qualified Nonprofit Organization must be the controlling Managing Member. Additionally, a Qualified Nonprofit Development submitting an Application in the nonprofit Set-Aside must have the nonprofit entity or its nonprofit Affiliate or subsidiary be the Developer or a co-Developer as evidenced in the development agreement. An Applicant that meets the requirements to be in the Qualified Non-Profit Set-Aside is deemed to be applying under that set-aside unless their Application specifically includes an affirmative election to not be treated under that set-aside and a certification that they do not expect to receive a benefit in the allocation of tax credits as a result of being affiliated with a nonprofit. The Department reserves the right to request a change in this determination and/or not recommend credits for those unwilling to switch if insufficient Applications in the Nonprofit Set-Aside are received; (§2306.6729 and §2306.6706(b))

(2) USDA Set-Aside. At least 5% of the State Housing Credit Ceiling for each calendar year shall be allocated to Rural Developments which are financed through TRDO-USDA. (§2306.111(d)(2)) If an Application in this Set-Aside involves Rehabilitation it will be attributed to and come from the At-Risk Development Set-Aside; if an Application in this Set-Aside involves New Construction it will be attributed to and come from the applicable Uniform State Service Region. Developments financed through TRDO-USDA's §538 Guaranteed Rural Rental Housing Program, in whole or in part, will not be considered under this Set-Aside. Any Rehabilitation or Reconstruction of an existing §515 Development that retains the §515 loan and restrictions will be considered under the At-Risk Development and TRDO-USDA Set-Asides, unless such Development is also financed through TRDO-USDA's §538 Guaranteed Rural Rental Housing Program. Commitments of Competitive Housing Tax Credits issued by the Board in the current program year will be applied to each Set-Aside, Rural Regional Allocation, Urban Regional Allocation and/or TRDO-USDA Set-Aside for the current Application Round as appropriate;

(3) At-Risk Set-Aside. At least 15% of the State Housing Credit Ceiling for each calendar year will be allocated under the At-Risk Development Set-Aside and will be deducted from the State Housing Credit Ceiling prior to the application of the regional formula required under subsection (b) of this section. Through this Set-Aside, the Department, to the extent possible, shall allocate credits to Applications involving the preservation of Developments identified as At-Risk Developments. (§2306.6714) Up to 5% of the State Credit Ceiling associated with this Set-Aside may be given priority to Rehabilitation Developments funded with TRDO. An At-Risk Development is a Development that: (§2306.6702)

(A) Has received the benefit of a subsidy in the form of a below-market interest rate loan, interest rate reduction, rental subsidy, Section 8 housing assistance payment, rental supplement payment, rental assistance payment, or equity incentive under at least one of the following federal laws, as applicable:

(i) Section 221(d)(3) and (5), National Housing Act (12 U.S.C. §17151);

(ii) Section 236, National Housing Act (12 U.S.C. §1715z-1);

(iii) Section 202, Housing Act of 1959 (12 U.S.C. §1701q);

(iv) Section 101, Housing and Urban Development Act of 1965 (12 U.S.C. §1701s);

(v) The Section 8 Additional Assistance Program for housing Developments with HUD-Insured and HUD-Held Mortgages administered by the United States Department of Housing and Urban Development;

(vi) The Section 8 Housing Assistance Program for the Disposition of HUD-Owned Projects administered by the United States Department of Housing and Urban Development;

(vii) Sections 514 - 516, Housing Act of 1949 (42 U.S.C. §§1484 - 1486);

(viii) Section 42, of the Internal Revenue Code of 1986 (26 U.S.C. §42); or

(ix) Section 538, Housing Act of 1949 only if the Development involves the Rehabilitation of an existing property that has received and will continue to receive as part of the financing of the Development federal assistance provided under §515 of the Housing Act of 1949; and

(B) Is subject to the following conditions:

(i) The stipulation to maintain affordability in the contract granting the subsidy is nearing expiration (expiration will occur within two (2) calendar years of July 31 of the year the Application is submitted); or

(ii) The federally insured mortgage on the Development is eligible for prepayment or is nearing the end of its mortgage term (the term will end within two calendar years of July 31 of the year the Application is submitted);

(C) An Application for a Development that includes the demolition of the existing Units which have received the financial benefit described in subparagraph (A) of this paragraph will not qualify as an At-Risk Development unless the redevelopment will include the same site;

(D) Developments must be at risk of losing affordability from the financial benefits available to the Development and must retain or renew all possible financial benefit if available, and at least maintain existing affordability to qualify as an At-Risk Development;

(E) Nearing expiration on a requirement to maintain affordability includes Developments eligible to request a qualified contract under §42 of the Code. Evidence must be provided in the form of a copy of the recorded LURA, the first years' IRS Forms 8609 for all buildings showing Part II completed and, if applicable, documentation from the original application regarding the right of first refusal;

(F) An amendment submitted to the Department while the Application is under review that would enable the Development to qualify as an At-Risk Development will not be accepted.

(d) Redistribution of Credits. (§2306.111(d)) If any amount of Housing Tax Credits remain after the initial commitment of Housing Tax Credits among the Set-Asides, Rural Regional Allocation and Urban Regional Allocation, the Department may redistribute the credits amongst the different regions and Set-Asides based on the need to most closely achieve regional allocation goals and the level of demand exhibited in the Uniform State Service Regions during the Application Round. However, if there are any tax credits set aside for Developments in a Rural Area in a specific Uniform State Service Region that remain after the allocation under subsection (e) of this section, those tax credits shall be made available in any other Rural Area in the state, first, and then to Developments in Urban areas of any uniform state service region. (§2306.111(d)(3)) As described in subsection (c)(1) and (2) of this section, no more than 90% of the State's Housing Credit Ceiling for the calendar year may go to Developments which are not Qualified Nonprofit Developments. If credits will be transferred from a Uniform State Service Region which does not have enough qualified Applications to meet its regional credit distribution amount, then those credits will be apportioned to the other Uniform State Service Regions.

(e) Methodology for Award Recommendations under the State Housing Credit Ceiling to the Board. The Department will assign, as herein described, Developments for review for financial feasibility by the Department's Real Estate Analysis Division. In general these will be those Applications identified as most competitive and that meet the requirements of Eligibility and Threshold. However, an Application may be reviewed by the Real Estate Analysis Division prior to the completion of the Eligibility and Threshold reviews. The procedure identified in paragraphs (1) - (6) of this subsection will also be used in making recommendations to the Board:

(1) Applications with the highest scores in the TRDO-USDA Allocation until the minimum requirements stated in subsection (c)(2) of this section are attained. If an Application in this Set-Aside involves Rehabilitation it will be attributed to, and come from the, At-Risk Set-Aside; if an Application in this Set-Aside involves New Construction it will be attributed to and come from the applicable Uniform State Service Region;

(2) Applications with the highest scores in the At-Risk Set-Aside Statewide until the minimum requirements stated in subsection (c)(3) of this section are attained;

(3) Remaining funds within each Uniform State Service Region will then be selected based on the highest scoring Developments in each of the 26 sub-regions, regardless of Set-Aside, in accordance with the requirements under subsection (b) of this section, without exceeding the credit amounts available for a Rural Regional Allocation and Urban Regional Allocation in each region. To the extent that Applications in the TRDO-USDA Set-Asides are not competitive enough within their respective Set-Aside, they will also be able to compete, with no Set-Aside preference, within their appropriate sub-region;

(4) If there are any tax credits set-aside for Developments in a Rural Area in a specific Uniform State Service Region that remain after allocation under paragraph (3) of this subsection those tax credits shall then be made available in any other Rural Area in the state to the Application in the most underserved Rural sub-region as compared to the Region's Rural Allocation. This rural redistribution will continue until at least 20% of the funds available to the state are allocated to Rural Areas. (§2306.111(d)(3)) This will be referred to as the Rural collapse;

(5) If there are any tax credits remaining in any sub-region after the Rural collapse, in the Rural Regional Allocation or Urban Regional Allocation, they then will be combined and made available to the Application in the most underserved sub-region as compared to the sub-region's allocation. This will be referred to as the statewide collapse;

(6) Staff will ensure that at least 10% of the State Housing Credit Ceiling is allocated to Qualified Nonprofit Organizations to satisfy the Nonprofit Set-Aside. If 10% is not met through the existing competitive process, then the Department will add the highest scoring Application by a Qualified Nonprofit Organization statewide until the 10% Nonprofit Set-Aside is met and this set-aside will take precedence over selection for the Rural Regional Allocation and Urban Regional Allocation. Funds for the Rural Regional Allocation or Urban Regional Allocation within a region, for which there are no eligible feasible Applications, will be redistributed as provided in subsection (d) of this section. If the Department determines that an allocation recommendation would cause a violation of the $2 million limit described in §50.5(c) of this chapter (relating to Site and Development Restrictions), the Department will make its recommendation by selecting the Development(s) that most effectively satisfy the Department's goals in meeting Set-Aside and regional allocation goals. Based on Application rankings, the Department shall continue to underwrite Applications until the Department has processed enough Applications satisfying the Department's underwriting criteria to enable the allocation of all available Housing Tax Credits according to regional allocation goals and Set-Aside categories. To enable the Board to establish a waiting list, the Department shall underwrite as many additional Applications as necessary to ensure that all available Competitive Housing Tax Credits are allocated within the period required by law. (§2306.6710(a) - (f); §2306.111)

(f) Tie Breaker Factors.

(1) In the event that two or more Applications receive the same number of points in any given Set-Aside category, Rural Regional Allocation or Urban Regional Allocation, or Rural or state collapse and each of the tied Applicants are practicable and economically feasible, the Department will utilize the factors in this paragraph, in the order they are presented, to determine which Development will receive a preference in consideration for a tax credit Commitment.

(A) Applications located in a census tract that has the lowest average of units per capita, supported by Housing Tax Credits, including those supported by Tax Exempt Bonds, at the time the Application Round begins will win the first tie breaker.

(B) The amount of requested tax credits per person assisted calculated at 1.5 persons per Bedroom (Efficiency Units will be considered to have one Bedroom for the purposes of this provision) as of the date of Application submission. The lower credits per Bedroom will win this second tie breaker.

(C) Each scoring item for the tied Applications will be compared in descending order until an item is identified where one Applicant's score is greater than the score of the tied Applicants and the Applicant with the highest score on that item will win this third tie breaker.

(2) This paragraph identifies how ties will be handled when dealing with the restrictions on location identified in §50.8(2)(B) of this chapter (relating to Threshold Criteria), and in dealing with any issues relating to capture rate calculation. When two Tax-Exempt Bond Developments would violate one of these restrictions, and only one Development can be selected, the Department will utilize the Certificate of Reservation docket number issued by the Texas Bond Review Board (TBRB) in making its determination. When two Competitive Housing Tax Credits Applications in the Application Round would violate one of these restrictions, and only one Development can be selected, the Department will utilize the tie breaker identified in paragraph (1) of this subsection. When a Tax-Exempt Bond Development and a Competitive Housing Tax Credit Application in the Application Round would both violate a restriction, the following determination will be used:

(A) Tax-Exempt Bond Developments that receive their Certificate of Reservation from the TBRB on or before April 30 of the current program year will take precedence over the Housing Tax Credit Applications in the current Application Round;

(B) Housing Tax Credit Applications approved by the Board for tax credits in July of the current program year will take precedence over the Tax-Exempt Bond Developments that received their Certificate of Reservation from the TBRB on or between May 1 and July 31 of the current program year; and

(C) After July 31, a Tax-Exempt Bond Development with a Certificate of Reservation from the TBRB will take precedence over any Housing Tax Credit Application from the current Application Round on the waiting list. However, if no Certificate of Reservation has been issued by the date the Board approves an allocation to a Development from the waiting list of Applications in the current Application Round then the waiting list Application will be eligible for its allocation.

(g) Staff Recommendations. (§2306.1112 and §2306.6731) In accordance with the QAP and other applicable Department rules, the Department Staff shall make its recommendations to the Executive Award and Review Advisory Committee for that committee to recommend to the Board. That committee, in making its recommendations, is not constrained to whether the proposed award meets legal and regulatory requirements and may, as it deems appropriate provide information about other factors and concerns. The committee, if it is not unanimous, shall report opposing minority views.

§50.7.Application Process.

(a) The purpose of this section is to outline the process by which Housing Tax Credit Applications are accepted and reviewed by the Department.

(b) General. The application process has two parts, a pre-application which is voluntary but creates an opportunity for a greater score on the required Application and applies only to Applications submitted under the State Housing Credit Ceiling and an Application which is mandatory. An Applicant that does not provide an Application on or before the deadlines provided herein is not eligible to be placed on the list of eligible Applicants to which awards of tax credits may be made. Pre-applications and Applications submitted to the Department are subject to restrictions in paragraphs (1) and (2) of this subsection.

(1) Ex Parte Communications. (§2306.1113) An ex parte communication occurs, when an Applicant initiates substantive contact (other than permitted social contact) with a board member, or vice versa, in a setting other than a duly posted and convened public meeting, in any manner not specifically permitted by §2306.1113(b). Such action is prohibited. For Applicants seeking funding after initial awards have been made, such as waiting list Applicants, the ex parte communication prohibition remains in effect. The ex parte provision does not prohibit the Board from participating in social events at which a Person with whom communications are prohibited may, or will be present, provided that all matters related to the Applications be considered by the Board will not be discussed.

(2) Administrative Deficiency Process. The purpose of the Administrative Deficiency process is to allow the Applicant an opportunity to provide clarification, correction or non-material missing information (i.e. not rising to the level of a Material Deficiency) to resolve inconsistencies in the original Application. Staff will request the missing information via an Administrative Deficiency and will make a recommendation to award points provided the information submitted in response to the Administrative Deficiency is submitted in the time frames specified therein and addresses the issues to the reasonable satisfaction of Staff.

(A) Administrative Deficiencies for Applications submitted under the State Housing Credit Ceiling and Rural Rescue Applications. If an Application contains Administrative Deficiencies which, in the determination of the Department Staff, require clarification, correction or the request of non-material missing information to resolve inconsistencies in the original Application the Department Staff may request such information in the form of an Administrative Deficiency. Because the review for Eligibility, Selection, Threshold Criteria, Quantifiable Community Participation (QCP) and review for financial feasibility by the Department's Real Estate Analysis Division may occur separately, Administrative Deficiency requests may be made during any of these reviews. The Department Staff will request the information in the form of an e-mail, or if an e-mail address is not provided in the Application, by facsimile, and a telephone call (only if there has not been confirmation of the receipt of the e-mail within twenty-four (24) hours) to the Applicant and one other party identified by the Applicant in the Application advising that such a request has been transmitted. If Administrative Deficiencies are not resolved to the satisfaction of the Department by 5:00 p.m. on the fifth business day following the date of the deficiency notice, then (5 points) shall be deducted from the Selection Criteria score for each additional day the deficiency remains unresolved. If Administrative Deficiencies are not resolved by 5:00 p.m. on the seventh business day following the date of the deficiency notice, then the Application shall be terminated. The time period for responding to a deficiency notice begins at the start of the business day following the deficiency notice date. Deficiency notices may be sent to an Applicant prior to or after the end of the Application Acceptance Period and may also be sent in response to reviews on post award submissions. An Applicant may not change or supplement any part of an Application in any manner after the filing deadline, and may not add any Set-Asides, increase the requested credit amount, revise the Unit mix (both income levels and bedroom mixes), or adjust their self-score except in response to a direct request from the Department to do so as a result of an Administrative Deficiency or by approved amendment of an Application after a commitment or allocation of tax credits as further described in §50.13(b) of this chapter (relating to Application Reevaluation). (§2306.6708(b); §2306.6708) To the extent that the review of Administrative Deficiency documentation during the review alters the score assigned to the Application, Applicants will be re-notified of their final adjusted score.

(B) Administrative Deficiencies for Tax Exempt Bond Applications. If an Application contains deficiencies which, in the determination of the Department Staff, require clarification, correction, or non-material missing information to resolve inconsistencies in the original Application the Department Staff may request such information in the form of an Administrative Deficiency. Because the review for Eligibility, Threshold Criteria, and review for financial feasibility by the Department's Real Estate Analysis Division may occur separately, Administrative Deficiency requests may be made during any of these reviews. The Department Staff will request the information in a deficiency notice in the form of an e-mail, or if an e-mail address is not provided in the Application, by facsimile, and a telephone call (only if there has not been confirmation of the receipt of the e-mail within twenty-four (24) hours) to the Applicant and one other party identified by the Applicant in the Application advising that such a request has been transmitted. All Administrative Deficiencies shall be resolved to the satisfaction of the Department within five (5) business days. Failure to resolve all outstanding deficiencies by 5:00 p.m. on the fifth business day following the date of the deficiency notice will result in a penalty fee of $500 for each business day the deficiency remains unresolved. Applications with unresolved deficiencies after 5:00 p.m. on the tenth day following the date of the deficiency notice will be terminated. The Applicant will be responsible for the payment of fees accrued pursuant to this paragraph regardless of any termination pursuant to §50.4 of this chapter (relating to Ineligible Applicants, Applications, and Developments). The time period for responding to a deficiency notice begins at the start of the business day following the deficiency notice date. Deficiency notices may be sent to an Applicant prior to or after the end of the Application Acceptance Period and may also be sent in response to reviews on post award submissions. The Application will not be presented to the Board for consideration until all outstanding fees have been paid.

(c) Pre-application Submission. The purpose of the pre-application process is to enable Applicants interested in pursuing the Application to assess generally who else is interested in submitting Applications and the nature of their proposed Development. Based on an understanding of the potential competition they can make a better and more informed decision whether they wish to proceed to prepare and submit an Application.

(1) As used herein a "complete pre-application" means a pre-application that meets all of the Department's criteria for an Application with all required information and exhibits provided pursuant to the Tax Credit (Procedures) Manual.

(2) The pre-application must be submitted in accordance with the Application Acceptance Period and Pre-application Final Delivery Date as identified in §50.3 of this chapter (relating to Program Calendar).

(3) To submit the complete pre-application the Applicant must deliver one (1) CD-R containing a PDF copy and Excel copy of the complete pre-application to the Department prior to the Pre-application Final Delivery Date.

(4) The pre-application must be a single file and individually bookmarked as presented in the order as required in the Tax Credit (Procedures) Manual.

(5) If a pre-application is not submitted to the Department on or before the applicable deadline indicated in §50.3 of this chapter, the Applicant will be deemed to have not made a pre-application.

(6) The required pre-application fee as described in §50.14 of this chapter (relating to Program Related Fees) must be submitted with the pre-application in order for the pre-application to be accepted by the Department.

(7) Only one pre-application may be submitted by an Applicant for each site. Prior to the pre-application deadline Applicants may withdraw their pre-application and subsequently file a new pre-application utilizing the original pre-application fee that was paid as long as no evaluation was performed by the Department.

(8) Department review at this stage is limited, and not all issues of eligibility and threshold are reviewed at pre-application. Acceptance by Staff of a pre-application does not ensure that an Applicant satisfies all Application eligibility, threshold or documentation requirements. The Department is not responsible for notifying an Applicant of potential areas of ineligibility or threshold deficiencies at the time of pre-application. The rejection of a pre-application shall not preclude an Applicant from submitting an Application with respect to a particular Development at the appropriate time.

(d) Pre-application Threshold Criteria. The Pre-application Threshold Criteria include:

(1) submission of a pre-application;

(2) legal description of the Development Site; and

(3) evidence in the form of a certification that all of the notifications required under this paragraph have been made. (§2306.6704)

(A) The Applicant must request a list of Neighborhood Organizations on record with the county and state whose boundaries include the proposed Development Site:

(i) No later than the Pre-application Neighborhood Organization Request Date identified in §50.3 of this chapter, the Applicant must e-mail, fax or mail with registered receipt (email or fax to be "receipt confirmed") a completed "Neighborhood Organization Request" letter as provided in the pre-application to the local elected official for the city and county where the Development is proposed to be located. If the Development is located in an area that has district based local elected officials, or both at-large and district based local elected officials, the request must be made to the city council member or county commissioner representing that district; if the Development is located in an area that has only at-large local elected officials, the request must be made to the mayor or county judge for the jurisdiction. If the Development is not located within a city or is located in the Extra Territorial Jurisdiction (ETJ) of a city, the county local elected official must be contacted. In the event that local elected officials refer the Applicant to another source, the Applicant must request Neighborhood Organizations from that source in the same format;

(ii) If no reply letter is received from the local elected officials by the Pre-application Response to Neighborhood Organization Request Date, then the Applicant must certify to that fact in the pre-application;

(iii) The Applicant must list in the pre-application all Neighborhood Organizations on record with the county or state whose boundaries include the proposed Development Site as provided by the local elected officials, or that the Applicant has knowledge of (regardless of whether the organization is on record with the county or state) as of the pre-application submission.

