TITLE 10. COMMUNITY DEVELOPMENT

PART 1. TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS

CHAPTER 10. UNIFORM MULTIFAMILY RULES

SUBCHAPTER A. GENERAL INFORMATION AND DEFINITIONS

10 TAC §§10.1 - 10.4

Preamble, Reasoned Response, and Repealed Rule

The Texas Department of Housing and Community Affairs (the "Department") adopts the repeal of 10 TAC Chapter 10, Uniform Multifamily Rules Subchapter A §§10.1 - 10.4, concerning General Information and Definitions, without changes to the proposed text as published in the September 23, 2016, of the Texas Register (41 TexReg 7299). The rules will not be republished.

REASONED JUSTIFICATION. The Department finds that the purpose of the repeal is to replace the sections with a new rule that encompasses all funding made available to multifamily programs. Accordingly, the repeal provides for consistency and minimizes repetition among the programs.

The Department accepted public comments between September 23, 2016, and October 14, 2016. Comments regarding the repealed were accepted in writing and by fax. No comments were received concerning the repeal.

The Board approved the final order adopting the repeal on November 10, 2016.

STATUTORY AUTHORITY. The repeal is adopted pursuant to Texas Government Code §2306.053, which authorizes the Department to adopt rules. Additionally, the repeal is adopted pursuant to Texas Government Code §2306.67022, which specifically authorizes the Department to adopt a qualified allocation plan.

The adopted repeal affects no other code, article or statute.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606429

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-3344


10 TAC §§10.1 - 10.4

The Texas Department of Housing and Community Affairs (the "Department") adopts new 10 TAC Chapter 10, Uniform Multifamily Rules, Subchapter A, §§10.1 - 10.4 concerning General Information and Definitions. Sections 10.3 and 10.4 are adopted with changes to the text as published in the September 23, 2016, issue of the Texas Register (41 TexReg 7299). Sections 10.1 and 10.2 are adopted without changes and will not be republished.

REASONED JUSTIFICATION. The Department finds that the adoption of the sections will result in a more consistent approach to governing multifamily activity and to the awarding of funding or assistance through the Department and to minimize repetition. The comments and responses include both administrative clarifications and corrections to the Uniform Multifamily Rule based on the comments received. After each comment title numbers are shown in parentheses. These numbers refer to the person or entity that made the comment as reflected at the end of the reasoned response. If comment resulted in recommended language changes to the proposed Uniform Multifamily Rule as presented to the Board in September, such changes are indicated.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS.

Public comments were accepted through October 14, 2016, with comments received from (28) Locke Lord Attorneys and Counselors, (33) Anderson Development and Construction, LLC, (40) Dominium, (42) Evolie Housing Partners, (43) Flores Residential, LLC, (54) Leslie Holleman and Associates, Inc., (60) Mears Development, and (73) The Brownstone Group.

1. §10.3 - Subchapter A - Definitions - Qualified Nonprofit Organization (28)

COMMENT SUMMARY: Commenter (28) indicated this definition presents confusion regarding property transfer issues in that not all property transfers involving a nonprofit organization require that organization comply with §2306.6706 of the Texas Government Code. Commenter (28) recommended the following modification "(107) Qualified Nonprofit Organization--An organization that meets the requirements of §42(h)(5)(C) of the Code for all purposes, and for an allocation in the nonprofit set-aside or subsequent transfer of the property, when applicable, meets the requirements of Tex. Gov't Code §2306.6706, and §2306.6729, and §42(h)(5) of the Code."

STAFF RESPONSE: Staff agrees and has made the modification as requested by commenter (28). Moreover, staff recommends a modification to the definition for Right of First Refusal to be consistent with changes proposed in Chapter 10, Subchapter E relating to the eligible entities can purchase a property under a Right of First Refusal. Staff proposes the following modification "(116) Right of First Refusal ("ROFR")--An Agreement to provide a right to purchase the Property to a Qualified Entity or a Qualified Nonprofit Organization, as applicable, with priority to that of any other buyer at a price established in accordance with an applicable LURA."

BOARD RESPONSE: Accepted staff's recommendation.

2. §10.4(4) - Subchapter A - Definitions - Administrative Deficiency Deadline (28)

COMMENT SUMMARY: Commenter (28) requested this section be modified for consistency with the 3-day timeframe by which to respond to a deficiency as indicated in §10.201(7)(B) of the Uniform Multifamily Rules. Moreover, commenter (28) suggested the 3-day timeframe is too short and should revert to 5-days as was the case for 2016.

STAFF RESPONSE: In response to comments received regarding the proposed 3-day deadline for administrative deficiencies, staff modified the timeframe to 5 days which corrects any inconsistency between sections in the rule. Staff does not recommend any further changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

3. §10.3(10) - Subchapter A - Definitions - Bedroom (40)

COMMENT SUMMARY: Commenter (40) expressed concern over the phrase "has at least one window that provides exterior access" in this definition. Specifically, commenter (40) noted the following: the international building code does not require a window provided the new construction building is fully sprinkled with a NFPA 13 sprinkler system; such windows can be problematic in new construction mid-rise buildings that are served by an elevator and double-loaded corridor since many times an internal bedroom is built; this could be problematic in adaptive re-use developments where the existing building does not necessarily allow for a feasible re-development if all bedrooms had to be located on an exterior wall with a window; and further indicated that buried bedrooms are not only allowed under code but are well accepted in the market. Commenter (40) further stated the requirement for a window that provides exterior access reduces the feasibility of certain new construction and historic adaptive re-use developments.

STAFF RESPONSE: Staff believes the modification as proposed by commenter (40) would require additional consideration by the Department and would constitute a substantive change that would necessitate additional public comment. Staff recommends no change based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

4. §10.3(29) - Subchapter A - Definitions - Control (42), (43), (54), (60), (73)

COMMENT SUMMARY: Commenters (42), (43), (54), (60), (73) stated that they do not believe Special Limited Partners generally possess factors or attributes that give them control, although some may and; therefore, recommended the following modification to the definition: "(29) Control (including the terms "Controlling," "Controlled by," and/or "under common Control with")--The power, ability, or authority, acting alone or in concert with others, directly or indirectly, to manage, direct, superintend, restrict, regulate, govern, administer, or oversee. Controlling entities of a partnership include the general partners, may include special limited partners when applicable, but not investor limited partners or special limited partners who do not possess other factors or attributes that give them Control. Controlling entities of a limited liability company include but are not limited to the managers, managing members, any members with 10 percent or more ownership of the limited liability company, and any members with authority similar to that of a general partner in a limited partnership, but not investor members who do not possess other factors or attributes that give them Control. Controlling individuals or entities of a corporation, including non-profit corporations, include voting members of the corporation's board, whether or not any one member did not participate in a particular decision due to recusal or absence. Multiple Persons may be deemed to have Control simultaneously."

STAFF RESPONSE: Staff does not object to the proposed modification and has made the change as suggested. Moreover, staff notes there was a comment proposed by commenter (28) with respect to Subchapter C regarding how the concept of Persons is used throughout the rules that triggers implications regarding certifications and how such Persons are treated. Staff believes the most appropriate way to address those concerns raised by commenter (28) is through a modification to the definition of control and; therefore, proposes the following, taking into account those requested changes by commenters (42), (43), (54), (60), (73): "(29) Control (including the terms "Controlling," "Controlled by," and/or "under common Control with")--The power, ability, or authority, acting alone or in concert with others, directly or indirectly, to manage, direct, superintend, restrict, regulate, govern, administer, or oversee. As used herein "acting in concert" involves more than merely serving as a single member of a multi-member body. For example a single director on a five person board is not automatically deemed to be acting in concert with the other members of the board because they retain independence of judgment. However, if that director is one of three directors on a five person board who all represent a single shareholder, they clearly represent a single interest and are presumptively acting in concert. Similarly, a single shareholder owning only a five percent interest might not exercise control under ordinary circumstances, but if they were in a voting trust under which a majority block of shares were voted as a group, they would be acting in concert with others and in a control position. However, even if a member of a multi-member body is not acting in concert and therefore does not exercise control in that role, they may have other roles, such as executive officer positions, which involve actual or apparent authority to exercise control. Controlling entities of a partnership include the general partners, may include special limited partners when applicable, but not investor limited partners or special limited partners who do not possess other factors or attributes that give them Control. Controlling entities of a limited liability company include but are not limited to the managers, managing members, any members with 10 percent or more ownership of the limited liability company, and any members with authority similar to that of a general partner in a limited partnership, but not investor members who do not possess other factors or attributes that give them Control. Controlling individuals or entities of a corporation, including non-profit corporations, include voting members of the corporation's board, whether or not any one member did not participate in a particular decision due to recusal or absence. Multiple Persons may be deemed to have Control simultaneously."

BOARD RESPONSE: Accepted staff's recommendation.

5. §10.3(47) - Subchapter A - Definitions - Elderly Development (42), (43), (54), (60), (73)

COMMENT SUMMARY: Commenter (42), (43), (54), (60), (73) indicated the Elderly Preference component of this definition does not preclude an applicant from choosing this type of Elderly Development even if HUD funding (or other federal assistance) is not used. Commenter (42), (43), (54), (60), (73) stated the 2016 application conflicted with this plain language and didn't allow for that type of choice to be made. Commenter (42), (43), (54), (60), (73) recommended that if the intention of the Elderly Preference definition is that it only apply to developments with HUD funding or other types of federal assistance then such intention should be clearly articulated in the definition.

STAFF RESPONSE: Staff acknowledges the oversight in the 2016 Uniform Multifamily Application that allowed an applicant to select from the drop down menu the specific type of HUD funding involved if Elderly Limitation was selected. Staff will correct this oversight in the 2017 Uniform Multifamily Application. Staff does not believe the definition needs to be modified to include the exhaustive list of the specific types of HUD or other federal funding that would trigger a development to be classified as Elderly Preference but believes this is best handled through the Application Submission Procedures Manual and Uniform Multifamily Application. Staff does not recommend any changes based on these comments.

BOARD RESPONSE: Accepted staff's recommendation.

6. §10.3(98) - Subchapter A - Definitions - Principal (42), (43), (54), (60), (73)

COMMENT SUMMARY: Commenter (42), (43), (54), (60), (73) stated it is unclear whether "Persons" is capitalized because it refers to the defined term, or simply because it is the first word in the sentence and further indicated that the context seems to indicate that it is the generalized term and; therefore, recommended the following modification, which also incorporates a prior suggestion by commenter (42), (43), (73) relating to the definition of control: "(98) Principal--Any persons that will exercise Control (which includes voting board members pursuant to §10.3(a)(29) of this chapter) over a partnership, corporation, limited liability company, trust, or any other private entity. In the case of: (A) partnerships, Principals include all General Partners, and Principals with ownership interest, and special limited partners with ownership interest who also possess factors or attributes that give them Control; (B) corporations, Principals include any officer authorized by the board of directors, regardless of title, to act on behalf of the corporation, including but not limited to the president, vice president, secretary, treasurer, and all other executive officers, and each stock holder having a 10 percent or more interest in the corporation, and any individual who has Control with respect to such stock holder; and (C) limited liability companies, Principals include all managers, managing members, members having a 10 percent or more interest in the limited liability company, any individual Controlling such members, or any officer authorized to act on behalf of the limited liability company."

STAFF RESPONSE: The proposed modification to change "person" to lower case could create doubt to exactly any person means; staff recommends no change in this regard. Staff does not object to the modifications to subparagraph (A) as requested by the commenters and has made the change accordingly.

BOARD RESPONSE: Accepted staff's recommendation.

7. §10.4(6) - Subchapter A - Definitions - Resolution Delivery Date (33)

COMMENT SUMMARY: Commenter (33) indicated the new language in this section regarding Direct Loan applications not layered with housing tax credits implies that resolutions will be required in the future. Commenter (33) stated that resolutions are not required by statute and the requirement for resolutions in this section seems to work contradictory to Affirmatively Furthering Fair Housing and will thus make development more difficult.

STAFF RESPONSE: Staff agrees that the resolutions are not required by statute and recommends the following modification: (6) Resolutions Delivery Date. Resolutions required for Tax-Exempt Bond Developments must be submitted no later than fourteen (14) calendar days before the Board meeting at which consideration of the award will occur. If the Direct Loan Application is made in conjunction with an Application for Housing Tax Credits, or Tax-Exempt Bond Developments, the Resolution Delivery Date for those programs will apply to the Direct Loan Application.

BOARD RESPONSE: Accepted staff's recommendation.

STATUTORY AUTHORITY. The new sections are adopted pursuant to Texas Government Code, §2306.053, which authorizes the Department to adopt rules. Additionally, the new sections are adopted pursuant to Texas Government Code, §2306.67022, which specifically authorizes the Department to adopt a qualified allocation plan.

The adopted rule affects no other code, article or statute.

§10.3.Definitions.

(a) Terms defined in this chapter apply to the Housing Tax Credit Program, Multifamily Housing Revenue Bond Program, Direct Loan Program and any other programs for the development of affordable rental property administered by the Department and as may be defined in this title. Any capitalized terms not specifically mentioned in this section or any section referenced in this document shall have the meaning as defined in Tex. Gov't Code Chapter 2306, Internal Revenue Code (the "Code") §42, the HOME Final Rule, and other Department rules, as applicable.

(1) Adaptive Reuse--The change-in-use of an existing building not, at the time of Application, being used, in whole or in part, for residential purposes (e.g., school, warehouse, office, hospital, hotel, etc.), into a building which will be used, in whole or in part, for residential purposes. Adaptive reuse requires that the exterior walls of the existing building remain in place. All units must be contained within the original exterior walls of the existing building. Porches and patios may protrude beyond the exterior walls. Ancillary non-residential buildings, such as a clubhouse, leasing office and/or amenity center may be newly constructed outside the walls of the existing building or as detached buildings on the Development Site.

(2) Administrative Deficiencies--Information requested by Department staff that is required to clarify or correct one or more inconsistencies or to provide non-material missing information in the original Application or to assist staff in evaluating the Application that, in the Department staff's reasonable judgment, may be cured by supplemental information or explanation which will not necessitate a substantial reassessment or re-evaluation of the Application. Administrative Deficiencies may be issued at any time while the Application or Contract is under consideration by the Department, including at any time while reviewing performance under a Contract, processing documentation for a Commitment of Funds, closing of a loan, processing of a disbursement request, close-out of a Contract, or resolution of any issues related to compliance.

(3) Affiliate--An individual, corporation, partnership, joint venture, limited liability company, trust, estate, association, cooperative or other organization or entity of any nature whatsoever that directly, or indirectly through one or more intermediaries, has Control of, is Controlled by, or is under common Control with any other Person. All entities that share a Principal are Affiliates.

(4) Affordability Period--The Affordability Period commences as specified in the Land Use Restriction Agreement (LURA) or federal regulation, or commences on the first day of the Compliance Period as defined by the Code §42(i)(1), and continues through the appropriate program's affordability requirements or termination of the LURA, whichever is earlier. The term of the Affordability Period shall be imposed by the LURA or other deed restriction and may be terminated upon foreclosure or deed in lieu of foreclosure. The Department reserves the right to extend the Affordability Period for Direct Loan Developments that fail to meet program requirements. During the Affordability Period, the Department shall monitor to ensure compliance with programmatic rules as applicable, regulations, and Application representations.

(5) Applicable Percentage--The percentage used to determine the amount of the Housing Tax Credit for any Development, 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 for 70 percent present value credits, pursuant to the Code, §42(b); or

(ii) fifteen basis points over the current applicable percentage for 30 percent 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 on:

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

(ii) 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.

(6) Applicant--Means any individual or a group of individuals and any Affiliates who file an Application for funding or tax credits subject to the requirements of this chapter or 10 TAC Chapters 11, 12, or 13 and who may contemplate the later formation of one or more business entities, such as a limited partnership, that is to be engaged in the ownership of a Development. In administering the application process the Department staff will assume that the applicant will be able to form any such entities and that all necessary rights, powers, and privileges including, but not limited to, site control will be transferable to that entity. The formation of the ownership entity, qualification to do business (if needed), and transfer of such rights, powers, and privileges must be accomplished as required in this Chapter and 10 TAC Chapters 11, 12 and 13, as applicable.

(7) Application Acceptance Period--That period of time during which Applications may be submitted to the Department. For Tax-Exempt Bond Developments it is the date the Application is submitted to the Department.

(8) Award Letter and Loan Term Sheet--A document that may be issued to an awardee of a Direct Loan before the issuance of a Commitment and/or Contract which preliminarily sets forth the terms and conditions under which the Direct Loan will be made available. An Award Letter and Loan Term Sheet will typically be contingent on the awardee satisfying certain requirements prior to executing a Commitment and/or Contract.

(9) Bank Trustee--A federally insured bank with the ability to exercise trust powers in the State of Texas.

(10) Bedroom--A portion of a Unit which is no less than 100 square feet; has no width or length less than 8 feet; is self contained with a door (or the Unit contains a second level sleeping area of 100 square feet or more); has at least one window that provides exterior access; and has at least one closet that is not less than 2 feet deep and 3 feet wide and high enough to accommodate 5 feet of hanging space. A den, study or other similar space that could reasonably function as a bedroom and meets this definition is considered a bedroom.

(11) Breakeven Occupancy--The occupancy level at which rental income plus secondary income is equal to all operating expenses, including replacement reserves and taxes, and mandatory debt service requirements for a Development.

(12) Building Costs--Cost of the materials and labor for the vertical construction or rehabilitation of buildings and amenity structures.

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

(14) Carryover Allocation Agreement--A document issued by the Department, and executed by the Development Owner, pursuant to §10.402(f) of this chapter (relating to Housing Tax Credit and Tax Exempt Bond Developments).

(15) Cash Flow--The funds available from operations after all expenses and debt service required to be paid have been considered.

(16) 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.

(17) 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").

(18) Code of Federal Regulations ("CFR")--The codification of the general and permanent rules and regulations of the federal government as adopted and published in the Federal Register.

(19) Commitment (also referred to as Contract)--A legally binding written contract, setting forth the terms and conditions under which housing tax credits, loans, grants or other sources of funds or financial assistance from the Department will be made available.

(20) Commitment of Funds--Occurs after the Development is approved by the Board and once a Commitment or Award Letter and Loan Term Sheet is executed between the Department and Development Owner. For Direct Loan Programs, this process is distinct from "Committing to a specific local project" as defined in 24 CFR Part 92, which may occur when the activity is set up in the disbursement and information system established by HUD; known as the Integrated Disbursement and Information System (IDIS). The Department's commitment of funds may not align with commitments made by other financing parties.

(21) Committee--See Executive Award and Review Advisory Committee.

(22) Comparable Unit--A Unit, when compared to the subject Unit, is similar in net rentable square footage, number of bedrooms, number of bathrooms, overall condition, location (with respect to the subject Property based on proximity to employment centers, amenities, services and travel patterns), age, unit amenities, utility structure, and common amenities.

(23) Competitive Housing Tax Credits ("HTC")--Tax credits available from the State Housing Credit Ceiling.

(24) Compliance Period--With respect to a building financed by Housing Tax Credits, the period of fifteen (15) taxable years, beginning with the first taxable year of the credit period pursuant to §42(i)(1) of the Code.

(25) Continuously Occupied--The same household has resided in the Unit for at least twelve (12) months.

(26) Contract--See Commitment.

(27) Contract Rent--Net rent based upon current and executed rental assistance contract(s), typically with a federal, state or local governmental agency.

(28) Contractor--See General Contractor.

(29) Control (including the terms "Controlling," "Controlled by," and/or "under common Control with")--The power, ability, or authority, acting alone or in concert with others, directly or indirectly, to manage, direct, superintend, restrict, regulate, govern, administer, or oversee. As used herein "acting in concert" involves more than merely serving as a single member of a multi-member body. For example a single director on a five person board is not automatically deemed to be acting in concert with the other members of the board because they retain independence of judgment. However, if that director is one of three directors on a five person board who all represent a single shareholder, they clearly represent a single interest and are presumptively acting in concert. Similarly, a single shareholder owning only a five percent interest might not exercise control under ordinary circumstances, but if they were in a voting trust under which a majority block of shares were voted as a group, they would be acting in concert with others and in a control position. However, even if a member of a multi-member body is not acting in concert and therefore does not exercise control in that role, they may have other roles, such as executive officer positions, which involve actual or apparent authority to exercise control. Controlling entities of a partnership include the general partners, may include special limited partners when applicable, but not investor limited partners or special limited partners who do not possess other factors or attributes that give them Control. Controlling entities of a limited liability company include but are not limited to the managers, managing members, any members with 10 percent or more ownership of the limited liability company, and any members with authority similar to that of a general partner in a limited partnership, but not investor members who do not possess other factors or attributes that give them Control. Controlling individuals or entities of a corporation, including non-profit corporations, include voting members of the corporation's board, whether or not any one member did not participate in a particular decision due to recusal or absence. Multiple Persons may be deemed to have Control simultaneously.

(30) Credit Underwriting Analysis Report--Sometimes referred to as the "Report." A decision making tool used by the Department and Board containing a synopsis and reconciliation of the Application information submitted by the Applicant.

(31)Debt Coverage Ratio ("DCR")--Sometimes referred to as the "Debt Coverage" or "Debt Service Coverage." Calculated as Net Operating Income for any period divided by scheduled debt service required to be paid during the same period.

(32) Deferred Developer Fee--The portion of the Developer Fee used as a source of funds to finance the development and construction of the Property.

(33) Deobligated Funds--The funds released by the Development Owner or recovered by the Department canceling a Contract or award involving some or all of a contractual financial obligation between the Department and a Development Owner or Applicant.

(34) 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 the Code, §42(m)(1)(D).

(35) Developer--Any Person entering into a contractual relationship with the Owner to provide Developer Services with respect to the Development and receiving a fee for such services and any other Person receiving any portion of a Developer Fee, whether by subcontract or otherwise, except if the Person is acting as a consultant with no Control and receiving less than 10 percent of the total Developer Fee. The Developer may or may not be a Related Party or Principal of the Owner.

(36) Developer Fee--Compensation in amounts defined in §10.302(e)(7) of this chapter (relating to Underwriting Rules and Guidelines) paid by the Owner to the Developer for Developer Services inclusive of compensation to a Development Consultant(s), Development Team member or any subcontractor that performs Developer Services or provides guaranties on behalf of the Owner will be characterized as Developer Fee.

(37) Developer Services--A scope of work relating to the duties, activities and responsibilities for pre-development, development, design coordination, and construction oversight of the Property generally including but not limited to:

(A) site selection and purchase or lease contract negotiation;

(B) identifying and negotiating sources of construction and permanent financing, including financing provided by the Department;

(C) coordination and administration of activities, including the filing of applications to secure such financing;

(D) coordination and administration of governmental permits, and approvals required for construction and operation;

(E) selection and coordination of development consultants including architect(s), engineer(s), third-party report providers, attorneys, and other design or feasibility consultants;

(F) selection and coordination of the General Contractor and construction contract(s);

(G) construction oversight;

(H) other consultative services to and for the Owner;

(I) guaranties, financial or credit support if a Related Party; and

(J) any other customary and similar activities determined by the Department to be Developer Services.

(38) Development--A residential rental housing project that consists of one or more buildings under common ownership and financed under a common plan which has applied for Department funds. This includes a project consisting of multiple buildings that are located on scattered sites and contain only rent restricted units. (§2306.6702)

(39) Development Consultant or Consultant--Any Person (with or without ownership interest in the Development) who provides professional or consulting services relating to the filing of an Application, or post award documents as required by the program.

(40) Development Owner (also referred to as "Owner")--Any Person, General Partner, or Affiliate of a Person who owns or proposes a Development or expects to acquire Control of a Development under a purchase contract or ground lease approved by the Department and is responsible for performing under the allocation and/or Commitment with the Department. (§2306.6702)

(41) Development Site--The area, or if scattered site, areas on which the Development is proposed and to be encumbered by a LURA.

(42) Development Team--All Persons and Affiliates thereof that play a role in the development, construction, rehabilitation, management and/or continuing operation of the subject Development, including any Development Consultant and Guarantor.

(43) Direct Loan--Funds provided through the HOME Program, Neighborhood Stabilization Program, National Housing Trust Fund, Tax Credit Assistance Program Repayment ("TCAP Repayment") or State Housing Trust Fund or other program available through the Department for multifamily development. The terms and conditions for Direct Loans will be determined by the NOFA under which they are awarded, the Contract or the loan documents. The tax-exempt bond program is specifically excluded.

(44) Economically Distressed Area--An area that is in a census tract that has a median household income that is 75 percent or less of the statewide median household income and in a municipality or, if not within a municipality, in a county that has been awarded funds under the Economically Distressed Areas Program administered by the Texas Water Development Board within the five (5) years ending at the beginning of the Application Acceptance Period. Notwithstanding all other requirements, for funds awarded to another type of political subdivision (e.g., a water district), the Development Site must be within the jurisdiction of the political subdivision.

(45) Effective Gross Income ("EGI")--The sum total of all sources of anticipated or actual income for a rental Development, less vacancy and collection loss, leasing concessions, and rental income from employee-occupied units that is not anticipated to be charged or collected.

(46) Efficiency Unit--A Unit without a separately enclosed Bedroom designed principally for use by a single person.

(47) Elderly Development--A Development that is subject to an Elderly Limitation or a Development that is subject to an Elderly Preference.

(A) Elderly Limitation Development--A Development subject to an "elderly limitation" is a Development that meets the requirements of the Housing for Older Persons Act ("HOPA") under the Fair Housing Act and receives no funding that requires leasing to persons other than the elderly (unless the funding is from a federal program for which the Secretary of HUD has confirmed that it may operate as a Development that meets the requirements of HOPA); or

(B) Elderly Preference Development--A property receiving HUD funding and certain other types of federal assistance is a Development subject to an "elderly preference." A Development subject to an Elderly Preference must lease to other populations, including in many cases elderly households with children. A property that is deemed to be a Development subject to an Elderly Preference must be developed and operated in a manner which will enable it to serve reasonable foreseeable demand for households with children, including, but not limited to, making provision for such in developing its unit mix and amenities.

(48) Eligible Hard Costs--Hard Costs includable in Eligible Basis for the purposes of determining a Housing Credit Allocation.

(49) Environmental Site Assessment ("ESA")--An environmental report that conforms to the Standard Practice for Environmental Site Assessments: Phase I Assessment Process (ASTM Standard Designation: E 1527) and conducted in accordance with §10.305 of this chapter (relating to Environmental Site Assessment Rules and Guidelines) as it relates to a specific Development.

(50)Executive Award and Review Advisory Committee ("EARAC" also referred to as the "Committee")--The Department committee created under Tex. Gov't Code §2306.1112.

(51) Existing Residential Development--Any Development Site which contains existing residential units at any time after the beginning of the Application Acceptance Period.

(52) Extended Use Period--With respect to an HTC building, the period beginning on the first day of the Compliance Period and ending the later of:

(A) the date specified in the Land Use Restriction Agreement or

(B) the date which is fifteen (15) years after the close of the Compliance Period.

(53) First Lien Lender--A lender whose lien has first priority as a matter of law or by operation of a subordination agreement or other intercreditor agreement.

(54) General Contractor (including "Contractor")--One who contracts for the construction or rehabilitation of an entire Development, rather than a portion of the work. The General Contractor hires subcontractors, such as plumbing contractors, electrical contractors, etc., coordinates all work, and is responsible for payment to the subcontractors. A prime subcontractor will also be treated as a General Contractor, and any fees payable to the prime subcontractor will be treated as fees to the General Contractor, in the scenarios described in subparagraphs (A) and (B) of this paragraph:

(A) any subcontractor, material supplier, or equipment lessor receiving more than 50 percent of the contract sum in the construction contract will be deemed a prime subcontractor; or

(B) if more than 75 percent of the contract sum in the construction contract is subcontracted to three or fewer subcontractors, material suppliers, and equipment lessors, such parties will be deemed prime subcontractors.

(55) General Partner--Any person or entity identified as a general partner in a certificate of formation for the partnership that is the Development Owner and that Controls the partnership. Where a limited liability corporation is the legal structure employed rather than a limited partnership, the manager or managing member of that limited liability corporation is deemed, for the purposes of these rules, to be the functional equivalent of a general partner.

(56) Governing Body--The elected or appointed body of public or tribal officials, responsible for the enactment, implementation, and enforcement of local rules and the implementation and enforcement of applicable laws for its respective jurisdiction.

(57) Governmental Entity--Includes federal, state or local agencies, departments, boards, bureaus, commissions, authorities, and political subdivisions, special districts, tribal governments and other similar entities.

(58) Gross Capture Rate--Calculated as the Relevant Supply divided by the Gross Demand.

(59) Gross Demand--The sum of Potential Demand from the Primary Market Area ("PMA"), demand from other sources, and Potential Demand from a Secondary Market Area ("SMA") to the extent that SMA demand does not exceed 25 percent of Gross Demand.

(60) Gross Program Rent--Maximum rent limits based upon the tables promulgated by the Department's division responsible for compliance, which are developed by program and by county or Metropolitan Statistical Area ("MSA") or Primary Metropolitan Statistical Area ("PMSA") or national non-metro area.

(61) Guarantor--Any Person that provides, or is anticipated to provide, a guaranty for all or a portion of the equity or debt financing for the Development.

(62) HTC Development (also referred to as "HTC Property")--A Development subject to an active LURA for Housing Tax Credits allocated by the Department.

(63) HTC Property--See HTC Development.

(64) Hard Costs--The sum total of Building Costs, Site Work costs, Off-Site Construction costs and contingency.

(65) Historically Underutilized Businesses ("HUB")--An entity that is certified as such under Tex. Gov't Code, Chapter 2161 by the State of Texas.

(66) Housing Contract System ("HCS")--The electronic information system established by the Department for tracking, funding, and reporting Department Contracts and Developments. The HCS is primarily used for Direct Loan Programs administered by the Department.

(67) Housing Credit Allocation--An allocation of Housing Tax Credits by the Department to a Development Owner for a specific Application in accordance with the provisions of this chapter and Chapter 11 of this title (relating to Housing Tax Credit Program Qualified Allocation Plan).

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

(69) Housing Quality Standards ("HQS")--The property condition standards described in 24 CFR §982.401.

(70) Initial Affordability Period--The Compliance Period or such longer period as shall have been elected by the Owner as the minimum period for which Units in the Development shall be retained for low-income tenants and rent restricted, as set forth in the LURA.

(71) Integrated Disbursement and Information System ("IDIS")--The electronic grants management information system established by HUD to be used for tracking and reporting HOME funding and progress and which may be used for other sources of funds as established by HUD.

(72) Land Use Restriction Agreement ("LURA")--An agreement, regardless of its title, between the Department and the Development Owner which is a binding covenant upon the Development Owner and successors in interest, that, when recorded, encumbers the Development with respect to the requirements of the programs for which it receives funds. (§2306.6702)

(73) Low-Income Unit--A Unit that is intended to be restricted for occupancy by an income eligible household, as defined by the Department utilizing its published income limits.

(74) Managing General Partner--A general partner of a partnership (or, as provided for in paragraph (55) of this subsection, its functional equivalent) that is vested with the authority to take actions that are binding on behalf of the partnership and the other partners. The term Managing General Partner can also refer to a manager or managing member of a limited liability company where so designated to bind the limited liability company and its members under its Agreement or any other person that has such powers in fact, regardless of their organizational title.

(75) Market Analysis--Sometimes referred to as "Market Study." An evaluation of the economic conditions of supply, demand and rental rates conducted in accordance with §10.303 of this chapter (relating to Market Analysis Rules and Guidelines) as it relates to a specific Development.

(76) Market Analyst--A real estate appraiser or other professional familiar with the subject property's market area who prepares a Market Analysis.

(77) Market Rent--The achievable rent at the subject Property for a Unit without rent and income restrictions determined by the Market Analyst or Underwriter after adjustments are made to actual rents on Comparable Units to account for differences in net rentable square footage, functionality, overall condition, location (with respect to the subject Property based on proximity to primary employment centers, amenities, services and travel patterns), age, unit amenities, utility structure, and common area amenities. The achievable rent conclusion must also consider the proportion of market units to total units proposed in the subject Property.

(78) Market Study--See Market Analysis.

(79) Material Deficiency--Any deficiency in an Application or other documentation that exceeds the scope of an Administrative Deficiency. May include a group of Administrative Deficiencies that, taken together, create the need for a substantial re-assessment or reevaluation of the Application.

(80) Multifamily Programs Procedures Manual--The manual produced and amended from time to time by the Department which reiterates and implements the rules and provides guidance for the filing of multifamily related documents.

(81) Net Operating Income ("NOI")--The income remaining after all operating expenses, including replacement reserves and taxes that have been paid.

(82) Net Program Rent--Calculated as Gross Program Rent less Utility Allowance.

(83) Net Rentable Area ("NRA")--The unit space that is available exclusively to the tenant and is typically heated and cooled by a mechanical HVAC system. NRA is measured to the outside of the studs of a unit or to the middle of walls in common with other units. NRA does not include common hallways, stairwells, elevator shafts, janitor closets, electrical closets, balconies, porches, patios, or other areas not actually available to the tenants for their furnishings, nor does NRA include the enclosing walls of such areas.

(84) Non-HTC Development--Sometimes referred to as Non-HTC Property. Any Development not utilizing Housing Tax Credits or Exchange funds.

(85) Notice of Funding Availability ("NOFA")--A notice issued by the Department that announces funding availability, usually on a competitive basis, for multifamily rental programs requiring Application submission from potential Applicants.

(86) Off-Site Construction--Improvements up to the Development Site such as the cost of roads, water, sewer, and other utilities to provide access to and service the Site.

(87) Office of Rural Affairs--An office established within the Texas Department of Agriculture; formerly the Texas Department of Rural Affairs.

(88) One Year Period ("1YP")--The period commencing on the date on which the Department and the Owner agree to the Qualified Contract price in writing and continuing for twelve (12) calendar months.

(89) Owner--See Development Owner.

(90) Person--Without limitation, any natural person, corporation, partnership, limited partnership, joint venture, limited liability company, trust, estate, association, cooperative, government, political subdivision, agency or instrumentality or other organization or entity of any nature whatsoever, and shall include any group of Persons acting in concert toward a common goal, including the individual members of the group.

(91) Persons with Disabilities--With respect to an individual, means that such person has:

(A) a physical or mental impairment that substantially limits one or more major life activities of such individual;

(B) a record of such an impairment; or

(C) is regarded as having such an impairment, to include persons with severe mental illness and persons with substance abuse disorders.

(92) Physical Needs Assessment--See Property Condition Assessment.

(93) Place--An area defined as such by the United States Census Bureau, which, in general, includes an incorporated city, town, or village, as well as unincorporated areas known as census designated places. Any part of a census designated place that, at the time of Application, is within the boundaries of an incorporated city, town or village will be considered as part of the incorporated area. The Department may provide a list of Places for reference.

(94) Post Carryover Activities Manual--The manual produced and amended from time to time by the Department which explains the requirements and provides guidance for the filing of post-carryover activities, or for Tax Exempt Bond Developments, the requirements and guidance for post Determination Notice activities.

(95) Potential Demand--The number of income-eligible, age-, size-, and tenure-appropriate target households in the designated market area at the proposed placement in service date.

(96) Primary Market--Sometimes referred to as "Primary Market Area." The area defined by the Market Analyst as described in §10.303 of this chapter from which a proposed or existing Development is most likely to draw the majority of its prospective tenants or homebuyers.

(97) Primary Market Area ("PMA")--See Primary Market.

(98) Principal--Persons that will exercise Control (which includes voting board members pursuant to §10.3(a)(29) of this chapter) over a partnership, corporation, limited liability company, trust, or any other private entity. In the case of:

(A) partnerships, Principals include all General Partners, and Principals with ownership interest and special limited partners with ownership interest who also possess factors or attributes that give them Control;

(B) corporations, Principals include any officer authorized by the board of directors, regardless of title, to act on behalf of the corporation, including but not limited to the president, vice president, secretary, treasurer, and all other executive officers, and each stock holder having a 10 percent or more interest in the corporation, and any individual who has Control with respect to such stock holder; and

(C) limited liability companies, Principals include all managers, managing members, members having a 10 percent or more interest in the limited liability company, any individual Controlling such members, or any officer authorized to act on behalf of the limited liability company.

(99) Pro Forma Rent--For a restricted Unit, the lesser of the Net Program Rent or the Market Rent. For an unrestricted unit, the Market Rent. Contract Rents, if applicable, will be used as the Pro Forma Rent.

(100) Property--The real estate and all improvements thereon which are the subject of the Application (including all items of personal property affixed or related thereto), whether currently existing or proposed to be built thereon in connection with the Application.

(101) Property Condition Assessment ("PCA")--Sometimes referred to as "Physical Needs Assessment," "Project Capital Needs Assessment," or "Property Condition Report." The PCA provides an evaluation of the physical condition of an existing Property to evaluate the immediate cost to rehabilitate and to determine costs of future capital improvements to maintain the Property. The PCA must be prepared in accordance with §10.306 of this chapter (relating to Property Condition Assessment Guidelines) as it relates to a specific Development.

(102) Qualified Contract ("QC")--A bona fide contract to acquire the non-low-income portion of the building for fair market value and the low-income portion of the building for an amount not less than the Applicable Fraction (specified in the LURA) of the calculation as defined within §42(h)(6)(F) of the Code.

(103) Qualified Contract Price ("QC Price")--Calculated purchase price of the Development as defined within §42(h)(6)(F) of the Code and as further delineated in §10.408 of this chapter (relating to Qualified Contract Requirements).

(104) Qualified Contract Request ("Request")--A request containing all information and items required by the Department relating to a Qualified Contract.

(105) Qualified Entity--Any entity permitted under §42(i)(7)(A) of the Code and any entity controlled by such qualified entity.

(106) Qualified Nonprofit Development--A Development which meets the requirements of §42(h)(5) of the Code, includes the required involvement of a Qualified Nonprofit Organization, and is seeking Competitive Housing Tax Credits.

(107) Qualified Nonprofit Organization--An organization that meets the requirements of §42(h)(5)(C) of the Code for all purposes, and for an allocation in the nonprofit set-aside or subsequent transfer of the property, when applicable, meets the requirements of Tex. Gov't Code §2306.6706, and §2306.6729, and §42(h)(5) of the Code.

(108) Qualified Purchaser--Proposed purchaser of the Development who meets all eligibility and qualification standards stated in this chapter of the year the Request is received, including attending, or assigning another individual to attend, the Department's Property Compliance Training.

(109) Reconstruction--The demolition of one or more residential buildings in an Existing Residential Development and the construction of an equal number of units or less on the Development Site. At least one Unit must be reconstructed in order to qualify as Reconstruction.

(110) Rehabilitation--The improvement or modification of an Existing Residential Development through alteration, incidental addition or enhancement. The term includes the demolition of an Existing Residential Development and the Reconstruction of a Development on the Development Site, but does not include Adaptive Reuse. (§2306.004(26-a)) More specifically, Rehabilitation is the repair, refurbishment and/or replacement of existing mechanical and structural components, fixtures and finishes. Rehabilitation will correct deferred maintenance, reduce functional obsolescence to the extent possible and may include the addition of: energy efficient components and appliances, life and safety systems; site and resident amenities; and other quality of life improvements typical of new residential Developments.

(111) Related Party--As defined in Tex. Gov't Code, §2306.6702.

(112) Relevant Supply--The supply of Comparable Units in proposed and Unstabilized Developments targeting the same population including:

(A) the proposed subject Units;

(B) Comparable Units in another proposed development within the PMA with a priority Application over the subject, based on the Department's evaluation process described in §10.201(6) of this chapter (relating to Procedural Requirements for Application Submission) that may not yet have been presented to the Board for consideration of approval;

(C) Comparable Units in previously approved but Unstabilized Developments in the PMA; and

(D) Comparable Units in previously approved but Unstabilized Developments in the Secondary Market Area (SMA), in the same proportion as the proportion of Potential Demand from the SMA that is included in Gross Demand.

(113) Report--See Credit Underwriting Analysis Report.

(114) Request--See Qualified Contract Request.

(115) Reserve Account--An individual account:

(A) created to fund any necessary repairs for a multifamily rental housing Development; and

(B) maintained by a First Lien Lender or Bank Trustee.

(116) Right of First Refusal ("ROFR")--An Agreement to provide a right to purchase the Property to a Qualified Entity or a Qualified Nonprofit Organization, as applicable, with priority to that of any other buyer at a price established in accordance with an applicable LURA.

(117) Rural Area--

(A) a Place that is located:

(i) outside the boundaries of a primary metropolitan statistical area or a metropolitan statistical area;

(ii) within the boundaries of a primary metropolitan statistical area or a metropolitan statistical area, if the statistical area has a population of 25,000 or less and does not share a boundary with an Urban Area; or

(iii) within the boundaries of a local political subdivision that is outside the boundaries of an Urban Area.

(B) for areas not meeting the definition of a Place, the designation as a Rural Area or Urban Area is assigned in accordance with §10.204(5)(A) of this chapter (relating to Required Documentation for Application Submission) or as requested in accordance with §10.204(5)(B).

(118) Secondary Market--Sometimes referred to as "Secondary Market Area." The area defined by the Qualified Market Analyst as described in §10.303 of this chapter.

(119) Secondary Market Area ("SMA")--See Secondary Market.

(120) 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.

(121) Site Control--Ownership or a current contract or series of contracts, that meets the requirements of §10.204(10) of this chapter, that is legally enforceable giving the Applicant the ability, not subject to any legal defense by the owner, to develop a Property and subject it to a LURA reflecting the requirements of any awards of assistance it may receive from the Department.

(122) Site Work--Materials and labor for the horizontal construction generally including excavation, grading, paving, underground utilities, and site amenities.

(123) 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, and Treasury Regulation §1.42-14.

(124) Sub-Market--An area defined by the Underwriter based on general overall market segmentation promulgated by market data tracking and reporting services from which a proposed or existing Development is most likely to draw the majority of its prospective tenants or homebuyers.

(125) 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 include established funding sources outside of project cash flow that require certain populations be served and/or certain services provided. The developments are expected to be debt free or have no permanent foreclosable or noncash flow debt. A Supportive Housing Development financed with tax-exempt bonds with a project based rental assistance contract for a majority of the Units may be treated as Supportive Housing under all subchapters of this chapter, except Subchapter D of this chapter (relating to Underwriting and Loan Policy). If the bonds are expected to be redeemed upon construction completion, placement in service or stabilization and no other permanent debt will remain, the Supportive Housing Development may be treated as Supportive Housing under Subchapter D of this chapter. The services offered generally include case management and 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.

(126) TDHCA Operating Database--Sometimes referred to as "TDHCA Database." A consolidation of recent actual income and operating expense information collected through the Department's Annual Owner Financial Certification process, as required and described in Subchapter F of this chapter (relating to Compliance Monitoring), and published on the Department's web site (www.tdhca.state.tx.us).

(127) Target Population--The designation of types of housing populations shall include Elderly Developments, and those that are entirely Supportive Housing. All others will be considered to serve general populations without regard to any subpopulations. An existing Development that has been designated as a Development serving the general population may not change to become an Elderly Development, or vice versa, without Board approval.

(128) 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.

(129) Tax-Exempt Bond Process Manual--The manual produced and amended from time to time by the Department which explains the process and provides guidance for the filing of a Housing Tax Credit Application utilizing Tax-Exempt Bonds.

(130) Third Party--A Person who is not:

(A) an Applicant, General Partner, Developer, or General Contractor; or

(B) an Affiliate to the Applicant, General Partner, Developer, or General Contractor; or

(C) anyone receiving any portion of the administration, contractor, or Developer fees from the Development; or

(D) any individual that is an executive officer or member of the governing board or has greater than 10 percent ownership interest in any of the entities are identified in subparagraphs (A) - (C) of this paragraph.

(131) Total Housing Development Cost--The sum total of the acquisition cost, Hard Costs, soft costs, Developer fee and General Contractor fee incurred or to be incurred through lease-up by the Development Owner in the acquisition, construction, rehabilitation, and financing of the Development.

(132) 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 twenty-four (24) months; and

(B) is owned by a Development Owner that includes 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 kitchen facilities.

(133) U.S. Department of Agriculture ("USDA")--Texas Rural Development Office ("TRDO") serving the State of Texas.

(134) U.S. Department of Housing and Urban Development ("HUD")-regulated Building--A building for which the rents and utility allowances of the building are reviewed by HUD.

(135) Underwriter--The author(s) of the Credit Underwriting Analysis Report.

(136) Uniform Multifamily Application Templates--The collection of sample resolutions and form letters, produced by the Department, as may be required under this chapter, Chapter 11 and Chapter 12 of this title that may be used, (but are not required to be used), to satisfy the requirements of the applicable rule.

(137) Uniform Physical Condition Standards ("UPCS")--As developed by the Real Estate Assessment Center of HUD.

(138) Unit--Any residential rental unit in a Development consisting of an accommodation, including a single room used as an accommodation on a non-transient basis, that contains complete physical facilities and fixtures for living, sleeping, eating, cooking and sanitation.

(139) Unit Type--Units will be considered different Unit Types if there is any variation in the number of bedroom, full bathrooms or a square footage difference equal to or more than 120 square feet. For example: A two Bedroom/one full bath Unit is considered a different Unit Type than a two Bedroom/two full bath Unit. A three Bedroom/two full bath Unit with 1,000 square feet is considered a different Unit Type than a three Bedroom/two full bath Unit with 1,200 square feet. A one Bedroom/one full bath Unit with 700 square feet will be considered an equivalent Unit Type to a one Bedroom/one full bath Unit with 800 square feet. A powder room is the equivalent of a half-bathroom but does not by itself constitute a change in Unit Type.

(140) Unstabilized Development--A development with Comparable Units that has been approved for funding by the Department's Board of Directors or is currently under construction or has not maintained a 90 percent occupancy level for at least twelve (12) consecutive months following construction completion. A development may be deemed stabilized by the Underwriter based on factors relating to a development's lease-up velocity, Sub-Market rents, Sub-Market occupancy trends and other information available to the Underwriter. The Market Analyst may not consider such development stabilized in the Market Study.

(141) Urban Area--A Place that is located within the boundaries of a primary metropolitan statistical area or a metropolitan statistical area other than a Place described by paragraph (117)(A) of this subsection. For areas not meeting the definition of a Place, the designation as a Rural Area or Urban Area is assigned in accordance with §10.204(5) of this chapter.

(142) Utility Allowance--The estimate of tenant-paid utilities made in accordance with Treasury Regulation, §1.42-10 and §10.614 of this chapter (relating to Utility Allowances).

(143) Work Out Development--A financially distressed Development for which the Owner and/or a primary financing participant is seeking a change in the terms of Department funding or program restrictions.

(b) Request for Staff Determinations. Where the definitions of Development, Development Site, New Construction, Rehabilitation, Reconstruction, Adaptive Reuse, and Target Population fail to account fully for the activities proposed in an Application, an Applicant may request and Department staff may provide a determination to an Applicant explaining how staff will review an Application in relation to these specific terms and their usage within the applicable rules. Such request must be received by the Department prior to submission of the pre-application (if applicable to the program) or Application (if no pre-application was submitted). Staff's determination may take into account the purpose of or policies addressed by a particular rule or requirement, materiality of elements, substantive elements of the development plan that relate to the term or definition, the common usage of the particular term, or other issues relevant to the rule or requirement. All such determinations will be conveyed in writing. If the determination is finalized after submission of the pre-application or Application, the Department may allow corrections to the pre-application or the Application that are directly related to the issues in the determination. It is an Applicant's sole responsibility to request a determination and an Applicant may not rely on any determination for another Application regardless of similarities in a particular fact pattern. For any Application that does not request and subsequently receive a determination, the definitions and applicable rules will be applied as used and defined herein. Such a determination is intended to provide clarity with regard to Applications proposing activities such as: scattered site development or combinations of construction activities (e.g., Rehabilitation with some New Construction). An Applicant may appeal a determination for their Application if the determination provides for a treatment that relies on factors other than the explicit definition. A Board determination or a staff determination not timely appealed cannot be further appealed or challenged.

§10.4.Program Dates.

This section reflects key dates for all multifamily development programs except for the Competitive Housing Tax Credit Program. A program calendar for the Competitive Housing Tax Credit Program is provided in Chapter 11 of this title (relating to Housing Tax Credit Program Qualified Allocation Plan). Applicants are strongly encouraged to submit the required items well in advance of established deadlines. Non-statutory deadlines specifically listed in this section may be extended by the Department for a period of not more than five (5) business days provided; however, that the Applicant requests an extension prior to the date of the original deadline and has established to the reasonable satisfaction of the Department that there is good cause for the extension. Except as provided for under 10 TAC §1.1 relating to Reasonable Accommodation Requests, extensions relating to Administrative Deficiency deadlines may only be extended if documentation needed to resolve the item is needed from a Third Party or the documentation involves signatures needed on certifications in the Application.

(1) Full Application Delivery Date. The deadline by which the Application must be submitted to the Department. For Direct Loan Applications, such deadline will generally be defined in the applicable NOFA and for Tax-Exempt Bond Developments, such deadlines are more fully explained in §10.201(2) of this chapter (relating to Procedural Requirements for Application Submission).

(2) Notice to Submit Lottery Application Delivery Date. No later than December 9, 2016, Applicants that receive an advance notice regarding a Certificate of Reservation must submit a notice to the Department, in the form prescribed by the Department.

(3) Applications Associated with Lottery Delivery Date. No later than December 16, 2016, Applicants that participated in the Texas Bond Review Board Lottery must submit the complete tax credit Application to the Department.

(4) Administrative Deficiency Response Deadline. Such deadline shall be five (5) business days after the date on the deficiency notice without incurring a penalty fee pursuant to §10.901 of this chapter (relating to Fee Schedule).

(5) Third Party Report Delivery Date (Environmental Site Assessment (ESA), Property Condition Assessment (PCA), Appraisal (if applicable), Market Analysis and the Site Design and Development Feasibility Report). For Direct Loan Applications, the Third Party reports meeting specific requirements described in §10.205 must be submitted with the Application in order for it to be considered a complete Application, unless the Application is made in conjunction with an Application for Housing Tax Credits or Tax Exempt Bond, in which case the Delivery Date for those programs will apply. For Tax-Exempt Bond Developments, the Third Party Reports must be submitted no later than seventy-five (75) calendar days prior to the Board meeting at which the tax credits will be considered. The seventy-five (75) calendar day deadlines are available on the Department's website.

(6) Resolutions Delivery Date. Resolutions required for Tax-Exempt Bond Developments must be submitted no later than fourteen (14) calendar days before the Board meeting at which consideration of the award will occur. If the Direct Loan Application is made in conjunction with an Application for Housing Tax Credits, or Tax-Exempt Bond Developments, the Resolution Delivery Date for those programs will apply to the Direct Loan Application.

(7) Challenges to Neighborhood Organization Opposition Delivery Date. No later than forty-five (45) calendar days prior to the Board meeting at which consideration of the award will occur.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606435

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-3344


SUBCHAPTER B. SITE AND DEVELOPMENT REQUIREMENTS AND RESTRICTIONS

10 TAC §10.101

Preamble, Reasoned Response, and Repealed Rule

The Texas Department of Housing and Community Affairs (the "Department") adopts the repeal of 10 TAC Chapter 10, Uniform Multifamily Rules Subchapter B §10.101, concerning Site and Development Requirements and Restrictions without changes to the proposed text as published in the September 23, 2016, issue of the Texas Register (41 TexReg 7308). The rules will not be republished.

REASONED JUSTIFICATION. The Department finds that the purpose of the repeal is to replace the sections with a new rule that encompasses all funding made available to multifamily programs. Accordingly, the repeal provides for consistency and minimizes repetition among the programs.

The Department accepted public comments between September 23, 2016, and October 14, 2016. Comments regarding the repeal were accepted in writing and by fax. No comments were received concerning the repeal.

The Board approved the final order adopting the repeal on November 10, 2016.

STATUTORY AUTHORITY. The repeal is adopted pursuant to Texas Government Code §2306.053, which authorizes the Department to adopt rules. Additionally, the repeal is adopted pursuant to Texas Government Code §2306.67022, which specifically authorizes the Department to adopt a qualified allocation plan.

The adopted repeal affects no other code, article or statute.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606431

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-3344


10 TAC §10.101

The Texas Department of Housing and Community Affairs (the "Department") adopts new 10 TAC, Chapter 10 Uniform Multifamily Rules, Subchapter B, §10.101, concerning Site and Development Restrictions and Requirements, with changes to the proposed text as published in the September 23, 2016, issue of the Texas Register (41 TexReg 7309).

REASONED JUSTIFICATION. The Department finds that the adoption of the section will result in a more consistent approach to governing multifamily activity and to the awarding of funding or assistance through the Department and to minimize repetition. The comments and responses include both administrative clarifications and corrections to the Uniform Multifamily Rule based on the comments received. After each comment title, numbers are shown in parentheses. These numbers refer to the person or entity that made the comment as reflected at the end of the reasoned response. If comment resulted in recommended language changes to the Uniform Multifamily Rule as presented to the Board in September, such changes are indicated.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS.

Public comments were accepted through October 14, 2016, with comments received from (4) Senator Jose Menendez, (9) City of Harlingen, (13) Fort Worth Housing Solutions, (17) 5th Ward Community Redevelopment Corporation, (19) Texas Association of Community Development Corporations, (22) Texas Affiliation of Affordable Housing Providers, (23) Texas Coalition of Affordable Developers, (24) Low Income Housing Information Service, (25) Center for Supportive Housing (28) Locke Lord Attorneys and Counselors, (33) Anderson Development and Construction, LLC, (34) BETCO Consulting, LLC (39) DMA Companies, (40) Dominium, (41) Endeavor Real Estate Group, (42) Evolie Housing Partners, (43) Flores Residential, LLC, (44) Foundation Communities, (50) Hoke Development Services, LLC, (51) Investment Builders, Inc., (52) ITEX Group, (54) Leslie Holleman and Associates, Inc., (58) Mark-Dana Corporation, (59) Marque Real Estate Consultants, (60) Mears Development, (63) National Church Residences, (64) New Hope Housing, (65) OM Housing, (69) Purple Martin Real Estate, (72) Structure Development, (73) The Brownstone Group, (74) Alyssa Carpenter, (78) Coats Rose.

1. §10.101(a)(2) - Subchapter B - Undesirable Site Features (4), (9), (17), (19), (22), (23), (24), (28), (33), (39), (40), (41), (42), (43), (44), (51), (52), (54), (58), (59), (60), (65), (69), (73), (74)

COMMENT SUMMARY: Commenter (4) expressed concern over the proposed change in proximity to a railroad track from 100 feet to 500 feet stating that many Texas communities were settled on the railroad and; therefore, many of the historic structures are near them. Commenter (4) further stated that such historical structures should be repurposed for affordable housing and the increased distance requirement thwarts that effort and could affect revitalization efforts in many of these areas. Commenter (4) suggested that historic structures be exempt from the distance requirements for railroad tracks. Commenter (9) expressed similar concerns as commenter (4) and further stated that this increased distance requirement would result in no historic building being eligible to be rehabbed into residences, no matter how appropriate and desirable. Commenter (9) also indicated that there is a difference between rehabbing a building that has been sitting near a railroad track for 50 to 100 years and allowing new construction within 500 feet of such railroad track. Similar to that of commenter (4), commenter (9) requested that should the distance requirement of 500 feet remain, that historical buildings be exempt from the requirement. Commenter (72) recommended that rehabilitation developments be exempt from the railroad distance separation requirement on the basis that it is impossible or cost prohibitive to move an existing building.

Similarly, commenters (22), (39), (41), (65), (81) stated that the distance in prior year rules are more appropriate and commenters (22), (39), (41), (81) further stated that HUD guidelines on proximity to active railroad tracks are more appropriate guidelines to use because they address the impact to the resident, rather than redline entire swaths of urban areas. Commenters (22), (39), (41), (69) recommended the following changes to this section: "(2) Undesirable Site Features. Development Sites within the applicable distance of any of the undesirable features identified in subparagraphs (A) - (K) of this paragraph maybe considered ineligible as determined by the Board, unless the Applicant provides information regarding mitigation of the applicable undesirable site feature(s). Rehabilitation (excluding Reconstruction) Developments with ongoing and existing federal assistance from HUD, USDA, or Veterans Affairs ("VA") may be granted an exemption by the Board. Such an exemption must be requested at the time of or prior to the filing of an Application. The distances are to be measured from the nearest boundary of the Development Site to the nearest boundary of the property or easement containing the undesirable feature. The minimum distances noted assume that the land between the proposed Development Site and the particular undesirable feature has no significant intervening barriers or obstacles such as waterways or bodies of water, major high speed roads, park land, or walls, such as noise suppression walls adjacent to railways or highways. Where there is a local ordinance that regulates the proximity of such undesirable feature to a multifamily development that has smaller distances than the minimum distances noted below, documentation such as a copy of the local ordinance identifying such distances relative to the Development Site must be included in the Application...(D) Development Sites in which the buildings are located within the easement of any overhead high voltage transmission line, support structures for high voltage transmission lines, or other similar structures. This does not apply to local service electric lines and poles; high voltage transmission are lines that carry 138 Kv of power or greater; (E) Development Sites located within 100 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, or the Applicant submits a noise study with the Application and commits at the time of commitment to provide sound attenuation of noise levels in excess of 65 decibels; (H) Development Sites in which the buildings are located within the accident zones or clear zones of any airport; (J) Development Sites located within 1,000 feet of refineries capable of refining more than 100,000 barrels of oil daily; or (K) Any other Site deemed unacceptable, which would include, without limitation, those with exposure to an environmental factor that may adversely affect the health and safety of the residents and which cannot be adequately mitigated."

Commenter (17) noted that while this section allows the Board to find a site eligible despite the undesirable site feature, applicants will not spend their time, money and effort to pursue a site that might not receive Board approval due to its proximity to such feature. Commenter (59) stated several of the changes proposed add significant barriers to the site selection and inner city development and re-development activities. Commenters (17), (59) requested the language in this section remain as written in 2016.

Commenter (58) requested the distance to the undesirable feature be modified such that it be measured from the nearest residential building of the development site to the nearest undesirable feature (rather than from the nearest boundary of the site to the nearest boundary of the property or easement containing the feature). Commenter (58) stated that if the development site is large, the residential building could actually be farther away from the undesirable feature than residential buildings on a small site that meet the boundary to boundary distances. Commenter (58) also requested the proximity to railroads not be considered an undesirable site feature if the development will provide adequate noise attenuation inside the residential units and further indicated that many high opportunity neighborhoods that back up to railroads, such as West University Place in Houston. In line with these comments, the suggested modifications from commenter (58) included the following: "(2) Undesirable Site Features. Development Sites within the applicable distance of any of the undesirable features identified in subparagraphs (A) - (K) of this paragraph maybe considered ineligible as determined by the Board. Rehabilitation (excluding Reconstruction) Developments with ongoing and existing federal assistance from HUD, USDA, or Veterans Affairs ("VA") may be granted an exemption by the Board. Such an exemption must be requested at the time of or prior to the filing of an Application. The distances are to be measured from the nearest residential building of the Development Site to the nearest undesirable feature. The minimum distances noted assume that the land between the proposed Development Site and the particular undesirable feature has no significant intervening barriers or obstacles such as waterways or bodies of water, major high speed roads, park land, or walls, such as noise suppression walls adjacent to railways or highways, in which case this section does not apply.. Where there is a local ordinance that regulates the proximity of such undesirable feature to a multifamily development that has smaller distances than the minimum distances noted below, then such smaller distances shall be used and documentation such as a copy of the local ordinance identifying such distances relative to the Development Site must be included in the Application...(D) Development Sites in which the buildings are located within the easement of any overhead high voltage transmission line, support structures for high voltage transmission lines, or other similar structures. This does not apply to local service electric lines and poles; high voltage transmission are lines that carry 138 Kv of power or greater; (E) Development Sites located within 100 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, or the Applicant submits a noise study with the Application and commits at the time of Commitment to provide sound attenuation of noise levels in excess of 65 decibels; (H) Development Sites in which the buildings are located within the accident zones or clear zones of any airport; (J) Development Sites located within 1,000 feet of refineries capable of refining more than 100,000 barrels of oil daily; or"

Commenters (19), (44) expressed support for the language added to this section indicating that proximity to such site features "may" be determined by the Board to be ineligible compared to prior language indicating the presence of such feature "will" be determined to be ineligible. Commenters (19), (44) indicated that it is important for staff and the Board to have the flexibility to waive the presence of such features if the developer can demonstrate that the feature would not negatively impact residents.

Commenters (23), (33) expressed concern over how the proposed distance modifications were derived and suggested that they should mirror HUD requirements. Commenter (23) requested an explanation as to why the changes were made and what they were based on as it relates to the proximity to a railroad track, high voltage lines and the distance from a refinery.

Commenter (24) recommended that, at a minimum, the distances in this section should remain at the greater of the 2016 distances or those proposed in the 2017 draft on the basis that while most of us have many housing choices available to us and would choose not to live in proximity to some of the undesirable site features, there is no reason to believe the desires of a low-income household would be any different.

Commenters (28), (42), (54) requested clarification on what is meant by use of the term "intervening barriers" in this section as it relates to the distance between the undesirable site feature and the proposed development site. Specifically, commenter (28) questioned if a there is an intervening barrier (i.e. river) that separates a development site from a nuclear plant, for example, whether the nuclear plant is considered an undesirable site feature. Similarly, commenters (28), (42) questioned if there is a noise suppression wall between a railroad track and a development site then whether this constitutes an undesirable site feature, even if the railroad track is within the applicable distance from the development site. Commenters (42), (54) asserted much of the new language in this section is far too subjective and questioned how the Department intends to define such things as high speed roads, which are listed separately from highways. Commenters (42), (43), (54), (60), (73) proposed the modifications listed below and commenters (42), (54) further explained the language regarding the primary purpose of the list should be removed since a number of the items relate to safety (i.e. nuclear power plants and airport accident zones). Commenters (42), (54) expressed support for the changes to high voltage power lines since fire burning near them can create electrical arcs or flashovers which could endanger near-by residents and also expressed support for the distance from a nuclear power plant state such change is in line with the Nuclear Regulatory Commission's first (of two) Emergency Planning Zone (plume exposure pathway zone). "(2) Undesirable Site Features. Development Sites within the applicable distance of any of the undesirable features identified in subparagraphs (A) - (K) of this paragraph may be considered ineligible as determined by the Board. Rehabilitation (excluding Reconstruction) Developments with ongoing and existing federal assistance from HUD, USDA, or Veterans Affairs ("VA") may be granted an exemption by the Board. Such an exemption must be requested at the time of or prior to the filing of an Application and must include a letter stating the Rehabilitation of the existing units is consistent with achieving at least one or more of the stated goals as outlined in the State of Texas Analysis of Impediments to Fair Housing Choice or, if within the boundaries of a participating jurisdiction or entitlement community, as outlined in the local analysis of impediments to fair housing choice and identified in the participating jurisdiction's Action Plan. The distances are to be measured from the nearest boundary of the Development Site to the undesirable feature. Where there is a local ordinance that for closer proximity to such undesirable feature than the minimum distances noted below, documentation such as a copy of the local ordinance identifying such distances relative to the Development Site must be included in the Application. If Department staff identifies what it believes would constitute an undesirable site feature not listed in this paragraph or covered under subparagraph (K) of this paragraph, staff may request a determination from the Board as to whether such feature is acceptable or not...(D) Development Sites in which the buildings are located within 100 feet of the easement of any overhead high voltage transmission line, or support structures for high voltage transmission lines. This does not apply to local service electric lines and poles; (E) Development Sites located within 100 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..."

Commenter (74) questioned that if there are significant intervening barriers between a site and an undesirable site feature, what is the process for submission and proof that those barriers provide mitigation of any sensory concerns and additionally questioned whether these would be Board determinations that must be submitted at a certain point in the application process. Commenter (74) also stated the new language in this section that speaks to addressing sensory concerns such as noise or smell, there should be an avenue for the applicant to prove existing mitigation or provide mitigation of any sensory concerns for a site that would otherwise be ineligible within such distances. Commenter (74) provided by way of example, a site located 1.99 miles from an oil refinery, would be extremely unlikely to have any sensory noise or smell factors that would render it undesirable and ineligible.

Commenter (52) recommended proximity to transmission lines be removed as an undesirable site feature. Should it remain; however, commenter (52) recommended that it be modified to state that buildings should not be placed within a power company right-of-way. Commenter (52) indicated that these right-of-ways are sized based on the amount of power carried over the lines.

Commenter (52) recommended the following modification based on their observation that there have been uninformed challenges to applications where the challenger made statements or assumptions that were incorrect, for example, the presence of oil refineries in the area means the air quality is bad. Commenter (52) believed that such burden of proof should be on the challenger, especially in instances where, in this example, the air quality data indicates it is below national and state air quality standards. "(K) Any other Site deemed unacceptable, which would include, without limitation, those with exposure to an environmental factor that have proven adverse affects on the health and safety of the residents and which cannot be adequately mitigated."

Commenter (33) stated the new language that requires documentation "such as a copy of the local ordinance identifying such distances relative to the Development Site must be included in the Application" is unduly burdensome and creates an opportunity for a challenge if a developer is unaware of a particular ordinance after reasonable due diligence on the matter.

Commenter (51) recommended the proximity to the railroad track be modified to state the 500 feet should be measured from the centerline of the railroad tracks to the nearest property boundaries.

Commenter (47) stated the 500 feet distance from a railroad track is excessive and should be relaxed to 200 to 300 feet.

Commenter (77) stated the Department of Transportation does not regulate development nor does it have any separation requirements from railroads.

Commenter (72) indicated easements on other people's property will not be revealed on a survey and; therefore, requested the distance requirements relating to high voltage power lines revert to the 2016 requirements.

Commenter (40) recommended 4% applications for existing residential developments (i.e. HUD Project Based Section 8 and existing Section 42 developments) should be exempted on the basis that such developments should be encouraged considering it is not feasible or practical to relocate existing housing. Commenter (40) further stated that the applicability of these site features is more appropriate for 9% applications.

STAFF RESPONSE: In response to comments recommending that rehabilitation developments be exempt from the railroad distance separation requirement, staff notes that there is language in this section that speaks to an exemption that may be granted by the Board for a development with ongoing and existing federal assistance from HUD, USDA or Veterans Affairs. This provision has worked well over the several years that it has been in the rule and staff does not believe there is a sound, policy reason by which it should be modified.

In response to those commenters requesting clarification regarding use of the term "intervening barriers" in this section, staff agrees that the additional language creates confusion and recommends the additional language be removed. Staff also agrees with the suggestion by commenter (74) to remove the language that speaks to sensory concerns and has removed it accordingly.

In response to those comments requesting historic preservation developments be exempt, staff has modified the language to include such developments, provided they would qualify as historic preservation under §11.9(e)(6) of the QAP. In response to other recommendations to reduce the distance requirement, staff proposes the distance remain at 500 feet but proposes to modify the measurement from the closest rail to the nearest boundary of the development site. Staff also notes that this section includes an option for mitigation to be provided should the distance be less than 500 feet.

Staff does not believe the language proposed by commenter (52) under option (K) is necessary in that should staff identify an environmental factor that could affect the health and safety of the residents, the applicant would have an opportunity, as the item suggests, to provide documentation that such environmental factor is adequately mitigated. Staff recommends no change based on this comment.

In response to those comments suggesting the distance from a high voltage transmission line be removed and the language just state that residential buildings cannot be in the easement of such lines, staff does not understand how a building would ever be in the easement. Staff recommends the distance remain at within 100 feet of the transmission line but has added clarifying language that it be within the nearest line or structural element. In response to those comments suggesting to define high voltage transmission lines as those that carry 138 Kv of power or greater, staff believes it would be difficult to document the actual KiloVolts associated with such transmission lines such that the undesirable site feature is not present. Moreover, data or other documentation was not provided by the commenters to substantiate that 138Kv is the threshold to be considered high voltage. Preliminary research by staff seemed to indicate such threshold could be as low as 115 Kv and be considered high voltage. Staff does not recommend any changes based on these comments and appreciates the support for this item from commenters (42) and (54).

In response to those comments that suggest the proximity from a refinery be reduced from 2 miles to 1,000 feet, staff has not received any data or other documentation to indicate the lesser distance is more appropriate than the current distance. Staff recommends no change based on this comment.

Staff agrees with those commenters requesting clarifying language if there is a local ordinance that has smaller distances than what is noted in this section and recommends the following modification but notes that even if there is a local ordinance, disclosure of the undesirable site feature would still be required: "Where there is a local ordinance that regulates the proximity of such undesirable feature to a multifamily development that has smaller distances than the minimum distances noted below, then such smaller distances may be used and documentation such as a copy of the local ordinance identifying such distances relative to the Development Site must be included in the Application."

In response to commenter (33) a copy of the ordinance would only be required to the extent an applicant was pursuing a development site that is closer in proximity to any of the undesirable site features noted. Absent such ordinance staff would expect the distance to the development site to adhere to those noted in this section. Staff recommends no change based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

2. §10.101(a)(3) - Subchapter B- Undesirable Neighborhood Characteristics (13), (17), (19), (22), (24), (25), (28), (33), (34), (39), (40), (42), (43), (44), (50), (52), (54), (58), (59), (60), (63), (64), (69), (72), (73), (78)

COMMENT SUMMARY: Commenters (17), (44), (59) indicated that making a development site ineligible if located in a census tract with greater than 30% poverty will significantly impact the production of affordable housing in the inner city neighborhoods that are gentrifying and undergoing active revitalization. Commenters (17), (59) suggested the language from 2016 be reinstated, allowing for a 40% poverty rate (55% for Regions 11 and 13) and further suggested the performance of the schools be stricken from consideration of ineligibility since the applicant has no control over the decision making process regarding school performance. Commenter (23) similarly recommended the higher limits for the poverty rate for Regions 11 and 13 be added back to this section. Commenters (13), (19), (22), (39), (33), (42), (43), (44), (54), (58), (60), (64), (72), (73) also requested the poverty rate increase to 40% with commenters (13), (22), (39), (42), (43), (54), (58), (60), (64), (69), (73) requesting the following language be added: "(i) Evidence that the poverty rate within the census tract has decreased over the five-year period preceding the date of Application, or that the census tract is contiguous to a census tract with a poverty rate below 40% and there are no physical barriers between them such as highways or rivers which would be reasonably considered as separating or dividing the neighborhood containing the proposed Development from the low poverty area must be submitted. Other mitigation may include, but is not limited to, evidence of the availability of adult education and job training that will lead to full-time permanent employment for tenants, a description of additional tenant services to be provided at the development that address root causes of poverty, evidence of gentrification in the area (which may include contiguous census tracts) and a clear and compelling reason that the Development should be located at the Site.."

Commenters (25), (52), (59), (63), (69) requested the undesirable neighborhood characteristics be removed in their entirety, or should they remain, commenters (25), (59), (63) recommended the most restrictive proposed language be changed back to 2016 standards. Specifically, commenters (25), (63) requested the poverty rate be increased back to 40% on the basis that at 30% poverty there are approximately 20% of the census tracts that would be excluded from receiving or preserving affordable housing. This would, according to commenters (25), (63), exclude areas of gentrification and areas of mixed-income and is in direct conflict with federal statute that encourages developments in QCTs which often have poverty rates greater than 30%. Commenters (33), (52) similarly expressed that increasing the poverty rate back to 40% would allow for inclusion of revitalization areas worthy of redevelopment and reinvestment. If the poverty rate remains at 30%, commenter (52) requested 4% applications be exempt from the requirement since the lower threshold would eliminate most qualified census tracts and destroy the 4% program.

Commenters (17), (59) stated that blighted structures and school performance are not within the control of an applicant to solve and; therefore, an applicant would not be able to demonstrate "satisfactory mitigation" or the "strong likelihood of a reasonable rapid transformation of the area to a more economically vibrant area" as required under the proposed rule.

Commenters (13), (22), (23), (39), (42), (43), (54), (58), (60), (64), (73) recommended the blight provision be modified to require disclosure if the proposed site is located within at least 5 vacant structures, rather than use of the current word "multiple" while commenter (52) requested specification and suggested it be modified to state at least 20 vacant structures and commenter ((69) suggested it be modified to reflect at least 15 vacant structures. Commenters (13), (22), (39), (42), (43), (54), (58), (60), (64), (69), (73) further recommended the following revision to this section: "(iii) Evidence of mitigation efforts to address blight or abandonment may include new construction in the area already underway that evidences public and/or private investment. In instances where blight exists but may only include a few properties, mitigation efforts could include partnerships with local agencies to engage in community-wide clean-up efforts, or other efforts to address the overall condition of the neighborhood."

Commenter (33) indicated that blight should be expected in revitalization areas. Commenter (78) expressed that in major cities the appearance of a vacant, derelict, or overgrown building may not be indicative of a vacant property, high crime area or undesirable location for urban redevelopment. Commenter (78) stated that dwellings in such condition may in fact be occupied by a living tenant, possibly elderly persons, living without assistance that may be unable to care for their yard. Commenter (78) asserted that ambiguity in the definition of urban blight has the potential to lead to irregular application of the criteria leaving many neighborhoods characterized as undesirable for development purposes when they should not be.

Commenter (52) indicated the 1,000 foot distance requirement for proximity to a blighted structure is too far and recommended the distance be shortened to 300 feet on the basis that it is too easy for a challenger to find a house in some surrounding neighborhood owned by someone who doesn't take care of their property in a radius that large that wasn't disclosed by the applicant. Commenter (52) further indicated that most cities are reluctant to require a private property owner to make repairs, paint or cut their grass unless there is a health risk.

Commenters (13), (22), (39), (42), (43), (52), (54), (58), (60), (64), (69), (73) recommended the violent crime provision be removed from consideration in the rule with commenter (13) stating that use of Neighborhoodscout requires a paid subscription, the data is not transparent and the fact that some of the most successful public housing redevelopment efforts have involved high-crime areas. Commenter (58) indicated that because crime can fluctuate significantly from year to year it doesn't seem reasonable to use such criteria in evaluating a site. Commenter (13) asserted that the Department should be part of the solution, rather redline neighborhoods that have some of the greatest housing need. Commenters (13), (22), (39), (42), (43), (54), (58), (60), (64) requested the following modification: "(ii) Evidence that crime rates are decreasing, based on violent crime data from the city's police department or county sheriff's department, for the police beat or patrol area within which the Development Site is located, based on the population of the police beat or patrol area that would yield a crime rate below the threshold indicated in this section."

Commenters (19), (25), (63), (69) recommended that the three consecutive year Met Standard requirement for schools be deleted from this section, asserting that TEA ratings do not provide sufficient reason for directing affordable housing away from large numbers of neighborhoods and communities. Commenters (19), (25), (63) expressed the belief that safe, affordable housing options are increasingly viewed by educators as an important element in reducing school transfers and absenteeism and improving grades among low income students.

Commenters (13), (22), (39), (42), (43), (54), (58), (60), (64), (73) suggested that only elementary schools that do not have the Met Standard rating be required to disclose and that the performance of middle and high schools be removed from this section, with commenter (13) citing the reality that many kids attend charter schools and elementary schools are often neighborhood schools that include a majority of children living in affordable housing. Commenters (13), (22), (39), (42), (43), (54), (58), (60), (64), (69), (73) further suggested the following modifications to this item: "(iv) Evidence of mitigation for all of the schools in the attendance zone that have not achieved Met Standard will include documentation from a school official with oversight of the school in question that indicates current progress towards meeting the goals and performance objectives identified in the Campus Improvement Plan. For schools that have not achieved Met Standard for two consecutive years, a letter from the superintendent, member of the school board or a member of the transformation team that has direct experience, knowledge and oversight of the specific school must also be submitted. The letter should, at a minimum and to the extent applicable, identify the efforts that have been undertaken to increase student performance, decrease mobility rate, benchmarks for re-evaluation, increased parental involvement, plans for school expansion, and long-term trends that would point toward their achieving Met Standard by the time the Development is placed in service. Such assessment could include whether the team involved has employed similar strategies at prior schools and were successful. In addition to the aforementioned letter from the school official, information should also be provided that addresses the types of services and activities offered at the Development or external partnerships that will facilitate and augment classroom performance."

Commenter (52) recommended schools that do not achieve Met Standard be removed as an undesirable neighborhood characteristic.

Commenters (17), (59) requested that the language be modified such that if an undesirable neighborhood characteristic exists, then in order for the development site to be considered eligible the applicant should only be required to provide evidence that such area is covered by a concerted plan of revitalization to demonstrate satisfactory mitigation for each characteristic disclosed. Commenter (69) recommended the requirement for a concerted plan of revitalization if a site involves three or more undesirable characteristics be removed from the rule.

As it relates to mitigation, commenter (13) indicated the proposed language is much stricter and severely constrains the Board in exercising discretion. Commenter (13) requested the language be modified to restore the discretion that was in the rule before the court dismissed the Dallas lawsuit. Moreover, commenters (13), (50) recommended that because the undesirable neighborhood characteristics are interwoven with fair housing, a letter from HUD stating that a site is consistent with site and neighborhood standards should be allowed as mitigating evidence. Along those lines, commenters (13), (22), (39), (42), (43), (50), (54), (58), (60), (64), (73) recommended the following modifications to this section: "(E) In order for the Development Site to be found eligible by the Board, despite the existence of undesirable neighborhood characteristics, the Board must find that the use of Department funds at the Development Site must be consistent with achieving at least one of the goals in clauses (i) - (iii) of this subparagraph. (i) Preservation of existing occupied affordable housing units subject to federal rent or income restrictions and mitigating evidence supports a conclusion that the characteristic will be remedied in an appropriate time period, which may be after placement in service; or; (ii) Factual determination that the undesirable characteristic(s) that has been disclosed are not of such a nature or severity that should render the Development Site ineligible based on the assessment and mitigation provided under subparagraphs (C) and (D) of this paragraph. Such information sufficiently supports a conclusion that the characteristic(s) will be remedied by the time the Development places into service; or" (iii) The Development satisfied HUD Site and Neighborhood Standards or is necessary to enable the state, a participating jurisdiction, or an entitlement community to comply with its obligation to affirmatively further fair housing, a HUD approved Conciliation Agreement, or a final and non-appealable court order."

Commenter (44) requested clarification regarding the instances by which the Board can find a development site eligible despite the existence of such characteristics, specifically as it relates to the language "subject to federal rent or income restrictions." Commenter (44) indicated this section appears to indicate a project must be preservation or federally sources in order for the Board to have the ability to consider it eligible. Commenter (44) asserted that while staff did an amazing job of adding scoring items to the QAP that allow Urban core projects to compete, this decision regarding eligibility directly impedes those projects that might score competitively under the new scoring priorities and; therefore, commenter (44) recommended the following modification to this section: "(i) Preservation of existing occupied affordable housing units to ensure they are safe and suitable or development of new high quality affordable housing units that are subject to federal rent or income restrictions; or (ii) Factual determination that the undesirable characteristic(s) that has been disclosed are not of such a nature or severity that should render the Development Site ineligible based on the assessment and mitigation provided under subparagraphs (C) and (D) of this paragraph. Such information sufficiently supports a conclusion that the characteristic(s) will be remedied by the time the Development places into service.

Commenters (13), (19), (22), (39), (42), (43), (44), (54), (58), (60), (64), (69), (73) requested that Single Room Occupancy developments be exempt from having to disclose the presence of low-performing schools, with commenters (19), (44), (64) stating that such developments have similar, if not more restrictive, occupancy standards as elderly limitation projects which are exempt from the school requirement. Commenters (25), (63) asserted that all elderly properties (preference and limitation) along with supportive housing developments targeting only adults should be exempt, indicating that it is rare that a single child would live at such properties. Commenter (25) stated that development and housing decisions should not be based on rare exceptions, but rather to serve the intended target population that the building will specifically serve.

Commenters (19), (44) suggested that only in instances where any 3 or more undesirable neighborhood characteristics exist should an applicant be required to provide the detailed report as required in this section. Similarly, commenters (25), (44), (63) requested that instead of all of the items being required as part of the report, only those that relate to the undesirable characteristic at hand. Requiring all of the items, according to commenters (25), (44), (63) is an excessive amount of information for the applicant to compile and staff to review. Commenter (34) indicated that the newly added requirement of an applicant submitting a report that outlines the disclosures and in-depth research of the area for staff review is labor intensive for both the applicant and staff further contending that these requirements can interfere with transactional timelines that may jeopardize a housing development unnecessarily. Commenter (33) expressed that the mitigation of such undesirable characteristics is highly subjective and creates an undue burden on the development community and the Department for review and further added that such subjectivity increases the likelihood of inconsistency of opinions on applications.

Commenter (24) indicated that no changes should be made to the undesirable neighborhood characteristics noted in this section and asserted that without a QAP, these are the only controls staff has on what the locational priorities are in awarding multifamily funding outside of the competitive housing tax credit applications. Commenter (24) stated that any decision to remove these in their entirety disregard the well-documented effects that such characteristics have on the levels of opportunity afforded to neighborhood residents, as well as their general quality of life. Commenter (24) expressed support for use of Neighborhoodscout in assessing the level of crime, since it is the best data that currently exists. Commenter (42), (54) indicated that this section is largely irrelevant for 9% applications due to the competitive nature of the program and incentives for high opportunity areas but believe this section is still necessary as threshold to ensure 4% developments are not placed in undesirable locations.

Commenters (22), (39), (42), (43), (50), (54), (58), (60), (64), (69), (73), (78) along with similar sentiments from commenter (34), recommended that the entire undesirable neighborhood characteristics section be deleted in its entirety on the basis that it is a remnant of the remediation plan and the dismissal of the ICP litigation warrants its removal. Moreover, commenters (22), (39), (42), (43), (54), (58), (60), (73), (78) indicated that such neighborhood characteristics work to eliminate large swaths of urban areas and the inherently faulty and inconsistent results found through the use of Neighborhoodscout and TEA school performance, such measures are of questionable value in determining the worth of certain neighborhoods. Similarly, commenters (64), (78) contended that the undesirable neighborhood characteristics are largely biased against urban core development and inhibits redevelopment in the most rapidly gentrifying parts of major metro areas with commenter (78) further indicating that should this section remain, the language should be altered such that re-development should be allowed to occur in the urban core of the State's largest cities.

Commenter (78) stated that based on the criteria relative to crime, nearly the entirety of the inner loop of Houston would be classified as an undesirable neighborhood which arguably indicates other large cities in Texas would be classified in the same way. Similar to that of crime, commenter (78) indicated that there is a high probability of being in proximity to a school that does not have the Met Standard rating based on a representation in the Houston Chronicle that nearly 40% of campuses in the Houston ISD were characterized as poor performers, with Dallas ISD reflecting the same percentage, the two of which comprise the two largest school districts in Texas.

Commenter (28) stated that the requirement that the undesirable characteristic be cured or mitigated by the time of placement in service is too rigid and further stated that communities undergoing revitalization take time to change and concurred with the recommendation by commenter (22) that this section be modified to indicate such undesirable neighborhood characteristics may be remedied after placement in service. Commenter (28) further expressed that the construction or rehabilitation of a development can promote other positive changes. Similarly, commenter (69) requested this be modified to reflect the undesirable characteristic be sufficiently mitigated 5 years after placement in service.

