TCAC Proposes How to Apportion Additional $980 Million in LIHTC Allocation to California’s 2017/2018 Fire Disaster Areas

Published by James R. Kroger, Thomas Stagg on Friday, May 1, 2020 - 12:00am

The California Tax Credit Allocation Committee (TCAC) issued proposed regulations April 24 and will hold a public hearing May 7 to discuss their proposal to apportion additional 2020 low-income housing tax credits (LIHTCs) granted under federal year-end budget legislation known as the Further Consolidated Appropriations Act (FCAA).

The FCAA federal legislation allocated an extra $98 million ($980 million 10-year credit) in 9 percent LIHTCs to California for 2020 to help rebuild from major fires that devastated communities in more than a dozen counties in 2017 and 2018 that destroyed more than 32,000 structures. California typically allocates just more than $100 million in 9 percent LIHTCs each year. As such, the $98 million provided by the FCCA is, in effect, approximately one extra year’s worth of LIHTCs for California.

Proposed Regulations to Apportion to Fire Damaged Counties

TCAC proposes to apportion the LIHTCs as shown below amongst the 13 fire-damaged counties, generally based on the number of structures destroyed in each county. If adopted, the proposed regulations would apply to the second round of competitive 9 percent applications due July 1, 2020, but the proposed regulations called for TCAC to have the FCAA LIHTC fall under a separate apportionment that has different point requirements and a drastically different tiebreaker.

County Apportionment Calculations for Further Consolidated Appropriations Act Federal Credits
Click to Enlarge

To put this chart in perspective, the existing 9 percent LIHTC pool estimated for the July round for the Northern Region that includes Butte, Marin, Napa, Shasta, Solano and Sonoma counties is approximately $1.5 million. This pales in comparison to the $58.6 million of FCAA LIHTC in total for Butte, Shasta, Napa and Sonoma.

The proposed regulations recommend that the FCAA LIHTCs be allocated beginning in the second round of competitive 9 percent applications due July 1, 2020 and continue to be allocated through the second round of 2021 until all of the credits are claimed. If there is remaining apportionment in any of the 13 counties after the second round of 2021, the remaining LIHTCs will then be used to fund any qualifying developments in the damaged counties that had already used all of their apportionment. If there is any remaining amount after that, it would be used to fund homeless assistance developments.

FCAA Credit Allocation Differences

TCAC proposes not to recommend investments for FCAA LIHTCs where the local reviewing agency (LRA) opposes the development, because local agencies have emphasized the importance of their involvement in the process as they rebuild their communities.

TCAC proposes the changes below to developments requesting FCAA LIHTCs.

  • All FCAA developments qualify for the 130 percent boost regardless if they are in a DDA or QCT
  • Max award per development is $5 million of LIHTCs
  • FCAA Developments are not eligible for state LIHTCs
  • Eligible developments are
    • new construction
    • rehabilitation of properties located within a FCAA disaster area fire perimeter and directly damaged by the fire
  • Properties awarded in FCAA competition do not count against the 4 project per developer/general partner limit
  • Developments awarded in FCAA competition do not count against the set-aside or housing-type goals
  • The existing 9 percent tiebreakers (including the public funds and requested basis tiebreaker) do not apply, and in the likely event that developments score the same points, the application with greatest number of LIHTC units shall be selected
  • Developments that don’t win in FCAA competition can compete in the applicable set-aside or geographic region.

FCAA Competition Changes

In light of the need for housing in these devastated communities and the lack of infrastructure and resources, as well as anticipated delays, TCAC proposes to only score applications applying for FCAA credits based on a subset of the point scoring categories with a tie breaker based on the number of proposed tax credit units.

  • Scoring is modified to only include the following point categories
    • GP and PM Experience
    • On-site amenities
    • Housing type selection
    • Lowest income targeting
    • The tie breaker is the number of LIHTC units, so larger projects will have a clear advantage (likely that all developments will score all of the available points)
  • Scoring is modified to NOT include the following point categories
    • Off-site amenities
    • Sustainable building methods
    • Readiness to proceed
    • Credit substitution
    • Accessibility
    • Smoke-free
    • Historic
    • Revitalization
    • Tenant ownership

TCAC has a June 17 target date for adopting the proposed regulations. TCAC will hold public hearing May 7 and comments may also be submitted through May 18 to [email protected] and [email protected].