(B) Not later than the date the pre-application is submitted, notification must be sent to all of the following individuals and entities by e-mail, fax or mail with registered receipt return or similar tracking mechanism in the format required in the "Pre-application Notification Template" provided in the pre-application. Developments located in an ETJ of a city are not required to notify city officials, however, are required to notify county officials. Evidence of notification is required in the form of a certification provided in the pre-application, although it is encouraged that Applicants retain proof of delivery of the notifications, to the persons or entities prescribed in clauses (i) - (ix) of this subparagraph, in the event that the Department requires proof of notification. Evidence of proof of delivery is demonstrated by signed receipt for mail or courier delivery and confirmation of receipt by the recipient for facsimile and electronic mail. Officials to be notified are those officials in office at the time the pre-application is submitted.

(i) Neighborhood Organizations on record with the state or county whose boundaries include the proposed Development Site;

(ii) Superintendent of the school district containing the Development;

(iii) Presiding officer of the board of trustees of the school district containing the Development;

(iv) Mayor of any municipality containing the Development;

(v) All elected members of the Governing Body of any municipality containing the Development;

(vi) Presiding officer of the Governing Body of the county containing the Development;

(vii) All elected members of the Governing Body of the county containing the Development;

(viii) State senator of the district containing the Development; and

(ix) State representative of the district containing the Development.

(C) Each such notice must include, at a minimum, all of the following:

(i) the Applicant's name, address, individual contact name and phone number;

(ii) the Development name, address, city and county;

(iii) a statement informing the entity or individual being notified that the Applicant is submitting a request for Housing Tax Credits with the Texas Department of Housing and Community Affairs;

(iv) whether the Development proposes New Construction, Reconstruction, Adaptive Reuse, or Rehabilitation;

(v) the type of Development being proposed (single family homes, duplex, apartments, townhomes, high-rise etc.); and

(vi) the approximate total number of Units and approximate total number of low-income Units.

(D) Pre-applications not meeting the Pre-application Threshold Criteria identified in this subsection will be terminated and the Applicant will receive a written notice to that effect. The Department shall not be responsible for the Applicant's failure to meet the Pre-application Threshold Criteria and any failure of the Department's Staff to notify the Applicant of such inability to satisfy the Pre-application Threshold Criteria shall not confer upon the Applicant any rights to which it would not otherwise be entitled.

(e) Pre-application Results. Only pre-applications which have satisfied all of the Pre-application Threshold Criteria requirements set forth in subsection (d) of this section and §50.9(b)(14) of this chapter (relating to Selection Criteria), will be eligible for pre-application points. The order and scores of those Developments released on the Pre-application Submission Log do not represent a Commitment on the part of the Department or the Board to allocate tax credits to any Development and the Department bears no liability for decisions made by Applicants based on the results of the Pre-application Submission Log. Inclusion of a Development on the Pre-application Submission Log does not ensure that an Applicant will receive points for a pre-application.

(f) Application Submission. An Applicant requesting a Housing Credit Allocation or a Determination Notice must submit an Application in order to be considered for Housing Tax Credits.

(1) As used herein a "complete application" means an Application that meets all of the Department's criteria for an Application with all required information and exhibits provided pursuant to the Tax Credit (Procedures) Manual.

(2) For Applications submitted under the State Housing Credit Ceiling, the Application must be submitted by the Full Application Delivery Date as identified in §50.3 of this chapter. The Full Application Delivery Date for Tax-Exempt Bond Developments is triggered by the Certificate of Reservation issued by the Texas Bond Review Board and is further defined in §50.11 of this chapter (relating to Tax-Exempt Bond Developments).

(3) To submit the complete application the Applicant must deliver one (1) CD-R containing a PDF copy and Excel copy of the complete application to the Department.

(4) The Application must be a single file and individually bookmarked in the order as required by the Tax Credit (Procedures) Manual.

(5) If an Application is not submitted to the Department on or before the applicable deadline indicated in paragraph (2) of this subsection, the Applicant will be deemed to have not made an Application.

(6) The required Application fee as described in §50.14 of this chapter must be submitted with the Application in order for the Application to be accepted by the Department.

(7) Only one Application may be submitted for a site in an Application Round. While the Application Acceptance Period is open, an Applicant may withdraw an Application and subsequently file a new Application utilizing the original Pre-application Fee that was paid as long as no evaluation was performed by the Department.

(g) Evaluation Process. Applications submitted for consideration (including Tax Exempt Bond Developments) will be reviewed according to the eligibility, threshold and for competitive applications under the State Housing Credit Ceiling, for Selection Criteria. An Application, during any of these stages of review, may be determined to be ineligible as further described in §50.4 of this chapter. Applicants will be notified in these instances.

(h) Underwriting Evaluation. The Department shall underwrite an Application to determine the financial feasibility of the Development and an appropriate allocation of Housing Tax Credits. In making this determination, the Department will use §1.32 of this title (relating to Underwriting Rules and Guidelines). The Department may have an external party perform the underwriting evaluation to the extent it determines appropriate. The expense of any external underwriting evaluation shall be paid by the Applicant prior to the commencement of the aforementioned evaluation.

(i) Compliance Evaluation. After the Department has determined which Developments will be reviewed for financial feasibility, those same Developments will be reviewed for evaluation of the compliance status in accordance with Chapter 60 of this title (relating to Compliance Administration), and will be evaluated in detail for eligibility under §50.4 of this chapter.

(j) Site Evaluation. Site conditions may be evaluated through a physical site inspection by the Department or its agents. Such inspection will evaluate the Development Site. The evaluations shall be based on the condition of the surrounding neighborhood, including appropriate environmental and aesthetic conditions and proximity to retail, medical, recreational, educational facilities, and employment centers. The site's appearance to prospective tenants and its accessibility via the existing transportation infrastructure and public transportation systems shall be considered. "Unacceptable" sites include, without limitation, those containing a non-mitigable environmental factor that may adversely affect the health and safety of the residents. For Developments applying under the TRDO-USDA Set-Aside, the Department may rely on the physical site inspection performed by TRDO-USDA.

(k) Application Process for Rural Rescue Applications under the Credit Ceiling.

(1) Submission Requirements. Rural Rescue Applications may be submitted during the Rural Rescue Application Submission Period as identified in §50.3 of this chapter. A complete Application must be submitted at least sixty (60) days prior to the date of the Board meeting at which the Applicant would like the Board to act on the proposed Development. Applications must include the full Application Fee as further described in §50.14 of this chapter. Applicants must submit documents in accordance with the Tax Credit (Procedures) Manual.

(A) Applications will be processed on a first-come, first-served basis. Applications unable to meet all Administrative Deficiency and underwriting requirements within thirty (30) days of the request by the Department, will remain under consideration, but will lose their submission status and the next Application in line will be moved ahead in order to expedite those Applications ready to proceed. Applications for Rural Rescue will be processed and evaluated as described in this paragraph. Applications will be reviewed to ensure that the Application is eligible as a rural "rescue" Development as described in paragraph (2) of this subsection.

(B) Prior to the Development being recommended to the Board, TRDO-USDA shall provide the Department with a copy of the physical site inspection report performed by TRDO-USDA, if applicable.

(2) Eligibility and Threshold Review. All Rural Rescue Applications will be reviewed pursuant to §50.8 and §50.9 of this chapter. Additional eligibility requirements include the criteria listed in subparagraphs (A) - (C) of this paragraph. Applications found to be ineligible will be notified.

(A) Applications must be funded through TRDO-USDA;

(B) Applications must be able to provide evidence that the loan:

(i) has been foreclosed and is in the TRDO-USDA inventory; or

(ii) is being foreclosed; or

(iii) is being accelerated; or

(iv) is in imminent danger of foreclosure or acceleration; or

(v) is for an Application in which two adjacent parcels are involved, of which at least one parcel qualifies under clauses (i) - (iv) of this subparagraph and for which the Application is submitted under one ownership structure, one financing plan and for which there are no market rate units; and

(C) Applicants must be identified as in compliance with TRDO-USDA regulations with all other properties.

(3) Selection Criteria Review. All Rural Rescue Applications will be evaluated against the Selection Criteria pursuant to §50.9 of this chapter and a score will be assigned to the Application. The minimum score for Selection Criteria as identified in §50.9(b) of this chapter is not required to be achieved to be eligible.

(4) Credit Ceiling and Applicability of this chapter. All Rural Rescue Applicants will receive their credit allocation out of the following program year Credit Ceiling and therefore, will be subject to the rules and guidelines identified in the Qualified Allocation Plan (QAP) of that program year. However, because the QAP for the following program year will not be in effect during the time period that the Rural Rescue Applications can be submitted, Applications submitted and eligible under the Rural Rescue Set-Aside will be considered to have satisfied the requirements of the following program years' QAP by having satisfied the requirements of the QAP for the current program year, to the extent permitted by statute.

(5) Procedures for Recommendation to the Board. Consistent with subsection (d) of this section, Staff will make its recommendation to the Committee. The Committee will make Commitment recommendations to the Board. Staff will provide the Board with a written, documented recommendation which will address at a minimum the financial and programmatic viability of each Application and a breakdown of which Selection Criteria were met by the Applicant. The Board will make its decision based on §50.10(a) of this chapter (relating to Board Decisions).

(6) Limitation on Allocation. No more than $350,000 in credits will be committed from the current State Housing Credit Ceiling. To the extent Applications are received that exceed the maximum limitation; Staff will prepare the award for Board consideration noting for the Board that the award would require a waiver of this limitation.

§50.8.Threshold Criteria.

The purpose of this section is to identify the mandatory requirements that must be submitted at the time of the original Application submission unless specifically indicated otherwise. If any of the Threshold Criteria indicated below are not resolved, clarified or corrected to the satisfaction of the Department, through the Administrative Deficiency process, the Application will be terminated.

(1) Submission of the Application. Includes the entire Uniform Application and any other supplemental forms which may be required by the Department and in the format prescribed by the Department. (§2306.1111)

(2) Governing Body Resolutions. The following resolutions, if applicable to the proposed Development, must be submitted by the Resolutions Delivery Date as indicated in §50.3 of this chapter (relating to Program Calendar) and may not be more than one year old from the beginning of the Application Acceptance Period or for Tax-Exempt Bond Developments from the date Parts 1 - 4 are submitted to the Department.

(A) Twice the State Average. If the Development is located in a municipality, or if located completely outside a municipality, a county, that has more than twice the state average of units per capita supported by Housing Tax Credits or private activity bonds at the time the Application Round begins (or for Tax-Exempt Bond Developments at the time the Certificate of Reservation is issued by the Texas Bond Review Board) the Applicant must obtain prior approval of the Development from the Governing Body of the appropriate municipality or county containing the Development. Such approval must reference this rule and authorize an allocation of Housing Tax Credits for the Development; (§2306.6703(a)(4))

(B) One Mile Three Year Rule. If the Applicant proposes to construct a Development proposing New Construction or Adaptive Reuse (excluding New Construction of non-residential buildings) that is located one linear mile (measured by a straight line on a map) or less from a Development that: (§2306.6703(a)(3))

(i) serves the same type of household as the new Development, regardless of whether the Development serves families, elderly individuals, or another type of household; and

(ii) has received an allocation of Housing Tax Credits or private activity bonds for any New Construction at any time during the three-year period preceding the date the Application Round begins (or for Tax-Exempt Bond Developments the three-year period preceding the date Parts 1 - 4 are submitted); and

(iii) has not been withdrawn or terminated from the Housing Tax Credit Program;

(iv) an Application is not ineligible under this paragraph if:

(I) the Development is using federal HOPE VI funds received through the United States Department of Housing and Urban Development; locally approved funds received from a public improvement district or a tax increment financing district; funds provided to the state under the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. §§12701 et seq.); or funds provided to the state and participating jurisdictions under the Housing and Community Development Act of 1974 (42 U.S.C. §§5301 et seq.); or

(II) the Development is located in a county with a population of less than one million; or

(III) the Development is located outside of a metropolitan statistical area; or

(IV) the Governing Body, of the Unit of General Local Government where the Development is to be located has by vote specifically allowed the construction of a new Development located within one linear mile or less from a Development described under clause (i) of this subparagraph.

(v) In determining when an existing Development received an allocation as it relates to the application of the three-year period, the Development will be considered from the date the Board took action on approving the allocation of tax credits. In dealing with ties between two or more Developments as it relates to this rule, refer to §50.6(f) of this chapter (relating to Allocation and Award Process).

(C) Developments in Certain Census Tracts. Staff will not recommend and the Board will not allocate Housing Tax Credits for a Competitive Housing Tax Credit or Tax-Exempt Bond Development located in a census tract that has more than 30% Housing Tax Credit Units per total households in the census tract as established by the U.S. Census Bureau for the most recent Decennial Census unless:

(i) the Development is in a Place whose population is less than 100,000;

(ii) the Applicant proposes only Reconstruction or Rehabilitation (excluding New Construction of non-residential buildings); or

(iii) submits to the Department an approval of the Development referencing this rule in the form of a resolution from the Governing Body of the appropriate municipality or county containing the Development. These ineligible census tracts are outlined in the Housing Tax Credit Site Demographic Characteristics Report for the current Application Round.

(3) Rehabilitation Costs. Developments involving Rehabilitation must establish a scope of work that will substantially improve the interiors of all Units and exterior deferred maintenance, at a minimum, and will involve at least $25,000 per Unit in direct construction cost, also referred to as building costs in §1.32(e)(4) of this title (relating to Underwriting Rules and Guidelines), and site work. If financed with TRDO-USDA the minimum is $19,000 and for Tax-Exempt Bond Developments, less than twenty-five (25) years old, the minimum is $15,000 per Unit.

(4) Experience Requirement. The purpose of the experience requirement is for someone in the Development to demonstrate they have experience in development. Evidence must be provided in the Application that meets the criteria as stated in subparagraph (A) of this paragraph. An Applicant may submit their experience documentation prior to the Application deadline and the Department will attempt to review and respond within thirty (30) days of submission regarding approval of the experience requirement. Experience of multiple parties may not be aggregated.

(A) A Principal of the Developer, Development Owner, General Partner or General Contractor must establish that they have experience in the development of 150 units or more. Acceptable documentation to meet this requirement shall include:

(i) an experience certificate issued by the Department in the past three (3) years; or

(ii) any of the items in subclauses (I) - (IX) of this clause:

(I) American Institute of Architects (AIA) Document (A102) or (A103) 2007 - Standard Form of Agreement between Owner & Contractor;

(II) AIA Document G704--Certificate of Substantial Completion;

(III) AIA Document G702--Application and Certificate for Payment;

(IV) Certificate of Occupancy;

(V) IRS Form 8609 (only one per development is required);

(VI) HUD Form 9822;

(VII) Development agreements;

(VIII) Partnership agreements; or

(IX) other documentation satisfactory to the Department verifying that the Development Owner's General Partner, partner (or if Applicant is to be a limited liability company, the managing member), General Contractor, Developer or their Principals have the required experience.

(B) For purposes of this requirement any individual attempting to use the experience of another individual must demonstrate they have or had the authority to act on their behalf that substantiates the minimum 150 unit requirement.

(i) The names on the forms and agreements in subparagraph (A)(ii) of this paragraph must tie back to the Development Owner's General Partner, partner (or if Applicant is to be a limited liability company, the managing member), Developer or their Principals as listed in the Application.

(ii) Experience may not be established for a Person who at any time within the preceding three years has been involved with affordable housing that has been in material non-compliance under the Department's rules or for affordable housing in another state, has been the subject of issued IRS Form 8823 citing non-compliance that has not been or is not being corrected with reasonable due diligence.

(iii) If a Principal is determined by the Department to not have the required experience, an acceptable replacement for that Principal must be identified prior to the date the award is made by the Board.

(iv) Notwithstanding the foregoing, no person may be used to establish such required experience if that Person or an Affiliate of that Person would not be eligible to be an Applicant themselves.

(5) Certifications. The "Certification Form" provided in the Application confirming:

(A) a certification of the basic common amenities selected for the Development. All Developments must meet at least the minimum threshold of points based on the total number of Units in the Development. These points are not associated with the Selection Criteria points in §50.9(b) of this chapter (relating to Selection Criteria). The amenities selected must be made available for the benefit of all tenants and must be made available throughout normal business hours. If fees in addition to rent are charged for amenities, then the amenity may not be included among those provided to satisfy the threshold requirement. All amenities must meet accessibility standards. Spaces for activities must be sized appropriately to serve the Target Population of the Development. Applications for non-contiguous scattered site housing, excluding non-contiguous single family sites, will have the threshold test applied based on the number of Units per individual site, and will have to identify in the LURA which amenities are at each individual site. The complete list of amenities can be found in §1.1 of this title (relating to Definitions and Amenities for Housing Program Activities).

(i) Applications must meet a minimum threshold of points:

(I) Total Units equal 16, (1 point) is required;

(II) Total Units are 17 to 40, (4 points) are required;

(III) Total Units are 41 to 76, (7 points) are required;

(IV) Total Units are 77 to 99, (10 points) are required;

(V) Total Units are 100 to 149, (14 points) are required;

(VI) Total Units are 150 to 199, (18 points) are required; or

(VII) Total Units are 200 or more, (22 points) are required.

(ii) Unit Amenities (Tax Exempt Bond Developments Only). The Development must include enough amenities to meet the minimum threshold of (14 points). The amenity and quality feature shall be for every Unit at no extra charge to the tenant as certified to in the Application. The amenities and corresponding point structure is provided in §1.1 of this title. The amenities will be required to be identified in the LURA. Applications involving scattered site Developments must have a specific amenity located within each Unit to count for points. Rehabilitation Developments will start with a base score of (3 points) and Supportive Housing Developments will start with a base score of (5 points).

(B) A certification that the Development will meet the minimum threshold for size of Units as provided in clauses (i) - (v) of this subparagraph. These minimum requirements are not associated with the points in §50.9(b)(4) of this chapter. Developments proposing Rehabilitation (excluding Reconstruction) or Supportive Housing Developments will not be subject to the requirements of this subparagraph.

(i) five hundred-fifty (550) square feet for an Efficiency Unit;

(ii) six hundred-fifty (650) square feet for a one Bedroom Unit that is not in a Qualified Elderly Development; 550 square feet for a one Bedroom Unit in a Qualified Elderly Development;

(iii) nine hundred (900) square feet for a two Bedroom Unit that is not in a Qualified Elderly Development; 700 square feet for a two Bedroom Unit in a Qualified Elderly Development;

(iv) one thousand (1,000) square feet for a three Bedroom Unit; and

(v) one thousand, two-hundred (1,200) square feet for a four Bedroom Unit.

(C) A certification that the Development will adhere to the Texas Property Code relating to security devices and other applicable requirements for residential tenancies, and will adhere to local building codes or, if no local building codes are in place, then to the most recent version of the International Building Code.

(D) A certification that the Applicant is and will remain in compliance with state and federal laws, including but not limited to, fair housing laws, including Chapter 301, Property Code, Title VIII of the Civil Rights Act of 1968 (42 U.S.C. §§3601 et seq.), the Fair Housing Amendments Act of 1988 (42 U.S.C. §§3601 et seq.); the Civil Rights Act of 1964 (42 U.S.C. §§2000a et seq.); the Americans with Disabilities Act of 1990 (42 U.S.C. §§12101 et seq.); the Rehabilitation Act of 1973 (29 U.S.C. §§701 et seq.); Fair Housing Accessibility; the Texas Fair Housing Act; and that the Development is designed consistent with the Fair Housing Act Design Manual produced by HUD, the Code Requirements for Housing Accessibility 2000 (or as amended from time to time) produced by the International Code Council and the Texas Accessibility Standards. (§2306.257; §2306.6705(7))

(E) A certification that the Applicant has read and understands the Department's fair housing educational materials posted on the Department's website as of the beginning of the Application Acceptance Period.