Commenter (40) recommended that these characteristics should not apply to HUD assisted Project Based Section 8 and existing Section 42 developments and requested language be added that would exempt such developments. Commenter (40) also recommended the following modification to the beginning paragraph of this section, stating that 4% applications utilizing a local issuer should be provided with the same opportunity for a determination regarding eligibility. "(A) If the Development Site has any of the characteristics described in subparagraph (B) of this paragraph, the Applicant must disclose the presence of such characteristics in the Application submitted to the Department. An Applicant may choose to disclose the presence of such characteristics at the time the pre-application (if applicable) is submitted to the Department. Requests for pre-determinations of Site eligibility prior to pre-application or Application submission will not be binding on full Applications submitted at a later date. For Tax-Exempt Bond Developments, the Applicant may submit the documentation described under subparagraphs (C) and (D) of this paragraph at pre-application and staff may perform an assessment of the Development Site to determine Site eligibility. The Applicant understands that any determination made by staff or the Board at the time of bond inducement regarding Site eligibility based on the documentation presented, is preliminary in nature. Should additional information related to any of the undesirable neighborhood characteristics become available while the full Application is under review, or the information by which the original determination was made changes in a way that could affect eligibility, then such information will be re-evaluated and presented to the Board."

Commenter (40) expressed concern over the added language that "preservation of affordable units alone does not present a compelling reason to support a conclusion of eligibility" because it seems to indicate preservation of existing affordable housing is not a priority for the Department. Commenter (69) recommended such language be removed from the rule.

Commenter (50) requested all mitigation requirements for undesirable neighborhood characteristics should be removed from the rule for existing occupied affordable housing that are subject to state or federal income restrictions further contending that if such characteristics are not able to be mitigated the residents will still reside at the property but without the benefit of rehabilitation of their residence.

STAFF RESPONSE: The presence of undesirable neighborhood characteristics does not automatically indicate a development site is ineligible. There are benchmarks and/or thresholds that simply indicate a more detailed assessment of the site and neighborhood needs to occur. Staff believes it is important for applicants to perform an initial evaluation of their sites with respect to all of the undesirable neighborhood characteristics and this rule encourages that evaluation. While a number of commenters requested this section be removed from the rule entirely, staff believes the safety, well-being of tenants and the decency of affordable housing should be of utmost importance and; therefore, recommends the section not be removed.

As it relates to comments received on the poverty rate; specifically that such rate revert to 40% with a consideration of 55% for Regions 11 and 13, staff agrees and has modified the proposed language accordingly. This section has also been modified to incorporate a number of comments to allow for gentrification as a way to address poverty rate. Staff recommends the following modification: "(i) The Development Site is located within a census tract that has a poverty rate above 40 percent for individuals (or 55 percent for Developments in regions 11 and 13)....(i) Evidence that the poverty rate within the census tract has decreased over the five-year period preceding the date of Application, or that the census tract is contiguous to a census tract with a poverty rate below 20% and there are no physical barriers between them such as highways or rivers which would be reasonably considered as separating or dividing the neighborhood containing the proposed Development from the low poverty area must be submitted. Other mitigation may include, but is not limited to, evidence of the availability of adult education and job training that will lead to full-time permanent employment for tenants, evidence of gentrification in the area which may include contiguous census tracts that could conceivably be considered part of the neighborhood containing the proposed Development, and a clear and compelling reason that the Development should be located at the Site."

In response to the suggestion by commenter (40) that allows for a pre-determination where the Department is not the issuer, staff agrees and has modified the language to reflect the following: "(A) If the Development Site has any of the characteristics described in subparagraph (B) of this paragraph, the Applicant must disclose the presence of such characteristics in the Application submitted to the Department. An Applicant may choose to disclose the presence of such characteristics at the time the pre-application (if applicable) is submitted to the Department. Requests for pre-determinations of Site eligibility prior to pre-application or Application submission will not be binding on full Applications submitted at a later date. For Tax-Exempt Bond Developments where the Department is the Issuer, the Applicant may submit the documentation described under subparagraphs (C) and (D) of this paragraph at pre-application or for Tax-Exempt Bond Developments utilizing a local issuer such documentation may be submitted with the request for a pre-determination and staff may perform an assessment of the Development Site to determine Site eligibility. The Applicant understands that any determination made by staff or the Board at that point in time regarding Site eligibility based on the documentation presented, is preliminary in nature. Should additional information related to any of the undesirable neighborhood characteristics become available while the full Application is under review, or the information by which the original determination was made changes in a way that could affect eligibility, then such information will be re-evaluated and presented to the Board."

As it relates to blight, several commenters provided suggestions for quantifying a specific number of blighted structures that would necessitate disclosure and there were also comments recommending the distance to such blighted structure be reduced. Staff could not identify a sound basis for incorporating one number over another and recommends no change to this section based on these comments. Moreover, while it may be true that blight is present in revitalization areas, staff also believes that there should conceivably be a plan to address the blight. In response to commenters who stated that blight in the neighborhood is not within the control of the applicant, staff recommends a modification to the manner in which it could be mitigated as reflected in the following: "...Acceptable mitigation to address extensive blight should include a plan whereby it is contemplated that a responsible party will use the property in a manner that complies with local ordinances...."

As it relates to crime, several commenters requested this undesirable characteristic be removed from the rule entirely mostly based on the assessment tool used (i.e. NeighborhoodScout) to trigger the need for disclosure. Recognizing that how local police departments report crime differs from city to city, NeighborhoodScout is the only universal benchmark by which such evaluation can be performed. Staff believes the rule provides additional flexibility in the data source or other information that can be used as mitigation. In response to several commenters who suggested removal of the word "substantially" as it relates to the trend of crime rates, staff agrees that the inclusion of such word could make it difficult to assess and proposes the word be removed.

As it relates to schools, a school that has failed to achieve Met Standard for consecutive years may be indicative of a systemic issue that requires more time and resources to turn the school around. The Texas Education Agency ratings and corresponding data can be a good initial assessment into performance trends. In response to comments that only the performance of the elementary school should be considered, staff believes that children residing in affordable housing should have the opportunity to receive a quality education from all three schools in the attendance zone and; therefore, all three schools should be included in the disclosure. Staff has not been provided with information that presents a sound, policy reason for excluding middle and high school performance and recommends no change based on these comments. Regarding the proposed modification from several commenters to remove the letter from an education professional that speaks to the degree to which the staff tasked with carrying out the goals and objectives will be successful as mitigation for school performance, staff believes that such letter is appropriate considering that prior staff and/or administration had been unsuccessful. It is worth understanding what makes the plan they have in place now is what it will take to turn the school around. Staff recommends no change based on this comment.

As it relates to comments received regarding criteria by which the Board would need to evaluate in order to find a site eligible, staff believes it is important to evaluate rehabilitation developments in a similar fashion as new construction developments in terms of severity of the undesirable neighborhood characteristics disclosed. This is important considering staff has seen rehabilitation developments where there are no undesirable characteristics present. Staff recommends no change based on these comments.

In response to commenter (44) requesting clarification on the phrase "subject to rent or income restrictions", an application that is awarded would be subject to rent and income restrictions. This was not intended to indicate preservation would have to already have these restrictions in place before being considered eligible.

Several commenters recommended a third criterion by which the Board could find a site eligible be added that includes documentation that the site satisfied HUD Site and Neighborhood Standards. The Department has been informed that HUD is no longer doing such reviews for HOME and that it is now the responsibility of the participating jurisdiction. Moreover, the standards by which HUD evaluates a site and neighborhood may not necessarily align with the policies and objectives of the Department. Staff agrees with those commenters that recommended prior language be added back that speaks to the development fulfilling an obligation to affirmatively further fair housing, a HUD Conciliation Agreement, etc. and has incorporated such language in the form of a waiver that is requested. Specifically, staff recommends the following modification to this section: "(E) In order for the Development Site to be found eligible by the Board, despite the existence of undesirable neighborhood characteristics, the Board must find that the use of Department funds at the Development Site must be consistent with achieving the goals in clauses (i) - (iii) of this subparagraph. (i) Preservation of existing occupied affordable housing units to ensure they are safe and suitable or the new construction of high quality affordable housing units that are subject to federal rent or income restrictions; and (ii) Factual determination that the undesirable characteristic(s) that has been disclosed are not of such a nature or severity that should render the Development Site ineligible based on the assessment and mitigation provided under subparagraphs (C) and (D) of this paragraph.; or (iii) The Applicant has requested a waiver of the presence of undesirable neighborhood characteristics on the basis that the Development is necessary to enable the state, a participating jurisdiction, or an entitlement community to comply with its obligation to affirmatively further fair housing, a HUD approved Conciliation Agreement, or a final and non-appealable court order and such documentation is submitted with the disclosure."

In response to commenters who requested that Single Room Occupancy and Elderly Preference developments be exempt from the school performance characteristic, staff maintains that a development characterized as Elderly Preference includes the possibility of residents of school age and; therefore, maintains that such target population not be exempt from this undesirable characteristic. Moreover, staff has concerns regarding exempting Single Room Occupancy developments because generally staff does not believe an adult with a child could lawfully be refused occupancy at a Single Room Occupancy development, unless a federal funding source has a specific exemption.

In response to comments relating to the content of the Undesirable Neighborhood Characteristic Report, staff believes that regardless of the number of characteristics applicable to a particular site, the Report should still be submitted. Staff agrees with the comments made that only information that pertains to the characteristic would need to be addressed in the report and has modified this section to reflect the following: "(B) The undesirable neighborhood characteristics include those noted in clauses (i) - (iv) of this subparagraph and additional information as applicable to the undesirable neighborhood characteristic(s) disclosed as provided in subparagraphs (C) and (D) of this paragraph must be submitted in the Application....(C) Should any of the undesirable neighborhood characteristics described in subparagraph (B) of this paragraph exist, the Applicant must submit the Undesirable Neighborhood Characteristics Report that contains the information described in clauses (i) - (viii) of this subparagraph and subparagraph (D) of this paragraph as such information might be considered to pertain to the undesirable neighborhood characteristic(s) disclosed so that staff may conduct a further Development Site and neighborhood review."

Staff appreciates the support expressed by commenter (24).

In response to comments that the undesirable neighborhood characteristics would preclude inner city preservation or new construction developments, staff notes that no such categorical exclusion resulted in 2016 after review of approximately 52 4% HTC applications with undesirable neighborhood characteristics.

Several comments were received that requested the timeframe by which the undesirable characteristic should be mitigated should be allowed to extend beyond placement in service. Staff believes that such flexibility is contemplated in the current language and has further modified this section of the rule for clarity as reflected in the following, along with removing what might be considered an inconsistency regarding the evaluation of such timeline in another part of this section. "(B)....In order to be considered as an eligible Site despite the presence of such undesirable neighborhood characteristic, an Applicant must demonstrate actions being taken that would lead a reader to conclude that there is a high probability and reasonable expectation the undesirable characteristic will be sufficiently mitigated or significantly improved within a reasonable time, typically prior to placement in service, and that the undesirable characteristic demonstrates a positive trend and continued improvement. Conclusions for such reasonable expectation may need to be affirmed by an industry professional, as appropriate, and may be dependent upon the severity of the undesirable neighborhood characteristic disclosed. (D) Information regarding mitigation of undesirable neighborhood characteristics should be relevant to the undesirable characteristics that are present in the neighborhood. Mitigation must include documentation of efforts underway at the time of Application and may include, but is not limited to, the measures described in clauses (i) - (iv) of this subparagraph. In addition to those measures described herein, documentation from the local municipality may also be submitted stating the Development is consistent with their obligation to affirmatively further fair housing."

BOARD RESPONSE: Accepted staff's recommendation.

3. §10.101(b)(1) - Subchapter B- General Ineligibility Criteria (22), (23), (66), (80)

COMMENT SUMMARY: Commenters (23), (66) indicated that the addition of adaptive reuse as it relates to one-for-one replacement units is not appropriate since adaptive reuse by definition includes no units because it was not being used for residential. Commenter (23), (66) recommended the following modification: "(vi) A Development utilizing a Direct Loan that is subject to the Housing and Community Development Act, §104(d) requirements and proposing Rehabilitation, Reconstruction, if the Applicant is not proposing at least the one-for-one replacement of the existing unit mix. Adding additional units would not violate this provision."

Commenters (22), (80) recommended the following modification to the limitation on development size and stated that the QAP in prior years allowed for developments in rural areas that exceeded 80 units, specifically noting that similar language to what commenters (22), (80) proposed was included in the 2004 QAP. Commenters (22), (80) indicated that rural areas exist in major MSAs such as Dallas, Austin, Houston, San Antonio, El Paso and McAllen that have significant demand and the market study is the most reasonable method to determine the number of units demand in the market. Commenter (80) further indicated that there have been 33 developments that have placed in service in rural areas that exceed 80 units. "(2) Development Size Limitations. The minimum Development size is 16 Units. New Construction or Adaptive Reuse Developments in Rural Areas are limited to a maximum of 80 Units. New Construction Tax-Exempt Bond Developments may exceed 80 units if the Market Analysis clearly documents that there is significant demand for additional Units. Other Developments do not have a limitation as to the maximum number of Units."

STAFF RESPONSE: In response to removing adaptive reuse as a one-for-one replacement staff agrees and has made the change as requested.

In response to the proposed changes by commenters (22), (80) relating to the development size limitations, staff believes that the ability to exceed 80 units is already contemplated in the rule via the waiver process and that such requests are better addressed on a case-by-case basis and based on more information that may be available other than solely a Market Study.

BOARD RESPONSE: Accepted staff's recommendation.

4. §10.101(b)(3) - Subchapter B- Rehabilitation Costs (27), (40), (50)

COMMENT SUMMARY: Commenter (40) recommended the minimum thresholds for rehabilitation costs be reduced to $15,000 per unit regardless of age. According to commenter (40) the increased levels will effectively encourage long-term owners of affordable housing to not maintain their property at high levels, it will encourage a waste of scarce resources (9% HTC and tax-exempt bonds) for developments that don't need more than $15,000 to $20,000 per unit of rehab. Commenters (27), (40) expressed the belief that lenders and investors should determine the level of rehab needed and are incentivized to ensure that any rehabilitation adequately addresses the short-and long-term needs of a property, with commenter (40) further stating that the increased thresholds would likely encourage existing Section 42 properties that have completed their initial 15-year compliance period to go to market versus preservation through re-syndication.

Commenter (27) stated the proposed increases for 4% developments will exclude many large multifamily projects from utilizing the tax credit program for substantial renovations and further explained that the availability of soft financing has decreased and the criteria for even obtaining such are skewed heavily towards developments that are more likely to receive a 9% allocation. Commenter (27) contended that in order to fund such rehabilitation costs, what doesn't get funded from equity will need to be funded from additional debt or deferred developer fee. Commenter (27) suggested that if the Department is concerned that credits would be allocated to projects that were not including enough in renovation expenditures to adequately preserve the property through the Compliance Period, perhaps it would be more precise to incorporate threshold criteria which require that systems of a certain age be replaced or that certain scope items be addressed absent some evidence of recent improvements addressing those items. Commenter (27) further stated that while the per unit minimum establishes a dollar amount to be spent, it does not necessarily direct that those dollars be spent on items that will preserve and enhance the property.

Commenter (50) requested the rehab costs per unit not be increased because it is an arbitrary cost considering the great diversity of developments throughout the State. Commenter (50) further recommended including exception language allowing the Department to approve a lesser amount of rehab per unit if a third party PCA, which meets Department requirements, supports the lower per unit rehab amount, and a letter from the investor/syndicator stating they have reviewed the PCA and support its conclusions that the rehab budget and scope of work is sufficient to extend the useful life of the development throughout the initial compliance period is submitted with the Application.

STAFF RESPONSE: In response to those commenters who recommended the minimum threshold costs be reduced, staff does not believe a reduction to $15,000/unit regardless of the age of the property is consistent with the needs of the property. Moreover, staff disagrees with the sentiment expressed by commenter (40) that the higher levels required would prevent the preservation of the affordability and would lead the property to go to market. Staff believes that the rehabilitation should be at a level that would allow the property to compete with market and that absent improvements to the property it would not be in a position to compete in the market. Staff does; however, believe the proposed increase by $10,000/unit for those properties less than 20 years old might be too much of an increase and that it would be more appropriate that for these properties the level is reduced to $20,000/unit. Since presumably such costs are funded with the tax credit proceeds and credit pricing remains at relatively high levels staff believes an increase nonetheless is appropriate. Staff believes the suggestion by commenter (27) is reasonable in that depending on the age of the property and absent recent improvements, it could make sense to require certain systems be replaced as part of the scope of work or that a certain level of improvements address the interior and exterior of the development; however, this would be a more substantive change that would necessitate additional public comment and could be considered in subsequent year rule-making.

In response to commenter (50) staff does not believe adding language to the rule that would allow for a lesser amount is appropriate. While the PCA is intended to document the scope of work needed for the development, staff believes that to the extent this scope of work does not meet the minimum threshold requirement for rehab costs as reflected in this section that the applicant is allowed to further add items to the scope of work beyond just those that the PCA provider identified. In such instances, staff would require the PCA provider review those additional items and sign off on those being appropriate needs for the development.

BOARD RESPONSE: Accepted staff's recommendation.

5. §10.101(b)(4) - Subchapter B- Mandatory Development Amenities (22), (23), (31), (33), (39), (40), (42), (43), (54), (58), (60), (62), (66), (67), (73)

COMMENT SUMMARY: Commenters (22), (23), (33), (39), (40), (42), (43), (54), (58), (60), (62), (73) disagreed with the addition of solar screens as a mandatory amenity for all developments and commenter (23) stated that in addition to the enormous cost associated with the screens, there could be potential conflicts and/or violations with local design ordinances. Commenter (23) provided comments from green building consultants who purportedly indicated that solar screens will reduce the effectiveness during winter to help heat the units, solar screens reduce the amount of natural daylight coming into the room, and that other green building features can be used to show equivalent or better energy savings instead of mandating solar screens for all units. Commenters (22), (23), (33), (39), (42), (43), (54), (58), (60), (62), (73) recommended that solar screens be added as a Green Building amenity at the option of the applicant, and not mandated. Commenter (40) requested the solar screen requirement be defined with more detail and further added that they shouldn't be required on existing affordable housing, especially where the windows are in good condition and are not being replaced.

Similarly, commenter (31), (58), (66) indicated that rather than requiring solar screens, a better solution to address the problem of energy use and heat infiltration is to install better quality windows which would have a more effective, longer-lasting solution and further stated that if solar screens are attached to window frames it may void the manufacturer's warranty. Commenter (31), (66) suggested that an alternative to solar screens could include mandating a specific window value (SHGC) minimum, appropriate per climate zone, or exempting those who achieve a Green certification since such certifications already include minimum standards for windows and shading.

Commenters (22), (39) stated that modern PTAC units are energy and cost efficient and older existing buildings typically don't have the plate height to allow for both central air and a reasonable ceiling height. While the current rule allows for PTAC units in historic preservation properties, this is an undefined term and commenters (22), (39) recommended historic preservation be replaced with Rehabilitation which is a defined term, as reflected in the following: "(L) All Units must have central heating and air-conditioning (Packaged Terminal Air Conditioners meet this requirement for SRO or Efficiency Units only or Rehabilitation where central would be cost prohibitive); and"

Commenter (67) requested clarification regarding the parking requirement in this section and stated that many urban developments include market rate units and with those units, covered parking as a way to add additional income to help make the development feasible. Commenter (67) indicated the current language is too limiting and does not allow for flexibility and; therefore, recommended the following modification: "(M) Adequate parking spaces consistent with local code, unless there is no local code, in which case the requirement would be one and a half (1.5) spaces per Unit for non- Elderly Developments and one (1) space per Unit for Elderly Developments. The minimum number of required spaces must be available to the affordable units at no cost."

Commenter (40) recommended that ceiling fans not be required on existing affordable housing where ceiling fans never existed.

Commenter (58) requested clarification regarding the RG-6/U COAX or better option under this section, specifically what the "U" is supposed to be an indicator of since there does not seem to be an industry standard definition.

STAFF RESPONSE: In response to commenters (22), (23), (33), (39), (40), (42), (43), (54), (58), (60), (62), (73) staff has removed the requirement that solar screens be mandatory and has instead, in response to commenters (22), (23), (33), (39), (42), (43), (54), (58), (60), (62), (73) moved the item to the Limited Green Amenities section such that it would be a matter of choice on the owner whether or not to provide. This option is separate and apart from the permanent shading device already listed under the Limited Green Amenities. Moreover, staff modified language in this section to require screens on all operable windows.

In response to commenter (40) regarding ceiling fans, staff believes this amenity is one that would be of beneficial use to tenants and should be provided, regardless of whether a ceiling fan currently exists on proposed rehabilitation developments.

In response to commenter (58) regarding the RG-6/U COAX, staff believes this to be the most recent technology and believes the "U" to represent "universal."

In response to commenters (22), (39) regarding the suggested modification on PTAC units, while staff agrees that historic preservation is not a defined term, replacing the term with rehabilitation effectively eliminates the requirement for all rehabilitation developments. Staff believes that the general high caliber of rehabilitation expected by the Department requires that central air conditioning remain a requirement for rehabilitation developments; however, should the Board choose to offer some relief to Applicant's proposing rehabilitation, specifically where there is a demonstrated structural need, the Board may still approve a waiver on a case-by-case basis.

In response to commenter (67) requesting a modification to the parking requirement, staff believes that free parking should be provided for affordable and market rate residents alike to prevent market rate residents who do not want to pay for parking from parking on neighborhood streets.

BOARD RESPONSE: Accepted staff's recommendation.

6. §10.101(b)(5) - Subchapter B- Common Amenities (40), (42), (43), (44), (54), (58), (60), (73), (79)

COMMENT SUMMARY: Commenter (79) indicated that there is not a EPA WaterSense specification for kitchen faucets as is currently reflected in the Green Building Features in this section.

Commenter (40) suggested there is no differentiation for rehabilitation of existing affordable housing and recommended they be treated differently with lower required amenities or provide more points for rehabilitation developments using 4% housing tax credits. Specifically, commenter (40) along with commenters (42), (43), (54), (60), (73) suggested the furnished community room should be worth two points or more because as written a community theater room is worth 3 points but yet a community room is only one point which will dissuade developments from having a furnished community room (and such amenity receives the same points as a horseshoe pit or bicycle parking). Commenter (40) suggested community dining room be defined because it is not clear if this is a separate room or could be included in the community room and asked whether it was a simple as a few tables where people could eat dinner. Moreover, according to commenter (40), the radiant barrier option should be modified to allow rehabilitation developments to be eligible for the points because such barrier can effectively be added to the underside of roof sheathing in renovation developments or where roofs are being replaced.

Commenter (44) stated that full perimeter fencing alone is not an amenity and that if the goal of this point item is security then it should be combined with controlled gate access for a maximum of two points.

Commenter (44) explained that in their experience one printer for every three computers is excessive and unnecessary and suggested requiring one printer per computer lab.

Commenter (44) suggested shade from trees be included as a shade option and further stated that it would be counterproductive to install an awning when a playground is adequately shaded by trees.

Commenter (44) requested clarification concerning the amount of bicycle parking and recommended "one bicycle per five units" be added to this amenity option.

Regarding the Green Building amenities, commenter (44) contended that green building features benefit both the residents and the owners and believed the point category should allow for more than four points and suggested it be modified to reflect six points with the Limited Green Amenities option increasing to four points. Commenter (44) also suggested Solar Arrays be added as its own Green category for two points.

Commenter (44) identified several options under Limited Green Amenities that are difficult to verify as constructed without a Third Party consultant such as those used for Enterprise Green Communities and LEED and further explained that it is beyond the means of Department staff and suggested limiting these options to those items that are high impact and verifiable. Commenter (44) recommended the following items be removed on the basis that they are difficult to verify: "(-a-) a rain water harvesting/collection system and/or locally approved greywater collection system; (-b-) newly installed native trees and plants that minimize irrigation requirements and are appropriate to the Development Site's soil and microclimate to allow for shading in the summer and heat gain in the winter. For Rehabilitation Developments this would be applicable to new landscaping planned as part of the scope of work; (-d-) all of the HVAC condenser units located so they are fully shaded 75 percent of the time during summer months (i.e. May through August) as certified by the design team at cost certification; (-m-) locate water fixtures within 20 feet of water heater;"

Commenter (44) recommended the installation of individual or sub-metered utility meters for electric and water be removed because it is already Texas code and indicated the healthy finish materials option is too vague as to how much finish materials should be used. Commenter (44) recommended that because this item is difficult to verify, it should be removed. Commenter (40) recommended allowing rehabilitation developments to be eligible for points for individually metered water and electric because if the development was built with individual meters or is changing to individual meters they should be allowed the same points as new construction.

Commenter (44) recommended the provision for the construction waste management system that meets LEEDs minimum standards be removed on the basis that per LEED Version 4 it is extremely difficult to achieve now.

Commenter (44) suggested that the option for developments with 41 units or less, whereby at least 25% by cost FSC certified salvaged wood products be used, be removed because it is very expensive and there is no real benefit to the tenant or building.

Commenter (44) recommended the following options be combined into one in order to truly achieve water savings. "(-n-) drip irrigate at non-turf areas and sprinkler system with rain sensors; "

Commenter (44) recommended TPO roofs be added to the amenity option below since they are considered "cool" roofing. "(-o-) radiant barrier decking for New Construction Developments or other "cool" roofing materials;"

Commenter (44) recommended black-out shades be removed from the option below because they are easy to remove and not as efficient as exterior shading devices. "(-p-) permanent shading devices for windows with solar orientation (does not include solar screens, but may include permanent awnings, fixed overhangs, etc.);"

Commenter (44) recommended the following option be removed because Energy Star does not certify insulation products. "(-q-) Energy-Star certified insulation products (For Rehabilitation Developments, this would require installation in all places where insulation could be installed, regardless of whether the area is part of the scope of work);"

Commenter (44) indicated that because Floor Score only certifies vinyl flooring, other options should be added to the amenity in order to count for points and recommended the following modification: (-t-) FloorScore certified vinyl flooring, Green Label certified carpet, or resilient flooring;

Commenter (58) recommended modifications to the following amenities: "(xxxii) Porte-cochere (1 point); (xv) Service provider office in addition to leasing offices or a desk for service provider in leasing office. (1 point);"

Commenter (58) recommended adding the following options to the Limited Green Amenities section under Green Building Features. "(-w-) no carpet in main living area of all units; (-x-) locate HVAC ducts within thermal envelope; (-y-) label all storm drains and storm inlets on the development site to discourage dumping of pollutants."

STAFF RESPONSE: Staff agrees with the modification suggested by commenter (79) and has made the change.

In response to the multiple suggestions proposed by commenter (44) staff recommends the following: full perimeter fencing alone can be an amenity and can, absent controlled gate access provide an initial layer of protection of security that prevents individuals from passing through a property with, for example, immediate access to a first floor balcony; therefore, staff recommends no change; staff agrees with the comment regarding the one printer per computer lab and has made the change; staff believes that while trees could provide shade for a playground, this could be difficult to monitor and verify to ensure adequate shading is in fact being provided and recommends no change; staff does not believe that additional clarification is needed at this time related to the amount of bicycle parking and believes that it should be adequate for the development size and has added such language. Staff agrees with commenter (44) regarding the difficulty with verifying that HVAC condenser units be located such that they are 75% shaded and has removed this item from the list. Staff does not believe the other items noted by commenter (44) are difficult to verify, has not encountered issues with them and believes there could still be value associated with them and; therefore, recommends no change. In response to the suggestion of adding Solar Arrays as its own category, staff believes there could be some merit in exploring this for possible inclusion in the 2018 Uniform Multifamily Rules when there has been more research and public comment surrounding it. Moreover, staff believes there could also be some merit in re-evaluating the points associated with the Limited Green option but believes this would be better served in re-evaluating in 2018 where there is an opportunity for additional public comment.

In response to commenters (40), (42), (43), (54), (60), (73) staff agrees and has increased the point value associated with a furnished community room to 2 points.

In response to commenter (40) requesting that the community dining room be defined, staff does not believe additional clarification is necessary beyond what is already stated in the item. The introductory paragraph in this section states "an Applicant can only count an amenity once; therefore combined functions (a library which is part of a community room) will only qualify for points under one category"; therefore, the community dining room could not be included in the community room and points received under both options.

In response to the sub-metering of electric and water staff believes any modification to this could benefit from additional public comment and therefore recommends that such change be contemplated for inclusion in the 2018 draft rules for public comment.

In response to commenter (44) that requested TPO roofs be added to the option for other "cool" roofing materials, staff believes such roofing materials could be used but doesn't believe TPO roofs specifically need to be incorporated into this item. Regardless of the roofing materials used under this option, an applicant would be required to provide documentation identifying the energy savings and something to document the materials are durable. Staff modified this item to provide this clarification as reflected in the following: "(-o-) radiant barrier decking for New Construction Developments or other "cool" roofing materials (documentation must be submitted that substantiates the "cool" roofing materials used are durable and that there are energy savings associated with them);"

Staff agrees with commenter (44) regarding removal of the black-out shades and has removed this from the option for permanent shading devices.

Staff believes that some of the suggestions proposed by commenter (44) such as combining the drip irrigate at non-turf areas and sprinkler system with rain sensors would be worth considering in the 2018 Rules when staff can better evaluate whether there are sufficient other items remaining on the list and there is an opportunity for additional public comment.

Staff does not agree with commenter (44) in removing the items relating to construction waste management and FSC certified salvaged wood products solely on the basis that they are difficult to achieve absent providing alternative options in their place to ensure there are still a sufficient number of items remaining by which applicants can choose from.

In response to the suggestion by commenter (44) to remove the Energy Star insulation products, based on staff's research such products are in fact certified and; therefore, absent any documentation to the contrary staff recommends this item remain.

Staff agrees with commenter (44) regarding the proposed changes to the FloorScore certified flooring and has made the modification as suggested.

In response to commenter (58) staff agrees with the suggestion to allow all developments the option to receive points for a Porte-cochere and has made the change accordingly. Regarding the suggestion to allow simply having a desk in the leasing office for the service provider, staff does not believe this equates to having a separate office for the provider in the leasing office and does not recommend this change.

In response to the additional options suggested by commenter (58) to be added to the list along with other suggestions by other commenters, staff believes more time and attention needs to be spent on the options listed under the Limited Green section as it relates to combining some items, removing and adding some based on whether they add value or not, such that there remains a sufficient number of options to choose from and that such revisions have had the opportunity to be open for public comment in order to receive more input. Staff recommends no changes other than the aforementioned modifications.

BOARD RESPONSE: Accepted staff's recommendation.

7. §10.101(b)(1)(6)(B) - Subchapter B- Unit Requirements (20), (40), (42), (43), (44), (53), (54), (73)

COMMENT SUMMARY: Commenters (20), (53) stated that the ability to use bond volume cap to revitalize multiple properties at one time could be a major solution to preservation efforts and in the interest of this cause recommended the following modifications to this section: "(B) Unit and Development Construction Features. Housing Tax Credit Applicants may select amenities for the score of an Application under this section, but must maintain the points associated with those amenities by maintaining the amenity selected or providing substitute amenities with equal or higher point values. Tax-Exempt Bond Developments must include enough amenities to meet a minimum of seven (7) points, unless the application is preserving multiple (3 or more) USDA rural properties under one bond transaction. Direct Loan Applications not layered with Housing Tax Credits must include enough amenities to meet a minimum of four (4) points. The amenity shall be for every Unit at no extra charge to the tenant.."

Commenter (40) indicated the seven point requirement for rehabilitation developments may be hard to achieve and suggested it be lowered for 4% applications. Moreover, commenter (40) requested clarification relating to high speed internet, specifically, whether a tenant can be charged for it or whether the owner just has to provide the ability for the resident to have high speed internet. Commenter (44) recommended the following clarification to the internet service option since the Department requires that such service be offered free of charge. "(xii) Free High Speed Internet service to all Units (can be wired or wireless; required equipment for either must be provided) (1 point);"

Commenter (40) suggested built-up or 4-ply flat roof be added as an option for flat roof developments to make it even with shingles, and further stated that there is a point consideration for a quality flat roof.

Commenters (42), (43), (54), (73) recommended the point value assigned to in-unit laundry equipment be increased to at least 2 points, if not 3 points and further argued that a community laundry room is worth three points under common amenities but it is a far less desirable amenity to tenants than having laundry equipment provided to them in their units.

Commenters (42), (54) recommended the following modification as it relates to exterior finishes: "(xv) Greater than 30 percent stucco or masonry (includes stone, cultured stone, and brick but excludes cementitious siding) on all building exteriors; the percentage calculation may exclude exterior glass entirely (2 points)."

Commenter (44) expressed that the list of features included in this section have been and still are too restrictive and should be expanded to allow for greater design options. Commenter (44) recommended the following amenities be added to the list because they provide value to the tenants and serve to improve the quality of developments. "Pantry (0.5 point); Breakfast bar (0.5 point); Walk-in closet in master bedroom (0.5 point); Low Flow Water Fixtures (0.5 point); Durable Flooring (1 point); Solar panels that directly offset the tenant's electricity bill (2 points)."

Commenter (44) indicated that because Energy Star dryers are cost prohibitive, the following modification should be made to the laundry equipment option: "(vii) Energy-Star qualified laundry equipment (washers) for each individual Unit; must be front loading washer in required accessible Units (1.5 points);"

Commenter (44) indicated that because R-value slabs are important in north Texas, the following modification should be made to the R-value requirements. "(x) Meet current R-value requirements (rating of wall/ceiling/slab system) of current IECC for the Development's climate zone (1.5 points);"

In order to incentivize Energy Star appliances, commenter (44) recommended the following modification to the HVAC option: "(xi) Energy Star Rated HVAC equipment (or greater) for New Construction, Adaptive Reuse, and Reconstruction or radiant barrier in the attic for Rehabilitation (excluding Reconstruction) where such systems are not being replaced as part of the scope of work, a radiant barrier in the attic is provided (1.5 points);"

Commenter (44) indicated that because the following option creates an accessibility conflict with 2010 ADA that it be removed: "(xii) Floor to ceiling kitchen cabinetry (1 point);"

Commenter (44) indicated the following option can add complications to ceiling assemblies due to fire rating and in their opinion do not add value for the tenant. Moreover, commenter (44) indicated that track LED lighting is difficult to source and should be removed.

Commenter (44) recommended a modification to the roofing option that includes TPO roofing material based on the following: many TPO roofing systems come with 30-year warranties and are arguably more durable and energy efficient than the commonly used 30-year shingle and TPO is a popular high-grade commercial roofing material with long term heat and UV resistance and a highly reflective, emissive white material that helps reduce energy costs and urban heat island effect. Moreover, commenter (44) explained the following practical benefits to a flat roof: it maximizes space for smaller urban sites or sites with strict impervious cover limits, allows projects to mount HVAC on the roof which frees up valuable space on the ground, provides more space and greater flexibility for placement of solar panels, allows for more strategic placement of downspouts and rainwater collection, allows projects to take full advantage of max height restrictions without using valuable vertical space for attics, and it's easier to provide significant continuous roofing insulation which is more effective than batts or loose fill typical in a pitched roof design. "(xiv) Thirty (30) year shingle or metal roofing (including Thermoplastic Polyolefin (TPO) roofing material) (0.5 point); and"

As it relates to masonry, commenter (44) recommended that Hardi be included as an option and contended that stone and brick are cost prohibitive and do not provide enough of a benefit to the resident to justify the cost; whereas Hardi is durable, aesthetically pleasing and popular Texas façade.

Commenter (44) requested the following modification: "(xv) Greater than 30 percent stucco or masonry (includes stone, cultured stone, hardi and brick metal siding) on all building exteriors; the percentage calculation may exclude exterior glass entirely (2 points)."

STAFF RESPONSE: In response to commenters (20), (53) proposing developments that are pooled together under a portfolio bond issuance be held to a different minimum threshold, staff believes this would constitute a substantive change that would necessitate additional public comment and; therefore, recommends no change.

In response to commenter (40) relating to the difficulty some Rehabilitation Developments may have in meeting the seven point minimum threshold for unit and development features, staff notes that this section already provides for Rehabilitation Developments to start with a base score of three points and; therefore, does not believe additional changes to the minimum threshold or the point values are necessitated. Staff recommends no change based on this comment.

In response to commenters (40), (44) regarding the high speed internet, staff notes that the introductory paragraph to this section states "the amenity shall be for every Unit at no extra charge to the tenant" and that because the item specifically states "high speed internet service" that no additional clarification is necessary. The intent of this option is that the service be provided and that it be free to the tenant. Staff recommends no change based on these comments.

In response to commenters (42), (54) who recommended the exterior finishes option be revised to allow for metal siding, staff notes that an applicant is not necessarily precluded from using metal siding should they choose to do so, they just wouldn't be allowed to claim the points associated with this option. Staff does not recommend any changes based on this comment.

In response to commenter (44) to allow for Hardi to be included as an option for exterior finishes, staff believes that while such option might be a cheaper alternative to stone or masonry it isn't necessarily cost prohibitive since such costs would be covered with tax credit proceeds. An applicant is not necessarily precluded from using Hardi should they choose to do so, they just wouldn't be allowed to claim the points associated with this option. Staff does not recommend any changes based on this comment.

In response to commenters who suggested the point value assigned to in-unit laundry equipment be increased to at least 2 points, staff agrees and has modified the point value accordingly.

In response to the additional features suggested by commenter (44) that would allow for greater design options, staff recommends adding a Breakfast Bar worth 0.5 points a and Walk-in closet in Master Bedroom worth 0.5 points and has modified the list accordingly.

Staff believes having an energy-star dryer could provide cost savings to the tenant and considering such cost would be covered with tax credit proceeds staff does not understand the cost prohibitive nature of the comment. Staff recommends no change based on this comment.

In response to the suggestion by commenter (44) to revise the R-value requirements to include the slab system, staff believes that because such R-value requirements are already state law and regulation based on climate zone, it should be removed from consideration and has modified this section accordingly.

In response to commenter (44) who suggested the 14 SEER HVAC system be modified to require Energy-Star Rated HVAC equipment, staff believes that such change could benefit from additional public comment and recommends it be contemplated for inclusion in the 2018 draft rules.

In response to the suggestion by commenter (44) that the floor to ceiling kitchen cabinetry be removed on the basis that it creates an accessibility conflict with 2010 ADA staff believes that cabinetry is already required to conform to the construction standards in 10 TAC Subchapter B for the accessible units and that floor to ceiling kitchen cabinetry could be included in all other units. However, staff believes that this item could create additional confusion on what is intended and has removed the item until it can be clarified further.

In response to the suggestion by commenter (44) that the recessed or track LED lighting option be removed, staff believes that if such option adds complications based on the design of the building then it could simply not be an option for that owner to provide. Staff believes that it should remain an option nonetheless in the event there are owners who wish to include it. Staff recommends no change based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

8. §10.101(b)(7) - Subchapter B- Tenant Supportive Services (20), (22), (23), (33), (42), (43), (44), (53), (54), (58), (60), (64), (69), (73)

COMMENT SUMMARY: Commenters (20), (53) stated that the ability to use bond volume cap to revitalize multiple properties at one time could be a major solution to preservation efforts and in the interest of this cause recommended the following modifications to this section: "(7) Tenant Supportive Services. The supportive services include those listed in subparagraphs (A) - (Z) of this paragraph. Tax Exempt Bond Developments must select a minimum of eight (8) points, unless the application is preserving multiple (3 or more) USDA rural properties under one bond transaction; Direct Loan Applications not layered with Housing Tax Credits must include enough services to meet a minimum of four (4) points."

Commenters (22), (23), (33), (42), (43), (54), (60), (73) objected to the fact that all tenant services should be provided by a third party/off-site entity and commenter (23) further noted that many of the tenant services (i.e. on-site food pantry, notary services and onsite social events) are most appropriately administered by on-site leasing or other property staff. Commenter (33) indicated this requirement will add undue cost to every development, escalating operating costs by $30,000 or more a year. Commenter (23), (58) recommended the following modifications to this section with commenter (58) indicating that on-site personnel can be and are qualified to provide many of the services listed and not allowing them to do so just increases operating costs unnecessarily: "(7) Tenant Supportive Services. The supportive services include those listed in subparagraphs (A) - (Z) of this paragraph. Tax Exempt Bond Developments must select a minimum of eight (8) points; Direct Loan Applications not layered with Housing Tax Credits must include enough services to meet a minimum of four (4) points....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. These services are intended to be provided by a qualified and reputable provider such that the experience and background of the provider demonstrates sufficient knowledge to be providing the service. Where applicable, the services must be documented by a written agreement with the provider."

Similarly, commenters (22), (42), (43), (54), (60), (69), (73) recommended the following modification to this section considering many smaller rural properties cannot financially support a separate staff person or a third party provider and in many rural communities such third party providers are not even available: "(7) Tenant Supportive Services. The supportive services include those listed in subparagraphs (A) - (Z) of this paragraph. Tax Exempt Bond Developments must select a minimum of eight (8) points; Direct Loan Applications not layered with Housing Tax Credits must include enough services to meet a minimum of four (4) points....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."

Commenter (44) expressed similar concerns as it relates to smaller developments and indicated where a dedicated service coordinator is not feasible, property management staff should be allowed to provide the services noted below (included herein for ease of reference but no changes to specific services were proposed by commenter), as reflected in their proposed modification to the introductory paragraph: "These services are intended to be provided by a qualified and reputable provider in the specified industry such that the experience and background of the provider demonstrates sufficient knowledge to be providing the service. In general, on-site leasing staff or property maintenance staff would not be considered a qualified provider, with the exception of services specified in subparagraphs C, D, L, P, Q, and Y in developments of less than 40 units. Where applicable, the services must be documented by a written agreement with the provider....(C) daily transportation such as bus passes, cab vouchers, specialized van on-site (4 points); (D) Food pantry consisting of an assortment of non-perishable food items and common household items (i.e. laundry detergent, toiletries, etc.) accessible to residents at least on a monthly basis or upon request by a tenant (1 point); (L) Notary Services during regular business hours (§2306.6710(b)(3)) (1 point); (P) monthly transportation to community/social events such as mall trips, community theatre, bowling, organized tours, etc. (1 point); (Q) twice monthly on-site social events (i.e. potluck dinners, game night, sing-a-longs, movie nights, birthday parties, etc.) (1 point); (Y) a resident-run community garden with annual soil preparation and mulch provided by the Owner and access to water (1 point); and"

Commenters (44), (64) expressed support for the new language that tenant services are intended to be provided by a qualified and reputable provider citing that this significantly enhances the quality of services to residents and it is an appropriate expectation that qualified personnel administer any supportive programs selected.

Commenter (44) requested clarification of use of the term "regular" in the following tenant service and further suggested the frequency be quarterly. "(A) partnership with local law enforcement to provide regular on-site social and interactive activities intended to foster relationships with residents (such activities could include playing sports, having a cook-out, swimming, card games, etc.) (3 points);"

Commenter (44) recommended the following modification to the food pantry service, stating that household items are not commonly available through nonprofit food banks and further suggested such item be replaced with fruits/vegetables. "(D) Food pantry consisting of an assortment of non-perishable food items and accessible to residents at least on a monthly basis or upon request by a tenant (1 point);"

Commenter (44) recommended the following modification to the income tax preparation tenant service: "(O) annual income tax preparation or IRS-certified VITA program (offered by an income tax prep service) (1 point);"

Commenter (44) requested the following tenant services be increased to 3 points because they are of utmost importance, are time consuming and expensive: "(R) specific case management services offered by a qualified Owner or Developer or through external, contracted parties for seniors, Persons with Disabilities or Supportive Housing (3 points); (X) a full-time resident services coordinator with a dedicated office space at the Development (3 points);

Commenters (42), (43), (54), (73) recommended the point value associated with scholastic tutoring be increased to at least 5 or 6 points because the requirements have increased, along with the cost to the Development to provide such a service and the enormous benefit gained by the tenants.

STAFF RESPONSE: In response to the suggestion by commenter (44) regarding the frequency of the partnership with local law enforcement, staff agrees that this tenant service needs clarification and further agrees that it should be provided quarterly and has made this change.

Staff believes, based on the proposed modification by commenter (44) regarding the food pantry, that this tenant service might need some clarification. The intent of providing a food pantry is that it be provided on-site and stocked with the non-perishable food items and common household items as indicated in the item. While it is possible that an owner can provide transportation (free of charge to a resident) to a nearby food bank to satisfy the requirement of this tenant service, and staff recognizes that such food banks may not provide common household items, the tenant must not be required to pay for items they receive at the food bank. Staff has clarified this item accordingly.

Staff agrees with the proposed modification by commenter (44) including the IRS-certified VITA program. It is staff's understanding that such service is a volunteer income tax assistance service whereby an individual is certified and qualified to provide such service. As such, staff has modified the item accordingly.

In response to the suggestions by commenter (44) relating to the increased point values relating to specific case management services and a full-time resident services coordinator, staff partially agrees with the suggestions. Specifically, as it relates to the specific case management services, staff agrees that it should be worth more than 1 point and recommends a modification to 2 points. Staff believes it is worth clarifying that, while a specific owner or developer may be qualified to provide this service, it could also be provided by a specific qualified provider and has modified the item accordingly. Regarding the suggested revision to the resident services coordinator item, staff does not agree with the proposed point value from 2 points to 3 points. Staff believes that this particular item is mutually beneficial considering the benefits received through the services. While the owner must market the property in this manner, in turn it helps make the property more appealing to prospective tenants and helps resident retention. Staff does not recommend any changes to the point value associated with resident services.

In response to commenters (42), (43), (54), (73) regarding the recommended increase in point value for scholastic tutoring, staff does not believe that, considering the minimum thresholds for applications to provide tenant services, such a high point value is appropriate because it could result in only a couple of services being provided to the tenants. Staff believes the provision of tenant services is important and of immense value to residents and that there should be multiple services available to the residents. Staff has proposed a slight modification to the frequency requirements of the scholastic tutoring indicating that instead of providing the tutoring Monday- Friday, that Monday- Thursday might be more indicative of the realistic use of the service.

In response to all other commenters regarding the language that requires the services be provided by a qualified and reputable provider in the specified industry, staff agrees that there are some services on the list that could possibly be provided by on-site property leasing staff (i.e. notary services and on-site social events) and others could possibly be provided by on-site maintenance staff (i.e. resident-run community garden, and transportation) rather than being out-sourced to a third party provider. Staff believes that some services do require greater levels of specialized skill or experience, such as providing case management or counseling and; therefore, staff would expect to see and require such services to be provided in a competent manner by someone with the certification or credentials otherwise necessary to provide the service. Staff believes that this intent and the flexibility that some of the services can be administered by on-site property staff is already captured in the language provided in this section and recommends no changes based on these comments.

In response to commenters (20), (53) proposing developments that are pooled together under a portfolio bond issuance be held to a different minimum threshold, staff believes this would constitute a substantive change that would necessitate additional public comment and therefore recommends no change.

BOARD RESPONSE: Accepted staff's recommendation.

INDEX OF COMMENTERS

(4) Senator Jose Menendez

(9) City of Harlingen

(13) Fort Worth Housing Solutions

(17) 5th Ward Community Redevelopment Corporation

(19) Texas Association of Community Development Corporations

(22) Texas Affiliation of Affordable Housing Providers

(23) Texas Coalition of Affordable Developers

(24) Low Income Housing Information Service

(25) Center for Supportive Housing

(28) Locke Lord Attorneys and Counselors

(33) Anderson Development and Construction, LLC

(34) BETCO Consulting, LLC

(39) DMA Companies

(40) Dominium

(41) Endeavor Real Estate Group

(42) Evolie Housing Partners

(43) Flores Residential, LLC

(44) Foundation Communities

(50) Hoke Development Services, LLC

(51) Investment Builders, Inc.

(52) ITEX Group

(54) Leslie Holleman and Associates, Inc.

(58) Mark-Dana Corporation

(59) Marque Real Estate Consultants

(60) Mears Development

(63) National Church Residences

(64) New Hope Housing

(65) OM Housing

(69) Purple Martin Real Estate

(72) Structure Development

(73) The Brownstone Group

(74) Alyssa Carpenter

(78) Coats Rose

STATUTORY AUTHORITY. The new section is adopted pursuant to Texas Government Code §2306.053, which authorizes the Department to adopt rules. Additionally, the new section is adopted pursuant to §2306.67022, which specifically authorizes the Department to adopt a qualified allocation plan.

The adopted rule affects no other code, article or statute.

§10.101.Site and Development Requirements and Restrictions.

(a) Site Requirements and Restrictions. The purpose of this section is to identify specific requirements and restrictions related to a Development Site seeking multifamily funding or assistance from the Department.

(1) Floodplain. New Construction or Reconstruction Developments located within a one-hundred (100) year floodplain as identified by the Federal Emergency Management Agency (FEMA) Flood Insurance Rate Maps must develop the site in full compliance with the National Flood Protection Act and all applicable federal and state statutory and regulatory requirements. The Applicant will have to use floodplain maps and comply with regulation as they exist at the time of commencement of construction. Even if not required by such provisions, the Site must be developed so that all finished ground floor elevations are at least one foot above the floodplain and parking and drive areas are no lower than six inches below the floodplain. If there are more stringent local requirements they must also be met. If no FEMA Flood Insurance Rate Maps are available for the proposed Development Site, flood zone documentation must be provided from the local government with jurisdiction identifying the one-hundred (100) year floodplain. Rehabilitation (excluding Reconstruction) Developments with existing and ongoing federal funding assistance from the U.S. Department of Housing and Urban Development (HUD) or U.S. Department of Agriculture (USDA) are exempt from this requirement. However, where existing and ongoing federal assistance is not applicable such Rehabilitation (excluding Reconstruction) Developments will be allowed in the one-hundred (100) year floodplain provided the local government has undertaken and can substantiate sufficient mitigation efforts and such documentation is submitted in the Application or the existing structures meet the requirements that are applicable for New Construction or Reconstruction Developments, as certified to by a Third Party engineer.

(2) Undesirable Site Features. Development Sites within the applicable distance of any of the undesirable features identified in subparagraphs (A) - (K) of this paragraph may be considered ineligible as determined by the Board, unless the Applicant provides information regarding mitigation of the applicable undesirable site feature(s). Rehabilitation (excluding Reconstruction) Developments with ongoing and existing federal assistance from HUD, USDA, or Veterans Affairs ("VA") may be granted an exemption by the Board. Such an exemption must be requested at the time of or prior to the filing of an Application. Historic Developments that would otherwise qualify under §11.9(e)(6) of this title (relating to the Qualified Allocation Plan) may be granted an exemption by the Board, and such exemption must be requested at the time of or prior to the filing of an Application. The distances are to be measured from the nearest boundary of the Development Site to the nearest boundary of the property or easement containing the undesirable feature, unless otherwise noted below. Where there is a local ordinance that regulates the proximity of such undesirable feature to a multifamily development that has smaller distances than the minimum distances noted below, then such smaller distances may be used and documentation such as a copy of the local ordinance identifying such distances relative to the Development Site must be included in the Application. In addition to these limitations, a Development Owner must ensure that the proposed Development Site and all construction thereon comply with all applicable state and federal requirements regarding separation for safety purposes. If Department staff identifies what it believes would constitute an undesirable site feature not listed in this paragraph or covered under subparagraph (K) of this paragraph, staff may request a determination from the Board as to whether such feature is acceptable or not. If the Board determines such feature is not acceptable and that, accordingly, the Site is ineligible, the Application shall be terminated and such determination of Site ineligibility and termination of the Application cannot be appealed.

(A) Development Sites located within 300 feet of junkyards. For purposes of this paragraph, a junkyard shall be defined as stated in Transportation Code, §396.001;

(B) Development Sites located within 300 feet of a solid waste or sanitary landfills;

(C) Development Sites located within 300 feet of a sexually-oriented business. For purposes of this paragraph, a sexually-oriented business shall be defined in Local Government Code, §243.002, or as zoned, licensed and regulated as such by the local municipality;

(D) Development Sites in which the buildings are located within 100 feet of the nearest line or structural element of any overhead high voltage transmission line, support structures for high voltage transmission lines, or other similar structures. This does not apply to local service electric lines and poles;

(E) Development Sites located within 500 feet of active railroad tracks, measured from the closest rail to the boundary of the Development Site, 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;

(F) Development Sites located within 500 feet of heavy industrial (i.e. facilities that require extensive capital investment in land and machinery, are not easily relocated and produce high levels of external noise such as manufacturing plants, fuel storage facilities (excluding gas stations) etc.);

(G) Development Sites located within 10 miles of a nuclear plant;

(H) Development Sites in which the buildings are located within the accident zones or clear zones of any airport;

(I) Development Sites that contain one or more pipelines, situated underground or aboveground, which carry highly volatile liquids. Development Sites located adjacent to a pipeline easement (for a pipeline carrying highly volatile liquids), the Application must include a plan for developing near the pipeline(s) and mitigation, if any, in accordance with a report conforming to the Pipelines and Informed Planning Alliance ("PIPA");

(J) Development Sites located within 2 miles of refineries capable of refining more than 100,000 barrels of oil daily; or

(K) Any other Site deemed unacceptable, which would include, without limitation, those with exposure to an environmental factor that may adversely affect the health and safety of the residents and which cannot be adequately mitigated.

(3) Undesirable Neighborhood Characteristics.

(A) If the Development Site has any of the characteristics described in subparagraph (B) of this paragraph, the Applicant must disclose the presence of such characteristics in the Application submitted to the Department. An Applicant may choose to disclose the presence of such characteristics at the time the pre-application (if applicable) is submitted to the Department. Requests for pre-determinations of Site eligibility prior to pre-application or Application submission will not be binding on full Applications submitted at a later date. For Tax-Exempt Bond Developments where the Department is the Issuer, the Applicant may submit the documentation described under subparagraphs (C) and (D) of this paragraph at pre-application or for Tax-Exempt Bond Developments utilizing a local issuer such documentation may be submitted with the request for a pre-determination and staff may perform an assessment of the Development Site to determine Site eligibility. The Applicant understands that any determination made by staff or the Board at that point in time regarding Site eligibility based on the documentation presented, is preliminary in nature. Should additional information related to any of the undesirable neighborhood characteristics become available while the full Application is under review, or the information by which the original determination was made changes in a way that could affect eligibility, then such information will be re-evaluated and presented to the Board. Should staff determine that the Development Site has any of the characteristics described in subparagraph (B) of this paragraph and such characteristics were not disclosed, the Application may be subject to termination. Termination due to non-disclosure may be appealed pursuant to §10.902 of this chapter (relating to Appeals Process (§2306.0321; §2306.6715)). The presence of any characteristics listed in subparagraph (B) of this paragraph will prompt staff to perform an assessment of the Development Site and neighborhood, which may include a site visit, and include, where applicable, a review as described in subparagraph (C) of this paragraph. The assessment of the Development Site and neighborhood will be presented to the Board with a recommendation with respect to the eligibility of the Development Site. Factors to be considered by the Board, despite the existence of the undesirable neighborhood characteristics are identified in subparagraph (E) of this paragraph. Preservation of affordable units alone does not present a compelling reason to support a conclusion of eligibility. Should the Board make a determination that a Development Site is ineligible, the termination of the Application resulting from such Board action is not subject to appeal.

(B) The undesirable neighborhood characteristics include those noted in clauses (i) - (iv) of this subparagraph and additional information as applicable to the undesirable neighborhood characteristic(s) disclosed as provided in subparagraphs (C) and (D) of this paragraph must be submitted in the Application. If an Application for a Development Site involves three or more undesirable neighborhood characteristics, in order to be found eligible it will be expected that, in addition to demonstrating satisfactory mitigation for each characteristic disclosed, the Development Site must be located within an area in which there is a concerted plan of revitalization already in place or that private sector economic forces, such as those referred to as gentrification are already underway and indicate a strong likelihood of a reasonably rapid transformation of the area to a more economically vibrant area. In order to be considered as an eligible Site despite the presence of such undesirable neighborhood characteristic, an Applicant must demonstrate actions being taken that would lead a reader to conclude that there is a high probability and reasonable expectation the undesirable characteristic will be sufficiently mitigated or significantly improved within a reasonable time, typically prior to placement in service, and that the undesirable characteristic demonstrates a positive trend and continued improvement. Conclusions for such reasonable expectation may need to be affirmed by an industry professional, as appropriate, and may be dependent upon the severity of the undesirable neighborhood characteristic disclosed.

(i) The Development Site is located within a census tract that has a poverty rate above 40 percent for individuals (or 55 percent for Developments in regions 11 and 13).

(ii) The Development Site is located in a census tract or within 1,000 feet of any census tract in an Urban Area and the rate of Part I violent crime is greater than 18 per 1,000 persons (annually) as reported on neighborhoodscout.com.

(iii) The Development Site is located within 1,000 feet (measured from nearest boundary of the Site to the nearest boundary of blighted structure) of multiple vacant structures that have fallen into such significant disrepair, overgrowth, and/or vandalism that they would commonly be regarded as blighted or abandoned.

(iv) The Development Site is located within the attendance zones of an elementary school, a middle school or a high school that does not have a Met Standard rating by the Texas Education Agency. Any school in the attendance zone that has not achieved Met Standard for three consecutive years and has failed by at least one point in the most recent year, unless there is a clear trend indicating imminent compliance, shall be unable to mitigate due to the potential for school closure as an administrative remedy pursuant to Chapter 39 of the Texas Education Code. In districts with district-wide enrollment or choice districts an Applicant shall use the rating of the closest elementary, middle and high school, respectively, which may possibly be attended by the tenants in determining whether or not disclosure is required. The applicable school rating will be the 2016 accountability rating assigned by the Texas Education Agency. School ratings will be determined by the school number, so that in the case where a new school is formed or named or consolidated with another school but is considered to have the same number that rating will be used. A school that has never been rated by the Texas Education Agency will use the district rating. If a school is configured to serve grades that do not align with the Texas Education Agency's conventions for defining elementary schools (typically grades K-5 or K-6), middle schools (typically grades 6-8 or 7-8) and high schools (typically grades 9-12), the school will be considered to have the lower of the ratings of the schools that would be combined to meet those conventions. In determining the ratings for all three levels of schools, ratings for all grades K-12 must be included, meaning that two or more schools' ratings may be combined. For example, in the case of an elementary school which serves grades K-4 and an intermediate school that serves grades 5-6, the elementary school rating will be the lower of those two schools' ratings. Also, in the case of a 9th grade center and a high school that serves grades 10-12, the high school rating will be considered the lower of those two schools' ratings. Sixth grade centers will be considered as part of the middle school rating. Development Sites subject to an Elderly Limitation is considered exempt and does not have to disclose the presence of this characteristic.

(C) Should any of the undesirable neighborhood characteristics described in subparagraph (B) of this paragraph exist, the Applicant must submit the Undesirable Neighborhood Characteristics Report that contains the information described in clauses (i) - (viii) of this subparagraph and subparagraph (D) of this paragraph as such information might be considered to pertain to the undesirable neighborhood characteristic(s) disclosed so that staff may conduct a further Development Site and neighborhood review.

(i) A determination regarding neighborhood boundaries, which will be based on the review of a combination of natural and manmade physical features (rivers, highways, etc.), apparent changes in land use, the Primary Market Area as defined in the Market Analysis, census tract or municipal boundaries, and information obtained from any Site visits;

(ii) An assessment of general land use in the neighborhood, including comment on the prevalence of residential uses;

(iii) An assessment concerning any of the features reflected in paragraph (2) of this subsection if they are present in the neighborhood, regardless of whether they are within the specified distances referenced in paragraph (2) of this subsection;

(iv) An assessment of the number of existing affordable rental units (generally includes rental properties subject to TDHCA, HUD, or USDA restrictions) in the Primary Market Area, including comment on concentration based on the size of the Primary Market Area;

(v) An assessment of the percentage of households residing in the census tract that have household incomes equal to or greater than the median household income for the MSA or county where the Development Site is located;

(vi) An assessment of the number of market rate multifamily units in the neighborhood and their current rents and levels of occupancy;

(vii) An assessment of school performance for each of the schools in the attendance zone containing the Development that did not achieve the Met Standard rating, for the previous two academic years (regardless of whether the school Met Standard in those years), that includes the TEA Accountability Rating Report, a discussion of performance indicators and what progress has been made over the prior year, and progress relating to the goals and objectives identified in the campus improvement plan in effect; and

(viii) Any additional information necessary to complete an assessment of the Development Site, as requested by staff.

(D) Information regarding mitigation of undesirable neighborhood characteristics should be relevant to the undesirable characteristics that are present in the neighborhood. Mitigation must include documentation of efforts underway at the time of Application and may include, but is not limited to, the measures described in clauses (i) - (iv) of this subparagraph. In addition to those measures described herein, documentation from the local municipality may also be submitted stating the Development is consistent with their obligation to affirmatively further fair housing.

(i) Evidence that the poverty rate within the census tract has decreased over the five-year period preceding the date of Application, or that the census tract is contiguous to a census tract with a poverty rate below 20% and there are no physical barriers between them such as highways or rivers which would be reasonably considered as separating or dividing the neighborhood containing the proposed Development from the low poverty area must be submitted. Other mitigation may include, but is not limited to, evidence of the availability of adult education and job training that will lead to full-time permanent employment for tenants, , evidence of gentrification in the area which may include contiguous census tracts that could conceivably be considered part of the neighborhood containing the proposed Development, and a clear and compelling reason that the Development should be located at the Site.

(ii) Evidence that crime rates are decreasing, based on violent crime data from the city's police department or county sheriff's department, for the police beat or patrol area within which the Development Site is located, based on the population of the police beat or patrol area that would yield a crime rate below the threshold indicated in this section. The instances of violent crimes within the police beat or patrol area that encompass the census tract, calculated based on the population of the census tract, may also be used. A map plotting all instances of violent crimes within a one-half mile radius of the Development Site may also be provided that it reflects that the crimes identified are not at a level that would warrant an ongoing concern. The data must include incidents reported during the entire 2015 and 2016 calendar year. Violent crimes reported through the date of Application submission may be requested by staff as part of the assessment performed under subparagraph (C) of this paragraph. A written statement from the local police department or local law enforcement agency, including a description of efforts by such enforcement agency addressing issues of crime and the results of their efforts may be provided, and depending on the data provided by the Applicant, such written statement may be required, as determined by staff. For Rehabilitation or Reconstruction Developments, to the extent that the high level of criminal activity is concentrated at the Development Site, documentation may be submitted to indicate such issue(s) could be remedied by the proposed Development. Evidence of such remediation should go beyond what would be considered a typical scope of work and should include a security plan, partnerships with external agencies, or other efforts to be implemented that would deter criminal activity. Information on whether such security features have been successful at any of the Applicant's existing properties should also be submitted, if applicable.

(iii) Evidence of mitigation efforts to address blight or abandonment may include new construction in the area already underway that evidences public and/or private investment. Acceptable mitigation to address extensive blight should include a plan whereby it is contemplated that a responsible party will use the property in a manner that complies with local ordinances. In instances where blight exists but may only include a few properties, mitigation efforts could include partnerships with local agencies to engage in community-wide clean-up efforts, or other efforts to address the overall condition of the neighborhood.

(iv) Evidence of mitigation for all of the schools in the attendance zone that have not achieved Met Standard will include documentation from a school official with oversight of the school in question that indicates current progress towards meeting the goals and performance objectives identified in the Campus Improvement Plan. For schools that have not achieved Met Standard for two consecutive years, a letter from the superintendent, member of the school board or a member of the transformation team that has direct experience, knowledge and oversight of the specific school must also be submitted. The letter should, at a minimum and to the extent applicable, identify the efforts that have been undertaken to increase student performance, decrease mobility rate, benchmarks for re-evaluation, increased parental involvement, plans for school expansion, and long-term trends that would point toward their achieving Met Standard by the time the Development is placed in service. The letter from such education professional should also speak to why they believe the staff tasked with carrying out the plan will be successful at making progress towards acceptable student performance considering that prior Campus Improvement Plans were unable to do so. Such assessment could include whether the team involved has employed similar strategies at prior schools and were successful. In addition to the aforementioned letter from the school official, information should also be provided that addresses the types of services and activities offered at the Development or external partnerships that will facilitate and augment classroom performance.

(E) In order for the Development Site to be found eligible by the Board, despite the existence of undesirable neighborhood characteristics, the Board must find that the use of Department funds at the Development Site must be consistent with achieving the goals in clauses (i) - (iii) of this subparagraph.

(i) Preservation of existing occupied affordable housing units to ensure they are safe and suitable or the new construction of high quality affordable housing units that are subject to federal rent or income restrictions; and

(ii) Factual determination that the undesirable characteristic(s) that has been disclosed are not of such a nature or severity that should render the Development Site ineligible based on the assessment and mitigation provided under subparagraphs (C) and (D) of this paragraph.; or

(iii) The Applicant has requested a waiver of the presence of undesirable neighborhood characteristics on the basis that the Development is necessary to enable the state, a participating jurisdiction, or an entitlement community to comply with its obligation to affirmatively further fair housing, a HUD approved Conciliation Agreement, or a final and non-appealable court order and such documentation is submitted with the disclosure.

(b) Development Requirements and Restrictions. The purpose of this section is to identify specific restrictions on a proposed Development submitted for multifamily funding by the Department.

(1) Ineligible Developments. A Development shall be ineligible if any of the criteria in subparagraphs (A) or (B) of this paragraph are deemed to apply.

(A) General Ineligibility Criteria.

(i) Developments such as hospitals, nursing homes, trailer parks, dormitories (or other buildings that will be predominantly occupied by students) or other facilities that are usually classified as transient housing (as provided in the §42(i)(3)(B)(iii) and (iv) of the Code);

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

(iii) A Housing Tax Credit Development that provides on-site continual or frequent nursing, medical, or psychiatric services. Refer to IRS Revenue Ruling 98-47 for clarification of assisted living;

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

(v) A Development seeking Housing Tax Credits that will not meet the general public use requirement under Treasury Regulation, §1.42-9 or a documented exception thereto; or

(vi) A Development utilizing a Direct Loan that is subject to the Housing and Community Development Act, §104(d) requirements and proposing Rehabilitation or Reconstruction, if the Applicant is not proposing at least the one-for-one replacement of the existing unit mix. Adding additional units would not violate this provision.

(B) Ineligibility of Elderly Developments.

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

(ii) Any 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; or

(iii) Any Elderly Development (including Elderly in a Rural Area) proposing more than 70 percent two-bedroom Units.

(2) Development Size Limitations. The minimum Development size is 16 Units. New Construction or Adaptive Reuse Developments in Rural Areas are limited to a maximum of 80 Units. Other Developments do not have a limitation as to the maximum number of Units.

(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. The minimum Rehabilitation amounts identified in subparagraphs (A) - (C) of this paragraph must be maintained through the issuance of IRS Forms 8609.

(A) For Housing Tax Credit Developments under the USDA Set-Aside the minimum Rehabilitation will involve at least $25,000 per Unit in Building Costs and Site Work;

(B) For Tax-Exempt Bond Developments, less than twenty (20) years old, based on the placed in service date, the minimum Rehabilitation will involve at least $20,000 per Unit in Building Costs and Site Work. If such Developments are greater than twenty (20) years old, based on the placed in service date, the minimum Rehabilitation will involve at least $30,000 per Unit in Building Costs and Site Work; or

(C) For all other Developments, the minimum Rehabilitation will involve at least $30,000 per Unit in Building Costs and Site Work.

(4) Mandatory Development Amenities. (§2306.187) New Construction, Reconstruction or Adaptive Reuse Units must include all of the amenities in subparagraphs (A) - (M) of this paragraph. Rehabilitation (excluding Reconstruction) Developments must provide the amenities in subparagraphs (D) - (M) of this paragraph unless stated otherwise. Supportive Housing Developments are not required to provide the amenities in subparagraph (B), (E), (F), (G), (I), or (M) of this paragraph; however, access must be provided to a comparable amenity in a common area. All amenities listed below must be at no charge to the tenants. Tenants must be provided written notice of the applicable required amenities for the Development.

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

(D) Screens on all operable windows;

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

(F) Energy-Star rated refrigerator;

(G) Oven/Range;

(H) Blinds or window coverings for all windows;

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

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

(K) Plumbing fixtures must meet performance standards of Texas Health and Safety Code, Chapter 372;

(L) All Units must have central heating and air-conditioning (Packaged Terminal Air Conditioners meet this requirement for SRO or Efficiency Units only or historic preservation where central would be cost prohibitive); and

(M) Adequate parking spaces consistent with local code, unless there is no local code, in which case the requirement would be one and a half (1.5) spaces per Unit for non- Elderly Developments and one (1) space per Unit for Elderly Developments. The minimum number of required spaces must be available to the tenants at no cost.

(5) Common Amenities.

(A) All Developments must include sufficient common amenities as described in subparagraph (C) of this paragraph to qualify for at least the minimum number of points required in accordance with clauses (i) - (vi) of this subparagraph. For Developments with 41 Units or more, at least two (2) of the required threshold points must come from subparagraph (C)(xxxi) of this paragraph.

(i) Developments with 16 to 40 Units must qualify for four (4) points;

(ii) Developments with 41 to 76 Units must qualify for seven (7) points;

(iii) Developments with 77 to 99 Units must qualify for ten (10) points;

(iv) Developments with 100 to 149 Units must qualify for fourteen (14) points;

(v) Developments with 150 to 199 Units must qualify for eighteen (18) points; or

(vi) Developments with 200 or more Units must qualify for twenty-two (22) points.

(B) These points are not associated with any selection criteria points. The amenities must be for the benefit of all tenants and made available throughout normal business hours and maintained throughout the Affordability Period. Tenants must be provided written notice of the elections made by the Development Owner. If fees in addition to rent are charged for amenities, then the amenity may not be included among those provided to satisfy the requirement. All amenities must meet accessibility standards and spaces for activities must be sized appropriately to serve the proposed Target Population. Applications for non-contiguous scattered site housing, excluding non-contiguous single family sites, will have the test applied based on the number of Units per individual site, which includes those amenities required under subparagraph (C)(xxxiii) of this paragraph. If scattered site with fewer than 41 Units per site, at a minimum at least some of the amenities required under subparagraph (C)(xxxiii) of this paragraph must be distributed proportionately across all sites. In the case of additional phases of a Development any amenities that are anticipated to be shared with the first phase development cannot be claimed for purposes of meeting this requirement for the second phase. The second phase must include enough points to meet this requirement that are provided on the Development Site. For example, if a swimming pool exists on the phase one property and it is anticipated that the second phase tenants will be allowed it use it, the swimming pool cannot be claimed for points for purposes of this requirement for the second phase Development. All amenities must be accessible and must be available to all units via an accessible route.

(C) The common amenities and respective point values are set out in clauses (i) - (xxxii) of this subparagraph. Some amenities may be restricted for Applicants proposing a specific Target Population. An Applicant can only count an amenity once; therefore combined functions (a library which is part of a community room) will only qualify for points under one category:

(i) Full perimeter fencing that includes parking areas and all amenities (excludes guest or general public parking areas); (2 points);

(ii) Controlled gate access (2 points);

(iii) Gazebo or covered pavilion w/sitting area (1 point);

(iv) Accessible walking/jogging path separate from a sidewalk and in addition to required accessible routes to Units or other amenities (1 point);

(v) Community laundry room with at least one washer and dryer for every 40 Units (3 points);

(vi) Barbecue grill and picnic table with at least one of each for every 50 Units (1 point);

(vii) Swimming pool (3 points);

(viii) Splash pad/water feature play area (1 point);

(ix) Furnished fitness center. Equipped with fitness equipment options with at least one option per every 40 Units or partial increment of 40 Units: stationary bicycle, elliptical trainer, treadmill, rowing machine, universal gym, multi-functional weight bench, sauna, stair-climber, or other similar equipment. Equipment shall be commercial use grade or quality. All Developments must have at least two equipment options but are not required to have more than five equipment options regardless of number of Units (2 points);

(x) Equipped and functioning business center or equipped computer learning center. Must be equipped with 1 computer for every 40 Units loaded with basic programs (maximum of 5 computers needed), 1 laser printer per computer lab and at least one scanner which may be integrated with printer (2 points);

(xi) Furnished Community room (2 points);

(xii) Library with an accessible sitting area (separate from the community room) (1 point);

(xiii) Enclosed community sun porch or covered community porch/patio (1 point);

(xiv) Service provider office in addition to leasing offices (1 point);

(xv) Regularly staffed service provider office in addition to leasing offices (3 points);

(xvi) Activity Room stocked with supplies (Arts and Crafts, etc.) (2 points);

(xvii) Health Screening Room (1 point);

(xviii) Secured Entry (applicable only if all Unit entries are within the building's interior) (1 point);

(xix) Horseshoe pit; putting green; shuffleboard court; pool table; or video game console(s) with a variety of games and a dedicated location accessible to all tenants to play such games (1 point);

(xx) Community Dining Room with full or warming kitchen furnished with adequate tables and seating (3 points);

(xxi) One Children's Playscape Equipped for 5 to 12 year olds, or one Tot Lot (2 points). Must be covered with a shade canopy or awning, intended to keep equipment cool, provide shade and ultraviolet protection. Can only select this item if clause (xxii) of this subparagraph is not selected; or

(xxii) Two Children's Playscapes Equipped for 5 to 12 year olds, two Tot Lots, or one of each (4 points). Must be covered with a shade canopy or awning, intended to keep equipment cool, provide shade and ultraviolet protection. Can only select this item if clause (xxi) of this subparagraph is not selected;

(xxiii) Sport Court (Tennis, Basketball or Volleyball) (2 points);

(xxiv) Furnished and staffed Children's Activity Center that must have age appropriate furnishings and equipment. Appropriate levels of staffing must be provided during after-school hours and during school vacations (3 points);

(xxv) Community Theater Room equipped with a 52 inch or larger screen or projection with surround sound equipment; DVD player; and theater seating (3 points);

(xxvi) Dog Park area that is fully enclosed and intended for tenant owned dogs to run off leash or a dog wash station with plumbing for hot and cold water connections and tub drainage (requires that the Development allow dogs) (1 point);

(xxvii) Common area Wi-Fi (1 point);

(xxviii) Twenty-four hour, seven days a week monitored camera/security system in each building (3 points);

(xxix) Bicycle parking within reasonable proximity to each residential building that allows for bicycles to be secured with lock (lock not required to be provided to tenant) and allows sufficient parking relative to the development size (1 point);

(xxx) Shaded rooftop or structural viewing deck of at least 500 square feet (2 points);

(xxxi) Porte-cochere (1 point); or

(xxxii) Green Building Features. Points under this item are intended to promote energy and water conservation, operational savings and sustainable building practices. Points may be selected from only one of four categories: Limited Green Amenities, Enterprise Green Communities, Leadership in Energy and Environmental Design (LEED), and ICC 700 National Green Building Standard. A Development may qualify for no more than four (4) points total under this clause.

(I) Limited Green Amenities (2 points). The items listed in subclauses (I) - (IV) of this clause constitute the minimum requirements for demonstrating green building of multifamily Developments. Six (6) of the twenty-two (22) items listed under items (-a-) - (-v-) of this subclause must be met in order to qualify for the maximum number of two (2) points under this subclause;

(-a-) a rain water harvesting/collection system and/or locally approved greywater collection system;

(-b-) newly installed native trees and plants that minimize irrigation requirements and are appropriate to the Development Site's soil and microclimate to allow for shading in the summer and heat gain in the winter. For Rehabilitation Developments this would be applicable to new landscaping planned as part of the scope of work;

(-c-) water-conserving fixtures that meet the EPA's WaterSense Label. Such fixtures must include low-flow or high efficiency toilets, bathroom lavatory faucets, and showerheads. Rehabilitation Developments may install WaterSense faucet aerators (minimum of 30% more efficient) instead of replacing the entire faucets;

(-d-) Energy-Star qualified water heaters or install those that are part of an overall Energy-Star efficient system;

(-e-) install individual or sub-metered utility meters for electric and water. Rehabilitation Developments may claim sub-meter only if not already sub-metered at the time of Application;

(-f-) healthy finish materials including the use of paints, stains, and sealants consistent with the Green Seal 11 standard or other applicable Green Seal standard;

(-g-) install daylight sensor, motion sensors or timers on all exterior lighting and install fixtures that include automatic switching on timers or photocell controls for all lighting not intended for 24-hour operation or required for security;

(-h-) recycling service (includes providing a storage location and service for pick-up) provided throughout the Compliance Period;

(-i-) construction waste management system provided by contractor that meets LEEDs minimum standards;

(-j-) for Rehabilitation Developments clothes dryers vented to the outside;

(-k-) for Developments with 41 units or less, at least 25% by cost FSC certified salvaged wood products;

(-l-) locate water fixtures within 20 feet of water heater;

(-m-) drip irrigate at non-turf areas;

(-n-) radiant barrier decking for New Construction Developments or other "cool" roofing materials (documentation must be submitted that substantiates the "cool" roofing materials used are durable and that there are energy savings associated with them);

(-o-) permanent shading devices for windows with solar orientation (does not include solar screens, but may include permanent awnings, fixed overhangs, etc.);

(-p-) Energy-Star certified insulation products (For Rehabilitation Developments, this would require installation in all places where insulation could be installed, regardless of whether the area is part of the scope of work);

(-q-) full cavity spray foam insulation in walls;

(-r-) Energy-Star rated windows;

(-s-) FloorScore certified vinyl flooring, Green Label certified carpet, or resilient flooring;

(-t-) sprinkler system with rain sensors;

(-u-) NAUF (No Added Urea Formaldehyde) cabinets;

(-v -) Solar screens on all windows (north-facing windows may exclude solar screens if north-facing operable windows provide insect screens).

(II) Enterprise Green Communities (4 points). The Development must incorporate all mandatory and optional items applicable to the construction type (i.e. New Construction, Rehabilitation, etc.) as provided in the most recent version of the Enterprise Green Communities Criteria found at http://www.greencommunitiesonline.org.

(III) LEED (4 points). The Development must incorporate, at a minimum, all of the applicable criteria necessary to obtain a LEED Certification, regardless of the rating level achieved (i.e., Certified, Silver, Gold or Platinum).

(IV) ICC 700 National Green Building Standard (4 points). The Development must incorporate, at a minimum, all of the applicable criteria necessary to obtain a NAHB Green Certification, regardless of the rating level achieved (i.e. Bronze, Silver, Gold, or Emerald).

(6) Unit Requirements.

(A) Unit Sizes. Developments proposing New Construction or Reconstruction will be required to meet the minimum sizes of Units as provided in clauses (i) - (v) of this subparagraph. These minimum requirements are not associated with any selection criteria. Developments proposing Rehabilitation (excluding Reconstruction) or Supportive Housing Developments will not be subject to the requirements of this subparagraph.

(i) five hundred (500) square feet for an Efficiency Unit;

(ii) six hundred (600) square feet for a one Bedroom Unit;

(iii) eight hundred (800) square feet for a two Bedroom Unit;

(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.

(B) Unit and Development Construction Features. Housing Tax Credit Applicants may select amenities for the score of an Application under this section, but must maintain the points associated with those amenities by maintaining the amenity selected or providing substitute amenities with equal or higher point values. Tax-Exempt Bond Developments must include enough amenities to meet a minimum of seven (7) points. Direct Loan Applications not layered with Housing Tax Credits must include enough amenities to meet a minimum of four (4) points. The amenity shall be for every Unit at no extra charge to the tenant. The points selected at Application and corresponding list of amenities will be required to be identified in the LURA, and the points selected at Application must be maintained throughout the Affordability Period. 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 three (3) points and Supportive Housing Developments will start with a base score of five (5) points.

(i) Covered entries (0.5 point);

(ii) Nine foot ceilings in living room and all bedrooms (at minimum) (0.5 point);

(iii) Microwave ovens (0.5 point);

(iv) Self-cleaning or continuous cleaning ovens (0.5 point);

(v) Refrigerator with icemaker (0.5 point);

(vi) Storage room or closet, of approximately 9 square feet or greater, separate from and in addition to bedroom, entryway or linen closets and which does not need to be in the Unit but must be on the property site (0.5 point);

(vii) Energy-Star qualified laundry equipment (washers and dryers) for each individual Unit; must be front loading washer and dryer in required accessible Units (2 points);

(viii) Covered patios or covered balconies (0.5 point);

(ix) Covered parking (including garages) of at least one covered space per Unit (1.5 points);

(x) 14 SEER HVAC (or greater) or for Rehabilitation (excluding Reconstruction) where such systems are not being replaced as part of the scope of work, a radiant barrier in the attic is provided (1.5 points);

(xi) High Speed Internet service to all Units (can be wired or wireless; required equipment for either must be provided) (1 point);

(xii) Built-in (recessed into the wall) computer nook (0.5 point);

(xiii) Built-in (recessed into the wall) shelving unit (0.5 point);

(xiv) Recessed or track LED lighting in kitchen and living areas (1 point);

(xv) Thirty (30) year shingle or metal roofing (excludes Thermoplastic Polyolefin (TPO) roofing material) (0.5 point);

(xvi) Greater than 30 percent stucco or masonry (includes stone, cultured stone, and brick but excludes cementitious and metal siding) on all building exteriors; the percentage calculation may exclude exterior glass entirely (2 points);

(xvii) Breakfast Bar (a space, generally between the kitchen and dining area, that includes seating) (0.5 points); and

(xviii) Walk-in closet in master bedroom (0.5 points).

(7) Tenant Supportive Services. The supportive services include those listed in subparagraphs (A) - (Z) of this paragraph. Tax Exempt Bond Developments must select a minimum of eight (8) points; Direct Loan Applications not layered with Housing Tax Credits must include enough services to meet a minimum of four (4) points. The points selected and complete list of supportive services will be included in the LURA and the timeframe by which services are offered must be in accordance with §10.619 of this chapter (relating to Monitoring for Social Services) and maintained throughout the Affordability Period. The Owner may change, from time to time, the services offered; however, the overall points as selected at Application must remain the same. The services provided should be those that will directly benefit the Target Population of the Development. Tenants must be provided written notice of the elections made by the Development Owner. No fees may be charged to the tenants for any of the services, there must be adequate space for the intended services and services offered should be accessible to all (e.g. exercises classes must be offered in a manner that would enable a person with a disability to participate). 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. These services are intended to be provided by a qualified and reputable provider in the specified industry such that the experience and background of the provider demonstrates sufficient knowledge to be providing the service. In general, on-site leasing staff or property maintenance staff would not be considered a qualified provider. Where applicable, the services must be documented by a written agreement with the provider.

(A) partnership with local law enforcement to provide quarterly on-site social and interactive activities intended to foster relationships with residents (such activities could include playing sports, having a cook-out, swimming, card games, etc.) (3 points);

(B) weekday character building program (shall include at least on a monthly basis a curriculum based character building presentation on relevant topics, for example teen dating violence, drug prevention, bullying, teambuilding, internet/social media dangers, stranger danger, etc.) (2 points);

(C) daily transportation such as bus passes, cab vouchers, specialized van on-site (4 points);

(D) Food pantry consisting of an assortment of non-perishable food items and common household items (i.e. laundry detergent, toiletries, etc.) accessible to residents at least on a monthly basis or upon request by a tenant. While it is possible that transportation may be provided to a local food bank to meet the requirement of this tenant service, the tenant must not be required to pay for the items they receive at the food bank (1 point);

(E) GED preparation classes (shall include an instructor providing on-site coursework and exam) (2 points);

(F) English as a second language classes (shall include an instructor providing on-site coursework and exam) (1 point);

(G) quarterly financial planning courses (i.e. homebuyer education, credit counseling, investing advice, retirement plans, etc.). Courses must be offered through an on-site instructor; a CD or online course is not acceptable (1 point);

(H) annual health fair provided by a health care professional(1 point);

(I) quarterly health and nutritional courses (1 point);

(J) organized youth programs or other recreational activities such as games, movies or crafts offered by the Development (1 point);

(K) scholastic tutoring (shall include daily (Monday- Thursday) homework help or other focus on academics) (3 points);

(L) Notary Services during regular business hours (§2306.6710(b)(3)) (1 point);

(M) weekly exercise classes (offered at times when most residents would be likely to attend) (2 points);

(N) twice monthly arts, crafts, and other recreational activities (e.g. Book Clubs and creative writing classes) (2 points);

(O) annual income tax preparation (offered by an income tax prep service) or IRS-certified VITA (Volunteer Income Tax Assistance) program (offered by a qualified individual) (1 point);

(P) monthly transportation to community/social events such as mall trips, community theatre, bowling, organized tours, etc. (1 point);

(Q) twice monthly on-site social events (i.e. potluck dinners, game night, sing-a-longs, movie nights, birthday parties, etc.) (1 point);

(R) specific case management services offered by a qualified Owner or Developer, qualified provider or through external, contracted parties for seniors, Persons with Disabilities or Supportive Housing (2 points);

(S) weekly home chore services (such as valet trash removal, assistance with recycling, furniture movement, etc., and quarterly preventative maintenance including light bulb replacement) for Elderly Developments or Developments where the service is provided for Persons with Disabilities and documentation to that effect can be provided for monitoring purposes (2 points);

(T) any of the programs described under Title IV-A of the Social Security Act (42 U.S.C. §§601, et seq.) which enables children to be cared for in their homes or the homes of relatives; ends the dependence of needy families on government benefits by promoting job preparation, work and marriage; prevents and reduces the incidence of unplanned pregnancies; and encourages the formation and maintenance of two-parent families (1 point);

(U) contracted career training and placement partnerships with local worksource offices, culinary programs, or vocational counseling services; also resident training programs that train and hire residents for job opportunities inside the development in areas like leasing, tenant services, maintenance, landscaping, or food and beverage operation (2 points);

(V) external partnerships for provision of weekly substance abuse meetings at the Development Site (2 points);

(W) contracted onsite occupational or physical therapy services for Elderly Developments or Developments where the service is provided for Persons with Disabilities and documentation to that effect can be provided for monitoring purposes (2 points);

(X) a full-time resident services coordinator with a dedicated office space at the Development (2 points);

(Y) a resident-run community garden with annual soil preparation and mulch provided by the Owner and access to water (1 point); and

(Z) Development Sites located within a one mile radius of one of the following can also qualify for one (1) point provided they also have a referral process in place and provide transportation to and from the facility:

(i) Facility for treatment of alcohol and/or drug dependency;

(ii) Facility for treatment of PTSD and other significant psychiatric or psychological conditions;

(iii) Facility providing therapeutic and/or rehabilitative services relating to mobility, sight, speech, cognitive, or hearing impairments; or

(iv) Facility providing medical and/or psychological and/or psychiatric assistance for persons of limited financial means.

(8) Development Accessibility Requirements. All Developments must meet all specifications and accessibility requirements as identified in subparagraphs (A) - (C) of this paragraph and any other applicable state or federal rules and requirements. The accessibility requirements are further identified in the Certification of Development Owner as provided in the Application.

(A) The Development shall comply with the accessibility requirements under Federal law and as further defined in Chapter 1, Subchapter B of this title (relating to Accessibility Requirements). (§§2306.6722; 2306.6730)

(B) New Construction (excluding New Construction of non-residential buildings) Developments where some Units are normally exempt from Fair Housing accessibility requirements, a minimum of 20% of each Unit Type (i.e., one bedroom one bath, two bedroom one bath, two bedroom two bath, three bedroom two bath) of otherwise exempt units (i.e. single family residence, duplexes, triplexes, and townhomes) 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.

(C) The Development Owner 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, and the Texas Accessibility Standards. (§2306.257; §2306.6705(7))

(D) All Applications proposing Rehabilitation (including Reconstruction) will be treated as Substantial Alteration, in accordance with Chapter 1, Subchapter B of this title.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606437

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-2973


SUBCHAPTER C. APPLICATION SUBMISSION REQUIREMENTS, INELIGIBILITY CRITERIA, BOARD DECISIONS AND WAIVER OF RULES OR PRE-CLEARANCE FOR APPLICATIONS

10 TAC §§10.201 - 10.207

Preamble, Reasoned Response, and Repealed Rule

The Texas Department of Housing and Community Affairs (the "Department") adopts the repeal of 10 TAC Chapter 10, Uniform Multifamily Rules Subchapter C §§10.201 - 10.207, concerning Application Submission Requirements, Ineligibility Criteria, Board Decisions and Waiver of Rules, without changes to the proposed text as published in the September 23, 2016, issue of the Texas Register (41 TexReg 7317). The rules will not be republished.

REASONED JUSTIFICATION. The Department finds that the purpose of the repeal is to replace the sections with a new rule that encompasses all funding made available to multifamily programs. Accordingly, the repeal provides for consistency and minimizes repetition among the programs.

The Department accepted public comments between September 23, 2016 and October 14, 2016. Comments regarding the repeal were accepted in writing and by fax. No comments were received concerning the repeal.

The Board approved the final order adopting the repeal on November 10, 2016.

STATUTORY AUTHORITY. The repeal is adopted pursuant to Texas Government Code §2306.053, which authorizes the Department to adopt rules. Additionally, the repeal is adopted pursuant to Texas Government Code §2306.67022, which specifically authorizes the Department to adopt a qualified allocation plan.

The adopted repeal affects no other code, article or statute.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606432

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-2973


10 TAC §§10.201 - 10.207

The Texas Department of Housing and Community Affairs (the "Department") adopts new 10 TAC, Chapter 10 Uniform Multifamily Rules, Subchapter C, concerning Application Submission Requirements, Ineligibility Criteria, Board Decisions and Waiver of Rules for Applications. Sections 10.201 - 10.204 are adopted with changes to the text as published in the September 23, 2016, issue of the Texas Register (41 TexReg 7318). Sections 10.205 - 10.207 are adopted without changes and will not be republished.

REASONED JUSTIFICATION. The Department finds that the adoption of the rule will result in a more consistent approach to governing multifamily activity and to the awarding of funding or assistance through the Department and to minimize repetition. The comments and responses include both administrative clarifications and corrections to the Uniform Multifamily Rule based on the comments received. After each comment title, numbers are shown in parentheses. These numbers refer to the person or entity that made the comment as reflected at the end of the reasoned response. If comment resulted in recommended language changes to the Draft Uniform Multifamily Rule as presented to the Board in September, such changes are indicated.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS.

Public comments were accepted through October 14, 2016, with comments received from (17) Fifth Ward Community Redevelopment Corporation, (19) Texas Association of Community Development Corporations, (20) Rural Rental Housing Association of Texas, Inc., (22) Texas Affiliation of Affordable Housing Providers, (23) Texas Coalition of Affordable Developers, (25) Center for Supportive Housing, (27) Atlantic Housing Foundation, (28) Locke Lord Attorneys and Counselors, (33) Anderson Development and Construction, LLC, (34) BETCO Consulting, LLC, (38) Dharma Development, LLC, (40) Dominium, (42) Evolie Housing Partners, (43) Flores Residential, LLC, (44) Foundation Communities, (48) Hamilton Valley Management, Inc., (50) Hoke Development Services, LLC, (54) Leslie Holleman and Associates, Inc., (58) Mark-Dana Corporation, (59) Marque Real Estate Consultants, (60) Mears Development, (62) Miller Valentine Group, (63) National Church Residences, (66) O-SDA Industries, (69) Purple Martin Real Estate, (72) Structure Development, (73) The Brownstone Group.

1. Subchapter C - General Comment (28)

COMMENT SUMMARY: Commenter (28) noted that throughout the Rules, the Department has various ways of referring to Persons involved with an Application - i.e. Applicant, Affiliate, Principal and Development Team and further stated that sometimes their usage creates unintended burdens or infeasibility for Applicants where the goal should be uniformity and consistency. Commenter (28) asserted that the organizational charts need to be the hub of the wheel hosting the various spokes (ineligibility, previous participation, etc.). Commenter (28) further explained the certain kinds of organizations such as non-profit organizations, governmental bodies and public corporations require different treatment because control and governance of these entities is so different than private, closely-held organizations. Non-profits, governmental bodies and public corporations are not generally run by those who own the entity or serve on the board but rather they are operated on a day-to-day basis by a few officers and/or employees. According to commenter (28), there have been instances where board members of non-profits, governmental bodies and public companies are uncomfortable with signing certifications required in the application, with some even resigning their role on the board, because they go beyond an individual's personal knowledge. Commenter (28) believed more improvement is needed with respect to these certifications and with the usage of various Persons involved with an Application.

STAFF RESPONSE: In response to the concerns raised by commenter (28) staff believes the most appropriate place to address the concern is within the definition of control. Staff has proposed a modification to that definition as previously mentioned herein. Staff recommends no change to Subchapter C in response to this general comment.

BOARD RESPONSE: Accepted staff's recommendation.

2. §10.201 - Subchapter C - Procedural Requirements for Application Submission (33), (42), (54)

COMMENT SUMMARY: Commenter (33) stated the new language in this section that restricts only one application for assistance relating to a specific development site across all programs does not allow for maximizing the likelihood of successful development on proposed sites. Commenter (33) expressed that such language appears to be directly targeting the successful application for a Direct Loan while a non-competitive 9% application was pending. Commenter (33) requested there be no restriction on applying for different types of funding.

Commenter (42), (54) stated the added language requiring that only one applicant may have an application or applications for assistance related to a specific development site at any given time should revert to its previous construct which read that only one application may be submitted for a development site in an application round. Commenters (42), (54) contended that because site control is a threshold item, it would not be possible for multiple applicants to submit applications for the same development site.

Commenter (42), (54) indicated the language added to this section that allows errors in the calculation of applicable fees to be cured via the administrative deficiency process is a slippery slope considering the highly competitive environment and requested the language be removed. According to commenter (42), (54) the application fee due is not a difficult calculation to perform and allowing such corrections goes against prior years of precedent where the Department terminated applications for unfortunate mistakes. Commenters (42), (54) asserted that miscalculation of a fee is no different from submitting the wrong electronic application file or third party report or exceeding the $3 million cap when, in such instances, applications were terminated. Commenters (42), (54) maintained that considering the highly competitive environment the added language should be removed in order to maintain the integrity of the rule.

Commenter (58) requested the added language that does not allow the cure period for correcting an error in the calculation of the application fee to be extended be removed and indicated it is better to address fees on a case-by-case basis rather than provide a complete prohibition.

STAFF RESPONSE: In response to comments regarding the added language that restricts only one application for assistance relating to a specific development site across all programs, staff recommends the sentence be removed and has reverted to the previous language indicating that only one application may be submitted for a development site in an application round.

In response to comments relating to the ability to cure an error in the calculation of fees staff believes that circumstances surrounding such error are somewhat different from those situations explained by the commenter. In this instance, an application fee was submitted with the application and staff in its review of the application may determine the fee was calculated incorrectly and staff believes the more appropriate way to address such error is through an administrative deficiency.

BOARD RESPONSE: Accepted staff's recommendation.

3. §10.201(3)(A) - Subchapter C - Certification of Tax Exempt Bond Applications with New Docket Numbers. (40)

COMMENT SUMMARY: In an effort to avoid an administrative burden to staff and the developer for something that is truly not material, commenter (40) suggested the following modification to this section: "(A) The Application must remain unchanged, which 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 (if TDHCA is bond issuer) or TBRB priority status including the effect on the inclusive capture rate. 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 or such changes are not material."

STAFF RESPONSE: Staff has not found this process to be administratively burdensome and believes that the proposed language by the commenter could present additional issues as it relates to defining what constitutes material changes. Staff recommends no change based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

4. §10.201(5) - Subchapter C - Evaluation Process (23), (28), (33)

COMMENT SUMMARY: Commenters (23), (33) asserted the posting of an online scoring log should not be what triggers timeframes as important as appeal rights and further asserted that formal scoring notices from the Department should not be considered a "courtesy." Commenter (23) stated that considering the problems associated with posting the log in the 2015 application round; it is not sound administrative policy to have such an important item be left to such a passive and problematic process. Commenter (23) suggested the following modification to this section on the basis that scoring notices are an important part of the administrative process and should be mandatory and not something that staff may provide: "(5) Evaluation Process. Priority Applications, which shall include those Applications believed likely to be competitive, will undergo a program review for compliance with submission requirements and selection criteria, as applicable. In general, Application reviews by the Department shall be prioritized based upon the likelihood that an Application will be competitive for an award based upon the set-aside, self score, received date, or other ranking factors. Thus, non-competitive or lower scoring Applications may never be reviewed. The Director of Multifamily Finance will identify those Applications that will receive a full program review based upon a reasonable assessment of each Application's priority, but no Application with a competitive ranking shall be skipped or otherwise overlooked. This initial assessment may be a high level assessment, not a full assessment. Applications deemed to be priority Applications may change from time to time...."

Commenter (28) similarly expressed concern regarding the proposed change for staff to not issue scoring notices and cited the fact that in 2016 only 6 scoring logs were posted compared to 15 from the prior year. Commenter (28) requested that if scoring notices will not be issued and applicants are expected to assess their score based on a scoring log, then updated scoring logs need to be posted more frequently throughout the application cycle.

STAFF RESPONSE: In response to these comments, staff notes that an applicant's appeal rights pursuant to statute are triggered by the publication of the application log. A failure by the Department to provide a scoring notice cannot overcome this statutory requirement. Staff will endeavor to post more frequent application logs throughout the application cycle. Staff recommends no change based on these comments.

BOARD RESPONSE: Accepted staff's recommendation.

5. §10.201(6)(B) - Subchapter C - General Review Priority (33)

COMMENT SUMMARY: Commenter (33) asserted that disallowing approval of 4% HTC applications during May, June or July is not good practice and shuts down many opportunities for development and economic growth and further contends that the Department should maintain an open application calendar since the funding source associated with these applications is under-subscribed.

STAFF RESPONSE: It was not staff's intent that the added language in this section would prohibit processing of 4% applications during the months of May, June or July. The language in this section states that in general these applications will not be prioritized over 9% applications and also states that staff will prioritize applications that have statutory or other more restrictive deadlines. Staff has always factored in the needs and timelines associated with 4% applications and has worked those applications into the review process. However, considering staff constraints in finalizing the review and underwriting analysis associated with the volume of housing tax credit applications, staff must prioritize applications in a manner that fulfills its obligations under Chapter 2306 of the Texas Government Code. Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

6. §10.201(7)(B) - Subchapter C - Administrative Deficiencies for Competitive Applications (19), (22), (23), (25), (28), (33), (34), (42), (43), (44), (54), (58), (60), (62), (63), (69), (72), (73)

COMMENT SUMMARY: Commenters (19), (22), (23), (25), (28), (33), (34), (42), (43), (44), (54), (58), (60), (62), (63), (69), (72), (73) recommended returning to a 5-day deficiency timeframe. Commenters (25), (63) recommended that point deductions not be imposed for late responses since some items that need to come from a third party could require additional time, especially if the third party is out of the office.

Commenter (28) indicated an inconsistency in the rules regarding the timeframe to respond to a deficiency. Specifically, this section indicates that such deficiencies must be satisfied within 3 business days; however, §10.4(4) states the deadline is five business days.

STAFF RESPONSE: In response to the commenters, staff has modified this section to reflect the 2016 language that requires a 5-day deficiency timeframe without incurring point deductions. Staff does not agree with commenters (25), (63) regarding removal of the point deductions and believes that such deductions are necessary in order to ensure the timeliness of responses and staff's ability to complete its review. Should information contained in a deficiency notice be required from a third party, there is language in the rule that allows for an extension of such item, should it be necessary.

BOARD RESPONSE: Accepted staff's recommendation.

7. §10.202 - Subchapter C - Ineligible Applicants (28)

COMMENT SUMMARY: Commenter (28) expressed concern regarding the new language in this section that permits a third party to question an applicant's eligibility. Specifically, commenter (28) requested staff reinstitute the language that allows the applicant to address the matter. While commenter (28) indicated such process may be inherent in the language "staff will make enquiry as it deems appropriate", the removal of the language giving the applicant the ability to "explain how they believe they or their application is eligible" is concerning.

STAFF RESPONSE: To address the concerns raised by commenter (28) staff proposes the following modification for clarification: "The purpose of this section is to identify those situations in which an Application or Applicant may be considered ineligible for Department funding and subsequently terminated. Such matters may be brought to the attention of staff by anyone, including members of the general public. If such ineligibility is raised by non-staff members it must be made in writing to the Executive Director and the Applicant and must cite the specific ineligible criteria under paragraph (1) of this section and provide factual evidence to support the claim. Any unsupported claim or claim determined to be untrue may be subject to all remedies available to the Department or Applicant. Staff will make enquiry as it deems appropriate and may send a notice to the Applicant and provide them the opportunity to explain how they believe they or their Application is eligible. Staff will present the matter to the Board, accompanied by staff's recommendation."

BOARD RESPONSE: Accepted staff's recommendation.

8. §10.202 - Subchapter C - Ineligible Applicants (40)

COMMENT SUMMARY: As it relates to claims that may be made by others regarding the eligibility of an application or applicant, commenter (40) recommended there be a fee required by such challenger to help dissuade bogus or disingenuous challenges. Commenter (40) suggested a fee of $500 stating that it would help offset the time staff spends on the challenge and would also dissuade challenges without merit.

STAFF RESPONSE: Staff believes the inclusion of such a fee is a sufficiently substantive change from what was proposed that it could not be accomplished without re-publication for public comment. Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

9. §10.202(1) - Subchapter C - Ineligible Applicants (28)

COMMENT SUMMARY: Commenter (28) stated the opening paragraph of this section applies the standard therein to any party on the Development Team, which is defined broadly to include any Person with any role in the Development, which would include not only the developer and guarantor, but also minor players like lawyers, architects, or even construction subcontractor. All of these parties would be held to this standard, and according to commenter (28) it is unconscionable to ask an applicant, developer, or guarantor to make representations and certifications as to every single member of the development team. Commenter (28) recommended the Department only apply these ineligibility standards to those persons reflected on the organizational chart for the applicant, developer and guarantor.

STAFF RESPONSE: Staff does not object to the changes proposed by commenter (28) and recommends this section be modified to reflect the following: "(1) Applicants. An Applicant shall be considered ineligible if any of the criteria in subparagraphs (A) - (M) of this paragraph apply to those identified on the organizational chart for the Applicant, Developer and Guarantor. An Applicant is ineligible if the Applicant, Developer, or Guarantor:.."

BOARD RESPONSE: Accepted staff's recommendation.

10. §10.202(1)(K) - Subchapter C - Ineligible Applicants (33)

COMMENT SUMMARY: Commenter (33) indicated that removal of the term "knowingly" in this section does not allow for due process for the burden placed on an applicant for information submitted, as the developer does not fabricate the majority of the documentation required in the application. Commenter (33) requested "knowingly" be added back to this section.

STAFF RESPONSE: Staff disagrees with commenter (33) in that there could be documentation contained in the application that could be falsified by the applicant. Staff notes that the mere existence of falsified documentation, whether knowingly or not can disqualify an application; however, this section allows for the applicant to have an opportunity to respond if such a claim is made. Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

11. §10.202(1)(M) - Subchapter C - Ineligible Applicants (28)

COMMENT SUMMARY: Commenter (28) requested an explanation regarding why the considerations for eligibility that were previously listed in clauses (i) through (v) were removed because it leaves room for question as to what the staff will consider when deciding whether an applicant is eligible to proceed. Commenter (28) stated that with the increase in ownership changes for LIHTC properties, applicants may like to know up front whether past activities will cause them to be ineligible. Commenter (28) suggested that such disclosure be made during the pre-application process for 9% applications, to be addressed before final application so that an applicant can decide whether it wants to proceed; and similarly for 4% Applications that a pre-determination be allowed to be submitted prior to the submission of a full application.

STAFF RESPONSE: Staff agrees with commenter (28) that the considerations listed in this section should be reinstated to the proposed rule; however, believes that such determination should be up to the Board and not the Executive Director. Staff recommends the following modifications to this section: "(M) fails to disclose, in the Application, any Principal or any entity or Person in the Development ownership structure who was or is involved as a Principal in any other affordable housing transaction, that has terminated voluntarily or involuntarily within the past ten (10) years or plans to or is negotiating to terminate their relationship with any other affordable housing development. Failure to disclose is grounds for termination. The disclosure must identify the person or persons and development involved, the identity of each other development, and contact information for the other Principals of each such development, a narrative description of the facts and circumstances of the termination or proposed termination, and any appropriate supporting documents. An Application may be referred to the Board for termination based upon factors in the disclosure. Staff shall present a determination to the Board as to a person's fitness to be involved as a principal with respect to an Application using the factors described in clauses (i) - (v) of this subparagraph as considerations: (i) The amount of resources in a development and the amount of the benefit received from the development; (ii) the legal and practical ability to address issues that may have precipitated the termination or proposed termination of the relationship; (iii) the role of the person in causing or materially contributing to any problems with the success of the development; (iv) the person's compliance history, including compliance history on other developments; and (v) any other facts or circumstances that have a material bearing on the question of the person's ability to be a compliant and effective participant in their proposed role as described in the Application."

BOARD RESPONSE: Accepted staff's recommendation.

12. §10.202(1)(N) - Subchapter C - Ineligible Applicants (28), (58), (62)

COMMENT SUMMARY: Commenter (28) expressed an objection to the deletion of this provision on the basis that while the remedies available in this provision may not have been utilized by the Department in recent years, it is still an important statement to have in the rules because it promotes a fair and professional culture of competition. Commenters (58), (62) expressed similar concerns stating the 2016 language be reinstated on the basis that applicants that actively work to create opposition to competing applications or disseminate misinformation should be considered ineligible.

STAFF RESPONSE: Staff believes the language contained in this section was problematic in that the Department would have been in the position of having to evaluate whether the opposition being created was based in substantive and legitimate concerns, and ultimately, whether such action was a violation of fair housing laws. While staff agrees on the premise that applicants should not work to create opposition on competing applications, absent any other method by which such opposition could be evaluated staff believed it was more appropriate to remove the item from the rule. Staff recommends no change based on these comments.

BOARD RESPONSE: Accepted staff's recommendation.

13. §10.203 - Subchapter C - Public Notifications (22), (33), (38), (42), (43), (54), (58), (60), (66), (69), (73)

COMMENT SUMMARY: Commenters (22), (33), (38), (42), (43), (54), (58), (60), (66), (69), (73) requested the new 14-day requirement by when newly elected or appointed officials would need to be notified be removed on the basis that it is very difficult to keep track of such changes, especially with respect to school districts and school superintendents. Commenters (22), (38), (42), (43), (54), (58), (60), (66), (69), (73) indicated that under prior rules applicants have until the date of full application to notify newly elected/appointed officials and requested the language be modified to reflect such requirement. Commenter (33) requested notice be required within 30 days of when the applicant becomes aware of the newly elected (or appointed) official.

Commenter (66) indicated that townhomes were removed as a development type; however, because this development type is an acceptable community in the application, removing it as a type seems inconsistent and recommended townhomes be re-instated.

STAFF RESPONSE: In response to the commenter (33), staff believes it would be difficult to verify, if ever questioned, when the applicant actually became aware of a change in an elected/appointed official. Staff agrees with the recommendation by the other commenters that would require the newly elected/appointed official be notified no later than the date the full application is submitted to the Department and has made the change accordingly.

In response to commenter (66), townhome-style developments are still allowed as a development type. Staff did not believe it was necessary to specify this development type over others and; therefore, removed any reference to development type.

BOARD RESPONSE: Accepted staff's recommendation.

14. §10.204(7) - Subchapter C - Financing Requirements (20), (42), (48), (54)

COMMENT SUMMARY: Commenters (20), (48) recommended the following modification to this financing requirement, stating the language as proposed places an unnecessary burden on both the applicant and USDA staff, and further stated that Rural Development will not likely process the application until it's known the project will receive an award: "(iii) For Developments proposing to refinance an existing USDA Section 515 loan, a letter from the USDA confirming that it has been provided with a complete loan transfer application within 60 days of tax credit award."

Commenters (42), (54) questioned why language has been added that requires the financing narrative to include dates and deadlines for application, approvals and closings, etc. associated with the commitments for all funding sources. Commenters (42), (54) stated that such information is merely an educated guess since it is often dependent upon other factors, including whether an allocation is even made, changes in market conditions, changes to proposed debt and equity providers, etc. and further requested the language be removed.

STAFF RESPONSE: In response to commenters (20), (48) regarding confirmation of the complete loan transfer application, staff recognizes that such application would only be completed after an award of housing tax credits. Staff proposes to modify this item as reflected in the following based on the comment and discussions with USDA as far as what would be more a more appropriate indicator of progress with the USDA process: "(iii) For Developments proposing to refinance an existing USDA Section 515 loan, a letter from the USDA confirming that it has been provided with the Preliminary Assessment Tool."

In response to commenters (42), (54) staff recognizes that financing components associated with 9% applications are somewhat fluid and that dates and deadlines associated with approvals, closings, etc are subject to change as the financing terms solidify; however, it is still an important piece of information that better helps staff understand the transaction. Moreover, because staff expects the financing components associated with 4% applications and Direct Loan applications to be more firm, including such information on the financing narrative is justified. Staff recommends no change based on these comments.

BOARD RESPONSE: Accepted staff's recommendation.

15. §10.204(9) - Subchapter C - Architectural Drawings (66)

COMMENT SUMMARY: Commenter (66) stated the requirement to describe flood mitigation that was added to be included on the site plan is typically handled by the civil engineer and; therefore, recommended that such information be moved to the feasibility report rather than on the face of a site plan.

Commenter (66) expressed concern over the new requirement that the site plan identify accessible routes. Specifically, commenter (66) stated that accessible routes are subject to very nominal slopes and grades, 5%, 8% with handrails and 2% cross slopes and those generally cannot be determined until full topography is known and grading plans are complete. Commenter (66) indicated that at the time of application not enough information or work has been determined to make informed decisions regarding accessible routes and further recommended that a statement by the architect or engineer that the site will comply with the requirement to have an accessible route would be more appropriate than requesting that they be identified on the site plan.

STAFF RESPONSE: In response to commenter (66) regarding the flood mitigation, such requirement is applicable to rehabilitation developments only and; therefore, moving it to the Site Design and Development Feasibility Report is not appropriate because such report is not required for Rehabilitation developments. Moreover, the requirement for accessible routes to be identified on the site plan is also specific to rehabilitation developments and staff believes that such information should be available and able to identify what the accessible routes are. Staff recommends no change based on these comments.

BOARD RESPONSE: Accepted staff's recommendation.

16. §10.204(11) - Subchapter C - Zoning (33)

COMMENT SUMMARY: Commenter (33) stated that requiring an applicant to provide a release to hold a jurisdiction harmless for zoning change requests is not the burden of a developer if the political subdivision is in violation of the Fair Housing Act. Commenter (33) contends that individuals cannot exempt anyone from accountability to the Department of Justice and that such language should be removed and revert to that of the prior year.

STAFF RESPONSE: In response to commenter (33), the requirement for an applicant to provide a release to hold a jurisdiction harmless for zoning change requests is a statutory requirement pursuant to Tex. Gov't Code, §2306.6705(5)(B). While the language contained in this section may have been tweaked over the prior year, the requirement to provide such release has been present in previous versions of the rule. Staff recommends no change based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

17. §10.204(13) - Subchapter C - Previous Participation (22), (58)

COMMENT SUMMARY: Commenters (22), (58) indicated that the new language in this section seems to require all Affiliates of a Development Owner complete the previous participation documentation and recommended this section be modified to state that only affiliates that have an ownership interest in the Development be required to submit such documentation.

STAFF RESPONSE: Staff agrees and has modified this requirement as suggested by the commenters.

BOARD RESPONSE: Accepted staff's recommendation.

18. §10.204(6) - Subchapter C - Experience Requirement (42), (43), (54), (73)

COMMENT SUMMARY: Commenters (42), (43), (54), (73) stated that because the experience criteria in 2014 is the same as it was in 2016, experience certificates issued in 2014 should be acceptable to meet the requirement. Commenters (42), (54) additionally suggested the term "natural Person" used in subparagraph (A) should be changed to "natural person" as the capitalized term Person includes entities.

STAFF RESPONSE: Staff agrees that the experience requirement proposed for 2017 is the same as it was in 2014 and has modified this section to reflect that experience certificates received in 2014 would be accepted.

BOARD RESPONSE: Accepted staff's recommendation.

19. §10.204(16) - Subchapter C - Section 811 Project Rental Assistance Program (17), (22), (23), (27), (33), (34), (40), (42), (43), (44), (50), (54), (58), (59), (60), (62), (66), (69), (73)

COMMENT SUMMARY: Commenters (17), (22), (23), (27), (33), (34), (40), (42), (43), (44), (50), (54), (58), (59), (60), (62), (69), (73) expressed that the Section 811 program should not be a threshold item, but should remain a scoring item where an applicant has the choice of participation with commenter (27) adding that in such instance the decision as to whether to accept the additional costs and administrative burden created by the federally assisted designation is up to the applicant. Commenter (44) further stated that having leased the first Section 811 unit, it was a very time intensive and multi-detailed program that should be awarded with points for undertaking. Commenters (23), (59) similarly expressed that until the program has been fully implemented and has some history of performance it is premature to make participation in the 811 program a threshold item. Commenters (22), (42), (43), (50), (54), (60), (69), (73) indicated that making it a threshold item will burden 4% developments by adding operating expenses to deals that often need tax exemptions or soft money to make them feasible and the inclusion of such units limits the ability to position these developments as workforce housing and gives neighbors another reason to voice opposition. Commenters (22), (27), (40), (42), (43), (50), (54), (60), (69) suggested that if participation in the 811 program remain as a threshold item that 4% tax credit applications be exempt from the requirement with commenter (27) suggesting that the threshold requirement should be limited to Direct Loan applications or others already choosing to receive funds that would designate the project as federally assisted.

Moreover, commenters (22), (42), (43), (54), (60), (66), (69), (73) indicated that whether it remains as threshold or reverts to a scoring item, there should be an option for an applicant to place the 811 units in an existing development or in the development for which an application is submitted. Commenters (22), (42), (43), (54), (60), (66), (69), (73) believed this flexibility is important, especially when committing to existing developments because of the lender and investor approvals that are required. Commenters (22), (42), (43), (54), (60), (66), (69), (73) further requested that language be added that could exempt an applicant from providing 811 units in an existing development if the applicant provides evidence that it cannot receive approval from either its lender or investor and that for developments with 100 or fewer units, the unit requirement be 10% of the total units, not 10 units. Similarly, commenter (34) recommended 10% of the units be set aside for 811 rather than 10 units in order to achieve economies of scale associated with smaller developments. Commenter (40) recommended that project based Section 8 developments be exempt from participation in the 811 program.

Commenter (58) recommended that while participation in the 811 program should return to being a point item under the QAP, if it remains as threshold, the following modifications be made on the basis that applicants should have the option to add 811 units into their existing developments or in the new development because of the different investors involved that own the developments and may not permit adding 811 units to existing properties. "(16) Section 811 Project Rental Assistance Program. All Applications must participate in the 811 Project Rental Assistance Program in accordance with the requirements of subparagraphs (A) or (B) of this paragraph unless an Applicant is unable to meet the requirements of either subparagraphs (A) or (B). Applications that are unable to meet the requirements of subparagraphs (A) or (B) must certify to that effect in the Application. (A) Applicants that opt to participate under this subparagraph (A) must apply for and obtain a determination by the Department that an Existing Development is approved to participate in the Department's Section 811 Project Rental Assistance Program ("Section 811 PRA Program"). The approved Existing Development must commit at least 10 units to the Section 811 PRA Program unless limited by the Integrated Housing Rule. An approved Existing Development may be used to satisfy the requirements of this paragraph in more than one Housing Tax Credit or other Multifamily Housing program Application, as long as at the time of Carryover, Award Letter or Determination Notice, as applicable, a minimum of 10 Units, unless limited by the Integrated Housing Rule, are provided for each Development awarded housing tax credits or Direct Loan funds. Once an Applicant submits their Application, Applicants may not withdraw their commitment to satisfy the threshold criteria of this subparagraph, although an Applicant may request to utilize a different approved Existing Development than the one submitted in association with the awarded Application to satisfy this criteria. Existing Developments that are included in an Application that does not receive an award are not obligated to participate in the Section 811 PRA Program. (B) Applicants that opt to participate under this subparagraph (B) must meet all of the requirements in clauses (i) - (v) of this subparagraph. Applicants must commit at least 10 Units in the Development for which the Application(s) has been submitted for participation in the Section 811 PRA Program unless the Integrated Housing Rule (10 TAC §1.15) or Section 811 PRA Program guidelines or other requirements limit the proposed Development to fewer than 10 Units..."

Commenter (27) asserted that requiring participation in the 811 program removes the choice from the applicant to accept the federally assisted housing designation and the requirements that accompany such designation, including Davis Bacon Wages, Uniform Relocation Act (URA), etc. Commenter (27) expressed that the application of URA substantially increases the administrative cost of an in-place rehabilitation relocation due to the federal regulations with which the owner would be required to comply and also suggested that there are significant additional cost burdens implemented by the URA (such as 42 months of rental assistance payment) for any permanently displaced tenants, which would occur for any in-place rehab proposing to increase the percentage of affordable units from its existing configuration. Commenter (27) stated that in the absence of the URA, the owner could determine what, in addition to moving expenses and any incentives offered to relocate, would be needed.

STAFF RESPONSE: Although there were numerous commenters suggesting this item revert to scoring for 2017, staff believes such change is prohibitive considering it was not included in the 2017 draft Qualified Allocation Plan that was published for public comment. However, in response to those commenters who suggested 4% HTC applications be exempt from having to place 811 units on their developments, staff agrees and has modified the language as reflected below. Staff does believe, however, that Direct Loan only applications or those 4% applications layered with Direct Loans should be required to participate in the 811 program. Moreover, in response to some comments, staff recommends adding language that would allow an applicant to place 811 units on the subject application should the lender or investor not approve of the 811 units being placed on an existing development in the applicant's portfolio. Staff also recommends the number of 811 units required should be the lower of 10 units or 10% of the total units, unless a lower number is required by a state or federal regulation. The recommended changes by staff to this item are reflected below: "(16) Section 811 Project Rental Assistance Program. All Competitive HTC Applications, Direct Loan only Applications and Tax-Exempt Bond Development Applications that are layered with Direct Loan funds must meet the requirements of subparagraphs (A) or (B) of this paragraph. Applications that are unable meet the requirements of subparagraphs (A) or (B) must certify to that effect in the Application. (A) Applicants must apply for and obtain a determination by the Department that an Existing Development is approved to participate in the Department's Section 811 Project Rental Assistance Program ("Section 811 PRA Program"). The approved Existing Development must commit at least the lower of 10 units or 10% of the total number of Units in the Development to the Section 811 PRA Program unless the Integrated Housing Rule (10 TAC §1.15) or Section 811 PRA Program guidelines (§PRA.305) or other requirements limit the proposed Development to fewer than 10 Units. An approved Existing Development may be used to satisfy the requirements of this paragraph in more than one Housing Tax Credit or other Multifamily Housing program Application, as long as at the time of Carryover, Award Letter or Determination Notice, as applicable, the minimum number of Units as stated above are provided for each Development awarded housing tax credits or Direct Loan funds. Once an Applicant submits their Application, Applicants may not withdraw their commitment to satisfy the threshold criteria of this subparagraph, although an Applicant may request to utilize a different approved Existing Development than the one submitted in association with the awarded Application to satisfy this criteria. Existing Developments that are included in an Application that does not receive an award are not obligated to participate in the Section 811 PRA Program. An Applicant may be exempt from having to provide 811 units in an Existing Development if approval from either their lender or investor cannot be obtained and documentation to that effect is submitted in the Application, but they would be required to provide such Units through subparagraph (B) of this paragraph. (B) Applicants that cannot meet the requirements of subparagraph (A) of this paragraph must submit evidence of such through a self-certification that the Applicant and any Affiliate do not have an ownership interest in or control of any Existing Development that would meet the criteria outlined in the Section 811 PRA Program Request for Applications, and if applicable, by submitting a copy of any rejection letter(s) that have been provided in response to the Request for Applications. In such cases, the Applicant is able to satisfy the threshold requirement of this paragraph through this subparagraph (B). Applications must meet all of the requirements in clauses (i) - (v) of this subparagraph. Applicants must commit at least the lower of 10 Units or 10% of the total number of Units in the Development for which the Application(s) has been submitted for participation in the Section 811 PRA Program unless the Integrated Housing Rule (10 TAC §1.15) or Section 811 PRA Program guidelines or other requirements limit the proposed Development to fewer than 10 Units. Once elected in the Application(s), Applicants may not withdraw their commitment to have the proposed Development participate in the Section 811 PRA Program unless the Department determines that the Development cannot meet all of the Section 811 PRA Program criteria or the Applicant chooses to request an amendment by Carryover, Award Letter, or subsequent to the issuance of the Determination Notice but prior to closing (for Tax-Exempt Bond Developments), or to place the Units on an Approved Existing Development. If the Applicant or an Affiliate obtain an ownership interest in an Approved Existing Development, the Applicant can submit an Amendment request authorizing that the Application satisfies this criteria under subparagraph (A), not subparagraph (B). Such an Amendment request will be considered a non-material change that has not been implemented, and Applicants will not be subject to the amendment fee required under §10.901(13) (relating to Fee Schedule, Appeals and other Provisions)...."

BOARD RESPONSE: Accepted staff's recommendation.

20. §10.205(2) - Subchapter C - Market Study (40)

COMMENT SUMMARY: Commenter (40) recommended that submission of a market study not be required on project based Section 8 developments or existing Section 42 developments that are 95% or greater occupied at the time of application and contended that it is an inefficient use of time and money to provide when it has no meaningful value and would relieve some of the administrative burden on staff. While commenter (40) recognized that such change might be too substantive to modify now, the Department should consider this change in future rule-making and further stated that while a market study is required by statute, a full market study is too much and a less intense version could suffice.

STAFF RESPONSE: Staff believes this suggestion is a sufficiently substantive change from what was proposed that it could not be accomplished without re-publication for public comment. A market study is required by statute and any proposal to deviate from the requirement must be fully evaluated to ensure compliance with statutory requirements. Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

INDEX OF COMMENTERS

(17) Fifth Ward Community Redevelopment Corporation

(19) Texas Association of Community Development Corporations

(20) Rural Rental Housing Association of Texas, Inc.

(22) Texas Affiliation of Affordable Housing Providers

(23) Texas Coalition of Affordable Developers

(25) Center for Supportive Housing

(27) Atlantic Housing Foundation

(28) Locke Lord Attorneys and Counselors

(33) Anderson Development and Construction, LLC

(34) BETCO Consulting, LLC

(38) Dharma Development, LLC

(40) Dominium

(42) Evolie Housing Partners

(43) Flores Residential, LLC

(44) Foundation Communities

(48) Hamilton Valley Management, Inc.

(50) Hoke Development Services, LLC

(54) Leslie Holleman and Associates, Inc.

(58) Mark-Dana Corporation

(59) Marque Real Estate Consultants

(60) Mears Development

(62) Miller Valentine Group

(63) National Church Residences

(66) O-SDA Industries

(69) Purple Martin Real Estate

(72) Structure Development

(73) The Brownstone Group

STATUTORY AUTHORITY. The new sections are adopted pursuant to Texas Government Code, §2306.053, which authorizes the Department to adopt rules. Additionally, the new sections are adopted pursuant to Texas Government Code, §2306.67022, which specifically authorizes the Department to adopt a qualified allocation plan.

§10.201.Procedural Requirements for Application Submission.

This subchapter establishes the procedural requirements for Application submission. Only one Application may be submitted for a Development Site in an Application Round. While the Application Acceptance Period is open or prior to the Application deadline, an Applicant may withdraw an Application and subsequently file a new Application utilizing the original pre-application fee (as applicable) that was paid as long as no substantive evaluation was performed by the Department and the re-submitted Application relates to the same Development Site, consistent with §11.9(e)(3) regarding pre-application Site changes. Applicants are subject to the schedule of fees as set forth in §10.901of this chapter (relating to Fee Schedule). When providing a pre-application, Application or other materials to a state representative, local governmental body, Neighborhood Organization, or anyone else to secure support or approval that may affect the Applicant's competitive posture, an Applicant must disclose that in accordance with the Department's rules aspects of the Development may not yet have been determined or selected or may be subject to change, such as changes in the amenities ultimately selected and provided.

(1) General Requirements.

(A) An Applicant requesting funding from the Department must submit an Application in order to be considered for an award. An Application must be complete (including all required exhibits and supporting materials) and submitted by the required program deadline. If an Application, including the corresponding Application fee as described in §10.901 of this chapter, is not submitted to the Department on or before the applicable deadline, the Applicant will be deemed not to have made an Application; provided, however, that errors in the calculation of applicable fees may be cured via an Administrative Deficiency. The deficiency period for curing fee errors will be three business days and may not be extended. Failure to cure such an error timely will be grounds for termination.

(B) Applying for multifamily funds from the Department is a technical process that must be followed completely. As a result of the competitive nature of some funding sources, an Applicant should proceed on the assumption that deadlines are fixed and firm with respect to both date and time and cannot be waived except where authorized and for truly extraordinary circumstances, such as the occurrence of a significant natural disaster that makes timely adherence impossible. If an Applicant chooses to submit by delivering an item physically to the Department, it is the Applicant's responsibility to be within the Department's doors by the appointed deadline. Applicants are strongly encouraged to submit the required items well in advance of established deadlines. Applicants must ensure that all documents are legible, properly organized and tabbed, and that materials provided in digital media are fully readable by the Department. Department staff receiving an application may perform a cursory review to see if there are any glaring problems. This is a cursory review and may not be relied upon as confirmation that the Application was complete or in proper form.

(C) The Applicant must upload a PDF copy and Excel copy of the complete Application to the Department's secure web transfer server. Each copy must be in a single file and individually bookmarked as further described in the Multifamily Programs Procedures Manual. Additional files required for Application submission (e.g., Third Party Reports) outside the Uniform Application must also be uploaded to the secure web transfer server. It is the responsibility of the Applicant to confirm the upload to the Department's secure web transfer server was successful and to do so in advance of the deadline. Where there are instances of computer problems, mystery glitches, etc. that prevents the Application from being received by the Department prior to the deadline the Application may be terminated.

(D) Applications must include materials addressing each and all of the items enumerated in this chapter and other chapters as applicable. If an Applicant does not believe that a specific item should be applied, the Applicant must include, in its place, a statement identifying the required item, stating that it is not being supplied, and a statement as to why the Applicant does not believe it should be required.

(2) Filing of Application for Tax-Exempt Bond Developments. Applications may be submitted to the Department as described in subparagraphs (A) and (B) of this paragraph. Multiple site applications by the same Applicant for Tax-Exempt Bond Developments will be considered to be one Application as identified in Tex. Gov't Code, Chapter 1372. Applications will be required to satisfy the requirements of the Qualified Allocation Plan (QAP) and Uniform Multifamily Rules in place at the time the Application is received by the Department. Applications that receive a Traditional Carryforward designation after November 15 will not be accepted until after January 2 and will be subject to the QAP and Uniform Multifamily Rules in place at the time the Application is received by the Department.

(A) Lottery Applications. For Applicants participating in the TBRB lottery for private activity bond volume cap and whereby advance notice is given regarding a Certificate of Reservation, the Applicant must submit a Notice to Submit Lottery Application form to the Department no later than the Notice to Submit Lottery Application Delivery Date described in §10.4 of this chapter (relating to Program Dates). The complete Application, accompanied by the Application Fee described in §10.901 of this chapter must be submitted no later than the Applications Associated with Lottery Delivery Date described in §10.4 of this chapter.

(B) Waiting List Applications. Applications designated as Priority 1 or 2 by the TBRB and receiving advance notice of a Certificate of Reservation for private activity bond volume cap must submit Parts 1 - 4 of the Application and the Application Fee described in §10.901 of this chapter prior to the issuance of the Certificate of Reservation by the TBRB. The remaining parts of the Application must be submitted at least seventy-five (75) days prior to the Board meeting at which the decision to issue a Determination Notice would be made. An Application designated as Priority 3 will not be accepted until after the issuer has induced the bonds, with such documentation included in the Application, and is subject to the following additional timeframes:

(i) The Applicant must submit to the Department confirmation that a Certificate of Reservation from the TBRB has been issued not more than thirty (30) days after the Application is received by the Department. The Department may, for good cause, administratively approve an extension for up to an additional thirty (30) days to submit confirmation the Certificate of Reservation has been issued. The Application will be terminated if the Certificate of Reservation is not received within the required timeframe;

(ii) The Department will require at least seventy-five (75) days to review an Application, unless Department staff can complete its evaluation in sufficient time for Board consideration. Applicants should be aware that unusual financing structures, portfolio transactions, and the need to resolve Administrative Deficiencies may require additional time to review and the prioritization of Applications will be subject to the review priority established in paragraph (6) of this subsection;

(iii) Department staff may choose to delay presentation to the Board in instances in which an Applicant is not reasonably expected to close within sixty (60) days of the issuance of a Determination Notice. Applications that receive Traditional Carryforward will be subject to closing within the same timeframe as would be typical of the Certificate of Reservation. This will be a condition of the award and reflected in the Determination Notice.

(3) Certification of Tax Exempt Bond Applications with New Docket Numbers. Applications that receive an affirmative Board Determination, but for which closing on the bonds does not occur prior to the Certificate of Reservation expiration date, and which subsequently have that docket number withdrawn from the TBRB, may have their Determination Notice reinstated. 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 The Applicant would need to receive a new docket number from the TBRB and meet the requirements described in subparagraphs (A) - (C) of this paragraph:

(A) The Application must remain unchanged, which 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 (if TDHCA is bond issuer) or TBRB priority status including the effect on the inclusive capture rate. 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 §10.203 of this chapter (relating to Public Notifications (§2306.6705(9)) 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) calendar days after the date the TBRB issues the new docket number; or

(B) the new docket number may not be issued more than four (4) months from the date the original application was withdrawn from the TBRB. The new docket number must be from the same program year as the original docket number or, for Applications that receive a new docket number from the program year that is immediately succeeding the program year of the original docket number, the requirements in clauses (i) and (ii) of this subparagraph must be met:

(i) The Applicant must certify that the Development will meet all rules and requirements in effect at the time the new docket number is issued; and

(ii) The Department must determine that the changes in the rules applicable to the program(s) under which the Application was originally awarded are not of a material nature that would necessitate a new Application and that any new forms and clarifications to the Application are of a nature that can be resolved through the Administrative Deficiency process; or

(C) if there are changes to the Application as referenced in subparagraph (A) of this paragraph or if such changes in the rules pursuant to subparagraph (B)(ii) of this paragraph are of a material nature 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. If there is public opposition but the Application remains the same pursuant to subparagraph (A) of this paragraph, a new Application will not be required to be submitted; however, the Application must be presented before the Board for consideration of the re-issuance of the Determination Notice.

(4) Withdrawal of Application. An Applicant may withdraw an Application prior to or after receiving an award of funding by submitting to the Department written notice of the withdrawal.

(5) Evaluation Process. Priority Applications, which shall include those Applications believed likely to be competitive, will undergo a program review for compliance with submission requirements and selection criteria, as applicable. In general, Application reviews by the Department shall be prioritized based upon the likelihood that an Application will be competitive for an award based upon the set-aside, self score, received date, or other ranking factors. Thus, non-competitive or lower scoring Applications may never be reviewed. The Director of Multifamily Finance will identify those Applications that will receive a full program review based upon a reasonable assessment of each Application's priority, but no Application with a competitive ranking shall be skipped or otherwise overlooked. This initial assessment may be a high level assessment, not a full assessment. Applications deemed to be priority Applications may change from time to time. The Real Estate Analysis division shall underwrite Applications that received a full program review and remain competitive to determine financial feasibility and an appropriate funding amount. In making this determination, the Department will use §10.302 of this chapter (relating to Underwriting Rules and Guidelines) and §10.307 of this chapter (relating to Direct Loan Requirements). The Department may have an external party perform all or part of the underwriting evaluation and components thereof to the extent it determines appropriate. The expense of any external underwriting shall be paid by the Applicant prior to the commencement of the aforementioned evaluation pursuant to §10.901(5) of this chapter (relating to Fee Schedule, Appeals and other Provisions). Applications will undergo a previous participation review in accordance with Chapter 1 Subchapter C of this title (relating to Previous Participation) and a Development Site may be evaluated by the Department or its agents through a physical site inspection or site visit, (which may include neighboring areas), independent of or concurrent with a site visit that may be performed in conjunction with §10.101(a)(3) (relating to Undesirable Neighborhood Characteristics). The Department will, from time to time during the review process, publish an application log which shall include the self-score and any scoring adjustments made by staff. The posting of such scores on the application log may trigger appeal rights and corresponding deadlines pursuant to Tex. Gov't. Code §2306.6715 and §10.902 of this chapter (relating to Appeals Process). The Department may also provide a courtesy scoring notice reflecting such score to the Applicant.

(6) Prioritization of Applications under various Programs. This paragraph identifies how ties or other prioritization matters will be handled when dealing with de-concentration requirements, capture rate calculations, and general review priority of Applications submitted under different programs.

(A) De-concentration and Capture Rate. Priority will be established based on the earlier date associated with an Application. The dates that will be used to establish priority are as follows:

(i) For Tax-Exempt Bond Developments, the issuance date of the Certificate of Reservation issued by the TBRB; and

(ii) For all other Developments, the date the Application is received by the Department; and

(iii) Notwithstanding the foregoing, after July 31 of the current program year, 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.

(B) General Review Priority. Review priority for Applications under various multifamily programs will be established based on Department staff's consideration of any statutory timeframes associated with a program or Application in relation to the volume of Applications being processed. In general, those with statutory deadlines or more restrictive deadlines will be prioritized for review and processing ahead of those that are not subject to the same constraints. In general, any non-Competitive Housing Tax Credit Applications received during the competitive tax credit round that include a request to be placed on the May, June or July Board agendas will not be prioritized for review or underwriting due to the statutory constraints on the award and allocation of competitive tax credits. Applicants are advised to keep this in consideration when planning the submission of an Application and issuance of the Certificate of Reservation.

(7) Administrative Deficiency Process. The purpose of the Administrative Deficiency process is to allow an Applicant to provide clarification, correction, or non-material missing information to resolve inconsistencies in the original Application or to assist staff in evaluating the Application. Staff will request such information via a deficiency notice. Because the review of an Application occurs in several phases, deficiency notices may be issued during any of these phases. Staff will send the deficiency notice via an e-mail to the Applicant and one other contact party if identified by the Applicant in the Application. The time period for responding to a deficiency notice commences on the first 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. Responses are required to be submitted electronically as a PDF or multiple PDF files. A review of the response provided by the Applicant may reveal that issues initially identified as an Administrative Deficiency are actually determined to be beyond the scope of an Administrative Deficiency process, meaning that they in fact implicated matters of a material nature not susceptible to being resolved. Department staff may in good faith provide an Applicant confirmation that an Administrative Deficiency response has been received or that such response is satisfactory. Communications from staff that the response was satisfactory do not establish any entitlement to points, eligibility status, or to any presumption of having fulfilled any requirements. Final determinations regarding the sufficiency of documentation submitted to cure an Administrative Deficiency as well as the distinction between material and non-material missing information are reserved for the Director of Multifamily Finance, Executive Director, and Board.

(A) It is critical that the use of the Administrative Deficiency process not unduly slow the review process, and since the process is intended to clarify or correct matters or obtain non-material missing information (that should already be in existence), there is a reasonable expectation that a party responding to an Administrative Deficiency will be able to respond immediately. It is the responsibility of a person who receives an Administrative Deficiency to address the matter fully by the close of business on the date by which resolution must be complete and the Administrative Deficiency fully resolved. Merely submitting materials prior to that time places the responsibility on the responding party that if the materials do not fully resolve the matter there may be a point deduction or termination.

(B) Administrative Deficiencies for Competitive HTC Applications. Unless an extension has been timely requested and granted, if an Administrative Deficiency is not fully 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, subject to appeal. An Applicant may not change or supplement any part of an Application in any manner after the filing deadline or while the Application is under consideration for an award, 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. (§2306.6708(b); §2306.6708) To the extent that the review of Administrative Deficiency documentation or the imposing of point reductions for late responses alters the score assigned to the Application, such score will be reflected in the updated application log published on the Department's website.

(C) Administrative Deficiencies for all other Applications or sources of funds. 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 an Administrative Deficiency Notice Late Fee of $500 for each business day the deficiency remains unresolved will be assessed, and the Application will not be presented to the Board for consideration until all outstanding fees have been paid. Applications with unresolved deficiencies after 5:00 p.m. on the tenth day following the date of the deficiency notice will be terminated or suspended from further processing so long as the active Application does not impact the processing or underwriting of other Applications. The Applicant will be responsible for the payment of fees accrued pursuant to this paragraph regardless of any termination. Department staff may or may not assess an Administrative Deficiency Notice Late Fee for or terminate Applications for Tax-Exempt Bond or Direct Loan Developments during periods when private activity bond volume cap or Direct Loan funds are undersubscribed. Applicants should be prepared for additional time needed for completion of staff reviews as described in paragraph (2)(B) of this section.

(8) Limited Priority Reviews. If, after the submission of the Application, an Applicant identifies an error in the Application that could likely be the subject of an Administrative Deficiency, the Applicant may request a limited priority review of the specific and limited issues in need of clarification or correction. The issue may not relate to the score of an Application. This limited priority review may only cover the specific issue and not the entire Application. If the limited priority review results in the identification of an issue that requires correction or clarification, staff will request such through the Administrative Deficiency process as stated in paragraph (7) of this section, if deemed appropriate. A limited priority review is intended to address:

(A) clarification of issues that Department staff would have difficulty identifying due to the omission of information that the Department may have access to only through Applicant disclosure, such as a prior removal from a tax credit transaction or participation in a Development that is not identified in the previous participation portion of the Application; or

(B) technical correction of non-material information that would cause an Application deemed non-competitive to be deemed competitive and, therefore, subject to a staff review. For example, failure to mark the Nonprofit Set-Aside in an Application that otherwise included complete submission of documentation for participation in the Nonprofit Set-Aside.

(9) Challenges to Opposition. Any written statement from a Neighborhood Organization expressing opposition to an Application may be challenged if it is contrary to findings or determinations, including zoning determinations, of a municipality, county, school district, or other local Governmental Entity having jurisdiction or oversight over the finding or determination. If any such comment is challenged, the challenger must declare the basis for the challenge and submit such challenge by the Challenges to Neighborhood Organization Opposition Delivery Date as identified in §10.4 of this chapter and no later than May 1, 2017 for Competitive HTC Applications. The Neighborhood Organization expressing opposition will be given seven (7) calendar days to provide any information related to the issue of whether their assertions are contrary to the findings or determinations of a local Governmental Entity. All such materials and the analysis of the Department's staff will be provided to a fact finder, chosen by the Department, for review and a determination of the issue presented by this subsection. The fact finder will not make determinations as to the accuracy of the statements presented, but only with regard to whether the statements are contrary to findings or determinations of a local Governmental Entity. The fact finder's determination will be final and may not be waived or appealed.

§10.202.Ineligible Applicants and Applications.

The purpose of this section is to identify those situations in which an Application or Applicant may be considered ineligible for Department funding and subsequently terminated. Such matters may be brought to the attention of staff by anyone, including members of the general public. If such ineligibility is raised by non-staff members it must be made in writing to the Executive Director and the Applicant and must cite the specific ineligible criteria under paragraph (1) of this section and provide factual evidence to support the claim. Any unsupported claim or claim determined to be untrue may be subject to all remedies available to the Department or Applicant. Staff will make enquiry as it deems appropriate and may send a notice to the Applicant and provide them the opportunity to explain how they believe they or their Application is eligible. Staff will present the matter to the Board, accompanied by staff's recommendation. The Board may take such action as it deems warranted by the facts presented, including any testimony that may be provided, either declining to take action, in which case the Applicant or Application, as applicable, remains eligible, or finding the Applicant is ineligible, or, for a matter relating to a specific Application, that that Application is ineligible. A Board finding of ineligibility is final. The items listed in this section include those requirements in §42 of the Code, Tex. Gov't Code, Chapter 2306, and other criteria considered important by the Department, and does not represent an exhaustive list of ineligibility criteria that may otherwise be identified in applicable rules or a NOFA specific to the programmatic funding. One or more of the matters enumerated in paragraph (1) of this section may also serve as a basis for debarment, or the assessment of administrative penalties, and nothing herein shall limit the Department's ability to pursue any such matter.

(1) Applicants. An Applicant shall be considered ineligible if any of the criteria in subparagraphs (A) - (M) of this paragraph apply to those identified on the organizational chart for the Applicant, Developer and Guarantor. An Applicant is ineligible if the Applicant, Developer, or Guarantor:

(A) has been or is barred, suspended, or terminated from procurement in a state or Federal program, including listed in HUD's System for Award Management (SAM); (§2306.0504)

(B) 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 submission;

(C) is, at the time of Application, subject to an order in connection with an enforcement or disciplinary action under state or federal securities law or by the NASD; subject to a federal tax lien (other than a contested lien for which provision has been made); or 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 financial misconduct or uncured violation of material laws, rules, or other legal requirements governing activities considered relevant by the Governmental Entity;

(D) has materially breached a contract with a public agency, and, if such breach is permitted to be cured under the contract, has been given notice of the breach and a reasonable opportunity to cure, and failed to cure that breach within the time specified in the notice of breach;

(E) has 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;

(F) has been found by the Board to be ineligible based on a previous participation review performed in accordance with Chapter 1 Subchapter C of this title;

(G) is delinquent in any loan, fee, or escrow payments to the Department in accordance with the terms of the loan, as amended, or is otherwise in default with any provisions of such loans;

(H) has failed to cure any past due fees owed to the Department within the time frame provided by notice from the Department and at least ten (10) days prior to the Board meeting at which the decision for an award is to be made;

(I) would be prohibited by a state or federal revolving door or other standard of conduct or conflict of interest statute, including Tex. Gov't Code, §2306.6733, or a provision of Tex. Gov't Code, Chapter 572, from participating in the Application in the manner and capacity they are participating;

(J) has, without prior approval from the Department, had previous Contracts or Commitments that 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, and the Person is on notice that such deobligation results in ineligibility under this chapter;

(K) has provided falsified documentation or made other intentional or negligent material misrepresentations or omissions in or in connection with an Application or Commitment for a Development.;

(L) was the owner or Affiliate of the owner of a Department assisted rental development for which the federal affordability requirements were prematurely terminated and the affordability requirements have not re-affirmed or Department funds repaid; or

(M) fails to disclose, in the Application, any Principal or any entity or Person in the Development ownership structure who was or is involved as a Principal in any other affordable housing transaction, that has terminated voluntarily or involuntarily within the past ten (10) years or plans to or is negotiating to terminate their relationship with any other affordable housing development. Failure to disclose is grounds for termination. The disclosure must identify the person or persons and development involved, the identity of each other development, and contact information for the other Principals of each such development, a narrative description of the facts and circumstances of the termination or proposed termination, and any appropriate supporting documents. An Application may be referred to the Board for termination based upon factors in the disclosure. Staff shall present a determination to the Board as to a person's fitness to be involved as a principal with respect to an Application using the factors described in clauses (i) - (v) of this subparagraph as considerations:

(i) The amount of resources in a development and the amount of the benefit received from the development;

(ii) the legal and practical ability to address issues that may have precipitated the termination or proposed termination of the relationship;

(iii) the role of the person in causing or materially contributing to any problems with the success of the development;

(iv) the person's compliance history, including compliance history on other developments; and

(v) any other facts or circumstances that have a material bearing on the question of the person's ability to be a compliant and effective participant in their proposed role as described in the Application.

(2) Applications. An Application shall be ineligible if any of the criteria in subparagraphs (A) - (C) of this paragraph apply to the Application:

(A) a violation of Tex. Gov't Code, §2306.1113, exists relating to Ex Parte Communication. An ex parte communication occurs when an Applicant or Person representing 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 Tex. Gov't Code, §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 so long as the Application remains eligible for funding. 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 no matters related to any Application being considered by the Board may be discussed. An attempted but unsuccessful prohibited ex parte communication, such as a letter sent to one or more board members but not opened, may be cured by full disclosure in a public meeting, and the Board may reinstate the Application and establish appropriate consequences for cured actions, such as denial of the matters made the subject to the communication.

(B) the Application is submitted after the Application submission deadline (time or date); is missing multiple parts of the Application; or has a Material Deficiency; or

(C) for any Development utilizing Housing Tax Credits or Tax-Exempt Bonds:

(i) 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 person covered by Tex. Gov't Code, §2306.6703(a)(1) or §2306.6733;

(ii) the Applicant proposes to replace in less than fifteen (15) years any private activity bond financing of the Development described by the Application, unless the exceptions in Tex. Gov't Code, §2306.6703(a)(2) of the are met.

§10.203.Public Notifications (§2306.6705(9)).

A certification, as provided in the Application, that the Applicant met the requirements and deadlines identified in paragraphs (1) - (3) of this section must be submitted with the Application. For Applications utilizing Competitive Housing Tax Credits, notifications must not be older than three (3) months from the first day of the Application Acceptance Period. For Tax-Exempt Bond Developments 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, and for all other Applications no older than three (3) months prior to the date the Application is submitted. If notifications were made in order to satisfy requirements of pre-application submission (if applicable to the program) for the same Application, then no additional notification is required at Application. However, re-notification is required by all Applicants who have submitted a change from pre-application to Application that reflects a total Unit increase of greater than 10 percent or a 5 percent increase in density (calculated as units per acre) as a result of a change in the size of the Development Site. In addition, should a change in elected official occur between the submission of a pre-application and the submission of an Application, Applicants are required to notify the newly elected (or appointed) official no later than the Full Application Delivery Date.

(1) Neighborhood Organization Notifications.

(A) The Applicant must identify and notify all Neighborhood Organizations on record with the county or the state as of 30 days prior to the Full Application Delivery Date and whose boundaries include the proposed Development Site. As used in this section, "on record with the state" means on record with the Secretary of State.

(B) The Applicant must list, in the certification form provided in the Application, all Neighborhood Organizations on record with the county or state as of 30 days prior to the Full Application Delivery Date and whose boundaries include the proposed Development Site as of the submission of the Application.

(2) Notification Recipients. No later than the date the Application is submitted, notification must be sent to all of the persons or entities identified in subparagraphs (A) - (H) of this paragraph. Developments located in an Extra Territorial Jurisdiction (ETJ) of a city are required to notify both city and county officials. The notifications may be sent by e-mail, fax or mail with return receipt requested or similar tracking mechanism in the format required in the Application Notification Template provided in the Application. Evidence of notification is required in the form of a certification provided in the Application. The Applicant is encouraged to retain proof of delivery in the event it is requested by the Department. Evidence of proof of delivery is demonstrated by a signed receipt for mail or courier delivery and confirmation of receipt by recipient for fax and e-mail. Officials to be notified are those officials in office at the time the Application is submitted. Note that between the time of pre-application (if made) and full Application, such officials may change and the boundaries of their jurisdictions may change. By way of example and not by way of limitation, events such as redistricting may cause changes which will necessitate additional notifications at full Application. Meetings and discussions do not constitute notification. Only a timely and compliant written notification to the correct person constitutes notification.

(A) Neighborhood Organizations on record with the state or county as of 30 days prior to the Full Application Delivery Date whose boundaries include the Development Site;

(B) Superintendent of the school district in which the Development Site is located;

(C) Presiding officer of the board of trustees of the school district in which the Development Site is located;

(D) Mayor of the municipality (if the Development Site is within a municipality or its extraterritorial jurisdiction);

(E) All elected members of the Governing Body of the municipality (if the Development Site is within a municipality or its extraterritorial jurisdiction);

(F) Presiding officer of the Governing Body of the county in which the Development Site is located;

(G) All elected members of the Governing Body of the county in which the Development Site is located; and

(H) State Senator and State Representative of the districts whose boundaries include the Development Site.

(3) Contents of Notification.

(A) The notification must include, at a minimum, all information described 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 indicating the program(s) to which the Applicant is applying with the Texas Department of Housing and Community Affairs;

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

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

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

(B) The notification may not contain any false or misleading statements. Without limiting the generality of the foregoing, the notification may not create the impression that the proposed Development will serve a Target Population exclusively unless such targeting or preference is documented in the Application and is or will be in full compliance with all applicable state and federal laws, including state and federal fair housing laws.

§10.204.Required Documentation for Application Submission.

The purpose of this section is to identify the documentation that is required at the time of Application submission, unless specifically indicated or otherwise required by Department rule. If any of the documentation indicated in this section is not resolved, clarified or corrected to the satisfaction of the Department through either original Application submission or the Administrative Deficiency process, the Application will be terminated. Unless stated otherwise, all documentation identified in this section must not be dated more than six (6) months prior to the close of the Application Acceptance Period or the date of Application submission as applicable to the program. The Application may include, or Department staff may request, documentation or verification of compliance with any requirements related to the eligibility of an Applicant, Application, Development Site, or Development.

(1) Certification, Acknowledgement and Consent of Development Owner. A certification of the information in this subchapter as well as Subchapter B of this chapter must be executed by the Development Owner and address the specific requirements associated with the Development. The Person executing the certification is responsible for ensuring all individuals referenced therein are in compliance with the certification, that they have given it with all required authority and with actual knowledge of the matters certified.

(A) 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.

(B) This Application and all materials submitted to the Department constitute records of the Department subject to Tex. Gov't Code, Chapter 552, and the Texas Public Information Act.

(C) All representations, undertakings and commitments made by Applicant in the Application process for Development assistance expressly constitute conditions to any Commitment, Determination Notice, Carryover Allocation, or Direct Loan Commitment for such Development which the Department may issue or award, and the violation of any such condition shall be sufficient cause for the cancellation and rescission of such Commitment, Determination Notice, Carryover Allocation, or Direct Loan Commitment by the Department. If any such representations, undertakings and commitments concern or relate to the ongoing features or operation of the Development, they shall each and all shall be enforceable even if not reflected in the Land Use Restriction Agreement. All such representations, undertakings and commitments are also enforceable by the Department and the tenants of the Development, including enforcement by administrative penalties for failure to perform, in accordance with the Land Use Restriction Agreement.

(D) The Development Owner 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.

(E) The Development Owner agrees to implement 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 Development Owner 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, if the Development does not have Housing Tax Credits, release of retainage.

(F) The Applicant will attempt to ensure that at least 30 percent of the construction and management businesses with which the Applicant contracts in connection with the Development are Minority Owned Businesses as further described in Tex. Gov't Code, §2306.6734.

(G) 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.

(H) The Development Owner will comply with any and all notices required by the Department.

(I) If the Development has an existing LURA with the Department, the Development Owner will comply with the existing restrictions.

(2) Applicant Eligibility Certification. A certification of the information in this subchapter as well as Subchapter B of this chapter must be executed by any individuals required to be listed on the organizational chart and also identified in subparagraphs (A) - (D) below. The certification must identify the various criteria relating to eligibility requirements associated with multifamily funding from the Department, including but not limited to the criteria identified under §10.202 of this chapter (relating to Ineligible Applicants and Applications).

(A) for for-profit corporations, any officer authorized by the board of directors, regardless of title, to act on behalf of the corporation, including but not limited to the president, vice president, secretary, treasurer, and all other executive officers, and each stock holder having a 10 percent or more interest in the corporation, and any individual who has Control with respect to such stock holder;

(B) for non-profit corporations or governmental instrumentalities (such as housing authorities), any officer authorized by the board, regardless of title, to act on behalf of the corporation, including but not limited to the president, vice president, secretary, treasurer, and all other executive officers, the Audit committee chair, the Board chair, and anyone identified as the Executive Director or equivalent;

(C) for trusts, all beneficiaries that have the legal ability to Control the trust who are not just financial beneficiaries; and

(D) for limited liability companies, all managers, managing members, members having a 10 percent or more interest in the limited liability company, any individual Controlling such members, or any officer authorized to act on behalf of the limited liability company.

(3) Architect Certification Form. The certification, addressing all of the accessibility requirements, must be executed by the Development engineer, an accredited architect or Third Party accessibility specialist. (§2306.6722; §2306.6730)

(4) Notice, Hearing, and Resolution for Tax-Exempt Bond Developments. In accordance with Tex. Gov't Code, §2306.67071, the following actions must take place with respect to the filing of an Application and any Department awards for a Tax-Exempt Bond Development.

(A) Prior to submission of an Application to the Department, an Applicant must provide notice of the intent to file the Application in accordance with §10.203 of this chapter (relating to Public Notifications (§2306.6705(9))).

(B) The Governing Body of a municipality must hold a hearing if the Development Site is located within a municipality or the extra territorial jurisdiction (ETJ) of a municipality. The Governing Body of a county must hold a hearing unless the Development Site is located within a municipality. For Development Sites located in an ETJ the county and municipality must hold hearings; however, the county and municipality may arrange for a joint hearing. The purpose of the hearing(s) must be to solicit public input concerning the Application or Development and the hearing(s) must provide the public with such an opportunity. The Applicant may be asked to substantively address the concerns of the public or local government officials.

(C) An Applicant must submit to the Department a resolution of no objection from the applicable Governing Body. Such resolution(s) must specifically identify the Development whether by legal description, address, Development name, Application number or other verifiable method. In providing a resolution, a municipality or county should consult its own staff and legal counsel as to whether such resolution will be consistent with Fair Housing laws as they may apply, including, as applicable, consistency with any FHAST form on file, any current Analysis of Impediments to Fair Housing Choice, or any current plans such as one year action plans or five year consolidated plans for HUD block grant funds such as HOME or CDBG funds. For an Application with a Development Site that is:

(i) Within a municipality, the Applicant must submit a resolution from the Governing Body of that municipality;

(ii) Within the extraterritorial jurisdiction (ETJ) of a municipality, the Applicant must submit both:

(I) a resolution from the Governing Body of that municipality; and

(II) a resolution from the Governing Body of the county; or

(iii) Within a county and not within a municipality or the ETJ of a municipality, a resolution from the Governing Body of the county.

(D) For purposes of meeting the requirements of subparagraph (C) of this paragraph, the resolution(s) must be submitted no later than the Resolutions Delivery Date described in §10.4 of this chapter (relating to Program Dates). An acceptable, but not required, form of resolution may be obtained in the Multifamily Programs Procedures Manual. Applicants should ensure that the resolutions all have the appropriate references and certifications or the Application may be terminated. The resolution(s) must certify that:

(i) Notice has been provided to the Governing Body in accordance with Tex. Gov't Code, §2306.67071(a) and subparagraph (A) of this paragraph;

(ii) The Governing Body has had sufficient opportunity to obtain a response from the Applicant regarding any questions or concerns about the proposed Development;

(iii) The Governing Body has held a hearing at which public comment may be made on the proposed Development in accordance with Tex. Gov't Code, §2306.67071(b) and subparagraph (B) of this paragraph; and

(iv) After due consideration of the information provided by the Applicant and public comment, the Governing Body does not object to the proposed Application.

(5) Designation as Rural or Urban.

(A) Each Application must identify whether the Development Site is located in an Urban Area or Rural Area of a Uniform State Service Region. The Department shall make available a list of Places meeting the requirements of Tex. Gov't Code, §2306.004(28-a)(A) and (B), for designation as a Rural Area and those that are an Urban Area in the Site Demographics Characteristics Report. Some Places are municipalities. For any Development Site located in the ETJ of a municipality and not in a Place, the Application shall have the Rural Area or Urban Area designation of the municipality whose ETJ within which the Development Site is located. For any Development Site not located within the boundaries of a Place or the ETJ of a municipality, the applicable designation is that of the closest Place.

(B) Certain areas located within the boundaries of a primary metropolitan statistical area or a metropolitan statistical area can request a Rural designation from the Department for purposes of receiving an allocation Housing Tax Credits (§2306.6740). In order to apply for such a designation, a letter must be submitted from a duly authorized official of the political subdivision or census designated place addressing the factors outlined in clauses (i) - (vi) of this subparagraph. Photographs and other supporting documentation are strongly encouraged. In order for the area to be designated Rural by the Department for the 2017 Application Round, such requests must be made no later than December 16, 2016. If staff is able to confirm the findings outlined in the request, the Rural designation will be granted without further action and will remain in effect until such time that the population as described in clause (i) of this subparagraph exceeds 25,000. In the event that staff is unable to confirm the information contained in the request, the Applicant will be given an opportunity to supplement their case. If, after receiving any supplemental information, staff still cannot confirm the rural nature of the Application, a recommendation for denial will be presented to the Board.

(i) The population of the political subdivision or census designated place does not exceed 25,000;

(ii) The characteristics of the political subdivision or census designated place and how those differ from the characteristics of the area(s) with which it shares a contiguous boundary;

(iii) The percentage of the total border of the political subdivision or census designated place that is contiguous with other political subdivisions or census designated places designated as urban. For purposes of this assessment, less than fifty percent contiguity with urban designated places is presumptively rural in nature;

(iv) The political subdivision or census designated place contains a significant number of unimproved roads or relies on unimproved roads to connect it to other places;

(v) The political subdivision or census designated place lacks major amenities commonly associated with urban or suburban areas; and

(vi) The boundaries of the political subdivision or census designated place contain, or are surrounded by, significant areas of undeveloped or agricultural land. For purposes of this assessment, significant being more than one-third of the total surface area of political subdivision/census designated place, or a minimum of 1,000 acres immediately contiguous to the border.

(6) Experience Requirement. Evidence that meets the criteria as stated in subparagraph (A) of this paragraph must be provided in the Application, unless an experience certificate was issued by the Department in 2014, 2015 or 2016 which may be submitted as acceptable evidence of this requirement. Experience of multiple parties may not be aggregated to meet this requirement.

(A) A natural Person, with control of the Development through placement in service, who is also a Principal of the Developer, Development Owner, or General Partner must establish that they have experience in the development and placement in service of 150 units or more. Acceptable documentation to meet this requirement shall include any of the items in clauses (i) - (ix) of this subparagraph:

(i) American Institute of Architects (AIA) Document (A102) or (A103) 2007 - Standard Form of Agreement between Owner and 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 a Principal of the Development Owner, General Partner, or Developer has the required experience.

(B) The names on the forms and agreements in subparagraph (A)(i) - (ix) of this paragraph must reflect that the individual seeking to provide experience is a Principal of the Development Owner, General Partner, or Developer as listed in the Application. For purposes of this requirement any individual attempting to use the experience of another individual or entity must demonstrate they had the authority to act on their behalf that substantiates the minimum 150 unit requirement.

(C) Experience may not be established for a Person who at any time within the preceding three years has been involved with affordable housing in another state in which the Person or Affiliate 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.

(D) 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.

(E) 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.

(7) Financing Requirements.

(A) Non-Department Debt Financing. Interim and permanent financing sufficient to fund the proposed Total Housing Development Cost less any other funds requested from the Department must be included in the Application. For any Development that is a part of a larger development plan on the same site, the Department may request and evaluate information related to the other components of the development plan in instances in which the financial viability of the Development is in whole or in part dependent upon the other portions of the development plan. Any local, state or federal financing identified in this section which restricts household incomes at any level that is lower than restrictions required pursuant to this chapter or elected in accordance with Chapter 11 of this title (relating to Housing Tax Credit Program Qualified Allocation Plan) must be identified in the rent schedule and the local, state or federal income restrictions must include corresponding rent levels in accordance with §42(g) of the Code. The income and corresponding rent restrictions will be memorialized in a recorded LURA and monitored for compliance. Financing amounts must be consistent throughout the Application and acceptable documentation shall include those described in clauses (i) and (ii) of this subparagraph.

(i) Financing is in place as evidenced by:

(I) a valid and binding loan agreement; and

(II) a valid recorded deed(s) of trust lien on the Development in the name of the Development Owner as grantor in favor of the party providing such financing and covered by a lender's policy of title insurance in their name;

(ii) Term sheets for interim and permanent loans issued by a lending institution or mortgage company that is actively and regularly engaged in the business of lending money must:

(I) have been signed by the lender;

(II) be addressed to the Development Owner or Affiliate;

(III) for a permanent loan, include a minimum loan term of fifteen (15) years with at least a thirty (30) year amortization;

(IV) include either a committed and locked interest rate, or the currently projected interest rate and the mechanism for determining the interest rate;

(V) include all required Guarantors, if known;

(VI) include the principal amount of the loan;

(VII) include an acknowledgement of the amounts and terms of all other anticipated sources of funds; and

(VIII) include and address any other material terms and conditions applicable to the financing. The term sheet may be conditional upon the completion of specified due diligence by the lender and upon the award of tax credits, if applicable; or

(iii) For Developments proposing to refinance an existing USDA Section 515 loan, a letter from the USDA confirming that it has been provided with the Preliminary Assessment Tool.

(B) Gap Financing. Any anticipated federal, state, local or private gap financing, whether soft or hard debt, must be identified and described in the Application. Applicants must provide evidence that an application for such gap financing has been made. Acceptable documentation may include a letter from the funding entity confirming receipt of an application or a term sheet from the lending agency which clearly describes the amount and terms of the financing. Other Department funding requested with Housing Tax Credit Applications must be on a concurrent funding period with the Housing Tax Credit Application, and no term sheet is required for such a request. Permanent loans must include a minimum loan term of fifteen (15) years with at least a thirty (30) year amortization or for non-amortizing loan structures a term of not less than thirty (30) years. A term loan request must also comply with the applicable terms of the NOFA under which an Applicant is applying.

(C) Owner Contributions. If the Development will be financed in part by a capital contribution by the General Partner, Managing General Partner, any other partner or investor that is not a partner providing the syndication equity, a guarantor or a Principal in an amount that exceeds 5 percent of the Total Housing Development Cost, a letter from a Third Party CPA must be submitted that verifies the capacity of the contributor to provide the capital from funds that are not otherwise committed or pledged. Additionally, a letter from the contributor's bank(s) or depository(ies) must be submitted confirming sufficient funds are readily available to the contributor. The contributor must certify that the funds are and will remain readily available at Commitment and until the required investment is completed. Regardless of the amount, all capital contributions other than syndication equity will be deemed to be a part of and therefore will be added to the Deferred Developer Fee for feasibility purposes under §10.302(i)(2) of this chapter (relating to Underwriting Rules and Guidelines) or where scoring is concerned, unless the Development is a Supportive Housing Development, the Development is not supported with Housing Tax Credits, or the ownership structure includes a nonprofit organization with a documented history of fundraising sufficient to support the development of affordable housing.

(D) Equity Financing. (§2306.6705(2) and (3)) If applicable to the program, the Application must include a term sheet from a syndicator that, at a minimum, includes:

(i) an estimate of the amount of equity dollars expected to be raised for the Development;

(ii) the amount of Housing Tax Credits requested for allocation to the Development Owner;

(iii) pay-in schedules;

(iv) anticipated developer fees paid during construction;

(v) syndicator consulting fees and other syndication costs. No syndication costs should be included in the Eligible Basis; and

(vi) include an acknowledgement of the amounts and terms of all other anticipated sources of funds.

(E) Financing Narrative. (§2306.6705(1)) A narrative must be submitted that describes all aspects of the complete financing plan for the Development, including but not limited to, the sources and uses of funds; construction, permanent and bridge loans, rents, operating subsidies, project-based assistance, and replacement reserves; and the status (dates and deadlines) for applications, approvals and closings, etc. associated with the commitments for all funding sources. For applicants requesting HOME funds, Match in the amount of at least 5 percent of the HOME funds requested must be documented with a letter from the anticipated provider of Match indicating the provider's willingness and ability to make a financial commitment should the Development receive an award of HOME funds. The information provided must be consistent with all other documentation in the Application.

(8) Operating and Development Cost Documentation.

(A) 15-year Pro forma. All Applications must include a 15-year pro forma estimate of operating expenses, in the form provided by the Department. Any "other" debt service included in the pro forma must include a description.

(B) Utility Allowances. This exhibit, as provided in the Application, must be submitted along with 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 and must comply with the requirements of §10.614 of this chapter (relating to Utility Allowances), including deadlines for submission. Where the Applicant uses any method that requires Department review, documentation indicating that the requested method has been granted by the Department must be included in the Application.

(C) Operating Expenses. This exhibit, as provided in the Application, must be submitted indicating the anticipated operating expenses associated with the Development. Any expenses noted as "other" in any of the categories must be identified. "Miscellaneous" or other nondescript designations are not acceptable.

(D) Rent Schedule. This exhibit, as provided in the Application, must indicate the type of Unit designation based on the Unit's rent and income restrictions. The rent and utility limits available at the time the Application is submitted should be used to complete this exhibit. Gross rents cannot exceed the maximum rent limits unless documentation of project-based rental assistance is provided and rents are consistent with such assistance and applicable legal requirements. The unit mix and net rentable square footages must be consistent with the site plan and architectural drawings. For Units restricted in connection with Direct Loans, the restricted Units will generally be designated "floating" unless specifically disallowed under the program specific rules. For Applications that propose utilizing Direct Loan funds, at least 90 percent of the Units restricted in connection with the Direct Loan program must be available to households or families whose incomes do not exceed 60 percent of the Area Median Income.

(E) Development Costs. This exhibit, as provided in the Application, must include the contact information for the person providing the cost estimate and must meet the requirements of clauses (i) and (ii) of this subparagraph.

(i) Applicants must provide a detailed cost breakdown of projected Site Work costs (excluding site amenities), if any, prepared by a Third Party engineer or cost estimator. If Site Work costs (excluding site amenities) exceed $15,000 per Unit and are included in Eligible Basis, a letter must be provided from a certified public accountant allocating which portions of those site costs should be included in Eligible Basis.