(F) A certification that the Applicant will attempt to ensure that at least 30% of the construction and management businesses with which the Applicant contracts in connection with the Development are Minority Owned Businesses, and that the Applicant will submit a report at least once in each 90-day period following the date of the Commitment until the Cost Certification is submitted, in a format prescribed by the Department and provided at the time a Commitment is received, on the percentage of businesses with which the Applicant has contracted that qualify as Minority Owned Businesses. (§2306.6734)

(G) Pursuant to §2306.6722 of the Texas Government Code, any Development supported with a Housing Tax Credit allocation shall comply with the accessibility standards that are required under §504, Rehabilitation Act of 1973 (29 U.S.C. §794), and specified under 24 C.F.R. Part 8, Subpart C. The Applicant must provide a certification from the Development engineer, an accredited architect or Department-approved Third Party accessibility specialist, that the Development will comply with the accessibility standards that are required under §504, Rehabilitation Act of 1973 (29 U.S.C. §794), and specified under 24 C.F.R. Part 8, Subpart C, and this subparagraph. (§2306.6722 and §2306.6730)

(H) For Developments involving New Construction (excluding New Construction of non-residential buildings) where some Units are two-stories or single family design and are normally exempt from Fair Housing accessibility requirements, a minimum of 20% of each Unit type (i.e., one bedroom, two bedroom, three bedroom) must provide an accessible entry level and all common-use facilities in compliance with the Fair Housing Guidelines, and include a minimum of one bedroom and one bathroom or powder room at the entry level. A similar certification will also be required after the Development is completed from an inspector, architect, or accessibility specialist.

(I) A certification that the Development Owner agrees to establish a reserve account consistent with §2306.186 of the Texas Government Code and as further described in §1.37 of this title (relating to Reserve for Replacement Rules and Guidelines).

(J) A certification that the Applicant, Developer, or any employee or agent of the Applicant has not formed a Neighborhood Organization for purposes of §50.9(b)(2) of this chapter, has not given money or a gift to cause the Neighborhood Organization to take its position of support or opposition, nor has provided any assistance to a Neighborhood Organization outside of the assistance allowed under §50.9(b)(2)(A)(viii) of this chapter to meet the requirements under §50.9(b)(2) of this chapter as it relates to the Applicant's Application or any other Application under consideration in the current Application Round.

(K) A certification that the Development will operate in accordance with the requirements pertaining to rental assistance in Chapter 60 of this title (relating to Compliance Administration).

(L) A certification that the Development Owner will contract with a Management Company throughout the Compliance Period that will perform criminal background checks on all adult tenants, head and co-head of households.

(M) A certification that the Development Owner will affirmatively market to veterans through direct marketing or contracts with veteran's organizations. The Development Owner will be required to identify how they will affirmatively market to veterans and report to the Department in the annual housing report on the results of the marketing efforts to veterans. Exceptions to this requirement must be approved by the Department.

(N) A certification as to whether the Applicant, Development Owner, Developer or Guarantor involved with the Application has not voluntarily or involuntarily had their involvement in a rent or income restricted multifamily Development terminated by a lender, equity provider, or other investors or owners as a Principal during the previous ten (10) years, however designated, or any combination thereof or if any litigation to effectuate such exit has been instituted and is continuing at the time of Application. If such a termination of involvement occurred the facts and circumstances shall be fully disclosed. If an Applicant or Developer signs the certification and fails to disclose a discloseable matter and the Department learns at a later date that an exit did take place as described, then the Application may be terminated and any Allocation made will be rescinded. The disclosure of an exit does not, in and of itself, result in the Applicant or Application being deemed ineligible. Only if the Executive Director determines that the disclosed matter warrants ineligibility, a report of the matter and that recommendation shall be presented to the Board for a final determination. The Board may impose reasonable constraints, including time constraints, as a part of its determination. Any such matter to be presented for final determination of ineligibility by the Board must include notice from the Department to the affected party not less than fourteen (14) days prior to the scheduled Board meeting. The Executive Director may, but is not required, to issue a formal notice after disclosure if it is determined that the matter does not warrant ineligibility.

(6) Architectural Drawings. While full size design or construction documents are not required, the drawings must have an accurate and legible scale and show the dimensions. All Developments involving New Construction, or conversion of existing buildings not configured in the Unit pattern proposed in the Application as well as all other Developments unless specifically stated otherwise, must provide all of the items identified in subparagraphs (A) - (C) of this paragraph.

(A) A site plan which:

(i) is consistent with the number of Units and Unit mix specified in the "Rent Schedule" provided in the Application;

(ii) is consistent with the number of buildings and building type/unit mix specified in the "Building/Unit Configuration" provided in the Application;

(iii) identifies all residential and common buildings;

(iv) clearly delineates the flood plain boundary lines and shows all easements;

(v) indicates possible placement of detention/retention pond(s) (if applicable); and

(vi) indicates the location of the parking spaces;

(B) Building floor plans and elevations for each type of residential building and each common area building clearly depicting the height of each floor, a percentage estimate of the exterior composition and square footage of the common areas. Adaptive Reuse Developments, are only required to provide building plans delineating each Unit by number, type and area consistent with those in the "Rent Schedule" and pictures of each elevation of the existing building depicting the height of each floor and percentage estimate of the exterior composition. For Rehabilitation Developments in which the Unit configurations are not being altered then building floor plans are not required; however, photographs of elevations must be submitted and if elevations are proposed to be altered then after renovation drawings must be submitted; and

(C) Unit floor plans for each type of Unit. The Net Rentable Areas these Unit floor plans represent should be consistent with those shown in the "Rent Schedule" and "Building/Unit Configuration" provided in the Application. Adaptive Reuse Developments, are only required to provide Unit floor plans for each distinct typical Unit type (i.e. one-bedroom, two-bedroom) and for all Unit types that vary in Net Rentable Area by 10% from the typical Unit.

(7) Development Costs.

(A) The Development Cost Schedule, as provided in the Application, must include the contact information for the person providing the cost estimate for the Hard Costs.

(B) If offsite costs are included in the budget as a line item, or embedded in the site acquisition contract, or referenced in the utility provider letters, then the supplemental form "Off Site Cost Breakdown" must be provided.

(C) If projected site work costs (excluding ineligible demolition costs) include unusual or extraordinary items or exceed $9,000 per Unit, then the Applicant must provide a detailed cost breakdown prepared by a Third Party engineer, and a letter from a certified public accountant allocating which portions of those site costs should be included in Eligible Basis and which ones may be ineligible.

(8) Readiness to Proceed.

(A) Site Control. Evidence that the Development Owner has and will have at all times while the Application or any Commitment or Determination Notice is pending the ability to compel legal title to a developable interest in the Development Site, i.e., site control. If by the timeframes required in this chapter or any extension thereof as approved by the Department, Applicant fails to have the ability to compel legal title to such a developable interest, that Applicant shall be ineligible for participation in the next Application Round. This is an appealable matter. If the evidence is not in the name of the Development Owner, then the documentation should reflect an expressed ability to transfer the rights to the Development Owner. All of the sellers of the proposed Property for the thirty-six (36) months prior to the first day of the Application Acceptance Period and their relationship, if any, to members of the Development team must be identified at the time of Application (not required at pre-application). One of the following items described in clauses (i) - (iii) of this subparagraph must be provided:

(i) a recorded warranty deed with corresponding executed settlement statement, unless required to submit items under clause (iv) of this subparagraph; or

(ii) a contract for lease (the minimum term of the lease must be at least forty-five (45) years) which is valid for the entire period the Development is under consideration for tax credits; or

(iii) a contract for sale, an exclusive option to purchase or a lease which is valid for the entire period the Development is under consideration for tax credits. For Tax Exempt Bond Development Applications, site control must be valid through December 1 of the prior program year with option to extend through March 1 of the current program year (Applications submitted for lottery) or ninety (90) days from the date of the Certificate of Reservation with the option to extend through the scheduled TDHCA Board meeting at which the award of Housing Tax Credits will be considered (Applications not submitted for lottery). The potential expiration of Site Control does not warrant the Application being presented to the TDHCA Board prior to the scheduled meeting. Proof of consideration, as specified in the contract, must be submitted and the expiration date and closing date deadline must be identified.

(iv) If the acquisition can be characterized as an identity of interest transaction, as described in §1.32 of this title then the Applicant will be required to meet the documentation requirements as further described in §1.32 of this title.

(B) Zoning. Evidence from the appropriate local municipal authority that satisfies one of clauses (i) - (iii) of this subparagraph. Documentation may be from more than one department of the municipal authority and must have been prepared and executed not more than six (6) months prior to the close of the Application Acceptance Period. (§2306.6705(5))

(i) For New Construction, Adaptive Reuse or Reconstruction Developments, a letter from the chief executive officer of the Unit of General Local Government or another local official with appropriate jurisdiction stating that the Development is located within the boundaries of a Unit of General Local Government that has no zoning or for Developments located in Harris County the letter must state the Development is consistent with local housing policy adopted by the Unit of General Local Government within which the Development is located or that such Unit of General Local Government has no zoning or formally adopted local housing policy.

(ii) For New Construction, Adaptive Reuse or Reconstruction Developments, a letter from the chief executive officer of the Unit of General Local Government or another local official with appropriate jurisdiction stating that:

(I) The Development is permitted under the provisions of the zoning ordinance that applies to the location of the Development; or

(II) the Applicant is in the process of seeking the appropriate zoning and has signed and provided to the Unit of General Local Government a release agreeing to hold the Unit of General Local Government and all other parties harmless in the event that the appropriate zoning is denied. (§2306.6705(5)(B)) Documentation of final approval of appropriate zoning must be submitted to the Department with the Commitment or Determination Notice. No extensions may be requested to the deadline for submitting evidence of final approval of appropriate zoning.

(iii) For Rehabilitation Developments, documentation of current zoning is required. If the property is currently conforming but with an overlay that would make it a non-conforming use as presently zoned, a letter from the chief executive officer of the Unit of General Local Government or another local official with appropriate jurisdiction which addresses the items in subclauses (I) - (IV) of this clause:

(I) a detailed narrative of the nature of non-conformance;

(II) the applicable destruction threshold;

(III) Owner's rights to reconstruct in the event of damage; and

(IV) Penalties for noncompliance.

(C) Financing Requirements.

(i) Evidence of all necessary interim and permanent financing sufficient to fund the proposed Total Housing Development Cost less any other funds requested from the Department and any other sources documented in the Application. Any local, state or federal financing identified in this section which restricts household incomes at any AMGI lower than restrictions required pursuant to this chapter must be identified in the "Rent Schedule" and the local, state or federal income restrictions must include corresponding rent levels that do not exceed 30% of the income limitation in accordance with §42(g) of the Code. The income and corresponding rent restrictions will be imposed by the Housing Tax Credit LURA and monitored throughout the extended use period. Such evidence must be consistent with the sources and uses of funds represented in the Application and shall be provided in one or more of the following forms described in subclauses (I) - (IV) of this clause:

(I) Financing is in place as evidenced by:

(-a-) a valid and binding loan agreement; and

(-b-) deed(s) of trust in the name of the Development Owner as grantor; or

(-c-) for TRDO-USDA §515 Developments involving, an executed TRDO-USDA letter indicating TRDO-USDA has received a notification of the tax credit Application; or

(II) term sheet for the interim and permanent loans issued by a lending institution or mortgage company that is actively and regularly engaged in the business of lending money which is addressed to the Development Owner and includes the following as identified in items (-a-) - (-d-) of this subclause:

(-a-) has been executed by the lender; and

(-b-) a minimum loan term of fifteen (15) years with at least a thirty (30) year amortization; and

(-c-) an expiration date; and

(-d-) all the terms and conditions applicable to the financing including the mechanism for determining the Interest rate, if applicable, and the anticipated interest rate, any required Guarantors, and anticipated developer fees paid during construction and anticipated deferred developer fees. Such a commitment may be conditional upon the completion of specified due diligence by the lender and upon the award of tax credits; or

(III) any federal, state or local gap financing, whether of soft or hard debt, must be identified at the time of Application as evidenced by:

(-a-) a term sheet from the lending agency which clearly describes the amount and terms of the funding must be submitted. If applying for points under §50.9(b)(5) of this chapter then documentation must be submitted as required by the deadlines stated therein; and

(-b-) evidence of a complete and receipted application for funding from another Department program must be obtained no later than March 1 (or for Tax Exempt Bond Developments at the time Parts 1 - 4 are submitted). The Department funding must be on a concurrent funding period with current tax credit Application Round; and

(IV) if the Development will be financed through more than 5% of Development Owner contributions, provide a letter from a Third Party CPA verifying the capacity of the Development Owner to provide the proposed financing with funds that are not otherwise committed together with a letter from the Development Owner's bank or banks confirming that sufficient funds are available to the Development Owner. Documentation must have been prepared and executed not more than six (6) months prior to the close of the Application Acceptance Period;

(ii) a written narrative describing the financing plan for the Development, including any non-traditional financing arrangements; the use of funds with respect to the Development; the funding sources for the Development including construction, permanent and bridge loans, rents, operating subsidies, and replacement reserves; and the commitment status of the funding sources for the Development. This information must be consistent with the information provided throughout the Application; and (§2306.6705(1))

(iii) provide a term sheet from a syndicator that, at a minimum, provides an estimate of the amount of equity dollars expected to be raised for the Development in conjunction with the amount of Housing Tax Credits requested for allocation to the Development Owner, including pay-in schedules, anticipated developer fees paid during construction and anticipated deferred developer fees, syndicator consulting fees and other syndication costs. No syndication costs should be included in the Eligible Basis. (§2306.6705(2) and (3))

(D) Title Commitment or Policy. The Application shall include a copy of:

(i) the current title policy (or title status report if on Tribal Land) including a legal description which shows that the ownership (or leasehold) of the Development Site is vested in the name of the Development Owner; or

(ii) a complete, current title commitment with the proposed insured matching the name of the Development Owner and the title of the Development Site vested in the name of the seller or lessor as indicated on the sales contract, option or lease;

(iii) if the title policy, title status report, or commitment is more than six (6) months old as of the day the Application Acceptance Period closes, then a letter from the title company/Bureau of Indian Affairs indicating that nothing further has transpired on the policy, title status report or commitment must be provided.

(9) Notifications. Evidence in the form of a certification that the Applicant met the requirements and deadlines identified in subparagraphs (A) - (C) of this paragraph. Notification must not be older than three (3) months from the first day of the Application Acceptance Period. (§2306.6705(9)) If evidence of these notifications was submitted with the pre-application for the same Application and satisfied the Department's review of Pre-application Threshold, then no additional notification is required at Application. However, re-notification is required by tax credit Applicants who have submitted a change in the Application, whether from pre-application to Application or as a result of an Administrative Deficiency that reflects a total Unit increase of greater than 10%, a total increase of greater than 10% for any given level of AMGI, or a change to the Target Population being served. For Applications submitted for Tax-Exempt Bond Developments or Applications not applying for Tax Credits, but applying only under other Multifamily Programs (HOME, Housing Trust Fund, etc.), notifications and proof thereof must not be older than three (3) months prior to the date Parts 5 and 6 of the Application are submitted.

(A) The Applicant must request a list of Neighborhood Organizations on record with the county and state whose boundaries include the proposed Development Site from local elected officials:

(i) no later than the Full Application Neighborhood Organization Request Date as identified in §50.3 of this chapter, the Applicant must e-mail, fax or mail with registered receipt a completed "Neighborhood Organization Request" letter as provided in the Application to the local elected official for the city and county where the Development is proposed to be located. If the Development is located in an area that has district based local elected officials, or both at-large and district based local elected officials, the request must be made to the city council member or county commissioner representing that district; if the Development is located an area that has only at-large local elected officials, the request must be made to the mayor or county judge for the jurisdiction. If the Development is not located within a city or is located in the ETJ of a city, the county local elected official must be contacted. In the event that local elected officials refer the Applicant to another source, the Applicant must request Neighborhood Organizations from that source in the same format;

(ii) if no reply letter is received from the local elected officials by the Full Application Response to Neighborhood Organization Request Date, then the Applicant must certify to that fact in the certification form provided in the Application;

(iii) the Applicant must list all Neighborhood Organizations on record with the county or state whose boundaries include the proposed Development Site as outlined by the local elected officials, or that the Applicant has knowledge of (regardless of whether the organization is on record with the county or state) as of the submission of the Application, in the certification form provided in the Application.

(B) No later than the date the Application is submitted, notification must be sent to all of the following individuals and entities by e-mail, fax or mail with registered receipt return or similar tracking mechanism e-mail, fax or mail with registered receipt in the format required in the "Application Notification Template" provided in the Application. Developments located in an ETJ of a city are not required to notify city officials, however, are required to notify county officials. Evidence of notification is required in the form of a certification provided in the Application, although it is encouraged that Applicants retain proof of delivery of the notifications, to the persons or entities prescribed in clauses (i) - (ix) of this subparagraph, in the event that the Department requires proof of notification. Evidence of proof of delivery is demonstrated by signed receipt for mail or courier delivery and confirmation of receipt by recipient for facsimile and electronic mail. Officials to be notified are those officials in office at the time the Application is submitted.

(i) Neighborhood Organizations on record with the state or county whose boundaries include the proposed Development Site as identified in subparagraph (A)(iii) of this paragraph;

(ii) Superintendent of the school district containing the Development;

(iii) Presiding officer of the board of trustees of the school district containing the Development;

(iv) Mayor of the Governing Body of any municipality containing the Development;

(v) All elected members of the Governing Body of any municipality containing the Development;

(vi) Presiding officer of the Governing Body of the county containing the Development;

(vii) All elected members of the Governing Body of the county containing the Development;

(viii) State senator of the district containing the Development; and

(ix) State representative of the district containing the Development.

(C) Each such notice must include, at a minimum, all of the following as identified in clauses (i) - (vi) of this subparagraph:

(i) the Applicant's name, address, individual contact name and phone number;

(ii) the Development name, address, city and county;

(iii) a statement informing the entity or individual being notified that the Applicant is submitting a request for Housing Tax Credits with the Texas Department of Housing and Community Affairs (TDHCA);

(iv) statement of whether the Development proposes New Construction, Reconstruction, Adaptive Reuse or Rehabilitation;

(v) the type of Development being proposed (single family homes, duplex, apartments, townhomes, high-rise etc.); and

(vi) the approximate total number of Units and approximate total number of low-income Units.

(10) Development's Proposed Ownership Structure.

(A) A chart which clearly illustrates the complete organizational structure of the final proposed Development Owner and of any Developer or Guarantor, providing the names and ownership percentages of all Persons having an ownership interest in the Development Owner or the Developer or Guarantor, as applicable, whether directly or through one or more subsidiaries. Nonprofit entities, public housing authorities, publicly traded corporations, individual board members, and executive directors must be included in this exhibit and trusts must list all beneficiaries that have the legal ability to control or direct activities of the trust and are not just financial beneficiaries.

(B) Evidence that each entity shown on the organizational chart described in subparagraph (A) of this paragraph that has ownership interest in the Development Owner, Developer or Guarantor, has provided a copy of the completed and executed Previous Participation and Background Certification Form to the Department. Nonprofit entities, public housing authorities and publicly traded corporations are required to submit documentation for the entities involved. Documentation for individual board members and executive directors, any Person receiving more than 10% of the Developer fee and Units of General Local Government are all required to submit this document. The form must include a list of all developments that are, or were, previously under ownership or Control of the Applicant and each Principal, including any Person providing the required experience. All participation in any TDHCA funded or monitored activity, including non-housing activities, as well as housing tax credit developments or other programs administered by other states using state or federal programs must be disclosed and authorize the parties overseeing such assistance to release compliance histories to the Department.

(C) The documentation relating to the experience requirement, as further described under paragraph (4) of this section, is submitted that reflects a Person that appears in the organizational chart provided in subparagraph (A) of this paragraph.

(11) Development's Projected Income and Operating Expenses.