(ii) If costs for Off-Site Construction 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 Off-Site Cost Breakdown prepared by a Third Party engineer must be provided. The certification from a Third Party engineer must describe the necessity of the off-site improvements, including the relevant requirements of the local jurisdiction with authority over building codes. If any Off-Site Construction costs are included in Eligible Basis, a letter must be provided from a certified public accountant allocating which portions of those costs should be included in Eligible Basis. If off-site costs are included in Eligible Basis based on PLR 200916007, a statement of findings from a CPA must be provided which describes the facts relevant to the Development and affirmatively certifies that the fact pattern of the Development matches the fact pattern in PLR 200916007.

(F) Rental Assistance/Subsidy. (§2306.6705(4)) 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. Such documentation shall, at a minimum, identify 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.

(G) Occupied Developments. The items identified in clauses (i) - (vi) of this subparagraph must be submitted with any Application where any structure on the Development Site is occupied at any time after the Application Acceptance Period begins or if the Application proposes the demolition of any housing occupied at any time after the Application Acceptance Period begins. If the current property owner is unwilling to provide the required documentation then a signed statement from the Applicant attesting to that fact must be submitted. If one or more of the items described in clauses (i) - (vi) of this subparagraph is not applicable based upon the type of occupied structures on the Development Site, the Applicant must provide an explanation of such non-applicability. Applicant must submit:

(i) at least one of the items identified in subclauses (I) - (IV) of this clause:

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

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

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

(IV) 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;

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

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

(v) any documentation necessary for the Department to facilitate, or advise an Applicant with respect to or to ensure compliance with the Uniform Relocation Act and any other relocation laws or regulations as may be applicable; and

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

(9) Architectural Drawings. All Applications must include the items identified in subparagraphs (A) - (D) of this paragraph, unless specifically stated otherwise, and must be consistent with all applicable exhibits throughout the Application. The drawings must have a legible scale and show the dimensions of each perimeter wall and floor heights.

(A) For all New Construction, Reconstruction and Adaptive Reuse Developments a site plan is submitted that includes the items identified in clauses (i) - (v) of this subparagraph and for all Rehabilitation Developments, the site plan includes the items identified in clauses (i) - (ix) of this subparagraph:

(i) includes a unit and building type table matrix that is consistent with the Rent Schedule and Building/Unit Configuration forms provided in the Application;

(ii) identifies all residential and common buildings;

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

(iv) if applicable, indicates possible placement of detention/retention pond(s);

(v) indicates the location and number of the parking spaces;

(vi) indicates the location and number of the accessible parking spaces;

(vii) describes, if applicable, how flood mitigation or any other required mitigation will be accomplished;

(viii) delineates compliant accessible routes; and

(ix) indicates the distribution of accessible Units.

(B) Building floor plans must be submitted for each building type. Applications for Rehabilitation (excluding Reconstruction) are not required to submit building floor plans unless the floor plan changes. Applications for Adaptive Reuse are only required to include building plans delineating each Unit by number and type. Building floor plans must include square footage calculations for balconies, breezeways, corridors and any other areas not included in net rentable area;

(C) Unit floor plans for each type of Unit must be included in the Application and must include the square footage for each type of Unit. Applications for Adaptive Reuse are only required to include Unit floor plans for each distinct typical Unit type such as one-bedroom, two-bedroom and for all Unit types that vary in Net Rentable Area by 10 percent from the typical Unit; and

(D) Elevations must be submitted for each side of each building type (or include a statement that all other sides are of similar composition as the front) and include a percentage estimate of the exterior composition and proposed roof pitch. Applications for Rehabilitation and Adaptive Reuse may submit photographs if the Unit configurations are not being altered and post-renovation drawings must be submitted if Unit configurations are proposed to be altered.

(10) Site Control.

(A) Evidence that the Development Owner has Site Control must be submitted. If the evidence is not in the name of the Development Owner, then an Affiliate of the Development Owner must have Site Control that allows for an ability to assign the Site Control 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. The Department may request documentation at any time after submission of an Application of the Development Owner's ability to compel title of any affiliated property acquisition(s) and the Development Owner must be able to promptly provide such documentation or the Application, award, or Commitment may be terminated. The Department acknowledges and understands that the Property may have one or more encumbrances at the time of Application submission and the Department will take into account whether any such encumbrance is reasonable within the legal and financial ability of the Development Owner to address without delaying development on the timeline contemplated in the Application. Tax-Exempt Bond Lottery Applications must have Site Control valid through December 1 of the prior program year with the option to extend through March 1 of the current program year.

(B) In order to establish Site Control, one of the items described in clauses (i) - (iii) of this subparagraph must be provided. In the case of land donations, Applicants must demonstrate that the entity donating the land has Site Control as evidenced through one of the items described in clauses (i) - (iii) of this subparagraph or other documentation acceptable to the Department.

(i) a recorded warranty deed vesting indefeasible title in the Development Owner or, if transferrable to the Development Owner, an Affiliate of the Owner, with corresponding executed settlement statement (or functional equivalent for an existing lease with at least forty-five (45) years remaining); or

(ii) a contract or option for lease with a minimum term of forty-five (45) years that includes a price; address and/or legal description; proof of consideration in the form specified in the contract; and expiration date; or

(iii) a contract for sale or an option to purchase that includes a price; address and/or legal description; proof of consideration in the form specified in the contract; and expiration date;

(C) If the acquisition can be characterized as an identity of interest transaction, as described in §10.302 of this chapter, then the documentation as further described therein must be submitted in addition to that of subparagraph (B) of this paragraph.

(11) Zoning. (§2306.6705(5)) Acceptable evidence of zoning for all Developments must include one of subparagraphs (A) - (D) of this paragraph. In instances where annexation of a Development Site occurs while the Application is under review, the Applicant must submit evidence of appropriate zoning with the Commitment or Determination Notice.

(A) No Zoning Ordinance in Effect. The Application must include a letter from a local government official with appropriate jurisdiction stating that the Development is located within the boundaries of a political subdivision that has no zoning.

(B) Zoning Ordinance in Effect. The Application must include a letter from a local government official with appropriate jurisdiction stating the Development is permitted under the provisions of the zoning ordinance that applies to the location of the Development.

(C) Requesting a Zoning Change. The Application must include evidence in the form of a letter from a local government official with jurisdiction over zoning matters that the Applicant or Affiliate has made formal application for a required zoning change and that the jurisdiction has received a release whereby the applicant for the zoning change has agreed to hold the political subdivision and all other parties harmless in the event the appropriate zoning is not granted. Documentation of final approval of appropriate zoning must be submitted to the Department with the Commitment or Determination Notice.

(D) Zoning for Rehabilitation Developments. In an area with zoning, the Application must include documentation of current zoning. If the Property is currently conforming but with an overlay that would make it a non-conforming use as presently zoned, the Application must include a letter from a local government official with appropriate jurisdiction which addresses the items in clauses (i) - (v) of this subparagraph:

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

(ii) the applicable destruction threshold;

(iii) that it will allow the non-conformance;

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

(v) penalties for noncompliance.

(12) Title Commitment/Policy. A title commitment or title policy must be submitted that includes a legal description that is consistent with the Site Control. If the title commitment or policy is dated more than six (6) months prior to the beginning of the Application Acceptance Period, then a letter from the title company indicating that nothing further has transpired during the six-month period on the commitment or policy must be submitted.

(A) The title commitment must list the name of the Development Owner as the proposed insured and lists the seller or lessor as the current owner of the Development Site.

(B) The title policy must show that the ownership (or leasehold) of the Development Site is vested in the name of the Development Owner.

(13) Ownership Structure and Previous Participation.

(A) Organizational Charts. A chart must be submitted that clearly illustrates the complete organizational structure of the final proposed Development Owner and of any Developer and Guarantor, identifying all Principals thereof and providing the names and ownership percentages of all Persons having an ownership interest in the Development Owner, Developer and 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) Previous Participation. Evidence must be submitted that each entity shown on the organizational chart described in subparagraph (A) of this paragraph that the Development Owner and each Affiliate (with an ownership interest in the Development), including entities and individuals (unless excluded under 10 TAC Chapter 1, Subchapter C) has provided a copy of the completed previous participation information to the Department. Individual Principals of such entities identified on the organizational chart must provide the previous participation information, unless excluded from such requirement pursuant to Chapter 1 Subchapter C of this title. In addition, any Person (regardless of any Ownership interest or lack thereof) receiving more than 10 percent of the Developer Fee is also required to submit this information. The information must include a list of all developments that are, or were, previously under ownership or Control of the Applicant and/or each Principal, including any Person providing the required experience. All participation in any Department 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. The individuals providing previous participation information will authorize the parties overseeing such assistance to release compliance histories to the Department.

(14) Nonprofit Ownership. Applications that involve a §501(c)(3) or (4) nonprofit General Partner or Owner shall submit the documentation identified in subparagraph (A) or (B) of this paragraph as applicable.

(A) Competitive HTC Applications. Applications for Competitive Housing Tax Credits involving a §501(c)(3) or (4) nonprofit General Partner and which meet the Nonprofit Set-Aside requirements, 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 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 documentation in subparagraph (B) of this paragraph.

(i) An IRS determination letter which states that the nonprofit organization has been determined by the Internal Revenue Service to be tax-exempt under §501(c)(3) or (4) of the Code;

(ii) The Nonprofit Participation exhibit as provided in the Application, including a list of the names and contact information for all board members, directors, and officers;

(iii) 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;

(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;

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

(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;

(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;

(VI) that the nonprofit organization has the ability to do business as a nonprofit in Texas;

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

(v) 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.

(B) All Other Applications. Applications that involve a §501(c)(3) or (4) nonprofit General Partner or Owner must submit an IRS determination letter which states that the nonprofit organization has been determined by the Internal Revenue Service to be tax-exempt under §501(c)(3) or (4) of the Code; and the Nonprofit Participation exhibit as provided in the Application. If the Application involves a nonprofit that is not exempt from taxation under §501(c)(3) or (4) of the Code, then they must disclose in the Application the basis of their nonprofit status.

(15) Site Design and Development Feasibility Report. This report, compiled by the Applicant or Third Party Consultant, and prepared in accordance with this paragraph, which reviews site conditions and development requirements of the Development and Development Site, is required for any New Construction or Reconstruction Development.

(A) Executive Summary as a narrative overview of the Development in sufficient detail that would help a reviewer of the Application better understand the site, the site plan, off site requirements (including discussion of any seller contributions or reimbursements), any other unique development requirements, and their impact on Site Work and Off Site Construction costs. The summary should contain a general statement regarding the level of due diligence that has been done relating to site development (including discussions with local government development offices). Additionally, the overview should contain a summary of zoning requirements, subdivision requirements, property identification number(s) and millage rates for all taxing jurisdictions, development ordinances, fire department requirements, site ingress and egress requirements, building codes, and local design requirements impacting the Development (include website links but do not attach copies of ordinances). Careful focus and attention should be made regarding any atypical items materially impacting costs or the successful and timely execution of the Development plan.

(B) Survey or current plat as defined by the Texas Society of Professional Surveyors in their Manual of Practice for Land Surveying in Texas (Category 1A - Land Title Survey or Category 1B - Standard Land Boundary Survey). Surveys may not be older than twelve (12) months from the beginning of the Application Acceptance Period. Plats must include evidence that it has been recorded with the appropriate local entity and that, as of the date of submission, it is the most current plat. Applications proposing noncontiguous single family scattered sites are not required to submit surveys or plats at Application, but this information may be requested during the Real Estate Analysis review.

(C) Preliminary site plan prepared by the civil engineer with a statement that the plan materially adheres to all applicable zoning, site development, and building code ordinances. The site plan must identify all structures, site amenities, parking spaces (include handicap spaces and ramps) and driveways, topography (using either existing seller topographic survey or U.S. Geological Survey (USGS)/other database topography), site drainage and detention, water and waste water utility tie-ins, general placement of retaining walls, set-back requirements, and any other typical or locally required items. Off-site improvements required for utilities, detention, access or other requirement must be shown on the site plan or ancillary drawings.

(D) Architect or civil engineer prepared statement describing the entitlement, site development permitting process and timing, building permitting process and timing, and an itemization specific to the Development of total anticipated impact, site development permit, building permit, and other required fees.

(16) Section 811 Project Rental Assistance Program. All Competitive HTC Applications, Direct Loan only Applications and Tax-Exempt Bond Development Applications that are layered with Direct Loan funds must meet the requirements of subparagraphs (A) or (B) of this paragraph. Applications that are unable meet the requirements of subparagraphs (A) or (B) must certify to that effect in the Application.

(A) Applicants must apply for and obtain a determination by the Department that an Existing Development is approved to participate in the Department's Section 811 Project Rental Assistance Program ("Section 811 PRA Program"). The approved Existing Development must commit at least the lower of 10 units or 10% of the total number of Units in the Development to the Section 811 PRA Program unless the Integrated Housing Rule (10 TAC §1.15) or Section 811 PRA Program guidelines (§PRA.305) or other requirements limit the proposed Development to fewer than 10 Units. An approved Existing Development may be used to satisfy the requirements of this paragraph in more than one Housing Tax Credit or other Multifamily Housing program Application, as long as at the time of Carryover, Award Letter or Determination Notice, as applicable, the minimum number of Units as stated above are provided for each Development awarded housing tax credits or Direct Loan funds. Once an Applicant submits their Application, Applicants may not withdraw their commitment to satisfy the threshold criteria of this subparagraph, although an Applicant may request to utilize a different approved Existing Development than the one submitted in association with the awarded Application to satisfy this criteria. Existing Developments that are included in an Application that does not receive an award are not obligated to participate in the Section 811 PRA Program. An Applicant may be exempt from having to provide 811 units in an Existing Development if approval from either their lender or investor cannot be obtained and documentation to that effect is submitted in the Application, but they would be required to provide such Units through subparagraph (B) of this paragraph.

(B) Applicants that cannot meet the requirements of subparagraph (A) of this paragraph must submit evidence of such through a self-certification that the Applicant and any Affiliate do not have an ownership interest in or control of any Existing Development that would meet the criteria outlined in the Section 811 PRA Program Request for Applications, and if applicable, by submitting a copy of any rejection letter(s) that have been provided in response to the Request for Applications. In such cases, the Applicant is able to satisfy the threshold requirement of this paragraph through this subparagraph (B). Applications must meet all of the requirements in clauses (i) - (v) of this subparagraph. Applicants must commit at least the lower of 10 Units or 10% of the total number of Units in the Development for which the Application(s) has been submitted for participation in the Section 811 PRA Program unless the Integrated Housing Rule (10 TAC §1.15) or Section 811 PRA Program guidelines or other requirements limit the proposed Development to fewer than 10 Units. Once elected in the Application(s), Applicants may not withdraw their commitment to have the proposed Development participate in the Section 811 PRA Program unless the Department determines that the Development cannot meet all of the Section 811 PRA Program criteria or the Applicant chooses to request an amendment by Carryover, Award Letter, or subsequent to the issuance of the Determination Notice but prior to closing (for Tax-Exempt Bond Developments), or to place the Units on an Approved Existing Development. If the Applicant or an Affiliate obtain an ownership interest in an Approved Existing Development, the Applicant can submit an Amendment request authorizing that the Application satisfies this criteria under subparagraph (A), not subparagraph (B). Such an Amendment request will be considered a non-material change that has not been implemented, and Applicants will not be subject to the amendment fee required under §10.901(13) (relating to Fee Schedule, Appeals and other Provisions).

(i) The Development must not be an ineligible Elderly Development;

(ii) Unless the Development is also proposing to use any federal funding, the Development must not be originally constructed before 1978;

(iii) The Development must have Units available to be committed to the Section 811 PRA Program in the Development, meaning that those Units do not have any other sources of project-based rental assistance within 6 months of receiving Section 811 PRA Program assistance, not have an existing use restriction for Extremely Low-income households, and the Units do not have an existing restriction for Persons with Disabilities;

(iv) The Development Site must be located in one of the following areas: Austin-Round Rock MSA, Brownsville-Harlingen MSA, Corpus Christi MSA; Dallas-Fort Worth-Arlington MSA; El Paso MSA; Houston-The Woodlands-Sugar Land MSA; McAllen-Edinburg-Mission MSA; or San Antonio-New Braunfels MSA; and

(v) No new construction activities or projects shall be located in the mapped 500-year floodplain or in the 100-year floodplain according to FEMA's Flood Insurance Rate Maps (FIRM). Rehabilitation Developments that have previously received HUD funding or obtained HUD insurance do not have to follow sections (i) - (iii) of this subparagraph. Existing structures may be assisted in these areas, except for sites located in coastal high hazard areas (V Zones) or regulatory floodways, but must meet the following requirements:

(I) The existing structures must be flood-proofed or must have the lowest habitable floor and utilities elevated above both the 500-year floodplain and the 100-year floodplain.

(II) The project must have an early warning system and evacuation plan that includes evacuation routing to areas outside of the applicable floodplains.

(III) Project structures in the 100-year floodplain must obtain flood insurance under the National Insurance Program. No activities or projects located within the 100-year floodplain may be assisted in a community that is not participating in or has been suspended from the National Flood Insurance Program.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606436

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-2973


SUBCHAPTER D. UNDERWRITING AND LOAN POLICY

10 TAC §§10.301 - 10.307

The Texas Department of Housing and Community Affairs (the "Department") adopts the repeal of 10 TAC Chapter 10, Subchapter D, §§10.301 - 10.307 concerning 2016 Underwriting and Loan Policy without changes to the proposed text as published in the September 23, 2016, issue of the Texas Register (41TexReg 7333).

REASONED JUSTIFICATION. This repeal was published concurrently with the proposed adoption of the new 10 TAC Chapter 10, Subchapter D, §§10.301 - 10.306 concerning 2017 Underwriting and Loan Policy. The purpose of the repeal is to allow for the rewrite of portions of the rule.

The Department accepted public comments between September 23, 2016, and October 14, 2016. Comments regarding the repeal were accepted in writing via fax and email. No comments were received concerning the proposed repeal.

The Board approved the final order adopting the repeal on November 10, 2016.

STATUTORY AUTHORITY. The repeal is adopted pursuant to Tex. Gov't Code §2306.053, which authorizes the Department to adopt rules. Specifically Tex. Gov't Code §2306.141 gives the Department the authority to promulgate rules governing the administration of its housing programs. The proposed repeal affects no other code, article or statute.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606425

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-2973


10 TAC §§10.301 - 10.307

The Texas Department of Housing and Community Affairs (the "Department") adopts new 10 TAC Chapter 10, Subchapter D, §§10.301 - 10.306, concerning Underwriting and Loan Policy, with changes to the proposed text as published in the September 23, 2016 issue of the Texas Register (41 TexReg 7333).

REASONED JUSTIFICATION FOR THE RULE: The proposed new 10 TAC Chapter 10, Subchapter D, §§10.301 - 10.306, concerning Underwriting and Loan Policy was published concurrently with the proposed repeal of the same section. The new rule clarifies language that was potentially causing uncertainty in the rules and in some instances will require additional supportive information to ensure accurate processing of underwriting activities and communicate the underwriting analysis and recommendations for funding or award by the Department more effectively.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS: The Department accepted public comments between September 23, 2016 and October 14, 2016. Comments regarding new sections and the proposed staff changes were accepted at a public hearing and in writing. Written comments were received from: (1) Doak Brown, Brownstone Affordable Housing, Ltd.; (2) Leslie Holleman, Leslie Holleman & Associates, Inc.; (3) Apolonio Flores, Flores Residential, L.C.; (4) Texas Coalition of Affordable Developers (TX-CAD); (5) Marque Real Estate Consultants; (6) Evon Harris, Evolie Housing Partners; (7) Dominium; (8) Barry J. Palmer, Coats | Rose; (9) Texas Affiliation of Affordable Housing Providers; (10) Terri Anderson, Anderson Development & Construction, LLC; (11) Bob Coe, Affordable Housing Analysts; (12) Darrell G. Jack, Apartment MarketData, (13) Naomi Byrne, Fort Worth Housing Solutions; (14) Blake Rue, Oryx Group; and, (15) Chris Akbari, ITEX Group.

New language will be ALL CAPITALS and deleted language will be italicized.

1. §10.302(d)(4)(D) Acceptable Debt Coverage Ratio Range ("DCR") (7)

COMMENT SUMMARY: Commenter (7) proposes increasing the maximum DCR for tax-exempt bond deals that are 80% or greater project based Section 8 because lenders and investors may underwrite more conservatively and require a higher DCR (greater than 1.35 or even 1.50). Commenter (7) also states this change will allow flexibility to make it easier to preserve HUD-assisted developments.

STAFF RESPONSE: Staff disagrees with commenter's suggested change primarily because it would be inconsistent with the evaluation required under IRC 42(m)(2). Also, the rules already allow for exemptions for additional flexibility in deals that are 50% or greater project based Section 8.

The acceptable debt coverage ratio range serves two purposes. First, the minimum 1.15 times DCR serves to cap the amount of debt on a property to minimize default risk. TDHCA's 1.15 times DCR minimum requirement is lower than the industry standard of 1.20 to 1.25 times providing applicants with more flexibility in structuring their transaction. Lenders and syndicators are going to apply their own credit standards and underwriting guidelines that will certainly be different than the Department's guidelines.

Second, the maximum 1.35 times DCR serves to ensure that tax credits are being efficiently allocated (serves as a sizing tool). This tool addresses the requirement in IRC 42(m)(2)(A) that "The housing credit dollar amount allocated to a project shall not exceed the amount the housing credit agency determines is necessary for the financial feasibility of the project and its viability as a qualified low-income housing project throughout the credit period." A DCR greater than 1.35 times indicates that a property can support additional debt and therefore require less tax credits. Lenders and syndicators do not have a maximum DCR as their interest is only the default risk.

At initial underwriting, the capital structure assumptions, including the pro forma net operating income, are merely preliminary. Each lender and syndicator underwrites the transaction based on their own guidelines and risk tolerances. Regardless, all financing participants including TDHCA recognize that there will be a re-underwriting of the transaction at some point in the future based on actual cost and operating information and not on the up front assumptions.

In addition, §10.302(i)(6)(B) allows for exceptions to expense ratio, pro forma rents, and long-term feasibility for Developments that will receive Section 8 vouchers for at least 50% of the Units. These exemptions allow for flexibility in the operating assumptions for Section 8 developments while not inflating eligible basis.

Staff does not recommend any changes to the proposed rule in this section.

2. §10.302(d)(4)(D)(i)(I) Acceptable Debt Coverage Ratio Range (10)

COMMENT SUMMARY: Commenter (10) suggests that REA should not decrease the Direct Loan below an amount that would require more than 50% of the developer fee be deferred, but instead adjust the interest rate and amortization term of the Direct Loan to achieve a 1.15 DCR minimum. Commenter suggests that 100% deferred developer fee makes a transaction more risky.

STAFF RESPONSE: Staff agrees that limiting the amount of developer fee that can be deferred warrants discussion, but the eventual sizing of the deferred fee amount is under control of the Applicant and financing partners. Limiting the fee could potentially increase the tax credit award to an amount greater than is needed for financial feasibility. Regardless, the commenter's proposed change is too significant to address at this time as it is not a natural outgrowth of the proposed changes. Additionally, because the comment is related to the sizing and terms of a Direct Loan, commenter's suggestions have been forwarded to the Multifamily Loan Program. The Multifamily Direct Loan Rule 10 TAC Chapter 13 is out for public comment from October 28, 2016 to November 28, 2016.

Staff does not recommend any changes to the proposed rule in this section.

3. §10.302(e)(1)(C) Acquisition from Seller without current Title (1), (3), (5), (14)

COMMENT SUMMARY: Commenter (14) opposes the proposed rule stating: (1) that it would increase development site costs; (2) undermine TDHCA policies; (3) generate potential legislative and legal risk for TDHCA; (4) that it takes a long time to close on land in tax credit deals and many contracts never close if tax credits are not awarded; (5) that land sellers dislike long term contracts and often require a premium purchase price for a long term contract; and, (6) that an Intermediary Purchaser allows lower land costs because the contract term is shorter and therefore the Seller does not charge a premium purchase price.

Commenter (14) also states, "By adopting the Proposed Acquisition Language TDHCA would undermine its own policies by limiting locations where affordable housing could be developed. Intermediary Purchasers, through our flexibility to close on development sites within typical short term timeframes, expand the potential locations of affordable housing in line with TDHCA policies and thereby promote TDHCAs goals and mission."

Lastly, Commenter (14) states that the proposed rule is an "infringement on legally recognized private property rights." The example provided, "Let's look at a scenario where the adoption of the Proposed Acquisition Language could ultimately lead. Landowner A owns legal title to a development site. As previously mentioned legal title, like equitable title, is a private property right recognized by the state of Texas. In February of 20xx, a developer, who has secured an award of tax credits, requests a contract extension from Landowner A. Landowner A, who has no interaction, affiliation, obligation or duty to TDHCA or the developer, over the past 12 months has become educated and realizes his property has significantly increased in value now that an award of tax credits has been secured by the developer. Landowner A now doubles or even triples his required price to the maximum amount he believes a developer could pay. Will TDHCA now attempt to restrict the price for which Landowner A can sell his property to the developer?"

Commenter (1) and (3) state agreement with Commenter (14).

Commenter (5) suggests additional language, "Something to the effect that if the applicant is not purchasing the land from the current title holder (most don't) then the applicant must require in the purchase and sale agreement with the seller that a copy of the closing statement or other evidence of amount paid to the title holder will be provided to the applicant and be submitted at 10% test. Most control the land then assign control via the buy sell agreement to the LP. So they won't care. Those that are flipping the land will care and make noise. The process may impede the intent on this one."

STAFF RESPONSE: Pursuant to IRC §42(m)(2), the Department is legally bound to allocate tax credits in an amount no more than necessary to make a Development financially feasible. Part of that determination requires the Department to determine the "reasonableness of the developmental and operational costs of the project." As land cost is part of the total development costs, the Department is obligated to evaluate its reasonableness.

§2306.6701 requires the Department to administer the tax credit program to "maximize the number of suitable, affordable residential rental units added to the state's housing supply." The impact of providing more credits than needed on one transaction affects the amount of tax credits available for other applications. Over sourcing on one application results in the Department awarding fewer applications generating fewer affordable units which is inconsistent with statute.

Although the proposed language would not restrict or limit the purchase price being paid by the Applicant to the intermediary, or the price being paid by the intermediary to the current title holder, nor does it impact or mandate contractual terms between private parties, staff believes, based on comment that the proposed rule warrants further discussion with stakeholders to ensure it is effective in optimizing the results it is intended to achieve and is consistent with statute.

With regard to Commenter (5), the Department requires a title policy showing the current owner. If the current owner is not the seller pursuant to the Application, then the intermediary contract is to be provided during the application review process. Therefore, the information suggested at 10% Test is not necessary.

Therefore, staff recommends removal of the proposed language.

(C) Acquisition from Seller without current Title. In cases where as of the first day of the Application Acceptance Period the seller does not hold title to the property, the acquisition price will be limited to the acquisition price between the seller and the current title holder unless the seller can document land improvement costs or work to be performed by the seller as obligated in the site control documents. If the seller is acquiring more land from the current title holder than will be conveyed to the Applicant [whether under a single or multiple purchase contract(s)], the value ascribed to the proposed Development Site will be determined according to §10.302(e)(1)(A).

4. §10.302(e)(7) Developer Fee (10)

COMMENT SUMMARY: Commenter (10) states the maximum allowable deferred developer fee should be 50% before an application is deemed infeasible.

STAFF RESPONSE: Staff believes this comment is better addressed in §10.302(c)(2) Gap Method which states, "This method evaluates the amount of funds needed to fill the gap created by Total Housing Development Cost less total non Department sourced funds or Housing Tax Credits. In making this determination, the Underwriter resizes any anticipated deferred developer fee downward (but not less than zero) before reducing the amount of Department funds or Housing Tax Credits."

Staff agrees that limiting the amount of developer fee that can be deferred warrants discussion, but the commenter's proposed change is too significant to address at this time, as it is not a natural outgrowth of the proposed changes.

Staff does not recommend any changes to the proposed rule in this section.

5. §10.302(e)(7)(C)(i) Developer Fee (15)

COMMENT SUMMARY: Commenter (15) requests an increase of developer fees for RAD transactions. Commenter (15) proposes the following addition to the rule to allow RAD transactions to become feasible in areas where the rents are lower:

"(i) the allocation of eligible Developer fee in calculating Rehabilitation/New Construction Housing Tax Credits will not exceed 15 percent of the Rehabilitation/New Construction eligible costs less Developer fees for Developments proposing fifty (50) Units or more and 20 percent of the Rehabilitation/New Construction eligible costs less Developer fees for Developments proposing EITHER HUD RENTAL ASSISTANCE DEMONSTRATION PROGRAM OR HAVE forty-nine (49) Units or less;"

STAFF RESPONSE: Staff evaluated the complexity of converting public housing under the HUD Rental Assistance Demonstration ("RAD") program. The Real Estate Analysis division has underwritten RAD transactions and understands the complexity of combining RAD assistance with tax exempt bond transactions. The RAD program is a HUD program in which guidance and program requirements are changing and evolving. Staff believes that the overhead and resources required of housing authorities to participate in the program on tax exempt bond transactions, due to their inherent complexity, represent additional Developer Services above those already defined in rule. For these reasons, the increase in developer fee was added in 2016.

Comments for the 2016 rules suggested that the developer fee calculation also be based on the building acquisition basis. The comments did not provide evidence of a relationship between the value of a building and Developer Services.

Staff does not recommend any changes to the proposed rule in this section.

6. §10.302(e)(7)(C)(ii) Developer Fee (15), (13)

COMMENT SUMMARY: Commenter (15) requests that the Department allow for developer fee on Identity of Interest acquisition transactions that are utilizing Project-Based Section 8 Rental Assistance or HUD Rental Assistance Demonstration Program. Commenter (15) proposes the following addition to the rule:

"(ii) no Developer fee attributable to an identity of interest acquisition of the Development will be included UNLESS THE PROJECT IS UTILIZING PROJECT-BASED SECTION 8 RENTAL ASSISTANCE OR THE HUD RENTAL ASSISTANCE DEMONSTRATION PROGRAM FOR AT LEAST 50 PERCENT OF THE UNITS."

Commenter (13) suggests allowing a 15% developer fee on acquisition costs in 4% tax credit transactions if financed through the RAD Program as this would reflect the work that is required in seeking the necessary HUD approval, such as for demolition/disposition and RAD. Commenter (13) also states that the 4% program is not competitive, so this change would not harm other developments' feasibility.

STAFF RESPONSE: The requested change would provide additional tax credits on the eligible basis associated with building value. Building value is determined by related parties.

Staff believes that the overhead and resources required of housing authorities to participate in the program on tax exempt bond transactions, due to the inherent complexity of bond transactions, represent additional Developer Services above those already defined in rule however there is no demonstrated relationship between the value of a building and Developer Services. Based on these same comments in the development of 2016 rules, the overall fee for RAD/Bond transactions was increased in the 2016 rules to 20% for the increase in Developer Services and not for building value.

Staff does not recommend any changes to the proposed rule in this section.

7. §10.302(e)(9) Reserves (1), (2), (3), (6)

COMMENT SUMMARY: Commenters (1), (2), (3), and (6) all suggest the same change to the proposed rule to include initial deposits to required voucher reserves in reserve calculation:

"(9) In no instance at initial underwriting will total reserves exceed twelve (12) months of stabilized operating expenses plus debt service (and only for USDA or HUD financed rehabilitation transactions the initial deposits to replacement reserves, INITIAL DEPOSITS TO REQUIRED VOUCHER RESERVES and transferred replacement reserves for USDA or HUD financed rehabilitation transactions)."

STAFF RESPONSE: Voucher reserves are generally a lender requirement to provide contingent operating funds should the rental assistance payments by HUD or USDA be decreased or eliminated. Generally the rent provided by the rental assistance is higher than the tax credit or achievable market rents. While staff understands the concern, the reserves can be substantial (as high as $20K per unit in some cases) and the amount is determined on the lender's underwriting to cover their own risk. Staff believes that the entire underwriting assumes that the rental subsidy is in place and the preservation of that subsidy is the rationale for providing tax credits to the application. Staff believes that tax credits should not be sourcing the reserves. While not to be included in staff's underwriting, staff is not limiting the amount of reserves that can be sourced in other ways, subject to the gap methodology.

Staff does not recommend any changes to the proposed rule in this section.

8. §10.303 Market Study (7)

COMMENT SUMMARY: Commenter (7) suggests a market study not be required for existing tax credit and Section 8 properties if they are not moving rents more than 5% and have been at least 90% occupied over the past 12 months. Commenter (7) states this is an inefficient use of time and money.

STAFF RESPONSE: IRC §42(m)(1)(A)(iii) requires a comprehensive market study of the housing needs of low-income individuals in the area to be served by the project is conducted before the credit allocation is made and at the developer's expense by a disinterested party who is approved by the state agency.

Staff does not recommend any changes to the proposed rule in this section.

9. §10.303(d)(8)(B)(i)(V) Secondary Market Area and §10.303(d)(9)(B)(i)(V) Primary Market Area (11)

COMMENT SUMMARY: Commenter (11) states that the proposed rule is vague and would like to see a minimum number of employment concentrations required.

STAFF RESPONSE: The general intent of this proposed rule is to show where concentrations of income qualified households and income qualifying employment are located in the Primary Market Area (PMA) and Secondary Market Area (SMA). This information allows staff and the Market Analyst to see where the income qualifying people are living and where they are likely to travel for jobs in relation to the Subject property.

Staff believes this type of analysis will only apply in certain situations and is not necessary for every Market Study, and that it is more suitable to be shown by density maps than in the definition of the PMA and SMA.

Staff recommends the removal of the specific subsections of the proposed rule requiring this information on all transactions and will request information on households and employment concentrations on a case-by-case basis as allowed for in §10.303(e).

The change to the proposed rule is combined with Item 10 and shown below.

10. §10.303(d)(8)(B)(i)(VI) Secondary Market Area and §10.303(d)(9)(B)(i)(VI) Primary Market Area (11)

COMMENT SUMMARY: Commenter (11) states: (1) that the proposed rule will increase the cost of market studies and add nothing useful to the demand analysis; (2) that current scoring is pushing tax credit developments into high opportunity areas which have fewer low/moderate income renter households and therefore will not necessarily be within a one mile radius of the Subject; and, (3) that market analysts will have to run additional demographic reports and demand analysis for the 1-mile radius.

STAFF RESPONSE: The general intent of this proposed rule evaluates whether the households in the immediate area can afford the Pro Forma Rents. If household incomes in the immediate area are lower than the county median income that the Pro Forma rents are calculated off of, then local households may not be able to afford the Pro Forma Rents. This is very important when Pro Forma rents are close to the breakeven rents as this affects the Development's financial feasibility.

The place/city median income is available on the Census Bureau website and would not require additional demographics or demand analysis calculated by the Market Analyst. It would require additional discussion if the local incomes could not support the Pro Forma Rents.

Staff believes this proposed rule is more relevant to §10.303(d)(9)(B)(i)(VI) regarding the Primary Market Area only and should not be included in reference to the Secondary Market Area.

The proposed language will be removed from §10.303(d)(8)(B)(i)(VI) Secondary Market Area and modified in §10.303(d)(9)(B)(i)(VI) Primary Market Area.

Proposed changes to the staff proposed rule resulting from comment #9 and #10:

§10.303(d)(8)(B)(i)(V) Secondary Market Area

(B) The Market Analyst's definition of the SMA must include:

(i) a detailed narrative specific to the SMA explaining;

(I) how the boundaries of the SMA were determined with respect to census tracts chosen and factors for including or excluding certain census tracts in proximity to the Development;

(II) whether a more logical market area within the SMA exists but is not definable by census tracts and how this subsection of the SMA supports the rationale for the defined SMA, and also explains how the SMA relates to the PMA in terms of its qualitative and quantitative aspects;

(III) what are the specific attributes of the Development's location within the SMA that would draw prospective tenants currently residing in other areas of the SMA to relocate to the Development;

(IV) what are the specific attributes, if known, of the Development itself that would draw prospective tenants currently residing in other areas of the SMA to relocate to the Development; AND

(V) the household and employment concentrations across the SMA and proximity to the Development;

(VI) that prospective tenants within one mile of the Development will be able to afford the Pro Forma rent or if not provide further comment on where eligible demand will come from; and

(V)(VII) other housing issues in general, if pertinent.

§10.303(d)(9)(B)(i)(V) Primary Market Area

(B) The Market Analyst's definition of the PMA must include:

(i) a detailed narrative specific to the PMA explaining:

(I) how the boundaries of the PMA were determined with respect to census tracts chosen and factors for including or excluding certain census tracts in proximity to the Development;

(II) whether a more logical market area within the PMA exists but is not definable by census tracts and how this subsection of the PMA supports the rationale for the defined PMA;

(III) what are the specific attributes of the Development's location within the PMA that would draw prospective tenants currently residing in other areas of the PMA to relocate to the Development;

(IV) what are the specific attributes, if known, of the Development itself that would draw prospective tenants currently residing in other areas of the PMA to relocate to the Development;

(V) the household and employment concentrations across the PMA and proximity to the Development;

(V) (VI) that prospective tenants within one mile of the Development THE MEDIAN INCOME (AS REPORTED ON THE CENSUS BUREAU WEBSITE) OF THE CITY, TOWN OR PLACE WHERE THE SUBJECT IS LOCATED AND IF THIS MEDIAN INCOME will be able to afford SUPPORT the Pro Forma rent or if not provide further comment on where eligible demand will come from;and

(VI) (VII) other housing issues in general, if pertinent.

11. §10.303(d)(9)(A)(i) Primary Market Area (12)

COMMENT SUMMARY: Commenter (12) states that the proposed rule is likely to cause the market analyst to have to perform two demand calculations: 1) using the smallest PMA they believe will provide sufficient demand to meet the capture rate threshold, and 2) a larger PMA (likely 100,000 pop.) so that a larger PMA may be considered if the staff's demand number is lower than that calculated by the market analyst. Commenter (12) suggests language be added that would allow the market analyst to submit a modified demand calculation (increasing the population) after the market study deadline if staff determines lower demand on the original PMA.

STAFF RESPONSE: The proposed change to the rule is meant to clarify that Primary Market Areas (PMAs) should not automatically be pushed to the 100,000 population maximum, but instead reflect the logical area that the Market Analyst believes most of the demand for Subject units will come from. The limit should not be used as a target population.

In most Market Studies, the proposed change will not have any effect, but instead gives Staff the ability to request updated information if the PMA is geographically large, and there is insufficient explanation of why demand will come from the large area. This is especially important when a large PMA produces a very low capture rate.

Staff does not recommend any changes to the proposed rule in this section.

12. §10.303(d)(10)(F) Employment (11)

COMMENT SUMMARY: Commenter (11) states that the proposed rule is vague and he would like to see a minimum number of employment opportunities that must be listed. Commenter (11) also states that getting information on employee income levels is very difficult.

STAFF RESPONSE: Income qualifying employment opportunities in the Primary Market Area (PMA) are essential to understanding the demand for Subject units. The proposed language requires the Market Analyst to discuss current or planned employment opportunities in the PMA as this affects where households will locate. Proximity of the Development to the employment centers and traffic patterns must be part of the analysis. For example, if there is a planned distribution center nearby, this may be a reason for income qualified households to move to the area.

Staff does not feel that putting a minimum requirement for employment centers is necessary; Market Analysts should include general employment information/largest employers, etc. as they do now, and also include any planned or current employment opportunities that are a driving factor for income qualified households to relocate or remain in the area.

To clarify, the proposed language does not assume the Market Analyst will verify incomes for all jobs in the PMA, but instead, will do general analysis to see if the jobs that are listed in their report, particularly those in proximity to the Development and within a reasonable drive time, are likely to income qualify for the Pro Forma rents. This will be especially important if a Market Study states that a planned employment opportunity in the PMA is a large factor in drawing tenants to the Subject. In these cases, the Market Analyst should do further research to see if the jobs they reference are indeed, income eligible.

Staff does not recommend any changes to the proposed rule in this section.

13. §10.304(d)(10)(B) Value Estimates (4), (8), (9), (13), (15)

COMMENT SUMMARY: Commenters (4), (8), (9), (13), and (15) all propose the same change to the rule allowing RAD deals to be appraised at unrestricted market rents instead of the post conversion restricted rents.

"(B) For existing Developments with any project based rental assistance that will remain with the property after the acquisition, the appraisal must include an "as is as currently restricted value". For public housing converting to project based rental assistance, the value must be based on the post conversion restricted rents and must consider any other ongoing restrictions that will remain in place even if not affecting rents THE UNRESTRICTED MARKET RENTS. If the rental assistance has an impact on the value, such as use of a lower capitalization rate due to the lower risk associated with rental rates and/or occupancy rates on project based developments, this must be fully explained and supported to the satisfaction of the Underwriter."

Commenter (4) provided further information, "Nationwide a number of closed RAD transactions have been awarded acquisition credits based on building values derived using market rents under the income approach. Tax counsel for these transactions have opined that this approach is reasonable, as have national accounting and appraisal firms. The reason this approach has been accepted nationwide is that in the "As Is" condition public housing developments operate on a breakeven basis, preventing an accurate valuation under the income approach. There are several ways in which HUD may allow the release of public housing restrictions. For public housing converting to Section 8 assistance, at the closing of RAD transactions, the existing public housing restrictions are removed and the property is unencumbered. This release of public housing restrictions supports the use of a market-rent derived value."

The other Commenters provided similar statements stating the unrestricted market value as a common valuation on RAD deals throughout the country.

STAFF RESPONSE: Since acquisition cost is part of the total development costs, the Department is obligated to evaluate its reasonableness.

An appraisal is required on all Identity of Interest transactions. Staff will review the appraisal submitted with the application and may require, a third-party review appraisal to ensure that the value is properly supported. If a third-party review appraisal concludes that the valuation was not appropriately determined the Real Estate Analysis staff may recommend that the award of acquisition credits be based on rent restricted values but this may be an appealable matter.

The Department does not restrict or limit the purchase price being paid by the Applicant to the housing authority. The Department only determines an acquisition value used to size the tax credits pursuant to IRC §42(m)(2). The sale price between the buyer and seller is not dictated by the Department.

Staff recommends the following changes to the staff proposed rule:

(B) For existing Developments with any project-based rental assistance that will remain with the property after the acquisition, the appraisal must include an "as-is as-currently-restricted value". For public housing converting to project-based rental assistance, THE APPRAISER MUST PROVIDE A VALUE BASED ON THE FUTURE RESTRICTED RENTS. THE value USED IN THE ANALYSIS must MAY be based on the post conversion UNrestricted MARKET rents IF SUPPORTED BY THE APPRAISAL. THE DEPARTMENT MAY REQUIRE THAT THE APPRAISAL BE REVIEWED BY A THIRD-PARTY APPRAISER ACCEPTABLE TO THE DEPARTMENT BUT SELECTED BY THE APPLICANT. USE OF FUTURE RESTRICTED RENTS BY THE APPRAISER WILL NOT REQUIRE A THIRD-PARTY APPRAISAL REVIEW. REGARDLESS OF THE RENTS USED IN THE VALUATION, THE APPRAISER and must consider any other on-going restrictions that will remain in place even if not affecting rents. If the rental assistance has an impact on the value, such as use of a lower capitalization rate due to the lower risk associated with rental rates and/or occupancy rates on project-based developments, this must be fully explained and supported to the satisfaction of the Underwriter.

14. §10.307(a)(2) Direct Loan Requirements (10)

COMMENT SUMMARY: Commenter (10) states that Direct Loan terms should not exceed the loan amortizations and both the term and amortization must be greater than the first lien debt term not to exceed 40 years and 6 months.

STAFF RESPONSE: The Direct Loan Requirements have been moved from Subchapter D to Chapter 13. Commenter's suggestions have been forwarded to the Multifamily Loan Program. The Multifamily Direct Loan Rule 10 TAC Chapter 13 is out for public comment from October 28, 2016 to November 28, 2016.

§10.307. Direct Loan Requirements.

(a) Direct Loans through the Department must be structured according to the criteria as identified in paragraphs (1) - (5) of this subsection:

(1) the interest rate may be as low as zero percent provided all applicable NOFA and program rules and requirements are met as well as requirements in this Subchapter;

(2) unless structured only as an interim construction or bridge loan and provided all NOFA and program requirements are met, the loan term shall be no less than fifteen (15) years and no greater than forty (40) years and the amortization schedule shall be no less than thirty (30) years and no greater than forty (40) years. The Department's debt will match within six (6) months of the shortest term or amortization of any senior debt so long as neither exceeds forty (40) years.

(3) the loan shall be structured with a regular monthly payment beginning on the first day of the 25th full month following the actual date of loan closing and continuing for the loan term. If the first lien mortgage is a federally insured HUD or FHA mortgage, the Department may approve a loan structure with annual payments payable from surplus cash flow provided that the debt coverage ratio, inclusive of the loan, continues to meet the requirements in this Subchapter. The Board may also approve, on a case-by-case basis, a cash flow loan structure provided it determines that the financial risk is outweighed by the need for the proposed housing;

(4) the loan shall have a deed of trust with a permanent lien position that is superior to any other sources for financing including hard repayment debt that is less than or equal to the Direct Loan amount and for any other sources that have soft repayment structures, non-amortizing balloon notes, have deferred forgivable provisions or in which the lender has an identity of interest with any member of the Development Team. The Board may also approve, on a case-by-case basis, an alternative lien priority provided it determines that the financial risk is outweighed by the need for the proposed housing; and,

(5) If the Direct Loan amounts to more than 50 percent of the Total Housing Development Cost, except for Developments also financed through the USDA §515 program, the Application must include the documents as identified in subparagraphs (A) - (B) of this paragraph:

(A) a letter from a Third Party CPA verifying the capacity of the Applicant, Developer or Development Owner to provide at least 10 percent of the Total Housing Development Cost as a short term loan for the Development; or

(B) evidence of a line of credit or equivalent tool equal to at least 10 percent of the Total Housing Development Cost from a financial institution that is available for use during the proposed Development activities.

(b) Direct Loans through the Department must observe the following construction, occupancy, and repayment provisions in accordance with the Federal requirements in 24 CFR Part 92 and as included in the Direct Loan documents:

(1) Construction must begin no later than six (6) months from the date of "Committing to a specific local project" as defined in 24 CFR Part 92 and must be completed within twenty-four (24) months of the actual date of loan closing as reflected by the development's certificate(s) of occupancy and Certificate of Substantial Completion (AIA Form G704). A final construction inspection request must be sent to the Department within 18 months of the actual loan closing date, with the repayment period beginning on the first day of the 25th month following the actual date of loan closing. Extensions to the construction or development period may only be made for good cause and approved by the Executive Director or authorized designee provided the start of construction is no later than twelve (12) months from the date of committing to a specific local project;

(2) Initial occupancy by eligible tenants shall occur within six (6) months of project completion. Requests to extend the initial occupancy period must be accompanied by marketing information and a marketing plan which will be submitted by the Department to HUD for final approval;

(3) repayment will be required on a per unit basis for units that have not been rented to eligible households within twenty-four (24) months of project completion; and

(4) termination and repayment of the HOME award in full will be required for any development that is not completed within four (4) years of the date of funding commitment.

The Board approved the final order adopting the new rule on November 10, 2016.

STATUTORY AUTHORITY. The rule is adopted pursuant to Texas Gov't Code §2306.053, which authorizes the Department to adopt rules. Specifically Texas Gov't Code §2306.141 gives the Department the authority to promulgate rules governing the administration of its housing programs. The adopted rule affects no other code, article or statute.

§10.301.General Provisions.

(a) Purpose. This Subchapter applies to the underwriting, Market Analysis, appraisal, Environmental Site Assessment, Property Condition Assessment, and Direct Loan standards employed by the Department. This Subchapter provides rules for the underwriting review of an affordable housing Development's financial feasibility and economic viability that ensures the most efficient allocation of resources while promoting and preserving the public interest in ensuring the long-term health of the Department's portfolio. In addition, this Subchapter guides staff in making recommendations to the Executive Award and Review Advisory Committee (the "Committee"), Executive Director, and the Board to help ensure procedural consistency in the determination of Development feasibility (Texas Government Code, §§2306.081(c), 2306.185, and 2306.6710(d)). Due to the unique characteristics of each Development, the interpretation of the rules and guidelines described in this Subchapter is subject to the discretion of the Department and final determination by the Board.

(b) Appeals. Certain programs contain express appeal options. Where not indicated, §10.902 of this chapter (relating to Appeals Process (§2306.0321; §2306.6715)) includes general appeal procedures. In addition, the Department encourages the use of Alternative Dispute Resolution ("ADR") methods, as outlined in §10.904 of this chapter (relating to Alternative Dispute Resolution (ADR) Policy).

§10.302.Underwriting Rules and Guidelines.

(a) General Provisions. Pursuant to Texas Government Code, §2306.148 and §2306.185(b), the Board is authorized to adopt underwriting standards as set forth in this section. Furthermore for Housing Credit Allocation, §42(m)(2) of the Internal Revenue Code of 1986 (the "Code"), requires the tax credits allocated to a Development not to exceed the amount necessary to assure feasibility. The rules adopted pursuant to the Texas Government Code and the Code are developed to result in a Credit Underwriting Analysis Report ("Report") used by the Board in decision making with the goal of assisting as many Texans as possible by providing no more financing than necessary based on an independent analysis of Development feasibility. The Report generated in no way guarantees or purports to warrant the actual performance, feasibility, or viability of the Development.

(b) Report Contents. The Report provides a synopsis and reconciliation of the Application information submitted by the Applicant. For the purpose of this Subchapter the term Application includes additional documentation submitted after the initial award of funds that is relevant to any subsequent reevaluation. The Report contents will be based upon information that is provided in accordance with and within the timeframes set forth in the current Qualified Allocation Plan ("QAP") (10 TAC Chapter 11) or a Notice of Funds Availability ("NOFA"), as applicable, and the Uniform Multifamily Rules (10 TAC Chapter 10, Subchapters A - E and G).

(c) Recommendations in the Report. The conclusion of the Report includes a recommended award of funds or Housing Credit Allocation Amount and states any feasibility or other conditions to be placed on the award. The award amount is based on the lesser of the following:

(1) Program Limit Method. For Housing Credit Allocations, this method is based upon calculation of Eligible Basis after applying all cost verification measures and program limits as described in this section. The Applicable Percentage used is defined in §10.3 of this chapter (relating to Definitions). For Department programs other than Housing Tax Credits, this method is based upon calculation of the funding limit in current program rules or NOFA at the time of underwriting.

(2) Gap Method. This method evaluates the amount of funds needed to fill the gap created by Total Housing Development Cost less total non-Department-sourced funds or Housing Tax Credits. In making this determination, the Underwriter resizes any anticipated deferred developer fee downward (but not less than zero) before reducing the amount of Department funds or Housing Tax Credits. In the case of Housing Tax Credits, the syndication proceeds needed to fill the gap in permanent funds are divided by the syndication rate to determine the amount of Housing Tax Credits. In making this determination and based upon specific conditions set forth in the Report, the Underwriter may assume adjustments to the financing structure (including treatment of cash flow loans as if fully amortizing over its term) or make adjustments to any Department financing, such that the cumulative Debt Coverage Ratio ("DCR") conforms to the standards described in this section. For Housing Tax Credit Developments at cost certification, timing adjusters may be considered as a reduction to equity proceeds for this purpose. Timing adjusters must be consistent with and documented in the original partnership agreement (at admission of the equity partner) but relating to causes outside of the Developer's or Owner's control. The equity partner must provide a calculation of the amount of the adjuster to be used by the Underwriter.

(3) The Amount Requested. The amount of funds that is requested by the Applicant. For Housing Tax Credit Developments (exclusive of Tax-Exempt Bond Developments) this amount is limited to the amount requested in the original Application documentation.

(d) Operating Feasibility. The operating feasibility of a Development funded by the Department is tested by analyzing its Net Operating Income ("NOI") to determine the Development's ability to pay debt service and meet other financial obligations throughout the Affordability Period. NOI is determined by subtracting operating expenses, including replacement reserves and taxes, from rental and other income sources.

(1) Income. In determining the first year stabilized pro forma, the Underwriter evaluates the reasonableness of the Applicant's income pro forma by determining the appropriate rental rate per unit based on subsidy contracts, program limitations including but not limited to utility allowances, actual rents supported by rent rolls and Market Rents and other market conditions. Miscellaneous income, vacancy and collection loss limits as set forth in subparagraphs (B) and (C) of this paragraph, respectively, are used unless well-documented support is provided and independently verified by the Underwriter.

(A) Rental Income. The Underwriter will review the Applicant's proposed rent schedule and determine if it is consistent with the representations made throughout the Application. The Underwriter will independently calculate a Pro Forma Rent for comparison to the Applicant's estimate in the Application.

(i) Market Rents. The Underwriter will use the Market Analyst's conclusion of Market Rent if reasonably justified and supported by the attribute adjustment matrix of Comparable Units as described in §10.303 of this chapter (relating to Market Analysis Rules and Guidelines). Independently determined Market Rents by the Underwriter may be used based on rent information gained from direct contact with comparable properties, whether or not used by the Market Analyst and other market data sources. For a Development that contains less than 15% unrestricted units, the Underwriter will limit the Pro Forma Rents to the lesser of Market Rent or the Gross Program Rent at 60% AMI. As an alternative, if the Applicant submits market rents that are up to 30% higher than the 60% AMI gross rent and the Applicant submits an investor commissioned market study with the application, the Underwriter has the discretion to use the market rents supported by the investor commissioned market study in consideration of the independently determined rents. The Applicant must also provide a statement by the investor indicating that they have reviewed the market study and agree with its conclusions.

(ii) Gross Program Rent. The Underwriter will use the Gross Program Rents for the year that is most current at the time the underwriting begins. When underwriting for a simultaneously funded competitive round, all Applications are underwritten with the Gross Program Rents for the same year. If Gross Program Rents are adjusted by the Department after the close of the Application Acceptance Period, but prior to publication of the Report, the Underwriter may adjust the Effective Gross Income ("EGI") to account for any increase or decrease in Gross Program Rents for the purposes of determining the reasonableness of the Applicant's EGI.

(iii) Contract Rents. The Underwriter will review rental assistance contracts to determine the Contract Rents currently applicable to the Development. Documentation supporting the likelihood of continued rental assistance is also reviewed. The Underwriter will take into consideration the Applicant's intent to request a Contract Rent increase. At the discretion of the Underwriter, the Applicant's proposed rents may be used as the Pro Forma Rent, with the recommendations of the Report conditioned upon receipt of final approval of such an increase.

(iv) Utility Allowances. The Utility Allowances used in underwriting must be in compliance with all applicable federal guidance, and §10.614 of Subchapter F of this Chapter relating to Utility Allowances. Utility allowances must be calculated for individually metered tenant paid utilities.

(v) Net Program Rents. Gross Program Rent less Utility Allowance.

(vi) Actual Rents for existing Developments will be reviewed as supported by a current rent roll. For Unstabilized Developments, actual rents will be based on the most recent units leased with occupancy and leasing velocity considered. Actual rents may be adjusted by the Underwriter to reflect lease-up concessions and other market considerations.

(vii) Collected Rent. Represents the monthly rent amount collected for each Unit Type. For rent-assisted units, the Contract Rent is used. In absence of a Contract Rent, the lesser of the Net Program Rent, Market Rent or actual rent is used.

(B) Miscellaneous Income. All ancillary fees and miscellaneous secondary income, including, but not limited to late fees, storage fees, laundry income, interest on deposits, carport and garage rent, washer and dryer rent, telecommunications fees, and other miscellaneous income, are anticipated to be included in a $5 to $20 per Unit per month range. Exceptions may be made at the discretion of the Underwriter and must be supported by either the normalized operating history of the Development or other existing comparable properties within the same market area.

(i) The Applicant must show that a tenant will not be required to pay the additional fee or charge as a condition of renting a Unit and must show that the tenant has a reasonable alternative.

(ii) The Applicant's operating expense schedule should reflect an itemized offsetting line-item associated with miscellaneous income derived from pass-through utility payments, pass-through water, sewer and trash payments, and cable fees.

(iii) Collection rates of exceptional fee items will generally be heavily discounted.

(iv) If an additional fee is charged for the optional use of an amenity, any cost associated with the construction, acquisition, or development of the hard assets needed to produce the additional fee for such amenity must be excluded from Eligible Basis.

(C) Vacancy and Collection Loss. The Underwriter generally uses a normalized vacancy rate of 7.5 percent (5 percent vacancy plus 2.5 percent for collection loss). The Underwriter may use other assumptions based on conditions in the immediate market area. 100 percent project-based rental subsidy developments and other well documented cases may be underwritten at a combined 5 percent at the discretion of the Underwriter if the immediate market area's historical performance reflected in the Market Analysis is consistently higher than a 95 percent occupancy rate.

(D) Effective Gross Income ("EGI"). EGI is the total of Collected Rent for all units plus Miscellaneous Income less Vacancy and Collection Loss. If the Applicant's pro forma EGI is within 5 percent of the EGI independently calculated by the Underwriter, the Applicant's EGI is characterized as reasonable in the Report; however, for purposes of calculating the underwritten DCR the Underwriter's pro forma will be used unless the Applicant's pro forma meets the requirements of paragraph (3) of this subsection.

(2) Expenses. In determining the first year stabilized operating expense pro forma, the Underwriter evaluates the reasonableness of the Applicant's expense estimate based upon the characteristics of each Development, including the location, utility structure, type, the size and number of Units, and the Applicant's management plan . Historical, stabilized and certified financial statements of an existing Development or Third Party quotes specific to a Development will reflect the strongest data points to predict future performance The Underwriter may review actual operations on the Applicant's other properties monitored by the Department, if any, or review the proposed management company's comparable properties. The Department's Database of properties located in the same market area or region as the proposed Development also provides data points; expense data from the Department's Database is available on the Department's website. Data from the Institute of Real Estate Management's ("IREM") most recent Conventional Apartments-Income/Expense Analysis book for the proposed Development's property type and specific location or region may be referenced. In some cases local or project-specific data such as PHA Utility Allowances and property tax rates are also given significant weight in determining the appropriate line item expense estimate. Estimates of utility savings from green building components, including on-site renewable energy, must be documented by an unrelated contractor or component vendor.

(A) General and Administrative Expense ("G&A")--Accounting fees, legal fees, advertising and marketing expenses, office operation, supplies, and equipment expenses. G&A does not include partnership related expenses such as asset management, accounting or audit fees. Costs of tenant services are not included in G&A.

(B) Management Fee. Fee paid to the property management company to oversee the operation of the Property and is most often based upon a percentage of EGI as documented in an existing property management agreement or proposal. Typically, 5 percent of EGI is used, though higher percentages for rural transactions may be used. Percentages as low as 3 percent may be used if well documented.

(C) Payroll Expense. Compensation, insurance benefits, and payroll taxes for on-site office, leasing and maintenance staff. Payroll does not include Third-Party security or tenant services contracts. Staffing specific to tenant services, security or other staffing not related to customary property operations should be itemized and included in other expenses or tenant services expense.

(D) Repairs and Maintenance Expense. Materials and supplies for the repairs and maintenance of the Development including Third-Party maintenance contracts. This line-item does not include costs that are customarily capitalized that would result from major replacements or renovations.

(E) Utilities Expense. Gas and electric energy expenses paid by the Development. Estimates of utility savings from green building components, including on-site renewable energy, must be documented by an unrelated contractor or component vendor.

(F) Water, Sewer, and Trash Expense ("WST"). Includes all water, sewer and trash expenses paid by the Development.

(G) Insurance Expense. Cost of Insurance coverage for the buildings, contents, and general liability, but not health or workman's compensation insurance.

(H) Property Tax. Includes real property and personal property taxes but not payroll taxes.

(i) An assessed value will be calculated based on the capitalization rate published by the county taxing authority. If the county taxing authority does not publish a capitalization rate, a capitalization rate of 10 percent or a comparable assessed value may be used.

(ii) If the Applicant proposes a property tax exemption or PILOT agreement the Applicant must provide documentation in accordance with §10.402(d). At the underwriter's discretion, such documentation may be required prior to Commitment if deemed necessary.

(I) Replacement Reserves. Periodic deposits to a reserve account to pay for the future replacement or major repair of building systems and components (generally items considered capitalized costs).The Underwriter will use a minimum reserve of $250 per Unit for New Construction and Reconstruction Developments and $300 per Unit for all other Developments. The Underwriter may require an amount above $300 for the Development based on information provided in the Property Condition Assessment ("PCA"). The Applicant's assumption for reserves may be adjusted by the Underwriter if the amount provided by the Applicant is insufficient to fund capital needs as documented by the PCA during the first fifteen (15) years of the long term pro forma. Higher reserves may be used if documented by a primary lender or syndicator.

(J) Other Operating Expenses. The Underwriter will include other reasonable, customary and documented property-level operating expenses such as audit fees, security expense, telecommunication expenses (tenant reimbursements must be reflected in EGI) and TDHCA's compliance fees. This category does not include depreciation, interest expense, lender or syndicator's asset management fees, or other ongoing partnership fees.

(K) Tenant Services. Tenant services are not included as an operating expense or included in the DCR calculation unless:

(i) There is a documented financial obligation on behalf of the Owner with a unit of state or local government to provide tenant supportive services at a specified dollar amount. The financial obligation must be identified by the permanent lender in their term sheet and the dollar amount of the financial obligation must be included in the DCR calculation on the permanent lender's 15-year pro forma at Application. At cost certification and as a minimum, the estimated expenses underwritten at Application will be included in the DCR calculation regardless if actually incurred; or,

(ii) The Applicant demonstrates a history of providing comparable supportive services and expenses at existing affiliated properties within the local area. Except for Supportive Housing Developments, the estimated expense of supportive services must be identified by the permanent lender in their term sheet and included in the DCR calculation on the 15-year pro forma. At cost certification and as a minimum, the estimated expenses underwritten at Application will be included in the DCR calculation regardless if actually incurred;

(iii) On-site staffing or pro ration of staffing for coordination of services only, not provision of services, can be included as a supportive services expense without permanent lender documentation.

(L) Total Operating Expenses. The total of expense items described above. If the Applicant's total expense estimate is within 5 percent of the final total expense figure calculated by the Underwriter, the Applicant's figure is characterized as reasonable in the Report; however, for purposes of calculating DCR, the Underwriter's independent calculation will be used unless the Applicant's first year stabilized pro forma meets the requirements of paragraph (3) of this subsection.

(3) Net Operating Income ("NOI"). The difference between the EGI and total operating expenses. If the Applicant's first year stabilized NOI figure is within 5 percent of the NOI calculated by the Underwriter, the Applicant's NOI is characterized as reasonable in the Report; however, for purposes of calculating the first year stabilized pro forma DCR, the Underwriter's calculation of NOI will be used unless the Applicant's first year stabilized EGI, total operating expenses, and NOI are each within 5 percent of the Underwriter's estimates. For Housing Tax Credit Developments at cost certification, actual NOI will be used as adjusted for stabilization of rents and extraordinary lease-up expenses. Permanent lender and equity partner stabilization requirements documented in the loan and partnership agreements will be considered in determining the appropriate adjustments and the NOI used by the Underwriter.

(4) Debt Coverage Ratio. DCR is calculated by dividing NOI by the sum of scheduled loan principal and interest payments for all permanent debt sources of funds. If executed loan documents do not exist, loan terms including principal and/or interest payments are calculated based on the terms indicated in the most current term sheet(s). Otherwise, actual terms indicated in the executed loan documents will be used. Term sheet(s) must indicate the DCR required by the lender for initial underwriting as well as for stabilization purposes. Unusual or non-traditional financing structures may also be considered.

(A) Interest Rate. The rate documented in the term sheet(s) or loan document(s) will be used for debt service calculations. Term sheets indicating a variable interest rate must provide a breakdown of the rate index and any component rates comprising an all-in interest rate. The term sheet(s) must state the lender's underwriting interest rate assumption, or the Applicant must submit a separate statement from the lender with an estimate of the interest rate as of the date of such statement. At initial underwriting, the Underwriter may adjust the underwritten interest rate assumption based on market data collected on similarly structured transactions or rate index history. Private Mortgage Insurance premiums and similar fees are not included in the interest rate but calculated on outstanding principal balance and added to the total debt service payment.

(B) Amortization Period. For purposes of calculating DCR, the permanent lender's amortization period will be used if not less than thirty (30) years and not more than forty (40) years. Up to fifty (50) years may be used for federally sourced or insured loans For permanent lender debt with amortization periods less than thirty (30) years, thirty (30) years will be used. For permanent lender debt with amortization periods greater than forty (40) years, forty (40) years will be used. For non-Housing Tax Credit transactions a lesser amortization period may be used if the Department's funds are fully amortized over the same period as the primary senior debt.

(C) Repayment Period. For purposes of projecting the DCR over a thirty (30) year period for developments with permanent financing structures with balloon payments in less than thirty (30) years, the Underwriter will carry forward debt service based on a full amortization at the interest rate stated in the term sheet(s).

(D) Acceptable Debt Coverage Ratio Range. Except as set forth in clauses (i) or (ii) of this subparagraph, the acceptable first year stabilized pro forma DCR for all priority or foreclosable lien financing plus the Department's proposed financing must be between a minimum of 1.15 and a maximum of 1.35 (maximum of 1.50 for Housing Tax Credit Developments at cost certification).

(i) If the DCR is less than the minimum, the recommendations of the Report may be based on an assumed reduction to debt service and the Underwriter will make adjustments to the assumed financing structure in the order presented in subclauses (I) - (III) of this clause subject to a Direct Loan NOFA and program rules:

(I) a reduction to the principal amount of a Direct Loan, or in the case where no repayable Developer Fee remains available for deferral and the Direct Loan is necessary to balance the sources and uses, a reduction to the interest rate or an increase in the amortization period for Direct Loans;

(II) a reclassification of Direct Loans to reflect grants,

(III) a reduction in the permanent loan amount for non-Department funded loans based upon the rates and terms in the permanent loan term sheet(s) as long as they are within the ranges in subparagraphs (A) and (B) of this paragraph.

(ii) If the DCR is greater than the maximum, the recommendations of the Report may be based on an assumed increase to debt service and the Underwriter will make adjustments to the assumed financing structure in the order presented in subclauses (I) - (III) of this clause subject to a Direct Loan NOFA and program rules:

(I) reclassification of Department funded grants to reflect loans;

(II) an increase in the interest rate or a decrease in the amortization period for Direct Loans;

(III) an increase in the permanent loan amount for non-Department funded loans based upon the rates and terms in the permanent loan term sheet as long as they are within the ranges in subparagraphs (A) and (B) of this paragraph.

(iii) For Housing Tax Credit Developments, a reduction in the recommended Housing Credit Allocation Amount may be made based on the Gap Method described in subsection (c)(2) of this section as a result of an increased debt assumption, if any.

(iv) The Underwriter may limit total debt service that is senior to a Direct Loan to produce an acceptable DCR on the Direct Loan.

(5) Long Term Pro forma. The Underwriter will create a 30-year operating pro forma using the following:

(A) The Underwriter's or Applicant's first year stabilized pro forma as determined by paragraph (3) of this subsection.

(B) A 2 percent annual growth factor is utilized for income and a 3 percent annual growth factor is utilized for operating expenses except for management fees that are calculated based on a percentage of each year's EGI.

(C) Adjustments may be made to the long term pro forma if satisfactory support documentation is provided by the Applicant or as independently determined by the Underwriter.

(e) Total Housing Development Costs. The Department's estimate of the Total Housing Development Cost will be based on the Applicant's development cost schedule to the extent that costs can be verified to a reasonable degree of certainty with documentation from the Applicant and tools available to the Underwriter. For New Construction Developments, the Underwriter's total cost estimate will be used unless the Applicant's Total Housing Development Cost is within 5 percent of the Underwriter's estimate. The Department's estimate of the Total Housing Development Cost for Rehabilitation Developments will be based in accordance with the estimated cost provided in the PCA for the scope of work as defined by the Applicant and §10.306(a)(5) of this chapter (relating to PCA Guidelines). If the Applicant's cost estimate is utilized and the Applicant's line item costs are inconsistent with documentation provided in the Application or program rules, the Underwriter may make adjustments to the Applicant's Total Housing Development Cost.

(1) Acquisition Costs. The underwritten acquisition cost is verified with Site Control document(s) for the Property.

(A) Excess Land Acquisition. In cases where more land is to be acquired (by the Applicant or a Related Party) than will be utilized as the Development Site and the remainder acreage is not accessible for use by tenants or dedicated as permanent and maintained green space, the value ascribed to the proposed Development Site will be prorated based on acreage from the total cost reflected in the Site Control document(s). An appraisal containing segregated values for the total acreage, the acreage for the Development Site and the remainder acreage, or tax assessment value may be used by the Underwriter in making a proration determination based on relative value; however, the Underwriter will not utilize a prorated value greater than the total amount in the Site Control document(s).

(B) Identity of Interest Acquisitions.

(i) An acquisition will be considered an identity of interest transaction when the seller is an Affiliate of, a Related Party to, any owner at any level of the Development Team or a Related Party lender; and

(I) is the current owner in whole or in part of the Property; or

(II) has or had within the prior 36 months, legal or beneficial ownership of the property or any portion thereof or interest therein prior to the first day of the Application Acceptance Period.

(ii) In all identity of interest transactions the Applicant is required to provide:

(I) the original acquisition cost evidenced by an executed settlement statement or, if a settlement statement is not available, the original asset value listed in the most current financial statement for the identity of interest owner; and

(II) if the original acquisition cost evidenced by subclause (I) of this clause is less than the acquisition cost stated in the application:

(-a-) an appraisal that meets the requirements of §10.304 of this chapter (relating to Appraisal Rules and Guidelines); and

(-b-) any other verifiable costs of owning, holding, or improving the Property, excluding seller financing, that when added to the value from subclause (I) of this clause justifies the Applicant's proposed acquisition amount.

(-1-) For land-only transactions, documentation of owning, holding or improving costs since the original acquisition date may include property taxes, interest expense to unrelated Third Party lender(s), capitalized costs of any physical improvements, the cost of zoning, platting, and any off-site costs to provide utilities or improve access to the Property. All allowable holding and improvement costs must directly benefit the proposed Development by a reduction to hard or soft costs. Additionally, an annual return of 10 percent may be applied to the original capital investment and documented holding and improvement costs; this return will be applied from the date the applicable cost is incurred until the date of the Department's Board meeting at which the Grant, Direct Loan and/or Housing Credit Allocation will be considered.

(-2-) For transactions which include existing buildings that will be rehabilitated or otherwise retained as part of the Development, documentation of owning, holding, or improving costs since the original acquisition date may include capitalized costs of improvements to the Property, and in the case of USDA financed Developments the cost of exit taxes not to exceed an amount necessary to allow the sellers to be made whole in the original and subsequent investment in the Property and avoid foreclosure. Additionally, an annual return of 10 percent may be applied to the original capital investment and documented holding and improvement costs; this return will be applied from the date the applicable cost was incurred until the date of the Department's Board meeting at which the Grant, Direct Loan and/or Housing Credit Allocation will be considered. For any period of time during which the existing buildings are occupied or otherwise producing revenue, holding costs may not include capitalized costs, operating expenses, including, but not limited to, property taxes and interest expense.

(iii) In no instance will the acquisition cost utilized by the Underwriter exceed the lesser of the original acquisition cost evidenced by clause (ii)(I) of this subparagraph plus costs identified in clause (ii)(II)(-b-) of this subparagraph, or if applicable the "as-is" value conclusion evidenced by clause (ii)(II)(-a-) of this subparagraph. Acquisition cost is limited to appraised land value for transactions which include existing buildings that will be demolished. The resulting acquisition cost will be referred to as the "Adjusted Acquisition Cost."

(C) Eligible Basis on Acquisition of Buildings. Building acquisition cost will be included in the underwritten Eligible Basis if the Applicant provided an appraisal that meets the Department's Appraisal Rules and Guidelines as described in §10.304 of this chapter. The underwritten eligible building cost will be the lowest of the values determined based on clauses (i) - (iii) of this subparagraph:

(i) the Applicant's stated eligible building acquisition cost;

(ii) the total acquisition cost reflected in the Site Control document(s), or the Adjusted Acquisition Cost (as defined in subparagraph (B)(iii) of this paragraph), prorated using the relative land and building values indicated by the applicable appraised value;

(iii) total acquisition cost reflected in the Site Control document(s), or the Adjusted Acquisition Cost (as defined in subparagraph (B)(iii) of this paragraph), less the appraised "as-vacant" land value; or

(iv) the Underwriter will use the value that best corresponds to the circumstances presently affecting the Development that will continue to affect the Development after transfer to the new owner in determining the building value. These circumstances include but are not limited to operating subsidies, rental assistance and/or property tax exemptions. Any value of existing favorable financing will be attributed prorata to the land and buildings.

(2) Off-Site Costs. The Underwriter will only consider costs of Off-Site Construction that are well documented and certified to by a Third Party engineer on the required Application forms with supporting documentation.

(3) Site Work Costs. The Underwriter will only consider costs of Site Work that are well documented and certified to by a Third Party engineer on the required Application forms with supporting documentation.

(4) Building Costs.

(A) New Construction and Reconstruction. The Underwriter will use the Marshall and Swift Residential Cost Handbook, other comparable published Third-Party cost estimating data sources, historical final cost certifications of previous Housing Tax Credit developments and other acceptable cost data available to the Underwriter to estimate Building Cost. Generally, the "Average Quality" multiple, townhouse, or single family costs, as appropriate, from the Marshall and Swift Residential Cost Handbook or other comparable published Third-Party data source, will be used based upon details provided in the Application and particularly building plans and elevations. The Underwriter will consider amenities, specifications and development types not included in the Average Quality standard. The Underwriter may consider a sales tax exemption for nonprofit General Contractors.

(B) Rehabilitation and Adaptive Reuse.

(i) The Applicant must provide a detailed narrative description of the scope of work for the proposed rehabilitation.

(ii) The Underwriter will use cost data provided on the PCA Cost Schedule Supplement.

(5) Contingency. Total contingency, including any soft cost contingency, will be limited to a maximum of 7 percent of Building Cost plus Site Work and off-sites for New Construction and Reconstruction Developments, and 10 percent of Building Cost plus Site Work and off-sites for Rehabilitation and Adaptive Reuse Developments. For Housing Tax Credit Developments, the percentage is applied to the sum of the eligible Building Cost, eligible Site Work costs and eligible off-site costs in calculating the eligible contingency cost.

(6) General Contractor Fee. General Contractor fees include general requirements, contractor overhead, and contractor profit. General requirements include, but are not limited to, on-site supervision or construction management, off-site supervision and overhead, jobsite security, equipment rental, storage, temporary utilities, and other indirect costs. General Contractor fees are limited to a total of 14 percent on Developments with Hard Costs of $3 million or greater, the lesser of $420,000 or 16 percent on Developments with Hard Costs less than $3 million and greater than $2 million, and the lesser of $320,000 or 18 percent on Developments with Hard Costs at $2 million or less. For tax credit Developments, the percentages are applied to the sum of the Eligible Hard Costs in calculating the eligible contractor fees. For Developments also receiving financing from USDA, the combination of builder's general requirements, builder's overhead, and builder's profit should not exceed the lower of TDHCA or USDA requirements. Additional fees for ineligible costs will be limited to the same percentage of ineligible Hard Costs but will not be included in Eligible Basis.

(7) Developer Fee.

(A) For Housing Tax Credit Developments, the Developer Fee included in Eligible Basis cannot exceed 15 percent of the project's eligible costs, less Developer fees, for Developments proposing fifty (50) Units or more and 20 percent of the project's eligible costs, less Developer fees, for Developments proposing forty-nine (49) Units or less. For Public Housing Authority Developments for conversion under the HUD Rental Assistance Demonstration ("RAD") program that will be financed using tax-exempt mortgage revenue bonds, the Developer Fee cannot exceed 20 percent of the project's eligible cost less Developer Fee.

(B) Any additional Developer fee claimed for ineligible costs will be limited to the same percentage but applied only to ineligible Hard Costs (15 percent for Developments with fifty (50) or more Units, or 20 percent for Developments with forty-nine (49) or fewer Units). Any Developer fee above this limit will be excluded from Total Housing Development Costs. All fees to Affiliates and/or Related Parties for work or guarantees determined by the Underwriter to be typically completed or provided by the Developer or Principal(s) of the Developer will be considered part of Developer fee.

(C) In the case of a transaction requesting acquisition Housing Tax Credits:

(i) the allocation of eligible Developer fee in calculating Rehabilitation/New Construction Housing Tax Credits will not exceed 15 percent of the Rehabilitation/New Construction eligible costs less Developer fees for Developments proposing fifty (50) Units or more and 20 percent of the Rehabilitation/New Construction eligible costs less Developer fees for Developments proposing forty-nine (49) Units or less; and

(ii) no Developer fee attributable to an identity of interest acquisition of the Development will be included.

(D) Eligible Developer fee is multiplied by the appropriate Applicable Percentage depending whether it is attributable to acquisition or rehabilitation basis.

(E) For non-Housing Tax Credit developments, the percentage can be up to 15 percent, but is based upon Total Housing Development Cost less the sum of the fee itself, land costs, the costs of permanent financing, excessive construction period financing described in paragraph (8) of this subsection, reserves, and any identity of interest acquisition cost.

(8) Financing Costs. All fees required by the construction lender, permanent lender and equity partner must be indicated in the term sheets. Eligible construction period interest is limited to the lesser of actual eligible construction period interest, or the interest on one (1) year's fully drawn construction period loan funds at the construction period interest rate indicated in the term sheet(s). For tax-exempt bond transactions up to twenty four (24) months of interest may be included. Any excess over this amount will not be included in Eligible Basis. Construction period interest on Related Party construction loans is only included in Eligible Basis with documentation satisfactory to the Underwriter that the loan will be at a market interest rate, fees and loan terms and the Related Party lender can demonstrate that it is routinely engaged in construction financing to unrelated parties.

(9) Reserves. Except for the underwriting of a Housing Tax Credit Development at cost certification, the Underwriter will utilize the amount described in the Applicant's project cost schedule if it is within the range of two (2) to six (6) months of stabilized operating expenses plus debt service. Alternatively, the Underwriter may consider a greater amount proposed by the first lien lender or syndicator if the detail for such greater amount is found by the Underwriter to be both reasonable and well documented. Reserves do not include capitalized asset management fees, guaranty reserves, tenant services reserves or other similar costs. Lease up reserves, exclusive of initial start-up costs, funding of other reserves and interim interest, may be considered with documentation showing sizing assumptions acceptable to the Underwriter. In no instance at initial underwriting will total reserves exceed twelve (12) months of stabilized operating expenses plus debt service (and only for USDA or HUD financed rehabilitation transactions the initial deposits to replacement reserves and transferred replacement reserves for USDA or HUD financed rehabilitation transactions). Pursuant to §10.404(c) and for the underwriting of a Housing Tax Credit Development at cost certification, operating reserves that will be maintained for a minimum period of five years and documented in the Owner's partnership agreement and/or the permanent lender's loan documents will be included as a development cost.

(10) Soft Costs. Eligible soft costs are generally costs that can be capitalized in the basis of the Development for tax purposes. The Underwriter will evaluate and apply the allocation of these soft costs in accordance with the Department's prevailing interpretation of the Code. Generally the Applicant's costs are used however the Underwriter will use comparative data to determine the reasonableness of all soft costs.

(11) Additional Tenant Amenities. For Housing Tax Credit Developments and after submission of the cost certification package, the Underwriter may consider costs of additional building and site amenities (suitable for the tenant population being served) proposed by the Owner in an amount not to exceed 1.5% of the originally underwritten Hard Costs. The additional amenities may be included in the LURA.

(12) Special Reserve Account. For Housing Tax Credit Developments at cost certification, the Underwriter may include a deposit of up to $2,500 per Unit into a Special Reserve Account as a Development Cost.

(f) Development Team Capacity and Development Plan.

(1) The Underwriter will evaluate and report on the overall capacity of the Development Team by reviewing aspects, including but not limited to those identified in subparagraphs (A) - (D) of this paragraph:

(A) personal credit reports for development sponsors, Developer fee recipients and those individuals anticipated to provide guarantee(s) in cases when warranted. The Underwriter may evaluate the credit report and identify any bankruptcy, state or federal tax liens or other relevant credit risks for compliance with eligibility and debarment requirements in this chapter;

(B) quality of construction, Rehabilitation, and ongoing maintenance of previously awarded housing developments by review of construction inspection reports, compliance on-site visits, findings of UPCS violations and other information available to the Underwriter;

(C) for Housing Tax Credit Developments, repeated or ongoing failure to timely submit cost certifications, requests for and clearance of final inspections, and timely response to deficiencies in the cost certification process;

(D) adherence to obligations on existing or prior Department funded developments with respect to program rules and documentation.

(2) While all components of the development plan may technically meet the other individual requirements of this section, a confluence of serious concerns and unmitigated risks identified during the underwriting process may result in an Application being referred to the Committee by the Director of Real Estate Analysis. The Committee will review any recommendation made under this subsection to deny an Application for a Grant, Direct Loan and/or Housing Credit Allocation prior to completion of the Report and posting to the Department's website.

(g) Other Underwriting Considerations. The Underwriter will evaluate additional feasibility elements as described in paragraphs (1) - (3) of this subsection.

(1) Floodplains. The Underwriter evaluates the site plan, floodplain map, survey and other information provided to determine if any of the buildings, drives, or parking areas reside within the 100-year floodplain. If such a determination is made by the Underwriter, the Report will include a condition that:

(A) the Applicant must pursue and receive a Letter of Map Amendment ("LOMA") or Letter of Map Revision ("LOMR-F"); or

(B) the Applicant must identify the cost of flood insurance for the buildings and for the tenant's contents for buildings within the 100-year floodplain and certify that the flood insurance will be obtained; and

(C) the Development must be proposed to be designed to comply with the QAP, NOFA and applicable Federal requirements.

(2) Proximity to Other Developments. The Underwriter will identify in the Report any developments funded or known and anticipated to be eligible for funding within one linear mile of the subject. Distance is measured in a straight line from nearest boundary point to nearest boundary point.