(A) All Applications must include a 15-year pro forma estimate of operating expenses and supporting documentation used to generate projections (operating statements from comparable properties);

(B) If rental assistance, an operating subsidy, an annuity, or an interest rate reduction payment is proposed to exist or continue for the Development, any related contract or other agreement securing those funds or proof of application for such funds must be provided, which at a minimum identifies the source and annual amount of the funds, the number of Units receiving the funds, and the term and expiration date of the contract or other agreement; (§2306.6705(4))

(C) Applicant must provide documentation from the source of the "Utility Allowance" estimate used in completing the Rent Schedule provided in the Application. This exhibit must clearly indicate which utility costs are included in the estimate;

(D) Occupied Developments undergoing Rehabilitation must also submit the items described in clauses (i) - (vi) of this subparagraph;

(i) The items in subclauses (I) and (II) of this clause are required unless the current property owner is unwilling to provide the required documentation. In that case, submit a signed statement as to the Applicant's inability to provide all documentation as described:

(I) submit at least one of the following identified in items (-a-) - (-d-) of this subclause:

(-a-) historical monthly operating statements of the subject Development for twelve (12) consecutive months ending not more than three (3) months from the first day of the Application Acceptance Period;

(-b-) the two (2) most recent consecutive annual operating statement summaries;

(-c-) the most recent consecutive six (6) months of operating statements and the most recent available annual operating summary;

(-d-) all monthly or annual operating summaries available; and

(II) a rent roll not more than six (6) months old as of the first day the Application Acceptance Period, that discloses the terms and rate of the lease, rental rates offered at the date of the rent roll, Unit mix, and tenant names or vacancy;

(ii) a written explanation of the process used to notify and consult with the tenants in preparing the Application; (§2306.6705(6))

(iii) for Qualified Elderly Developments, identification of the number of existing tenants qualified under the Target Population elected under this title;

(iv) a relocation plan outlining relocation requirements and a budget with an identified funding source; (§2306.6705(6))

(v) compliance with the Uniform Relocation Act, if applicable; and

(vi) if applicable, evidence that the relocation plan has been submitted to the appropriate legal or governmental agency. (§2306.6705(6))

(12) Applications involving Nonprofit General Partners and Qualified Nonprofit Developments. All Applications under the State Housing Credit Ceiling involving a §501(c)(3) or (4) nonprofit General Partner, and which meet the Nonprofit Set-Aside in §42(h)(5) of the Code, must submit all of the documents described in this subparagraph and indicate the nonprofit status on the carryover documentation and IRS Forms 8609. (§2306.6706) Applications under the State Housing Credit Ceiling that include an affirmative election to not be treated under the set-aside and a certification that they do not expect to receive a benefit in the allocation of tax credits as a result of being affiliated with a nonprofit only need to submit the information in subparagraphs (A) and (B) of this paragraph. Tax-Exempt Bond Applications only need to submit the information in subparagraphs (A) and (B) of this paragraph. Applications involving a nonprofit that is not a §501(c)(3) or (4) only need to disclose the basis of their nonprofit status. A participating nonprofit, regardless of whether it is applying under the Nonprofit Set-Aside (for Applications under the State Housing Credit Ceiling) may be reported to the Internal Revenue Service as being involved if such request is by the Internal Revenue Service.

(A) An IRS determination letter which states that the nonprofit organization is a §501(c)(3) or (4) entity;

(B) The "Nonprofit Participation Exhibit" as provided in the Application;

(C) A Third Party legal opinion stating:

(i) that the nonprofit organization is not affiliated with or Controlled by a for-profit organization and the basis for that opinion; and

(ii) that the nonprofit organization is eligible, as further described, for a Housing Credit Allocation from the Nonprofit Set-Aside pursuant to §42(h)(5) of the Code and the basis for that opinion; and

(iii) that one of the exempt purposes of the nonprofit organization is to provide low-income housing; and

(iv) that the nonprofit organization prohibits a member of its board of directors, other than a chief Staff member serving concurrently as a member of the board, from receiving material compensation for service on the board; and

(v) that the Qualified Nonprofit Development will have the nonprofit entity or its nonprofit Affiliate or subsidiary be the Developer or co-Developer as evidenced in the development agreement; and

(D) a copy of the nonprofit organization's most recent financial statement as prepared by a Certified Public Accountant; and

(E) evidence in the form of a certification that a majority of the members of the nonprofit organization's board of directors principally reside:

(i) in this state, if the Development is located in a Rural Area; or

(ii) not more than ninety (90) miles from the Development, if the Development is not located in a Rural Area.

(13) Authorization to Release Credit Information. The Authorization to Release Credit Information form may be requested, at the discretion of the Department, for any General Partner, Developer or Guarantor and other Affiliates of the Applicant.

(14) Supplemental Threshold Reports. The reports as required in this section must be prepared by a qualified Third party and must meet the requirements stated in subparagraphs (A) - (F) of this paragraph. The Environmental Site Assessment, Property Condition Assessment and Appraisal (if applicable) must be submitted on or before the Third Party Report Delivery Date as identified in §50.3 of this chapter. The Market Analysis Report must be submitted on or before the Market Analysis Delivery Date as identified in §50.3 of this chapter. If the entire report is not received by that date, the Application will be terminated and will be removed from consideration. A searchable electronic copy of the report in the format of a single file containing all information and exhibits clearly labeled with the report type, Development name, and Development location are required.

(A) A Phase I Environmental Site Assessment (ESA) Report (required for all Developments):

(i) dated not more than twelve (12) months prior to the first day of the Application Acceptance Period. In the event that a Phase I Environmental Site Assessment on the Development is more than twelve (12) months old prior to the first day of the Application Acceptance Period, the Applicant must supply the Department with an updated letter or updated report dated not more than three (3) months prior to the first day of the Application Acceptance Period from the Person or organization which prepared the initial assessment confirming that the site has been re-inspected and reaffirming the conclusions of the initial report or identifying the changes since the initial report;

(ii) prepared in accordance with §1.35 of this title (relating to Environmental Site Assessment Rules and Guidelines);

(iii) developments whose funds have been obligated by TRDO-USDA will not be required to supply this information; however, the Applicants of such Developments are hereby notified that it is their responsibility to ensure that the Development is maintained in compliance with all state and federal environmental hazard requirements; and

(iv) if the report includes a recommendation that an additional assessment be performed then a statement from the Applicant must be submitted with the Application indicating those additional assessments and recommendations will be performed prior to closing. If the assessments require further mitigating recommendations then evidence indicating the mitigating recommendations have been carried out must be submitted at cost certification.

(B) A comprehensive Market Analysis Report (required for all Developments):

(i) prepared by a Qualified Market Analyst approved by the Department in accordance with the approval process outlined in §1.33 of this title (relating to Market Analysis Rules and Guidelines);

(ii) dated not more than six (6) months prior to the first day of the Application Acceptance Period. In the event that a Market Analysis is more than six (6) months old prior to the first day of the Application Acceptance Period, the Applicant must supply the Department with an updated Market Analysis from the Person or organization which prepared the initial report; however, the Department will not accept any Market Analysis which is more than twelve (12) months old as of the first day of the Application Acceptance Period;

(iii) prepared in accordance with the methodology prescribed in §1.33 of this title;

(iv) included in the Application submission is an executed engagement letter by the Qualified Market Analyst stating that the required exhibit has been commissioned to be performed and that the delivery date will be no later than the Market Analysis Delivery Date as identified in §50.3 of this chapter. In addition to the submission of the engagement letter with the Application, a map must be submitted that reflects the Qualified Market Analyst's intended market area; and

(v) for Applications in the TRDO-USDA Set-Aside proposing acquisition and Rehabilitation with residential structures at or above 80% occupancy at the time of Application Submission, the appraisal, required for Rehabilitation Developments and Identity of Interest transactions prepared in accordance with §1.34 of this title (relating to Appraisal Rules and Guidelines), will satisfy the requirement for a Market Analysis; however, the Department may request additional information as needed. (§2306.67055; §42(m)(1)(A)(iii))

(C) A Property Condition Assessment (PCA) Report (required for Rehabilitation and Adaptive Reuse Developments):

(i) dated not more than six (6) months prior to the first day of the Application Acceptance Period. In the event that a PCA is more than six (6) months old prior to the first day of the Application Acceptance Period, the Applicant must supply the Department with an updated PCA from the Person or organization which prepared the initial report; however the Department will not accept any PCA which is more than twelve (12) months old as of the first day of the Application Acceptance Period;

(ii) prepared in accordance with §1.36 of this title (relating to Property Condition Assessment Guidelines); and

(iii) for Developments which require a capital needs assessment from TRDO-USDA, the capital needs assessment may be substituted and may be more than six (6) months old, as long as TRDO-USDA has confirmed in writing that the existing capital needs assessment is still acceptable and it meets the requirements of §1.36 of this title.

(D) An appraisal report (required for Rehabilitation Developments and Identity of Interest transactions pursuant to §1.34 of this title):

(i) dated not more than six (6) months prior to the first day of the Application Acceptance Period. In the event that an appraisal is more than six (6) months old prior to the first day of the Application Acceptance Period, the Applicant must supply the Department with an updated appraisal from the Person or organization which prepared the initial report; however the Department will not accept any appraisal which is more than twelve (12) months old as of the first day of the Application Acceptance Period;

(ii) prepared in accordance with the §1.34 of this title; and

(iii) for Developments that require an appraisal from TRDO-USDA, the appraisal may be more than six (6) months old, as long as TRDO-USDA has confirmed in writing that the existing appraisal is still acceptable.

(E) Inserted at the front of each of these reports must be a transmittal letter from the individual preparing the report that states that the Department is granted full authority to rely on the findings and conclusions of the report. The transmittal letter must also state the report preparer has read and understood the Department rules specific to the report found at §§1.33 - 1.36 of this title.

(F) All Applicants acknowledge by virtue of filing an Application that the Department is not bound by any opinion expressed in the report. The Department may determine from time to time that information not required in the Department's Rules and Guidelines will be relevant to the Department's evaluation of the need for the Development and the allocation of the requested Housing Credit Allocation Amount. The Department may request additional information from the report provider or revisions to the report to meet this need. In instances of non-response by the report provider, the Department may substitute in-house analysis.

§50.9.Selection Criteria.

(a) The purpose of this section is to identify the scoring criteria used in evaluating and ranking Applications submitted under the State Housing Credit Ceiling. The criteria identified below include those items required under Chapter 2306 of the Texas Government Code, §42 of the Internal Revenue Code and other criteria considered important by the Department.

(b) All Applications, with the exception of TRDO-USDA Applications, must receive a final score totaling a minimum of 130, not including any points awarded or deducted pursuant to paragraphs (2) and (6) of this subsection to be eligible for an allocation of Housing Tax Credits. Unless otherwise stated, do not round calculations.

(1) Financial Feasibility. (§2306.6710(b)(1)(A)) Applications may qualify to receive a maximum of (28 points) for this item. The purpose of this scoring item, as the highest prioritized item under Chapter 2306 of the Texas Government Code, is to provide an incentive for Applications based on the financial feasibility of the Development based on the supporting financial data as required in the Application. Receipt of feasibility points under this paragraph does not ensure that an Application will be considered feasible during the feasibility evaluation by the Real Estate Analysis Division, and, conversely, a Development may be found feasible during the feasibility evaluation by the Real Estate Analysis Division even if it did not receive all possible points under this paragraph. To qualify for the points, the supporting financial data in the Application must include:

(A) a fifteen (15) year pro forma prepared by the permanent or construction lender:

(i) specifically identifying each of the first five (5) years and every fifth year thereafter;

(ii) specifically identifying underlying assumptions including, but not limited to general growth factor applied to income and expense; and

(iii) indicating that the Development maintains a minimum 1.15 debt coverage ratio throughout the initial fifteen (15) years proposed for all third party lenders that require scheduled repayment; and

(B) a statement in the term sheet, or other form deemed acceptable by the Department, indicating that the lender's assessment, based on considerations that included the Development's underwriting pro forma, finds that the Development will be feasible for fifteen (15) years.

(C) For Developments maintaining existing financing from TRDO-USDA, a current note balance must be provided or other form of documentation of the existing loan deemed acceptable by the Department to meet the requirements of this section.

(2) Quantifiable Community Participation. (§2306.6710(b)(1)(B); §2306.6725(a)(2)) The purpose of this scoring item is to encourage community participation from Neighborhood Organizations whose boundaries contain the proposed Development Site with consideration for those areas that may not have any Neighborhood Organizations. Points will be awarded based on written statements of support or opposition from Neighborhood Organizations on record with the state or county in which the Development is to be located and whose boundaries contain the proposed Development Site. It is possible for points to be awarded or deducted based on written statements from organizations that were not identified by the process utilized for notification purposes under §50.8(9) of this chapter (relating to Threshold Criteria) if the organization provides the information and documentation required in subparagraphs (A) and (B) of this paragraph. It is also possible that Neighborhood Organizations that were initially identified as appropriate organizations for purposes of the notification requirements will subsequently be determined by the Department not to meet the requirements for scoring. If an organization is determined not to be qualified under this paragraph, the organization may qualify under paragraph (13)(B) of this subsection and will be reviewed by Staff accordingly even if points under paragraph (13)(B) of this subsection were not selected in the Self-Scoring Form. If an Application receives points under subparagraph (B)(i)(II) or (III) of this paragraph then they may also qualify for points under paragraph (13)(B) of this subsection provided that documentation required under that scoring item is submitted.

(A) Submission Requirements. Each Neighborhood Organization may submit the form as included in the QCP Neighborhood Information Packet that represents the organization's input. In order to receive a point score, the form must be received, by the Department, or postmarked, if mailed by the U.S. Postal Service, no later than the Quantifiable Community Participation Delivery Date as identified in §50.3 of this chapter (relating to Program Calendar). Forms received after the deadline will be summarized for the Board's information and consideration, but will not affect the score for the Application. The form must:

(i) state the name and location of the proposed single Development;

(ii) certify that the letter is signed by two officials or board members of the Neighborhood Organization with the authority to sign on behalf of the Neighborhood Organization, and include:

(I) the street and/or mailing addressee(s) for the signers of the letter;

(II) day and evening phone number(s) for the signers of the letter;

(III) email addresses and/or facsimile number(s) for the signers of the letter and one additional contact for the organization; and

(IV) a written description and map of the organization's geographical boundaries;

(iii) certify that the organization has boundaries, and that the boundaries in effect on or before the Full Application Delivery Date identified in §50.3 of this chapter contain the proposed Development Site;

(iv) certify that the organization meets the definition of "Neighborhood Organization"; defined as an organization of persons living near one another within the organization's defined boundaries that contain the proposed Development Site and that has a primary purpose of working to maintain or improve the general welfare of the neighborhood (§2306.004(23-a)). For purposes of this section, "persons living near one another" means two or more separate residential households. "Neighborhood Organizations" include homeowners associations, property owners associations, and resident councils in which the council is commenting on the Rehabilitation or Reconstruction of the property occupied by the residents. "Neighborhood Organizations" do not include broader based "community" organizations;

(v) include documentation showing that the organization is on record as of the Full Application Delivery Date with the state or the county in which the Development is proposed to be located. The receipt of the QCP form that meets the requirements of this subsection and further outlined in the QCP Neighborhood Information Packet will constitute being on record with the State. The Department is permitted to issue an Administrative Deficiency notice for this registration process and, if satisfied, the organization will still be deemed to be timely placed on record with the state;

(vi) a Neighborhood Organization must provide notice, of at least seventy-two (72) hours, to persons eligible to join or participate in the affairs of the organization;

(vii) while a formal meeting is not required, the organization is encouraged to hold a meeting, that complies with its bylaws, to which all the members of the organization are invited to consider and/or have a membership vote on whether the organization should support, oppose, or be neutral on the proposed Development. The organization is also encouraged to meet with the Developer or Applicant to discuss the proposed Development; and

(viii) the form from the Neighborhood Organization for the purposes of this subsection must be submitted to the Department by the Neighborhood Organization and not the Applicant. This documentation must be submitted independent of the Application. Furthermore, while the Applicant may assist the Neighborhood Organization in the Administrative Deficiency process or any other request from the Department as it relates to this item, the Administrative Deficiency Notice from the Department will be issued to the Neighborhood Organization with a copy to the Applicant; however, the Deficiency response must be submitted to the Department directly by the Neighborhood Organization.

(B) Scoring. The input must clearly and concisely state each reason for the Neighborhood Organization's support for or opposition to the proposed Development.

(i) The score awarded for each letter for this exhibit will be based on the following:

(I) support letters will receive (24 points). Support letters must make a direct statement of support. Support by inference (i.e. "The city supports the Development and we support the city" will not suffice; or

(II) letters that do not meet the requirements of this section, letters that do not provide a reason for support or opposition, letters that are unclear even after correspondence with the Department or Applications for which no letters are received will receive a score of (14 points);

(III) applications for which no Neighborhood Organizations exist will receive a score of (18 points);

(IV) opposition letters (must state at least one reason for opposition) will receive (0 points);

(V) if an Application receives multiple eligible letters, the average score of all eligible letters will be applied to the Application.

(ii) The Department may investigate a matter and contact the Applicant and Neighborhood Organizations to clarify if it is unclear whether the letter is a letter of support, opposition, or neutrality and to confirm compliance with procedural matters such as organization, existence, and being on record.

(iii) The Department highly values quality public input addressed to the merits of a Development. Input that identifies matters that are specific to the neighborhood, the proposed site, the proposed Development, or Developer are valued. If a proposed Development is permitted by the existing or pending zoning or absence of zoning, concerns addressed by the allowable land use that are related to any multifamily development may generally be considered to have been addressed at the local level through the land use planning process. Input concerning positive efforts or the lack of efforts by the Applicant to inform and communicate with the neighborhood about the proposed Development is highly valued. If the Neighborhood Organization refuses to communicate with the Applicant the efforts of the Applicant will not be considered negative. Input that evidences unlawful discrimination against classes of persons protected by Fair Housing law or the scoring of which the Department determines to be contrary to the Department's efforts to affirmatively further fair housing will not be considered. If the Department receives input that could reasonably be suspected to implicate issues of non-compliance under the Fair Housing Act, Staff will refer the matter to the Texas Workforce Commission for investigation, but such referral will not, in and of itself, cause Staff or the Department to terminate consideration of the Application. Staff will report all such referrals to the Board and summarize the status of any such referrals in any recommendations.

(3) The Income Levels of Tenants of the Development. (§§2306.111(g)(3)(B) and (E); 2306.6710(b)(1)(C) and (e); and §42(m)(1)(B)(ii)(I)) The purpose of this scoring item is to encourage deep income targeting with Units set aside for households at 30% and/or 50% of AMGI. Applications may qualify to receive up to (22 points) for qualifying under only one of subparagraph (A) or (B) of this paragraph. To qualify for these points, the household incomes must not be higher than permitted by the AMGI level (must round to the next highest whole Unit, no less than one Unit). The Development Owner, upon making selections for this exhibit, will set aside Units at the levels of AMGI and will maintain the percentage of such Units continuously over the compliance and extended use period as specified in the LURA. These income levels require corresponding rent levels that do not exceed 30% of the income limitation in accordance with §42(g) of the Internal Revenue Code.

(A) For Developments proposed to be located in an area of the MSA of Houston, Dallas, Fort Worth, San Antonio or Austin that is not a Rural Area, an Application may qualify to receive:

(i) twenty-two (22) points if at least 40% of the Low-Income Units in the Development are set-aside with incomes at or below a combination of 50% and 30% of AMGI in which at least 5% of the Low-Income Units are at or below 30% of AMGI;

(ii) twenty (20) points if at least 60% of the Low-Income Units in the Development are set-aside with incomes at or below 50% of AMGI; or

(iii) eighteen (18) points if at least 10% of the Low-Income Units in the Development are set-aside with incomes at or below 30% of AMGI.

(B) For Developments proposed to be located in areas other than those listed in subparagraph (A) of this paragraph, an Application may qualify to receive:

(i) twenty-two (22) points if at least 20% of the Low-Income Units in the Development are set-aside with incomes at or below a combination of 50% and 30% of AMGI in which at least 5% of the Low-Income Units are at or below 30% of AMGI;

(ii) twenty (20) points if at least 30% of the Low-Income Units in the Development are set-aside with incomes at or below 50% of AMGI; or

(iii) eighteen (18) points if at least 5% of the Low-Income Units in the Development are set-aside with incomes at or below 30% of AMGI.

(4) The Size and Quality of the Units (§2306.6710(b)(1)(D); §42(m)(1)(C)(iii)). The purpose of this scoring item is to promote interior features of the Unit that would serve to improve the quality of life of the resident. Applications may qualify to receive up to (20 points) under both subparagraphs (A) and (B) of this paragraph.

(A) Size of the Units (6 points). The Development must meet the minimum requirements identified in this subparagraph to qualify for points. Six (6) points for this item will be automatically granted for Applications involving Rehabilitation (excluding Reconstruction), Developments receiving funding from TRDO-USDA, or Supportive Housing Developments without meeting these square footage minimums only if requested in the Self Scoring Form. The square feet of all of the Units in the Development, for each type of Unit, must be at least the minimum noted in clauses (i) - (v) of this subparagraph. Changes to an Application during any phase of the review process that decreases the square footage below the minimums noted in clauses (i) - (v) of this subparagraph, will be re-evaluated and may result in a reduction of the Application score.

(i) six-hundred (600) square feet for an Efficiency Unit;

(ii) seven-hundred (700) square feet for a one Bedroom Unit that is not in a Qualified Elderly Development; 600 square feet for a one Bedroom Unit in a Qualified Elderly Development;

(iii) nine-hundred-fifty (950) square feet for a two Bedroom Unit that is not in a Qualified Elderly Development; 750 square feet for a two Bedroom Unit in a Qualified Elderly Development;

(iv) one-thousand-fifty (1,050) square feet for a three Bedroom Unit; and

(v) one-thousand, two-hundred-fifty (1,250) square feet for a four Bedroom Unit.

(B) Quality of the Units (14 points). Applications in which Developments provide specific amenity and quality features in every Unit at no extra charge to the tenant will be awarded points based on the point structure provided in §1.1 of this title (relating to Definitions and Amenities for Housing Program Activities) and as certified to in the Application. The amenities will be required to be identified in the LURA. Applications involving scattered site Developments must have a specific amenity located within each Unit to count for points. Rehabilitation Developments will start with a base score of (3 points) and Supportive Housing Developments will start with a base score of (5 points).

(5) The Commitment of Development Funding by a Unit of General Local Government or Governmental Instrumentality. (§2306.6710(b)(1)(E)) The purpose of this scoring item is to provide an incentive for local support for a proposed Development as demonstrated by the dedication of financial assistance, as described in this section, for the proposed Development. Applications may qualify to receive up to (18 points) under this paragraph. Funding must be from a Unit of General Local Government or a Governmental Instrumentality with jurisdiction, as established in accordance with statute, in the same county as or a contiguous county to the proposed Development.

(A) Submission Requirements. Evidence of the following must be submitted in accordance with the Tax Credit (Procedures) Manual.

(i) The loans, grant(s) or in-kind contribution(s) must be attributed to the total number of Low-Income Units in the Development.

(ii) An Applicant may submit enough sources to substantiate the point request, and all sources must be included in the Sources and Uses form.

(iii) An Applicant may substitute any source in response to an Administrative Deficiency Notice or after the Application has been submitted to the Department.

(iv) In-kind contributions such as donation of land, tax exemptions, or waivers of fees such as building permits, water and sewer tap fees, or similar contributions are only eligible for points if the in-kind contribution provides a tangible economic benefit that results in a quantifiable Total Housing Development Cost reduction to benefit the Development. The quantified value of the Total Housing Development Cost reduction may only include the value during the period the contribution or waiver is received and/or assessed. Donations of land must be under the control of the Applicant, pursuant to §50.8(8)(A) of this chapter to qualify. The value of in-kind contributions may only include the time period as of the beginning of the Application Acceptance Period and the Development's Placed in Service date, with the exception of contributions of land. The full value of land contributions, as established by the appraisal required pursuant §50.8(14)(D) of this chapter will be counted. Contributions in the form of tax exemptions or abatements may only count for points if the contribution is in addition to any tax exemption or abatement required under statute.

(v) To the extent that a Notice of Funding Availability (NOFA) is released and funds are available, funds from TDHCA's HOME Investment Partnerships (HOME) Program will qualify if a resolution, dated on or before the date the Application Acceptance Period ends, is submitted with the Application from the Governing Body of the Unit of General Local Government authorizing the Applicant to act on behalf of the Governing Body of the Unit of General Local Government in applying for HOME Funds from TDHCA for the particular Application. TDHCA's HOME funds may be substituted for a source originally submitted with the Application, provided the HOME funds substituted are from a NOFA released after the Application Acceptance Period ends and a resolution is submitted with the substitution documentation from the Governing Body of the Unit of General Local Government authorizing the Applicant to act on behalf of the Unit of General Local Government in applying for HOME Funds from TDHCA for the particular Application.

(vi) The granting of a new rental support or subsidy with a term of not less than fifteen (15) years; the funding for which is provided directly (not merely as administrator) by the UGLG or an instrumentality thereof.

(vii) If the support is being provided in the form of a below market rate loan, the loan must be at least 100 basis points below the current market rate and have a term of at least three (3) years and origination fees (including other lender fees that are substantially similar) must be equal to or less than 2% of the loan amount. A statement from the Applicant with respect to the loan amount to be applied for and the specific terms requested or to be requested must be submitted.

(viii) Acceptable evidence submitted in the Application would include, by way of example and not by way of limitation, a resolution from the Unit of General Local Government, a letter from its Appropriate Local Official, or an executed agreement with the Unit of General Local Government or Governmental Instrumentality that will be providing the funding. If the funds have been applied for but not awarded, a letter from the funding entity indicating that an application has been received, funding is available and that award results will be announced by August 1 of the current program year is required in the Application. The Application must also include a statement from the Applicant that reflects the requirements of clause (vii) of this subparagraph. If, in the instance of a below market rate loan as provided for in clause (vii) of this subparagraph, the application has not yet been made, a letter from the Applicant setting forth when the application will be made must be submitted.

(ix) At the time the executed Commitment is required to be submitted, the Applicant or Development Owner must provide updated evidence of a commitment approved by the Governing Body of the Unit of General Local Government, or its designee or agent, for the Development Funding to the Department. If the funding commitment is not available as of the date the Department's Commitment is to be submitted, the Department will determine if the Application would have been infeasible or noncompetitive without the source of funding. The Commitment will be rescinded and the credits reallocated if the Department determines that the Application would have been infeasible or noncompetitive.

(x) Funding commitments from a Governmental Instrumentality will not be considered final unless the Governmental Instrumentality attests to the fact that any funds committed were not first provided to the Governmental Instrumentality by the Applicant, the Developer, Consultant, Related Party or any individual or entity acting on behalf of the proposed Application, unless the Applicant itself is a Governmental Instrumentality or subsidiary.

(B) Scoring. Points will be determined based on the amount of funds committed to the Development on a per Unit basis, based on the total number of Low-Income Units in the Development.

(i) A total contribution of at least $1,000 (or $500 for Rural Developments or Developments located in non-participating jurisdictions) per Low-Income Unit receives (12 points); or

(ii) A total contribution at least $2,000 (or $1,000 for Rural Developments or Developments located in non-participating jurisdictions) per Low-Income Unit receives (18 points).

(6) Community Support from State Representative or State Senator. (§2306.6710(b)(1)(F); §2306.6725(a)(2)) The purpose of this scoring item is to allow the State Representative and State Senator the opportunity to express their support or opposition for proposed Developments whose boundaries are within their district. Applications may qualify to receive up to (16 points) or have deducted up to (16 points) for this item. Letters must be on the State Representative's or State Senator's letterhead, must be signed by the State Representative or State Senator, identify the specific Development and must clearly state support for or opposition to the specific Development. This documentation will be accepted with the Application or through delivery to the Department from the Applicant or the State Representative or Senator and must be submitted no later than the Input from State Senator or Representative Delivery Date as identified in §50.3 of this chapter. Once a State Representative or State Senator submits a letter it may not be changed or withdrawn; therefore, it is encouraged that letters not be submitted earlier than the specified Delivery Date in order to facilitate consideration of all constituent comment and other relevant input on the proposed Development. State Representatives or Senators to be considered are those State Representatives or Senators in office at the time the letter is submitted. Support letters are (+16 points); neutral letters, or letters that do not specifically refer to the Development, will receive (0 points); Opposition letters (must state reason for opposition) will receive (-16 points). If one letter is received in support and one letter is received in opposition the score would be (0 points). A letter that does not directly express support but expresses it indirectly by inference, (i.e. "the local jurisdiction supports the Development and I support the local jurisdiction") will be treated as a neutral letter.

(7) The Rent Levels of the Units. (§2306.6710(b)(1)(G)) The purpose of this scoring item is to encourage deep rent targeting with Units set aside for households at 30% and/or 50% of AMGI that are in addition to those Units already designated under paragraph (3) of this subsection. Additionally, such Units must come from the 60% of AMGI Units that have not previously been designated under paragraph (3) of this subsection. Applications may qualify to receive up to (14 points) for this item under subparagraph (A) or (B) of this paragraph provided the Application has qualified for points under paragraph (3) of this subsection, relating to Income Levels of Tenants of the Development. An Application may qualify for points under this subsection by providing the additional Low-Income Units at 30% and 50% of AMGI (must round up to the next whole Unit, not less than one Unit):

(A) for Developments proposed to be located in an area of the MSA of Houston, Dallas, Fort Worth, San Antonio or Austin that is not a Rural Area, an Application may qualify to receive:

(i) an Application may receive (2 points) for every 5% of Low-Income Units at rents and incomes at 50% of AMGI; or

(ii) an Application may receive (6 points) for every 2.5% of Low-Income Units at rents and incomes at 30% of AMGI.

(B) for Developments proposed to be located in areas other than those listed in subparagraph (A) of this paragraph, an Application may qualify to receive:

(i) An Application may receive (2 points) for every 2.5% of Low-Income Units at rents and incomes at 50% of AMGI; or

(ii) An Application may receive (6 points) for every 1% of Low-Income Units at rents and incomes at 30% of AMGI.

(8) The Cost of the Development by Square Foot. (§2306.6710(b)(1)(H); §42(m)(1)(C)(iii)) Applications may qualify to receive (12 points) for this item. For this exhibit, costs shall be defined as Hard Cost plus contractor profit, overhead and general requirements, as represented in the Development Cost Schedule. This calculation does not include indirect construction costs. The calculation will be costs per square foot of Net Rentable Area (NRA). For the purposes of this paragraph only, if a building is in a Qualified Elderly Development with an elevator or a Development with one or more buildings any of which have elevators serving four or more floors (Elevator Served Development) the NRA may include elevator served interior corridors. If the proposed Development is a Supportive Housing Development, the NRA may include elevator served interior corridors and may include up to 50 square feet of common area per Unit. As it relates to this paragraph, an interior corridor is a corridor that is enclosed, heated and/or cooled and otherwise finished space. The calculations will be based on the cost listed in the Development Cost Schedule and NRA shown in the Rent Schedule of the Application. Developments qualify for (12 points) if their costs do not exceed:

(A) ninety-five dollars ($95) per square foot (and direct construction cost, also referred to as building costs in §1.32(e)(4) of this title (relating to Underwriting Rules and Guidelines) do not exceed $80 per square foot) for Qualified Elderly and Elevator Served Development, single family design, and Supportive Housing Developments and Developments located in a Central Business District unless located in a "First Tier County" in which case their costs do not exceed $97 per square foot (and direct construction cost, also referred to as building costs in §1.32(e)(4) of this title do not exceed $82 per square foot); or

(B) eighty-five ($85) per square foot (and direct construction cost, also referred to as building costs in §1.32(e)(4) of this title do not exceed $70 per square foot) for all other Developments, unless designated as "First Tier" by the Texas Department of Insurance, in which case their costs do not exceed $87 per square foot (and direct construction cost, also referred to as building costs in §1.32(e)(4) of this title do not exceed $72 per square foot). The First Tier counties are identified in the Tax Credit (Procedures) Manual. There are also specifically designated First Tier communities in Harris County that are east of State Highway 146, and evidence in the Application must include a map with the Development Site designated clearly within the community. These communities are Pasadena, Morgan's Point, Shoreacres, Seabrook and La Porte.

(9) Tenant Services. (§2306.6710(b)(1)(I) and §2306.6725(a)(1)) The purpose of this scoring item is to provide professional tenant services, tailored for the tenant population that will enhance the quality of life for the residents of the proposed Development. Applications may qualify to receive up to (10 points) for this item. By electing points, the Applicant certifies that the Development will provide a combination of supportive services, which are listed in §1.1 of this title, appropriate for the proposed tenants and that there is adequate space for the intended services. The provision and complete list of supportive services will be included in the LURA. The Owner may change, from time to time, the services offered; however, the overall points as selected at Application must remain the same. No fees may be charged to the tenants for any of the services. Services must be provided on-site or transportation to those off-site services identified on the list must be provided. The same service may not be used for more than one scoring item.

(10) Declared Disaster Areas. (§2306.6710(b)(1)) The purpose of this scoring item is to provide an incentive for the development of affordable housing in declared disaster areas. Applications may receive (8 points), if by the Full Application Delivery Date as identified in §50.3 of this chapter or at any time within the two-year period preceding the date of submission, the proposed Development Site is located in an area declared a disaster under §418.014 of the Texas Government Code.

(11) Additional Evidence of Preparation to Proceed. The purpose of this scoring item is to provide an incentive for a level of due diligence by the Applicant and lender that ultimately should result in better Developments, better site selection, the expeditious construction of Units and less feasibility risk on the financial aspects of the Development. Applications may receive up to (7 points) under subparagraphs (A) - (C) of this paragraph.

(A) Submission of a civil engineering feasibility study that includes, at a minimum, discussion of utility availability and fees, offsite requirements and costs, onsite requirements and costs, ingress and egress requirements, drainage and detention/retention requirements, discussion of required approvals, review process and general timing, and discussion of other necessary fees (permit, impact, drainage, tree, etc). All cost estimates to be as of the date of the study (3 points).

(B) Applicants may qualify to receive up to (4 points) by providing:

(i) for New Construction and Reconstruction, the submission of:

(I) executed architectural and engineering contracts (including structural, Mechanical, Electrical, Plumbing, Civil and landscape) with architect or other Third-Party lead consultant certification showing all total fees (1 point);

(II) a survey or current plat, for the Development Site, as defined by the Texas Society of Professional Surveyors in their Manual of Practice for Land Surveying in Texas;

(-a-) Category 1A: Land Title Survey no older than 6 months prior to the beginning of the Application Acceptance Period (1 point); or

(-b-) Category 1B: Standard Land Boundary Survey no older than twelve (12) months prior to the beginning of the Application Acceptance Period (1 point);

(III) a Geotechnical Report with non-building specific soil borings and general recommendations regarding slab specifications (1 point);

(IV) a civil engineered site plan as by a Third-Party civil engineer, showing all structures, site amenities, parking and driveways, topography, drainage and detention, water and waste water utility distribution, retaining walls and any other typical or required items (1 point);

(ii) for Rehabilitation Developments, the submission of:

(I) Executed architectural and engineering contracts (including structural, Mechanical, Electrical, Plumbing, Civil and landscape as applicable) with an architect or other Third-Party lead consultant certification indicating total fees and all fees paid to date (1 point);

(II) Category 5: As-built survey (an existing survey dated within the last twelve (12) months of the beginning of the Application Acceptance Period qualifies) (1 point);

(III) in addition to the PCA independently identified scope of immediate work, the submission of the Applicant's detailed schedule outlining the unit-by-unit specifications for all interior work and a detailed schedule outlining the building-by-building specifications; each including a line-item preliminary cost estimate, as if constructed as of the date of the Application submission, provided by the General Contractor (1 point);

(IV) Structural and Mechanical, Electrical, Plumbing reports prepared by licensed engineers reconciling all existing conditions to the scope of work identified in subclause (III) of this clause (1 point).

(C) Applications (excluding Pre-applications) that were submitted in the preceding three (3) Application Rounds; however, they were not considered competitive enough to ultimately receive an award may receive up to (2 points). The current Application must include the same number of Units, some overlap of the original Development Site, and at least one Affiliate of the previous Applicant is an Affiliate of the current Applicant. Terminated Applications do not qualify for these points.

(i) The Application, as submitted for the current Application Round, was previously submitted in one prior Application Round (1 point); or

(ii) The Application, as submitted for the current Application Round, was previously submitted in two prior Application Rounds (2 points).

(iii) Documentation must be submitted in the Application that includes the name, location, assigned TDHCA Identification Number and year of submission(s).

(12) Leveraging of Private, State, and Federal Resources. (§2306.6725(a)(3)). The purpose of this scoring item is to provide an incentive for the leveraging of financial resources, when economically feasible, for a Development that proposes to serve a specified percentage of households at or below 30% of AMGI. Applications may qualify to receive (7 points) for a Development located outside of a Qualified Census Tract and (6 points) for a Development located inside a Qualified Census Tract. To receive points under this item, the Development must have at least 5% of the total Units restricted for occupancy by households at or below 30% of AMGI. Funding sources used for points under paragraph (5) of this subsection may not be used for this point item. Division of the same source into separate loans or grants does not result in eligibility under this paragraph and paragraph (5) of this subsection. Multiple sources may be combined to qualify under this item.

(A) If in the form of a loan, funding must be the primary source of debt with a first lien position and a minimum loan term of fifteen (15) years. Loans that are not first lien but are the largest source(s) of funding, not including equity generated from Housing Tax Credits, other federal tax credits, or funds used under paragraph (5) of this subsection also qualify. Origination fees cannot exceed 2% of the loan amount(s). Funding must be provided by a Third Party except when the funds are federally sourced and passed-through a Government Instrumentality. All loan funds qualifying for consideration under this section must provide an economic benefit over a market rate transaction (i.e. cannot buy down the rate by increasing upfront interest costs).

(B) Permanent grant funding not secured by a deed of trust may be used, provided the grant funding is the largest source of funding not including equity generated from Housing Tax Credits, other federal tax credits, or funds used under paragraph (5) of this subsection. Funding must be provided by a Third Party except when the funds are federally sourced and passed-through a Government Instrumentality.

(C) Examples of sources of funds that may qualify include those listed under clauses (i) - (viii) of this subparagraph. A Certification from the lender as of the date of such certification that the loan would meet this provision is required.

(i) HOPE VI;

(ii) Capital Grant Funds;

(iii) Community Investment Program (Federal Home Loan Bank);

(iv) Affordable Housing Program (Federal Home Loan Bank);

(v) HOME Investment Partnerships Program;

(vi) Community Development Block Grant (CDBG);

(vii) HUD-insured mortgage loans; or

(viii) other sources of grants or loans that provide for a 100 basis point savings over the market interest rate for comparable terms.

(D) Funding for ongoing operations, including rental subsidies, or other sources not directly offsetting the Total Housing Development Cost are not eligible for points under this paragraph. Qualifying funds awarded through local entities may qualify for points if the original source of the funds is from a private, state or federal source. If qualifying funds awarded through local entities are used for this item, a statement from the local entity must be provided that identifies the original source of funds.

(E) The Development must have already applied for funding from the funding entity. Evidence to be submitted with the Application must include a copy of the commitment of funds with terms meeting the requirements of subparagraphs (A) - (C) of this paragraph or a letter from the funding entity indicating that the application was received and that the terms for available funding meet the requirements of subparagraphs (A) - (C) of this paragraph.

(F) At the time of the Carryover Documentation Delivery Date, the Applicant or Development Owner must provide evidence of a commitment approved by the funding entity for the sufficient financing to the Department. An Applicant may substitute the qualifying source under this item between the time of Application and Carryover.

(13) Community Input other than Quantifiable Community Participation. The purpose of this scoring item is to allow community and civic organizations active in the area that includes the proposed Development the opportunity to express their support or opposition. If an Application was awarded (18 or 14 points) under paragraph (2) of this subsection, then that Application may receive up to (6 points) for letters that qualify for points under subparagraph (A), (B) or (C) of this paragraph. An Application may not receive points under more than one of the subparagraphs (A) - (C) of this paragraph. All letters must be submitted within the Application. At no time will the Application receive a score lower than zero (0) for this item.

(A) An Application may receive (2 points) maximum of (6 points) for each letter of support submitted from a community or civic organization that serves the community in which the Development Site is located. Letters of support must identify the specific Development and must state support of the specific Development at the proposed location. The community or civic organization must provide some documentation of its existence in the community in which the Development is located including, but not limited to, listing of services and/or members, brochures, annual reports, etc. Letters of support from organizations that cannot provide reasonable evidence that they are active in the area that includes the location of the Development will not be counted. For purposes of this subparagraph, community and civic organizations do not include neighborhood organizations, governmental entities (excluding Special Management Districts), taxing entities or educational activities. Organizations that were created by a governmental entity or derive their source of creation from a governmental entity do not qualify under this item. For purposes of this item, educational activities include school districts, trade and vocational schools, charter schools and depending on how characterized could include day care centers; a PTA or PTO would qualify. Should an Applicant elect this option and the Application receives letters in opposition, then (2 points) will be subtracted from the score for each letter in opposition, provided that the letter is from an organization serving the community.

(B) An Application may receive (6 points) for a letter of support, from a property owners association created for a master planned community whose boundaries include the Development Site that does not meet the requirements of a Neighborhood Organization for points under paragraph (2) of this subsection.

(C) An Application may receive (6 points) for a letter of support from a Special Management District, whose boundaries, as of the Full Application Delivery Date as identified in §50.3 of this chapter, include the Development Site and for which there is not a Neighborhood Organization on record with the county or state.

(D) Input that evidences unlawful discrimination against classes of persons protected by Fair Housing law or the scoring of which the Department determines to be contrary to the Department's efforts to affirmatively further fair housing will not be considered. If the Department receives input that could reasonably be suspected to implicate issues of non-compliance under the Fair Housing Act, Staff will refer the matter to the Texas Workforce Commission for investigation, but such referral will not, in and of itself, cause Staff or the Department to terminate consideration of the Application. Staff will report all such referrals to the Board and summarize the status of any such referrals in any recommendations.