(3) Supportive Housing. The unique development and operating characteristics of Supportive Housing Developments may require special consideration in these areas:

(A) Operating Income. The extremely-low-income tenant population typically targeted by a Supportive Housing Development may include deep-skewing of rents to well below the 50 percent AMGI level or other maximum rent limits established by the Department. The Underwriter should utilize the Applicant's proposed rents in the Report as long as such rents are at or below the maximum rent limit proposed for the units and equal to any project based rental subsidy rent to be utilized for the Development;

(B) Operating Expenses. A Supportive Housing Development may have significantly higher expenses for payroll, management fee, security, resident support services, or other items than typical affordable housing developments. The Underwriter will rely heavily upon the historical operating expenses of other Supportive Housing Developments affiliated with the Applicant or otherwise available to the Underwriter. Expense estimates must be categorized as outlined in subsection (d)(2) of this section;

(C) DCR and Long Term Feasibility. Supportive Housing Developments may be exempted from the DCR requirements of subsection (d)(4)(D) of this section if the Development is anticipated to operate without conventional or "must-pay" debt. Applicants must provide evidence of sufficient financial resources to offset any projected 15-year cumulative negative Cash Flow. Such evidence will be evaluated by the Underwriter on a case-by-case basis to satisfy the Department's long term feasibility requirements and may take the form of one or a combination of: executed subsidy commitment(s); set-aside of Applicant's financial resources to be substantiated by current financial statements evidencing sufficient resources; and/or proof of annual fundraising success sufficient to fill anticipated operating losses. If either a set aside of financial resources or annual fundraising are used to evidence the long term feasibility of a Supportive Housing Development, a resolution from the Applicant's governing board must be provided confirming their irrevocable commitment to the provision of these funds and activities; and/or

(D) Total Housing Development Costs. For Supportive Housing Developments designed with only Efficiency Units, the Underwriter may use "Average Quality" dormitory costs, or costs of other appropriate design styles from the Marshall & Swift Valuation Service, with adjustments for amenities and/or quality as evidenced in the Application, as a base cost in evaluating the reasonableness of the Applicant's Building Cost estimate for New Construction Developments.

(h) Work Out Development. Developments that are underwritten subsequent to Board approval in order to refinance or gain relief from restrictions may be considered infeasible based on the guidelines in this section, but may be characterized as "the best available option" or "acceptable available option" depending on the circumstances and subject to the discretion of the Underwriter as long as the option analyzed and recommended is more likely to achieve a better financial outcome for the property and the Department than the status quo.

(i) Feasibility Conclusion. An infeasible Development will not be recommended for a Grant, Direct Loan or Housing Credit Allocation unless the Underwriter can determine an alternative structure and/or conditions the recommendations of the Report upon receipt of documentation supporting an alternative structure. A Development will be characterized as infeasible if paragraph (1) or (2) of this subsection applies. The Development will be characterized as infeasible if one or more of paragraphs (3) - (5) of this subsection applies unless paragraph (6)(B) of this subsection also applies.

(1) Gross Capture Rate and Individual Unit Capture Rate. The method for determining capture rates for a Development is defined in §10.303of this chapter. The Underwriter will independently verify all components and conclusions of the capture rates and may, at their discretion, use independently acquired demographic data to calculate demand and may make a determination of the capture rates based upon an analysis of the Sub-market. The Development:

(A) is characterized as an Elderly Development and the Gross Capture Rate exceeds 10 percent for the total proposed Units; or

(B) is outside a Rural Area and targets the general population, and the Gross Capture Rate exceeds 10 percent for the total proposed Units; or

(C) is in a Rural Area and targets the general population, and the Gross Capture Rate exceeds 30 percent; or

(D) is Supportive Housing and the Gross Capture Rate exceeds 30 percent; or,

(E) has an Individual Unit Capture Rate for any Unit Type greater than 75 percent.

(F) Developments meeting the requirements of subparagraph (A), (B), (C), (D) or (E) of this paragraph may avoid being characterized as infeasible if clause (i) or (ii) of this subparagraph apply.

(i) Replacement Housing. The proposed Development is comprised of affordable housing which replaces previously existing affordable housing within the Primary Market Area as defined in §10.303 of this chapter on a Unit for Unit basis, and gives the displaced tenants of the previously existing affordable housing a leasing preference.

(ii) Existing Housing. The proposed Development is comprised of existing affordable housing, whether defined by an existing land use and rent restriction agreement or if the subject rents are at or below 50% AMI rents, which is at least 50 percent occupied and gives displaced existing tenants a leasing preference as stated in a relocation plan.

(2) Deferred Developer Fee. Applicants requesting an allocation of tax credits where the estimated deferred Developer Fee, based on the underwritten capitalization structure, is not repayable from Cash Flow within the first fifteen (15) years of the long term pro forma as described in subsection (d)(5) of this section.

(3) Pro Forma Rent. The Pro Forma Rent for Units with rents restricted at 60 percent of AMGI is less than the Net Program Rent for Units with rents restricted at or below 50 percent of AMGI unless the Applicant accepts the Underwriter's recommendation, if any, that all restricted units have rents and incomes restricted at or below the 50 percent of AMGI level.

(4) Initial Feasibility.

(A) Except when underwritten at cost certification, the first year stabilized pro forma operating expense divided by the first year stabilized pro forma Effective Gross Income is greater than 68 percent for Rural Developments 36 Units or less and 65 percent for all other Developments.

(B) The first year DCR is below 1.15 (1.00 for USDA Developments).

(5) Long Term Feasibility. The Long Term Pro forma at any time during years two through fifteen, as defined in subsection (d)(5) of this section, reflects:

(A) a Debt Coverage Ratio below 1.15; or,

(B) negative cash flow (throughout the term of a Direct Loan).

(6) Exceptions. The infeasibility conclusions may be excepted when:

(A) Waived by the Executive Director of the Department or by the Committee if documentation is submitted by the Applicant to support unique circumstances that would provide mitigation.

(B) Developments not meeting the requirements of one or more of paragraphs (3), (4)(A) or (5) of this subsection will be re-characterized as feasible if one or more of clauses (i) - (v) of this subparagraph apply. A Development financed with a Direct Loan will not be re-characterized as feasible with respect to (5)(B).

(i) The Development will receive Project-based Section 8 Rental Assistance or the HUD Rental Assistance Demonstration Program for at least 50 percent of the Units and a firm commitment, with terms including Contract Rent and number of Units, is submitted at Application.

(ii) The Development will receive rental assistance for at least 50 percent of the Units in association with USDA financing.

(iii) The Development will be characterized as public housing as defined by HUD for at least 50 percent of the Units.

(iv) The Development will be characterized as Supportive Housing for at least 50 percent of the Units and evidence of adequate financial support for the long term viability of the Development is provided.

(v) The Development has other long term project based restrictions on rents for at least 50 percent of the Units that allow rents to increase based upon expenses and the Applicant's proposed rents are at least 10 percent lower than both the Net Program Rent and Market Rent.

§10.303.Market Analysis Rules and Guidelines.

(a) General Provision. A Market Analysis prepared for the Department must evaluate the need for decent, safe, and sanitary housing at rental rates or sales prices that eligible tenants can afford. The analysis must determine the feasibility of the subject Property rental rates or sales price and state conclusions as to the impact of the Property with respect to the determined housing needs. The Market Analysis must include a statement that the report preparer has read and understood the requirements of this section.

(b) Self-Contained. A Market Analysis prepared for the Department must allow the reader to understand the market data presented, the analysis of the data, and the conclusions derived from such data. All data presented should reflect the most current information available and the report must provide a parenthetical (in-text) citation or footnote describing the data source. The analysis must clearly lead the reader to the same or similar conclusions reached by the Market Analyst. All steps leading to a calculated figure must be presented in the body of the report.

(c) Market Analyst Qualifications. A Market Analysis submitted to the Department must be prepared and certified by an approved Qualified Market Analyst. (§2306.67055) The Department will maintain an approved Market Analyst list based on the guidelines set forth in paragraphs (1) - (3) of this subsection.

(1) The approved Qualified Market Analyst list will be updated and published annually on or about October 1st. If not listed as an approved Qualified Market Analyst by the Department, a Market Analyst may request approval by submitting items in subparagraphs (A) - (F) of this paragraph at least thirty (30) days prior to the first day of the competitive tax credit Application Acceptance Period or thirty (30) days prior to submission of any other application for funding for which the Market Analyst must be approved.

(A) Franchise Tax Account Status from the Texas Comptroller of Public Accounts (not applicable for sole proprietorships).

(B) A current organization chart or list reflecting all members of the firm who may author or sign the Market Analysis. A firm with multiple offices or locations must indicate all members expected to be providing Market Analysis.

(C) Resumes for all members of the firm or subcontractors who may author or sign the Market Analysis.

(D) General information regarding the firm's experience including references, the number of previous similar assignments and timeframes in which previous assignments were completed.

(E) Certification from an authorized representative of the firm that the services to be provided will conform to the Department's Market Analysis Rules and Guidelines, as described in this section, in effect for the Application Round in which each Market Analysis is submitted.

(F) A sample Market Analysis that conforms to the Department's Market Analysis Rules and Guidelines, as described in this section, in effect for the year in which the sample Market Analysis is submitted.

An already approved Qualified Market Analyst will remain on the list so long as at least one (1) Market Analysis has been submitted to the Department in the previous 12 months or items (A),(B),(C) and (E) are submitted prior to October 1st. Otherwise, the Market Analyst will automatically be removed from the list.

(2) During the underwriting process each Market Analysis will be reviewed and any discrepancies with the rules and guidelines set forth in this section may be identified and require timely correction. Subsequent to the completion of the Application Round and as time permits, staff or a review appraiser will re-review a sample set of submitted market analyses to ensure that the Department's Market Analysis Rules and Guidelines are met. If it is found that a Market Analyst has not conformed to the Department's Market Analysis Rules and Guidelines, as certified to, the Market Analyst will be notified of the discrepancies in the Market Analysis and will be removed from the approved Qualified Market Analyst list.

(A) In and of itself, removal from the list of approved Market Analysts will not invalidate a Market Analysis commissioned prior to the removal date and at least ninety (90) days prior to the first day of the applicable Application Acceptance Period.

(B) To be reinstated as an approved Qualified Market Analyst, the Market Analyst must amend the previous report to remove all discrepancies or submit a new sample Market Analysis that conforms to the Department's Market Analysis Rules and Guidelines, as described in this section, in effect for the year in which the updated or new sample Market Analysis is submitted.

(3) The list of approved Qualified Market Analysts will be posted on the Department's web site no later than November 1st.

(d) Market Analysis Contents. A Market Analysis for a rental Development prepared for the Department must be organized in a format that follows a logical progression and must include, at minimum, items addressed in paragraphs (1) - (13) of this subsection.

(1) Title Page. Include Property address or location, effective date of analysis, date report completed, name and address of person authorizing report, and name and address of Market Analyst.

(2) Letter of Transmittal. The date of the letter must be the date the report was completed. Include Property address or location, description of Property, statement as to purpose and scope of analysis, reference to accompanying Market Analysis report with effective date of analysis and summary of conclusions, date of Property inspection, name of persons inspecting subject Property, and signatures of all Market Analysts authorized to work on the assignment. Include a statement that the report preparer has read and understood the requirements of this section.

(3) Table of Contents. Number the exhibits included with the report for easy reference.

(4) Market Analysis Summary. Include the Department's Market Analysis Summary exhibit.

(5) Assumptions and Limiting Conditions. Include a description of all assumptions, both general and specific, made by the Market Analyst concerning the Property.

(6) Identification of the Property. Provide a statement to acquaint the reader with the Development. Such information includes street address, tax assessor's parcel number(s), and Development characteristics.

(7) Statement of Ownership. Disclose the current owners of record and provide a three (3) year history of ownership for the subject Property.

(8) Secondary Market Area. A geographic area from which the Development may draw limited demand in addition to the PMA. A SMA is not required, but may be defined at the discretion of the Market Analyst to support identified demand. All of the Market Analyst's conclusions specific to the subject Development must be based on only one SMA definition. The entire PMA, as described in this paragraph, must be contained within the SMA boundaries. The Market Analyst must adhere to the methodology described in this paragraph when determining the Secondary Market Area. (§2306.67055)

(A) The SMA will be defined by the Market Analyst with:

(i) geographic size based on a base year population of no more than 250,000 people inclusive of the PMA; and

(ii) boundaries based on U.S. census tracts.

(B) The Market Analyst's definition of the SMA must include:

(i) a detailed narrative specific to the SMA explaining;

(I) how the boundaries of the SMA were determined with respect to census tracts chosen and factors for including or excluding certain census tracts in proximity to the Development;

(II) whether a more logical market area within the SMA exists but is not definable by census tracts and how this subsection of the SMA supports the rationale for the defined SMA, and also explains how the SMA relates to the PMA in terms of its qualitative and quantitative aspects;

(III) what are the specific attributes of the Development's location within the SMA that would draw prospective tenants currently residing in other areas of the SMA to relocate to the Development;

(IV) what are the specific attributes, if known, of the Development itself that would draw prospective tenants currently residing in other areas of the SMA to relocate to the Development; and

(V) other housing issues in general, if pertinent.

(ii) a complete demographic report for the defined SMA; and

(iii) a scaled distance map indicating the SMA boundaries showing relevant U.S. census tracts with complete 11-digit identification numbers in numerical order with labels as well as the location of the subject Development and all comparable Developments.

(9) Primary Market Area. A limited geographic area from which the Development is expected to draw most of its demand. The size and shape of the PMA should be reflective of proximity to employment centers, services and amenities and contain the most significant areas from which to draw demand. All of the Market Analyst's conclusions specific to the subject Development must be based on only one PMA definition. The Market Analyst must adhere to the methodology described in this paragraph when determining the market area. (§2306.67055)

(A) The PMA will be defined by the Market Analyst as:

(i) geographic size based on a base year population no larger than necessary to provide sufficient demand but no more than 100,000 people;

(ii) boundaries based on U.S. census tracts; and

(iii) the population of the PMA may exceed 100,000 if the amount over the limit is contained within a single census tract.

(B) The Market Analyst's definition of the PMA must include:

(i) a detailed narrative specific to the PMA explaining:

(I) how the boundaries of the PMA were determined with respect to census tracts chosen and factors for including or excluding certain census tracts in proximity to the Development;

(II) whether a more logical market area within the PMA exists but is not definable by census tracts and how this subsection of the PMA supports the rationale for the defined PMA;

(III) what are the specific attributes of the Development's location within the PMA that would draw prospective tenants currently residing in other areas of the PMA to relocate to the Development;

(IV) what are the specific attributes, if known, of the Development itself that would draw prospective tenants currently residing in other areas of the PMA to relocate to the Development; and

(V) other housing issues in general, if pertinent.

(ii) a complete demographic report for the defined PMA;

(iii) a scaled distance map indicating the PMA boundaries showing relevant U.S. census tracts with complete 11-digit identification numbers in numerical order with labels as well as the location of the subject Development and all comparable Developments. The map must indicate the total square miles of PMA; and,

(iv) a proximity table indicating distance from the Development to employment centers, medical facilities, schools, entertainment and any other amenities relevant to the potential residents and include drive time estimates.

(C) Comparable Units. Identify developments in the PMA with Comparable Units. In PMAs lacking sufficient rent comparables, it may be necessary for the Market Analyst to collect data from markets with similar characteristics and make quantifiable and qualitative location adjustments. Provide a data sheet for each comparable development consisting of:

(i) development name;

(ii) address;

(iii) year of construction and year of Rehabilitation, if applicable;

(iv) property condition;

(v) Target Population;

(vi) unit mix specifying number of Bedrooms, number of baths, Net Rentable Area; and

(I) monthly rent and Utility Allowance; or

(II) sales price with terms, marketing period and date of sale;

(vii) description of concessions;

(viii) list of unit amenities;

(ix) utility structure;

(x) list of common amenities;

(xi) narrative comparison of its proximity to employment centers and services relative to targeted tenant population of the subject property; and,

(xii) for rental developments only, the occupancy and turnover.

(10) Market Information.

(A) For each of the defined market areas, identify the number of units for each of the categories in clauses (i) - (vi) of this subparagraph; the data must be clearly labeled as relating to either the PMA or the SMA, if applicable:

(i) total housing;

(ii) all multi-family rental developments, including unrestricted developments, whether existing or proposed;

(iii) Affordable housing;

(iv) Comparable Units;

(v) Unstabilized Comparable Units; and

(vi) proposed Comparable Units.

(B) Occupancy. The occupancy rate indicated in the Market Analysis may be used to support both the overall demand conclusion for the proposed Development and the vacancy rate assumption used in underwriting the Development described in §10.302(d)(1)(C) of this chapter (relating to Underwriting Rules and Guidelines). State the overall physical occupancy rate for the proposed housing tenure (renter or owner) within the defined market areas by:

(i) number of Bedrooms;

(ii) quality of construction (class);

(iii) Target Population; and

(iv) Comparable Units.

(C) Absorption. State the absorption trends by quality of construction (class) and absorption rates for Comparable Units.

(D) Demographic Reports.

(i) All demographic reports must include population and household data for a five (5) year period with the year of Application submission as the base year;

(ii) All demographic reports must provide sufficient data to enable calculation of income-eligible, age-, size-, and tenure-appropriate household populations;

(iii) For Developments targeting seniors, all demographic reports must provide a detailed breakdown of households by age and by income; and

(iv) A complete copy of all demographic reports relied upon for the demand analysis, including the reference index that indicates the census tracts on which the report is based.

(E) Demand. Provide a comprehensive evaluation of the need for the proposed housing for the Development as a whole and each Unit type by number of Bedrooms proposed and rent restriction category within the defined market areas using the most current census and demographic data available. A complete demand and capture rate analysis is required in every Market Study, regardless of the current occupancy level of an existing Development.

(i) Demographics. The Market Analyst should use demographic data specific to the characteristics of the households that will be living in the proposed Development. For example, the Market Analyst should use demographic data specific to elderly population for an Elderly Development, if available, and should avoid making adjustments from more general demographic data. If adjustment rates are used based on more general data for any of the criteria described in subclauses (I) - (V) of this clause, they should be clearly identified and documented as to their source in the report.

(I) Population. Provide population and household figures, supported by actual demographics, for a five (5) year period with the year of Application submission as the base year.

(II) Target. If applicable, adjust the household projections for the elderly population targeted by the proposed Development.

(III) Household Size-Appropriate. Adjust the household projections or target household projections, as applicable, for the appropriate household size for the proposed Unit type by number of Bedrooms proposed and rent restriction category based on 1.5 persons per Bedroom (round up).

(IV) Income Eligible. Adjust the household size appropriate projections for income eligibility based on the income bands for the proposed Unit Type by number of Bedrooms proposed and rent restriction category with:

(-a-) the lower end of each income band calculated based on the lowest gross rent proposed divided by 35 percent for the general population and 50 percent for elderly households; and

(-b-) the upper end of each income band equal to the applicable gross median income limit for the largest appropriate household size based on 1.5 persons per Bedroom (round up) or one person for Efficiency Units.

(V) Tenure-Appropriate. Adjust the income-eligible household projections for tenure (renter or owner). If tenure appropriate income eligible target household data is available, a tenure appropriate adjustment is not necessary.

(ii) Gross Demand. Gross Demand is defined as the sum of Potential Demand from the PMA, Demand from Other Sources, and Potential Demand from a Secondary Market Area (SMA) to the extent that SMA demand does not exceed 25 percent of Gross Demand.

(iii) Potential Demand. Potential Demand is defined as the number of income-eligible, age-, size-, and tenure-appropriate target households in the designated market area at the proposed placed in service date.

(I) Maximum eligible income is equal to the applicable gross median income limit for the largest appropriate household size based on 1.5 persons per Bedroom (round up) or one person for Efficiency Units.

(II) For Developments targeting the general population:

(-a-) minimum eligible income is based on a 35 percent rent to income ratio;

(-b-) appropriate household size is defined as 1.5 persons per Bedroom (rounded up); and

(-c-) the tenure-appropriate population for a rental Development is limited to the population of renter households.

(III) For Developments consisting solely of single family residences on separate lots with all Units having three (3) or more Bedrooms:

(-a-) minimum eligible income is based on a 35 percent rent to income ratio;

(-b-) appropriate household size is defined as 1.5 persons per Bedroom (rounded up); and

(-c-) Gross Demand includes both renter and owner households.

(IV) Elderly Developments or Supportive Housing:

(-a-) minimum eligible income is based on a 50 percent rent to income ratio; and

(-b-) Gross Demand includes all household sizes and both renter and owner households.

(iv) Demand from Secondary Market Area:

(I) Potential Demand from an SMA should be calculated in the same way as Potential Demand from the PMA;

(II) Potential Demand from an SMA may be included in Gross Demand to the extent that SMA demand does not exceed 25 percent of Gross Demand; and

(III) the supply of proposed and unstabilized Comparable Units in the SMA must be included in the calculation of the capture rate at the same proportion that Potential Demand from the SMA is included in Gross Demand.

(v) Demand from Other Sources:

(I) the source of additional demand and the methodology used to calculate the additional demand must be clearly stated;

(II) consideration of Demand from Other Sources is at the discretion of the Underwriter;

(III) Demand from Other Sources must be limited to households that are not included in Potential Demand; and

(IV) if households with Section 8 vouchers are identified as a source of demand, the Market Study must include:

(-a-) documentation of the number of vouchers administered by the local Housing Authority; and

(-b-) a complete demographic report for the area in which the vouchers are distributed.

(F) Employment. Provide a comprehensive analysis of employment trends and forecasts in the Primary Market Area. Analysis must discuss existing or planned employment opportunities with qualifying income ranges.

(11) Conclusions. Include a comprehensive evaluation of the subject Property, separately addressing each housing type and specific population to be served by the Development in terms of items in subparagraphs (A) - (I) of this paragraph. All conclusions must be consistent with the data and analysis presented throughout the Market Analysis.

(A) Unit Mix. Provide a best possible unit mix conclusion based on the occupancy rates by Bedroom type within the PMA and target, income-eligible, size-appropriate and tenure-appropriate household demand by unit type and income type within the PMA.

(B) Rents. Provide a separate Market Rent conclusion for each proposed Unit Type by number of Bedrooms and rent restriction category. Conclusions of Market Rent below the maximum Net Program Rent limit must be well documented as the conclusions may impact the feasibility of the Development under §10.302(i) of this chapter. In support of the Market Rent conclusions, provide a separate attribute adjustment matrix for each proposed Unit Type by number of Bedrooms and rental restriction category.

(i) The Department recommends use of HUD Form 92273.

(ii) A minimum of three developments must be represented on each attribute adjustment matrix.

(iii) Adjustments for concessions must be included, if applicable.

(iv) Adjustments for proximity and drive times to employment centers and services narrated in the Comparable Unit description must be included.

(v) Total adjustments in excess of 15 percent must be supported with additional narrative.

(vi) Total adjustments in excess of 25 percent indicate the Units are not comparable for the purposes of determining Market Rent conclusions.

(C) Effective Gross Income. Provide rental income, secondary income, and vacancy and collection loss projections for the subject derived independent of the Applicant's estimates.

(D) Demand:

(i) state the Gross Demand for each Unit Type by number of Bedrooms proposed and rent restriction category (e.g. one-Bedroom Units restricted at 50 percent of AMGI; two-Bedroom Units restricted at 60 percent of AMGI); and

(ii) state the Gross Demand for the proposed Development as a whole. If some households are eligible for more than one Unit Type due to overlapping eligible ranges for income or household size, Gross Demand should be adjusted to avoid including households more than once.

(E) Relevant Supply. The Relevant Supply of proposed and unstabilized Comparable Units includes:

(i) the proposed subject Units;

(ii) Comparable Units in an Application with priority over the subject pursuant to §10.201(6) of this chapter.

(iii) Comparable Units in previously approved but Unstabilized Developments in the PMA; and

(iv) Comparable Units in previously approved but Unstabilized Developments in the SMA, in the same proportion as the proportion of Potential Demand from the SMA that is included in Gross Demand.

(F) Gross Capture Rate. The Gross Capture Rate is defined as the Relevant Supply divided by the Gross Demand. Refer to §10.302(i) of this chapter for feasibility criteria.

(G) Individual Unit Capture Rate. For each Unit Type by number of Bedrooms and rent restriction categories, the individual unit capture rate is defined as the Relevant Supply of proposed and unstabilized Comparable Units divided by the eligible demand for that Unit.

(H) Absorption. Project an absorption period for the subject Development to achieve Breakeven Occupancy. State the absorption rate.

(I) Market Impact. Provide an assessment of the impact the subject Development, as completed, will have on existing Developments supported by Housing Tax Credits in the Primary Market. (§2306.67055)

(12) Photographs. Provide labeled color photographs of the subject Property, the neighborhood, street scenes, and comparables. An aerial photograph is desirable but not mandatory.

(13) Appendices. Any Third Party reports including demographics relied upon by the Market Analyst must be provided in appendix form. A list of works cited including personal communications also must be provided, and the Modern Language Association (MLA) format is suggested.

(14) Qualifications. Current Franchise Tax Account Status from the Texas Comptroller of Public Accounts (not applicable for sole proprietorships) and any changes to items listed in §10.303(c)(1)(B) and (C) of this chapter.

(e) The Department reserves the right to require the Market Analyst to address such other issues as may be relevant to the Department's evaluation of the need for the subject Development and the provisions of the particular program guidelines.

(f) In the event that the PMA for a subject Development overlaps the PMA's of other proposed or unstabilized comparable Developments, the Underwriter may perform an extended Sub-Market analysis considering the combined PMA's and all proposed and unstabilized Units in the extended Sub-Market Area; the Gross Capture Rate from such an extended Sub-Market Area analysis may be used as the basis for a feasibility conclusion.

(g) All Applicants shall acknowledge, by virtue of filing an Application, that the Department shall not be bound by any such opinion or Market Analysis, and may substitute its own analysis and underwriting conclusions for those submitted by the Market Analyst.

§10.304.Appraisal Rules and Guidelines.

(a) General Provision. An appraisal prepared for the Department must conform to the Uniform Standards of Professional Appraisal Practice (USPAP) as adopted by the Appraisal Standards Board of the Appraisal Foundation. The appraisal must include a statement that the report preparer has read and understood the requirements of this section.

(b) Self-Contained. An appraisal prepared for the Department must describe sufficient and adequate data and analyses to support the final opinion of value. The final value(s) must be reasonable, based on the information included. Any Third Party reports relied upon by the appraiser must be verified by the appraiser as to the validity of the data and the conclusions.

(c) Appraiser Qualifications. The qualifications of each appraiser are determined on a case-by-case basis by the Director of Real Estate Analysis or review appraiser, based upon the quality of the report itself and the experience and educational background of the appraiser. At minimum, a qualified appraiser must be appropriately certified or licensed by the Texas Appraiser Licensing and Certification Board.

(d) Appraisal Contents. An appraisal prepared for the Department must be organized in a format that follows a logical progression. In addition to the contents described in USPAP Standards Rule 2, the appraisal must include items addressed in paragraphs (1) - (12) of this subsection.

(1) Title Page. Include a statement identifying the Department as the client, acknowledging that the Department is granted full authority to rely on the findings of the report, and name and address of person authorizing report.

(2) Letter of Transmittal. Include reference to accompanying appraisal report, reference to all person(s) that provided significant assistance in the preparation of the report, date of report, effective date of appraisal, date of property inspection, name of person(s) inspecting the property, tax assessor's parcel number(s) of the site, estimate of marketing period, and signatures of all appraisers authorized to work on the assignment including the appraiser who inspected the property. Include a statement indicating the report preparer has read and understood the requirements of this section.

(3) Table of Contents. Number the exhibits included with the report for easy reference.

(4) Disclosure of Competency. Include appraiser's qualifications, detailing education and experience.

(5) Statement of Ownership of the Subject Property. Discuss all prior sales of the subject Property which occurred within the past three (3) years. Any pending agreements of sale, options to buy, or listing of the subject Property must be disclosed in the appraisal report.

(6) Property Rights Appraised. Include a statement as to the property rights (e.g., fee simple interest, leased fee interest, leasehold, etc.) being considered. The appropriate interest must be defined in terms of current appraisal terminology with the source cited.

(7) Site/Improvement Description. Discuss the site characteristics including subparagraphs (A) - (E) of this paragraph.

(A) Physical Site Characteristics. Describe dimensions, size (square footage, acreage, etc.), shape, topography, corner influence, frontage, access, ingress-egress, etc. associated with the Development Site. Include a plat map and/or survey.

(B) Floodplain. Discuss floodplain (including flood map panel number) and include a floodplain map with the subject Property clearly identified.

(C) Zoning. Report the current zoning and description of the zoning restrictions and/or deed restrictions, where applicable, and type of Development permitted. Any probability of change in zoning should be discussed. A statement as to whether or not the improvements conform to the current zoning should be included. A statement addressing whether or not the improvements could be rebuilt if damaged or destroyed, should be included. If current zoning is not consistent with the highest and best use, and zoning changes are reasonable to expect, time and expense associated with the proposed zoning change should be considered and documented. A zoning map should be included.

(D) Description of Improvements. Provide a thorough description and analysis of the improvements including size (Net Rentable Area, gross building area, etc.), number of stories, number of buildings, type/quality of construction, condition, actual age, effective age, exterior and interior amenities, items of deferred maintenance, energy efficiency measures, etc. All applicable forms of depreciation should be addressed along with the remaining economic life.

(E) Environmental Hazards. It is recognized appraisers are not experts in such matters and the impact of such deficiencies may not be quantified; however, the report should disclose any potential environmental hazards (such as discolored vegetation, oil residue, asbestos-containing materials, lead-based paint etc.) noted during the inspection.

(8) Highest and Best Use. Market Analysis and feasibility study is required as part of the highest and best use. The highest and best use analysis should consider paragraph (7)(A) - (E) of this subsection as well as a supply and demand analysis.

(A) The appraisal must inform the reader of any positive or negative market trends which could influence the value of the appraised Property. Detailed data must be included to support the appraiser's estimate of stabilized income, absorption, and occupancy.

(B) The highest and best use section must contain a separate analysis "as if vacant" and "as improved" (or "as proposed to be improved/renovated"). All four elements (legally permissible, physically possible, feasible, and maximally productive) must be considered.

(9) Appraisal Process. It is mandatory that all three approaches, Cost Approach, Sales Comparison Approach and Income Approach, are considered in valuing the Property. If an approach is not applicable to a particular property an adequate explanation must be provided. A land value estimate must be provided if the Cost Approach is not applicable.

(A) Cost Approach. This approach should give a clear and concise estimate of the cost to construct the subject improvements. The source(s) of the cost data should be reported.

(i) Cost comparables are desirable; however, alternative cost information may be obtained from Marshall & Swift Valuation Service or similar publications. The section, class, page, etc. should be referenced. All soft costs and entrepreneurial profit must be addressed and documented.

(ii) All applicable forms of depreciation must be discussed and analyzed. Such discussion must be consistent with the description of the improvements.

(iii) The land value estimate should include a sufficient number of sales which are current, comparable, and similar to the subject in terms of highest and best use. Comparable sales information should include address, legal description, tax assessor's parcel number(s), sales price, date of sale, grantor, grantee, three (3) year sales history, and adequate description of property transferred. The final value estimate should fall within the adjusted and unadjusted value ranges. Consideration and appropriate cash equivalent adjustments to the comparable sales price for subclauses (I) - (VII) of this clause should be made when applicable.

(I) Property rights conveyed.

(II) Financing terms.

(III) Conditions of sale.

(IV) Location.

(V) Highest and best use.

(VI) Physical characteristics (e.g., topography, size, shape, etc.).

(VII) Other characteristics (e.g., existing/proposed entitlements, special assessments, etc.).

(B) Sales Comparison Approach. This section should contain an adequate number of sales to provide the reader with a description of the current market conditions concerning this property type. Sales data should be recent and specific for the property type being appraised. The sales must be confirmed with buyer, seller, or an individual knowledgeable of the transaction.

(i) Sales information should include address, legal description, tax assessor's parcel number(s), sales price, financing considerations and adjustment for cash equivalency, date of sale, recordation of the instrument, parties to the transaction, three (3) year sale history, complete description of the Property and property rights conveyed, and discussion of marketing time. A scaled distance map clearly identifying the subject and the comparable sales must be included.

(ii) The method(s) used in the Sales Comparison Approach must be reflective of actual market activity and market participants.

(I) Sale Price/Unit of Comparison. The analysis of the sale comparables must identify, relate, and evaluate the individual adjustments applicable for property rights, terms of sale, conditions of sale, market conditions, and physical features. Sufficient narrative must be included to permit the reader to understand the direction and magnitude of the individual adjustments, as well as a unit of comparison value indicator for each comparable.

(II) Net Operating Income/Unit of Comparison. The Net Operating Income statistics or the comparables must be calculated in the same manner. It should be disclosed if reserves for replacement have been included in this method of analysis. At least one other method should accompany this method of analysis.

(C) Income Approach. This section must contain an analysis of both the actual historical and projected income and expense aspects of the subject Property.

(i) Market Rent Estimate/Comparable Rental Analysis. This section of the report should include an adequate number of actual market transactions to inform the reader of current market conditions concerning rental Units. The comparables must indicate current research for this specific property type. The comparables must be confirmed with the landlord, tenant or agent and individual data sheets must be included. The individual data sheets should include property address, lease terms, description of the property (e.g., Unit Type, unit size, unit mix, interior amenities, exterior amenities, etc.), physical characteristics of the property, and location of the comparables. Analysis of the Market Rents should be sufficiently detailed to permit the reader to understand the appraiser's logic and rationale. Adjustment for lease rights, condition of the lease, location, physical characteristics of the property, etc. must be considered.

(ii) Comparison of Market Rent to Contract Rent. Actual income for the subject along with the owner's current budget projections must be reported, summarized, and analyzed. If such data is unavailable, a statement to this effect is required and appropriate assumptions and limiting conditions should be made. The Contract Rents should be compared to the market-derived rents. A determination should be made as to whether the Contract Rents are below, equal to, or in excess of market rates. If there is a difference, its impact on value must be qualified.

(iii) Vacancy/Collection Loss. Historical occupancy data and current occupancy level for the subject should be reported and compared to occupancy data from the rental comparables and overall occupancy data for the subject's Primary Market.

(iv) Expense Analysis. Actual expenses for the subject, along with the owner's projected budget, must be reported, summarized, and analyzed. If such data is unavailable, a statement to this effect is required and appropriate assumptions and limiting conditions should be made. Historical expenses should be compared to comparables expenses of similar property types or published survey data (such as IREM, BOMA, etc.). Any expense differences should be reconciled. Include historical data regarding the subject's assessment and tax rates and a statement as to whether or not any delinquent taxes exist.

(v) Capitalization. The appraiser should present the capitalization method(s) reflective of the subject market and explain the omission of any method not considered in the report.

(I) Direct Capitalization. The primary method of deriving an overall rate is through market extraction. If a band of investment or mortgage equity technique is utilized, the assumptions must be fully disclosed and discussed.

(II) Yield Capitalization (Discounted Cash Flow Analysis). This method of analysis should include a detailed and supportive discussion of the projected holding/investment period, income and income growth projections, occupancy projections, expense and expense growth projections, reversionary value and support for the discount rate.

(10) Value Estimates. Reconciliation of final value estimates is required. The Underwriter may request additional valuation information based on unique existing circumstances that are relevant for deriving the market value of the Property.

(A) All appraisals shall contain a separate estimate of the "as vacant" market value of the underlying land, based upon current sales comparables. The appraiser should consider the fee simple or leased fee interest as appropriate.

(B) For existing Developments with any project-based rental assistance that will remain with the property after the acquisition, the appraisal must include an "as-is as-currently-restricted value". For public housing converting to project-based rental assistance, the appraiser must provide a value based on the future restricted rents. The value used in the analysis may be based on the unrestricted market rents if supported by an appraisal. The Department may require that the appraisal be reviewed by a third-party appraiser acceptable to the Department but selected by the Applicant. Use of the restricted rents by the appraiser will not require an appraisal review. Regardless of the rents used in the valuation, the appraiser must consider any other on-going restrictions that will remain in place even if not affecting rents. If the rental assistance has an impact on the value, such as use of a lower capitalization rate due to the lower risk associated with rental rates and/or occupancy rates on project-based developments, this must be fully explained and supported to the satisfaction of the Underwriter.

(C) For existing Developments with rent restrictions, the appraisal must include the "as-is as-restricted" value. In particular, the value must be based on the proposed restricted rents when deriving the value based on the income approach.

(D) For all other existing Developments, the appraisal must include the "as-is" value.

(E) For any Development with favorable financing (generally below market debt) that will remain in place and transfer to the new owner, the appraisal must include a separate value for the existing favorable financing with supporting information.

(F) If required the appraiser must include a separate assessment of personal property, furniture, fixtures, and equipment ("FF&E") and/or intangible items. If personal property, FF&E, or intangible items are not part of the transaction or value estimate, a statement to such effect should be included.

(11) Marketing Time. Given property characteristics and current market conditions, the appraiser(s) should employ a reasonable marketing period. The report should detail existing market conditions and assumptions considered relevant.

(12) Photographs. Provide good quality color photographs of the subject Property (front, rear, and side elevations, on-site amenities, interior of typical Units if available). Photographs should be properly labeled. Photographs of the neighborhood, street scenes, and comparables should be included. An aerial photograph is desirable but not mandatory.

(e) Additional Appraisal Concerns. The appraiser(s) must be aware of the Department program rules and guidelines and the appraisal must include analysis of any impact to the subject's value.

§10.305.Environmental Site Assessment Rules and Guidelines.

(a) General Provisions. The Environmental Site Assessments (ESA) prepared for the Department must be conducted and reported in conformity with the standards of the American Society for Testing and Materials ("ASTM"). The initial report must conform with the Standard Practice for Environmental Site Assessments: Phase I Assessment Process (ASTM Standard Designation: E1527- 13 or any subsequent standards as published). Any subsequent reports should also conform to ASTM standards and such other recognized industry standards as a reasonable person would deem relevant in view of the Property's anticipated use for human habitation. The ESA shall be conducted by a Third Party environmental professional at the expense of the Applicant, and addressed to the Department as a User of the report (as defined by ASTM standards). Copies of reports provided to the Department which were commissioned by other financial institutions must either address Texas Department of Housing and Community Affairs as a co-recipient of the report or letters from both the provider and the recipient of the report may be submitted extending reliance on the report to the Department. The ESA report must also include a statement that the person or company preparing the ESA report will not materially benefit from the Development in any other way than receiving a fee for performing the ESA, and that the fee is in no way contingent upon the outcome of the assessment. The ESA report must contain a statement indicating the report preparer has read and understood the requirements of this section.

(b) In addition to ASTM requirements, the report must:

(1) state if a noise study is recommended for a property in accordance with current HUD guidelines and identify its proximity to industrial zones, major highways, active rail lines, civil and military airfields, or other potential sources of excessive noise;

(2) provide a copy of a current survey, if available, or other drawing of the site reflecting the boundaries and adjacent streets, all improvements on the site, and any items of concern described in the body of the ESA or identified during the physical inspection;

(3) provide a copy of the current FEMA Flood Insurance Rate Map showing the panel number and encompassing the site with the site boundaries precisely identified and superimposed on the map;

(4) if the subject Development Site includes any improvements or debris from pre-existing improvements, state if testing for Lead Based Paint and/or asbestos containing materials would be required pursuant to local, state, and federal laws, or recommended due to any other consideration;

(5) state if testing for lead in the drinking water would be required pursuant to local, state, and federal laws, or recommended due to any other consideration such as the age of pipes and solder in existing improvements. For buildings constructed prior to 1980, a report on the quality of the local water supply does not satisfy this requirement;

(6) assess the potential for the presence of Radon on the Property, and recommend specific testing if necessary;

(7) identify and assess the presence of oil, gas or chemical pipelines, processing facilities, storage facilities or other potentially hazardous explosive activities on-site or in the general area of the site that could potentially adversely impact the Development. Location of these items must be shown on a drawing or map in relation to the Development Site and all existing or future improvements. The drawing must depict any blast zones (in accordance with HUD guidelines) and include HUD blast zone calculations; and

(8) include a vapor encroachment screening in accordance with Vapor Intrusion E2600-10.

(c) If the report recommends further studies or establishes that environmental hazards currently exist on the Property, or are originating off-site, but would nonetheless affect the Property, the Development Owner must act on such a recommendation, or provide a plan for either the abatement or elimination of the hazard. Evidence of action or a plan for the abatement or elimination of the hazard must be presented upon Application submittal.

(d) For Developments in programs that allow a waiver of the Phase I ESA such as a USDA funded Development, the Development Owners 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.

(e) Those Developments which have or are to receive first lien financing from HUD may submit HUD's environmental assessment report, provided that it conforms to the requirements of this section.

§10.306.Property Condition Assessment Guidelines.

(a) General Provisions. The objective of the Property Condition Assessment (PCA) for Rehabilitation Developments is to provide cost estimates for repairs and replacements, and new construction of additional buildings or amenities, which are: immediately necessary repairs and replacements; improvements proposed by the Applicant as outlined in a scope of work narrative submitted by the Applicant to the PCA provider that is consistent with the scope of work provided in the Application; and expected to be required throughout the term of the Affordability Period and not less than thirty (30) years. The PCA prepared for the Department should be conducted and reported in conformity with the American Society for Testing and Materials "Standard Guide for Property Condition Assessments. Baseline Property Condition Assessment Process (ASTM Standard Designation: E 2018") except as provided for in subsections (b) and (c) of this section. The PCA report must contain a statement indicating the report preparer has read and understood the requirements of this section. The PCA must include the Department's PCA Cost Schedule Supplement which details all Rehabilitation costs and projected repairs and replacements through at least thirty (30) years. The PCA must also include discussion and analysis of:

(1) Useful Life Estimates. For each system and component of the property the PCA should assess the condition of the system or component, and estimate its remaining useful life, citing the basis or the source from which such estimate is derived;

(2) Code Compliance. The PCA should review and document any known violations of any applicable federal, state, or local codes. In developing the cost estimates specified herein, it is the responsibility of the Applicant to ensure that the PCA adequately considers any and all applicable federal, state, and local laws and regulations which may govern any work performed to the subject Property. For transactions with Direct Loan funding from the Department, the PCA provider must also evaluate cost estimates to meet the International Existing Building Code and other property standards;

(3) Program Rules. The PCA should assess the extent to which any systems or components must be modified, repaired, or replaced in order to comply with any specific requirements of the housing program under which the Development is proposed to be financed, the Department's Uniform Physical Condition Standards, and any scoring criteria for which the Applicant may claim points;

(4) Accessibility Requirements. The PCA report must include an analysis of compliance with the Department's accessibility requirements pursuant to Chapter 1, Subchapter B and Section 10.101 (B)(8) and include the specific scope of work and costs needed to ensure that the Development will meet these requirements upon Rehabilitation (including conversion and Adaptive Reuse).

(5) Reconciliation of Scope of Work and Costs. The PCA report must include the Department's PCA Cost Schedule Supplement with the signature of the PCA provider; the costs presented on the PCA Cost Schedule Supplement are expected to be consistent with both the scope of work and immediate costs identified in the body of the PCA report, and with the Applicant's scope of work and Hard Costs as presented on the Applicant's development cost schedule; any significant variation between the costs listed on the PCA Cost Schedule Supplement and the costs listed in the body of the PCA report or on the Applicant's development cost schedule must be reconciled in a narrative analysis from the PCA provider; and

(6) Cost Estimates for Repair and Replacement. It is the responsibility of the Applicant to ensure that the PCA provider is apprised of all development activities associated with the proposed transaction and consistency of the total immediately necessary and proposed repair and replacement cost estimates with the Total Housing Development Cost schedule and scope of work submitted as an exhibit of the Application.

(A) Immediately Necessary Repairs and Replacement. Systems or components which are expected to have a remaining useful life of less than one (1) year, which are found to be in violation of any applicable codes, which must be modified, repaired or replaced in order to satisfy program rules, or which are otherwise in a state of deferred maintenance or pose health and safety hazards should be considered immediately necessary repair and replacement. The PCA must provide a separate estimate of the costs associated with the repair, replacement, or maintenance of each system or component which is identified as being an immediate need, citing the basis or the source from which such cost estimate is derived.

(B) Proposed Repair, Replacement, or New Construction. If the development plan calls for additional repair, replacement, or New Construction above and beyond the immediate repair and replacement described in subparagraph (A) of this paragraph, such items must be identified and the nature or source of obsolescence or improvement to the operations of the Property discussed. The PCA must provide a separate estimate of the costs associated with the repair, replacement, or new construction which is identified as being above and beyond the immediate need, citing the basis or the source from which such cost estimate is derived.

(C) Reconciliation of Costs. The combined costs described in subparagraphs (A) and (B) of this paragraph should be consistent with the Hard Costs presented on the Applicant's development cost schedule.

(D) Expected Repair and Replacement Over Time. The term during which the PCA should estimate the cost of expected repair and replacement over time must equal the lesser of thirty (30) years or the longest term of any land use or regulatory restrictions which are, or will be, associated with the provision of housing on the Property. The PCA must estimate the periodic costs which are expected to arise for repairing or replacing each system or component or the property, based on the estimated remaining useful life of such system or component as described in paragraph (1) of this subsection adjusted for completion of repair and replacement immediately necessary and proposed as described in subparagraphs (A) and (B) of this paragraph. The PCA must include a separate table of the estimated long term costs which identifies in each line the individual component of the property being examined, and in each column the year during the term in which the costs are estimated to be incurred and no less than thirty (30) years. The estimated costs for future years should be given in both present dollar values and anticipated future dollar values assuming a reasonable inflation factor of not less than 2.5 percent per annum.

(b) Any costs not identified and discussed in the PCA as part of subsection (a)(4), (5)(A) and (5)(B) of this section will not be included in the underwritten Total Development Cost in the Report.

(c) If a copy of such standards or a sample report have been provided for the Department's review, if such standards are widely used, and if all other criteria and requirements described in this section are satisfied, the Department will also accept copies of reports commissioned or required by the primary lender for a proposed transaction, which have been prepared in accordance with:

(1) Fannie Mae's criteria for Physical Needs Assessments;

(2) Federal Housing Administration's criteria for Project Capital Needs Assessments;

(3) Freddie Mac's guidelines for Engineering and Property Condition Reports;

(4) USDA guidelines for Capital Needs Assessment.

(d) The Department may consider for acceptance reports prepared according to other standards which are not specifically named in subsection (b) of this section, if a copy of such standards or a sample report have been provided for the Department's review, if such standards are widely used, and if all other criteria and requirements described in this section are satisfied.

(e) The PCA shall be conducted by a Third Party at the expense of the Applicant, and addressed to Texas Department of Housing and Community Affairs as the client. Copies of reports provided to the Department which were commissioned by other financial institutions should address Texas Department of Housing and Community Affairs as a co-recipient of the report, or letters from both the provider and the recipient of the report should be submitted extending reliance on the report to Texas Department of Housing and Community Affairs. The PCA report should also include a statement that the person or company preparing the PCA report will not materially benefit from the Development in any other way than receiving a fee for performing the PCA. The PCA report must contain a statement indicating the report preparer has read and understood the requirements of this section.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606426

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-2973


SUBCHAPTER G. FEE SCHEDULE, APPEALS AND OTHER PROVISIONS

10 TAC §§10.901 - 10.904

Preamble, Reasoned Response, and Repealed Rule

The Texas Department of Housing and Community Affairs (the "Department") adopts the repeal of 10 TAC Chapter 10, Uniform Multifamily Rules, Subchapter G §§10.901 - 10.904, concerning Fee Schedule, Appeals and Other Provisions, without changes to the proposed text as published in the September 23, 2016, issue of the Texas Register (41 TexReg 7350) and will not be republished.

REASONED JUSTIFICATION. The Department finds that the purpose of the repeal is to replace the sections with a new rule that encompasses all funding made available to multifamily programs. Accordingly, the repeal provides for consistency and minimizes repetition among the programs.

The Department accepted public comments between September 23, 2016 and October 14, 2016. Comments regarding the repeal were accepted in writing and by fax. No comments were received concerning the repeal.

The Board approved the final order adopting the repeal on November 10, 2016.

STATUTORY AUTHORITY. The repeal is adopted pursuant to Texas Government Code §2306.053, which authorizes the Department to adopt rules. Additionally, the repeal is adopted pursuant to Texas Government Code §2306.67022, which specifically authorizes the Department to adopt a qualified allocation plan.

The adopted repeal affects no other code, article or statute.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606434

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-3344


10 TAC §§10.901 - 10.904

The Texas Department of Housing and Community Affairs (the "Department") adopts new 10 TAC, Chapter 10 Uniform Multifamily Rules, Subchapter G, §§10.901 - 10.904 concerning Fee Schedule, Appeals and Other Provisions. Section 10.901 is adopted with change and §§10.902 - 10.904 are adopted without changes to text as published in the September 23, 2016, issue of the Texas Register (41 TexReg 7351) and will not be republished.

REASONED JUSTIFICATION. The Department finds that the adoption of the sections will result in a more consistent approach to governing multifamily activity and to the awarding of funding or assistance through the Department and to minimize repetition. The comments and responses include both administrative clarifications and corrections to the Uniform Multifamily Rule based on the comments received. After each comment title numbers are shown in parentheses. These numbers refer to the person or entity that made the comment as reflected at the end of the reasoned response. If comment resulted in recommended language changes to the proposed Uniform Multifamily Rule as presented to the Board in September, such changes are indicated.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS.

Public comments were accepted through October 14, 2016, with comments received from (28) Locke Lord Attorneys and Counselors, (42) Evolie Housing Partners, (43) Flores Residential, LLC, (54) Leslie Holleman and Associates, Inc. (58) Mark-Dana Corporation, (60) Mears Development, (73) The Brownstone Group.

1. §10.901(3) - Subchapter G - Application Fee (28)

COMMENT SUMMARY: Commenter (28) requested the following modification to clarify any confusion as it relates to the change in units from pre-application to final application: "(A) Housing Tax Credit Applications. For Applicants having submitted a competitive housing tax credit pre-application which met the pre-application threshold requirements, and for which a pre-application fee was paid, the Application fee will be $20 per Unit based on the total number of Units in the full Application. Otherwise, the Application fee will be $30 per Unit based on the total number of Units in the full Application.…"

STAFF RESPONSE:

Staff agrees with the modifications proposed and has made the changes accordingly.

BOARD RESPONSE: Accepted staff's recommendation.

2. §10.901(5) - Subchapter G - Third Party Underwriting Fee (42), (43), (54), (73)

COMMENT SUMMARY: Commenters (42), (43), (73) recommended this fee be removed from this section since the third party underwriter language was removed from §10.201(5) of the Uniform Multifamily Rules.

STAFF RESPONSE:

Staff recognizes the inconsistency between these two sections and recommends the language be reinserted under §10.201(5) to correct the inconsistency. The language under §10.201(5) has been modified to reflect the following: "…The Real Estate Analysis division shall underwrite Applications that received a full program review and remain competitive to determine financial feasibility and an appropriate funding amount. In making this determination, the Department will use §10.302 of this chapter (relating to Underwriting Rules and Guidelines) and §10.307 of this chapter (relating to Direct Loan Requirements). The Department may have an external party perform all or part of the underwriting evaluation and components thereof to the extent it determines appropriate. The expense of any external underwriting shall be paid by the Applicant prior to the commencement of the aforementioned evaluation pursuant to §10.901(5) of this chapter (relating to Fee Schedule, Appeals and other Provisions)…"

BOARD RESPONSE: Accepted staff's recommendation.

3. §10.901(12) and (13) - Subchapter G - Extension and Amendment Fees (28), (42), (43), (44), (54), (58), (60), (73)

COMMENT SUMMARY: Commenter (28) requested clarification regarding the intention of the proposed new language "increase by $500" and how these fees are to be calculated. Specifically, commenter (28) noted whether the first request will be $2500, second request is $3000 and third request is $3500, or whether the first request will be $2500, second request is $500 and third request is $500. Commenter (58) expressed similar concerns and requested clarification noting that the assumption is that multiple amendments in one request will only incur one fee. Commenter (58) requested this new language be removed.

Commenters (42), (43), (44), (54), (58), (60), (73) stated that construction status reports should not need to be extended and recommended removing this reference from this section. Commenter (42), (54) further contended that such report is simply updating the Department on the status of construction progress and fails to see a reason why an owner would need an extension on a simple type of reporting. Commenter (42), (54) indicated that the additional language in this section may be used to collect $2,500 for submitting a late Construction Status Report and stated that if the intention of the Department is to find a penalty for late reporting, imposing a fee is not the appropriate place or method. Commenter (44) stated that such status reports are a relatively new requirement, are not followed up on or enforced by Department staff and are by no means as important or time critical as the Carryover, 10% Test or Cost Certification and should not be treated as such.

STAFF RESPONSE: In response to commenters (28), (58) requesting clarification on the calculation of the amendment fee if subsequent requests are made, the first request for an amendment will be $2,500. If a second request for an amendment related to the same application is submitted, a subsequent fee for $3,000 must accompany the revised request, and if a third request is made related to the same application, a fee in the amount of $3,500 must be submitted before the amendment will be processed by the Department. Amendment requests are typically very time intensive for Owners, several Department Divisions, and (where applicable) the Board. Amendment requests are currently often submitted on multiple occasions for the same Developments, requiring staff to re-evaluate the same Developments, re-work previous amendments, and bring the same Developments back to the Board for consideration multiple times. In response to Commenter 58, multiple amendments in one request will only incur one fee; the intent of this rule change is to encourage Owners to be as thorough as possible and to include any and all items requiring amendment in one request rather than submitting multiple requests for changes to the same Development. Staff believes that encouraging Owners to review any and all changes from application prior to submitting an amendment request will make amendment requests more thorough and clear, will assist staff and the Board in considering the full and correct scope of changes affecting an application, and will make the amendment process more efficient for all parties. Staff has modified the section for clarity as reflected by the following: "(13) Amendment Fees. An amendment request for a non-material change that has not been implemented will not be required to pay an amendment fee. Material amendment requests (whether implemented or not), or non-material amendment requests that have already been implemented will be required to submit an amendment fee of $2,500. A subsequent request, related to the same application, regardless of whether the first request was non-material and did not require a fee, must include a fee of $3,000 and if a third request for such amendment is made, it must include a fee of $3,500. Amendment fees and fee increases are not required for the Direct Loan programs." Similarly, staff has modified the section relating to Extension fees to reflect the same as reflected by the following: "(12) Extension Fees. All extension requests for deadlines relating to the Carryover, 10 Percent Test (submission and expenditure), Construction Status Reports, or Cost Certification requirements submitted at least thirty (30) calendar days in advance of the applicable deadline will not be required to submit an extension fee. Any extension request submitted fewer than thirty (30) days in advance or after the original deadline must be accompanied by an extension fee of $2,500. A subsequent request on the same activity, regardless of whether the first request was submitted thirty (30) calendar days in advance of the applicable deadline, must include a fee of $3,000 and if a third request for such amendment is made, it must include a fee of $3,500. An extension fee will not be required for extensions requested on Developments that involve Rehabilitation when the Department or U.S. Department of Agriculture (USDA) is the primary lender if USDA or the Department is the cause for the Applicant not meeting the deadline."

While the Department recognizes that extension requests for construction status reports would be a new process, the Department disagrees with Commenters 42, 43, 44, 54, 58, 60, and 73 that construction status reports should not need to be extended. The construction status report requirement has been included in Subchapter E of the Uniform Multifamily Rules since 2013, appears in the Post Award Activities Manual, and is relied on by the Department as an essential tool to assist in documenting and discussing issues later brought to light with amendment and other extension requests, force majeure requests, placed in service extension requests, requests from congressional offices, and cost certifications - not just for regular updates to the Department on the status of construction progress, as Commenters 42 and 54 stated. Though this requirement was also explicitly added to Determination Notices and Carryover Allocation Agreements in 2015 (the Department's further attempt at highlighting this critical requirement), the Department continues to struggle with receiving Construction Status Reports on time and sometimes at all from a large number of Owners, which has affected its ability to act timely and reasonably in taking action on different types of external requests and receive an adequate amount of information to form responses for the Board, Owners, and representatives of the public. Because of this continuing issue, the Department has proposed the extension process and $2,500 extension fee as a way to begin better enforcing this requirement, which has thus far been difficult given that there is no consequence for failing to submit the information, as noted by Commenter 44. While construction status reports may not seem as time critical as Carryover, 10% Test, or Cost Certification, as stated by Commenter 44, the Department would argue that the need for responses to items can sometimes be unforeseen by both Owners and staff and that such requests can become even more time critical given the needs of Owners or external parties. Given the Department's reliance on these reports, if the choice is made not to implement the extension process and $2,500 fee because of agreement with Commenters 42 and 54 that imposing a fee is not the appropriate place or method for finding a penalty for late reporting, the Department will still need to seek other fair means of encouraging timely submissions and gaining compliance with the rule, which may result in looking to other available routes of correcting non-compliance, such as referring participants directly to the Administrative Penalties Committee, which the Department fears would become more onerous for Owners than adding construction status reports to the extension process. Staff recommends no change based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

INDEX OF COMMENTERS

(28) Locke Lord Attorneys and Counselors

(42) Evolie Housing Partners

(43) Flores Residential, LLC

(54) Leslie Holleman and Associates, Inc.

(58) Mark-Dana Corporation

(60) Mears Development

(73) The Brownstone Group

STATUTORY AUTHORITY. The new sections are adopted pursuant to Texas Government Code §2306.053, which authorizes the Department to adopt rules. Additionally, the new sections are adopted pursuant to Texas Government Code, §2306.67022, which specifically authorizes the Department to adopt a qualified allocation plan, and Texas Government Code, §2306.144, §2306.147, and §2306.6716.

The adopted rule affects no other code, article or statute.

§10.901.Fee Schedule.

Any fees, as stated in this section, not paid will cause an Applicant to be ineligible to apply for Department funding, ineligible to receive additional Department funding associated with a Commitment, Determination Notice or Contract, and ineligible to submit extension requests, ownership transfers, and Application amendments until such time the Department receives payment. Payments of the fees shall be in the form of a check and to the extent there are insufficient funds available, it may cause the Application, Commitment, Determination Notice or Contract to be terminated or Allocation rescinded. The Department may extend the deadline for specific extenuating and extraordinary circumstances, provided the Applicant submits a written request for an extension no later than ten (10) business days prior to the deadline associated with the particular fee. For those requests that do not have a specified deadline, the written request for a fee waiver and description of extenuating and extraordinary circumstances must be included in the original request cover letter.

(1) Competitive Housing Tax Credit Pre-Application Fee. A pre-application fee, in the amount of $10 per Unit, based on the total number of Units reflected in the pre-application, must be submitted with the pre-application in order for the pre-application to be considered accepted by the Department. Pre-applications in which a Community Housing Development Corporation (CHDO) or a private 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, may be eligible to receive a discount of 10 percent off the calculated pre-application fee provided such documentation is submitted with the fee. (§2306.6716(d))

(2) Refunds of Pre-application Fees. (§2306.6716(c)) Upon written request from the Applicant, the Department shall refund the balance of the pre-application fee for a pre-application that is withdrawn by the Applicant and that is not fully processed by the Department. The amount of refund will be commensurate with the level of review completed. Initial processing will constitute 50 percent of the review, threshold review prior to a deficiency issued will constitute 30 percent of the review, and deficiencies submitted and reviewed constitute 20 percent of the review.

(3) Application Fee. Each Application must be accompanied by an Application fee.

(A) Housing Tax Credit Applications. For Applicants having submitted a competitive housing tax credit pre-application which met the pre-application threshold requirements, and for which a pre-application fee was paid, the Application fee will be $20 per Unit based on the total number of Units in the full Application. Otherwise, the Application fee will be $30 per Unit based on the total number of Units in the full Application. 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, may be eligible to receive a discount of 10 percent off the calculated Application fee provided such documentation is submitted with the fee. (§2306.6716(d))

(B) Direct Loan Applications. The fee will be $1,000 per Application except for those Applications that are layered with Housing Tax Credits and submitted simultaneously with the Housing Tax Credit Application. Pursuant to Tex. Gov't Code §2306.147(b), the Department is required to waive Application fees for private nonprofit organizations that offer expanded services such as child care, nutrition programs, job training assistance, health services, or human services and if HOME funds are awarded. In lieu of the Application fee, these organizations must include proof of their exempt status and a description of their supportive services as part of the Application. The Application fee is not a reimbursable cost under the HOME Program.

(4) Refunds of Application Fees. Upon written request from the Applicant, the Department shall refund the balance of the Application fee for an Application that is withdrawn by the Applicant and that is not fully processed by the Department. The amount of refund will be commensurate with the level of review completed. Initial processing will constitute 20 percent, the site visit will constitute 20 percent, program review will constitute 40 percent, , and underwriting review will constitute 20 percent.

(5) Third Party Underwriting Fee. Applicants will be notified in writing prior to the evaluation in whole or in part of a Development by an independent external underwriter 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 or Determination Notice Fee, as applicable, established in paragraphs (8) and (9) of this section, in the event that a Commitment or Determination Notice is issued by the Department to the Development Owner.

(6) Administrative Deficiency Notice Late Fee. (Not applicable for Competitive Housing Tax Credit Applications.) Applications that fail to resolve Administrative Deficiencies pursuant to §10.201(7) of this chapter may incur a late fee in the amount of $500 for each business day the deficiency remains unresolved.

(7) Third Party Deficiency Request Fee. For Competitive Housing Tax Credits (HTC) Applications, a fee equal to $500 must be submitted with a Third Party Request for Administrative Deficiency that is submitted per Application pursuant to §11.10 of this title (relating to Housing Tax Credit Program Qualified Allocation Plan).

(8) Housing Tax Credit Commitment Fee. No later than the expiration date in the Commitment, a fee equal to 4 percent of the annual Housing Credit Allocation amount must be submitted. If the Development Owner has paid the fee and returns the credits by November 1 of the current Application Round, then a refund of 50 percent of the Commitment Fee may be issued upon request.

(9) Tax Exempt Bond Development Determination Notice Fee. No later than the expiration date in the Determination Notice, a fee equal to 4 percent of the annual Housing Credit Allocation amount must be submitted. If the Development Owner has paid the fee and is not able close on the bonds within ninety (90) days of the issuance date of the Determination Notice, then a refund of 50 percent of the Determination Notice Fee may be issued upon request.

(10) Building Inspection Fee. (For Housing Tax Credit and Tax-Exempt Bond Developments only.) No later than the expiration date in the Commitment or Determination Notice, a fee of $750 must be submitted. Building inspection fees in excess of $750 may be charged to the Development Owner not to exceed an additional $250 per Development.

(11) Tax-Exempt Bond Credit Increase Request Fee. 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 4 percent of the amount of the credit increase for one (1) year.

(12) Extension Fees. All extension requests for deadlines relating to the Carryover, 10 Percent Test (submission and expenditure), Construction Status Reports, or Cost Certification requirements submitted at least thirty (30) calendar days in advance of the applicable deadline will not be required to submit an extension fee. Any extension request submitted fewer than thirty (30) days in advance or after the original deadline must be accompanied by an extension fee of $2,500. A subsequent request on the same activity, regardless of whether the first request was submitted thirty (30) calendar days in advance of the applicable deadline, must include a fee of $3,000 and if a third request for such amendment is made, it must include a fee of $3,500. An extension fee will not be required for extensions requested on Developments that involve Rehabilitation when the Department or U.S. Department of Agriculture (USDA) is the primary lender if USDA or the Department is the cause for the Applicant not meeting the deadline.

(13) Amendment Fees. An amendment request for a non-material change that has not been implemented will not be required to pay an amendment fee. Material amendment requests (whether implemented or not), or non-material amendment requests that have already been implemented will be required to submit an amendment fee of $2,500.A subsequent request, related to the same application, regardless of whether the first request was non-material and did not require a fee, must include a fee of $3,000 and if a third request for such amendment is made, it must include a fee of $3,500. Amendment fees and fee increases are not required for the Direct Loan programs.

(14) Right of First Refusal Fee. Requests for approval of the satisfaction of the Right of First Refusal provision of the Land Use Restriction Agreement (LURA) must be accompanied by a non-refundable fee of $2,500.

(15) Qualified Contract Pre-Request Fee. A Development Owner must file a preliminary Qualified Contract Request to confirm eligibility to submit a Qualified Contract request. The Pre-Request must be accompanied by a non-refundable processing fee of $250.

(16) Qualified Contract Fee. Upon eligibility approval of the Qualified Contract Pre-Request, the Development Owner may file a Qualified Contract Request. Such request must be accompanied by a non-refundable processing fee of $3,000.

(17) Ownership Transfer Fee. Requests to approve an ownership transfer must be accompanied by a non-refundable processing fee of $1,000.

(18) Unused Credit or Penalty Fee. 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 IRS Form 8609. For Competitive Housing Tax Credit Developments, a penalty fee equal to the one year credit amount of the lost credits (10 percent of the total unused tax credit amount) will be required to be paid by the Owner prior to the issuance of IRS Form 8609 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 Internal Revenue Code, §42. 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) calendar 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 percent.

(19) Compliance Monitoring Fee. Upon receipt of the cost certification for HTC Developments or HTC Developments that are layered with Direct Loan funds, or upon the completion of the 24-month development period and the beginning of the repayment period for Direct Loan only Developments, the Department will invoice the Development Owner for compliance monitoring fees. The amount due will equal $40 per tax credit Unit and $34 per Direct Loan designated Unit, with two fees due for units that are dually designated. For HTC Developments, the fee will be collected, retroactively if applicable, beginning with the first year of the credit period. For Direct Loan only Developments, the fee will be collected beginning with the first year of the repayment period. The invoice must be paid prior to the issuance of IRS Form 8609 for HTC properties. 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. Compliance fees may be adjusted from time to time by the Department.

(20) Public Information Request Fee. Public information requests are processed by the Department in accordance with the provisions of Tex. Gov't 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.

(21) 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 and HOME programs may 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. 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.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606438

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-3344


CHAPTER 11. HOUSING TAX CREDIT PROGRAM QUALIFIED ALLOCATION PLAN

10 TAC §§11.1 - 11.10

The Texas Department of Housing and Community Affairs (the "Department") adopts the repeal of 10 TAC Chapter 11, Housing Tax Credit Program Qualified Allocation Plan §§11.1 - 11.10, without changes to the proposed text as published in the September 23, 2016, of the Texas Register (41 TexReg 7299). The repealed text will not be republished.

REASONED JUSTIFICATION. The Department finds that the repeal will replace the sections with a new QAP applicable to the 2017 application cycle.

The Department accepted public comments between September 23, 2016, and October 14, 2016. Comments regarding the repealed were accepted in writing and by fax. No comments were received concerning the repeal.

The Board approved the final order adopting the repeal on November 10, 2016.

STATUTORY AUTHORITY. The repeal is adopted pursuant to Texas Government Code §2306.053, which authorizes the Department to adopt rules. Additionally, the repeal is adopted pursuant to Tex. Gov't Code §2306.67022, which specifically authorizes the Department to adopt a qualified allocation plan.

The adopted repeal affects no other code, article or statute.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606439

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-2973


10 TAC §§11.1 - 11.10

The Texas Department of Housing and Community Affairs (the "Department") adopts new 10 TAC, Chapter 11, §§11.1 - 11.10, concerning the Housing Tax Credit Program Qualified Allocation Plan. Sections 11.1, 11.2, 11.6, 11.7, 11.8, 11.9, and 11.10 are adopted with changes to text as published in the September 23, 2016 issue of the Texas Register (41 TexReg 7354). Sections 11.3, 11.4, and 11.5 are adopted without change and will not be republished.

REASONED JUSTIFICATION. The Department finds that the adoption of the rule will result in a more consistent approach to governing multifamily activity and to the awarding of multifamily funding or assistance through the Department while minimizing repetition among the programs. The comments and responses include both administrative clarifications and revisions to the Housing Tax Credit Program Qualified Allocation Plan based on the comments received. After each comment title, numbers are shown in parentheses. These numbers refer to the person or entity that made the comment as reflected at the end of the reasoned response. If comment resulted in recommended language changes to the Draft Housing Tax Credit Program Qualified Allocation Plan as presented to the Board in September, such changes are indicated.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS

Public comments were accepted through October 14, 2016, with comments received from (1) Senator Eddie Lucio, Jr., (2) Representative Eddie Lucio, III, (3) Representative Marisa Márquez, (4) Senator José Menéndez, (5) Representative Joe Moody, (6) Representative Joseph C. Pickett, (7) Senator José Rodríguez, (8) City of Fort Worth, (9) City of Harlingen, (10) City of San Angelo, (11) City of San Saba, (12) Travis County (13) Fort Worth Housing Solutions, (14) San Antonio Housing Authority, (15) Housing Authority of the City of El Paso, (16) Marble Falls Economic Development Corporation, (17) 5th Ward Community Redevelopment Corporation, (18) City Wide Community Development Corporation, (19) Texas Association of Community Development Corporations, (20) Rural Rental Housing Association of Texas, Inc., (21) Trinity University, (22) Texas Affiliation of Affordable Housing Providers, (23) Texas Coalition of Affordable Developers, (24) Low Income Housing Information Service, (25) Corporation for Supportive Housing, (26) Preservation Texas, (27) Atlantic Housing Foundation, Inc., (28) Locke Lord Attorneys and Counselors, (29) Leading Age Texas, (30) Uplift Education, (31) Structure Development, (32) Anderson Development and Construction, LLC, (33) BETCO Consulting, LLC, (34) Savage, William, (35) Casa Linda Development Corporation, (36) Churchill Residential, (37) Columbia Residential, (38) Dharma Development, LLC, (39) DMA Companies, (40) Dominium, (41) Endeavor Real Estate Group, (42) Evolie Housing Partners, (43) Flores Residential, LLC, (44) Foundation Communities, (45) Franklin Development, (46) FW Mason Heights, LP, (47) Marks, Roger, (48) Hamilton Valley Management, Inc., (49) Highridge Costa Development Company, LLC, (50) Hoke Development Services, LLC, (51) Investment Builders, Inc., (52) ITEX Group, (53) Lakewood Property Management, LLC, (54) Leslie Holleman and Associates, Inc., (55) Carpenter, Alyssa, (56) Lucas and Associates, LP, (57) Madhouse Development Services, (58) Mark-Dana Corporation, (59) Marque Real Estate Consultants, (60) Mears Development, (61) MGroup, LLC, (62) Miller Valentine Group, (63) National Church Residences, (64) New Hope Housing, (65) The Brownstone Group, (66) O-SDA Industries, (67) Palladium USA, (68) Prospera Housing Community Services, (69) Purple Martin Real Estate, (70) Saigebrook Development, (71) Stoneleaf Companies, (72) Allgeier, Dan

1. §11 - General Comment (24), (28)

COMMENT SUMMARY: Commenter (24) applauds the great efforts that staff have expended in working with stakeholders to craft the Draft 2017 QAP. Commenter states that many of the rules and changes contained in the proposed 2017 Multifamily Rules will advance this state's obligation to affirmatively further fair housing and to provide quality housing choices to low-income Texans who are dependent on affordable housing programs. Commenter continues that there are several changes that stand to impede this same obligation and are a regression from the 2016 QAP.

COMMENT SUMMARY: Commenter (28) pointed out several administrative corrections needed.

STAFF RESPONSE: Staff appreciates the support expressed by commenter (24) and provides responses in the specific areas of the rule commented upon.

Staff appreciates the corrections suggested by commenter (28) and has incorporated them throughout the rule as discussed, below.

BOARD RESPONSE: Accepted staff's recommendation.

2. §11.1 General (42), (54), (59)

COMMENT SUMMARY: Commenters (42) and (54) state that the language added to the end of section (b), regarding Due Diligence and Applicant Responsibility, raises procedural questions regarding appeal rights. Commenter asks if the Department intends to move away from issuing scoring notices and rely on the posting of application logs to communicate scoring decisions. Commenter points out that fewer logs were published during the last cycle than from the previous two, and only 3 were announced via Department listserv. Commenter recommends striking this language as it is ambiguous and unnecessary as there is an entire section related to Appeal rights in Subchapter G.

Commenter (59) asks staff to clarify what staff intends to publish to the Department's website that represents the "results of the evaluation process" since a scoring notice will no longer be considered Staff's summary of their assessments of an application.

STAFF RESPONSE: In response to commenters (42), (54), and (59), staff clarifies that the Department is not moving away from issuing scoring notices. As in years past, scoring notices will be issued when the scoring review of an application is complete, and revised scoring notices will be issued when appropriate. The added language clarifies that the scoring notice is a courtesy communication to the Applicant of the score that will appear on a future log at publication. Tex. Gov't Code §2306.67041 requires the Department to post online an application log that includes the application score. In posting such log, the Department provides information regarding the scoring of the application, which is one the appealable decisions indicated in Tex. Gov't Code §2306.6715 regarding appeals. Because Tex. Gov't Code §2306.6715(c) provides for appeal within seven days after publication of scoring results, staff will post the log on a regular basis during the review process. Staff believes that the language in this section should be clarified and has revised the rule accordingly.

(b) Due Diligence and Applicant Responsibility. Department staff may, from time to time, make available for use by Applicants information and informal guidance in the form of reports, frequently asked questions, and responses to specific questions. The Department encourages communication with staff in order to clarify any issues that may not be fully addressed in the QAP or may be unclear when applied to specific facts. However, while these resources are offered to help Applicants prepare and submit accurate information, Applicants should also appreciate that this type of guidance is limited by its nature and that staff will apply the rules of the QAP to each specific situation as it is presented in the submitted Application. Moreover, after the time that an issue is initially presented and guidance is provided, additional information may be identified and/or the issue itself may continue to develop based upon additional research and guidance. Thus, until confirmed through final action of the Board, staff guidance must be considered merely as an aid and an Applicant continues to assume full responsibility for any actions Applicant takes regarding an Application. In addition, although the Department may compile data from outside sources in order to assist Applicants in the Application process, it remains the sole responsibility of the Applicant to perform independently the necessary due diligence to research, confirm, and verify any data, opinions, interpretations, or other information upon which an Applicant bases an Application or includes in any submittal in connection with an Application. As provided by Tex. Gov't Code §2306.6715(c), an applicant is given until the later of the seventh day of the publication on the Department's website of a scoring log reflecting that applicant's score or the seventh day from the date of transmittal of a scoring notice; PROVIDED, however, that an applicant may not appeal any scoring matter after the award of credits unless they are within the above-described time limitations AND have appeared at the meeting when the Department's Governing Board makes competitive tax credit awards and stated on the record that they have an actual or possible appeal that has not been heard. Appeal rights may be triggered by the publication on the Department's website of the results of the evaluation process. Individual Scoring notices or similar communications are a courtesy only.

BOARD RESPONSE: Accepted staff's recommendation.

3. §11.2 - Program Calendar for Competitive Housing Tax Credits (19), (31), (36), (38), (44)

COMMENT SUMMARY: Commenters (19), (31), (36), and (44) state that the time frame for clearing a deficiency should not be reduced from five (5) days to three (3) days.

Commenter (38) points out that the Application Acceptance Period Begins on January 5, 2017 (a Thursday), and the Pre-Application Final Delivery Date is January 9, 2017 (a Monday). Commenter states that Developers should have the work week to work on the pre-applications and make sure that they are ready prior to the filing deadline.

STAFF RESPONSE: In response to commenters (19), (31), (36), and (44), staff agrees that the time frame for clearing a deficiency should not change. The language in this section and in §10.201(7) will revert to that of the 2016 QAP.

In response to commenter (38), the Application Acceptance Period marks the date on which Applicants may send their applications to the Department and does not mark the date one which an Applicant may start to prepare the Pre-application. Applicants are able (and encouraged) to begin preparing the Pre-application as soon as the application materials are posted on the Department's website. For Program Year 2016, the Pre-application materials were posted on December 4, 2015, giving Applicants access to the materials one month prior to the beginning of the Application Acceptance Period.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

4. §11.3 - Housing De-Concentration Factors (61)

COMMENT SUMMARY: Commenter (61) states that to prevent over-concentration of tax credits in certain census tracts, the de-concentration and linear distance conditions for same year awards should apply statewide and not just in counties with a population in excess of one million people. Commenter suggests adding language to this section so that in urban areas, regardless of county population, any award is limited to a minimum linear distance de-concentration factor. Commenter proposes a rule that mandates a minimum one mile linear separation for same year development awards. Commenter suggests the following revision to item (d):

(d) Limitations on Developments in Certain Census Tracts. An Application that proposes the New Construction or Adaptive Reuse of a Development proposed to may not be located in a census tract that has more than 20 percent Housing Tax Credit Units per total households as established by the 5-year American Community Survey, regardless of whether 1) the units are existing at the time the application cycle begins, or 2) any multiple awards within the same program year causes the census tract to meet the 20% limit. The application that causes the 20% limit to be exceeded shall be deemed ineligible for an award of tax credits.

STAFF RESPONSE: In response to commenter (61), staff believes that these revisions represent sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. These ideas could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

5. §11.4 Tax Credit Request and Award Limits (40), (59), (62)

COMMENT SUMMARY: Commenter (40) states that under item (C), the existing language is ambiguous as it pertains to tax exempt bond financed transactions and requests §11.4(c)(1) not apply to 4% bond deals, particularly 4% bond deals that are preservation of existing affordable housing (project based Section 8 or existing Section 42). Commenter suggests the following revisions:

(1) The Development is located in a Qualified Census Tract (QCT) (as determined by the Secretary of HUD) that has less than 20 percent Housing Tax Credit Units per total households in the tract as established by the U.S. Census Bureau for the 5-year American Community Survey. New Construction or Adaptive Reuse Developments seeking Competitive Housing Tax Credits located in a QCT that has in excess of 20 percent Housing Tax Credit Units per total households in the tract are not eligible to qualify for a 30 percent increase in Eligible Basis, which would otherwise be available for the Development Site pursuant to §42(d)(5) of the Code. For Tax-Exempt Bond Developments, as a general rule, a QCT designation would have to coincide with the program year the Certificate of Reservation is issued in order for the Department to apply the 30 percent boost in its underwriting evaluation. For New Construction or Adaptive Reuse Developments seeking Competitive Housing Tax Credits that are located in a QCT with 20 percent or greater Housing Tax Credit Units per total households, the Development is eligible for the boost if the Application includes a resolution stating that the Governing Body of the appropriate municipality or county containing the Development has by vote specifically allowed the construction of the new Development and referencing this rule. An acceptable, but not required, form of resolution may be obtained in the Multifamily Programs Procedures Manual. Required documentation must be submitted by the Full Application Delivery Date as identified in §11.2 of this chapter or Resolutions Delivery Date in §10.4 of this title, as applicable. Applicants must submit a copy of the census map that includes the 11-digit census tract number and clearly shows that the proposed Development is located within a QCT. For Tax-Exempt Bond Developments of existing affordable housing, either Section 42 or HUD-assisted, located in a QCT the 30 percent increase in Eligible Basis would still apply even if the QCT had in excess of 20 percent Housing Tax Credits Units per total household.

Commenter (59) requests that Applicants be given the opportunity to withdraw applications of their choosing if it appears that one or more members of a development team might violate the $3 million cap, instead of TDHCA selecting the Development(s) that most effectively satisfies the Department's goals in fulfilling set-aside priorities and are highest scoring in the regional allocation.

Commenter (62) states that the change in how guarantors are considered for credit cap should be removed and last year's language should be included. Commenter states that any entity with significant involvement in the development and ownership of the property should be considered under the credit cap rules.

STAFF RESPONSE: In response to commenters (20) and (40), staff believes that these revisions represent sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. These ideas could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

In response to commenter (59), staff clarifies that the Applicant can withdraw an Application at any time during the application process. The added language establishes a process for decision making if the Applicant has not withdrawn an Application, under which staff will select the Development(s) that most effectively satisfies the Department's goals in fulfilling set-aside priorities and are the highest scoring in the regional allocation.

Staff recommends no changes based on this comment.

In response to commenter (62), staff clarifies that the change in the language regarding the guarantor is to ensure that the credit cap is limited to those permanently involved in the development. General contractors and those providing construction financing may only be involved during construction. Staff believes that the entities considered under the credit cap rules are appropriately limited.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

6. §11.5 - Competitive HTC Set-Asides (43)

COMMENT SUMMARY: Regarding item (3) At-Risk Set-Aside, commenter (43) states that there is a limit on the number of tax credits units for properties where affordable units are being relocated; however, for an at-risk development on same site, there is no limit on the number of tax credits units. Commenter recommends that the tax credit units should be limited to the same number of affordable units on the site, or perhaps not more than a minimum percentage of additional units.

STAFF RESPONSE: In response to commenter (43), staff believes that this revision represents a sufficiently substantive change from what was proposed that it could not be accomplished without re-publication for public comment. This idea could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

7. §11.6 - Competitive HTC Allocation Process (23), (42), (54), (58), (65)

COMMENT SUMMARY: Regarding item (2), commenters (42) and (54) state that the addition of this new language limits the Department's ability to allocate the entire credit ceiling in any given year. Commenters recommend striking this language.

Regarding item (3)(C), commenter (23) requests clarification on the point in the allocation process at which an award for the highest scoring development that is part of a concerted revitalization plan would be made, particularly in the case that there are revitalization developments in the At-Risk Set-Aside and in the subregion from the same city. Commenter requests clarification on which requirements of 10 TAC §11.9(d)(7) must the application meet.

Commenters (23), (54) and (65) state that subparagraph 11.6(3)(C)(ii) is missing statutory reference (2306.6711(g)).

Commenter (58) points out administrative corrections needed and requests that staff explain the resulting requirements if the last sentence is deleted from §11.6(3)(C)(i).

STAFF RESPONSE: In response to commenters (42) and (54), staff believes the added language is necessary to ensure that the next deal to be awarded from the waiting list can be fully funded.

Staff recommends no changes based on this comment.

In response to commenter (23), the recommendation for an award for such an application would be submitted for approval along with all other award recommendations. The status of applications that may meet the requirements of this subsection will be identified on each application log posted by staff. The requirement does not consider any revitalization developments in the At-Risk Set-Aside as item (C) pertains only to the initial allocation for the subregions. Until the set-aside requirement is met, award recommendations for the At-Risk Set-Aside take precedence over recommendations for the subregions. In no case would an award that would violate 10 TAC §11.3(a) (the "2 mile same year rule") be recommended.

Staff recommends no changes based on this comment.

In response to commenters (23), (54), (58) and (65), the application must meet all requirements of 10 TAC §11.9(d)(7), except the application does not have to score one additional point under §11.9(d)(7)(A)(ii)(III) or §11.9(d)(7)(B)(iv). Staff agrees that this scoring item should be clarified and has revised §11.9(d)(7) accordingly.

(C) Initial Application Selection in Each Sub-Region (Step 3). The highest scoring Applications within each of the 26 sub-regions will then be selected provided there are sufficient funds within the sub-region to fully award the Application. Applications electing the At-Risk or USDA Set-Asides will not be eligible to receive an award from funds made generally available within each of the sub-regions. . The Department will, for each such Urban subregion, calculate the maximum percentage in accordance with Tex. Gov't Code, §2306.6711(h) and will publish such percentages on its website.

(ii) In accordance with Tex. Gov't Code, §2306.6711(g), in Uniform State Service Regions containing a county with a population that exceeds 1.7 million, the Board shall allocate competitive tax credits to the highest scoring development, if any, that is part of a concerted revitalization plan that meets the requirements of §11.9(d)(7) (except for §11.9(d)(7)(A)(ii)(III) and §11.9(d)(7)(B)(iv)), is located in an urban subregion, and is within the boundaries of a municipality with a population that exceeds 500,000.