(14) Pre-application Participation Incentive Points. (§2306.6704) Applicants that submitted a pre-application during the Pre-Application Acceptance Period and meet the requirements of this paragraph will qualify to receive (6 points) for this item. The purpose of this scoring item is to encourage participation in the pre-application process and prevent unnecessary filing costs by promoting transparency in the external assessment of competing Applications. Amendments to the Application subsequent to the award do not affect pre-application points if approved by the Board; however, the Board may take into consideration points received that would be lost as a result of the amendment. To be eligible for these points, the Application must:

(A) be for the identical Development Site, or reduced portion of the Development Site based on the legal description provided at pre-application;

(B) have met the Pre-application Threshold Criteria;

(C) be serving the same Target Population as in the pre-application;

(D) be applying for the same Set-Asides as indicated in the pre-application (Set-Asides can be dropped between pre-application and Application, but no Set-Asides can be added); and

(E) be awarded by the Department an Application score that is not more than (9 points) greater or less than the number of points awarded by the Department at pre-application, with the exclusion of points for support and opposition under paragraphs (2), (6), and (14) of this subsection. The Application score used to determine whether the Application score is (9 points) greater or less than the number of points awarded at pre-application will also include all point losses under §50.7(b)(2)(A) of this chapter (relating to Application Process). An Applicant must choose, at the time of Application either clause (i) or (ii) of this subparagraph:

(i) to request the pre-application points and have the Department cap the Application score at no greater than the (9 points) increase regardless of the total points accumulated in the scoring evaluation. This allows an Applicant to avoid penalty for increasing the point structure outside the (9 points) range from pre-application to Application; or

(ii) to request that the pre-application points be forfeited and that the Department evaluate the Application as requested in the Self-Score Form.

(15) Developments in Census Tracts with Limited Existing HTC Developments. (§2306.6725(b)(2)) The purpose of this scoring item is to encourage a de-concentration of housing tax credit Developments in census tracts, according to the Department's Housing Tax Credit Site Demographic Characteristics Report for the current Application Round. Applications may qualify for up to (6 points) under subparagraph (A) or (B) of this paragraph.

(A) If the proposed Development is located in a census tract in which there are no other existing HTC Developments that serve the same Target Population (4 points); or

(B) If the proposed Development is located in a census tract in which there are no other existing HTC Developments (6 points).

(C) Evidence of the census tract identifying the location of the proposed Development must be submitted in the Application.

(16) Development Location. (§2306.6725(a)(4); §42(m)(1)(C)(i)) Applications (excluding those requesting funds from the At-Risk Set-Aside) may qualify to receive up to (4 points) under subparagraph (A) of this paragraph, with the exception of Qualified Elderly Developments which may receive up to (3 points) under subparagraph (A) of this paragraph, or (4 points) under subparagraph (B) of this paragraph or (1 point) under subparagraph (C), (D) or (E) of this paragraph. The purpose of this scoring item is to promote affordable housing development in traditionally underserved areas that allow access to a variety of services and socioeconomic opportunities that would not otherwise be readily accessible as well as meet legally mandated requirements. Evidence must not be more than six (6) months old from the first day of the Application Acceptance Period. Applicants must submit documentation in the form of a map of the defined area that includes the location of the proposed Development. If qualifying for being in a Colonia, the name of the Colonia must also be identified on the map. An Application may only receive points under one of the subparagraphs (A) - (E) of this paragraph.

(A) The Development is proposed to be located in a High Opportunity Area as defined in §50.2(15) of this chapter (relating to Definitions) ((3 points) for Qualified Elderly Developments or (4 points) for all other Developments).

(B) The Development is proposed to be located in a Central Business District as defined in §50.2(7) of this chapter. The Application must include a letter from the Appropriate Local Official confirming the location of the proposed Development and include the boundaries of the Central Business District (4 points).

(C) A Federal Enterprise Community, a Growth Zone or any other comparable community as designated by HUD, which are typically defined with census tract boundaries. Such locations may have previously been known as Empowerment Zones, Enterprise Communities or Renewal Communities (1 point); or

(D) An Economically Distressed Area as specifically designated by the Texas Water Development Board as of the beginning of the Application Acceptance Period or a Colonia (1 point); or

(E) The Application is not receiving points under paragraph (5) of this subsection and the proposed Development will be located in an area supported by the Governing Body of the appropriate municipality or county containing the Development Site, as evidenced by a resolution or ordinance, submitted with the Application, supporting the location of the Development Site (1 point).

(17) Tenant Populations with Special Housing Needs. (§42(m)(1)(C)(v)) Applications may qualify to receive (4 points) for this item. The purpose of this scoring item is to integrate special housing needs populations into traditional housing tax credit Developments. The Department will award these points to Applications in which at least 5% of the Units are set aside for Persons with Special Needs. For purposes of this section, Persons with Special Needs is defined as persons with alcohol and/or drug addictions, Colonia residents, Persons with Disabilities, victims of domestic violence, persons with HIV/AIDS, homeless populations and migrant farm workers. Throughout the Compliance Period, unless otherwise permitted by the Department, the Development Owner agrees to affirmatively market Units to Persons with Special Needs. In addition, the Department will require a minimum twelve-month period during which Units must either be occupied by Persons with Special Needs or held vacant. The twelve-month period will begin on the date each building receives its Certificate of Occupancy. For buildings that do not receive a Certificate of Occupancy, the twelve-month period will begin on the placed in service date as provided in the Cost Certification manual. After the twelve-month period, the Development Owner will no longer be required to hold Units vacant for households with special needs, but will be required to continue to affirmatively market Units to household with special needs.

(18) Length of Affordability Period. (§§2306.6725(a)(5); 2306.111(g)(3)(C); 2306.185(a)(1) and (c); 2306.6710(e)(2); and 42(m)(1)(B)(ii)(II)) The purpose of this scoring item is to provide an incentive for Applications that will extend the affordability period beyond the extended use period. Rehabilitation (excluding Reconstruction) Developments are not eligible for these points. Applications may qualify to receive up to (4 points). In accordance with the Code, each Development is required to maintain its affordability for a 15-year compliance period and, subject to certain exceptions, an additional 15-year extended use period. Development Owners that are willing to extend the affordability period for a Development beyond the thirty (30) years required in the Code may receive points as follows:

(A) add five (5) years of affordability after the extended use period for a total affordability period of thirty-five (35) years (2 points); or

(B) add ten (10) years of affordability after the extended use period for a total affordability period of forty (40) years (4 points).

(19) Site Characteristics. Development Sites, including scattered sites, may qualify to receive up to (4 points) for this item. The purpose of this scoring item is to encourage affordable rental housing development in proximity to services and amenities that would be considered beneficial to the tenants. Developments Sites must be located within a one mile radius (two-mile radius for Developments competing for a Rural Regional Allocation) of at least six (6) services. A site located within one-half mile of public transportation that is accessible to all residents including Persons With Disabilities and/or located within a community that has another form of transportation, including, but not limited to, special transit service or specialized elderly transportation for Qualified Elderly Developments, will receive full points regardless of the proximity to amenities, as long as the Applicant provides appropriate evidence of the transportation services used to satisfy this requirement. If a Development is providing its own specialized van or funding a comparable service, then this will be a requirement of the LURA. Only one service of each type listed in subparagraphs (A) - (O) of this paragraph will count towards the points. A map must be included identifying the Development Site and the location of the services by name. If the services are not identified by name, points will not be awarded. All services must exist or, if under construction, must be under active construction, post pad by the date the Application is submitted.

(A) Full service grocery store.

(B) Pharmacy.

(C) Convenience Store/Mini-market.

(D) Department or Retail Merchandise Store.

(E) Bank/Credit Union.

(F) Restaurant (including fast food).

(G) Indoor public recreation facilities, such as civic centers, community centers, and libraries.

(H) Outdoor public recreation facilities such as parks, golf courses, and swimming pools.

(I) Medical offices (physician, dentistry, optometry) or hospital/medical clinic.

(J) Public Schools (only eligible for Developments that are not Qualified Elderly Developments).

(K) Senior Center.

(L) Religious Institutions.

(M) Day Care Services (must be licensed - only eligible for Developments that are not Qualified Elderly Developments).

(N) Post Office, City Hall, County Courthouse.

(O) Fire/Police Station.

(20) Repositioning of Existing Developments. Applications may qualify to receive up to (3 points) for this item. The purpose of this scoring item is to provide an incentive for Applications proposing the substantial Rehabilitation of an Existing Residential Development that meet the following criteria:

(A) proposes Rehabilitation (including Reconstruction);

(B) contains residential buildings originally constructed between 1980-1990;

(C) the Application includes a scope of work (excluding Reconstruction) for the interior of the Units that includes an intentional lease-down or relocation of tenants off-site; and

(D) the Development, as of the beginning of the Application Acceptance Period, has no income or rent restrictions recorded in the property records of the county.

(21) Sponsor Characteristics. The purpose of this scoring item is to encourage the material participation of Historically Underutilized Businesses relative to the housing industry in the development and operation of affordable housing. Applications may qualify to receive a maximum of (2 points) for this item. Qualifying under subparagraph (A) of this paragraph shall be worth (1 point) and qualifying under subparagraph (B) of this paragraph shall be worth (2 points). (§42(m)(1)(C)(iv))

(A) The Applicant has submitted a plan to use Historically Underutilized Businesses (HUB) in the development process consistent with the Historically Underutilized Business Guidelines for contracting with the State of Texas. The Applicant will be required to submit a report of the success of the plan as part of the cost certification documentation, in order to receive IRS Forms 8609; or

(B) there is a HUB as certified by the Texas Comptroller of Public Accounts, has at least 51% ownership interest in the General Partner and materially participates in the Development and operation of the Development throughout the Compliance Period. To qualify for these points, the Applicant must submit a certification from the Texas Comptroller of Public Accounts that the Person is a HUB at the close of the Application Acceptance Period.

(22) Economic Development Initiatives. (§2306.127) The purpose of this item is to provide an incentive for proposed Developments located in areas that have adopted initiatives that promote economic development. An Application may qualify to receive (1 point) under subparagraph (A) or (B) of this paragraph.

(A) An economic development initiative adopted by the local government in which the Development Site is located, such as, but not limited to, a Tax Increment Financing (TIF) or Tax Increment Reinvestment Zone (TIRZ). Acceptable evidence will be a letter from the Appropriate Local Official certifying they have authority, stating the economic development initiative that is in place and certifying the date the initiative was adopted by the Unit of General Local Government.

(B) A Designated State Enterprise Zone.

(23) Community Revitalization (§42(m)(1)(C)(iii)) or Historic Preservation. Applications may qualify to receive (1 point) under subparagraph (A) or (B) of this paragraph. The purpose of this scoring item is to provide an incentive for community transformation (including Qualified Census Tracts) by utilizing already existing capacities and providing long-term improvements to specific geographic areas as well as preserving federal or state designated historic buildings.

(A) Any Development, regardless of whether located in a Qualified Census Tract, that is part of a community revitalization plan. To qualify for these points a letter from the Appropriate Local Official must be submitted affirming that the Development is located within the specific geographic area covered by the plan, that the plan is not a Consolidated Plan or other Economic Development Plan or city-wide plan, the plan has been approved or adopted by ordinance, resolution, or other vote by the Governing Body with jurisdiction over the area covered by the plan (or, if such body has delegated that responsibility to another body by resolution, ordinance, or other vote, the body to which the responsibility was delegated) in a process that allows for public input and/or comment.

(B) The Development includes the use of an existing building that is designated as historic by a federal or state Entity and proposes Rehabilitation (including Reconstruction) or Adaptive Reuse. The Development itself must have the designation; points in this subparagraph are not available for Developments simply located within historic districts or areas that do not have a designation on the building. The Development must include the historic building. Evidence will include proof of the historic designation from the appropriate Governmental Entity. The Applicant will be required to show proof of the Historic designation and Historic Tax Credits at Cost Certification.

(24) Developments Intended for Eventual Tenant Ownership--Right of First Refusal. Applications may qualify to receive (1 point) for this item. (§2306.6725(b)(1); §42(m)(1)(C)(viii)) The purpose of this scoring item is to allow for consideration for tenant or nonprofit ownership at the end of the Compliance Period. Evidence that Development Owner agrees to provide a right of first refusal to purchase the Development upon or following the end of the Compliance Period in accordance with §2306.6726 and the Department's rules related to Right of First Refusal and Qualified Contract in §1.9 of this title (relating to Qualified Contract Policy).

(c) Scoring Criteria Imposing Penalties. (§2306.6710(b)(2)) Staff will recommend to the Board a penalty of up to (5 points) for any of the items listed in paragraphs (1) and (2) of this subsection, unless the person approving the extension (the Board or Executive Director, as applicable) makes an affirmative finding setting forth that the facts which gave rise to the need for the extension were beyond the reasonable control of the Applicant and could not have been reasonably anticipated. Any such matter to be presented for final determination of penalties by the Board must include notice from the Department to the affected party not less than fourteen (14) days prior to the scheduled Board meeting. The Executive Director may, but is not required, to issue a formal notice after disclosure if it is determined that the matter does not warrant penalties.

(1) If the Applicant or Affiliate failed to meet the original Carryover submission or 10% Test deadline(s) or has requested an extension of the Carryover submission deadline, the 10% Test deadline (relating to either submission or expenditure).

(2) If the Developer or Principal of the Applicant violates the Adherence to Obligations pursuant to §50.12(a) of this chapter (relating to Post Award Activities).

(3) No penalty points will be deducted for extensions that were requested on Developments that involved Rehabilitation when the Department is the primary lender, or for Developments that involve TRDO-USDA as a lender if TRDO-USDA or the Department is the cause for the Applicant not meeting the deadline.

(4) Any penalties assessed by the Board for paragraph (1) or (2) of this subsection based on a Housing Tax Credit Commitment from the preceding Application Round will be attributable to the Applicant or Affiliate of an Application submitted in the current Application Round.

§50.10.Board Decisions.

(a) The Board's decisions shall be based upon the Department's and the Board's evaluation of the proposed Developments' consistency with the criteria and requirements set forth in this QAP and other applicable Department rules.

(1) On awarding tax credits, the Board shall document the reasons for each Application's selection, including any discretionary factors used in making its determination, including good cause and the reasons for any decision that conflicts with the recommendations made by Department Staff. Good cause includes the Board's decision to apply discretionary factors. (§§2306.6725(c); 2306.6731; and 42(m)(1)(A)(iv))

(2) Before the Board approves any Application, the Department shall assess the compliance history of the Applicant with respect to all applicable requirements; and the compliance issues associated with the proposed Development. The Board has established a rule for the materiality of noncompliance in Chapter 60 of this title (relating to Compliance Administration) to address noncompliance associated with the Development, Applicant or Affiliate.

(b) Waiting List. (§2306.6711(c) and (d)) If the entire State Housing Credit Ceiling for the applicable calendar year has been committed or allocated in accordance with this chapter, the Board shall generate, concurrently with the issuance of the Commitment, a waiting list of additional Applications ranked by score in descending order of priority based on Set-Aside categories and regional allocation goals. The Board may also apply discretionary factors in determining the waiting list provided that it takes into account the need to assure adherence to regional allocation requirements. If at any time prior to the end of the Application Round, one or more Commitments expire or a sufficient amount of the State Housing Credit Ceiling becomes available, the Board shall issue a Commitment to Applications on the waiting list subject to the amount of returned credits, the regional allocation goals and the Set-Aside categories, including the 10% Nonprofit Set-Aside allocation, 15% At-Risk Set-Aside allocation and 5% TRDO-USDA Set-Aside required under §42(h)(5) of the Code. At the end of each calendar year, all Applications which have not received a Commitment shall be deemed terminated. The Applicant may re-apply to the Department during the next Application Round.

(c) Appeals Process. (§2306.6715) An Applicant may appeal decisions made by the Department described in paragraphs (1) - (6) of this subsection:

(1) The decisions that may be appealed are identified in subparagraphs (A) - (D) of this paragraph.

(A) A determination regarding the Application's satisfaction of:

(i) Eligibility Requirements;

(ii) Disqualification or debarment criteria;

(iii) Pre-application or Application Threshold Criteria;

(iv) Underwriting Criteria;

(B) The scoring of the Application under the Selection Criteria;

(C) A recommendation as to the amount of Housing Tax Credits to be allocated to the Application; and

(D) Any Department decision that results in termination of an Application can be appealed in accordance with this section. Termination of an Application based on Material Noncompliance will follow the process as described in Chapter 60 of this title;

(2) An Applicant may not appeal a decision made regarding an Application filed by another Applicant;

(3) An Applicant must file its appeal in writing with the Department not later than the seventh calendar day after the date the Department publishes the results of any stage of the Application evaluation process identified in §50.7 of this chapter (relating to Application Process). The appeal must be in writing, signed by the person designated to act on behalf of the Applicant or an attorney that represents the Applicant. The Appeal must be addressed to the Department to the attention of the Director of Housing Tax Credits. In the appeal, the Applicant must specifically identify the Applicant's grounds for appeal, based on the original Application and additional documentation filed with the original Application as supplemented in accordance with the limitations and requirements of this chapter. If the appeal relates to the amount of Housing Tax Credits recommended to be allocated, the Department will provide the Applicant with the underwriting report upon request;

(4) The Executive Director of the Department shall respond in writing to the appeal not later than fourteen (14) calendar days after the date of actual receipt of the appeal by the Department in its offices. If the Applicant is not satisfied with the Executive Director's response to the appeal, the Applicant may appeal directly in writing to the Board, provided that an appeal filed with the Board under this subsection must be received by the Board before:

(A) the seventh calendar day preceding the date of the Board meeting at which the relevant commitment decision is expected to be made; or

(B) the third calendar day preceding the date of the Board meeting described by subparagraph (A) of this paragraph, if the Executive Director does not respond to the appeal before the date described by subparagraph (A) of this paragraph;

(5) Board review of an appeal under paragraph (4) of this subsection is based on the original Application. The Board may not review any information not contained in or filed with the original Application. The decision of the Board regarding the appeal is the final decision of the Department;

(6) the Department will post to its website an appeal filed with the Department or Board and any other document relating to the processing of the appeal. (§2306.6717(a)(5))

(d) Provision of Information or Challenges Regarding Applications from Unrelated Entities to the Application. The Department will address information or challenges received from unrelated entities to a specific active Application, utilizing a preponderance of the evidence standard, as stated in paragraphs (1) - (4) of this subsection, provided the information or challenge includes a contact name, telephone number, fax number and e-mail address of the person providing the information or challenge and must be received by the Department no later than the Application Challenges Deadline as identified in §50.3 of this chapter (relating to Program Calendar):

(1) within fourteen (14) business days of the Application Challenges Deadline as identified in §50.3 of this chapter the Department will post all information and challenges received (including any identifying information) to the Department's website;

(2) within seven (7) business days of the Application Challenges Deadline as identified in §50.3 of this chapter the Department will notify the Applicant related to the information or challenge. The Applicant will then have seven (7) business days to respond to all information and challenges provided to the Department; and

(3) within fourteen (14) business days of the receipt of the response from the Applicant, the Department will evaluate all information submitted and other relevant documentation related to the investigation. This information may include information requested by the Department relating to this evaluation. The Department will post its determination summary to its website. Any determinations made by the Department cannot be appealed by any party unrelated to the Applicant.

(4) Nothing herein shall serve to limit the authority of the Board to apply discretion for good cause to the fullest extent lawfully permitted.

§50.11.Tax-Exempt Bond Developments.

(a) Filing of Applications. Applications for a Tax-Exempt Bond Development may be submitted to the Department as described in paragraphs (1) and (2) of this subsection:

(1) Applicants which receive advance notice of a Certificate of Reservation as a result of the Texas Bond Review Board's (TBRB) lottery for the private activity bond volume cap must file a complete Application not later than the deadline as posted in the Application Procedures for Housing Tax Credits with Tax Exempt Bond Financing document on the Department's website. Such filing must be accompanied by the Application fee described in §50.14 of this chapter (relating to Program Related Fees);

(2) Applicants which receive advance notice of a Certificate of Reservation after being placed on the waiting list for private activity bond volume cap must submit Parts 1 - 4 of the Application and the Application fee described in §50.14 of this chapter prior to the Applicant's Certificate of Reservation date as assigned by the TBRB. Those Applications designated as Priority 3 by the TBRB must submit Parts 1 - 4 within fourteen (14) days of the Certificate of Reservation date if the Applicant intends to apply for tax credits regardless of the Issuer. Any outstanding documentation required under this section regardless of Priority must be submitted to the Department at least sixty (60) days prior to the Board meeting at which the decision to issue a Determination Notice would be made unless a waiver is requested by the Applicant. The Department Staff will have limited discretion to recommend an Application with appropriate justification of the late submission;

(3) Multiple site applications will be considered to be one Application as identified in Chapter 1372 of the Texas Government Code.