In response to commenter (58), the language deleted from clause (i) has been added to item (C). The Department will continue to calculate the maximum percentage in accordance with Texas Gov't Code, §2306.6711(h) and publish such percentages on its website.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

8. §11.7 Tie Breaker Factors (12), (20), (22), (25), (33), (35), (39), (40), (41), (42), (43), (44), (45), (49), (52), (54), (58), (59), (60), (63), (65)

COMMENT SUMMARY: Commenters (12), (20), (22), (33), (35), (40), (41), (42), (43), (49), (52), (54), (60), and (65) suggest removal of item (4). Commenters (12), (22), (40), (41), (42), and (43) state that having Educational Quality as two of the seven tie breakers seems unnecessary. Commenter (20) states that item (3) regarding Opportunity Index scoring is sufficient to capture the Department's preference for high opportunity without repeating a selection for Educational Quality.

Commenters (12), (22), (33), (40), (41), (42), (43) suggests that staff remove item (6).

Commenter (20) asks that item (6) regarding the poverty rate in a census tract become the last tie breaker.

Commenters (25) and (58) suggest not applying item (1) to applications in the At-Risk Set-Aside. Commenter (25) states that this addition creates an uneven playing field as at-risk applications compete state-wide and include both rural and urban applications.

Commenters (33), (45), (59), (63) suggest that staff remove item (1). Commenter (59) states that item (1) should be removed because Urban Core points only apply to developments in five cities. Commenter (63) states that item (1) creates an uneven playing field, especially in regards to at-risk developments that might be located in rural areas.

Commenters (35), (42), (49) and (54) state that as written, the rule presents problems for Applicants wishing to judge potential competition as there is no enforcement mechanism by which to require disclosure at Pre-application. Commenter (35) states that at the September Board meeting, public comment was made that Opportunity Index menu items above the point cap (items (3) and (4)) should be disclosed at Pre-Application. Commenter (42) suggests that the chosen menu items not be allowed to swing more than 4 items up or down at Full Application

Commenters (35), (42), (43), (54), (60), (65) recommend revision to item (3). Commenter (42) states that using one menu item to break a tie when another application may have a positive attribute that is not on the list is not a good policy. Commenter recommends limiting the number of above the point cap menu items that can be claimed on this tie break factor to 4 or more to incentivize finding High Opportunity sites.

(3) Applications having achieved the maximum Opportunity Index Score and have at least four (4) additional point items on the Opportunity index menu that they were unable to claim because of the 7-point cap on that item.

Commenter (39) supports the new Proximity to Urban Core scoring category and its rank as the first tie breaker.

Commenter (44) expresses support of the additions for tiebreaker factors. Commenter encourages staff to consider adding proximity to public transportation versus one of the two current Educational Quality tie breakers, as the property that is most accessible to public transportation is the project that will align with responsible development and broader appeal to the State's affordable housing residents living in urban areas.

Commenter (52) states that item (1) should be lowered to the 3rd tie breaker, item (3) should be the first tie-breaker, and item (5) should be removed.

Commenter (58) proposes the following tie breaker rubric:

(i) Applications having achieved a score on Proximity to the Urban Core (does not apply to Applications in the At-Risk Set-Aside)

(ii) Applications having achieved the highest score on the Opportunity Index

(iii) Applications having the most amenities on the Opportunity Index

(iv) The Application with the highest average rating for the elementary, middle, and high school designated for attendance by the Development Site.

(v) Applications proposed to be located the greatest linear distance from the nearest Housing Tax Credit assisted Development. Developments awarded Housing Tax Credits but do not yet have a Land Use Restriction Agreement in place will be considered Housing Tax Credit assisted Developments for purposes of this paragraph. The linear measurement will be performed from closest boundary to closest boundary.

STAFF RESPONSE: In response to commenters (12), (20), (22), (33), (35), (40), (41), (42), (43), (49), (52), (54), (60), and (65), staff agrees that item (4) should be removed due to the lowered point value for the item. Staff has revised the rule accordingly.

In response to commenters (12), (22), (33), (40), (41), (42), (43), staff believes that when all scoring factors fail to break a tie, there must be some objective measures utilized to break the tie. Two such measures are included: the poverty rate and the distance from the nearest HTC Development. The poverty rate measure is an objective measure that directly affects the Development. If this measure fails to break the tie, the last tie breaker is the only measure that has the least effect on the Development.

Staff recommends no changes based on this comment.

In response to commenter (20), the last tie breaker is reserved for an item that has the least bearing on the actual development. In this case, that is the greatest linear distance from the nearest HTC assisted Development.

Staff recommends no changes based on this comment.

In response to commenters (25) and (58), staff clarifies that Proximity to the Urban Core will not apply to Applications in the At-Risk Set-Aside. Staff has revised the rule accordingly.

In response to commenters (33), (45), (59), (63), staff believes that item (1) represents a policy priority of the Department to encourage the placement of affordable housing in areas that are proximate to the urban core of major cities. As such, staff believes that it is an appropriate measure as the first tie breaker. This item will not apply to Applications in the At-Risk Set-Aside. Regarding items (4) and (6), as a result of public comment, item (4) has been removed from the list; however, staff believes that item (6) should remain. Staff has revised the rule accordingly.

In response to commenter (35), (42), (49) and (54), the 2017 Pre-Application will require that applicants disclose which Opportunity Index and Educational Quality items they intend to count for tie-breaker items.

Staff recommends no changes based on this comment.

In response to commenters (35), (42), (43), (54), (60), (65), staff believes that as written, the scoring item will provide incentive to the application that is able to claim the most items under Opportunity Index. Staff does not see the necessity of adding a lower limit. If there are items that the commenter believes should be included on the list, staff encourages commenter to suggest those items during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

In response to commenter (39), staff appreciates the support expressed.

Staff recommends no changes based on this comment.

In response to commenter (44), staff believes that this revision represents sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. This idea could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

In response to commenter (52), staff believes that item (1) represents a policy priority of the Department to encourage the placement of affordable housing in areas that are proximate to the urban core of major cities. As such, staff believes that it is an appropriate measure as the first breaker. Regarding item (5), as a result of public comment, item (4), the other tie breaker item dealing with Educational Quality, has been removed from the list. Staff believes that as a result, item (5) should remain. Staff has revised the rule accordingly.

(1) Applications having achieved a score on Proximity to the Urban Core. This item does not apply to the At-Risk Set-Aside.

(2)Applications scoring higher on the Opportunity Index under §11.9(c)(4) of this chapter (relating to Competitive HTC Selection Criteria) as compared to another Application with the same score.

(3) Applications having achieved the maximum Opportunity Index Score and the highest number of point items on the Opportunity Index menu that they were unable to claim because of the 7 point cap on that item.

(4) The Application with the highest average rating for the elementary, middle, and high school designated for attendance by the Development Site.

(5) Applications proposed to be located in a census tract with the lowest poverty rate as compared to another Application with the same score.

(6) Applications proposed to be located the greatest linear distance from the nearest Housing Tax Credit assisted Development. Developments awarded Housing Tax Credits but do not yet have a Land Use Restriction Agreement in place will be considered Housing Tax Credit assisted Developments for purposes of this paragraph. The linear measurement will be performed from closest boundary to closest boundary.

In response to commenter (58), staff believes that this revision represents sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. This idea could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

9. §11.8 Pre-Application Requirements (20), (22), (32), (33) (40), (57), (58)

COMMENT SUMMARY: Commenters (20), (22), (33), (40) and (58) recommend that the disclosure requirement be removed from Pre-application. Commenter (20) states that the added requirement under (B) that applicants must disclose Undesirable Neighborhood Characteristics should be moved to full application as property sites, and particularly new construction sites, will not know all of the undesirable neighborhood characteristics at Pre-application. Commenter (58) states that developers need more time to investigate and identify Undesirable Neighborhood Characteristics than what the pre-application deadline currently allows.

Commenter (32) states that such disclosure was provided in the past and TDHCA staff was unable to respond to the voluminous request for waivers and review. Commenter suggests that unless adequate time can be dedicated by TDHCA staff to provide meaningful feedback and timely presentation to the Board if necessary, this threshold requirement adds undue burden to the developer should the Department disagree with the disclosure or lack thereof, which could subsequently result in inconsistency and subjective termination of applications.

Commenter (57) asks staff to clarify whether or not a townhome is still considered an eligible type of development.

STAFF RESPONSE: In response to commenters (20), (22), (32), (33), (40) and (58), staff believes that it may be impractical to require the disclosure of certain Undesirable Neighborhood Characteristics at Pre-application. Staff has revised the rule so that Applicants must only provide disclosure at Pre-Application for items that are easily identified, as shown below:

Pursuant to Tex. Gov't Code, §2306.6704(c) pre-applications will be terminated unless they meet the threshold criteria described in subsection (a) of this section and paragraphs (1) and (2) of this subsection:

(1) Submission of the competitive HTC pre-application in the form prescribed by the Department which identifies at a minimum: . . .

(I) Disclosure of the following Undesirable Neighborhood Characteristics under §10.101(a)(4):

(i) The Development Site is located in a census tract or within 1,000 feet of any census tract in an Urban Area and the rate of Part I violent crime is greater than 18 per 1,000 persons (annually) as reported on neighborhoodscout.com.

(ii) The Development Site is located within the attendance zones of an elementary school, a middle school or a high school that does not have a Met Standard rating by the Texas Education Agency.

In response to commenter (57), staff clarifies that a townhome that meets all accessibility requirements can be considered an eligible unit type.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

10. §11.9(a) - General Information (59)

COMMENT SUMMARY: Commenter (59) asks staff to clarify what the repercussions would be if an Applicant fails to provide this disclosure. Also, commenter asks staff to specify what constitutes evidence for providing this disclosure to the statewide elected and local officials or stakeholders.

STAFF RESPONSE: In response to commenter (59), staff clarifies that failure to make such disclosure to a state representative, local governmental body, Neighborhood Organization, or anyone else to secure support or approval that may affect the Applicant's competitive posture would be considered an incomplete notification. The disclosure must be included in any pre-application, Application or other materials provided.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

11. §11.9(c)(3) - Tenant Services (19), (22), (25), (29), (40), (42), (44), (54), (60), (63), (64), (65)

COMMENT SUMMARY: Commenters (19), (25), (29), (44), (63) and (64) suggest the following revisions in order to ensure value for tenants:

A Supportive Housing Development proposed by a Qualified Nonprofit may qualify to receive up to eleven (11) points and all other Developments may receive up to ten (10) points. . . .

(B) The Applicant certifies that the Development will have a dedicated Service Coordinator or Case Manager to contact local service providers, and will make Development community space available to them on a regularly-scheduled basis to provide outreach services and education to the tenants. The Service Coordinator will proactively engage and assess residents' needs through direct communication and tailor services appropriately.

Commenters (19), (25), (44), (63), and (64) suggest the following additional scoring item:

A Development selecting these points will also provide:

(i) Minimum of 1 monthly program onsite provided by a local service provider, and

(ii) minimum of 3 local service providers engaged to provide services to residents, or

(iii) The applicant is a nonprofit organization and is itself providing services to residents of the Development. (1 point)

Commenters (22), (40), suggest that in the event that Educational Quality is removed as a separate point category, staff should reduce the total points available for this item from 11 points to 10 points for all development types based on the scoring parity bill.

Commenters (42), (43) (54), (60) (65) state that paragraph (B) is ambiguous and should therefore be removed from this section and added as an option under 10.101(7) in more clearly defined terms. Commenters (42) and (54) ask several questions seeking clarification regarding item (3)(B) and Commenter (54) further questions if services used to score under §10.101(7) could be used to score under §11.9(c)(3).

STAFF RESPONSE: In response to commenters (19), (25), (29), (44), (63) and (64), during planning meetings held by staff with the development community and other stakeholders (including advocates for tenants), there was overwhelming opposition to including the requirements that Developments have a dedicated service coordinator or case manager and that tenants must be assessed for case management services. Commenters stated that, in most cases, tenants that require case management services already receive those services from one or more providers. Further, if the services go unused, a Development may be sidled with dedicated staff that is not being utilized.

Staff recommends no changes based on this comment.

In response to commenters (19), (25), (44), (63), and (64), staff believes that this revision represents sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. This idea could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

In response to commenters (22) and (40), Educational Quality is not being removed as a separate point category; therefore the point value for this item will remain unchanged.

Staff recommends no changes based on this comment.

In response to commenters (42) and (54), staff has revised the rule as follows to provide greater clarity:

B) The Applicant certifies that the Development will contact local service nonprofit and governmental providers of services that would support the health and well-being of the Development's tenants, and will make Development community space available to them on a regularly-scheduled basis to provide outreach services and education to the tenants. Applicants may contact service providers on the Department list, or contact other providers that serve the general area in which the Development is located. (1 point)

In response to commenter (54), Staff understands that this scoring scenario is possible.

Staff recommends no changes based on this comment.

In response to commenters (42), (43) (54), (60) and (65), staff does not agree that item (B) should be moved to §10.101(7) as that section applies to services that the Applicant agrees to provide to tenants, while this section only requires outreach and dedicated space.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

12. §11.9(c)(4) - Opportunity Index (11), (16), (19), (20), (22), (23), (24), (31), (32), (33), (36), (38), (39), (40), (42), (43), (44), (45), (48), (52), (53), (54), (55), (57), (58), (59), (65), (67), (71), (72)

ITEM (A) COMMENT SUMMARY: Commenters (11) and (16) state that due to the nature of economic and socioeconomic patterns in their cities, any scoring criteria that is ranked according to quartiles will yield uneven results. Commenters state that the existing criteria are adequate and request that any broad application of quartile and poverty rankings in rural areas be reconsidered.

Commenter (19) supports the increase of the poverty rate to 20% and allowing second and third quartile census tracts to score under this item as these changes will open new areas to locate housing.

Commenters (23), (31), (58) state that under item (A), the change from calculating quartiles by Metropolitan Statistical Area ("MSA") or County (if outside of an MSA) to by Region will be a huge shift for rural areas as some will now have no high opportunity census tracts, or the high opportunity census tracts will be disproportionately urban. Commenter (31) requests that staff not change the calculation.

Commenter (24) states that the equalization of 1st, 2nd, and 3rd quartile tracts in scoring accompanied by a raising of the poverty threshold from 15 percent to the higher of 20 percent or the average for the state service region takes the QAP from rewarding deals in high opportunity tracts where few LIHTC developments are currently located to, poverty rate aside, placing three-fourths of census tracts in Texas on an equal playing field. Commenter states that given that property values, a major factor in development decisions, are likely to be lower in 3rd quartile tracts, it is reasonable to presume that there will be a significant shift in the locations of awards in the 2017 cycle away from the progress which has been made over the past several competitive cycles. Commenter states that with the addition of the Proximity to the Urban Core points which are weighted equally with Educational Quality, there is a further reduced incentive to pursue developments in these top quartile tracts. Commenter recommends that 3rd quartile tracts be eligible for a maximum of 6 points for the opportunity index scoring item.

Commenter (32) states that a 20% poverty rate limitation unfairly limits financing in certain neighborhoods. Commenter further states that including "without physical barriers...and the Development Site is no more than 2 miles from the boundary..." is the prime definition of the unlawful Redlining that blatantly violates the Fair Housing Act. Either a census tract is eligible or it isn't. Refusing the same financing across the highway or railroad tracks where minorities historically live is perpetuating racial discrimination. Commenter states that the physical barrier and distance language must be removed.

Commenter (45) states that there is a discrepancy in the total points a development site can receive between items (i) or (ii) under 11.9(c)(4)(A). Clause (i) qualifies for 2 points, whereas clause (ii) qualifies for 1 point. Commenter (45) asks staff to review this possible discrepancy.

Commenter (55) requests that under item (A)(i), staff further clarify what TDHCA means by "highway." Commenter (55) states that, according to both Merriam Webster and Wikipedia, 'highway' can be interpreted as any "public way," such as a local street. Commenter proposes that staff replace "highway" with "controlled access highway," which is more likely to create "non-contiguous" areas than local streets.

Commenters (20), (22), (33), (39), (40), (42), (43), (44), (45), (48), (54), (55), (58), (59), (60), (65), and (67) suggest revisions to item (A).

Commenter (20) suggests revisions to support the preservation of existing rural properties and new rural construction:

(A) A Proposed Development is eligible for up to two (2) opportunity index points if it is located in a census tract with a poverty rate of less than the greater of 20% or the median poverty rate for the region and meets the requirements in (i) or (ii) below. The requirements in (i) and (ii) do not apply to the USDA and the At- Risk Set-Asides.

(i)The Development Site is located in a an urban census tract that has a poverty rate of less than the greater of 20% or the median poverty rate for the region and an income rate in the two highest quartiles within the uniform service region. (2 points)

(ii) The Development Site is located in an urban census tract that has a poverty rate of less than the greater of 20% or the median poverty rate for the region, with income in the third quartile within the region, and is contiguous to a census tract in the first or second quartile, without physical barriers such as highways or rivers between, and the Development Site is no more than 2 miles from the boundary between the census tracts. and, (1 points)

Commenters (22), (39), (40), suggest revisions to further clarify the item. Commenters suggest including aspects of the Educational Quality scoring item into the menu of items:

(A) A Proposed Development is eligible for up to two (2) opportunity index points if it is located in a census tract with a poverty rate of less than the greater of 20% or the median poverty rate for the region and meets the requirements in (i) or (ii) below. Rural developments and developments that are competing in the At-Risk and/or USDA set-asides can achieve the maximum score without meeting (i) or (ii) below.

(ii) The Development Site is located in a census tract that has a poverty rate of less than the greater of 20% or the median poverty rate for the region, with income in the third quartile within the region, and is contiguous to a census tract in the first or second quartile, and the Development Site is no more than 2 miles from the boundary between the census tracts. and, (1 points)

Commenter (33) states that due to the manner in which the quartiles are assigned, rural communities would be at a significant disadvantage in meeting this criteria and providing needed new housing opportunities for the community. Commenter states that because rural areas do not have the transportation infrastructure in place that an urban/metro place has, residents in a rural community depend on personal transportation to reach amenities and services. Commenter suggests the following revisions:

(A) A Proposed Development is eligible for up to two (2) opportunity index points if it is located in a census tract with a poverty rate of less than the greater of 20% or the median poverty rate for the region and meets the requirements in (i) or (ii) below. Rural developments and developments that are competing in the At-Risk and/or USDA set-asides can achieve the maximum 7 points without meeting (i) or (ii) below.

Commenters (42), (43), (54), (60), and (65) suggest the following revisions:

(A) A proposed Development is eligible for up to two (2) opportunity index points if it is located in a census tract with a poverty rate of less than the greater of 20% or the median poverty rate for the region and has:

an income rate in the two highest quartiles within the uniform service region; (2 points)

(ii) an income rate in the third quartile within the region, and is contiguous to a census tract in the first or second quartile, without physical barriers such as highways or rivers between, and the Development Site is no more than 2 miles from the boundary between the first or second quartile census tracts. and, (1 point)

Commenters (48) and (58) request that rural developments just not be required to meet the criteria set forth in Clauses (A)(i) and (ii). Commenter (48) states that Clauses (A)(i) and (ii) exacerbate the "donut hole" effect, whereby in non-MSA rural areas, the ranking of quartiles and poverty rate for any given census tract is indirectly proportionate to the density of population within the county. Commenter (48) asks that staff consider language that exempts developments competing in the Rural Set Aside from poverty rates or quartile rankings, and just default to the already existing criteria where presence of and proximity to certain amenities and services helps to define Rural high opportunity. Commenter (48) proposes the following rule:

For Developments located in a Rural Area, an Application may qualify to receive points through a combination of requirements in subclauses {i) - (xiii) of this subparagraph if the Development Site is located within a census tract that has a poverty rate below 20 percent.

Commenter (59) asks staff to clarify how it calculates the median poverty rate for a region. Commenter recommends using the median for all of the census tracts in a Region since this methodology give equal weight to more sparsely populated and smaller counties as large counties with high populations. Commenter asks TDHCA to continue to recognize that Regions 11 and 13 have higher median poverty rates, as it did in 2016. Commenter suggests the following language if the proposed Development Site is located in a census tract in Regions 11 or 13, in order to add more eligible 1st and 2nd quartile census tracts to Regions 11 and 13:

"...with a poverty rate of less than the greater of 20% (35% for Regions 11 and 13) or the median poverty rate for the region..."

Commenter (62) asks that TDHCA issue the data sets it will use to evaluate applications for Opportunity Index points as quickly as possible. Commenter proposes that this information be provided before October.

Commenter (67) believes that there is a significant difference between 1st quartile and 3rd quartile census tracts, and the scoring system for the Opportunity Index should reflect that. Commenter proposes that development sites located in 1st quartile census tracts qualify for an extra point under paragraph (A) of this section. Commenter also asks that the maximum number of opportunity index points be raised to eight (8) points. Commenter's proposed language seeking to privilege development sites in 1st quartile census tracts is as follows:

(A) A Proposed Development is eligible for a maximum of eight (8) opportunity index points if it is located in a census tract with a poverty rate of less than the greater of 20% or the median poverty rate for the region and meets the requirements in (i) or (ii) below.

(i) The Development Site is located in a census tract that has a poverty rate of less than the greater of 20% or the median poverty rate for the region and an income rate in the two highest quartiles within the uniform service region. (2 points)

(ii) The Development Site is located in a census tract that has a poverty rate of less than the greater of 20% or the median poverty rate for the region, with income in the second quartile or the third quartile within the region, as long as the third quartile census tract is contiguous to a census tract in the first or second quartile, without physical barriers such as highways or rivers between, and the Development Site is no more than 2 miles from the boundary between the census tracts. and, (1 points)

ITEM (B) COMMENT SUMMARY: Commenter (23) requests clarification of what data source(s) can be used to obtain property crime rates.

Commenter (23) requests clarification of what constitutes a government-sponsored museum. Commenter (58) also asks that staff strike "government sponsored" as a descriptor of "museum," as there are very good and reputable privately funded museums.

Commenter (23) requests clarification of what constitutes a university, Commenter (31) asks staff to clarify if two-year colleges constitute a University of Community College campus.

Commenters (22), (31), (39), (40), (42), (44), (54), (58), (60) and (65) made comments regarding "accessible playground". Commenter (31) asks ask staff to clarify what TDHCA means by 'accessible playground', 'access', 'play equipment', especially from the perspective of the child and/or caregiver. Commenter (44) asks whether "accessible playground" means the equipment itself has to be accessible or the route to the playground must be accessible. Commenter expresses concern that if the 2010 ADA accessibility standard is used, older playgrounds in urban areas may not meet this requirement. Commenters (22), (39), (40), (42), (54), (60), and (65) recommend removing the accessible playground language in favor of a playground that is not accessible because the accessibility of a public path is difficult to prove and the term "accessible" is not specific and could mean compliance with a variety of laws dealing with accessibility. Commenter (57) asks if by "accessible" staff mean handicap ramps, sidewalks, crosswalks, or driveway without a sidewalk. Commenter (57) asks if staff mean a playground that is fairly easy to access, ore a playground equipped for handicapped children. Commenter (38) requests that staff clarify the definition of "accessible playground".

Commenter (42) recommends striking the square footage requirement as one million square feet limits this point item to only the largest shopping malls. Commenter also recommends striking "big-box" as this is not a defined term. Commenter recommends tying "adults 25 and older with associate's degrees or higher" to exceeding the statewide average, which per the commenter is 24.5% according to the 2014 American Community Survey. Commenter states that the phrase "government-sponsored" is vague and recommends substituting the word "nonprofit" to achieve the intended goal while using objective data point.

Commenters (57) and (58) ask staff to specify how it measures distances; does it mean "drivable" or "as the crow flies."

Commenters (31), (36), (52), (53), (57), and (58) request clarification regarding item (IX) proximity to concentrated retail. Commenter (31) states that "4 big-box national retail stores" is preferable to "at least 1 million square feet." Commenter further asks how staff determines the proximity of big box retail stores, and proposes the walkable standard of ¼ mile. Commenter (36) requests that staff allow retailers to be in scattered locations within 3 miles of subject site, rather than in one concentrated retail shopping center. Commenter (52) asks that staff reduce the square footage for a retail shopping center to 250,000 square feet. Commenter (53) states that tax appraisal district information does not always include square footages of buildings and is not available everywhere, particularly in rural counties. Commenters (53) and (58) state that the square footage of a retail shopping center seems difficult to verify and unnecessary due to online purchasing and his understanding that retail stores are getting smaller (like WalMart Express). Commenters (53), (57), (58) ask how national big box retail stores will be defined. Commenter (53) suggests that staff define this requirement in both urban and rural areas as a retail center with at least 3 stores that sell goods to the general public and are open at least from 10 a.m. to 5 p.m. Monday through Friday. Commenter (57) asks that the total square footage be reduced to at least 500,000 square feet, but still comprises four big-box retail stores.

Commenters (58) and (71) request that staff consider the distance to amenities in rural communities. Commenter (71) states that rural communities generally have amenities but usually located within the vicinity of downtown, while most new construction is located on the outskirts of town due to the availability of land. Commenter states that reducing the distance to these amenities restricts the physical size of a city that can be considered.

Commenter (72) requests that the distances to museums, indoor and outdoor recreation facilities and community, civic or service organizations in Rural areas be the same as in Urban areas.

Commenters (20), (22), (33), (39), (40), (42), (43), (44), (45), (48), (54), (55), (58), (59), (60), (65), (67) and (71) suggest revisions to item (B).

Commenter (20) suggests the following revisions:

An application that meets the foregoing criteria, and applications in the USDA and At-Risk Set-Asides, may qualify for additional points up to seven (7) points for any one or more of the following factors. Each facility or amenity may be used only once for scoring purposes, regardless of the number of categories it fits:

(i) For Developments located in an Urban Area, an Application may qualify to receive points through a combination of requirements in clauses (I) through (XV) of this subparagraph.

(XV) For properties in the At-Risk or USDA Set-Aside, the Development Site is located within 1 mile of an elementary, middle and high school that meets 77 or higher on the 2016 TEA Index 1 score, or the average of the regional subregion score (1 point for each school up to 3 points).

(ii) For Developments located in a Rural Area, an Application may qualify to receive points through a combination of requirements in clauses (I) through (XIV) of this subparagraph.

(VI) The Development Site is located within 3 miles of a public park or outdoor recreation facility. (1 point)

(VII) The Development Site is located within 15 miles of a University or Community College campus (1 point)

(VIII) The Development Site is located within 5 miles of a retail shopping center with specialty stores, around a central plaza or a main street with 10 or more distinctly identifiable and separate businesses (3 points), or a retail shopping center containing 5 or more stores. (1point)

(IX) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher is 20% or higher. (1 point)

(X) Development Site is within 3 miles of a government-sponsored, nonprofit, or privately sponsored museum (1 point)

(XI) Development Site is within 3 miles of an indoor recreation facility available to the public (1 point)

(XII) For existing properties in the At-Risk or USDA Set-Aside, Development Site is within 3 miles of a high school (1 point), elementary school (1 point) or middle school (1 point) with a rating of Met Standard rating.

(XIII) Development Site is within 3 miles of community, civic or service organizations that provide regular and recurring services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club) (1 point)

(XIV) Development Site is within 3 miles of a movie theater, and at least 3 restaurants open to the public (1 point).

Commenters (22), (39), (40), suggest the following revisions:

An application that meets the foregoing criteria may qualify for additional points up to seven (7) points for any one or more of the following factors. Each facility or amenity may be used only once for scoring purposes, regardless of the number of categories it fits:

(i) For Developments located in an Urban Area, an Application may qualify to receive points through a combination of requirements in clauses (1) through (15) of this subparagraph.

(I) The Development Site is located less than 1/2 mile on an accessible route from a public park with a playground (1 point)

(II) The Development Site is located less than ½ mile on an accessible route from Public Transportation with a route schedule that provides regular service (meaning buses scheduled between 7 and 9 a.m. and 4 and 6 p.m., Monday through Friday) to employment and basic services (1 point)

(IX) The Development Site is located within 3 miles of a concentrated retail shopping center of at least 500,000 square feet or that includes at least 4 big-box national retail stores (1 point)

(X) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher is 27% or higher as tabulated by the 2010-2014 American Community Survey 5-year Estimate. (1 point)

(XI) Development Site is within 2 miles of a government or 501(c)(3) nonprofit-sponsored museum (1 point)

(XV) The Development Site is within the attendance zone of an elementary school, a middle school and a high school with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score. (3 points)

(XVI) The Development Site is within the attendance zone of any two of the following three schools (an elementary school, a middle school, and a high school) with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score. (2 points)

(XVII) The Development Site is within the attendance zone of any one of the following three schools (an elementary school, a middle school, and a high school) with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score. Center.(1 point)

(ii) For Developments located in a Rural Area, an Application may qualify to receive points through a combination of requirements in clauses (1) through (13) of this subparagraph.

(I) The Development Site is located within 5 miles of a full-service grocery store or pharmacy. A full service grocery store is a store of sufficient size and volume to provide for the needs of the surrounding neighborhood including the proposed development; and the space of the store is dedicated primarily to offering a wide variety of fresh, frozen canned and prepared foods, including but not limited to a variety of fresh meats, poultry, and seafood; a wide selection of fresh produce including a selection of different fruits and vegetables; a selection of baked goods and a wide array of dairy products including cheeses, and a wide variety of household goods, paper goods and toiletry items. (1 point)

(VII) The Development Site is located within 15 miles of a University or Community College campus (1 point)

(VIII) The Development Site is located within 5 miles of a retail shopping center with at least three retail establishments.(1point)

(IX) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher is 20% or higher as tabulated by the 2010-2014 American Community Survey 5-year Estimate. (1 point)

(X) Development Site is within 5 miles of a government-sponsored museum (1 point)

(XI) Development Site is within 3 miles of an indoor recreation facility available to the public (1 point)

(XII) Development Site is within 3 miles of an outdoor recreation facility available to the public (1 point)

(XIII) Development Site is within 3 miles of community, civic or service organizations that provide regular and recurring services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club) (1 point)

Commenter (33) suggests the following revisions:

An application that meets the foregoing criteria may qualify for additional points up to seven (7) points for any one or more of the following factors. Each facility or amenity may be used only once for scoring purposes, regardless of the number of categories it fits:

(ii) For Developments located in a Rural Area, an Application may qualify to receive points through a combination of requirements in clauses (1) through (13) of this subparagraph.

(I) The Development Site is located within 3 miles of a full-service grocery store or pharmacy. A full service grocery store is a store of sufficient size and volume to provide for the needs of the surrounding neighborhood including the proposed development; and the space of the store is dedicated primarily to offering a wide variety of fresh, frozen canned and prepared foods, including but not limited to a variety of fresh meats, poultry, and seafood; a wide selection of fresh produce including a selection of different fruits and vegetables; a selection of baked goods and a wide array of dairy products including cheeses, and a wide variety of household goods, paper goods and toiletry items. (1 point)

(VII) The Development Site is located within 15 miles of a University or Community College campus (1 point)

(VIII) The Development Site is located within 5 miles of a retail shopping center with at least three retail establishments. (1point)

(IX) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher is 20% or higher. (1 point)

(X) Development Site is within 2 miles of a nonprofit museum (1 point)

(XI) Development Site is within 3 miles of an indoor recreation facility available to the public (1 point)

(XII) Development Site is within 3 miles of an outdoor recreation facility available to the public (1 point)

(XIII) Development Site is within 3 miles of community, civic or service organizations that provide regular and recurring services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club) (1 point)

Commenter (42) suggests the following revisions:

(B) An application that meets the foregoing criteria may qualify for additional points for any one or more of the following factors. Each facility or amenity may be used only once for scoring purposes, regardless of the number of categories it fits:

(i) For Developments located in an Urban Area:

(I) The Development site is located less than 1/2 mile from a public park with a playground (1 point);

(II) The Development Site is located less than ½ mile from Public Transportation with a route schedule that provides regular service to employment and basic services (1 point);

(VI) The Development Site is located in a census tract with a property crime rate of 26 per 1,000 persons or less, as defined by neighborhoodscout.com (1 point);

(IX) The Development Site is located within 3 miles of a concentrated retail shopping center that includes at least 4 national retail stores (1 point);

(X) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher exceeds that of the State-wide average. (1 point);

(XI) Development site is within 2 miles of a non-profit museum (1 point);

(XV) Development Site is within the attendance zone of a high school (1 point), elementary school (1 point) or middle school (1 point) with a Met Standard rating.

(ii) For Developments located in a Rural Area:

(I) The Development site is located within 5 miles of a full-service grocery store or pharmacy. A full service grocery store is a store of sufficient size and volume to provide for the needs of the surrounding neighborhood including the proposed development; and the space of the store is dedicated primarily to offering a wide variety of fresh, frozen canned and prepared foods, including but not limited to a variety of fresh meats, poultry, and seafood; a wide selection of fresh produce including a selection of different fruits and vegetables; a selection of baked goods and a wide array of dairy products including cheeses, and a wide variety of household goods, paper goods and toiletry items. (1 point);

(IV) The Development Site is located in a census tract with a property crime rate 26 per 1,000 or less, as defined by neighborhoodscout.com (1 point);

(VII) The Development Site is located within 15 miles of a University or Community College campus (1 point);

(VIII) The Development Site is located within 5 miles of a retail shopping center with at least 3 retail stores (1point);

(IX) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher exceeds that of the State-wide average. (1 point);

(X) Development site is within 2 miles of a non-profit museum (1 point);

(XI) Development site is within 3 miles of an indoor recreation facility available to the public (1 point);

(XII) Development site is within 3 miles of an outdoor recreation facility available to the public (1 point); and

(XIII) Development site is within 3 miles of community, civic or service organizations that provide regular and recurring services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club) (1 point).

(XIV) Development Site is within the attendance zone of a high school (1 point), elementary school (1 point) or middle school (1 point) with a rating of Met Standard rating.

Commenter (44) provides comments and/or requested clarification on the following items:

(II) Definition of "regular". Commenter suggests using the Federal Home Loan Bank of San Francisco's definition as service at least every 30 minutes between 7 and 9 a.m. and between 4 and 6 p.m., Monday through Friday.

(XII): Commenter suggests that "indoor recreation facility" be more fully described and recommends that staff add specific descriptors such as publicly operated and/or specific features the facility must offer, and whether fees are required.

(XIII) Commenter suggests that "outdoor recreation facility" be more fully described and recommends that staff add specific descriptors such as publicly operated and/or specific features the facility must offer, and whether fees are required.

(XIV) Commenter states that this item seems to duplicate items in §11.9(c)(3) Tenant Services. Commenter suggests for replacement a Public Community Garden or Farmer's Market, Proximity to full banking services (used by FHLB San Francisco), or Proximity to Fire, Police or Post Office (used by FHLB San Francisco)

Commenter (53) suggests the following revisions:

(I) The Development site is located within 4 miles of a full-service grocery store or pharmacy. A full service grocery store is a store of sufficient size and volume to provide for the needs of the surrounding neighborhood including the proposed development; and the space of the store is dedicated primarily to offering a wide variety of fresh, frozen canned and prepared foods, including but not limited to a variety of fresh meats, poultry, and seafood; a wide selection of fresh produce including a selection of different fruits and vegetables; a selection of baked goods and a wide array of dairy products including cheeses, and a wide variety of household goods, paper goods and toiletry items. (1 point)

(II) The Development is located within 8 miles of health -related facility, such a full service hospital, community health center, or minor emergency center. Physician specialty offices are not considered in this category. (1 point)

(III) The Development Site is within 6 miles of a center that is licensed by the Department of Family and Protective Services specifically to provide a school-age program or to provide a child care program for infants, toddlers, and/or pre-kindergarten (1 point)

(V) The development site is located within 6 miles of a public library (1 point)

(VI) The development site is located within 6 miles of a public park (1 point)

(VII) The Development Site is located within 14 miles of a University or Community College campus (1 point)

(VIII) The Development Site is located within 10 miles of a retail shopping center with XX square feet of stores (1point)

(X) Development Site is within 5 miles of a nonprofit museum (1 point)

(XI) Development Site is within 3 miles of an indoor recreation facility available to the public (1 point)

(XII) Development Site is within 3 miles of an outdoor recreation facility available to the public (1 point)

(XIII) Development site is within 3 miles of community, civic or service organizations that provide regular and recurring services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club) (1 point).

Commenters (54), (60), and (65) propose the following revisions:

An application that meets the foregoing criteria may qualify for additional points up for any one or more of the following factors. Each facility or amenity may be used only once for scoring purposes, regardless of the number of categories it fits.

(i) For Developments located in an Urban Area

(I) The Development site is located less than 1/2 mile on an from a public park with an playground (1 point);

(II) The Development Site is located less than ½ mile from Public Transportation with a route schedule that provides regular service to employment and basic services (1 point);

(VI) The Development Site is located in a census tract with a property crime rate of 26 per 1,000 persons or less, as defined by neighborhoodscout.com (1 point);

(IX) The Development Site is located within 3 miles of a concentrated retail shopping center that includes at least 4 national retail stores (1 point);

(X) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher exceeds that of the State-wide average. (1 point);

(XI) Development site is within 2 miles of a non-profit museum (1 point);

(ii) For Developments located in a Rural Area.

(I) The Development site is located within 5 miles of a full-service grocery store or pharmacy. A full service grocery store is a store of sufficient size and volume to provide for the needs of the surrounding neighborhood including the proposed development; and the space of the store is dedicated primarily to offering a wide variety of fresh, frozen canned and prepared foods, including but not limited to a variety of fresh meats, poultry, and seafood; a wide selection of fresh produce including a selection of different fruits and vegetables; a selection of baked goods and a wide array of dairy products including cheeses, and a wide variety of household goods, paper goods and toiletry items. (1 point);

(IV) The Development Site is located in a census tract with a property crime rate 26 per 1,000 or less, as defined by neighborhoodscout.com (1 point);

(VII) The Development Site is located within 15 miles of a University or Community College campus (1 point);

(VIII) The Development Site is located within 5 miles of a retail shopping center with at least 3 retail stores (1point);

(IX) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher exceeds that of the State-wide average. (1 point);

(X) Development site is within 2 miles of a non-profit museum (1 point);

(XI) Development site is within 3 miles of an indoor recreation facility available to the public (1 point);

(XII) Development site is within 3 miles of an outdoor recreation facility available to the public (1 point); and

(XIII) Development site is within 3 miles of community, civic or service organizations that provide regular and recurring services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club) (1 point).

Commenter (58) notes that the wording for health care facilities is different for Urban and Rural Areas. In Urban, the item states, "The Development is located within 3 miles of either an emergency room or an urgent care facility." In Rural, the item states, "The Development is located within 4 miles of health -related facility, such a full service hospital, community health center, or minor emergency center. Physician specialty offices are not considered in this category. (1 point)" Commenter asks that they be the same, and proposes the following language:

The Development is located within 4 miles of a health -related facility, such a full-service hospital, community health center, minor emergency center, emergency room or an urgent care facility.

Commenter (58) also recommends increasing rural distances by two miles for subclauses (XIV) - (XII).

(XIV) The Development Site is located within 5 miles of a concentrated retail shopping center of at least 1 million square feet or that includes at least 4 big-box national retail stores (1 point)

(XI) Development site is within 4 miles of a government-sponsored museum (1 point)

(XII) Development site is within 3 miles of an indoor recreation facility available to the public (1 point)

Commenter (67) proposes adding another scoring item under 4(B)(i) to reward development sites that already has the appropriate zoning in place to allow the proposed use of the development. Commenter offers the following language:

An application that meets the foregoing criteria may qualify for an additional six (6) points for any one or more of the following factors. Each facility or amenity may be used only once for scoring purposes, regardless of the number of categories it fits:

(XVI) Development site is appropriately zoned for the proposed use by March 1, 2017 (1 point)

Commenter (71) suggests that the distance to the grocery store/pharmacy remain at 3 miles, the distance to a museum be 4-7 miles, the distance to a university or community college should be at least 11 miles (based on his data).

(I) The Development site is located within 3 miles of a full-service grocery store or pharmacy. A full service grocery store is a store of sufficient size and volume to provide for the needs of the surrounding neighborhood including the proposed development; and the space of the store is dedicated primarily to offering a wide variety of fresh, frozen canned and prepared foods, including but not limited to a variety of fresh meats, poultry, and seafood; a wide selection of fresh produce including a selection of different fruits and vegetables; a selection of baked goods and a wide array of dairy products including cheeses, and a wide variety of household goods, paper goods and toiletry items. (1 point);

(VII) The Development Site is located within 11 miles of a University or Community College campus (1 point);

(X) Development site is within 4-7 miles of a non-profit museum (1 point);

ITEM (A) STAFF RESPONSE: In response to commenters (11), (16), (23), (31), and (58), it is understood that the quartiles will yield different results for different applications. Staff believes that expanding the quartiles so that they are regional provides an avenue for more applications to compete for points for this item.

Staff recommends no changes based on this comment.

Staff appreciates the support expressed by commenter (19).

In response to commenters (20), (22), (33), (39), (40), (48), (58), items (3)(A)(i) and (ii) are threshold items for meeting the requirement for Opportunity Index. All Applications must meet this threshold in order to score any points under this scoring item.

Staff recommends no changes based on this comment.

In response to commenters (22), (32), (39), and (40), staff does not agree that the language regarding physical barriers between the Development Site and amenities should be removed as there are instances where such a barrier makes the amenity inaccessible to those on the other side of the barrier. If an Applicant believes that a barrier between the census tracts should not be considered to make the amenity inaccessible, the Applicant should provide information in the application supporting this belief.

Staff recommends no changes based on this comment.

In response to commenter (24), staff believes that it is premature to conclude that the item as written will result in reduced incentive to pursue development in top quartile tracts. Staff welcomes commenter to provide further information during preparations for the 2018 QAP if this issue is relevant at the time.

Staff recommends no changes based on this comment.

In response to commenter (32), staff believes that it is premature to conclude that the item as written will result in limited financing in certain neighborhoods. Staff welcomes commenter to provide further information during preparations for the 2018 QAP if this issue is relevant at the time.

Staff recommends no changes based on this comment.

In response to commenter (42), staff has revised the rule to include the citation for neighborhoodscout.com and to clarify requirements for museums. Regarding the rest of the recommended revisions, staff believes that the revisions represent sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. This idea could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest this revision during planning for the 2018 QAP.

In response to commenters (42), and (43), (54), (60) and (65), staff does not believe that it is appropriate to remove this measure from the rule, and staff did not receive comment regarding an acceptable adjustment. Staff believes that this is an appropriate measure as written.

Staff recommends no changes based on this comment.

In response to commenter (45), the most points an Applicant can receive for paragraph (A) under 11.9(c)(4) is seven (7) points. Clause (i) is preferable to Clause (ii) since it stipulates an income rate in the two highest quartiles, whereas the latter allows an income rate in the third quartile in a census tract contiguous with a first or second quartile census tracts. Thus, clause (i) warrants more points. An Applicant selecting Clause (ii) can still achieve a total of seven (7) points by selecting six (6) items under paragraph (B).

Staff recommends no changes based on this comment.

In response to commenters (54), (60) and (65), the median rate among census tracts for adults age 25 and older with an Associate's Degree or higher is 27%. The statewide rate is approximately 33%. Staff believes this is an appropriate measure as written.

Staff recommends no changes based on this comment.

In response to commenter (55), staff agrees that highway should be better defined and has revised the rule accordingly:

(ii) The Development Site is located in a census tract that has a poverty rate of less than the greater of 20% or the median poverty rate for the region, with income in the third quartile within the region, and is contiguous to a census tract in the first or second quartile, without physical barriers such as highways or rivers between, and the Development Site is no more than 2 miles from the boundary between the census tracts. For purposes of this scoring item, a highway is a limited-access road with a speed limit of 50 miles per hour or more; and, (1 points)

In response to commenter (59), staff will calculate the median poverty rate for the region by taking the median of the poverty rates of all census tracts within the region. Regarding using a higher poverty rate for Regions 11 and 13, staff did not include that provision in the published draft, and staff believes that this revision represents sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. This idea could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

In response to commenter (62), staff cannot post the datasets it will use to evaluate applications until the Board adopts the rules at the Board meeting of November 10, 2016. Staff will post the rules and supporting information as soon after the board meeting as possible.

Staff recommends no changes based on this comment.

In response to commenter (67), staff believes that this revision represents sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. This idea could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

ITEM (B) STAFF RESPONSE: In response to commenter (20), items (3)(A)(i) and (ii) are threshold items for meeting the requirement for Opportunity Index. All Applications must meet this threshold to score any points under this scoring item. Regarding the suggested items (i)(XV), (ii)(XII) and (ii)(XIV), staff believes that the addition of menu items represents a sufficiently substantive change from what was proposed that it could not be accomplished without re-publication for public comment. This idea could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest this revision during planning for the 2018 QAP. Regarding items (ii)(VI) and (ii)(XII), staff believes that there is a difference between a public park and an outdoor recreation facility. For example, a public park might not have a soccer field, but a soccer field would be considered an outdoor recreation facility.

Staff recommends no changes based on this comment.

In response to commenters (20), (22), (33), (39), (40), (42), (44), (53), (54), (58), (60), (65), and (71), staff agrees that revisions to this section are required and has revised the rule accordingly.

(B) An application that meets the foregoing criteria may qualify for additional points up to seven (7) points for any one or more of the following factors. Each facility or amenity may be used only once for scoring purposes, regardless of the number of categories it fits:

(i) For Developments located in an Urban Area, an Application may qualify to receive points through a combination of requirements in clauses (I) through (XIII) of this subparagraph.

(I) The Development site is located less than 1/2 mile on an accessible route from a public park with an accessible playground, both of which meet 2010 ADA standards. (1 point)

(II) The Development Site is located less than ½ mile on an accessible route from Public Transportation with a route schedule that provides regular service to employment and basic services. For purposes of this scoring item, regular is defined as scheduled service beyond 8 a.m. to 5 p.m., plus weekend service. (1 point)

(III) The Development site is located within 1 mile of a full-service grocery store or pharmacy. A full service grocery store is a store of sufficient size and volume to provide for the needs of the surrounding neighborhood including the proposed development; and the space of the store is dedicated primarily to offering a wide variety of fresh, frozen canned and prepared foods, including but not limited to a variety of fresh meats, poultry, and seafood; a wide selection of fresh produce including a selection of different fruits and vegetables; a selection of baked goods and a wide array of dairy products including cheeses, and a wide variety of household goods, paper goods and toiletry items. (1 point)

(IV) The Development is located within 3 miles of a health-related facility, such a full service hospital, community health center, minor emergency center, emergency room or urgent care facility. Physician specialty offices are not considered in this category. (1 point)

(V) The Development Site is within 2 miles of a center that is licensed by the Department of Family and Protective Services specifically to provide a school-age program or to provide a child care program for infants, toddlers, and/or pre-kindergarten (1 point)

(VI) The Development Site is located in a census tract with a property crime rate of 26 per 1,000 persons or less as defined by neighborhoodscout.com. (1 point)

(VII) The development site is located within 1 mile of a public library (1 point)

(VIII) The Development Site is located within 5 miles of a University or Community College campus. To be considered a university for these purposes, the provider of higher education must have the authority to confer bachelor's degrees. Two-year colleges are considered Community Colleges. Universities and Community Colleges must have a physical location within the required distance; online-only institutions do not qualify under this item. (1 point)

(IX) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher is 27% or higher as tabulated by the 2010-2014 American Community Survey 5-year Estimate. (1 point)

(X) Development site is within 2 miles of a museum that is a government-sponsored or non-profit, permanent institution open to the public and is not an ancillary part of an organization whose primary purpose is other than the acquisition, conservation, study, exhibition, and educational interpretation of objects having scientific, historical, or artistic value. (1 point)

(XI) Development site is within 1 mile of an indoor recreation facility available to the public (1 point)

(XII) Development site is within 1 mile of an outdoor recreation facility available to the public (1 point)

(XIII) Development site is within 1 mile of community, civic or service organizations that provide regular and recurring services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club) (1 point)

(ii) For Developments located in a Rural Area, an Application may qualify to receive points through a combination of requirements in clauses (I) through (XII) of this subparagraph.

(I) The Development site is located within 4 miles of a full-service grocery store or pharmacy. A full service grocery store is a store of sufficient size and volume to provide for the needs of the surrounding neighborhood including the proposed development; and the space of the store is dedicated primarily to offering a wide variety of fresh, frozen canned and prepared foods, including but not limited to a variety of fresh meats, poultry, and seafood; a wide selection of fresh produce including a selection of different fruits and vegetables; a selection of baked goods and a wide array of dairy products including cheeses, and a wide variety of household goods, paper goods and toiletry items. (1 point)

(II) The Development is located within 4 miles of health-related facility, such a full service hospital, community health center, or minor emergency center. Physician specialty offices are not considered in this category. (1 point)

(III) The Development Site is within 4 miles of a center that is licensed by the Department of Family and Protective Services specifically to provide a school-age program or to provide a child care program for infants, toddlers, and/or pre-kindergarten (1 point)

(IV) The Development Site is located in a census tract with a property crime rate 26 per 1,000 or less, as defined by neighborhoodscout.com. (1 point)

(V) The development site is located within 4 miles of a public library (1 point)

(VI) The development site is located within 4 miles of a public park (1 point)

(VII) The Development Site is located within 15 miles of a University or Community College campus (1 point)

(VIII) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher is 27% or higher as tabulated by the 2010-2014 American Community Survey 5-year Estimate. (1 point)

(IX) Development site is within 4 miles of a museum that is a government-sponsored or non-profit, permanent institution open to the public and is not an ancillary part of an organization whose primary purpose is other than the acquisition, conservation, study, exhibition, and educational interpretation of objects having scientific, historical, or artistic value. (1 point)

(X) Development site is within 3 miles of an indoor recreation facility available to the public (1 point)

(XI) Development site is within 3 miles of an outdoor recreation facility available to the public (1 point)

(XII) Development site is within 3 miles of community, civic or service organizations that provide regular and recurring services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club) (1 point)

In response to commenters (20), (22) (39), (40), (42), and (67) regarding suggested revisions and the addition of menu items, staff believes that the revisions represent sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. This idea could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest the revisions during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

In response to commenters (22) (39), (40) and (44), staff believes that the suggested definition of "regular service" does not consider persons who need transportation outside of what is referred to as "A shift". Staff would define "regular service" as scheduled service beyond 8 a.m. to 5 p.m., plus weekend service and has revised the rule accordingly.

In response to commenters (22), (31), (38), (39), (40), (42), (44), (54), (57), (58), (60), and (65), staff believes the availability of an accessible playground on an accessible route is a valuable community amenity and therefore should be considered in scoring. Playgrounds that are not accessible would be able to gain points through item (XIII).

Staff recommends no changes based on this comment.

In response to commenters (22), (31), (36), (39), (40), (42), (52), (53), (54), (57) and (58), (60), and (65), staff could find no consensus among the commenters to revise the scoring item regarding concentrated retail shopping. Staff has removed the item from the menu and may consider it for the 2018 QAP.

In response to commenters (42), (54), (60), (65) regarding items (i) and (ii), staff believes that as written there is clear definition of which scoring items pertain to Developments in Urban areas.

Staff recommends no changes based on this comment.

In response to commenter (44), regarding items (XII) and (XIII), "Recreational activities" are generally those done for pleasure and by choice. As such, it would be difficult to make an exhaustive list of everything recreation could include or what the facility must offer. Staff suggests that if commenter has questions about whether a specific recreational activity would count, commenter may contact staff for guidance. The activity does not have to publicly operated and may require fees. Staff does not agree that item (XIV) is duplicative of §11.9(c)(3). For this scoring item, the organization only needs to be within the required distance of the Development; for §11.9(c)(3), the Applicant must actively engage the organization to secure services for tenants.

Staff recommends no changes based on this comment.

In response to commenters (57) and (58), staff clarifies that distance is measured as linear distance, or "as the crow flies" from the closest points of the boundaries of the amenity and Development Site.

Staff recommends no changes based on this comment.

In response to commenters (58) and (71), staff believes that doubling the distances to amenities in rural areas across the board would not accomplish the Department's affordable housing location goals. Staff believes that it is more convenient for tenants to have a variety of amenities closer to the Development Site rather than farther away, and that the Development Site should be as close to the downtown area as possible. Staff has incorporated changes to the distance on some items in the rule.

Staff recommends no changes based on this comment.

In response to commenter (72), staff believes that it is appropriate for distances to amenities to be longer in rural areas than in urban areas as the concentration of people and development are different in rural areas. Often, some amenities are in the older part of the downtown area, and some are in the newer parts near major roads; or all the amenities are in the downtown area, and all new development is farther from downtown. Staff believes that even though the distances may be longer, they are reasonable distances that accomplish the Department's affordable housing location goals.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation and directed staff to revise the description of the threshold items under Opportunity Index to clarify that the maximum score under this items is seven (7) points, no matter how the threshold is reached.

Staff revised the description to clarify that the maximum score under this item is seven (7) points.

13. §11.9(c)(5) - Educational Quality (8), (9), (18), (20), (22), (23), (24), (25), (30), (31), (33), (34), (35), (37), (39), (40), (41), (42), (43), (46), (47), (49), (54), (55), (58), (59), (60), (62), (65), (66), (67)

COMMENT SUMMARY: Commenters (8), (30), (34), (37), (46), and (47) state that most schools have some registration/application process and capacity or enrollment limit and suggests the following change for clarity:

Schools with an application process for admittance that include academic achievement or other potentially restrictive requirements that may prevent a tenant from attending will not be considered as the closest school or the school which attendance zone contains the site.

Commenters (8), (30), (34), (37), (46), and (47) suggest adding the following items to §11.9(c)(5)(A) - (E):

The Development Site is part of a concerted revitalization plan that meets the requirements in section 11.9(d)(7) and is within the attendance zone of an elementary school, a middle school, and a high school with an index 1 score that has improved for three consecutive years prior to application (5 points)

The Development Site is part of a concerted revitalization plan that meets the requirements in section 11.9(d)(7) and is within the attendance zone of any two of the following three schools (an elementary school, a middle school, and a high school) with an index 1 score that has improved for three consecutive years prior to application (3 points, or 2 points for a Supportive Housing Development)

Commenters (9) and (31) request that staff allow an applicant an opportunity to score the additional points under item (E) without first scoring points under items (A) - (D). Commenter (9) states that this item would effectively disqualify any site in Harlingen as the mean score for Region 11 is 73 and none of the high schools in Harlingen meet that score. Commenter states that this has the effect of pushing housing to suburban areas and neutralizing points for historic rehabilitation.

Commenter (18) states that Development Sites subject to an Elderly Limitation are exempt from schools as an undesirable neighborhood characteristic; therefore, these sites should not be subject to Educational Quality rating and should be awarded 5 points.

Commenter (20) states that the item should be stricken from the USDA and At-Risk Set-Asides as a result of the Supreme Court's decision in ICP v TDHCA, and that there is sufficient location criteria for existing properties under Opportunity Index.

Commenters (22), (35), (39), (40), (41), (42), (43), (49), (54), (58), (59), (60), and (65) suggest that this scoring provision should be deleted entirely but that aspects of it should be included in the Opportunity Index scoring. Commenters state that the testing and standards by which Texas schools are rated are flawed and unreliable.

Commenters (23) and (55) state that, as written, Supportive Housing appears to be eligible for five points, but that was not the case last year and does not appear to be the case based on the "Selection Criteria" table posted in the board book of July 28, 2016.

Commenter (24) recommends that there be no changes to this section from its current form in the 2017 draft. Commenter states that states that TEA metrics are the sole source of the objective measures that TDHCA has to work with. Commenter states that emphasizing school quality has contributed to the trend of awards to areas which haven't had affordable housing available, providing new housing choices to low-income Texans. Commenter does not agree with others who comment that school quality become one of the "menu items" under opportunity index.

Commenter (25) suggests that in Elderly and Supportive Housing projects serving only adults the residents do not benefit from proximity to a high performing school. Commenter recommends either placement of this criterion as an item in the Opportunity Index so that Elderly and Supportive Housing projects select it if they wish and not be penalized, or leave it in place and allow Supportive Housing projects to score just as highly as other developments.

Commenter (31) states that for subclause (3) of paragraph (E), staff recognize that not all extended day Pre-K programs are on the same premises as the elementary school. Commenter suggests changing this language to provide points if Pre-K is offered at all for the development site, regardless of the length of the day, and not required to be within the elementary school.

Commenter (33) suggests that this item has had significant impact on awards and not always to the benefit of the residents being served. Commenter states that education is an important factor that should be considered in the placement of housing, but it should not dwarf other factors that are just as important to residents. Commenter recommends placing items relating to education in the menu of items that are being considered when determining a "good real estate transaction" under Opportunity Index.

Commenter (58) states that, if Educational Quality must remain a threshold item, staff revise paragraphs (A) - (D) to use the same criteria for evaluating schools. Currently, paragraph (D) only specifies statewide comparisons, while paragraphs (A) - (C) specify statewide and region comparisons.

Commenter (59) proposes revising Educational Quality as a menu item under §11.9(c) (4)(B), as this would promote dispersion of senior developments to locations with the appropriate amenities. Commenter has proposed the following scoring menu be added to §11.9(c)(4)(B):

(XV) The Development Site is within the attendance zone of an elementary school, a middle school and a high school with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score (3 points)

(XVI) The Development Site is within the attendance zone of any two of the following three schools (an elementary school, a middle school, and a high school) with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score. (2points)

(XVII) The Development Site is within the attendance zone of any one of the following three schools (an elementary school, a middle school, and a high school) with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score. (1point).

Commenter (62) asks that TDHCA issue the data sets it will use to evaluate applications for Education Quality points as quickly as possible. Commenter proposes that this information be provided before October. Commenter (62) specifies that schools' scores for subregions should be made available immediately.

Commenter (66) states that, as currently stated, Supportive Housing Developments receive an unfair advantage in this subdivision. Commenter shares in that the November 12, 2015 board book, staff wrote that Supportive Housing Developments would be limited to two (2) points under Educational Excellence. In the draft 2017 QAP, however, the proposed language allows Supportive Housing Developments to quality for three (3) points. Commenter says that Supportive Housing Developments already hold an unfair advantage over non-Supportive Housing Developments. Commenter references the three (3) additional points through Rent Levels of the Tenants and Tenant Service, the removal of size minimums, the fewer features required to score well, the permissibility of owner contributions to the development, and feasibility allowances under REA rules-all of which already extend advantages to Supportive Housing Developments. To maintain parity, Commenter recommends that staff limits points available to Supportive Housing Developments under the Educational Quality Scoring Item. If Education Quality is removed or minimized, Commenter asks that staff find another way to remove the three (3) point advantage of Supportive Housing Developments in order to maintain parity.

Commenter (67) states disagreement with TAAHP's suggestion to remove or minimize Educational Quality in the QAP. Commenter also disagrees with the suggestion from other developers that placing a new affordable housing development in an undesirable urban neighborhood is the economic driver to lift that neighborhood into renewal. Commenter (67) requests that Education Quality points as currently written remain the same.

STAFF RESPONSE: In response to the suggestion from commenters (8), (30), (34), (37), (46), and (47) staff does not agree that the suggested clarification achieves the same outcome as the original text. The suggested revision considers only the application process, while the original text considers the application in concert with other factors. In response to the second suggestion from commenters, staff believes this suggestion is a sufficiently substantive change from what was proposed that it could not be accomplished without re-publication for public comment. These ideas could be taken into consideration for drafting the 2018 QAP. Staff encourages commenters to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

In response to commenters (9) and (31), items (A) - (D) are threshold items for meeting the requirement under Educational Quality. All Applications must meet this threshold in order to score any points under this scoring item. Staff did revise the point structure for the scoring item:

Staff recommends no changes based on this comment.

In response to commenter (18), staff clarifies that regarding Educational Quality, Development Sites subject to an Elderly Limitation are exempt from the disclosure requirements of §10.101(a)(4)(B) regarding Undesirable Neighborhood Characteristics but are not exempt from the requirements of this section and will not be automatically awarded 5 points.

Staff recommends no changes based on this comment.

In response to commenter (20), staff has revised the point structure for the scoring item so the point item will have less impact for those Applications that do not score points under this item. Staff does not agree that this item should be deleted in its entirety and can find no policy reason for making the item not applicable to the USDA and At-Risk Set-Asides as Applications in the set-asides already compete on a similar basis.

Staff recommends no changes based on this comment.

In response to commenters (20), (22), (33), (35), (39), (40), (41), (42), (43), (49), (54), (58), (59), (60), and (65), staff does not agree that this item should be deleted in its entirety or moved to Opportunity Index; however, staff has revised the point structure for the scoring item:

(A) The Development Site is within the attendance zone of an elementary school, a middle school and a high school with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score (3 points);

(B) The Development Site is within the attendance zone of any two of the following three schools (an elementary school, a middle school, and a high school) with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score. (2 points, or 1 point for a Supportive Housing Development); or

(C) The Development Site is within the attendance zone of a middle school or a high school with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score. (1 point); or

(D) The Development Site is within the attendance zone of an elementary school with an Index 1 score in the first quartile of all elementary schools statewide. (1 point); or

(E) If the Development Site is able to score one or two points under clauses (B) through- (D) above, one additional point may be added if one or more of the features described in subclause (1) - (4) is present:

In response to commenters (23) and (55), staff agrees and has revised the rule accordingly:

In order to qualify for points under Educational Quality, the elementary school and the middle school or high school within the attendance zone of the Development must have a TEA rating of Met Standard. Except for Supportive Housing Developments, an Application may qualify to receive up to three (3) points for a Development Site located within the attendance zones of public schools meeting the criteria as described in subparagraphs (A) - (E) of this paragraph, as determined by the Texas Education Agency. A Supportive Housing Development may qualify to receive no more than two (2) points for a Development Site located within the attendance zones of public schools meeting the criteria as described in subparagraphs (A) or (B) of this paragraph, as determined by the Texas Education Agency. For districts without attendance zones, the schools closest to the site which may possibly be attended by the tenants must be used for scoring. Choice districts with attendance zones will use the school zoned to the Development site. Schools with an application process for admittance, limited enrollment or other requirements that may prevent a tenant from attending will not be considered as the closest school or the school which attendance zone contains the site. The applicable ratings will be the 2016 accountability rating determined by the Texas Education Agency for the State, Education Service Center region, or individual campus. School ratings will be determined by the school number, so that in the case where a new school is formed or named or consolidated with another school but is considered to have the same number that rating will be used. A school that has never been rated by the Texas Education Agency will use the district rating. If a school is configured to serve grades that do not align with the Texas Education Agency's conventions for defining elementary schools (typically grades K-5 or K-6), middle schools (typically grades 6-8 or 7-8) and high schools (typically grades 9-12), the school will be considered to have the lower of the ratings of the schools that would be combined to meet those conventions. In determining the ratings for all three levels of schools, ratings for all grades K-12 must be included, meaning that two or more schools' ratings may be combined. For example, in the case of an elementary school which serves grades K-4 and an intermediate school that serves grades 5-6, the elementary school rating will be the lower of those two schools' ratings. Also, in the case of a 9th grade center and a high school that serves grades 10-12, the high school rating will be considered the lower of those two schools' ratings. Sixth grade centers will be considered as part of the middle school rating.

In response to commenter (24), staff appreciates the comment. Rather than delete the scoring item entirely, staff has revised the point structure for the item.

Staff recommends no changes based on this comment.

In response to commenter (25), staff believes that only a small portion of Elderly Developments serve adults only. Only certain Elderly Limitation Developments are absolutely closed to families with children as most are open to the elderly and to disabled tenants. Staff has revised the point structure for the item including the scoring for Supportive Housing Developments.

Staff recommends no changes based on this comment.

In response to commenter (31), regarding item (E)(2), to determine the 4-year graduation rate, staff will refer to the TEA 2016 Index 4: Postsecondary Readiness Data table for the district found at http://tea.texas.gov/2016accountability.aspx. Regarding item (E)(3), staff's intent with extended pre-kindergarten is that there be pre-kindergarten provided beyond the required 7 hours of full day pre-kindergarten. The program does not have to be held at a campus for which the site is zoned, as school districts have designated campuses that the entire district may access. Programs that include restrictions such as limited participation with preference given to parents who work for the school system, or programs where participation is limited would be questionable as these programs are like magnet schools where attendance is limited. If commenter has a program that commenter would like for staff to review, commenter should contact staff. Staff agrees that item (E)(2) requires clarification and staff has revised the rule accordingly.

(E) If the Development Site is able to score one or two points under clauses (B) through- (D) above, one additional point may be added if one or more of the features described in subclause (1) - (4) is present:

(2) The Development Site is located in the attendance zone of a general admission high school with a four-year longitudinal graduation rate in excess of the statewide four-year longitudinal graduation rate for all schools for the latest year available, based on the TEA 2016 Index 4: Postsecondary Readiness Data table for the district found at http://tea.texas.gov/2016accountability.aspx. (1 point)

In response to commenter (58), staff believes that item (D) is a separate and distinct scoring item and should not mirror items (A) - (C).

Staff recommends no changes based on this comment.

In response to commenter (62), data regarding schools' scores for subregions is posted on the TEA website at http://tea.texas.gov/2016accountability.aspx.

Staff recommends no changes based on this comment.

In response to commenter (66), staff has revised the point structure for the item including the scoring for Supportive Housing Developments.:

In response to commenter (67), staff agrees that this item should be not deleted in its entirety or moved to Opportunity Index; however, staff has revised the point structure for the scoring item.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

14. §11.9(c)(6) - Underserved Area (18), (20), (22), (23), (24), (25), (35), (36), (38), (40), (45), (49), (55), (56), (57), (59), (61), (63), (67)

COMMENT SUMMARY: Commenters (18), (20), (22), (25), (36), (38), (40), (61), (63), (67) suggest adding the phrase "serving the same population" to items (C), (D) and (E).

(C) A census tract within the boundaries of an incorporated area that has not received a competitive tax credit allocation or a 4 percent non-competitive tax credit allocation for a Development serving the same population within the past 15 years (3 points);

(D) For areas not scoring points for (C) above, a census tract that does not have a Development serving the same population subject to an active tax credit LURA; (2 points);

(E) A census tract within the boundaries of an incorporated area and all contiguous census tracts for which neither the census tract in which the Development is located nor the contiguous census tracts have received an award or HTC allocation serving the same population within the past 15 years and continues to appear on the Department's inventory. This item will apply in cities with a population of 500,000 or more, and will not apply in the At-Risk Set-Aside (5 points).

Commenter (20) suggests the following revision to item (C):

(C) A census tract that has not received a competitive tax credit allocation or a 4 percent non-competitive tax credit allocation for a Development within the past 15 years (3 points);

Commenters (22), (40), suggest adding the following options for scoring to the rule:

(C) A census tract within the boundaries of an incorporated area that has not received a competitive tax credit allocation or a 4 percent non-competitive tax credit allocation for a Development serving the same population within the past 15 years (2 points);

(D) A census tract within the boundaries of an incorporated area that has not received a competitive tax credit allocation or a 4 percent non-competitive tax credit allocation for a Development within the past 15 years (3 points);

(E) A census tract within the boundaries of an incorporated area and all contiguous census tracts for which neither the census tract in which the Development is located nor the contiguous census tracts have received an award or HTC allocation serving the same population within the past 15 years. This item will apply in cities with a population of 500,000 or more, and will not apply in the At-Risk Set-Aside (4 points).

(F)A census tract within the boundaries of an incorporated area and all contiguous census tracts for which neither the census tract in which the Development is located nor the contiguous census tracts have received an award or HTC allocation within the past 15 years. This item will apply in cities with a population of 500,000 or more, and will not apply in the At-Risk Set-Aside (5 points).

Commenter (23) expressed concern about the accuracy of the inventory and census tract data. Commenter suggests that subparagraph C should be consistent with subparagraph E and refer to allocations that continue to appear on the Department's inventory.

Commenter (24) states that limiting part (E) of this scoring item to cities of 500,000 or more is a significant advantage available to qualifying proposals in large urban areas which smaller cities do not have. Commenter states that this item should not carry the same scoring weight as educational quality. Commenter states that scoring criteria should not place suburban areas at such a disadvantage given the current lack of affordable housing options in many of these areas. Commenter recommends that either lowering the population threshold for the 5-point underserved area item to 100,000 people or reducing the point award to a level below that of educational quality.

Commenters (31) and (61) state that the current language of paragraph (E) does not account for census tracts that straddle city boundaries. Therefore, commenter proposes using language that emphasizes incorporated areas, first and foremost, and any census tracts that share a boundary with those incorporated areas. Commenter (61) states that there are several census tracts that have both un-incorporated areas as well as incorporated areas.

Commenter (35) states that in order to further the goal of attracting affordable housing to urban centers, points under this item should only be eligible for sites within the corporate limits of a municipality. Commenter suggests the following revisions:

(C) A census tract within the boundaries of an incorporated area, not including the ETJ, that has not received a competitive tax credit allocation or a 4 percent non-competitive tax credit allocation for a Development within the past 15 years (3 points);

(E)A census tract within the boundaries of an incorporated area, not including the ETJ, and all contiguous census tracts for which neither the census tract in which the Development is located nor the contiguous census tracts have received an award or HTC allocation within the past 15 years and continues to appear on the Department's inventory. This item will apply in cities with a population of 500,000 or more, and will not apply in the At-Risk Set-Aside (5 points).

Commenter (38) requests that staff clarify the statement "A census tract within the boundaries of an incorporated area..." as some areas will have a census tract large enough that it will fall within the boundaries of an incorporated area and also outside the boundaries of an incorporated area.

Commenter (45) proposes completely removing paragraph (E), or reducing the possible points to two (2), whereas it currently grants five (5) points.

Commenter (49) states that the Extraterritorial Jurisdiction (ETJ) should not be considered part of an incorporated area in regards to paragraphs (C) and (E) of §11.9(c)(6).

Commenter (55) states that items (C), (D), and (E) have inconsistent language with regard to whether there is a development in the census tract that is currently active. Commenter proposes that these items only apply to developments that are subject to an active tax credit LURA and currently being monitored by TDHCA.

Commenters (57), (59) and (68) suggest that the population limitation in item (E) is problematic for moderately-sized cities. Commenters propose no threshold or lower thresholds for the population minimum.

Commenter (59) proposes that staff remove "within the boundaries of an incorporated area" requirement.

STAFF RESPONSE: In response to commenters (18), (20), (22), (25), (36), (40), (61), (63), (67), the purpose of the scoring item is to ensure that areas that are underserved by LIHTC-funded projects in general receive points for being underserved. Staff believes that differentiating among populations served does not meet the spirit or the intent of the scoring item.

Staff recommends no changes based on this comment.

In response to commenters (20) and (59), staff believes that removing the option for a census tract within an incorporated area from this scoring is not in keeping with the intent of this scoring item.

Staff recommends no changes based on this comment.

In response to commenters (22), (40), the suggestion to add scoring items is a sufficiently substantive change from what was proposed that it could not be accomplished without re-publication for public comment. These ideas could be taken into consideration for drafting the 2018 QAP. Staff encourages commenters to suggest this revision during planning for the 2018 QAP. Commenters did not give a reason for requesting that the option for a census tract that does not have a Development subject to a LURA be removed. Staff does not agree that the item should be removed as the item offers an opportunity for different areas to qualify for points. Staff believes that removing the requirement that a Development continues to appear on the Department's inventory would make it difficult for the Department to objectively score the item.

Staff recommends no changes based on this comment.

In response to the first comment from commenter (23), staff works to ensure that all information provided to Applicants is accurate and encourages everyone to bring identified errors to staff's attention. However, pursuant to 10 TAC §11.1(b), "...while these resources are offered to help Applicants prepare and submit accurate information, Applicants should also appreciate that this type of guidance is limited by its nature and that staff will apply the rules of the QAP to each specific situation as it is presented in the submitted Application. Moreover, after the time that an issue is initially presented and guidance is provided, additional information may be identified and/or the issue itself may continue to develop based upon additional research and guidance. Thus, until confirmed through final action of the Board, staff guidance must be considered merely as an aid and an Applicant continues to assume full responsibility for any actions Applicant takes regarding an Application. In addition, although the Department may compile data from outside sources in order to assist Applicants in the Application process, it remains the sole responsibility of the Applicant to perform independently the necessary due diligence to research, confirm, and verify any data, opinions, interpretations, or other information upon which an Applicant bases an Application or includes in any submittal in connection with an Application".

Staff recommends no changes based on this comment.

In response to the second comment from commenter (23), staff agrees and has revised the rule accordingly:

(C) A census tract within the boundaries of an incorporated area that has not received a competitive tax credit allocation or a 4 percent non-competitive tax credit allocation for a Development within the past 15 years and continues to appear on the Department's inventory (3 points);

In response to commenter (24), the scoring criteria for §11.9(c)(5) Educational Quality has been revised to reduce the maximum score. Staff does not believe that this item should have a lower point value than Educational Quality as this scoring item advances the Department's stated policy of the dispersion of affordable housing.

Staff recommends no changes based on this comment.

In response to commenters (31), (38) and (61), staff clarifies that "within the boundaries of an incorporated area" means that the entire census tract is completely within the boundaries of the incorporated area of a home rule or general law city as defined by Texas law. If any portion of the census tract is outside of the incorporated area, the census tract would not qualify for points under any item that includes this requirement.

Staff recommends no changes based on this comment.

In response to commenter (35), staff believes that the proposed rule includes appropriate incentives to encourage the development of affordable housing in urban centers.

Staff recommends no changes based on this comment.

In response to commenter (45), staff does not agree that the item should be removed as the item offers an opportunity for different areas to qualify for points and advances the Department's stated policy of the dispersion of affordable housing

Staff recommends no changes based on this comment.

In response to commenter (49), ETJ is defined in Texas Local Gov't Code Sec. §42.021. Extent of Extraterritorial Jurisdiction "(a) The extraterritorial jurisdiction of a municipality is the unincorporated area that is contiguous to the corporate boundaries of the municipality." Because ETJ by definition is an unincorporated area, sites in an ETJ would not be able to score points under this item.

Staff recommends no changes based on this comment.

In response to commenter (55), staff does not believe that items (C), (D), and (E) should only apply to developments that are subject to an active tax credit LURA as this scoring item advances the Department's stated policy of the dispersion of affordable housing.

Staff recommends no changes based on this comment.

In response to commenters (57), (59), (68), staff agrees that the population limitation in item (E) should be lowered to a level that captures cities that staff believes would most likely require attention regarding housing de-concentration. Staff has revised the rule accordingly:

(E) A census tract within the boundaries of an incorporated area and all contiguous census tracts for which neither the census tract in which the Development is located nor the contiguous census tracts have received an award or HTC allocation within the past 15 years and continues to appear on the Department's inventory. This item will apply in cities with a population of 300,000 or more, and will not apply in the At-Risk Set-Aside (5 points).

BOARD RESPONSE: Accepted staff's recommendation.

15. §11.9(c)(7) - Tenant Populations with Special Housing Needs (22), (23), (27), (33), (40), (58), (62), (69)

COMMENT SUMMARY: Commenters (22), (33), (40), (62), (69), suggest reverting back to the language that was included in the 2016 QAP.

Commenter (23) and (58) state that it is premature to make participation in the 811 Program a threshold item. Commenter suggests that this should remain a scoring item where an applicant has the choice of participation until the program has been fully implemented and has some history of performance.

Commenter (27) states that inclusion of the Section 811 Program as a threshold item will result in developers being forced to make the project for which an application is submitted or an existing project with the developer's portfolio fall under the definition of "federally assisted housing" according to 42 U.S.C. 13641. Commenter states that making the Section 811 program a threshold criteria will remove the choice as to whether or not to accept the "federally assisted housing" designation and the requirements that accompany the designation such as Davis Bacon Wages, the Uniform Relocation Act (with additional cost burdens), etc. Commenter suggests that expanding the reach of the 811 program would be better achieved by imposing the threshold requirement on Direct Loan applications or others already choosing to receive funds that would designate the project as federally assisted.

Commenter (58) suggests revising the rule so that in order for a Development Site to be eligible for points under this item, the Site must be located in an Urban Region in one of the areas specified previously in clause (iv) for the same reasons that the 811 program is only required in certain MSAs. Commenter also proposes making the Section 811 Program a separate program that requires its own RFP process.

STAFF RESPONSE: In response to commenters (22), (23), (27), (33) and (40), (58), (62), and (69), staff believes that moving the Section 811 Project Rental Assistance Program to threshold, we are responding to stakeholder input that indicated this would be the preferred method to make use of the program. Staff is seeking more existing developments for the program and initially proposed a point incentive for existing developments. Stakeholders expressed that this would create an unfair advantage to established, experienced developers who already had developments located in the state (and in the eligible MSAs). By relocating Section 811 into 10 TAC §10.204, the program prioritizes access to existing developments, while still allowing Applicants who do not have existing developments to participate in the program. In addition, by opening participation to more programs, Texas is able to increase housing choice for extremely low-income persons with disabilities.

Staff recommends no changes based on this comment.

In response to commenter (58), staff believes this suggestion is a sufficiently substantive change from what was proposed that it could not be accomplished without re-publication for public comment. These ideas could be taken into consideration for drafting the 2018 QAP. Staff encourages commenters to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

16. §11.9(c)(8) - Proximity to the Urban Core (3), (5), (6), (7), (12), (14), (15) (18), (19), (21), (23), (24), (25), (32), (33), (36), (39), (41), (42), (43), (45), (51), (54), (55), (59), (60), (63), (65)

COMMENT SUMMARY: Commenters (3), (5), (6) (7), (15), (23), (25), (42), (43), (51), (54), (59), (60), (63), and (65) state that this item should not be a scoring factor for the At-Risk Set-Aside. Commenters (3), (5), (6) (7), and (15) expressed concern and strong opposition to having this item apply to the At-Risk Set-Aside because it excludes El Paso. Commenters state that this would effectively disqualify El Paso from the set-aside and request that the At-Risk Set-Aside be exempted from this item. Commenters (23), (51), (54), (59), (60), (63), and (65) state that because of its regional impact, urban areas would have an insurmountable scoring advantage in a statewide competition and

Commenters (12), (14), (19) (21), (39) and (41), support the new scoring item.

Commenter (14) is opposed to changing the item so that it does not apply to the At-Risk Set-Aside. Commenter states that At-Risk deals are already ineligible for full points under §11.9(c)(6) Underserved Areas and it would be unfair for deals to be ineligible for these points as well because the points are available to other urban deals.

Commenter (18) suggests revising the rule to include areas that have transit options that offer access to the urban core.

A development in a County with a population over 1 million and in a City with a population over 500,000 if the Development Site is located within 4 miles of the main City Hall facility, or if the Development Site is located less than ½ mile from a light rail station and is located within 8 miles of the main city Hall. The main City Hall facility will be determined by the location of regularly scheduled City Council, City Commission, or similar governing body meetings. Distances are measured from the nearest property boundaries, not inclusive of non-contiguous parking areas. (5 points)

Commenters (23), (51), (54), (59), (60), (63), and (65) question whether this item conflicts with the legislative purpose of the Regional Allocation Formula.

Commenter (24) states that this item should not carry the same scoring weight as educational quality. Commenter recommends that either lowering the population threshold for the 5-point underserved area item to 100,000 people or reducing the point award to a level below that of educational quality.

Commenters (24) and (59) state that limiting this scoring item to cities of 500,000 is problematic for smaller cities. Commenter (24) states that scoring criteria should not place suburban areas at such a disadvantage given the current lack of affordable housing options in many of these areas. Commenter (59) states that only five cities are eligible for these points, which would have the effect of concentrating developments instead of dispersing them. Commenter proposes the following language:

Proximity to the Urban Core. A development in a County with a population over

500,000, and in a City located in an Urban Area if the Development Site. This item will apply to only one development, if any, in a qualifying Urban Area and will not apply to the At-Risk Set-Aside. (5 points)

Commenter (32) states that Proximity to Urban Core should be located within seven (7) miles to allow more site availability with reasonably priced land that is more feasible for responsible use of the limited tax credit and program resources.

Commenter (33) recommends that should Educational Quality be removed, this section should be removed in its entirety, as this would give an advantage to Urban Core applications. Commenter states that with the Educational Quality and Proximity to Urban Core categories being removed together, urban core and outside the urban core can compete equally.

Commenter (36) states that Dallas and Fort Worth already have somewhat of a set aside for the top scoring application. Comment requests that staff remove this scoring item or limit the point value to 1 versus 5.

Commenter (39) supports the new Proximity to Urban Core scoring category and its rank as the first tie breaker.

Commenter (45) asks that this scoring item be removed since urban core development sites are already incentivized through House Bill 3535 and the urban prioritization of Community Revitalization Plan projects.

Commenter (55) states the purpose of section 11.9(c)(8) - Proximity to the Urban Core was to counterbalance the Educational Quality scoring item, so that urban areas with lower performing schools would remain competitive with suburban areas with higher performing schools. If staff deletes Educational Quality as a threshold item or moves it to a menu item, then staff should make a similar adjustment to this item, section 11.9(c)(8).

STAFF RESPONSE: In response to commenters (3), (5), (6) (7), (15), (23), (25), (42), (43), (51), (54), (59), (60), (63), and (65), staff agrees that this scoring item should not apply to the At-Risk Set-Side and has revised the rule accordingly:

BOARD RESPONSE: Accepted staff's recommendation.

Proximity to the Urban Core. A Development in a City with a population over 300,000 may qualify for points under this scoring item. The Development Site is must be located within 4 miles of the main City Hall facility if the population of the city is more than 500,000, or within 2 miles of the main City Hall facility if the population of the city is 300,000 - 500,000. The main City Hall facility will be determined by the location of regularly scheduled City Council, City Commission, or similar governing body meetings. Distances are measured from the nearest property boundaries, not inclusive of non-contiguous parking areas. This scoring item will not apply to the At-Risk Set-Aside. (5 points)

Staff appreciates the support expressed by commenters (12), (14), (19), (21), (39) and (41).

Staff recommends no changes based on this comment.

In response to commenter (14), urban deals in the At-Risk Set-Aside do not compete against urban deals in the subregions. Staff does not agree that changing the item so that it does not apply to the At-Risk Set-Aside would be unfair to urban deals in the set-aside. Staff believes that this change levels the playing field for applications in the set-aside in relation to this scoring item.

Staff recommends no changes based on this comment.

In response to commenter (18), staff believes this suggestion is a sufficiently substantive change from what was proposed that it could not be accomplished without re-publication for public comment. These ideas could be taken into consideration for drafting the 2018 QAP. Staff encourages commenters to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

In response to commenters (23), (51), (54), (59), (60), (63), and (65), staff believes that the scoring item does not conflict with the legislative purpose of the Regional Allocation Formula. The scoring item does not direct additional funding to any region or set-aside but simply provides points according to the location of a development within a region.

Staff recommends no changes based on this comment.

In response to commenters (24) and (55), the scoring criteria for §11.9(c)(5) Educational Quality has been revised to reduce the maximum score. Staff does not believe that this item should have a lower point value than Educational Quality as this scoring item advances the Department's stated policy of the dispersion of affordable housing.

Staff recommends no changes based on this comment.