(b) Applicability of Rules. Tax-Exempt Bond Development Applications are subject to all rules in this chapter, with the only exceptions being the following sections: §50.4(d)(14) of this chapter (relating to Ineligible Applicants, Applications, and Developments); §50.5(c) of this chapter (relating to Site and Development Restrictions); §50.6(b) - (e) of this chapter (relating to Allocation and Award Process); §50.7(c), (d), (e) and (k) of this chapter (relating to Application Process); §50.9(b) of this chapter (relating to Selection Criteria); §50.10(b) of this chapter (relating to Board Decisions); and §50.12(e) - (f) of this chapter (relating to Post Award Activities).

(c) Tenant Services. Tax-Exempt Bond Development Applications must include the provision of supportive services. No fees may be charged to the tenants for any of the services. Services must be provided on-site or transportation to off-site services as identified on the list must be provided. The provision of these services will be included in the LURA. Acceptable services include those described in §1.1 of this title (relating to Definitions and Amenities for Housing Program Activities).

(d) Financial Feasibility Evaluation for Tax-Exempt Bond Developments. Section 42(m)(2)(D), Internal Revenue Code, requires the bond issuer (if other than the Department) to ensure that a Tax-Exempt Bond Development does not receive more tax credits than the amount needed for the financial feasibility and viability of a Development throughout the Compliance Period. Treasury Regulations prescribe the occasions upon which this determination must be made. In light of the requirement, issuers may either elect to underwrite the Development for this purpose in accordance with the QAP and §1.32 of this title (relating to Underwriting Rules and Guidelines), or request that the Department perform the function. If the issuer underwrites the Development, the Department may request such underwriting report and may upon review make such changes in the amount of credits which the Development may be allowed as are appropriate under the Department's guidelines. The Determination Notice issued by the Department and any subsequent IRS Form(s) 8609 will reflect the amount of tax credits for which the Development is determined to be eligible in accordance with this subsection, and the amount of tax credits reflected in the IRS Form 8609 may be greater or less than the amount set forth in the Determination Notice, based upon the Department's and the bond issuer's determination as of each building's placement in service. Any increase of tax credits, from the amount specified in the Determination Notice, at the time of each building's placement in service will only be permitted if it is determined by the Department, as required by §42(m)(2)(D) of the Code. Increases to the amount of tax credits that exceed 110% of the amount of credits reflected in the Determination Notice are contingent upon approval by the Board. Increases to the amount of tax credits that do not exceed 110% of the amount of credits reflected in the Determination Notice may be approved administratively by the Executive Director and are subject to the Credit Increase Fee as described in §50.14 of this chapter.

(e) Certification of Tax Exempt Applications with New Docket Numbers. Applications that are processed through the Department review and evaluation process and receive an affirmative Board Determination, but do not close the bonds prior to the Certificate of Reservation expiration date, and subsequently have that docket number withdrawn from the TBRB, may have their Determination Notice reinstated. The Applicant would need to receive a new docket number from the TBRB and paragraph (1) or (2) of this subsection must apply:

(1) the new docket number must be issued in the same program year as the original docket number and must not be more than four (4) months from the date the original application was withdrawn from the TBRB. The Application must remain unchanged. This means that at a minimum, the following cannot have changed: site control, total number of units, unit mix (bedroom sizes and income restrictions), design/site plan documents, financial structure including bond and Housing Tax Credit amounts, development costs, rent schedule, operating expenses, sources and uses, ad valorem tax exemption status, target population, scoring criteria (TDHCA issues) or TBRB priority status including the effect on the inclusive capture rate. Note that the entities involved in the Applicant entity and Developer cannot change; however, the certification can be submitted even if the lender, syndicator or issuer changes, as long as the financing structure and terms remain unchanged. Notifications under §50.8(9) of this chapter (relating to Threshold Criteria) are not required to be reissued. A revised Determination Notice will be issued once notice of the assignment of a new docket number has been provided to the Department and the Department has confirmed that the capture rate and market demand remain acceptable. This certification must be submitted no later than thirty (30) days after the date the TBRB issues the new docket number. In the event that the Department's Board has not yet approved the Application, the Application will continue to be processed and ultimately provided to the Board for consideration. This certification must be submitted no later than thirty (30) days after the date the TBRB issues the new docket number; or

(2) if there are changes to the Application as referenced in paragraph (1) of this subsection or if there is public opposition, the Applicant will be required to submit a new Application in full, along with the applicable fees, to be reviewed and evaluated in its entirety for a new Determination Notice to be issued.

§50.12.Post Award Activities.

(a) Adherence to Obligations. (§2306.6720) Compliance with representations, undertakings and commitments made by an Applicant in the Application process for a Development, whether with respect to Threshold Criteria, Selection Criteria or otherwise, including the timely submittal and completion of cost certification (except for Department approved extensions), shall be deemed to be a condition to any Commitment, Determination Notice, or Carryover Allocation for such Development, the violation of which shall be cause for cancellation of such Commitment, Determination Notice, or Carryover Allocation by the Department, and if concerning the ongoing features or operation of the Development, shall be enforceable even if not reflected in the LURA. All such representations are enforceable by the Department and the tenants of the Development, including enforcement by administrative penalties for failure to perform, as stated in the representations and in accordance with the LURA. If a Development Owner does not produce the Development as represented in the Application; does not receive approval for an amendment to the Application by the Department prior to implementation of such amendment; or does not provide the necessary evidence for any points received by the required deadline:

(1) the Development Owner must provide a plan to the Department, for approval and subsequent implementation, that incorporates additional amenities to compensate for the non-conforming components; and

(2) the Board will opt either to terminate the Application and rescind the Commitment, Determination Notice or Carryover Allocation Agreement as applicable or the Department must:

(A) reduce the score for Applications for Competitive Housing Tax Credits that are submitted by an Applicant or Affiliate related to the Development Owner of the non-conforming Development by up to (10 points) for the two Application Rounds concurrent to, or following, the date that the non-conforming aspect, or lack of financing, was recognized by the Department of the need for the amendment; the placed in service date; or the date the amendment is accepted by the Board;

(B) prohibit eligibility to apply for Housing Tax Credits for a Tax-Exempt Bond Development that are submitted by an Applicant or Affiliate related to the Development Owner of the non-conforming Development for up to twenty-four (24) months from the date that the non-conforming aspect, or lack of financing, was recognized by the Department of the need for the amendment; the placed in service date; or the date the amendment is accepted by the Board, less any time delay caused by the Department;

(C) in addition to, or in lieu of, the penalty in subparagraph (A) or (B) of this paragraph, the Board may assess a penalty fee of up to $1,000 per day for each violation.

(3) For amendments approved administratively by the Executive Director, the penalties in paragraph (2) of this subsection will not be imposed.

(b) Commitments and Determination Notices.

(1) Commitments. If the Application is for a commitment from the State Housing Credit Ceiling, the Department shall issue a Commitment to the Development Owner which shall:

(A) confirm that the Board has approved the Application; and

(B) state the Department's commitment to make a Housing Credit Allocation to the Development Owner in a specified amount, subject to the feasibility determination described in this chapter, and compliance by the Development Owner with the remaining requirements of this chapter and any other terms and conditions set forth therein by the Department. This Commitment shall expire on the date specified therein unless the Development Owner indicates acceptance of the Commitment by executing the Commitment, pays the required fee specified in §50.14(f) of this chapter (relating to Program Related Fees), and satisfies any other conditions set forth therein by the Department. The Commitment expiration date may not be extended.

(2) Determination Notices. If the Application regards a Tax-Exempt Bond Development, issue a Determination Notice to the Development Owner which shall:

(A) confirm the Board's determination that the Development satisfies the requirements of this chapter and other applicable Department rules in accordance with the §42(m)(1)(D) of the Code. Applications that receive a Certificate of Reservation from the TBRB on or before November 15 of the prior program year will be required to satisfy the requirements of the prior year QAP; Applications that receive a Certificate a Reservation from the TBRB on or after January 2 of the current program year will be required to satisfy the requirements of the current program year QAP; and

(B) state the Department's commitment to issue IRS Form(s) 8609 to the Development Owner in a specified amount, subject to the requirements set forth in §50.11 of this chapter (relating to Tax-Exempt Bond Developments) and compliance by the Development Owner with all applicable requirements of this chapter and any other terms and conditions set forth therein by the Department. The Determination Notice shall expire on the date specified therein unless the Development Owner indicates acceptance by executing the Determination Notice, pays the required fee specified in §50.14(f) of this chapter and satisfies any conditions set forth therein by the Department. The Determination Notice expiration date may not be extended. Furthermore, no later than sixty (60) days following closing on the bonds, the Development Owner must submit:

(i) a Management Plan and an Affirmative Marketing Plan (as further described in the carryover procedures as identified in the Tax Credit (Procedures) Manual; and

(ii) evidence that the Development Owner or management company has attended Department-approved Fair Housing training relating to leasing and management issues for at least five (5) hours; and

(iii) the Development architect or engineer responsible for Fair Housing compliance for the Development has attended Department-approved Fair Housing training relating to design issues for at least five (5) hours. Certifications required under clauses (ii) and (iii) of this subparagraph must not be older than two (2) years from the date of the submission deadline.

(3) The Department shall notify, in writing, the mayor or other equivalent chief executive officer of the municipality in which the Property is located informing him/her of the Board's issuance of a Commitment or Determination Notice, as applicable.

(4) A Commitment or Determination Notice shall not be issued with respect to any Development for an unnecessary amount or where the cost for the total development, acquisition, construction or Rehabilitation exceeds the limitations established from time to time by the Department and the Board, unless the Department Staff make a recommendation to the Board based on the need to fulfill the goals of the Housing Tax Credit Program as expressed in this QAP and other applicable Department rules, and the Board accepts the recommendation. The Department's recommendation to the Board shall be clearly documented.

(5) The executed Commitment or Determination Notice must be returned to the Department no later than thirty (30) days after the effective date of the Notice provided that for Commitments under the State Housing Credit Ceiling that date is not later than December 31.

(6) The Department may cancel a Commitment, Determination Notice or Carryover Allocation prior to the issuance of IRS Form 8609 with respect to a Development if:

(A) the Applicant or the Development Owner, or the Development, as applicable, fails after written notice and a reasonable opportunity to cure to meet any of the conditions of such Commitment, Determination Notice or Carryover Allocation or any of the undertakings and commitments made by the Development Owner in the Applications process for the Development;

(B) any material statement or representation made by the Development Owner or made with respect to the Development Owner or the Development is untrue or misleading;

(C) an event occurs with respect to the Applicant or the Development Owner which would have made the Development's Application ineligible for funding pursuant to §50.4 of this chapter (relating to Ineligible Applicants, Applications, and Developments) if such event had occurred prior to issuance of the Commitment, Determination Notice or Carryover Allocation; or

(D) the Applicant or the Development Owner or the Development, as applicable, fails after written notice and a reasonable opportunity to cure to comply with this chapter or other applicable Department rules or the procedures or requirements of the Department.

(c) Agreement and Election Statement. The Development Owner may execute an Agreement and Election Statement, in the form prescribed by the Department, for the purpose of fixing the Applicable Percentage with respect to a building or buildings for the month in which the Carryover Allocation was accepted (or the month the bonds were closed for Tax-Exempt Bond Developments), as provided in the §42(b)(2) of the Code. Current Treasury Regulations, §1.42-8(a)(1)(v), suggest that in order to permit a Development Owner to make an effective election to fix the Applicable Percentage for a Development receiving credits from the State Housing Credit Ceiling, the Carryover Allocation Document must be executed by the Department and the Development Owner within the same month. The Department Staff will cooperate with a Development Owner, as possible or reasonable; to assure that the Carryover Allocation Document can be so executed. For Tax-Exempt Bond Developments where the election is not made for the month the bonds closed, the Applicable Percentage will be determined based on the month each building is placed in service.

(d) Documentation Submission Requirements at Commitment of Funds. No later than the date the Commitment or Determination Notice is executed by the Applicant and returned to the Department with the appropriate Commitment or Determination Fee as further described in §50.14(f) of this chapter, the following documents must also be provided to the Department. Failure to provide these documents may cause the Commitment or Determination Notice to be rescinded. For each Applicant documents described in paragraphs (1) - (5) of this subsection must be provided:

(1) for entities formed outside the state of Texas, evidence that the entity has the authority to do business in Texas in the form of a Certificate of Filing from the Texas Office of the Secretary of State;

(2) a Certificate of Account Status from the Texas Comptroller of Public Accounts or, if such a Certificate is not available because the entity is newly formed, a statement to such effect; and a Certificate of Name Reservation from the Texas Office of the Secretary of State;

(3) evidence that the signer(s) of the Application have the authority to sign on behalf of the Applicant in the form of a corporate resolution which indicates the sub-entity in Control and that those Persons signing the Application constitute all Persons required to sign or submit such documents;

(4) evidence of final zoning that was proposed or needed to be changed pursuant to the Development plan; and

(5) any conditions identified in the Real Estate Analysis report or any other conditions of the award required to be met at Commitment or Determination Notice.

(e) Carryover. All Developments which received a Commitment, and will not be placed in service and receive IRS Form 8609 in the year the Commitment was issued, must submit the Carryover documentation to the Department no later than the Carryover Documentation Delivery Date as identified in §50.3 of this chapter (relating to Program Calendar) of the year in which the Commitment is issued pursuant to §42(h)(1)(C) of the Code.

(1) Commitments for credits will be terminated if the Carryover documentation, or an approved extension, has not been received by this deadline. In the event that a Development Owner intends to submit the Carryover documentation in any month preceding November of the year in which the Commitment is issued, in order to fix the Applicable Percentage for the Development in that month, it must be submitted no later than the first Friday in the preceding month.

(2) If the financing structure, syndication rate, amount of debt or syndication proceeds are revised at the time of Carryover from what was proposed in the original Application, applicable documentation of such changes must be provided and the Development may be reevaluated by the Department.

(3) The Carryover Allocation must be properly completed and delivered to the Department as prescribed by the carryover procedures identified in the Tax Credit (Procedures) Manual.

(4) All Carryover Allocations will be contingent upon the Development Owner providing evidence that they have and will maintain Site Control through 10% Test or through the anticipated closing date, whichever is earlier. For purposes of this paragraph, site control must be identical to the same Development Site that was submitted at the time of Application submission.

(5) Evidence that the Development Owner entity has been formed must be submitted with the Carryover Allocation.

(6) The Department will not execute a Carryover Allocation Agreement with any Development Owner having any member in Material Noncompliance on October 1 of the current program year.

(f) 10% Test. No later than July 1 of the year following the submission of the Carryover Allocation Document more than 10% of the Development Owner's reasonably expected basis must have been incurred pursuant to §42(h)(1)(E)(i) and (ii) of the Internal Revenue Code (as amended by The Housing and Economic Recovery Act of 2008) and Treasury Regulations, §1.42-6. The evidence to support the satisfaction of this requirement must be submitted to the Department no later than the 10% Test Documentation Delivery Date as identified in §50.3 of this chapter. The Development Owner must submit, in the form prescribed by the Department, documentation evidencing paragraphs (1) - (5) of this subsection. The 10% Test Documentation will be contingent upon the following, in addition to all other conditions placed upon the Application in the Commitment:

(1) evidence that the Development Owner has purchased, transferred, leased or otherwise has ownership of, the Development Site;

(2) a certification from a Third Party civil engineer stating that all necessary utilities will be available at the site and that no easements, licenses, royalties or other conditions on or affecting the Development which would materially and adversely impact the ability to acquire, develop and operate as set forth in the Application. Copies of such supporting documents will be provided upon request;

(3) a Management Plan and an Affirmative Marketing Plan as further described in the carryover procedures identified in Tax Credit (Procedures) Manual;

(4) evidence confirming attendance of the Development Owner or management company at Department-approved Fair Housing training relating to leasing and management issues for at least five (5) hours and the Development architect or engineer responsible for Fair Housing compliance for the Development has attended Department-approved Fair Housing training relating to design issues for at least five (5) hours on or before the time the 10% Test Documentation is submitted. Certifications must not be older than two (2) years from the date of submission of the 10% Test Documentation; and

(5) a Certification from the lender or syndicator identifying all Guarantors.

(g) Cost Certification. The Cost Certification Procedures Manual sets forth the documentation required for the Department to perform a feasibility analysis in accordance with §42(m)(2)(C)(i)(II), Internal Revenue Code, and determine the final Credit to be allocated to the Development.

(1) Required cost certification documentation must be received by the Department no later than January 15 following the year the Credit Period begins. Any Developments issued a Commitment or Determination Notice that fails to submit its cost certification documentation by this deadline will be reported to the IRS and the Owner will be required to submit a request for extension consistent with §50.13(c) of this chapter (relating to Application Reevaluation; (§2306.6731(b))

(2) the Department will perform an initial evaluation of the cost certification documentation and notify the Development Owner in a deficiency letter of all additional required documentation. Any communication issued to the Development Owner pertaining to the cost certification documentation may also be copied to the syndicator;

(3) for the Department to release IRS Forms 8609, Developments must have:

(A) placed in Service by December 31 of the year the Commitment Notice was issued if a Carryover Allocation was not requested and received; December 31 of the second year following the year the Carryover Allocation Agreement was executed; or approved Placed in Service deadline;

(B) submitted all Cost Certification documentation as more fully described in the Cost Certification Procedures Manual including:

(i) Carryover Allocation Agreement/Determination Notice and Election Statement;

(ii) Owner's Statement of Certification;

(iii) Owner Summary;

(iv) Evidence of Nonprofit and CHDO Participation;

(v) Evidence of Historically Underutilized Business (HUB) Participation;

(vi) Development Summary (including list of tenant services, unit and common amenities);

(vii) As-Built Survey;

(viii) Closing Statement;

(ix) Title Policy;

(x) Evidence of Placement in Service;

(xi) Independent Auditor's Reports;

(xii) Total Development Cost Schedule;

(xiii) AIA Form G702 and G703, Application and Certificate for Payment;

(xiv) Rent Schedule;

(xv) Utility Allowance;

(xvi) Annual Estimated Operating Expenses and 15-Year Proforma;

(xvii) Current Annual Operating Statement and Rent Roll;

(xviii) Final Sources of Funds;

(xix) Executed Limited Partnership Agreement;

(xx) Loan Agreement or Firm Commitment;

(xxi) Architect's Certification of Fair Housing Requirements;

(xxii) TDHCA Compliance Workshop Certificate;

(C) complied with the requirements set forth in the Cost Certification Procedures Manual;

(D) received written notice from the Department that all deficiencies noted during the final construction inspection have been resolved in accordance with Chapter 60 of this title;

(E) informed the Department of and received written approval for all Development amendments in accordance with §50.13(b) of this chapter (relating to Application Reevaluation); (§2306.6731(b))

(F) informed the Department of and received written approval for all ownership transfers in accordance with §50.13(d) of this chapter;

(G) submitted to the Department the recorded LURA in accordance with Chapter 60 of this title (relating to Compliance Administration);

(H) paid all applicable Department fees; and

(I) corrected all issues of noncompliance, including but not limited to noncompliance status with the LURA (or any other document containing an Extended Low-income Housing Commitment) or the program rules in effect for the subject property, as described in Chapter 60 of this title.

§50.13.Application Reevaluation (§2306.6731(b)).

(a) Regardless of development stage, the Board shall reevaluate a Development that undergoes a substantial change at any time after the initial Board approval of the Development. For the purposes of this subsection, substantial change shall be based on those items identified in subsection (b)(4) of this section. The Board may revoke any Commitment or Determination Notice issued for a Development that has been unfavorably reevaluated by the Board.

(b) Amendment of Application Subsequent to Allocation by Board. (§2306.6712 and §2306.6717(a)(4))

(1) If a proposed modification would materially alter a Development approved for an allocation of Housing Tax Credits, or if the Applicant has altered any Selection Criteria item for which it received points, the Department shall require the Applicant to file a formal, written request for an amendment to the Application. Such request shall include a proposed form of amendment, if requested by the Department, and the applicable fee as identified in §50.14(l) of this chapter (relating to Program Related Fees). The amendment request will not be considered received or processed unless accompanied with the corresponding fee. Changes to the Developer, Guarantor, or Person used for experience constitute a change requiring an amendment and may be approved by the Executive Director.

(2) The Executive Director of the Department shall require appropriate Department Staff to evaluate the amendment and provide a written analysis and recommendation to the Board. The appropriate party monitoring compliance during construction in accordance with Chapter 60 of this title (relating to Compliance Administration) shall also provide to the Board an analysis and written recommendation regarding the amendment. For amendments not requiring Board approval, the amendment will be deemed approved if the Executive Director does not approve or deny within thirty (30) days from the date on which the Department has acknowledged it has received all additional information that it has, in writing, requested of the Applicant to enable the Department to evaluate the amendment request. Amendment requests which require Board approval must be received by the Department at least forty-five (45) calendar days prior to the Board meeting in which the amendment will be considered.

(3) The Board must vote whether to approve an amendment that is material. The Executive Director may administratively approve all non-material amendments. The Board may vote to reject an amendment request and if appropriate, rescind a Commitment or terminate the allocation of Housing Tax Credits and reallocate the credits to other Applicants on the waiting list. Amendment requests may be denied if the Board determines that the modification proposed in the amendment:

(A) would materially alter the Development in a negative manner; or

(B) would have adversely affected the selection of the Application in the Application Round.

(4) Material alteration of a Development includes, but is not limited to:

(A) a significant modification of the site plan;

(B) a modification of the number of units or bedroom mix of units;

(C) a substantive modification of the scope of tenant services;

(D) a reduction of 3% or more in the square footage of the units or common areas;

(E) a significant modification of the architectural design of the Development;

(F) a modification of the residential density of the Development of at least 5%;

(G) an increase or decrease in the site acreage of greater than 10% from the original site under control and proposed in the Application; and

(H) exclusion of any threshold requirements as identified in §50.8 of this chapter (relating to Threshold Criteria).

(I) Any other modification considered significant by the Board.

(5) In evaluating the amendment under this subsection, Department Staff shall consider whether the need for the proposed modification was:

(A) reasonably foreseeable by the Applicant at the time the Application was submitted; or

(B) preventable by the Applicant. Amendment requests will be denied if the circumstances were reasonably foreseeable and preventable unless good cause is found for the approval of the amendment.

(6) This section shall be administered in a manner that is consistent with §42 of the Code.

(7) Before the 15th day preceding the date of Board action on the amendment, notice of an amendment and the recommendation of the Executive Director and monitor regarding the amendment will be posted to the Department's website and the Applicant will be notified of the posting.

(8) In the event that an Applicant or Developer seeks to be released from the commitment to serve the income level of tenants targeted in the Real Estate Analysis Report at the time of the Commitment or Determination Notice issuance, as approved by the Board, the following procedure described in subparagraphs (A) and (B) of this paragraph will apply:

(A) for amendments that involve a reduction in the total number of Low-Income Units being served, or a reduction in the number of Low-Income Units at any level of AMGI, as approved by the Board, evidence must be presented to the Department that includes written confirmation from the lender and syndicator that the Development is infeasible without the adjustment in Units. The Board may or may not approve the amendment request; however, any affirmative recommendation to the Board is contingent upon concurrence from the Real Estate Analysis Division that the Unit adjustment (or an alternative Unit adjustment) is necessary for the continued feasibility of the Development; and

(B) if it is determined by the Department that the allocation of credits would not have been made in the year of allocation because the loss of low-income targeting points would have resulted in the Application not receiving an allocation, and the amendment is approved by the Board, the approved amendment will carry a penalty that prohibits the Applicant and all Persons or entities with any ownership interest in the Application (excluding any tax credit purchaser/syndicator), from participation in the Housing Tax Credit Program (for both the Competitive Housing Tax Credit Developments and Tax-Exempt Bond Developments) for twenty-four (24) months from the time that the amendment is approved.

(c) Extension Requests. Extensions must be requested if the original deadline associated with Carryover, 10% Test (including submission and expenditure deadlines), or Cost Certification requirements will not be met. If the extension is requested at least thirty (30) calendar days in advance of the deadline no fee will be required; however, if the extension is requested at any point after the applicable deadline the applicable fee as further described in §50.14(l) of this chapter must be submitted. Extension requests submitted after the deadline will not be considered received or processed unless accompanied by the applicable fee. Extension requests will be approved by the Executive Director, unless, at Staff's discretion it warrants Board approval due to extenuating circumstances stated in the request. The extension request must specify a requested extension date and the reason why such an extension is required. Carryover extension requests will not be granted an extended deadline later than December 1st of the year the Commitment was issued. If an extension is required at Cost Certification, the fee as identified in §50.14 of this chapter must be received by the Department to qualify for issuance of IRS Forms 8609.

(d) Housing Tax Credit and Ownership Transfers. (§2306.6713) A Development Owner may not transfer an allocation of Housing Tax Credits or ownership of a Development supported with an allocation of Housing Tax Credits to any Person including an Affiliate of the Development Owner unless the Development Owner obtains the Executive Director's prior, written approval of the transfer. The Executive Director may not unreasonably withhold approval of the transfer.

(1) Transfers (other than to an Affiliate included in the ownership structure) will not be approved prior to the issuance of IRS Forms 8609 unless the Development Owner can provide evidence that a hardship is creating the need for the transfer (potential bankruptcy, removal by a partner, etc.). A Development Owner seeking Executive Director approval of a transfer and the proposed transferee must provide to the Department a copy of any applicable agreement between the parties to the transfer, including any Third Party agreement.

(2) A Development Owner seeking Executive Director approval of a transfer must submit documentation requested by the Department, including but not limited to, a list of the names of transferees and Related Parties and detailed information describing the experience and financial capacity of transferees and related parties. All transfer requests must disclose the reason for the request. The Development Owner shall certify to the Executive Director that the tenants in the Development have been notified in writing of the transfer before the 30th day preceding the date of submission of the transfer request to the Department. Not later than the fifth working day after the date the Department receives all necessary information under this section, Staff shall conduct a qualifications review of a transferee to determine the transferee's past compliance with all aspects of the Housing Tax Credit Program, LURAs and eligibility under §§50.4(a), 50.5(c), and 50.8(4) of this chapter. If the viable operation of the Development is deemed to be in jeopardy by the Department, the Department may authorize changes that were not contemplated in the Application.

(3) As it relates to the credit amount further described in §50.5(c) of this chapter (relating to Site and Development Restrictions), the credit amount will not be applied in circumstances described in subparagraphs (A) and (B) of this paragraph:

(A) in cases of transfers in which the syndicator, investor or limited partner is taking over ownership of the Development and not merely replacing the General Partner; or

(B) in cases where the General Partner is being replaced if the award of credits was made at least five (5) years prior to the transfer request date.

(4) The Development Owner, as on record with the Department, will be liable for any penalties imposed by the Department even if such penalty can be attributable to the new Owner unless such ownership transfer is approved by the Department.

(5) The Development Owner must comply with the additional documentation requirements as stated in Chapter 60 of this title (relating to Compliance Administration).

(e) Withdrawals. An Applicant may withdraw an Application prior to receiving a Commitment, Determination Notice, Carryover Allocation Document or Housing Credit Allocation, or may cancel a Commitment or Determination Notice by submitting to the Department written notice of withdrawal or cancellation, and subject to the Unused Credit Fee or Penalty in §50.14(n) of this chapter.

(f) Alternative Dispute Resolution (ADR) Policy. In accordance with §2306.082 of the Texas Government Code, it is the Department's policy to encourage the use of appropriate ADR procedures under the Governmental Dispute Resolution Act, Chapter 2010, Texas Government Code, to assist in resolving disputes under the Department's jurisdiction. As described in Chapter 154, Civil Practices and Remedies Code, ADR procedures include mediation. Except as prohibited by law and the Department's Ex Parte Communications policy, the Department encourages informal communications between Department Staff and Applicants, and other interested persons, to exchange information and informally resolve disputes. The Department also has administrative appeals processes to fairly and expeditiously resolve disputes. If at any time an Applicant or other person would like to engage the Department in an ADR procedure, the person may send a proposal to the Department's Dispute Resolution Coordinator. For additional information on the Department's ADR Policy, see the Department's General Administrative Rule on ADR at §1.17 of this title. Any Applicant may request an informal conference with Staff to attempt to resolve any appealable matter, and the Executive Director may toll the running of periods for appeal to accommodate such meetings. In the event a successful resolution cannot be reached, the statements made in the meeting process may not be used by the Department as admissions.

§50.14.Program Related Fees.

(a) Timely Payment of Fees. All fees must be paid as stated in this section, unless the Executive Director has granted a waiver for specific extenuating and extraordinary circumstances. To be eligible for a waiver, the Applicant must submit a request for a waiver no later than ten (10) business days prior to the deadlines as stated in this section. Any fees, as further described in this section, that are not paid will cause an Applicant to be ineligible to apply for tax credits and additional tax credits and ineligible to submit extension requests, ownership changes and Application amendments until such time the Department receives payment. Payments made by check, for which insufficient funds are available, may cause the Application, Commitment or Allocation to be terminated.

(b) Pre-application Fee. Each Applicant that submits a Pre-application shall submit to the Department, along with such Pre-application, a non refundable Pre-application fee, in the amount of $10 per Unit. Units for the calculation of the Pre-application Fee include all Units within the Development, including tax credit, market rate and owner-occupied Units. Pre-applications without the specified Pre-application Fee in the form of a check will not be accepted. Pre-applications in which a CHDO or Qualified Nonprofit Organization intends to serve as the Managing General Partner of the Development Owner, or Control the Managing General Partner of the Development Owner, will receive a discount of 10% off the calculated Pre-application fee. (§2306.6716(d)) For Tax Exempt Bond Developments with the Department as the issuer, the Applicant shall submit the following fees: $1,000 (payable to TDHCA), $2,000 (payable to Vinson & Elkins, Bond Counsel), and $5,000 (payable to the Texas Bond Review Board).

(c) Application Fee. Each Applicant that submits an Application shall submit to the Department, along with such Application, an Application fee. For Applicants having submitted a pre-application which met Pre-application Threshold and for which a pre-application fee was paid, the Application fee will be $20 per Unit. For Applicants not having submitted a pre-application, the Application fee will be $30 per Unit. Units for the calculation of the Application Fee include all Units within the Development, including tax credit, market rate and owner-occupied Units. Applications without the specified Application Fee in the form of a check will not be accepted. Applications in which a CHDO or Qualified Nonprofit Organization intends to serve as the Managing General Partner of the Development Owner, or Control the Managing General Partner of the Development Owner, will receive a discount of 10% off the calculated Application fee. (§2306.6716(d)) For Tax Exempt Bond Developments with the Department as the Issuer the Applicant shall submit a tax credit application fee of $30 per unit and bond application fee of $10,000. Those Applications utilizing a local issuer only need to submit the tax credit application fee. For Tax-Exempt Bond Development refunding Applications, with the Department as the issuer, the Application Fee will be $10,000 unless the refunding is not required to have a TEFRA public hearing, in which case the fee will be $5,000.

(d) Refunds of Pre-application or Application Fees. (§2306.6716(c)) Upon written request from the Applicant, the Department shall refund the balance of any fees collected for a pre-application or Application that is withdrawn by the Applicant or that is not fully processed by the Department. The amount of refund on pre-applications not fully processed by the Department will be commensurate with the level of review completed. Intake and data entry will constitute 50% of the review, and Threshold review prior to a deficiency issued will constitute 30% of the review. Deficiencies submitted and reviewed constitute 20% of the review. The amount of refund on Applications not fully processed by the Department will be commensurate with the level of review completed. Intake and data entry will constitute 20% of the review, the site visit will constitute 20% of the review, Eligibility and Selection review will constitute 20%, and Threshold review will constitute 20% of the review, and underwriting review will constitute 20%. The Department must provide the refund to the Applicant not later than the 30th day after the date of request.

(e) Third Party Underwriting Fee. Applicants will be notified in writing prior to the evaluation of a Development by an independent external underwriter in accordance with §50.7(h) of this chapter (relating to Application Process) if such a review is required. The fee must be received by the Department prior to the engagement of the underwriter. The fees paid by the Development Owner to the Department for the external underwriting will be credited against the Commitment Fee established in subsection (f) of this section, in the event that a Commitment or Determination Notice is issued by the Department to the Development Owner.

(f) Commitment or Determination Notice Fee. Each Development Owner that receives a Commitment or Determination Notice shall submit to the Department, not later than the expiration date on the Commitment or Determination Notice, a Commitment or Determination Fee equal to 4% of the annual Housing Credit Allocation amount. The Commitment or Determination Fee shall be paid by check. If a Development Owner of an Application awarded Competitive Housing Tax Credits has paid a Commitment Fee and returns the credits by November 1 of the current Application Round, the Development Owner may receive a refund of 50% of the Commitment Fee. If a Development Owner of an Application awarded Housing Tax Credits associated with Tax-Exempt Bonds has paid a Determination Fee and is not able close on the bond transaction within ninety (90) days of the issuance date of the Determination Notice, the Development Owner may receive a refund of 50% of the Determination Fee. The Determination Fee will not be refundable after ninety (90) days of the issuance date of the Determination Notice.

(g) Compliance Monitoring Fee. Upon receipt of the cost certification, the Department will invoice the Development Owner for compliance monitoring fees. The amount due will equal $40 per tax credit Unit. The fee will be collected, retroactively if applicable, beginning with the first year of the credit period. The invoice must be paid prior to the issuance of IRS Form 8609. Subsequent anniversary dates on which the compliance monitoring fee payments are due shall be determined by the month the first building is placed in service. For Tax-Exempt Bond Developments with the Department as the issuer, the tax credit compliance fee will be paid annually in advance (for the duration of the compliance or affordability period) and is equal to $40/Unit beginning two (2) years from the first payment date of the bonds; the asset management fee, if applicable, is paid in advance and is equal to $25/Unit beginning two (2) years from the first payment date. Compliance fees may be adjusted from time to time by the Department.

(h) Building Inspection Fee. The Building Inspection Fee must be paid at the time the Commitment Fee is paid. The Building Inspection Fee for all Developments is $750. Inspection fees in excess of $750 may be charged to the Development Owner not to exceed an additional $250 per Development.

(i) Tax-Exempt Bond Credit Increase Request Fee. As further described in §50.11 of this chapter (relating to Tax-Exempt Bond Developments), requests for increases to the credit amounts to be issued on IRS Forms 8609 for Tax-Exempt Bond Developments must be submitted with a request fee equal to 5% of the amount of the credit increase for one (1) year.

(j) Public Information Requests. Public information requests are processed by the Department in accordance with the provisions of the Texas Government Code, Chapter 552. The Department uses the guidelines promulgated by the Office of the Attorney General to determine the cost of copying and other costs of production.

(k) Periodic Adjustment of Fees by the Department and Notification of Fees. (§2306.6716(b)) All fees charged by the Department in the administration of the tax credit program will be revised by the Department from time to time as necessary to ensure that such fees compensate the Department for its administrative costs and expenses. The Department shall publish each year an updated schedule of Application fees that specifies the amount to be charged at each stage of the Application process. Unless otherwise determined by the Department, all revised fees shall apply to all Applications in process and all Developments in operation at the time of such revisions.

(l) Extension and Amendment Fees.

(1) All extension requests for deadlines relating to the Carryover, 10% Test (submission and expenditure), or Cost Certification requirements that are submitted after the applicable deadline must be accompanied by an extension fee in the form of a check in the amount of $2,500. Extension requests submitted at least thirty (30) days in advance of the applicable deadline will not be required to submit an extension fee. An extension fee will not be required for extensions requested on Developments that involved Rehabilitation when the Department is the primary lender, or for Developments that involve TRDO-USDA as a lender if TRDO-USDA or the Department is the cause for the Applicant not meeting the deadline.

(2) Amendment requests must be submitted in accordance with §50.13(b) of this chapter (relating to Application Reevaluation). (§2306.6731(b)) An amendment request to be considered non-material that has not been implemented will not be required to pay an amendment fee. Material or non-material amendment requests that have already been implemented will be required to be accompanied by a mandatory amendment fee in the form of a check in the amount of $2,500.

(3) The Board may waive extension or amendment fees for good cause.

(m) Refund of Fees. The Executive Director may approve full or partial refunds of the fees listed in this subsection to ensure equity regarding the work already performed by the Department.

(n) Unused Credit Fee or Penalty. Development Owners who have more tax credits allocated to them than they can substantiate through Cost Certification will return those excess tax credits prior to issuance of 8609's. For Competitive Housing Tax Credit Developments, a penalty fee equal to the one year credit amount of the lost credits (10% of the total unused tax credit amount) will be required to be paid by the Owner prior to the issuance of form 8609's if the tax credits are not returned, and 8609's issued, within one hundred eighty (180) days of the end of the first year of the credit period. This penalty fee may be waived without further Board action if the Department recaptures and re-issues the returned tax credits in accordance with §42, Internal Revenue Code. If an Applicant returns a full credit allocation after the Carryover Allocation deadline required for that allocation, the Executive Director will recommend to the Board the imposition of a penalty on the score for any Competitive Housing Tax Credit Applications submitted by that Applicant or any Affiliate for any Application in an Application Round occurring concurrent to the return of credits or if no Application Round is pending the Application Round immediately following the return of credits. If any such point penalty is recommended to be assessed and presented for final determination by the Board, it must include notice from the Department to the affected party not less than fourteen (14) days prior to the scheduled Board meeting. The Executive Director may, but is not required, to issue a formal notice after disclosure if it is determined that the matter does not warrant point penalties. The penalty will be assessed in an amount that reduces the Applicant's final awarded score by an additional 20%.

§50.16.Waiver and Amendment of Rules.

(a) The Board, in its discretion, may waive any one or more of the rules provided herein if the Board finds that a waiver is necessary to fulfill the purposes or policies of Chapter 2306 of the Texas Government Code, as determined by the Board or if the Board finds that such waiver is in response to a natural, federally declared disaster that occurs after the adoption of this Qualified Allocation Plan. No waiver shall be granted to provide forward commitments. Any such waiver will be subject to all reasonable restrictions and requirements customarily applied by Staff including as applicable, but not limited to, underwriting, satisfactory previous participation reviews, scoring criteria and receipt of required Third Party approvals, including lender or investor approvals.

(b) An Applicant may, at any time, make a specific written request for a waiver. Any waiver must be evidenced in writing consistent with Board approval and must expressly state the purposes or other good cause that the Board finds to justify the waiver. Waiver requests will be submitted to agency Staff, who will review it and place it on the next eligible Board meeting agenda. Staff shall have at least ten (10) days from the date on which it has received all information reasonably necessary for its consideration and evaluation of the request to make a recommendation to the Executive Director. The Staff recommendation must be reviewed by the Executive Award and Review Advisory Committee. Any recommendation to grant a waiver that would have the effect of changing the Applicant's score must be accompanied by an analysis of competing Applications and their scores. Any such request for waiver must be specific to the unique facts and circumstances of an actual proposed Development. Any waiver, if granted, shall apply solely to the Application and shall not constitute a modification or waiver of the rule involved. Any waiver must be evidenced in writing consistent with Board approval and may specify necessary restrictions, exceptions and other requirements. It is an Applicant's responsibility to initiate any waiver request in sufficient time to allow for it to be assessed and acted upon prior to the time it is actually needed.

§50.17.Department Responsibilities.

(a) The Department shall make all required notifications pursuant to Chapter 2306 of the Texas Government Code.

(b) In accordance with §§2306.6724, 2306.67022, 2306.6711, and §42(m)(1) regarding the deadlines for allocating Housing Tax Credits, paragraphs (1) - (7) of this subsection shall apply:

(1) regardless of whether the Board will adopt the Qualified Allocation Plan (QAP) annually or biennially, the Department, not later than September 30 of the year preceding the year in which the new plan is proposed for use, shall prepare and submit to the Board for adoption any proposed QAP required by federal law for use by the Department in setting criteria and priorities for the allocation of tax credits under the Housing Tax Credit program;

(2) regardless of whether the Board has adopted the plan annually or biennially, the Board shall submit to the Governor any proposed QAP not later than November 15 of the year preceding the year in which the new plan is proposed for use;

(3) the Governor shall approve, reject, or modify and approve the proposed QAP not later than December 1;

(4) the Board shall annually adopt a manual, corresponding to the QAP, to provide information on how to apply for Housing Tax Credits;

(5) applications for Housing Tax Credits to be issued a Commitment during the Application Round in a calendar year must be submitted to the Department not later than March 1;

(6) the Board shall review the recommendations of Department Staff regarding Applications and shall issue a list of approved Applications each year in accordance with the Qualified Allocation Plan not later than June 30 or thirty (30) days preceding the date the board approves final Commitments of Housing Tax Credits for the Application Round; and

(7) the Board shall approve final commitments for allocations of Housing Tax Credits each year in accordance with the QAP not later than July 31, unless unforeseen circumstances prohibit action by that date. In any event, the Board shall approve final Commitments for allocations of Housing Tax Credits each year in accordance with the QAP not later than September 30. Department Staff will subsequently issue Commitments based on the Board's approval. Final Commitments may be conditioned on various factors approved by the Board, including resolution of contested matters in litigation.

(c) With respect to site demographics information, the general rule is for the Department to use current State Demographer information. If the State Demographer information is not available as of the date that is four (4) months prior to the Application Acceptance Period, the Executive Director may approve the use of prior year site demographics.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2011.

TRD-201105449

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2011

Proposal publication date: October 21, 2011

For further information, please call: (512) 475-3916