In response to commenters (24), (36) and (59), staff agrees that the 500,000-population limitation plus the requirement for the county to have a population over 1 million is problematic for smaller cities and has revised the rule accordingly:

Proximity to the Urban Core. A Development in a City with a population over 300,000 may qualify for points under this scoring item. The Development Site is must be located within 4 miles of the main City Hall facility if the population of the city is more than 500,000, or within 2 miles of the main City Hall facility if the population of the city is 300,000 - 500,000. The main City Hall facility will be determined by the location of regularly scheduled City Council, City Commission, or similar governing body meetings. Distances are measured from the nearest property boundaries, not inclusive of non-contiguous parking areas. This scoring item will not apply to the At-Risk Set-Aside. (5 points)

In response to commenters (32), (33), and (45), staff believes that the suggested revision is contrary to the stated policy of the Department and the purpose of the scoring item, which is to encourage the placement of affordable housing in areas that are proximate to the urban core of major cities.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

17. §11.9(d)(2) Commitment of Development Funding by Local Subdivisions (42), (54)

COMMENT SUMMARY: Commenters (42) and (54) question why terms would be necessary on a de minimis contribution and recommend including statutory citation (2306.6725(e)).

STAFF RESPONSE: In response to commenters (42) and (54), the word "terms" as used here is not the same as when the term is used for documentation of a loan. The commitment of development funding must be reflected in the Application as a financial benefit to the Development, i.e. reported as a source of funds on the Sources and Uses Form and/or reflected in a lower cost in the Development Cost Schedule, such as a reduction in building permits fees. Whatever the form of the contribution, the letter from the Local Political Subdivision must describe value of the contribution, the form of the contribution, e.g. reduced fees or gap funding, and any caveats to delivering the contribution. Staff believes that the item requires clarification and staff agrees that statutory citation (2306.6725(e)) should be included. Staff has revised the rule accordingly:

(2) Commitment of Development Funding by Local Political Subdivision. (§2306.6725(a)(5)); (2306.6725(e)) An Application may receive one (1) point for a commitment of Development funding from the city (if located in a city) or county in which the Development Site is located. The commitment of development funding must be reflected in the Application as a financial benefit to the Development, i.e. reported as a source of funds on the Sources and Uses Form and/or reflected in a lower cost in the Development Cost Schedule, such as notation of a reduction in building permits and related costs. Documentation must include a letter from an official of the municipality, county, or other instrumentality with jurisdiction over the proposed Development stating they will provide a loan, grant, reduced fees or contribution of other value for the benefit of the Development. The letter must describe value of the contribution, the form of the contribution, e.g. reduced fees or gap funding, and any caveats to delivering the contribution. Once a letter is submitted to the Department it may not be changed or withdrawn.

BOARD RESPONSE: Accepted staff's recommendation.

18. §11.9(d)(5) - Community Support from State Representative (19), (22), (23), (24), (28), (31), (32), (33), (40), (42), (43), (54), (59), (60), (62), (65)

COMMENT SUMMARY: Commenter (19) states that if a state representative seat is vacated, developers should be allowed an extension to request a letter after the seat is filled.

Commenters (22), (40), (42), (43), (52), (54), (60), and (65) state that because this item has a 16-point swing between letters of opposition and support, allowing state representatives to change their position after developers have incurred significant expense creates and unfair burden on the development community and suggests that the item not to be changed as indicated in the proposed rule.

Commenters (23), (28), (31), (32), (33), (59), (62), state that new language adds another avenue for communities with a "not in my back yard" kind of stance to adversely impact the scoring process. Commenter (23) recommends that the Department sanction an applicant who misrepresents items in the application or that Representatives pursue legal options if an applicant lies or misrepresents information to the official. Commenter (28) states that this encourages behind-the-scenes activities that are not healthy for the program. Commenter (32) states that allowing rescission of a letter after submission provides for "NIMBYism", which is a violation of the Fair Housing Act. Commenter (62) states that the new language opens the door for corruption.

Commenters (24) and (28) state that the burden should be upon the representative to get the information and facts they need to make their decision. Commenter (24) states that changes to this item stand to make it easy for state representatives to effectively veto LIHTC developments. Commenter (28) states that the State Representatives should perform some due diligence and be comfortable with the proposal before issuing a letter of support and if an Applicant has truly provided false information, there is a mechanism in the threshold criteria to address that situation with a different procedure and remedy.

STAFF RESPONSE: In response to commenters (19), (22), (23), (24), (28), (31), (32), (33), (40), (42), (43), (52), (54), (59), (60), (62), and (65), staff agrees that the rule requires revision and has revised the rule accordingly:

Applications may receive up to eight (8) points or have deducted up to eight (8) points for this scoring item. To qualify under this paragraph letters must be on the State Representative's letterhead, be signed by the State Representative, identify the specific Development and 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 and must be submitted no later than the Final Input from Elected Officials Delivery Date as identified in §11.2 of this chapter. Once a letter is submitted to the Department it may not be changed or withdrawn except in the instance where a representative who has provided a letter then provides an additional letter to the Department, on or before April 3, 2017, supported by substantiating or corroborating evidence such as copies of communications or contemporaneous notes about verbal communications, stating that in their estimation a material factual representation made to them to secure their original letter has proven to have been inaccurate or misleading and therefore insufficient to serve as a basis for their support, neutrality, or opposition and, accordingly, their letter is withdrawn. A change in this manner is final and will result in a score of zero (0) points for this scoring item. Therefore, it is encouraged that letters not be submitted well in advance of the specified deadline in order to facilitate consideration of all constituent comment and other relevant input on the proposed Development. State Representatives to be considered are those in office at the time the letter is submitted and whose district boundaries include the Development Site. A letter expressly stating opposition is scored- 8 points. A letter expressly stating neutrality is scored 0 points. Any other letter conveying a sense of support is scored 8 points. If support cannot be discerned in a letter that does not expressly state support, neutrality or opposition, the representative will be contacted and given five (5) business days to indicate in writing if they wish to have the letter scored as support or neutral. If clarification is not timely provided, the letter will be scored as neutral.

BOARD RESPONSE: Accepted staff's recommendation.

19. §11.9(d)(6) - Input from Community Organizations (22), (40)

COMMENT SUMMARY: Commenters (22), (40), recommend a new scoring category for additional letter in the event that the application gets zero points under Local Government Support and suggests the following revisions to the rule:

Where, at the time of Application, the Development Site does not fall within the boundaries of any qualifying Neighborhood Organization, then, in order to ascertain if there is community support, an Application may receive up to four (4) points for letters that qualify for points under subparagraphs (A), (B), and/or (C) of this paragraph. Additionally, the Application may receive up to four (4) additional points if it claims less than 17 points under §11.7(d)(1). No more than eight (8) points will be awarded under this point item under any circumstances. All letters must be submitted within the Application. Once a letter is submitted to the Department it may not be changed or withdrawn. Should an Applicant elect this option and the Application receives letters in opposition, then one (1) point will be subtracted from the score under this paragraph for each letter in opposition, provided that the letter is from an organization that would otherwise qualify under this paragraph. However, at no time will the Application receive a score lower than zero (0) for this item.

STAFF RESPONSE: In response to commenters (22) and (40), staff believes that these revisions represent sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. These ideas could be taken into consideration for drafting the 2018 QAP. Staff encourages commenters to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

20. §11.9(d)(7) - Concerted Revitalization Plan (4), (8), (9), (10), (12), (13), (17), (18), (20), (22), (23), (25), (30), (31), (32), (34), (37), (39), (40), (41), (42), (43), (46), (47), (48), (54), (58), (59), (60), (62), (63), (65)

COMMENT SUMMARY: Commenters (4), (9) and (31) propose tying Concerted Revitalization Plans ("CRP") to Qualified Census Tracts ("QCT"). Commenter (4) suggests that staff amend (7)(A) to allow Qualified Census Tracts ("QCT") in Concerted Revitalization Plans ("CRP") to compete regardless of population size which is more in line with Chapter 42 of the Internal Revenue Code. Commenter (9) requests that staff amend the rule to award full CRP points for a development in a QCT regardless of population or in a QCT in a jurisdiction of at least 50,000.

Commenters (4), (9), (10), (12), (22), (31), (39), (40), (41), (43), (54), (58), (59), (60), and (65), commented on the 100,000-population limit. Commenter (4) states that the proposed rules arbitrarily limit a downtown revitalization area to only cities with a population of 100,000 or more, disqualifying any rural or mid-sized city. Commenter (10) states that the federal Office of Management and Budget ("OMB") defines a Metropolitan Statistical Area ("MSA") as an area that has at least one core urbanized area of 50,000 or more population plus adjacent territory that has a high degree of social and economic integration with that core as measured by commuting ties. Commenter requests that staff lower the population requirement to 50,000 to coincide with the MSA definition. Commenter (42) states that with this population limitation, all of Region 4 would be ineligible for points under this scoring criterion. Commenter states that if a limitation must be included it should be 25,000 or more. Commenters (54), (58), (59), (60), (65) state that if a population limit must be included, they recommend 25,000 or more people as the limit. Commenters (31) and (59) state that the population threshold of 100,000 limits cities' goal and ability to revitalize their towns and should therefore be removed. Commenter (59) states that the requirement that a Development be in a city with a population of 100,000 or more significantly reduces the number of cities in Urban Areas with active revitalization efforts underway in targeted areas of their city from qualifying for these points. Commenters (12), (22), (31), (39), (40), (41), (54), (58), (59), (60), and (65) recommend deleting the language entirely.

Commenters (8), (34), (46), and (47) point out that the assigned point value is inconsistent with other information in the rule as (A)(i) says six (6) points and (A)(ii) says seven points.

Commenters (8), (17), (18), (20), (30), (31), (34), (37), (42), (46), (47), (48), and (59), state that meeting the Opportunity Index threshold requirements under §11.9(c)(4)(A) should not be required in order to score points under items (A)(ii)(III) and (B)(iv).

An Application may qualify for points under this paragraph only if no points are elected under subsection (c)(4) of this section, related to Opportunity Index.

(A) For Developments located in an Urban Area, and in a city with a population of 100,000 or more.

(i) An Application may qualify to receive points if the Development Site is located in a distinct area that was once vital and has lapsed into a situation requiring concerted revitalization, and where a concerted revitalization plan has been developed and executed. The area targeted for revitalization must be larger than the assisted housing footprint and should be a neighborhood or small group of contiguous neighborhoods with common attributes and problems. The concerted revitalization plan that meets the criteria described in subclauses (I) - (IV) of this clause:

(ii) Up to seven (7) points will be awarded based on:

(III) Applications will receive (1) point in addition to those under subclause (I) and (II) if the development is in a location that would score at least 4 points under Opportunity Index, §11.9(c)(4)(B), but for the criteria found in §11.9(c)(4)(A) and subparagraphs §11.9(c)(4)(A)(i) and §11.9(c)(4)(A)(ii).

Commenters (12), (13), (20), (22), (25), (39), (40), (41), (42) and (63) state that properties previously funded by HUD, should be added to the list of eligible properties for clauses (i) and (ii). Commenter (63) specifically mentions HUD 202 developments at risk of being lost.

(B) For Developments located in a Rural Area.

(i) Applications will receive 4 points for the rehabilitation or demolition and reconstruction in a location meeting the threshold requirements of the Opportunity Index, §11.9(c)(4)(A) of a development in a rural area that is currently leased at 90% or greater by low income households and which was initially constructed prior to 1980 as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program. Demolition and relocation of units must be determined locally to be necessary to comply with the Affirmatively Furthering Fair Housing Rule, or if necessary to create an acceptable distance form Undesirable Site Features or Undesirable Neighborhood Characteristics.

(ii) Applications will receive 3 points for the rehabilitation of a development in a rural area that is currently leased at 90% or greater by low income households and which was initially constructed prior to 1980 as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program if the proposed location requires no disclosure of Undesirable Neighborhood Features under Section §10.101(a)(4) or required such disclosure but the disclosed items were found acceptable.

Commenters (12), (22), (39), (40), and (41), state that the TDHCA definition for a CRP is extremely codified making it difficult to achieve points under the scoring item. Commenter suggests the following revisions to the rule to open up areas that are truly undergoing revitalization:

An Application may qualify for points under this paragraph only if no points are elected under subsection (c)(4) of this section, related to Opportunity Index.

(i) An Application may qualify to receive points if the Development Site is located in a distinct area that was once vital and has lapsed into a situation requiring concerted revitalization, and where a concerted revitalization plan has been developed. The area targeted for revitalization must be larger than the assisted housing footprint and should be a neighborhood or small group of contiguous neighborhoods with common attributes and problems. The concerted revitalization plan that meets the criteria described in subclauses (I) - (IV) of this clause:

(IV) The adopted plan must have a sufficient, documented and committed budget to accomplish its purposes on its established timetable. The funding for the budgeted expenses must either be identified in the plan or have already been spent in full or in part such that the problems identified within the plan will have been sufficiently mitigated and addressed within 5 years of being placed into service.

(ii) Up to seven (7) points will be awarded based on:

(II) Applications may receive (2) points in addition to those under subclause (I) of this clause if the Development is explicitly identified in a letter from the city or county as contributing more than any other to the concerted revitalization efforts of the city or county (as applicable). A city or county may only identify one single Development during each Application Round for the additional points under this subclause. If multiple Applications submit letters under this subclause from the same Governing Body, none of the Applications shall be eligible for the additional points.

Commenter (13) suggests that the item be open to HUD-approved plans such as a demolition/disposition approval or the Choice Neighborhoods program. Commenter also suggests that the points be limited to QCTs. Commenter states that if HUD approves a plan, then the requirement for a resolution should be removed, and that the requirement that funding must have been previously committed to the plan is too restrictive. Commenter states that a letter from a city official or HUD that a site is a revitalizing area should suffice for these points.

Commenters (17) and (59) state that it seems duplicative to grant 2 points to a development that is explicitly identified since we now have a set-aside requiring an award to the highest scoring revitalization development. Commenter (17) recommends deleting the item, and commenter (59) proposes deleting the item and relocating the two (2) points to the preceding item which requests a letter from the appropriate local official providing documentation of measurable improvements within the revitalization area:

(ii) Up to seven (7) points will be awarded based on:

(I) Applications will receive six (6) points for a letter from the appropriate local official providing documentation of measurable improvements within the revitalization area based on the target efforts outlined in the plan; and

Commenters (17), (32) and (59) suggest the following revision. Commenter (32) states that requiring the CRP to "include the limited availability of safe, decent, affordable housing" prevents real plans that have been duly adopted from being considered.

(II) The problems in the revitalization area must be identified through a process in which affected local residents had an opportunity to express their views....and prioritized. These may include the following:

Commenters (20), (25), (42), and (54) suggest the following revisions to section (B) of the rule to make it open to more viable preservation solutions:

(B) For Developments located in a Rural Area.

(i) Applications will receive 4 points for the rehabilitation or demolition and reconstruction in an location meeting the threshold requirements of the Opportunity Index, §11.9(c)(4)(A) of a development of 50 or more units in a rural area that is currently leased at 85% or greater by low income households and which was initially constructed prior to 1985; or for a development of less than 50 units in a rural area that is currently leased at 80% or greater by low income households and which was initially constructed prior to 1985, as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program. Demolition and relocation of units must be determined locally to be necessary to comply with the Affirmatively Furthering Fair Housing Rule, or if necessary to create an acceptable distance form Undesirable Site Features or Undesirable Neighborhood Characteristics. The requirements in §11.9(c)(4)(A) do not apply to the USDA and the At- Risk Set-Asides.

(ii) Applications will receive 3 points for the rehabilitation of a development in a rural area that is currently leased at 85% or greater by low income households and which was initially constructed prior to 1985 as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program if the proposed location requires no disclosure of Undesirable Neighborhood Features under Section §10.101(a)(4) or required such disclosure but the disclosed items were found acceptable. Any property that has less than 85% occupancy for a property of 50 or more units, or 80% occupancy for a property of less than 50 units, may petition the TDHCA Board for a waiver of this rule in order to rehab an existing property(s).

(iii) Applications may receive (2) points in addition to those under subclause (i) or (ii) of this clause if the Development is explicitly identified in a letter by the city or county as contributing to the concerted revitalization efforts of the city or county (as applicable). A city or county may only identify one single Development during each Application Round for the additional points under this subclause. The letter from the Governing Body of the city or county that approved the plan is required to be submitted in the Application. If multiple Applications submit valid letters under this subclause from the same Governing Body, none of the Applications shall be eligible for the additional points. A city or county may, but is not required, to identify a particular Application as contributing more than any other Development to concerted revitalization efforts.

(iv) Applications may receive (1) additional point if the development is in a location that would score at least 4 points under Opportunity Index, §11.9(c)(4). The requirements in §11.9(c)(4)(A) do not apply to the USDA and the At- Risk Set-Asides.

Commenter (23) states that new language required in the plan is too prescriptive and does not seem to match what staff of the Board says they want to see in the plans. Commenter recommends the following revisions:

(IV) The adopted plan must have sufficient, documented and committed budget to accomplish its purposes on its established timetable. This funding for the budgeted expenses must be identified in the plan, such that the problems identified within the plan will have been sufficiently mitigated and addressed within 5 years of the Development being placed in service.

Commenter (31) suggests the following revision to (A)(ii)(III):

Applications will receive (1) point in addition to those under sub clause (I) and (II) if the development is in a location that meets 4 factors under Opportunity Index 11.9 (c)(4).

Commenter (48) states that the chances are slim of finding an RD 515 that is in a town with a CRP that will qualify; is built prior to 1980 (he states that only 18% of the RD 515 portfolio was built before 1980); is over 90% occupied; and is in a 1st or 2nd quartile census tract. Commenter suggests moving the built by date to 1985 and moving the occupancy requirement to 85%. Commenter states that if the property would otherwise qualify for Concerted Revitalization Plan points then quartile 3 or 4 should be acceptable as the first and second quartile areas are outside of town. Commenter suggests that location in a first or second quartile census tract need not be applicable to At-Risk applications to get points under Opportunity Index.

Commenter (62) states that points for rehabilitation and demolition/reconstruction developments should be removed from clauses (i), (ii), and (iii) of (7)(B). Commenter worries that the current language incentivizes replacing existing units rather than creating new and quality affordable units.

STAFF RESPONSE: In response to commenters (4), (9) and (31), §11.4(C), the rules allow for a 30 percent increase in eligible basis for developments located in QCTs. Staff believes that this item is in line with Chapter 42 of the Internal Revenue Code without an allowance for CRPs in QCTs. Staff believes that the full requirements of the CRP must be satisfied for an application to be awarded full points under this item. Simply having a Development Site located within a QCT does not guarantee that the application will meet all the requirements.

Staff recommends no changes based on this comment.

In response to commenters (4), (9), (10), (12), (22), (31), (39), (40), (41), (43), (54), (58), (59), (60), and (65), staff agrees that the 100,000-population limit could be problematic for smaller cities with CRPs and has removed the restriction:

An Application may qualify for points under this paragraph only if no points are elected under subsection (c)(4) of this section, related to Opportunity Index.

(A) For Developments located in an Urban Area:

Staff appreciates the correction suggested by commenters (8), (34), (46), and (47) and has revised the rule accordingly.

(i) An Application may qualify to receive points if the Development Site is located in a distinct area that was once vital and has lapsed into a situation requiring concerted revitalization, and where a concerted revitalization plan has been developed and executed. The area targeted for revitalization must be larger than the assisted housing footprint and should be a neighborhood or small group of contiguous neighborhoods with common attributes and problems. The concerted revitalization plan that meets the criteria described in subclauses (I) - (IV) of this clause:

In response to commenters (8), (17), (18), (20), (30), (31), (34), (37), (42), (46), (47), (48), and (59), staff clarifies that meeting the Opportunity Index threshold requirements under §11.9(c)(4)(A) is not required to score an extra point under items (A)(ii)(III) and (B)(iv). Staff has revised the rule to clarify this issue:

(ii) Up to seven (7) points will be awarded based on:

(III) Applications will receive (1) point in addition to those under subclause (I) and (II) if the development is in a location that would score at least 4 points under Opportunity Index, §11.9(c)(4)(B), except for the criteria found in §11.9(c)(4)(A) and subparagraphs §11.9(c)(4)(A)(i) and §11.9(c)(4)(A)(ii).

In response to commenters (12), (13), (20), (22), (25), (39), (40), (41), (42) and (63), staff agrees that HUD programs should be included and has revised the rule accordingly:

(B) For Developments located in a Rural Area.

(i) Applications will receive 4 points for the rehabilitation or demolition and reconstruction in an location meeting the threshold requirements of the Opportunity Index, §11.9(c)(4)(A) of a development in a rural area that is currently leased at 85% or greater by low income households and which was initially constructed prior to 1985 as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program. Demolition and relocation of units must be determined locally to be necessary to comply with the Affirmatively Furthering Fair Housing Rule, or if necessary to create an acceptable distance form Undesirable Site Features or Undesirable Neighborhood Characteristics.

(ii) Applications will receive 3 points for the rehabilitation of a development in a rural area that is currently leased at 85% or greater by low income households and which was initially constructed prior to 1985 as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program if the proposed location requires no disclosure of Undesirable Neighborhood Features under Section §10.101(a)(4) or required such disclosure but the disclosed items were found acceptable.

In response to commenters (12), (13), (22), (39), (40), and (41), staff believes that the requirements for a resolution and for budgeted and appropriated funding should remain to evidence the local jurisdiction's acceptance of and commitment to the plan.

Staff recommends no changes based on this comment.

In response to commenter (13), staff believes that the full requirements of the Community Revitalization Plan ("CRP") must be satisfied for an application to be awarded full points under this item. The HUD-approved plans may be acceptable if they meet the requirements of the point item. Staff believes that limiting the point item to QCTs would limit the dispersion of affordable housing, which is a policy priority for the Department.

Staff recommends no changes based on this comment.

In response to commenters (17), (23), (32) and (59), staff agrees that the plan may not include the language prescribed in the proposed rule and has revised the rule accordingly:

(A) For Developments located in an Urban Area:

(i) An Application may qualify to receive points if the Development Site is located in a distinct area that was once vital and has lapsed into a situation requiring concerted revitalization, and where a concerted revitalization plan has been developed and executed. The area targeted for revitalization must be larger than the assisted housing footprint and should be a neighborhood or small group of contiguous neighborhoods with common attributes and problems. The concerted revitalization plan that meets the criteria described in subclauses (I) - (IV) of this clause:

(I) The concerted revitalization plan must have been adopted by the municipality or county in which the Development Site is located. The resolution adopting the plan must be submitted with the application.

(II) The problems in the revitalization area must be identified through a process in which affected local residents had an opportunity to express their views on problems facing the area, and how those problems should be addressed and prioritized. These problems may include the following: . . .

(ii) Up to seven (7) points will be awarded based on:

(I) Applications will receive four (4) points for a letter from the appropriate local official providing documentation of measurable improvements within the revitalization area based on the target efforts outlined in the plan. The letter must also discuss how the improvements will result in the area being appropriate for the development of safe, decent, affordable housing; and

In response to commenters (17) and (59), the CRP requirement included in §11.6(3)(C)(ii) requires that an application meets the requirements of this subsection. Staff believes this includes the two points for a development that is explicitly identified in a resolution.

Staff recommends no changes based on this comment.

In response to commenters (20), (25), (42), and (54), staff believes that the recommendations to limit item (B)(i) to Developments with 50 or more units, to add the option for a development of less than 50 units in a rural area that is currently leased at 80% or greater, that any property that has less than 85% occupancy for a property of 50 or more units, or 80% occupancy for a property of less than 50 units, may petition the TDHCA Board for a waiver of this rule in order to rehab an existing property(s), and that staff remove the requirement that the Development is explicitly identified in a letter by the city or county as contributing more than any other Development to the concerted revitalization efforts of the city or county represent sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. These ideas could be taken into consideration for drafting the 2018 QAP. Staff encourages commenters to suggest this revision during planning for the 2018 QAP. Staff has no objection to changing the leasing requirement to 85%, changing the initial construction date to 1985, and including HUD programs. Staff has determined that applicants do not have to meet the Opportunity Index threshold requirements to score points for concerted revitalization. Staff believes it is not necessary to add language exempting the At-Risk and USDA Set-Asides from the requirement. Staff has revised the rule accordingly:

(B) For Developments located in a Rural Area.

(i) Applications will receive 4 points for the rehabilitation or demolition and reconstruction of a development in a rural area that is currently leased at 85% or greater by low income households and which was initially constructed prior to 1985 as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program. Demolition and relocation of units must be determined locally to be necessary to comply with the Affirmatively Furthering Fair Housing Rule, or if necessary to create an acceptable distance form Undesirable Site Features or Undesirable Neighborhood Characteristics.

(ii) Applications will receive 3 points for the rehabilitation of a development in a rural area that is currently leased at 85% or greater by low income households and which was initially constructed prior to 1985 as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program if the proposed location requires no disclosure of Undesirable Neighborhood Features under Section §10.101(a)(4) or required such disclosure but the disclosed items were found acceptable.

(iii) Applications may receive (2) points in addition to those under subclause (i) or (ii) of this clause if the Development is explicitly identified in a letter by the city or county as contributing more than any other Development to the concerted revitalization efforts of the city or county (as applicable). A city or county may only identify one single Development during each Application Round for the additional points under this subclause. The letter from the Governing Body of the city or county that approved the plan is required to be submitted in the Application. If multiple Applications submit valid letters under this subclause from the same Governing Body, none of the Applications shall be eligible for the additional points. A city or county may, but is not required, to identify a particular Application as contributing more than any other Development to concerted revitalization efforts.

(iv) Applications may receive (1) additional point if the development is in a location that would score at least 4 points under Opportunity Index, §11.9(c)(4).

In response to commenter (23), staff believes that the suggested revision would remove the assurance that there is a local financial commitment to the revitalization area. Staff believes that extending the time frame for when revitalization efforts must be completed to within 5 years after the Development is placed into service would further weaken the jurisdiction's commitment to the revitalization and would be problematic for scoring and monitoring purposes should the revitalization not be completed.

Staff recommends no changes based on this comment.

In response to commenter (31), staff agrees that the item requires clarification and has revised the rule accordingly:

Applications will receive (1) point in addition to those under sub clause (I) and (II) if the development is in a location that would score at least 4 points under Opportunity Index 11.9(c)(4)(B).

In response to commenter (48), staff believes that the option (A)(ii) of this item, which allows for a development to be in a census tract that is in the third quartile but contiguous to a census tract in the first or second quartile, gives applicants the ability to locate developments in areas of opportunity. Further, staff believes that by offering a menu of amenities from which to choose, point differentials are more easily managed. Staff has no objection to revising the rule to require that a development be built prior to 1985 and have 85% occupancy and has revised the rule accordingly:

(7) Concerted Revitalization Plan. An Application may qualify for points under this paragraph only if no points are elected under subsection (c)(4) of this section, related to Opportunity Index.

(B) For Developments located in a Rural Area.

(i) Applications will receive 4 points for the rehabilitation or demolition and reconstruction of a development in a rural area that is currently leased at 85% or greater by low income households and which was initially constructed prior to 1985 as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program. Demolition and relocation of units must be determined locally to be necessary to comply with the Affirmatively Furthering Fair Housing Rule, or if necessary to create an acceptable distance form Undesirable Site Features or Undesirable Neighborhood Characteristics.

(ii) Applications will receive 3 points for the rehabilitation of a development in a rural area that is currently leased at 85% or greater by low income households and which was initially constructed prior to 1985 as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program if the proposed location requires no disclosure of Undesirable Neighborhood Features under Section §10.101(a)(4) or required such disclosure but the disclosed items were found acceptable.

STAFF RESPONSE: In response to commenter (62), staff believes that the QAP should provide some incentives for the preservation of existing units through rehabilitation and demolition/reconstruction. Staff does not believe that points for these activities should be removed from clauses (i), (ii), and (iii) of (7)(B).

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

21. §11.9(e)(2) - Cost of Development per Square Foot (13), (19), (22), (23), (25), (35), (36), (39), (40), (42), (43), (52), (54), (58), (60), (63), (66), (69), (70)

COMMENT SUMMARY: Commenter (19) supports the revisions to the scoring item.

Commenters (13), (22), (23), (35), (39), (40), (42), (43), (49), (54), (60), (65), (66), (69), and (70) suggest the following revisions to clarify the rule. Commenter (58) also requests that items can be voluntary excluded from Eligible Basis:

An Application may qualify to receive up to twelve (12) points based on either the Building Cost per square foot of the proposed Development voluntarily included in eligible basis ("Eligible Building Cost") or the Hard Costs per square foot of the proposed Development voluntarily included in eligible basis ("Eligible Hard Cost"), as originally submitted in the Application. For purposes of this paragraph, Eligible Building Costs will exclude structured parking or commercial space that is not included in Eligible Basis, and Eligible Hard Costs will include general contractor overhead, profit, and general requirements. Structured parking or commercial space costs must be supported by a cost estimate from a Third Party General Contractor or subcontractor with experience in structured parking or commercial construction, as applicable. The square footage used will be the Net Rentable Area (NRA). The calculations will be based on the cost listed in the Development Cost Schedule and NRA shown in the Rent Schedule. If the proposed Development is a Supportive Housing Development, the NRA will include common area up to 50 square feet per Unit.

(B) Applications proposing New Construction or Reconstruction will be eligible for twelve (12) points if one of the following conditions is met:

(i) The Eligible Building Cost per square foot is less than $72.80 per square foot;

(ii) The Eligible Building Cost per square foot is less than $78 per square foot, and the Development meets the definition of a high cost development;

(C) Applications proposing New Construction or Reconstruction will be eligible for eleven (11) points if one of the following conditions is met:

(i) The Eligible Building Cost per square foot is less than $78 per square foot;

(ii) The Eligible Building Cost per square foot is less than $83.20 per square foot, and the Development meets the definition of a high cost development;

(D) Applications proposing New Construction or Reconstruction will be eligible for ten (10) points if one of the following conditions is met:

(i) The Eligible Building Cost is less than $93.60 per square foot; or

Commenters (25) and (63) applaud TDHCA for increasing the cost per square foot of hard cost by 4% and states that the allowance remains well below the actual cost to house seniors, who require buildings with elevators, interior hallways and common space; all with costs that are not included in the Net Rentable calculation. Commenters recommend that developments electing to coordinate with local service providers under Tenant Services and have appropriate community space for services be allowed to add an additional 50 square feet per unit; or that any development serviced by elevators and includes social service offices or a service coordinator office and includes common area for providers to deliver services be allowed an additional 50 square feet per unit.

Commenter (36) states that staff should increase Building Cost per square foot by 8% versus 4% due to large construction cost increases in Texas.

Commenter (52) proposes the following revisions to encourage Historic Preservation projects:

An Application may qualify to receive up to twelve (12) points based on either the Building Cost or the Hard Costs per square foot of the proposed Development voluntarily included in eligible basis ("Eligible Hard Cost"), as originally submitted in the Application. For purposes of this paragraph, Building Costs will exclude structured parking or commercial space that is not included in Eligible Basis, and Eligible Hard Costs will include general contractor overhead, profit, and general requirements. Structured parking or commercial space costs must be supported by a cost estimate from a Third Party General Contractor or subcontractor with experience in structured parking or commercial construction, as applicable. The square footage used will be the Net Rentable Area (NRA). The calculations will be based on the cost listed in the Development Cost Schedule and NRA shown in the Rent Schedule. If the proposed Development is a Supportive Housing Development or Adaptive Reuse involving Historic Preservation, the NRA will include common area up to 50 square feet per Unit.

(A) A high cost development is a Development that meets one of the following conditions:

(v) the Development is Adaptive Reuse involving Historic Preservation

(E) Applications proposing Adaptive Reuse or Rehabilitation (excluding Reconstruction) will be eligible for points if one of the following conditions is met:

(i) Twelve (12) points for Applications which include Eligible Hard Costs plus acquisition costs included in Eligible Basis that are less than $135 per square foot;

(ii) Twelve (12) points for Applications which include Eligible Hard Costs plus acquisition costs included in Eligible Basis that are less than $135.20 per square foot, located in an Urban Area, and that qualify for 5 or 7 points under subsection (c)(4) of this section, related to Opportunity Index; or

(iii) Eleven (11) points for Applications which include Eligible Hard Costs plus acquisition costs included in Eligible Basis that are less than $150 per square foot.

Commenter (58) proposes a 5th conditional clause for High Cost Developments:

(v) the Development qualifies for five (5) points under subsection (c)(8) of this section related to proximity to the Urban Core.

STAFF RESPONSE: Staff appreciates the support expressed by commenter (19).

Staff recommends no changes based on this comment.

In response to commenters (13), (22), (23), (35), (39), (40), (42), (43), (52), (54), (60), (65), (66), (69) and (70), Staff agrees with commenters that "voluntarily included in eligible basis" should apply to both Building Costs and Hard Costs, not just Hard Costs. Staff's goal is to solicit real estimates of cost. The proposed 2017 QAP provides the option to limit Hard Costs claimed as Eligible for scoring. Staff agrees with commenters that the same logic should be extended to Building Costs to promote the same outcome, assuming Applicant selects that option. To clarify these changes, Staff has defined "Eligible Building Costs" within this rule. Staff has revised the rule accordingly.

(2) Cost of Development per Square Foot. (§2306.6710(b)(1)(F); §42(m)(1)(C)(iii)) An Application may qualify to receive up to twelve (12) points based on either the Eligible Building Cost or the Eligible Hard Costs per square foot of the proposed Development voluntarily included in eligible basis as originally submitted in the Application. For purposes of this scoring item, Eligible Building Costs will be defined as Building Costs includable in Eligible Basis for the purposes of determining a Housing Credit Allocation. Eligible Building Costs will exclude structured parking or commercial space that is not included in Eligible Basis, and Eligible Hard Costs will include general contractor overhead, profit, and general requirements. Structured parking or commercial space costs must be supported by a cost estimate from a Third Party General Contractor or subcontractor with experience in structured parking or commercial construction, as applicable. The square footage used will be the Net Rentable Area (NRA). The calculations will be based on the cost listed in the Development Cost Schedule and NRA shown in the Rent Schedule. If the proposed Development is a Supportive Housing Development, the NRA will include common area up to 50 square feet per Unit.

(A) A high cost development is a Development that meets one of the following conditions:

(i) the Development is elevator served, meaning it is either a Elderly Development with an elevator or a Development with one or more buildings any of which have elevators serving four or more floors;

(ii) the Development is more than 75 percent single family design;

(iii) the Development is Supportive Housing; or

(iv) the Development Site qualifies for a minimum of five (5) points under subsection (c)(4) of this section, related to Opportunity Index, and is located in an Urban Area.

(B) Applications proposing New Construction or Reconstruction will be eligible for twelve (12) points if one of the following conditions is met:

(i) The voluntary Eligible Building Cost per square foot is less than $72.80 per square foot;

(ii) The voluntary Eligible Building Cost per square foot is less than $78 per square foot, and the Development meets the definition of a high cost development;

(iii) The voluntary Eligible Hard Cost per square foot is less than $93.60 per square foot; or

(iv) The voluntary Eligible Hard Cost per square foot is less than $104 per square foot, and the Development meets the definition of high cost development.

(C) Applications proposing New Construction or Reconstruction will be eligible for eleven (11) points if one of the following conditions is met:

(i) The voluntary Eligible Building Cost per square foot is less than $78 per square foot;

(ii) The voluntary Eligible Building Cost per square foot is less than $83.20 per square foot, and the Development meets the definition of a high cost development;

(iii) The voluntary Eligible Hard Cost per square foot is less than $98.80 per square foot; or

(iv) The voluntary Eligible Hard Cost per square foot is less than $109.20 per square foot, and the Development meets the definition of high cost development.

(D) Applications proposing New Construction or Reconstruction will be eligible for ten (10) points if one of the following conditions is met:

(i) The voluntary Eligible Building Cost is less than $93.60 per square foot; or

(ii) The voluntary Eligible Hard Cost is less than $114.40 per square foot.

(E) Applications proposing Adaptive Reuse or Rehabilitation (excluding Reconstruction) will be eligible for points if one of the following conditions is met:

(i) Twelve (12) points for Applications which include voluntary Eligible Hard Costs plus acquisition costs included in Eligible Basis that are less than $104 per square foot;

(ii) Twelve (12) points for Applications which include voluntary Eligible Hard Costs plus acquisition costs included in Eligible Basis that are less than $135.20 per square foot, located in an Urban Area, and that qualify for 5 or 7 points under subsection (c)(4) of this section, related to Opportunity Index; or

(iii) Eleven (11) points for Applications which include voluntary Eligible Hard Costs plus acquisition costs included in Eligible Basis that are less than $135.20 per square foot.

In response to commenters (25), (52), (58) and (63), staff believes that these revisions represent sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. These ideas could be taken into consideration for drafting the 2018 QAP. Staff encourages commenters to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

In response to commenter (36), staff did not find, and the commenter did not provide, evidence to suggest that building costs in Texas have risen by eight percent in Texas since publication of the 2016 QAP.

Staff recommends no changes based on this comment.

In response to commenter (52), regarding the recommendation to increase the allowable cost per square foot for Adaptive Reuse involving Historic Preservation, staff believes that commenter's proposed revision is a substantive change staff's original revision and that it cannot be accomplished without re-publication for public comment. Staff reminds commenter that Eligible Hard Costs per square foot for Adaptive Reuse involving Historic Preservation has been raised by 4% for the 2017 QAP. Staff believes that the increase for this type of construction should reflect the 4% increase in other development cost sections. Staff encourages commenter to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

22. §11.9(e)(3) - Pre-application Participation (20), (22), (28), (40), (42), (43), (54), (58), (60), (65)

COMMENT SUMMARY: Commenters (20), (22), (40) and (58) suggest removing the requirement that Undesirable Neighborhood Characteristics be disclosed at Pre-application from the rule and keeping the requirement that such disclosures be made at full Application. Commenters state that it is difficult to vet all aspects of a neighborhood prior to pre-application and that losing these points based on something the applicant missed prior to is an undue burden. Commenter suggests removing the requirement that Undesirable Neighborhood Characteristics be disclosed at Pre-application from the rule and keeping the requirement that such disclosures be made at full Application.

Commenter (28) suggests the following clarification for item (F) to account for the possibility of a change in an elected public official:

The Development Site at Pre-Application and full Application are the same or have contiguous borders of at least 10% with the site at full application, and the site at both pre-application and at full application are entirely within the same census tract. The site at full Application may not require notification to any person or entity not required to have been notified at pre-application, other than by reason of a change in elected public officials;

Commenters (42), (43), (54), (60) and (65) state that the current language should not be changed. Commenters (42) and (54) state that if an Applicant submits a Pre-App with one piece of property, but then submit a Full Application with an entirely different piece of property, but the two pieces happen to share a boundary, that should be considered a completely new application.

STAFF RESPONSE: In response to commenters (20), (22), (40), and (58), staff believes that it may be impractical to require the disclosure of certain Undesirable Neighborhood Characteristics at Pre-application. Staff has revised the rule so that Applicants must only provide disclosure at Pre-Application for the items below. Staff has revised the rule accordingly.

(G) The Development Site does not have the following Undesirable Neighborhood Characteristics as described in 10 TAC §10.101(a)(4) that were not disclosed with the pre-application:

(i) The Development Site is located in a census tract or within 1,000 feet of any census tract in an Urban Area and the rate of Part I violent crime is greater than 18 per 1,000 persons (annually) as reported on neighborhoodscout.com.

(ii) The Development Site is located within the attendance zones of an elementary school, a middle school or a high school that does not have a Met Standard rating by the Texas Education Agency.

In response to commenter (28), staff does not believe that the suggested revision is necessary as the notification requirement in the scoring item pertains only to notifications triggered by changes in the Development Site. Requirements for the notification of newly elected (or appointed) officials are covered under 10 TAC §10.203.

Staff recommends no changes based on this comment.

In response to commenters (42), (43), (54), (60) and (65), staff agrees and has revised the rule to remove the added language.

BOARD RESPONSE: Accepted staff's recommendation.

23. §11.9(e)(4) - Leveraging of Private, State, and Federal Resources (22), (23), (25), (32), (35), (36), (38), (40), (42), (43), (49), (52), (54), (58), (59), (63), (65), (66), (69), (70)

COMMENT SUMMARY: Commenters (22), (23), (25), (32), (35), (38), (40), (42), (43), recommend not changing the percentages to ensure the quality and feasibility of Developments.

Commenter (36) recommends not changing the percentages as it is necessary to obtain these 3 points to have a competitive application, especially with senior living, and the change in percentage would require too many market rate units at rental rates that are not achievable in a mixed income environment.

COMMENT SUMMARY: Commenters (49), (52), (54), (58), (59), (60), (63), (65), (66), (69), and (70) also state that leveraging percentages remain at the 2016 level. Commenter (70) states that the percentage reduction is devastating to deals and creates less financially sound developments.

STAFF RESPONSE: In response to commenters (22), (23), (25), (32), (35), (36), (38), (40), (42), (43), staff agrees and has revised the rule accordingly:

"(A) An Application may qualify to receive up to three (3) points if at least five (5) percent of the total Units are restricted to serve households at or below 30 percent of AMGI (restrictions elected under other point items may count) and the Housing Tax Credit funding request for the proposed Development meet one of the levels described in clauses (i) - (iv) of this subparagraph:

(i) The Development leverages CDBG Disaster Recovery, HOPE VI, RAD, or Choice Neighborhoods funding and the Housing Tax Credit Funding Request is less than 9 percent of the Total Housing Development Cost (3 points). The Application must include a commitment of such funding; or

(ii) If the Housing Tax Credit funding request is less than eight (8) percent of the Total Housing Development Cost (3 points); or

(iii) If the Housing Tax Credit funding request is less than nine (9) percent of the Total Housing Development Cost (2 points); or

(iv) If the Housing Tax Credit funding request is less than ten (10) percent of the Total Housing Development Cost (1 point)."

BOARD RESPONSE: Accepted staff's recommendation.

24. §11.9(e)(6) - Historic Preservation (1), (2), (9), (17), (26), (36), (59)

COMMENT SUMMARY: Commenters (1), (2), (9) and (36) state that the proposal that a project that qualifies for points under Historic Preservation loses points if located in an area served by a school not having high Educational Quality scores would have a negative effect on the 84th Legislature's intent that the rehabilitation and adaptive reuse of certified historic structures is a priority for Texas through the LIHTC process, as established in SB 1316 and codified in Tex. Gov't Code §2306.6725(a)(6).

Commenters (17) and (59) recommend the following revisions to incentivize historic preservation and the use of historic tax credit leveraging.

At least ten percent of the residential units shall reside within the Certified Historic Structure and the Development must reasonably be expected to qualify to receive and document receipt of historic tax credits by issuance of Forms 8609. The Application must include either documentation from the Texas Historical Commission that the property is currently a Certified Historic Structure, or documentation determining preliminary eligibility for Certified Historic Structure status.

Commenter (26) states that vacant and underused historic buildings can be efficiently repurposed as affordable housing, becoming dynamic catalysts for the revitalization of historic downtowns. Commenter encourages TDHCA to give priority consideration to the scoring of applications for historic structures.

STAFF RESPONSE: In response to commenters (1), (2), (9) and (36), the requirement that an application that includes the Rehabilitation or Adaptive Reuse of a Historic Structure meet certain Educational Quality scoring item (10 TAC §11.9(c)(5)) requirements was not included in the published proposed rule. Staff notes that in revising the rule for publication in the draft, removal of the education scoring provision inadvertently removed the score for this subsection. Staff will make a technical correction and add language describing this as a five (5) point item.

Staff recommends no changes based on this comment.

In response to commenters (17) and (59), staff believes that this revision represents sufficiently substantive changes from what was proposed that it could not be accomplished without re-publication for public comment. These ideas could be taken into consideration for drafting the 2018 QAP. Staff encourages commenters to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

In response to commenter (26), staff believes that such consideration cannot be given as priority consideration to the scoring of applications is prescribed by Tex. Gov't Code §2306.6710(b)(1).

Staff recommends no changes based on this comment.

STAFF RESPONSE: In response to commenter (36), the requirement that an application that includes the Rehabilitation or Adaptive Reuse of a Historic Structure meet certain Educational Quality scoring item (10 TAC §11.9(c)(5)) requirements was not included in the published proposed rule.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

25. §11.9(e)(8) - Funding Request Amount (52)

COMMENT SUMMARY: Commenter (52) states that a developer should not be penalized by 1 point for producing an excess number of affordable units if the market study supports the number of units proposed in a new development. Commenter states that if a developer asks for a higher amount than a competitor, but his/her application provides for a more affordable units on a percentage basis than a competitor requesting a lesser amount, it may not be in the best interest to award the developer producing fewer affordable units 1 additional point over a competitor who is better leveraging the tax credits

STAFF RESPONSE: In response to commenter (52), staff believes that this revision represents a sufficiently substantive change from what was proposed that it could not be accomplished without re-publication for public comment. These ideas could be taken into consideration for drafting the 2018 QAP. Staff encourages commenter to suggest this revision during planning for the 2018 QAP.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

26. §11.9(f) Point Adjustments (58)

COMMENT SUMMARY: Commenter (58) states that the paragraphs in this section are not numbered properly, and that they should be correctly referenced.

STAFF RESPONSE: In response to commenter (58), staff appreciates the suggested correction and has revised the rule accordingly.

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

(2) If the Applicant or Affiliate failed to meet the commitment or expenditure requirements of a HOME or National Housing Trust Fund award from the Department.

(3) If the Developer or Principal of the Applicant violates the Adherence to Obligations.

(4) Any deductions 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.

BOARD RESPONSE: Accepted staff's recommendation.

27. §11.10- Third Party Request for Administrative Deficiency for Competitive HTC Applications (22), (23), (40), (59)

COMMENT SUMMARY: Commenters (22) and (40) state that staff sometimes makes errors and it is important that these errors be caught during the third party request for administrative deficiency process.

Commenter (23) requests that the Development community continues to have the right to point out mistakes on the part of competing applicants, as well as Department staff as the added language "seems to indicate that staff mistakes cannot be a part of this review." Commenter requests that the Department use the same process previously used for Challenges, including posting of all information received from both the Requestor, applicant, and staff determinations in a timely manner.

Commenter (59) requests that staff remove the requirement that the requester send a copy of the request and supporting information directly to the Applicant at the same time it is provided to the Department:

The purpose of the Third Party Request for Administrative Deficiency ("RFAD") process is to allow an unrelated person or entity to bring new, material information about an Application to staff's attention. Such Person may request the staff to consider whether a matter in an Application in which the Person has no involvement should be the subject of an Administrative Deficiency. Staff will consider the request and proceed as it deems appropriate under the applicable rules including, if the Application in question is determined by staff to not be a priority Application, not reviewing the matter further. Requestors must provide, at the time of filing the challenge, all briefings, documentation, and other information that the requestor offers in support of the deficiency. Requestors must provide sufficient credible evidence that, if confirmed, would substantiate the deficiency request. Assertions not accompanied by supporting documentation susceptible to confirmation will not be considered. The results of a RFAD may not be appealed by the Requestor.

STAFF RESPONSE: In response to commenters (22), (23), (40), and (59), staff believes that allowing an applicant to question the review of a competitor's application is tantamount to an appeal of staff's determination, which is prohibited by Tex. Gov't Code §2306.6715(b), which states that An applicant may not appeal a decision made under §2306.6710, Evaluation and Underwriting of Applications, regarding an application filed by another applicant. Staff will ensure that all information received from the requester and the applicant, as well as staff determinations, is posted online in a timely manner. Staff has revised the rule as follows:

The purpose of the Third Party Request for Administrative Deficiency ("RFAD") process is to allow an unrelated person or entity to bring new, material information about an Application to staff's attention. Such Person may request the staff to consider whether a matter in an Application in which the Person has no involvement should be the subject of an Administrative Deficiency. Staff will consider the request and proceed as it deems appropriate under the applicable rules including, if the Application in question is determined by staff to not be a priority Application, not reviewing the matter further. Requestors must provide, at the time of filing the challenge, all briefings, documentation, and other information that the requestor offers in support of the deficiency. A copy of the request and supporting information must be provided directly to the Applicant at the same time it is provided to the Department. Requestors must provide sufficient credible evidence that, if confirmed, would substantiate the deficiency request. Assertions not accompanied by supporting documentation susceptible to confirmation will not be considered. Staff shall provide to the Board a written report summarizing each third party request for administrative deficiency and the manner in which it was addressed. Interested persons may provide testimony on this report before the Board's takes any formal action to accept the report. The results of a RFAD may not be appealed by the Requestor.

In response to commenters (59), staff believes that in order to ensure that each applicant his aware of the request at the time it is submitted, the requester must inform the applicant.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted staff's recommendation.

The Board approved the final order adopting the new 10 TAC Chapter 11 concerning the Housing Tax Credit Program Qualified Allocation Plan on November 10, 2016.

STATUTORY AUTHORITY. The new sections are adopted pursuant to Tex. Gov't Code §2306.053, which authorizes the Department to adopt rules. Additionally, the new sections are proposed pursuant to Tex. Gov't Code §2306.67022, which specifically authorizes the Department to adopt a qualified allocation plan.

The adopted rule affects no other code, article or statute.

§11.1.General.

(a) Authority. This chapter applies to the awarding and allocation by the Texas Department of Housing and Community Affairs (the "Department") of Housing Tax Credits. The federal laws providing for the awarding and allocation of Housing Tax Credits require states to adopt a qualified allocation plan. Pursuant to Tex. Gov't Code, Chapter 2306, Subchapter DD, the Department is assigned responsibility for this activity. As required by Internal Revenue Code (the "Code"), §42(m)(1), the Department has developed this Qualified Allocation Plan (QAP) and it has been duly approved to establish the procedures and requirements relating to an award and allocation of Housing Tax Credits. All requirements herein and all those applicable to a Housing Tax Credit Development or an Application under Chapter 10 of this title (relating to Uniform Multifamily Rules), or otherwise incorporated by reference herein collectively constitute the QAP required by Tex. Gov't Code, §2306.67022.

(b) Due Diligence and Applicant Responsibility. Department staff may, from time to time, make available for use by Applicants information and informal guidance in the form of reports, frequently asked questions, and responses to specific questions. The Department encourages communication with staff in order to clarify any issues that may not be fully addressed in the QAP or may be unclear when applied to specific facts. However, while these resources are offered to help Applicants prepare and submit accurate information, Applicants should also appreciate that this type of guidance is limited by its nature and that staff will apply the rules of the QAP to each specific situation as it is presented in the submitted Application. Moreover, after the time that an issue is initially presented and guidance is provided, additional information may be identified and/or the issue itself may continue to develop based upon additional research and guidance. Thus, until confirmed through final action of the Board, staff guidance must be considered merely as an aid and an Applicant continues to assume full responsibility for any actions Applicant takes regarding an Application. In addition, although the Department may compile data from outside sources in order to assist Applicants in the Application process, it remains the sole responsibility of the Applicant to perform independently the necessary due diligence to research, confirm, and verify any data, opinions, interpretations, or other information upon which an Applicant bases an Application or includes in any submittal in connection with an Application. As provided by Tex. Gov't Code §2306.6715(c), an applicant is given until the later of the seventh day of the publication on the Department's website of a scoring log reflecting that applicant's score or the seventh day from the date of transmittal of a scoring notice; provided, however, that an applicant may not appeal any scoring matter after the award of credits unless they are within the above-described time limitations and have appeared at the meeting when the Department's Governing Board makes competitive tax credit awards and stated on the record that they have an actual or possible appeal that has not been heard. Appeal rights may be triggered by the publication on the Department's website of the results of the evaluation process. Individual Scoring notices or similar communications are a courtesy only.

(c) Competitive Nature of Program. Applying for competitive housing tax credits is a technical process that must be followed completely. As a result of the highly competitive nature of applying for tax credits, an Applicant should proceed on the assumption that deadlines are fixed and firm with respect to both date and time and cannot be waived except where authorized and for truly extraordinary circumstances, such as the occurrence of a significant natural disaster that could not have been anticipated and makes timely adherence impossible. If an Applicant chooses to submit by delivering an item physically to the Department, it is the Applicant's responsibility to be within the Department's doors by the appointed deadline. Applicants should further ensure that all required documents are included, legible, properly organized, and tabbed, and that materials in required formats involving digital media are complete and fully readable. Applicants are strongly encouraged to submit the required items well in advance of established deadlines. Staff, when accepting Applications, may conduct limited reviews at the time of intake as a courtesy only. If staff misses an issue in such a limited review, the fact that the Application was accepted by staff or that the issue was not identified does not operate to waive the requirement or validate the completeness, readability, or any other aspect of the Application.

(d) Definitions. The capitalized terms or phrases used herein are defined in §10.3 of this title (relating to Definitions), unless the context clearly indicates otherwise. Any capitalized terms that are defined in Tex. Gov't Code, Chapter 2306, §42 of the Code, or other Department rules have, when capitalized, the meanings ascribed to them therein. Defined terms when not capitalized, are to be read in context and construed according to common usage.

(e) Census Data. Where this chapter requires the use of census or American Community Survey data, the Department shall use the most current data available as of October 1, 2016, unless specifically otherwise provided in federal or state law or in the rules. The availability of more current data shall generally be disregarded.

(f) Deadlines. Where a specific date or deadline is identified in this chapter, the information or documentation subject to the deadline must be submitted on or before 5:00 p.m. Austin local time on the day of the deadline. If the deadline falls on a weekend or holiday, the deadline is 5:00 p.m. Austin local time on the next day which is not a weekend or holiday and on which the Department is open for general operation. Unless otherwise noted deadlines are based on calendar days.

§11.2.Program Calendar for Competitive Housing Tax Credits.

Non-statutory deadlines specifically listed in the Program Calendar may be extended by the Department for a period of not more than five (5) business days provided that the Applicant has, in writing, requested an extension prior to the date of the original deadline and has established to the reasonable satisfaction of the Department that there is good cause for the extension. Except as provided for under 10 TAC §1.1 relating to Reasonable Accommodation Requests, extensions relating to Administrative Deficiency deadlines may only be extended if documentation needed to resolve the item is needed from a Third Party or the documentation involves signatures needed on certifications in the Application.

Figure: 10 TAC §11.2 (.pdf)

§11.6.Competitive HTC Allocation Process.

This section identifies the general allocation process and the methodology by which awards are made.

(1) Regional Allocation Formula. The Department shall initially make available in each Rural Area and Urban Area of each Uniform State Service Region ("sub-region") Housing Tax Credits in an amount consistent with the Regional Allocation Formula developed in compliance with Tex. Gov't Code, §2306.1115. The process of awarding the funds made available within each sub-region shall follow the process described in this section. Where a particular situation that is not contemplated and addressed explicitly by the process described herein, Department staff shall formulate a recommendation for the Board's consideration based on the objectives of regional allocation together with other policies and purposes set out in Tex. Gov't Code, Chapter 2306 and the Department shall provide Applicants the opportunity to comment on and propose alternatives to such a recommendation. In general, such a recommendation shall not involve broad reductions in the funding request amounts solely to accommodate regional allocation and shall not involve rearranging the priority of Applications within a particular sub-region or set-aside except as described herein. If the Department determines that an allocation recommendation would cause a violation of the $3 million credit limit per Applicant, 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. Where sufficient credit becomes available to award an application on the waiting list late in the calendar year, staff may allow flexibility in meeting the Carryover Allocation submission deadline to ensure to the fullest extent feasible that available resources are allocated by December 31.

(2) Credits Returned and National Pool Allocated After January 1. For any credits returned after January 1 and eligible for reallocation, the Department shall first return the credits to the sub-region or set-aside from which the original allocation was made. The credits will be treated in a manner consistent with the allocation process described in this section and may ultimately flow from the sub-region and be awarded in the collapse process to an Application in another region, sub-region or set-aside. For any credit received from the "national pool" after the initial approval of awards in late July, the credits will be added to and awarded to the next Application on the waiting list for the state collapse, if sufficient credits are available to meet the requirements of the Application after underwriting review.

(3) Award Recommendation Methodology. (§2306.6710(a) - (f); §2306.111) The Department will assign, as described herein, Developments for review by the program and underwriting divisions. In general, Applications will be prioritized for assignment, with highest priority given to those identified as most competitive based upon the Applicant self-score and an initial program review. The procedure identified in subparagraphs (A) - (F) of this paragraph will also be used in making recommendations to the Board.

(A) USDA Set-Aside Application Selection (Step 1). The first level of priority review will be those Applications with the highest scores in the USDA Set-Aside until the minimum requirements stated in §11.5(2) of this chapter (relating to Competitive HTC Set-Asides. (§2306.111(d))) are attained. The minimum requirement may be exceeded in order to award the full credit request or underwritten amount of the last Application selected to meet the At-Risk Set-Aside requirement;

(B) At-Risk Set-Aside Application Selection (Step 2). The second level of priority review will be those Applications with the highest scores in the At-Risk Set-Aside statewide until the minimum requirements stated in §11.5(3) of this chapter are attained. This may require the minimum requirement to be exceeded to award the full credit request or underwritten amount of the last Application selected to meet the At-Risk Set-Aside requirement. This step may leave less than originally anticipated in the 26 sub-regions to award under the remaining steps, but these funds would generally come from the statewide collapse;

(C) Initial Application Selection in Each Sub-Region (Step 3). The highest scoring Applications within each of the 26 sub-regions will then be selected provided there are sufficient funds within the sub-region to fully award the Application. Applications electing the At-Risk or USDA Set-Asides will not be eligible to receive an award from funds made generally available within each of the sub-regions. The Department will, for each such Urban subregion, calculate the maximum percentage in accordance with Tex. Gov't Code, §2306.6711(h) and will publish such percentages on its website.

(i) In Uniform State Service Regions containing a county with a population that exceeds one million, the Board may not allocate more than the maximum percentage of credits available for Elderly Developments, unless there are no other qualified Applications in the subregion

(ii) In accordance with Tex. Gov't Code, §2306.6711(g), in Uniform State Service Regions containing a county with a population that exceeds 1.7 million, the Board shall allocate competitive tax credits to the highest scoring development, if any, that is part of a concerted revitalization plan that meets the requirements of §11.9(d)(7) (except for §11.9(d)(7)(A)(ii)(III) and §11.9(d)(7)(B)(iv)), is located in an urban subregion, and is within the boundaries of a municipality with a population that exceeds 500,000.

(D) Rural Collapse (Step 4). If there are any tax credits set-aside for Developments in a Rural Area in a specific Uniform State Service Region ("Rural sub-region") that remain after award under subparagraph (C) of this paragraph, those tax credits shall be combined into one "pool" and 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 sub-region's allocation. This rural redistribution will continue until all of the tax credits in the "pool" are allocated to Rural Applications and at least 20 percent of the funds available to the State are allocated to Applications in Rural Areas. (§2306.111(d)(3)) In the event that more than one sub-region is underserved by the same percentage, the priorities described in clauses (i) - (ii) of this subparagraph will be used to select the next most underserved sub-region:

(i) the sub-region with no recommended At-Risk Applications from the same Application Round; and

(ii) the sub-region that was the most underserved during the Application Round during the year immediately preceding the current Application Round.

(E) Statewide Collapse (Step 5). Any credits remaining after the Rural Collapse, including those in any sub-region in the State, will be combined into one "pool." The funds will be used to award the highest scoring Application (not selected in a prior step) in the most underserved sub-region in the State compared to the amount originally made available in each sub-region. In Uniform State Service Regions containing a county with a population that exceeds one million, the Board may not allocate more than the maximum percentage of credits available for Elderly Developments, unless there are no other qualified Applications in the subregion. The Department will, for each such Urban subregion, calculate the maximum percentage in accordance with Tex. Gov't Code, §2306.6711(h) and will publish such percentages on its website. This process will continue until the funds remaining are insufficient to award the next highest scoring Application in the next most underserved sub-region. In the event that more than one sub-region is underserved by the same percentage, the priorities described in clauses (i) and (ii) of this subparagraph will be used to select the next most underserved sub-region:

(i) the sub-region with no recommended At-Risk Applications from the same Application Round; and

(ii) the sub-region that was the most underserved during the Application Round during the year immediately preceding the current Application Round.

(F) Contingent Qualified Nonprofit Set-Aside Step (Step 6). If an insufficient number of Applications participating in the Nonprofit Set-Aside are selected after implementing the criteria described in subparagraphs (A) - (E) of this paragraph to meet the requirements of the 10 percent Nonprofit Set-Aside, action must be taken to modify the criteria described in subparagraphs (A) - (E) of this paragraph to ensure the set-aside requirements are met. Therefore, the criteria described in subparagraphs (C) - (E) of this paragraph will be repeated after selection of the highest scoring Application(s) under the Nonprofit Set-Aside statewide are selected to meet the minimum requirements of the Nonprofit Set-Aside. This step may cause some lower scoring Applications in a sub-region to be selected instead of a higher scoring Application not participating in the Nonprofit Set-Aside.

(4) Waiting List. The Applications that do not receive an award by July 31 and remain active and eligible will be recommended for placement on the waiting list. The waiting list is not static. The allocation process will be used in determining the Application to award. For example, if credits are returned, those credits will first be made available in the set-aside or sub-region from which they were originally awarded. This means that the first Application on the waiting list is in part contingent on the nature of the credits that became available for award. The Department shall hold all credit available after the late-July awards until September 30 in order to collect credit that may become available when tax credit Commitments are submitted. Credit confirmed to be available, as of September 30, may be awarded to Applications on the waiting list unless insufficient credits are available to fund the next Application on the waiting list. For credit returned after September 30, awards from the waiting list will be made when the remaining balance is sufficient to award the next Application on the waiting list based on the date(s) of returned credit. Notwithstanding the foregoing, if decisions related to any returns or rescissions of tax credits are under appeal or are otherwise contested, the Department may delay awards until resolution of such issues. (§2306.6710(a) - (f); §2306.111)

(5) Credit Returns Resulting from Force Majeure Events. In the event that the Department receives a return of Competitive HTCs during the current program year from an Application that received a Competitive Housing Tax Credit award during any of the preceding three years, such returned credit will, if the Board determines that all of the requirements of this paragraph are met to its satisfaction, be allocated separately from the current year's tax credit allocation, and shall not be subject to the requirements of paragraph (2) of this section. Requests to separately allocate returned credit where all of the requirements of this paragraph have not been met or requests for waivers of any part of this paragraph will not be considered. For purposes of this paragraph, credits returned after September 30 of the preceding program year may be considered to have been returned on January 1 of the current year in accordance with the treatment described in §(b)(2)(C)(iii) of Treasury Regulation 1.42-14. The Department's Governing Board may approve the execution of a current program year Carryover Agreement regarding the returned credits with the Development Owner that returned such credits only if:

(A) The credits were returned as a result of "Force Majeure" events that occurred after the start of construction and before issuance of Forms 8609. Force Majeure events are the following sudden and unforeseen circumstances outside the control of the Development Owner: acts of God such as fire, tornado, flooding, significant and unusual rainfall or subfreezing temperatures, or loss of access to necessary water or utilities as a direct result of significant weather events; explosion; vandalism; orders or acts of military authority; litigation; changes in law, rules, or regulations; national emergency or insurrection; riot; acts of terrorism; supplier failures; or materials or labor shortages. If a Force Majeure event is also a presidentially declared disaster, the Department may treat the matter under the applicable federal provisions. Force Majeure events must make construction activity impossible or materially impede its progress;

(B) Acts or events caused by the negligent or willful act or omission of the Development Owner, Affiliate or a Related Party shall under no circumstance be considered to be caused by Force Majeure;

(C) A Development Owner claiming Force Majeure must provide evidence of the type of event, as described in subparagraph (A) of this paragraph, when the event occurred, and that the loss was a direct result of the event;

(D) The Development Owner must prove that reasonable steps were taken to minimize or mitigate any delay or damages, that the Development Owner substantially fulfilled all obligations not impeded by the event, including timely closing of all financing and start of construction, that the Development and Development Owner was properly insured and that the Department was timely notified of the likelihood or actual occurrence of an event described in subparagraph (A) of this paragraph;

(E) The event prevents the Development Owner from meeting the placement in service requirements of the original allocation;

(F) The requested current year Carryover Agreement allocates the same amount of credit as that which was returned;

(G) The Department's Real Estate Analysis Division determines that the Development continues to be financially viable in accordance with the Department's underwriting rules after taking into account any insurance proceeds related to the event; and

(H) The Development Owner submits a signed written request for a new Carryover Agreement concurrently with the voluntary return of the HTCs.

§11.7.Tie Breaker Factors.

In the event there are Competitive HTC Applications that receive the same number of points in any given set-aside category, rural regional allocation or urban regional allocation, or rural or statewide collapse, the Department will utilize the factors in this section, in the order they are presented, to determine which Development will receive preference in consideration for an award. The tie breaker factors are not intended to specifically address a tie between equally underserved sub-regions in the rural or statewide collapse.

(1) Applications having achieved a score on Proximity to the Urban Core. This item does not apply to the At-Risk Set-Aside.

(2) Applications scoring higher on the Opportunity Index under §11.9(c)(4) of this chapter (relating to Competitive HTC Selection Criteria) as compared to another Application with the same score.

(3) Applications having achieved the maximum Opportunity Index Score and the highest number of point items on the Opportunity Index menu that they were unable to claim because of the 7 point cap on that item.

(4) The Application with the highest average rating for the elementary, middle, and high school designated for attendance by the Development Site.

(5) Applications proposed to be located in a census tract with the lowest poverty rate as compared to another Application with the same score.

(6) Applications proposed to be located the greatest linear distance from the nearest Housing Tax Credit assisted Development. Developments awarded Housing Tax Credits but do not yet have a Land Use Restriction Agreement in place will be considered Housing Tax Credit assisted Developments for purposes of this paragraph. The linear measurement will be performed from closest boundary to closest boundary.

§11.8.Pre-Application Requirements (Competitive HTC Only).

(a) General Submission Requirements. The pre-application process allows Applicants interested in pursuing an Application to assess potential competition across the thirteen (13) state service regions, sub-regions and set-asides. Based on an understanding of the potential competition they can make a more informed decision whether they wish to proceed to prepare and submit an Application. A complete pre-application is a pre-application that meets all of the Department's criteria, as outlined in subsections (a) and (b) of this section, with all required information and exhibits provided pursuant to the Multifamily Programs Procedures Manual.

(1) The pre-application must be submitted using the URL provided by the Department, as outlined in the Multifamily Programs Procedures Manual, along with the required pre-application fee as described in §10.901 of this title (relating to Fee Schedule), not later than the Pre-application Final Delivery Date as identified in §11.2 of this chapter (relating to Program Calendar for Competitive Housing Tax Credits). If the pre-application and corresponding fee is not submitted on or before this deadline the Applicant will be deemed to have not made a pre-application.

(2) Only one pre-application may be submitted by an Applicant for each Development Site.

(3) Department review at this stage is limited, and not all issues of eligibility and threshold are reviewed or addressed at pre-application. Acceptance by staff of a pre-application does not ensure that an Applicant satisfies all Application eligibility, threshold or documentation requirements. While the pre-application is more limited in scope than an Application, pre-applications are subject to the same limitations, restrictions, or causes for disqualification or termination as a full Application, and pre-applications will thus be subject to the same consequences for violation, including but not limited to loss of points and termination of the pre-application.

(b) Pre-Application Threshold Criteria. Pursuant to Tex. Gov't Code, §2306.6704(c) pre-applications will be terminated unless they meet the threshold criteria described in subsection (a) of this section and paragraphs (1) and (2) of this subsection:

(1) Submission of the competitive HTC pre-application in the form prescribed by the Department which identifies at a minimum:

(A) Site Control meeting the requirements of §10.204(10) of this title (relating to Required Documentation for Application Submission). For purposes of meeting this specific requirement related to pre-application threshold criteria, proof of consideration and any documentation required for identity of interest transactions is not required at the time of pre-application submission but will be required at the time of full application submission;

(B) Funding request;

(C) Target Population;

(D) Requested set-asides (At-Risk, USDA, Nonprofit, and/or Rural);

(E) Total Number of Units proposed;

(F) Census tract number in which the Development Site is located;

(G) Expected score for each of the scoring items identified in the pre-application materials;

(H) Proposed name of ownership entity; and

(I) Disclosure of the following Undesirable Neighborhood Characteristics under §10.101(a)(4).:

(i) The Development Site is located in a census tract or within 1,000 feet of any census tract in an Urban Area and the rate of Part I violent crime is greater than 18 per 1,000 persons (annually) as reported on neighborhoodscout.com.

(ii) The Development Site is located within the attendance zones of an elementary school, a middle school or a high school that does not have a Met Standard rating by the Texas Education Agency.

(2) Evidence in the form of a certification provided in the pre-application, that all of the notifications required under this paragraph have been made. (§2306.6704)

(A) 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 of the beginning of the Application Acceptance Period.

(B) Notification Recipients. No later than the date the pre-application is submitted, notification must be sent to all of the persons or entities prescribed in clauses (i) - (viii) of this subparagraph. Developments located in an ETJ of a city are required to notify both city and county officials. The notifications may be sent by e-mail, fax or mail with registered return receipt or similar tracking mechanism in the format required in the Pre-application Notification Template provided in the pre-application. The Applicant is encouraged to retain proof of delivery in the event the Department requires proof of notification. Acceptable evidence of such delivery is demonstrated by signed receipt for mail or courier delivery and confirmation of delivery for fax and e-mail. Officials to be notified are those officials in office at the time the pre-application is submitted. Note that between the time of pre-application (if made) and full Application, such officials may change and the boundaries of their jurisdictions may change. By way of example and not by way of limitation, events such as redistricting may cause changes which will necessitate additional notifications at full Application. Meetings and discussions do not constitute notification. Only a timely and compliant written notification to the correct person constitutes notification.

(i) Neighborhood Organizations on record with the state or county as of the beginning of the Application Acceptance Period whose boundaries include the proposed Development Site;

(ii) Superintendent of the school district in which the Development Site is located;

(iii) Presiding officer of the board of trustees of the school district in which the Development Site is located;

(iv) Mayor of the municipality (if the Development Site is within a municipality or its extraterritorial jurisdiction);

(v) All elected members of the Governing Body of the municipality (if the Development Site is within a municipality or its extraterritorial jurisdiction);

(vi) Presiding officer of the Governing Body of the county in which the Development Site is located;

(vii) All elected members of the Governing Body of the county in which the Development Site is located; and

(viii) State Senator and State Representative of the districts whose boundaries include the proposed Development Site;

(C) Contents of Notification.

(i) The notification must include, at a minimum, all of the information described in subclauses (I) - (VI) of this clause.

(I) the Applicant's name, address, an 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 physical type of Development being proposed (e.g. single family homes, duplex, apartments, high-rise etc.); and

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

(ii) The notification may not contain any false or misleading statements. Without limiting the generality of the foregoing, the notification may not create the impression that the proposed Development will serve a Target Population exclusively unless such targeting or preference is documented in the Application and is in full compliance with all applicable state and federal laws, including state and federal fair housing laws.

(c) Pre-application Results. Only pre-applications which have satisfied all of the pre-application requirements, including those in §11.9(e)(3) of this chapter, 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 pre-application on the Pre-application Submission Log does not ensure that an Applicant will receive points for a pre-application.

§11.9.Competitive HTC Selection Criteria.

(a) General Information. This section identifies the scoring criteria used in evaluating and ranking Applications. The criteria identified in subsections (b) - (e) of this section include those items required under Tex. Gov't Code, Chapter 2306, §42 of the Code, and other criteria established in a manner consistent with Chapter 2306 and §42 of the Code. There is no rounding of numbers in this section for any of the calculations in order to achieve the desired requirement or limitation, unless rounding is explicitly stated as allowed for that particular calculation or criteria. Due to the highly competitive nature of the program, Applicants that elect points where supporting documentation is required but fail to provide any supporting documentation will not be allowed to cure the issue through an Administrative Deficiency. However, Department staff may provide the Applicant an opportunity to explain how they believe the Application, as submitted, meets the requirements for points or otherwise satisfies the requirements. When providing a pre-application, Application or other materials to a state representative, local governmental body, Neighborhood Organization, or anyone else to secure support or approval that may affect the Applicant's competitive posture, an Applicant must disclose that in accordance with the Department's rules aspects of the Development may not yet have been determined or selected or may be subject to change, such as changes in the amenities ultimately selected and provided.

(b) Criteria promoting development of high quality housing.

(1) Size and Quality of the Units. (§2306.6710(b)(1)(D); §42(m)(1)(C)(iii)) An Application may qualify for up to fifteen (15) points under subparagraphs (A) and (B) of this paragraph.

(A) Unit Sizes (8 points). The Development must meet the minimum requirements identified in this subparagraph to qualify for points. Points for this item will be automatically granted for Applications involving Rehabilitation (excluding Reconstruction), for Developments receiving funding from USDA, or for Supportive Housing Developments without meeting these square footage minimums only if requested in the Self Scoring Form.

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

(ii) six-hundred fifty (650) square feet for a one Bedroom Unit;

(iii) eight-hundred fifty (850) square feet for a two Bedroom Unit;

(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) Unit and Development Features (7 points). Applicants that elect in an Application to 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 §10.101(b)(6)(B) of this title (relating to Site and Development Requirements and Restrictions) and as certified to in the Application. The amenities will be required to be identified in the LURA. Rehabilitation Developments will start with a base score of three (3) points and Supportive Housing Developments will start with a base score of five (5) points.

(2) Sponsor Characteristics. (§42(m)(1)(C)(iv)) An Application may qualify to receive one (1) point if the ownership structure contains a HUB certified by the Texas Comptroller of Public Accounts by the Full Application Delivery Date, or Qualified Nonprofit Organization provided the Application is under the Nonprofit Set-Aside.

(A) The HUB or Qualified Nonprofit Organization must have some combination of ownership interest in the General Partner of the Applicant, cash flow from operations, and developer fee which taken together equal at least 80 percent and no less than 5 percent for any category. For example, a HUB or Qualified Nonprofit Organization may have 20 percent ownership interest, 30 percent of the developer fee, and 30 percent of cash flow from operations.

(B) The HUB or Qualified Nonprofit Organization must also materially participate in the Development and operation of the Development throughout the Compliance Period and must have experience directly related to the housing industry, which may include experience with property management, construction, development, financing, or compliance. A Principal of the HUB or Qualified Nonprofit Organization cannot be a Related Party to any other Principal of the Applicant or Developer (excluding another Principal of said HUB or Qualified Nonprofit Organization).

(c) Criteria to serve and support Texans most in need.

(1) Income Levels of Tenants. (§§2306.111(g)(3)(B) and (E); 2306.6710(b)(1)(C) and (e); and §42(m)(1)(B)(ii)(I)) An Application may qualify for up to sixteen (16) points for rent and income restricting a Development for the entire Affordability Period at the levels identified in subparagraph (A) or (B) of this paragraph.

(A) For any Development located within a non-Rural Area of the Dallas, Fort Worth, Houston, San Antonio, or Austin MSAs:

(i) At least 40 percent of all low-income Units at 50 percent or less of AMGI (16 points);

(ii) At least 30 percent of all low income Units at 50 percent or less of AMGI (14 points); or

(iii) At least 20 percent of all low-income Units at 50 percent or less of AMGI (12 points).

(B) For Developments proposed to be located in areas other than those listed in subparagraph (A) of this paragraph:

(i) At least 20 percent of all low-income Units at 50 percent or less of AMGI (16 points);

(ii) At least 15 percent of all low-income Units at 50 percent or less of AMGI (14 points); or

(iii) At least 10 percent of all low-income Units at 50 percent or less of AMGI (12 points).

(2) Rent Levels of Tenants. (§2306.6710(b)(1)(E)) An Application may qualify to receive up to thirteen (13) points for rent and income restricting a Development for the entire Affordability Period. These levels are in addition to those committed under paragraph (1) of this subsection.

(A) At least 20 percent of all low-income Units at 30 percent or less of AMGI for Supportive Housing Developments proposed by a Qualified Nonprofit (13 points);

(B) At least 10 percent of all low-income Units at 30 percent or less of AMGI or, for a Development located in a Rural Area, 7.5 percent of all low-income Units at 30 percent or less of AMGI (11 points); or

(C) At least 5 percent of all low-income Units at 30 percent or less of AMGI (7 points).

(3) Tenant Services. (§2306.6710(b)(1)(G) and §2306.6725(a)(1)) A Supportive Housing Development proposed by a Qualified Nonprofit may qualify to receive up to eleven (11) points and all other Developments may receive up to ten (10) points.

(A) By electing points, the Applicant certifies that the Development will provide a combination of supportive services, which are listed in §10.101(b)(7) 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 will 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 points for Supportive Housing, 9 points for all other Development)

(B) The Applicant certifies that the Development will contact local nonprofit and governmental providers of services that would support the health and well-being of the Department's tenants, and will make Development community space available to them on a regularly-scheduled basis to provide outreach services and education to the tenants. Applicants may contact service providers on the Department list, or contact other providers that serve the general area in which the Development is located. (1 point)

(4) Opportunity Index. The Department may refer to locations qualifying for points under this scoring item as high opportunity areas in some materials. A Development is eligible for a maximum of seven (7) Opportunity Index Points.

(A) A proposed Development is eligible for up to two (2) opportunity index points if it is located in a census tract with a poverty rate of less than the greater of 20% or the median poverty rate for the region and meets the requirements in (i) or (ii) below.

(i) The Development Site is located in a census tract that has a poverty rate of less than the greater of 20% or the median poverty rate for the region and an income rate in the two highest quartiles within the uniform service region. (2 points)

(ii) The Development Site is located in a census tract that has a poverty rate of less than the greater of 20% or the median poverty rate for the region, with income in the third quartile within the region, and is contiguous to a census tract in the first or second quartile, without physical barriers such as highways or rivers between, and the Development Site is no more than 2 miles from the boundary between the census tracts. For purposes of this scoring item, a highway is a limited-access road with a speed limit of 50 miles per hour or more; and, (1 points)

(B) An application that meets the foregoing criteria may qualify for additional points (for a maximum of seven (7) points) for any one or more of the following factors. Each facility or amenity may be used only once for scoring purposes, regardless of the number of categories it fits:

(i) For Developments located in an Urban Area, an Application may qualify to receive points through a combination of requirements in clauses (I) through (XIII) of this subparagraph.

(I) The Development site is located less than 1/2 mile on an accessible route from a public park with an accessible playground, both of which meet 2010 ADA standards. (1 point)

(II) The Development Site is located less than ½ mile on an accessible route from Public Transportation with a route schedule that provides regular service to employment and basic services. For purposes of this scoring item, regular is defined as scheduled service beyond 8 a.m. to 5 p.m., plus weekend service. (1 point)

(III) The Development site is located within 1 mile of a full-service grocery store or pharmacy. A full service grocery store is a store of sufficient size and volume to provide for the needs of the surrounding neighborhood including the proposed development; and the space of the store is dedicated primarily to offering a wide variety of fresh, frozen canned and prepared foods, including but not limited to a variety of fresh meats, poultry, and seafood; a wide selection of fresh produce including a selection of different fruits and vegetables; a selection of baked goods and a wide array of dairy products including cheeses, and a wide variety of household goods, paper goods and toiletry items. (1 point)

(IV) The Development is located within 3 miles of a health-related facility, such a full service hospital, community health center, minor emergency center, emergency room or urgent care facility. Physician specialty offices are not considered in this category. (1 point)

(V) The Development Site is within 2 miles of a center that is licensed by the Department of Family and Protective Services specifically to provide a school-age program or to provide a child care program for infants, toddlers, and/or pre-kindergarten (1 point)

(VI) The Development Site is located in a census tract with a property crime rate of 26 per 1,000 persons or less as defined by neighborhoodscout.com, or local data sources. (1 point)

(VII) The development site is located within 1 mile of a public library (1 point)

(VIII) The Development Site is located within 5 miles of a University or Community College campus. To be considered a university for these purposes, the provider of higher education must have the authority to confer bachelor's degrees. Two-year colleges are considered Community Colleges. Universities and Community Colleges must have a physical location within the required distance; online-only institutions do not qualify under this item. (1 point)

(IX) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher is 27% or higher as tabulated by the 2010-2014 American Community Survey 5-year Estimate. (1 point)

(X) Development site is within 2 miles of a museum that is a government-sponsored or non-profit, permanent institution open to the public and is not an ancillary part of an organization whose primary purpose is other than the acquisition, conservation, study, exhibition, and educational interpretation of objects having scientific, historical, or artistic value. (1 point)

(XI) Development site is within 1 mile of an indoor recreation facility available to the public (1 point)

(XII) Development site is within 1 mile of an outdoor recreation facility available to the public (1 point)

(XIII) Development site is within 1 mile of community, civic or service organizations that provide regular and recurring services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club) (1 point)

(ii) For Developments located in a Rural Area, an Application may qualify to receive points through a combination of requirements in clauses (I) through (XII) of this subparagraph.

(I) The Development site is located within 4 miles of a full-service grocery store or pharmacy. A full service grocery store is a store of sufficient size and volume to provide for the needs of the surrounding neighborhood including the proposed development; and the space of the store is dedicated primarily to offering a wide variety of fresh, frozen canned and prepared foods, including but not limited to a variety of fresh meats, poultry, and seafood; a wide selection of fresh produce including a selection of different fruits and vegetables; a selection of baked goods and a wide array of dairy products including cheeses, and a wide variety of household goods, paper goods and toiletry items. (1 point)

(II) The Development is located within 4 miles of health-related facility, such a full service hospital, community health center, or minor emergency center. Physician specialty offices are not considered in this category. (1 point)

(III) The Development Site is within 4 miles of a center that is licensed by the Department of Family and Protective Services specifically to provide a school-age program or to provide a child care program for infants, toddlers, and/or pre-kindergarten (1 point)

(IV) The Development Site is located in a census tract with a property crime rate 26 per 1,000 or less, as defined by neighborhoodscout.com, or local data sources. (1 point)

(V) The development site is located within 4 miles of a public library (1 point)

(VI) The development site is located within 4 miles of a public park (1 point)

(VII) The Development Site is located within 15 miles of a University or Community College campus (1 point)

(VIII) Development Site is located in a census tract where the percentage of adults age 25 and older with an Associate's Degree or higher is 27% or higher as tabulated by the 2010-2014 American Community Survey 5-year Estimate (1 point)

(IX) Development site is within 4 miles of a museum that is a government-sponsored or non-profit, permanent institution open to the public and is not an ancillary part of an organization whose primary purpose is other than the acquisition, conservation, study, exhibition, and educational interpretation of objects having scientific, historical, or artistic value. (1 point)

(X) Development site is within 3 miles of an indoor recreation facility available to the public (1 point)

(XI) Development site is within 3 miles of an outdoor recreation facility available to the public (1 point)

(XII) Development site is within 3 miles of community, civic or service organizations that provide regular and recurring services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club) (1 point)

(5) Educational Quality. In order to qualify for points under Educational Quality, the elementary school and the middle school or high school within the attendance zone of the Development must have a TEA rating of Met Standard. Except for Supportive Housing Developments, an Application may qualify to receive up to three (3) points for a Development Site located within the attendance zones of public schools meeting the criteria as described in subparagraphs (A) - (E) of this paragraph, as determined by the Texas Education Agency. A Supportive Housing Development may qualify to receive no more than two (2) points for a Development Site located within the attendance zones of public schools meeting the criteria as described in subparagraphs (A) or (B) of this paragraph, as determined by the Texas Education Agency. For districts without attendance zones, the schools closest to the site which may possibly be attended by the tenants must be used for scoring. Choice districts with attendance zones will use the school zoned to the Development site. Schools with an application process for admittance, limited enrollment or other requirements that may prevent a tenant from attending will not be considered as the closest school or the school which attendance zone contains the site. The applicable ratings will be the 2016 accountability rating determined by the Texas Education Agency for the State, Education Service Center region, or individual campus. School ratings will be determined by the school number, so that in the case where a new school is formed or named or consolidated with another school but is considered to have the same number that rating will be used. A school that has never been rated by the Texas Education Agency will use the district rating. If a school is configured to serve grades that do not align with the Texas Education Agency's conventions for defining elementary schools (typically grades K-5 or K-6), middle schools (typically grades 6-8 or 7-8) and high schools (typically grades 9-12), the school will be considered to have the lower of the ratings of the schools that would be combined to meet those conventions. In determining the ratings for all three levels of schools, ratings for all grades K-12 must be included, meaning that two or more schools' ratings may be combined. For example, in the case of an elementary school which serves grades K-4 and an intermediate school that serves grades 5-6, the elementary school rating will be the lower of those two schools' ratings. Also, in the case of a 9th grade center and a high school that serves grades 10-12, the high school rating will be considered the lower of those two schools' ratings. Sixth grade centers will be considered as part of the middle school rating.

(A) The Development Site is within the attendance zone of an elementary school, a middle school and a high school with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score (3 points);

(B) The Development Site is within the attendance zone of any two of the following three schools (an elementary school, a middle school, and a high school) with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score. (2 points, or 1 point for a Supportive Housing Development); or

(C) The Development Site is within the attendance zone of a middle school or a high school with an Index 1 score at or above the lower of the score for the Education Service Center region, or the statewide score.(1 point); or

(D) The Development Site is within the attendance zone of an elementary school with an Index 1 score in the first quartile of all elementary schools statewide.(1 point); or

(E) If the Development Site is able to score one or two points under clauses (B) through- (D) above, one additional point may be added if one or more of the features described in subclause (1) - (4) is present:

(i) The Development Site is in the attendance zone of an elementary school that has Met Standard, and has earned at least one distinction designation by TEA (1 point);

(ii) The Development Site is located in the attendance zone of a general admission high school with a four-year longitudinal graduation rate in excess of the statewide four-year longitudinal graduation rate for all schools for the latest year available, based on the TEA 2016 Index 4: Postsecondary Readiness Data table for the district found at http://tea.texas.gov/2016accountability.aspx. (1 point)

(iii) The development is in the primary attendance zones for an elementary school that has met standard and offers an extended day Pre-K program. (1 point)

(iv) The development site within the attendance zone of an elementary school, a middle school and a high school that all have a Met Standard rating for the three years prior to application. (1 point)

(6) Underserved Area. (§§2306.6725(b)(2); 2306.127, 42(m)(1)(C)(ii)) An Application may qualify to receive up to five (5) points if the Development Site is located in one of the areas described in subparagraphs (A) - (E) of this paragraph, and the Application contains evidence substantiating qualification for the points. If an Application qualifies for points under paragraph §11.9(c)(4) of this subsection then the Application is not eligible for points under subparagraphs (A) and (B) of this paragraph.

(A) The Development Site is located wholly or partially within the boundaries of a colonia as such boundaries are determined by the Office of the Attorney General and within 150 miles of the Rio Grande River border. For purposes of this scoring item, the colonia must lack water, wastewater, or electricity provided to all residents of the colonia at a level commensurate with the quality and quantity expected of a municipality and the proposed Development must make available any such missing water, wastewater, and electricity supply infrastructure physically within the borders of the colonia in a manner that would enable the current dwellings within the colonia to connect to such infrastructure (2 points);

(B) An Economically Distressed Area (1 point);

(C) A census tract within the boundaries of an incorporated area that has not received a competitive tax credit allocation or a 4 percent non-competitive tax credit allocation for a Development within the past 15 years and continues to appear on the Department's inventory (3 points);

(D) For areas not scoring points for (C) above, a census tract that does not have a Development subject to an active tax credit LURA (or has received a tax credit award but not yet reached the point where its LURA must be recorded); (2 points);

(E) A census tract within the boundaries of an incorporated area and all contiguous census tracts for which neither the census tract in which the Development is located nor the contiguous census tracts have received an award or HTC allocation within the past 15 years and continues to appear on the Department's inventory. This item will apply in cities with a population of 300,000 or more, and will not apply in the At-Risk Set-Aside (5 points).

(7) Tenant Populations with Special Housing Needs. (§42(m)(1)(C)(v)) An Application may qualify to receive up to two (2) points by serving Tenants with Special Housing Needs.

In order to qualify for points, Applicants must agree to set-aside at least 5 percent of the total Units for Persons with Special Needs. The units identified for this scoring item may not be the same units identified for Section 811 Project Rental Assistance Demonstration program. For purposes of this subparagraph, Persons with Special Needs is defined as households where one individual has alcohol and/or drug addictions, Colonia resident, Persons with Disabilities, Violence Against Women Act Protections (domestic violence, dating violence, sexual assault, and stalking), persons with HIV/AIDS, homeless populations, veterans, wounded warriors (as defined by the Caring for Wounded Warriors Act of 2008), and farmworkers. 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 an initial minimum twelve-month period during which Units must either be occupied by Persons with Special Needs or held vacant, unless the units receive HOME funds from any source. After the initial twelve-month period, the Development Owner will no longer be required to hold Units vacant for Persons with Special Needs, but will be required to continue to affirmatively market Units to Persons with Special Needs.

(8) Proximity to the Urban Core. A Development in a City with a population over 300,000 may qualify for points under this item. The Development Site must be located within 4 miles of the main City Hall facility if the population of the city is more than 500,000, or within 2 miles of the main City Hall facility if the population of the city is 300,000 - 500,000. The main City Hall facility will be determined by the location of regularly scheduled City Council, City Commission, or similar governing body meetings. Distances are measured from the nearest property boundaries, not inclusive of non-contiguous parking areas. This scoring item will not apply to the At-Risk Set-Aside. (5 points)

(d) Criteria promoting community support and engagement.

(1) Local Government Support. (§2306.6710(b)(1)(B)) An Application may qualify for up to seventeen (17) points for a resolution or resolutions voted on and adopted by the bodies reflected in subparagraphs (A) - (C) of this paragraph, as applicable. The resolution(s) must be dated prior to Final Input from Elected Officials Delivery Date and must be submitted to the Department no later than the Final Input from Elected Officials Delivery Date as identified in §11.2 of this chapter. Such resolution(s) must specifically identify the Development whether by legal description, address, Development name, Application number or other verifiable method. In providing a resolution a municipality or county should consult its own staff and legal counsel as to whether such resolution will be consistent with Fair Housing laws as they may apply, including, as applicable, consistency with any Fair Housing Activity Statement-Texas ("FHAST") form on file, any current Analysis of Impediments to Fair Housing Choice, or any current plans such as one year action plans or five year consolidated plans for HUD block grant funds, such as HOME or CDBG funds. Once a resolution is submitted to the Department it may not be changed or withdrawn. For an Application with a proposed Development Site that, at the time of the initial filing of the Application, is:

(A) Within a municipality, the Application will receive:

(i) seventeen (17) points for a resolution from the Governing Body of that municipality expressly setting forth that the municipality supports the Application or Development; or

(ii) fourteen (14) points for a resolution from the Governing Body of that municipality expressly setting forth that the municipality has no objection to the Application or Development.

(B) Within the extraterritorial jurisdiction of a municipality, the Application may receive points under clause (i) or (ii) of this subparagraph and under clause (iii) or (iv) of this subparagraph:

(i) eight and one-half (8.5) points for a resolution from the Governing Body of that municipality expressly setting forth that the municipality supports the Application or Development; or

(ii) seven (7) points for a resolution from the Governing Body of that municipality expressly setting forth that the municipality has no objection to the Application or Development; and

(iii) eight and one-half (8.5) points for a resolution from the Governing Body of that county expressly setting forth that the county supports the Application or Development; or

(iv) seven (7) points for a resolution from the Governing Body of that county expressly setting forth that the county has no objection to the Application or Development.

(C) Within a county and not within a municipality or the extraterritorial jurisdiction of a municipality:

(i) seventeen (17) points for a resolution from the Governing Body of that county expressly setting forth that the county supports the Application or Development; or

(ii) fourteen (14) points for a resolution from the Governing Body of that county expressly setting forth that the county has no objection to the Application or Development.

(2) Commitment of Development Funding by Local Political Subdivision. (§2306.6725(a)(5)) An Application may receive one (1) point for a commitment of Development funding from the city (if located in a city) or county in which the Development Site is located. The commitment of development funding must be reflected in the Application as a financial benefit to the Development, i.e. reported as a source of funds on the Sources and Uses Form and/or reflected in a lower cost in the Development Cost Schedule, such as notation of a reduction in building permits and related costs. Documentation must include a letter from an official of the municipality, county, or other instrumentality with jurisdiction over the proposed Development stating they will provide a loan, grant, reduced fees or contribution of other value for the benefit of the Development. The letter must describe value of the contribution, the form of the contribution, e.g. reduced fees or gap funding, and any caveats to delivering the contribution. Once a letter is submitted to the Department it may not be changed or withdrawn.

(3) Declared Disaster Area. (§2306.6710(b)(1)(H)) An Application may receive ten (10) points if at the time of Application submission or at any time within the two-year period preceding the date of submission, the Development Site is located in an area declared to be a disaster area under the Tex. Gov't Code, §418.014.

(4) Quantifiable Community Participation. (§2306.6710(b)(1)(J); §2306.6725(a)(2)) An Application may qualify for up to nine (9) points for written statements from a Neighborhood Organization. In order for the statement to qualify for review, the Neighborhood Organization must have been in existence prior to the Pre-Application Final Delivery Date and its boundaries must contain the entire Development Site. In addition, the Neighborhood Organization must be on record with the Secretary of State or county in which the Development Site is located. Once a letter is submitted to the Department it may not be changed or withdrawn. The written statement must meet all of the requirements in subparagraph (A) of this paragraph.

(A) Statement Requirements. If an organization cannot make the following affirmative certifications or statements then the organization will not be considered a Neighborhood Organization for purposes of this paragraph.

(i) the Neighborhood Organization's name, a written description and map of the organization's boundaries, signatures and contact information (phone, email and mailing address) of at least two individual members with authority to sign on behalf of the organization;

(ii) certification that the boundaries of the Neighborhood Organization contain the Development Site and that the Neighborhood Organization meets the definition pursuant to Tex. Gov't Code, §2306.004(23-a) and includes at least two separate residential households;

(iii) certification that no person required to be listed in accordance with Tex. Gov't Code §2306.6707 with respect to the Development to which the Application requiring their listing relates participated in any way in the deliberations of the Neighborhood Organization, including any votes taken;

(iv) certification that at least 80 percent of the current membership of the Neighborhood Organization consists of homeowners and/or tenants living within the boundaries, of the Neighborhood Organization; and

(v) an explicit expression of support, opposition, or neutrality. Any expression of opposition must be accompanied with at least one reason forming the basis of that opposition. A Neighborhood Organization is encouraged to be prepared to provide additional information with regard to opposition.

(B) Technical Assistance. For purposes of this section, if and only if there is no Neighborhood Organization already in existence or on record, 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. Technical assistance is limited to:

(i) the use of a facsimile, copy machine/copying, email and accommodations at public meetings;

(ii) assistance in completing the QCP Neighborhood Information Packet, providing boundary maps and assisting in the Administrative Deficiency process; and

(iii) presentation of information and response to questions at duly held meetings where such matter is considered.

(C) Point Values for Quantifiable Community Participation. An Application may receive points based on the values in clauses (i) - (vi) of this subparagraph. Points will not be cumulative. Where more than one written statement is received for an Application, the average of all statements received in accordance with this subparagraph will be assessed and awarded.

(i) nine (9) points for explicit support from a Neighborhood Organization that, during at least one of the three prior Application Rounds, provided a written statement that qualified as Quantifiable Community Participation opposing any Competitive Housing Tax Credit Application and whose boundaries remain unchanged;

(ii) eight (8) points for explicitly stated support from a Neighborhood Organization;

(iii) six (6) points for explicit neutrality from a Neighborhood Organization that, during at least one of the three prior Application Rounds provided a written statement, that qualified as Quantifiable Community Participation opposing any Competitive Housing Tax Credit Application and whose boundaries remain unchanged;

(iv) four (4) points for statements of neutrality from a Neighborhood Organization or statements not explicitly stating support or opposition, or an existing Neighborhood Organization provides no statement of either support, opposition or neutrality, which will be viewed as the equivalent of neutrality or lack of objection;

(v) four (4) points for areas where no Neighborhood Organization is in existence, equating to neutrality or lack of objection, or where the Neighborhood Organization did not meet the explicit requirements of this section; or

(vi) zero (0) points for statements of opposition meeting the requirements of this subsection.

(D) Challenges to opposition. Any written statement from a Neighborhood Organization expressing opposition to an Application may be challenged if it is contrary to findings or determinations, including zoning determinations, of a municipality, county, school district, or other local Governmental Entity having jurisdiction or oversight over the finding or determination. If any such statement is challenged, the challenger must declare the basis for the challenge and submit such challenge by the Challenges to Neighborhood Organization Opposition Delivery Date May 1, 2017. The Neighborhood Organization expressing opposition will be given seven (7) calendar days to provide any information related to the issue of whether their assertions are contrary to the findings or determinations of a local Governmental Entity. All such materials and the analysis of the Department's staff will be provided to a fact finder, chosen by the Department, for review and a determination of the issue presented by this subsection. The fact finder will not make determinations as to the accuracy of the statements presented, but only with regard to whether the statements are contrary to findings or determinations of a local Governmental Entity. The fact finder's determination will be final and may not be waived or appealed.

(5) Community Support from State Representative. (§2306.6710(b)(1)(J); §2306.6725(a)(2)) Applications may receive up to eight (8) points or have deducted up to eight (8) points for this scoring item. To qualify under this paragraph letters must be on the State Representative's letterhead, be signed by the State Representative, identify the specific Development and 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 and must be submitted no later than the Final Input from Elected Officials Delivery Date as identified in §11.2 of this chapter. Once a letter is submitted to the Department it may not be changed or withdrawn. Therefore, it is encouraged that letters not be submitted well in advance of the specified deadline in order to facilitate consideration of all constituent comment and other relevant input on the proposed Development. State Representatives to be considered are those in office at the time the letter is submitted and whose district boundaries include the Development Site. Neutral letters or letters that do not specifically refer to the Development or specifically express support or opposition will receive zero (0) points. A letter that does not directly express support but expresses it indirectly by inference (e.g. "the local jurisdiction supports the Development and I support the local jurisdiction") will be treated as a neutral letter.

(6) Input from Community Organizations. (§2306.6725(a)(2)) Where, at the time of Application, the Development Site does not fall within the boundaries of any qualifying Neighborhood Organization, then, in order to ascertain if there is community support, an Application may receive up to four (4) points for letters that qualify for points under subparagraphs (A), (B), and/or (C) of this paragraph. No more than four (4) points will be awarded under this point item under any circumstances. All letters must be submitted within the Application. Once a letter is submitted to the Department it may not be changed or withdrawn. Should an Applicant elect this option and the Application receives letters in opposition, then one (1) point will be subtracted from the score under this paragraph for each letter in opposition, provided that the letter is from an organization that would otherwise qualify under this paragraph. However, at no time will the Application receive a score lower than zero (0) for this item.

(A) An Application may receive two (2) 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. To qualify, the organization must be qualified as tax exempt and have as a primary (not ancillary or secondary) purpose the overall betterment, development, or improvement of the community as a whole or of a major aspect of the community such as improvement of schools, fire protection, law enforcement, city-wide transit, flood mitigation, or the like. The community or civic organization must provide evidence of its tax exempt status and its existence and participation in the community in which the Development Site is located including, but not limited to, a 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 Site will not be awarded points. For purposes of this subparagraph, community and civic organizations do not include neighborhood organizations, governmental entities (excluding Special Management Districts), or taxing entities.

(B) An Application may receive two (2) points for a letter of support from a property owners association created for a master planned community whose boundaries include the Development Site and that does not meet the requirements of a Neighborhood Organization for the purpose of awarding points under paragraph (4) of this subsection.

(C) An Application may receive two (2) points for a letter of support from a Special Management District whose boundaries, as of the Full Application Delivery Date as identified in §11.2 of this chapter (relating to Program Calendar for Competitive Housing Tax Credits), include the Development Site.

(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, standing alone, cause staff or the Department to terminate the Application. Staff will report all such referrals to the Board and summarize the status of any such referrals in any recommendations.

(7) Concerted Revitalization Plan. An Application may qualify for points under this paragraph only if no points are elected under subsection (c)(4) of this section, related to Opportunity Index.

(A) For Developments located in an Urban Area:

(i) An Application may qualify to receive points if the Development Site is located in a distinct area that was once vital and has lapsed into a situation requiring concerted revitalization, and where a concerted revitalization plan has been developed and executed. The area targeted for revitalization must be larger than the assisted housing footprint and should be a neighborhood or small group of contiguous neighborhoods with common attributes and problems. The concerted revitalization plan that meets the criteria described in subclauses (I) - (IV) of this clause:

(I) The concerted revitalization plan must have been adopted by the municipality or county in which the Development Site is located. The resolution adopting the plan, or if development of the plan and budget were delegated the resolution of delegation and other evidence in the form of certifications by authorized persons confirming the adoption of the plan and budget, must be submitted with the application.

(II) The problems in the revitalization area must be identified through a process in which affected local residents had an opportunity to express their views on problems facing the area, and how those problems should be addressed and prioritized. These problems may include the following:

(-a-) long-term disinvestment, such as significant presence of residential and/or commercial blight, streets infrastructure neglect such as inadequate drainage, and/or sidewalks in significant disrepair;

(-b-) declining quality of life for area residents, such as high levels of violent crime, property crime, gang activity, or other significant criminal matters such as the manufacture or distribution of illegal substances or overt illegal activities;

(III) Staff will review the target area for presence of the problems identified in the plan and for targeted efforts within the plan to address those problems. In addition, but not in lieu of, such a plan may be augmented with targeted efforts to promote a more vital local economy and a more desirable neighborhood, including but not limited to:

(-a-) creation of needed affordable housing by improvement of existing affordable housing that is in need of replacement or major renovation;

(-b-) attracting private sector development of housing and/or business;

(-c-) developing health care facilities;

(-d-) providing public transportation;

(-e-) developing significant recreational facilities; and/or

(-f-) improving under-performing schools.

(IV) The adopted plan must have sufficient, documented and committed funding to accomplish its purposes on its established timetable. This funding must have been flowing in accordance with the plan, such that the problems identified within the plan will have been sufficiently mitigated and addressed prior to the Development being placed into service.

(ii) Up to seven (7) points will be awarded based on:

(I) Applications will receive four (4) points for a letter from the appropriate local official providing documentation of measurable improvements within the revitalization area based on the target efforts outlined in the plan. The letter must also discuss how the improvements will lead to an appropriate area for the placement of housing; and

(II) Applications may receive (2) points in addition to those under subclause (I) of this clause if the Development is explicitly identified in a resolution by the city or county as contributing more than any other to the concerted revitalization efforts of the city or county (as applicable). A city or county may only identify one single Development during each Application Round for the additional points under this subclause. The resolution from the Governing Body of the city or county that approved the plan is required to be submitted in the Application. If multiple Applications submit resolutions under this subclause from the same Governing Body, none of the Applications shall be eligible for the additional points; and

(III) Applications will receive (1) point in addition to those under subclause (I) and (II) if the development is in a location that would score at least 4 points under Opportunity Index, §11.9(c)(4)(B), except for the criteria found in §11.9(c)(4)(A) and subparagraphs §11.9(c)(4)(A)(i) and §11.9(c)(4)(A)(ii).

(B) For Developments located in a Rural Area.

(i) Applications will receive 4 points for the rehabilitation or demolition and reconstruction of a development in a rural area that is currently leased at 85% or greater by low income households and which was initially constructed prior to 1985 as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program. Demolition and relocation of units must be determined locally to be necessary to comply with the Affirmatively Furthering Fair Housing Rule, or if necessary to create an acceptable distance form Undesirable Site Features or Undesirable Neighborhood Characteristics.

(ii) Applications will receive 3 points for the rehabilitation of a development in a rural area that is currently leased at 85% or greater by low income households and which was initially constructed prior to 1985 as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program if the proposed location requires no disclosure of Undesirable Neighborhood Features under Section §10.101(a)(4) or required such disclosure but the disclosed items were found acceptable.

(iii) Applications may receive (2) points in addition to those under subclause (i) or (ii) of this clause if the Development is explicitly identified in a letter by the city or county as contributing more than any other Development to the concerted revitalization efforts of the city or county (as applicable). A city or county may only identify one single Development during each Application Round for the additional points under this subclause. The letter from the Governing Body of the city or county that approved the plan is required to be submitted in the Application. If multiple Applications submit valid letters under this subclause from the same Governing Body, none of the Applications shall be eligible for the additional points. A city or county may, but is not required, to identify a particular Application as contributing more than any other Development to concerted revitalization efforts.

(iv) Applications may receive (1) additional point if the development is in a location that would score at least 4 points under Opportunity Index, §11.9(c)(4)(B), except for the criteria found in §11.9(c)(4)(A) and subparagraphs §11.9(c)(4)(A)(i) and §11.9(c)(4)(A)(ii)..

(e) Criteria promoting the efficient use of limited resources and applicant accountability.

(1) Financial Feasibility. (§2306.6710(b)(1)(A)) An Application may qualify to receive a maximum of eighteen (18) points for this item. To qualify for points, a 15-year pro forma itemizing all projected income including Unit rental rate assumptions, operating expenses and debt service, and specifying the underlying growth assumptions and reflecting a minimum must-pay debt coverage ratio of 1.15 for each year must be submitted. The pro forma must include the signature and contact information evidencing that it has been reviewed and found to be acceptable by an authorized representative of a proposed Third Party construction or permanent lender. In addition to the signed pro forma, a lender approval letter must be submitted. An acceptable form of lender approval letter may be obtained in the Uniform Multifamily Application Templates. If the letter evidences review of the Development alone it will receive sixteen (16) points. If the letter evidences review of the Development and the Principals, it will receive eighteen (18) points.

(2) Cost of Development per Square Foot. (§2306.6710(b)(1)(F); §42(m)(1)(C)(iii)) An Application may qualify to receive up to twelve (12) points based on either the Eligible Building Cost or the Eligible Hard Costs per square foot of the proposed Development voluntarily included in eligible basis as originally submitted in the Application. For purposes of this scoring item, Eligible Building Costs will be defined as Building Costs includable in Eligible Basis for the purposes of determining a Housing Credit Allocation. Eligible Building Costs will exclude structured parking or commercial space that is not included in Eligible Basis, and Eligible Hard Costs will include general contractor overhead, profit, and general requirements. Structured parking or commercial space costs must be supported by a cost estimate from a Third Party General Contractor or subcontractor with experience in structured parking or commercial construction, as applicable. The square footage used will be the Net Rentable Area (NRA). The calculations will be based on the cost listed in the Development Cost Schedule and NRA shown in the Rent Schedule. If the proposed Development is a Supportive Housing Development, the NRA will include common area up to 50 square feet per Unit.

(A) A high cost development is a Development that meets one of the following conditions:

(i) the Development is elevator served, meaning it is either a Elderly Development with an elevator or a Development with one or more buildings any of which have elevators serving four or more floors;

(ii) the Development is more than 75 percent single family design;

(iii) the Development is Supportive Housing; or

(iv) the Development Site qualifies for a minimum of five (5) points under subsection (c)(4) of this section, related to Opportunity Index, and is located in an Urban Area.

(B) Applications proposing New Construction or Reconstruction will be eligible for twelve (12) points if one of the following conditions is met:

(i) The voluntary Eligible Building Cost per square foot is less than $72.80 per square foot;

(ii) The voluntary Eligible Building Cost per square foot is less than $78 per square foot, and the Development meets the definition of a high cost development;

(iii) The voluntary Eligible Hard Cost per square foot is less than $93.60 per square foot; or

(iv) The voluntary Eligible Hard Cost per square foot is less than $104 per square foot, and the Development meets the definition of high cost development.

(C) Applications proposing New Construction or Reconstruction will be eligible for eleven (11) points if one of the following conditions is met:

(i) The voluntary Eligible Building Cost per square foot is less than $78 per square foot;

(ii) The voluntary Eligible Building Cost per square foot is less than $83.20 per square foot, and the Development meets the definition of a high cost development;

(iii) The voluntary Eligible Hard Cost per square foot is less than $98.80 per square foot; or

(iv) The voluntary Eligible Hard Cost per square foot is less than $109.20 per square foot, and the Development meets the definition of high cost development.

(D) Applications proposing New Construction or Reconstruction will be eligible for ten (10) points if one of the following conditions is met:

(i) The voluntary Eligible Building Cost is less than $93.60 per square foot; or

(ii) The voluntary Eligible Hard Cost is less than $114.40 per square foot.

(E) Applications proposing Adaptive Reuse or Rehabilitation (excluding Reconstruction) will be eligible for points if one of the following conditions is met:

(i) Twelve (12) points for Applications which include voluntary Eligible Hard Costs plus acquisition costs included in Eligible Basis that are less than $104 per square foot;

(ii) Twelve (12) points for Applications which include voluntary Eligible Hard Costs plus acquisition costs included in Eligible Basis that are less than $135.20 per square foot, located in an Urban Area, and that qualify for 5 or 7 points under subsection (c)(4) of this section, related to Opportunity Index; or

(iii) Eleven (11) points for Applications which include voluntary Eligible Hard Costs plus acquisition costs included in Eligible Basis that are less than $135.20 per square foot.

(3) Pre-application Participation. (§2306.6704) An Application may qualify to receive up to six (6) points provided a pre-application was submitted during the Pre-Application Acceptance Period. Applications that meet the requirements described in subparagraphs (A) - (G) of this paragraph will qualify for six (6) points:

(A) The total number of Units does not increase by more than ten (10) percent from pre-application to Application;

(B) The designation of the proposed Development as Rural or Urban remains the same;

(C) The proposed Development serves the same Target Population;

(D) The pre-application and Application are participating in the same set-asides (At-Risk, USDA, Non-Profit, and/or Rural);

(E) The Application final score (inclusive of only scoring items reflected on the self score form) does not vary by more than six (6) points from what was reflected in the pre-application self score;

(F) The Development Site at Application is at least in part the Development Site at pre-application, and the census tract number listed at pre-application is the same at Application. The site at full Application may not require notification to any person or entity not required to have been notified at pre-application;

(G) The Development Site does not have the following Undesirable Neighborhood Characteristics as described in 10 TAC §10.101(a)(4) that were not disclosed with the pre-application:

(i) The Development Site is located in a census tract or within 1,000 feet of any census tract in an Urban Area and the rate of Part I violent crime is greater than 18 per 1,000 persons (annually) as reported on neighborhoodscout.com.

(ii) The Development Site is located within the attendance zones of an elementary school, a middle school or a high school that does not have a Met Standard rating by the Texas Education Agency.

(H) The pre-application met all applicable requirements.

(4) Leveraging of Private, State, and Federal Resources. (§2306.6725(a)(3))

(A) An Application may qualify to receive up to three (3) points if at least five (5) percent of the total Units are restricted to serve households at or below 30 percent of AMGI (restrictions elected under other point items may count) and the Housing Tax Credit funding request for the proposed Development meet one of the levels described in clauses (i) - (iv) of this subparagraph:

(i) the Development leverages CDBG Disaster Recovery, HOPE VI, RAD, or Choice Neighborhoods funding and the Housing Tax Credit Funding Request is less than 9 percent of the Total Housing Development Cost (3 points). The Application must include a commitment of such funding; or

(ii) If the Housing Tax Credit funding request is less than eight (8) percent of the Total Housing Development Cost (3 points); or

(iii) If the Housing Tax Credit funding request is less than nine (9) percent of the Total Housing Development Cost (2 points); or

(iv) If the Housing Tax Credit funding request is less than ten (10) percent of the Total Housing Development Cost (1 point).

(B) The calculation of the percentages stated in subparagraph (A) of this paragraph will be based strictly on the figures listed in the Funding Request and Development Cost Schedule. Should staff issue an Administrative Deficiency that requires a change in either form, then the calculation will be performed again and the score adjusted, as necessary. However, points may not increase based on changes to the Application. In order to be eligible for points, no more than 50 percent of the developer fee can be deferred. Where costs or financing change after completion of underwriting or award (whichever occurs later), the points attributed to an Application under this scoring item will not be reassessed unless there is clear evidence that the information in the Application was intentionally misleading or incorrect.

(5) Extended Affordability. (§§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)) 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 agree to extend the Affordability Period for a Development to thirty-five (35) years total may receive two (2) points.

(6) Historic Preservation. (§2306.6725(a)(5)) At least seventy-five percent of the residential units shall reside within the Certified Historic Structure and the Development must reasonably be expected to qualify to receive and document receipt of historic tax credits by issuance of Forms 8609. The Application must include either documentation from the Texas Historical Commission that the property is currently a Certified Historic Structure, or documentation determining preliminary eligibility for Certified Historic Structure status (5 points).

(7) Right of First Refusal. (§2306.6725(b)(1); §42(m)(1)(C)(viii)) An Application may qualify to receive (1 point) for Development Owners that will agree to provide a right of first refusal to purchase the Development upon or following the end of the Compliance Period in accordance with Tex. Gov't Code, §2306.6726 and the Department's rules including §10.407 of this title (relating to Right of First Refusal) and §10.408 of this title (relating to Qualified Contract Requirements).

(8) Funding Request Amount. An Application may qualify to receive one (1) point if the Application reflects a Funding Request of Housing Tax Credits, as identified in the original Application submission, of no more than 100% of the amount available within the sub-region or set-aside as determined by the application of the regional allocation formula on or before December 1, 2015.

(f) Point Adjustments. Staff will recommend to the Board and the Board may make a deduction of up to five (5) points for any of the items listed in paragraph (1) 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 deduction 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 point deductions. (§2306.6710(b)(2))

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

(2) If the Applicant or Affiliate failed to meet the commitment or expenditure requirements of a HOME or National Housing Trust Fund award from the Department.

(3) If the Developer or Principal of the Applicant violates the Adherence to Obligations.

(4) Any deductions 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.

§11.10.Third Party Request for Administrative Deficiency for Competitive HTC Applications.

The purpose of the Third Party Request for Administrative Deficiency ("RFAD") process is to allow an unrelated person or entity to bring new, material information about an Application to staff's attention. Such Person may request the staff to consider whether a matter in an Application in which the Person has no involvement should be the subject of an Administrative Deficiency. Staff will consider the request and proceed as it deems appropriate under the applicable rules including, if the Application in question is determined by staff to not be a priority Application, not reviewing the matter further. Requestors must provide, at the time of filing the challenge, all briefings, documentation, and other information that the requestor offers in support of the deficiency. A copy of the request and supporting information must be provided directly to the Applicant at the same time it is provided to the Department. Requestors must provide sufficient credible evidence that, if confirmed, would substantiate the deficiency request. Assertions not accompanied by supporting documentation susceptible to confirmation will not be considered. Staff shall provide to the Board a written report summarizing each third party request for administrative deficiency and the manner in which it was addressed. Interested persons may provide testimony on this report before the Board's takes any formal action to accept the report. The results of a RFAD may not be appealed by the Requestor.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 9, 2016.

TRD-201606440

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: December 29, 2016

Proposal publication date: September 23, 2016

For further information, please call: (512) 475-2973


PART 5. OFFICE OF THE GOVERNOR, ECONOMIC DEVELOPMENT AND TOURISM OFFICE

CHAPTER 184. SPORTS AND EVENTS TRUST FUND

The Office of the Governor, Economic Development and Tourism Office (OOG) repeals Title 10, Subchapter A (Major Events Trust Fund), §§184.100 - 184.106; and Subchapter B (Events Trust Fund), §§184.200 - 184.206, and adopts new rules in Title 10, Subchapter A (Authority and Applicability, Purpose, Construction of Rules and General Definitions), §§184.1 - 184.4; Subchapter B (Major Events Reimbursement Program Definitions, Eligibility, Participation and Deadlines), §§184.10 - 184.13; Subchapter C (Events Trust Fund Program Definitions, Eligibility, Participation and Deadlines), §§184.20 - 184.23; Subchapter D (Required Reports), §§184.30 - 184.33; Subchapter E (Disbursement Process), §§184.40 - 184.45; and Subchapter F (Event Support Contracts), §§184.50 - 184.51, with changes to the proposed text as published in the July 22, 2016, issue of the Texas Register (41 TexReg 5312). The new rules will replace the repealed rules, which implement and govern the Events Trust Fund and Major Events Trust Fund (renamed in 2015 as the "Major Events Reimbursement Program" pursuant to H.B. 26, 84th Regular Legislative Session). The rules are adopted in order to implement and administer the transfer of programs, including the Major Events Reimbursement Program (MERP), Events Trust Fund (ETF), and Motor Sports Racing Trust Fund (MSRTF), from the Comptroller of Public Accounts to the OOG pursuant to S.B. 633, 84th Regular Legislative Session. The rules will also ensure the efficient administration of the MERP, ETF, and MSRTF, which are established in Article 5190.14 of the Texas Revised Civil Statutes. The new rules become effective on January 1, 2017.

SUBSTANTIVE MODIFICATIONS

The OOG has modified proposed definitions of "site selection organization" in Rule 184.10(5), "endorsing county" in Rule 184.20(2), and "endorsing municipality" in Rule 184.20(3) to match the statutory definitions of those terms. The OOG has modified proposed Rule 184.11(a)(5) so that when the OOG determines the incremental increase in tax receipts for a major event that is scheduled to be held each year for a period of years, it will be calculated as if the event did not occur in the prior year. This change brings the rule in line with Article 5190.14, §5A(a-1)(4). The OOG has modified proposed Rule 184.21(b) so that an applicant may not submit in a state fiscal year, rather than a rolling 12-month period, more than 10 events to the program for which the OOG determines that the amount of the incremental increase in tax receipts is less than $200,000. The OOG has modified Rule 184.43(a)(3) to clarify that internal billing documentation can be used to support a disbursement request where appropriate. The OOG has modified Rule 184.44 to allow reimbursement for food costs that are directly related to the conduct of the event and that are provided on-site at the event to event participants or other personnel necessary to the conduct of the event. Rule 184.44 will also be modified to permit reimbursement for limited travel costs and for non-monetary prizes and awards given to event participants.

COMMENTS

The OOG received ten written public comments, each requesting changes to the proposed rules. Among the commenters are representatives of the Texas Hotel & Lodging Association, Hillco Partners, Angelou Economics, Houstonfirst, the Arlington Convention & Visitors Bureau, the Harris County- Houston Sports Authority, the National Cutting Horse Association, the City of Fort Worth, and twenty-three other Texas cities. One comment was submitted outside the designated comment period and will not be addressed.

COMMENT SUMMARY: Four commenters request that Rule 184.30(b) be changed to permit an increase in the amount of a trust fund disbursement for an endorsing entity if the actual attendance at an event is significantly higher than the estimated attendance.

OOG RESPONSE: The OOG declines to modify Rule 184.30(b) in response to this comment because it lacks the authority to authorize an increase in the amount of a disbursement based on attendance. Article 5190.14, §§5A(y) & 5C(t) expressly authorize the OOG to reduce the amount of a disbursement if the actual event attendance is significantly lower than the estimated attendance, but no statutory authority exists to increase the amount of a disbursement if the actual event attendance is significantly higher than the estimated attendance.

COMMENT SUMMARY: Five commenters object to the requirement that an endorsing entity pay event-related costs upfront and then seek reimbursement for those costs from their respective trust fund. The commenters claim this requirement conflicts with Article 5190.14, §§5A(k) & 5C(k).

OOG RESPONSE: The OOG declines to modify the rules in response to this comment. House Bill 26, 84th Regular Legislative Session, changed the name of the "Major Events Trust Fund" to the "Major Events Reimbursement Program" (emphasis added). This change was made to "clarify what the program was meant to do and how it works." See House Research Org., Bill Analysis, Tex. H.B. 26, 84th Leg., R.S. (2015). This is indicative of the legislature's intent to use a payment method based on reimbursement. The OOG acknowledges that the names of the ETF and MSRTF were not changed by the Legislature, though an attempt was made to do so by the Senate when considering House Bill 26. See Senate Comm. on Nat. Res. & Econ. Dev., Bill Analysis, Tex. C.S.H.B. 26, 84th Leg., R.S. (2015). Nevertheless, the OOG does not discern a legislative intent to allow upfront costs for the ETF and MSRTF based on the Legislature's failure to pass the Senate's proposed changes to the fund names. See El Chico Corp. v. Poole, 732 S.W.2d 306, 314 (Tex. 1987) ("While failure to enact a bill may arguably be some evidence of intent, other reasons are equably inferable. Lack of time for consideration, opposition by a particular member or committee chair, efforts of special interest groups, or any other unidentified extraneous factor may, standing alone or combined together, act to defeat a legislative proposal regardless of the legislature's collective view of the bill's merits"). Furthermore, to require a reimbursement payment method for the MERP, but not the ETF and MSRTF, would result in the inefficient administration of the program, which the Legislature has instructed the OOG to avoid. The OOG also does not believe that the proposed rules conflict with the contingency clause language in Article 5190.14, §§5A(k) & 5C(k). The statute prohibits the OOG from considering a contingency clause in an event support contract as relieving an applicant's obligation to pay a particular cost under the contract. Requiring a payment method based on reimbursement does not diminish the effectiveness of contingency clauses in event support contracts. For example, if reimbursement is ultimately denied for a cost for which there is a contingency clause, the applicant can still enforce the contingency clause by seeking a return of its payment of the cost to the site selection organization.

COMMENT SUMMARY: Seven commenters request that Rule 184.45(a)(7)(D) be modified so that the cost of conducting an economic impact study for an event could be eligible for reimbursement.

OOG RESPONSE: The OOG declines to modify Rule 184.45(a)(7)(D) in response to this comment. The purpose of the program generally is to reimburse some of an applicant's costs for preparing and conducting an eligible event. See Texas Revised Civil Statutes, Article 5190.14, §2. The cost of conducting an economic impact study is not a cost related to the preparation and conduct of an event, but rather an administrative cost of participating in the trust fund program. Furthermore, the program does not require an applicant to hire a third party to conduct the economic impact study.

COMMENT SUMMARY: One commenter requests that Rule 184.45(a)(7)(E)-(G) be modified so that the cost of preparing a pre-event attendance estimate or post-event attendance verification, conducting any pre-event or post-event survey, and responding to requests for information relating to participation in the program could be eligible for reimbursement.

OOG RESPONSE: The OOG declines to modify Rule 184.45(a)(7)(E)-(G) in response to this comment. The purpose of the program generally is to reimburse some of an applicant's costs for preparing and conducting an eligible event. See Texas Revised Civil Statutes, Article 5190.14, §2. The cost of preparing a pre-event attendance estimate or post-event attendance verification, conducting any pre-event or post-event survey, and responding to requests for information are not costs related to the preparation and conduct of an event, but rather are administrative costs of participating in the trust fund program.

COMMENT SUMMARY: Six commenters request that Rule 184.45(a)(5)-(6) be modified so that the cost of event-related food and travel could be eligible for reimbursement.

OOG RESPONSE: The OOG accepts this comment. The OOG will modify the rules by adding Rule 184.44(21) and altering Rule 184.45(a)(5) in order to permit reimbursement of the cost of food that is directly related to the conduct of the event and that is provided on-site at the event to event participants or other personnel necessary to the conduct of the event. The cost of food may not exceed $36 per person/per day, which is the standard state employee reimbursement rate set by the Comptroller of Public Accounts. Under the rules, food is still generally unallowable except in the narrow circumstance described above. Examples of allowable food costs under the modified rule are providing an on-site meal to event referees or to event volunteers that directly assist in the conduct of the event. The OOG will also modify the rules by adding Rule 184.44(23) and altering Rule 184.45(a)(6) in order to permit reimbursement of certain travel costs. Specifically, the rules will permit reimbursement for an event participant's, coach's, referee's, judge's, or other similar person's lodging, automobile mileage, rental car, and airfare costs that are directly related to the conduct of the event. Such costs for members or employees of the site selection organization are not subject to reimbursement under this provision. The rules will set maximum reimbursement rates for these costs, based on the reimbursement rates for state employees set by the Comptroller of Public Accounts. Travel costs are still generally unallowable except in the narrow circumstances described above.

COMMENT SUMMARY: One commenter requests that Rule 184.45(a)(4) be modified so that the cost of event-related alcoholic beverages could be eligible for reimbursement.

OOG RESPONSE: The OOG declines to modify Rule 184.45(a)(4) in response to this comment. The OOG believes it is inappropriate to use program trust funds to reimburse alcohol expenses.

COMMENT SUMMARY: Two commenters request that Rule 184.45(a)(8) be modified so that the cost of prizes and awards for event participants could be eligible for reimbursement.

OOG RESPONSE: The OOG accepts this comment. The proposed rules will be modified by adding Rule 184.44(22) and amending Rule 184.45(a)(8)(A) in order to allow reimbursement for the cost of a non-monetary prize or other form of award for participation or competitive performance in an event that is reasonable and customary for that event. The cost of gifts or any monetary awards, including cash and gift cards/certificates, are still unallowable.

COMMENT SUMMARY: One commenter requests that Rule 184.44 be modified so that the cost of implementing an approved event attendance verification methodology could be eligible for reimbursement.

OOG RESPONSE: The OOG declines to modify Rule 184.44 in response to this comment. The purpose of the program generally is to reimburse some of an applicant's costs for preparing and conducting an eligible event. See Texas Revised Civil Statutes, Article 5190.14, §2. The cost of implementing an approved event attendance verification methodology is not a cost related to the preparation and conduct of an event, but rather an administrative cost of participating in the trust fund program.

COMMENT SUMMARY: Six commenters request that Rule 184.30(a)(3) be modified to allow more methodologies for determining an event's attendance, including on-site attendee surveys and vehicle counters.

OOG RESPONSE: The OOG declines to accept this comment. As proposed, the rule lists five generally allowable methodologies for determining an event's attendance: (1) ticket sales count; (2) turnstile count; (3) ticket scan count; (4) convention registration check-in count; and (5) participant totals. These five methodologies have generally proven to be reliable methods for determining an event's attendance. However, the rule also includes a provision that allows an endorsing entity to use any unlisted methodology, including on-site attendee surveys and vehicle counters, provided that the endorsing entity seeks and receives permission from the OOG to use that particular methodology prior to the event. The OOG believes that in order to efficiently administer the program, it must retain discretion to approve particular methodologies based on the merits of the methodology and the nature of the event for which it is to be used (i.e. one methodology may be appropriate for one type of event and inappropriate for another event). Therefore, the only allowable methodologies are those described above. The OOG will clarify this by removing the word "include" in Rule 184.30(a)(3) and inserting the word "are." See Tex. Att'y Gen. Op. No. GA-733 (2009) ("The term 'include' is a term of enlargement that does not limit a series of terms to only the terms listed, and does not create a presumption that components not expressed are excluded.") (internal quotations omitted).

COMMENT SUMMARY: Four commenters request that the proposed definition of "highly competitive selection process" in Rule 184.4(7) be changed to remove the requirement that a site selection organization must intend to considered sites for the event outside of Texas on a competitive basis in the future in order to qualify for the program.

OOG RESPONSE: The OOG declines to modify Rule 184.4(7) in response to this comment. The term "highly competitive selection process" is used in Article 5190.14 but is not defined in that statute. The OOG believes its proposed definition to be reasonable and within its authority to clarify ambiguous statutory terms. See Zimmer US, Inc. v. Combs, 368 S.W.3d 579, 587 (Tex. App.-Austin 2012, no pet.) (deferring to Comptroller's reasonable interpretation of ambiguous tax statute). The proposed definition is based on the definition in current Rules 184.100(8) and 184.200(8). The requirement that applicants intend to consider sites for their events outside of Texas on a competitive and prospective basis is designed to ensure that trust funds are used to lure events to Texas that may not otherwise come and to keep events that realistically may be moved to another state in the future. Furthermore, the proposed definition would not exclude certain annual events that are held in different states each year. Such events can fit within the proposed definition.

COMMENT SUMMARY: Two commenters request that the proposed definition of "professional services" in Rule 184.4(16) be changed to reflect the definition of the term used in Attorney General Opinions JM-1038 (1989), JM-940 (1988), and MW-344 (1981).

OOG RESPONSE: The OOG declines to modify Rule 184.4(16) in response to this comment. The definition of "professional services" used by the Attorney General in the opinions referenced above is based on the general dictionary definition of the term. The OOG specifically chose not to utilize that general definition because it is too broad for the program and could result in all professional services being eligible for reimbursement (subject to compliance with other applicable rules). The OOG has determined that those professional services specifically listed in Rule 184.4(16) are sufficiently related to the preparation or conduct of an event, and thus proper for reimbursement under the program. The rule permits applicants to seek reimbursement for other professional services, provided that the applicant can justify to the satisfaction of the OOG that the services are reasonably necessary (or desirable, as authorized in the MERP and MSRTF) for the preparation or presentation of the event.

COMMENT SUMMARY: Four commenters request that Rule 184.11(a)(5) be changed to match the statutory language used in Article 5190.14, §5A(a-1)(4).

OOG RESPONSE: The OOG accepts this comment. Rule 184.11(a)(5) will be modified to incorporate language used in Article 5190.14, §5A(a-1)(4).

COMMENT SUMMARY: Two commenters request that Rule 184.42 be changed in order to provide a more objective standard by which deadline extension requests will be considered by the OOG.

OOG RESPONSE: The OOG declines to modify Rule 184.42 in response to this comment. The inclusion of objective standards by which extension requests will be considered could limit the OOG's discretion to grant an extension. The OOG believes that, in the interest of the efficient administration of the program, it should retain maximum discretion in determining whether to grant an extension. This is best accomplished on a case-by-case basis.

COMMENT SUMMARY: Four commenters request that Rule 184.44(9)-(10) be changed to allow an applicant to seek reimbursement for event-related expenses incurred by another entity, such as a site selection organization.

OOG RESPONSE: The OOG declines to modify Rule 184.44(9)-(10) in response to this comment. Under Article 5190.14, §§5A(k) & 5C(k), disbursements may only be made "for a purpose for which a local organizing committee, an endorsing municipality, or an endorsing county or this state is obligated under an" event support contract. Costs incurred by a third party for which the local organizing committee, endorsing municipality, or endorsing county are not obligated under an event support contract are not eligible for reimbursement.

COMMENT SUMMARY: Two commenters request that the OOG provide definitions for the terms "fiscally irresponsible" and "not supportive of program objectives," as those terms are used in Rule 184.45(b).

OOG RESPONSE: The OOG declines to modify the rules in response to this comment. Proposed Rule 184.45(b) incorporates current Rules 184.106(c) and 184.205(c), which permit the OOG to deny a disbursement if it determines that the cost is fiscally irresponsible or not supportive of program objectives. The application of the current rules has not resulted in any problematic issues in the administration of the program, and the OOG does not anticipate such issues in the future. The rule allows the OOG to maintain strict control over disbursements, which is in line with the statutory mandate to efficiently administer the program.

COMMENT SUMMARY: Two commenters request that the OOG clarify the deadline requirements in Rules 184.22(i) and 184.23(b).

OOG RESPONSE: The OOG accepts this comment. Rules 184.22(i) and 184.23(b) implement Article 5190.14, §5C(b) and (c-1). Subsection (c-1) of that statute requires the OOG to determine the incremental increase in tax receipts attributable to an event within 30 days of receiving an endorsing entity's completed request for participation in the program and other requisite information needed to make that determination. However, subsection (b) of the statute also mandates that the determination be made not later than three months before the event. The OOG will modify Rule 184.23(b) to include a reference to the 30 day deadline outlined in Article 5190.14, §5C(b).

COMMENT SUMMARY: One commenter requests that the rules be changed to permit applicants to seek reimbursement for certain costs even if the costs are not directly supported by the event support contract.

OOG RESPONSE: The OOG declines to modify the rules in response to this comment. Article 5190.14, §§5A(k) & 5C(k) only permit disbursements for a purpose for which a local organizing committee, an endorsing municipality, or an endorsing county or the state is obligated under an event support contract.

COMMENT SUMMARY: One commenter requests that the OOG delete Rule 184.45(a)(14), which prohibits an applicant from obtaining reimbursement for the cost of conducting usual and customary maintenance of an event facility.

OOG RESPONSE: The OOG declines to modify Rule 184.45(a)(14) in response to this comment. Article 5190.14, §5C(k-1)(3) prohibits ETF disbursements for the purpose of conducting usual and customary maintenance of a facility.

COMMENT SUMMARY: Rule 184.21(b) generally provides that, during any 12-month period, an applicant may not submit more than 10 events for reimbursement under the ETF program for which the OOG determines that the amount of the incremental increase in tax receipts is less than $200,000. One commenter requests that the rule be changed from a rolling 12-month period to a set 12-month timeframe (i.e. calendar year or fiscal year).

OOG RESPONSE: The OOG accepts this comment. Rule 184.21(b) will be modified so that the 12-month period mirrors the state fiscal year.

COMMENT SUMMARY: Proposed Rule 184.30(a) requires applicants to submit to the OOG an event attendance certification, which must include actual attendance numbers, an estimate of the number of non-Texas resident attendees, and the source and methodology used to determine those numbers. One commenter states that providing such information to the OOG would be challenging because that level of detailed information is too difficult to obtain.

OOG RESPONSE: The OOG declines to modify Rule 184.30(a) in response to this comment. Article 5190.14, §§5A(i) & 5C(i) require the local organizing committee, endorsing municipality, or endorsing county to submit attendance figures and an estimate of the number of non-Texas resident attendees. Furthermore, the methodology used to identify those numbers will be easily identifiable under proposed Rule 184.30(a)(3).

COMMENT SUMMARY: One commenter states that Rule 184.50(c), which requires costs to be clearly identifiable in the event support contract, could limit applicants' ability to recover costs associated with providing complimentary hotel rooms and other facilities to site selection organizations.

OOG RESPONSE: The OOG declines to modify Rule 184.50(c) in response to this comment. Requiring that costs be clearly identified in an event support contract is designed to implement Article 5190.14, §§5A(k) & 5C(k), which permit disbursements only for a purpose for which a local organizing committee, an endorsing municipality, or an endorsing county or the state is obligated under an event support contract. The rule was not intended to, and will not necessarily result in, the denial of reimbursement for providing hotel rooms at no cost. In such a scenario, an event support contract that identifies the normal room rate that would be charged for the complimentary rooms could be sufficient. The OOG has also modified Rule 184.43(a)(3) to clarify that internal billing documentation may be submitted to support the cost of providing complimentary hotel rooms.

COMMENT SUMMARY: One commenter is supportive of the repeal of current Rule 184.202(i), which had required a reduction of the estimated incremental tax revenue for an event if that event had been held in Texas within the past 5 years. But the commenter requests that the proposed rules be changed to allow future amounts of estimated incremental tax revenue for an event to be based on the full reimbursement level and not on a reduced amount under the current rule.

OOG RESPONSE: The OOG declines to modify the rules in response to this comment. Under the proposed language, estimated incremental tax revenue will not be reduced as specified in current Rule 184.202(i). Therefore, the proposed rules will not result in the scenario described by the commenter.

COMMENT SUMMARY: One commenter is supportive of the 7 year retention period established in Rule 184.41(b).

OOG RESPONSE: The OOG agrees and has maintained the proposed language of Rule 184.41(b).

COMMENT SUMMARY: One commenter requests that Rules 184.12(a)(4) be changed to permit applicants to submit the requisite economic impact study 45-60 days after an event.

OOG RESPONSE: The OOG declines to modify Rule 184.12(a)(4) in response to this comment. The OOG utilizes economic impact studies to help determine the estimated economic impact of the event. Under Article 5190.14, §§5A(b-1) and 5C(b), that determination must occur prior to the event.

COMMENT SUMMARY: One commenter requests a rule that would allow event sanction fees to be eligible for reimbursement from the MERP trust fund within 45 days of the event.

OOG RESPONSE: The OOG declines to modify the proposed rules in response to this comment. The OOG believes that it is more efficient to process all disbursements for a single event together, which gives OOG staff the opportunity to analyze the event and all event costs as a whole, giving them a better perspective of the event.

COMMENT SUMMARY: One commenter requests that spending at an event be determined by a survey of event attendees.

OOG RESPONSE: The determination of event spending is not addressed in the proposed rules. The OOG considers this to be a request for agency action outside the rulemaking process rather than a direct comment on the proposed rules. The OOG will take the request under advisement. No changes will be made to the proposed rules in response to this comment.

COMMENT SUMMARY: One commenter states that the OOG should determine event spending based on the unique aspects of each event and that event's attendees rather than using an average of spending at all MERP events.

OOG RESPONSE: The determination of event spending is not addressed in the proposed rules. The OOG considers this to be a request for agency action outside the rulemaking process rather than a direct comment on the proposed rules. The OOG will take the request under advisement. No changes will be made to the proposed rules in response to this comment.

COMMENT SUMMARY: One commenter requests that event-related hotel spending be determined by a survey of hotels within the market area.

OOG RESPONSE: The determination of event-related hotel spending is not addressed in the proposed rules. The OOG considers this to be a request for agency action outside the rulemaking process rather than a direct comment on the proposed rules. The OOG will take the request under advisement. No changes will be made to the proposed rules in response to this comment.

COMMENT SUMMARY: One commenter requests that major event-related expenditures occurring within a 12 month period beginning 2 months before an event and ending 10 months after the event be eligible for reimbursement from the trust fund.

OOG RESPONSE: The proposed rules do not address a timeline for allowable costs under the MERP program. The OOG considers this to be a request for agency action outside the rulemaking process rather than a direct comment on the proposed rules. The OOG will take the request under advisement. No changes will be made to the proposed rules in response to this comment.

COMMENT SUMMARY: One commenter states that if a force majeure condition impacts attendance at an event, data from the previous year's event should be considered when determining the event's economic impact.

OOG RESPONSE: The OOG declines to modify the rules in response to this comment. Article 5190.14, §§5A(y) & 5C(t) require the applicant to provide and the OOG to consider actual event attendance figures. However, if a force majeure condition results in significantly lower attendance at an event, the OOG may choose not to reduce the amount of disbursement under Rule 184.30(b).

COMMENT SUMMARY: Five commenters request that the definition of "endorsing municipality" in Rule 184.20(3) be changed to track the statutory definition of the same term in Article 5190.14, §5C(a)(2). Four of the commenters also request that the definitions of "endorsing county" in §184.20(2), "event support contract" in §184.4(5), and "site selection organization" in §184.10(5) be changed to track the statutory definitions of the same terms.

OOG RESPONSE: The OOG partially accepts this comment and will modify Rules 184.10(5) and 184.20(2)-(3) so that the definitions of "site selection organization," "endorsing municipality," and "endorsing county" will match the statutory definitions of the same terms. The OOG declines to modify the proposed definition of "event support contract" in Rule 184.4(5). The proposed definition incorporates the broad definition of the same term in Article 5190.14, §§5A(a)(3), 5B(a)(3), 5C(a)(4), but the proposed definition also provides clarification on what must be included in the contract and an illustrative list of documents that are not considered event support contracts. The proposed definition supplements, and does not conflict with, the statutory definition.

COMMENT SUMMARY: Two commenters request assurance from the OOG that the cost of leased livestock at a particular event, which is included in the event support contract, is an allowable expense.

OOG RESPONSE: The OOG will not determine whether a particular expense in a hypothetical scenario is eligible for reimbursement as that would require a factual analysis. However, if the cost of leased livestock is supported by the event support contract and is directly attributable to the preparation or conduct of the event, then the cost may be eligible for reimbursement under Rule 184.44(18).

COMMENT SUMMARY: One commenter asks whether Rule 184.44(4) will require applicants to disclose the amount of an event sanction fee when applying to the program.

OOG RESPONSE: Rule 184.44(4) will require that the amount of an event sanction fee be listed in the program application.

SUBCHAPTER A. AUTHORITY AND APPLICABILITY, PURPOSE, CONSTRUCTION OF RULES AND GENERAL DEFINITIONS

10 TAC §§184.1 - 184.4

The rules are adopted under Texas Revised Civil Statutes, Article 5190.14, §§3A, 5A(v) and 5C(p), which requires the Office of the Governor to adopt rules to ensure the efficient administration of the trust funds established under Article 5190.14, including rules related to application and receipt requirements.

Cross Reference to Statute

Article 5190.14, as amended by Senate Bills 293 & 633 and House Bill 26, 84th Regular Legislative Session.

§184.1.Authority and Applicability.

(a) Authority for this Chapter is provided in Texas Revised Civil Statutes, Article 5190.14, Sections 3A, 5A(v) and 5C(p).

(b) A request to participate in the Major Events Reimbursement Program, Events Trust Fund Program, or Motor Sports Racing Trust Fund Program that is submitted to the Office prior to the effective date of these rules is governed by the applicable rules in effect at the time the request is received by the Office.

(c) The effective date of these rules is January 1, 2017.

§184.2.Purpose.

(a) The purpose of the Major Events Reimbursement Program is to reimburse local governments and local organizing committees for certain eligible costs associated with conducting major events specifically referenced in Texas Revised Civil Statutes, Article 5190.14, Section 5A, provided that all statutory and administrative requirements are satisfied.

(b) The purpose of the Events Trust Fund Program is to reimburse local governments and local organizing committees for certain eligible costs associated with conducting eligible events under Texas Revised Civil Statutes, Article 5190.14, Section 5C, provided that all statutory and administrative requirements are satisfied.

(c) The purpose of the Motor Sports Racing Trust Fund Program is to reimburse local governments and local organizing committees for certain eligible costs associated with conducting specific motor sports racing events under Texas Revised Civil Statutes, Article 5190.14, Section 5B, provided that the event is sanctioned by the Automobile Competition Committee for the United States, held at a temporary event venue, and that all statutory and administrative requirements are satisfied.

§184.3.Construction of Rules.

(a) The Office shall administer the Major Events Reimbursement Program, the Events Trust Fund Program, and the Motor Sports Racing Trust Fund program in a manner consistent with the requirements in Texas Revised Civil Statutes, Article 5190.14, and that statute shall control over any conflicting provision of these administrative rules.

(b) Unless otherwise provided by law or this chapter, the rules applicable to the Events Trust Fund Program shall also be applicable in the same manner to the Motor Sports Racing Trust Fund Program.

(c) The Chief of Staff of the Office of the Governor or his designee may, in their sole discretion, waive any provision of this chapter upon a finding that the public interest would be furthered by granting a waiver. Any such waiver must be consistent with applicable statutory law.

§184.4.General Definitions.

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise:

(1) Applicant--An endorsing county, endorsing municipality, or local organizing committee that is eligible to participate in the Major Events Reimbursement Program, Events Trust Fund Program, or Motor Sports Racing Trust Fund Program. The term includes one or more endorsing counties and/or endorsing municipalities acting collectively or in conjunction with a local organizing committee. The term may also include a local government corporation that meets the requirements of Texas Revised Civil Statutes, Article 5190.14, Section 12.

(2) Day--As used in this chapter, all references to "day" mean a calendar day.

(3) Direct cost--Any cost that is directly attributable to the preparation or presentation of an event. The term does not include:

(A) any indirect, administrative, or overhead cost;

(B) any cost that is recouped or refunded by other parties or from event related revenue relating to the same expense or obligation; or

(C) any cost that is not directly attributable to an event.

(4) Estimate--The Office's determination of the amount of incremental increase in tax receipts that are directly attributable to the preparation or presentation of an event eligible to be deposited in the trust fund for an eligible event.

(5) Event support contract--A contract by and between a site selection organization and a local organizing committee, an endorsing municipality, or an endorsing county setting out the representations and assurances of the parties with respect to the selection of a site in this state for the location of an event, and the requirements and costs necessary (or desirable, as authorized by Texas Revised Civil Statutes, Article 5190.14, Section 5A(h) or 5B(h)) for the preparation or presentation of an event. The term includes a joinder agreement or joinder undertaking as defined by Texas Revised Civil Statutes, Article 5190.14. The term does not include a request for bid, request for proposal, bid response, or a selection letter from a site selection organization except as those documents may be incorporated by reference into the event support contract.

(6) Events Trust Fund--The fund established by the Office for the event pursuant to Texas Revised Civil Statutes, Article 5190.14, Section 5C(d).

(7) Highly competitive selection process--A process in which the site selection organization has considered sites for the event outside of Texas on a competitive basis and intends to do so in the future.

(8) Host fee or sanction fee--A cost charged by a site selection organization under an event support contract for the cost of hosting or authorizing the event.

(9) Internal billing--Costs incurred under an event support contract by a local organizing committee, an endorsing municipality, or an endorsing county for the costs of services or facilities provided for the event by an endorsing municipality or endorsing county, including, but not limited to, facility rentals and charges for police, fire, or emergency medical services.

(10) Local organizing committee--A nonprofit corporation or its successor in interest that:

(A) has been authorized by an endorsing municipality, endorsing county, or more than one endorsing municipality or county acting collectively to pursue an application and bid with a site selection organization for selection as the site of an event; or

(B) with the authorization of an endorsing municipality, endorsing county, or more than one endorsing municipality or county acting collectively, has executed an agreement with a site selection organization regarding a bid to host an event.

(11) Local share--The contribution to the fund made by or on behalf of an endorsing municipality or endorsing county pursuant to Texas Revised Civil Statutes, Article 5191.14, Section 5A(d), 5A(d-1), 5B(d), 5C(d), or 5C(d-1).

(12) Major Events Reimbursement Program Trust Fund-- The trust fund established by the Office for the event pursuant to Texas Revised Civil Statutes, Article 5190.14, Section 5A(d).

(13) Market area--The geographic area within which the Office determines there is a reasonable likelihood of measurable economic impact directly attributable to the preparation for or presentation of the event and related activities.

(14) Motor Sports Racing Trust Fund-- The fund established by the Office for the event pursuant to Texas Revised Civil Statutes, Article 5190.14, Section 5B(d).

(15) Office--The Economic Development and Tourism Office within the Office of the Governor.

(16) Professional services--The services of a licensed accountant, architect, attorney, professional engineer, landscape architect, land surveyor, physician, nurse, or real estate appraiser. The term does not include the services of other types of licensed professionals unless otherwise determined by the Office to be reasonably necessary (or desirable, as authorized by Texas Revised Civil Statutes, Article 5190.14, Section 5A(h) or 5B(h)) for the preparation or presentation of an approved event.

(17) Proof of payment--An official banking statement, check copy, credit card receipt, or other document required by the Office to support or document a requested disbursement from the trust fund that reflects the transmission, transfer, or payment of funds related to an event, which may be redacted of information related to transactions and balances not pertaining to the event.

(18) Publicly owned property-- Any property that is owned by a governmental unit as defined by Texas Civil Practices and Remedies Code, Section 101.001(3).

(19) Travel--Includes lodging, mileage, rental car expense, airfare, toll fares, parking and meals that are incurred while a person travels.

(20) Trust fund--The fund created by the Texas Comptroller of Public Accounts, at the direction of the Office, and designated as either the Major Events Reimbursement Program Fund, Events Trust Fund, or Motor Sports Racing Trust Fund for the event.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 8, 2016.

TRD-201606398

James Person

Assistant General Counsel

Office of the Governor, Economic Development and Tourism Office

Effective date: January 1, 2017

Proposal publication date: July 22, 2016

For further information, please call: (512) 936-0275


SUBCHAPTER B. MAJOR EVENTS REIMBURSEMENT PROGRAM DEFINITIONS, ELIGIBILITY, PARTICIPATION AND DEADLINES

10 TAC §§184.10 - 184.13

Statutory Authority

The rules are adopted under Texas Revised Civil Statutes, Article 5190.14, Sections 3A, 5A(v) and 5C(p), which requires the Office of the Governor to adopt rules to ensure the efficient administration of the trust funds established under Article 5190.14, including rules related to application and receipt requirements.

Cross Reference to Statute

Article 5190.14, as amended by Senate Bills 293 & 633 and House Bill 26, 84th Regular Legislative Session.

§184.10.Definitions.

The following words and terms, when used in this chapter in the context of the Major Events Reimbursement Program, shall have the following meanings:

(1) Cost--An Applicant's direct expenses and obligations necessary or desirable for the preparation or presentation of an event and related activities under an event support contract that are not recouped from or refunded by other parties.

(2) Endorsing county--A county that contains a site selected by a site selection organization for one or more events, or a county that:

(A) does not contain a site selected by a site selection organization for an event;

(B) is included in the market area for the event as designated by the Office; and

(C) is a party to an event support contract.

(3) Endorsing municipality--A municipality that contains a site selected by a site selection organization for one or more events, or a municipality that:

(A) does not contain a site selected by a site selection organization for an event;

(B) is included in the market area for the event as designated by the Office; and

(C) is a party to an event support contract.

(4) Event--This term has the same meaning as assigned by Texas Revised Civil Statutes, Article 5190.14, Section 5A(a)(4).

(5) Site selection organization-- An entity expressly listed in Texas Revised Civil Statutes, Article 5190.14, Section 5A(a)(5).

§184.11.Eligibility.

(a) An event is eligible for participation in the Major Events Reimbursement Program only if:

(1) the event and the site selection organization for the event are identified in Texas Revised Civil Statutes, Article 5190.14, Sections 5A(a)(4) and (5);

(2) a site selection organization selects a site in Texas through a highly competitive process after considering one or more sites that are not located in this state, for the event to be held one time or, for an event scheduled to be held each year for a period of years under an event support contract, one time each year for the period of years;

(3) a site selection organization selects a site in this state as:

(A) the sole site for the event; or

(B) the sole site for the event in a region composed of this state and one or more adjoining states;

(4) the event will not be held more than one time in any year; and

(5) the Office determines that the incremental increase in tax receipts equals or exceeds $1 million per year for the event, provided that for an event scheduled to be held each year for a period of years under an event support contract, the incremental increase in tax receipts shall be calculated as if the event did not occur in the prior year.

(b) The requirements of subsections (a)(2) of this section do not apply to an event as described by Texas Revised Civil Statutes, Article 5190.14, Section 5A(a-2).

(c) An Applicant cannot receive disbursements for the same event under both the Major Events Reimbursement Program and the Events Trust Fund Program. Nothing contained herein prohibits the submission of an application for the Events Trust Fund Program for events that are ineligible as a matter of law to participate in the Major Events Reimbursement Program.

§184.12.Request to Participate in the Major Events Reimbursement Program.

(a) A request to establish a trust fund for the Major Event Reimbursement Program must contain:

(1) a complete and signed application;

(2) documentation from the endorsing municipality or endorsing county requesting participation in the trust fund program and signed by a person authorized to bind the municipality or county;

(3) a signed letter from the site selection organization selecting the site in Texas that includes all the information necessary to establish that the site was selected through a highly competitive selection process; and

(4) an economic impact study or other data sufficient for the Office to make the determination of the estimated incremental increase in tax revenue directly attributable to the preparation or presentation of the event, including any data for any related activities.

(A) the economic impact study and other data submitted should contain detailed information on the direct expenditures for the event in the requested market area relating to the economic activity of attendees and other persons associated with the event during a reasonable time prior to the event, during the event, and within a reasonable time immediately after the event. The study may also include information on event expenditures if available.

(B) any other data or information addressing the secondary economic impact for the event in the requested market area during the ten months immediately following the last day of the event must be stated separately from data listed in subparagraph (A) of this paragraph such that the data for each can be easily distinguished. If the applicant fails to include information listed in this subparagraph, the Office's determination of the amount of incremental tax receipts will be based solely on the submitted data.

(C) all economic impact studies and other data submitted by the applicant shall address only the incremental increase in tax receipts for the tax types identified in Texas Revised Civil Statutes, Article 5190.14, Section 5A(b)(1)-(5). Information regarding other actual or estimated economic impacts will not be considered by the Office.

(D) any economic impact study submitted shall include a certification from the person(s) who prepared the study for the application, attesting to the accuracy of the information provided.

(b) The request for participation and the economic impact report should propose the applicant's desired market area and include information to support the choice of market area. The Office shall make the final determination establishing the market area. An endorsing municipality or endorsing county that has been selected as the site for the event must be included in the market area for the event.

(c) The request for participation and the economic impact report should include a list of all event activities proposed to be included in the estimate and must include data for each activity, including, at a minimum:

(1) projected attendance figures;

(2) a description of the methodology that will be used for determining the total actual attendance at the event;

(3) the projected spending of attendees; and

(4) any anticipated expenditure information related to the activity.

(d) The request for participation must be accompanied by a certification provided by an authorized representative from each endorsing municipality, endorsing county, and local organizing committee (if applicable) attesting to the accuracy of the information provided.

(e) The Office is not required to review or act on a request for participation that does not contain all items in subsections (a) - (d) of this section.

(f) A request for participation must be submitted not earlier than one year and not later than 45 days before the date the event begins. Requests submitted outside this time frame shall not be reviewed.

(g) The Office may issue guidance to establish, interpret, or clarify requirements for the submission of requests to participate in the Major Events Reimbursement Program. Compliance with any such guidance shall be required by the Applicant. Any such guidance must be consistent with all applicable statutes and this chapter.

(h) All requests and required documentation must be submitted electronically to: eventsfund@gov.texas.gov.

(i) The Office shall make a determination of the amount of incremental increase in tax receipts not later than the 30th day after the date the Office receives the completed request for participation and all related information required by this section.

§184.13.Major Events Reimbursement Program Deadlines.

(a) Application Deadline. Applications for participation in the Major Events Reimbursement Program must be submitted not earlier than one year, and not later than 45 days, before the first day of the event.

(b) Determination Deadline. Not later than the 30th day after the date the Office receives a completed request for participation and all required information, the Office will make a determination of whether the event meets the eligibility requirements of Texas Revised Civil Statutes, Article 5190.14 for the establishment of a Major Events Reimbursement Program Fund, and a determination of the amount of incremental increase in tax receipts, as determined by the Office, that is directly attributable to the preparation or presentation of the event.

(c) Event Support Contract Submission. Before the first date of the event, the applicant shall submit an event support contract and other documentation required by section 184.31 of this chapter. If the event support contract is not timely submitted, the Office may deem the Applicant ineligible for disbursements from the trust fund established for the event.

(d) Attendance Certification Deadline. The applicant shall submit the attendance certification and supporting documentation required by section 184.30 of this chapter not later than 45 days after the last date of the event. If the attendance documentation for the event is not timely submitted, the Office may deem the applicant ineligible for disbursements from the trust fund established for the event.

(e) Local Share Submission. Not later than 90 days after the last day of the event, the applicant shall remit to the Office the local share contribution to the fund made by or on behalf of an endorsing municipality or endorsing county pursuant to Texas Revised Civil Statutes, Article 5191.14, Section 5A(d) or (d-1). The local share cannot be submitted on a weekend or state holiday. If the local share is not timely submitted, the trust fund established for the event will be closed.

(f) Disbursement Request Submission. The applicant shall submit all requests for disbursements from the trust fund and supporting documentation no later than 180 days after the last day of the event. Any disbursement requests that are not timely submitted may be ineligible for reimbursement from the trust fund established for the event.

(g) A local organizing committee, endorsing municipality, or endorsing county must provide an annual audited financial statement if requested by the Office no later than the end of the fourth month after the date the period covered by the financial statement ends.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 8, 2016.

TRD-201606399

James Person

Assistant General Counsel

Office of the Governor, Economic Development and Tourism Office

Effective date: January 1, 2017

Proposal publication date: July 22, 2016

For further information, please call: (512) 936-0275


SUBCHAPTER C. EVENTS TRUST FUND PROGRAM DEFINITIONS, ELIGIBILITY, PARTICIPATION AND DEADLINES

10 TAC §§184.20 - 184.23

Statutory Authority

The rules are adopted under Texas Revised Civil Statutes, Article 5190.14, Sections 3A, 5A(v) and 5C(p), which requires the Office of the Governor to adopt rules to ensure the efficient administration of the trust funds established under Article 5190.14, including rules related to application and receipt requirements.

Cross Reference to Statute

Article 5190.14, as amended by Senate Bills 293 & 633 and House Bill 26, 84th Regular Legislative Session.

§184.20.Definitions.

The following words and terms, when used in this Chapter in the context of the Events Trust Fund Program, shall have the following meanings:

(1) Cost--An applicant's direct expenses and obligations necessary for the preparation or presentation of an event and related activities under an event support contract that are not recouped from or refunded by other parties.

(2) Endorsing county--A county that contains within its boundaries a site selected by a site selection organization for one or more events.

(3) Endorsing municipality--A municipality that contains within its boundaries a site selected by a site selection organization for one or more events.

(4) Event--An event or a related series of events held in this state for which a local organizing committee, endorsing county, or endorsing municipality seeks approval from a site selection organization to hold the event at a site in this state. The term includes any activities related to or associated with the event.

(5) Direct spending--The amount of incremental increase in tax receipts for the 30-day period that ends one day after the last date of the event that are directly attributable to spending related to the preparation or presentation of an event.

(6) Site selection organization--An entity that conducts or considers conducting an eligible event in this state.

§184.21.Eligibility.

(a) An event is eligible for participation in the Events Trust Fund Program only if:

(1) a site selection organization selects a site in Texas through a highly competitive process after considering one or more sites that are not located in this state, for the event to be held one time or, for an event scheduled to be held each year for a period of years under an event support contract, one time each year for the period of years;

(2) a site selection organization selects a site in this state as:

(A) the sole site for the event; or

(B) the sole site for the event in a region composed of this state and one or more adjoining states; and

(3) the event that is held not more than one time in this state or an adjoining state in any year.

(b) During any state fiscal year (September 1 - August 31), an applicant may not submit more than 10 events, only three of which may be nonsporting events, for reimbursement under the Events Trust Fund Program for which the Office determines that the amount of the incremental increase in tax receipts is less than $200,000. A sporting event is an event whose primary purpose, as determined by the Office, is the conduct of recreational or competitive athletic or physical activities, including individual, team, equestrian, or automotive competitions.

(c) An applicant cannot receive disbursements for the same event under both the Major Events Reimbursement Program and the Events Trust Fund Program. Nothing contained herein prohibits the submission of an application for the Events Trust Fund Program for events that are ineligible as a matter of law for participation in the Major Events Reimbursement Program.

§184.22.Request to Establish a Trust Fund.

(a) A request to establish a trust fund for the Events Trust Fund Program must contain:

(1) a complete and signed application;

(2) documentation from the endorsing municipality or endorsing county requesting participation in the trust fund program and signed by a person authorized to bind the municipality or county;

(3) a signed letter from the site selection organization selecting the site in Texas that includes all the information necessary to establish that the site was selected through a highly competitive selection process; and

(4) an economic impact study or other data sufficient for the Office to make the determination of the estimated incremental increase in tax revenue directly attributable to the preparation or presentation of the event, including any data for any related activities.

(A) the economic impact study and other data submitted must contain detailed information on the direct expenditures and direct spending data for the event for the requested market area.

(B) all economic impact studies and other data submitted by the applicant shall address only the incremental increase in tax receipts for the tax types identified in Texas Revised Civil Statutes, Article 5190.14, Section 5C(b)(1)-(5). Information regarding other actual or estimated economic impacts will not be considered by the Office.

(C) any economic impact study submitted shall include a certification from the person(s) who prepared the study for the application, attesting to the accuracy of the information provided.

(b) The request for participation and the economic impact report should propose the applicant's desired market area and include information to support the choice of market area. The Office shall make the final determination establishing the market area. An endorsing municipality or endorsing county that has been selected as the site for the event must be included in the market area for the event.

(c) The request for participation and the economic impact report should include a list of all event activities proposed to be included in the estimate and must include data for each activity, including, at a minimum:

(1) projected attendance figures;

(2) a description of the methodology that will be used for determining the total actual attendance at the event;

(3) the projected spending of attendees; and

(4) any anticipated expenditure information related to the activity.

(d) The request for participation must be accompanied by a certification provided by an authorized representative from each endorsing municipality, endorsing county, and local organizing committee (if applicable) attesting to the accuracy of the information provided.

(e) The Office is not required to review or act on a request for participation that does not contain all items in subsections (a) - (d) of this section.

(f) A request for participation must be submitted not later than 120 days before the date the event begins. Requests submitted outside this time frame shall not be reviewed.

(g) The Office may issue guidance to establish, interpret, or clarify requirements for the submission of requests to participate in the Events Trust Fund Program. Compliance with any such guidance shall be required by the Applicant. Any such guidance must be consistent with all applicable statutes and this chapter.

(h) All requests and required documentation must be submitted electronically to: eventsfund@gov.texas.gov.

(i) The Office shall make a determination of the amount of incremental increase in tax receipts not later than the 30th day after the date the Office receives the completed request for participation and all related information required by this section, and not later than three months before the date of the event.

§184.23.Events Trust Fund Program Deadlines.

(a) Application Deadline. Applications for participation in the Events Trust Fund Program should be submitted no later than 120 days before the first day of the event in order to permit the Office to timely determine the amount of incremental increase in tax by not later than three months before the date of the event.

(b) Determination Deadline. No later than the 30th day after the date the Office receives a completed request for participation and all required information, the Office will make a determination of whether the event meets the eligibility requirements of Texas Revised Civil Statutes, Article 5190.14 for the establishment of an event trust fund, and a determination of the amount of incremental increase in tax receipts, as determined by the Office, that is directly attributable to the preparation or presentation of the event. The determination must be made no later than three months before the date of the event.

(c) Event Support Contract Submission. Before the first date of the event, the applicant shall submit an event support contract and other documentation required by section 184.31 of this chapter. If the event support contract is not timely submitted, the Office may deem the applicant ineligible for disbursements from the trust fund established for the event.

(d) Attendance Certification Deadline. The applicant shall submit the attendance certification and supporting documentation required by Section 184.30 not later than 45 days after the last date of the event. If the attendance documentation for the event is not timely submitted, the Office may deem the applicant ineligible for disbursements from the trust fund established for the event.

(e) Local Share Submission. Not later than 90 days after the last day of the event, the applicant shall remit to the Office the local share contribution to the fund made by or on behalf of an endorsing municipality or endorsing county pursuant to Texas Revised Civil Statutes, Article 5191.14, Section 5B(d), 5C(d) or 5C(d-1). The local share cannot be submitted on a weekend or state holiday. If the local share is not timely submitted, the trust fund established for the event will be closed.

(f) Disbursement Request Submission. The applicant shall submit all requests for disbursements from the trust fund and supporting documentation by not later than 180 days after the last day of the event. Any disbursement requests that are not timely submitted may be ineligible for reimbursement from the trust fund established for the event.

(g) A local organizing committee, endorsing municipality, or endorsing county must provide an annual audited financial statement if requested by the Office no later than the end of the fourth month after the date the period covered by the financial statement ends.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 8, 2016.

TRD-201606400

James Person

Assistant General Counsel

Office of the Governor, Economic Development and Tourism Office

Effective date: January 1, 2017

Proposal publication date: July 22, 2016

For further information, please call: (512) 936-0275


SUBCHAPTER D. REQUIRED REPORTS

10 TAC §§184.30 - 184.33

Statutory Authority

The rules are adopted under Texas Revised Civil Statutes, Article 5190.14, Sections 3A, 5A(v) and 5C(p), which requires the Office of the Governor to adopt rules to ensure the efficient administration of the trust funds established under Article 5190.14, including rules related to application and receipt requirements.

Cross Reference to Statute

Article 5190.14, as amended by Senate Bills 293 & 633 and House Bill 26, 84th Regular Legislative Session.

§184.30.Attendance Certification.

(a) Not later than 45 days after the last day of the approved event, an attendance certification based on a methodology acceptable to the Office signed by the person who signed the original request for participation or their successor under §184.12 (for the Major Events Reimbursement Program) or §184.22 (for the Events Trust Fund Program) of this chapter as applicable. The certification must include:

(1) total actual attendance at the event;

(2) the estimated number of attendees at the approved event that are not residents of Texas; and

(3) the verifiable source and methodology for such numbers. Approved attendance methodologies are:

(A) ticket sales count;

(B) turnstile count;

(C) ticket scan count;

(D) convention registration check-in count;

(E) participant totals; or

(F) another methodology that is approved by the Office in its sole discretion prior to the first day of the event.

(b) If the actual attendance figures are significantly lower than the estimated attendance numbers, the Office may reduce the amount of a disbursement for an endorsing entity under the trust fund in proportion to the discrepancy and in proportion to the amount contributed to the fund by the entity. Actual attendance at an event is considered significantly lower than estimated attendance when the difference is 25% or greater.

§184.31.Submission of Event Support Contract.

Before the first date of the event, the Applicant shall submit to the Office a complete and fully executed copy of the event support contract, any amendment to the contract, and any incorporated documentation.

§184.32.Other Information Required by the Office.

(a) Upon request of the Office, the applicant must provide to the Office any additional information, including financial information, or other information held by the applicant that the Office considers necessary to verify event related expenditures or to administer the program.

(b) If the applicant fails or refuses to timely provide any information required by statute or this section, the Office may deem the applicant ineligible for disbursements from the trust fund established for the event.

§184.33.Post Event Report Information for Major Events Reimbursement Program.

Upon request of the Office, an applicant to the Major Events Reimbursement Program must provide to the Office any information the Office finds necessary to comply with the post event reporting requirements in Texas Revised Civil Statutes, Article 5190.14, Section 5A(w).

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 8, 2016.

TRD-201606401

James Person

Assistant General Counsel

Office of the Governor, Economic Development and Tourism Office

Effective date: January 1, 2017

Proposal publication date: July 22, 2016

For further information, please call: (512) 936-0275


SUBCHAPTER E. DISBURSEMENT PROCESS

10 TAC §§184.40 - 184.45

Statutory Authority

The rules are adopted under Texas Revised Civil Statutes, Article 5190.14, Sections 3A, 5A(v) and 5C(p), which requires the Office of the Governor to adopt rules to ensure the efficient administration of the trust funds established under Article 5190.14, including rules related to application and receipt requirements.

Cross Reference to Statute

Article 5194.10, as amended by Senate Bills 293 & 633 and House Bill 26, 84th Regular Legislative Session.

§184.40.Disbursements for Event Costs.

(a) Disbursements from the trust fund established for the event shall be issued by the Office to reimburse only allowable direct costs that are directly attributable to the preparation or presentation of the approved event related to:

(1) preparing for and conducting an event in this state in accordance with the event support contract;

(2) the construction, improvement, or renovation of facilities to the extent authorized by law that are directly attributable to fulfilling obligations of the event support contract and that are reasonably necessary (or desirable, as authorized by Texas Revised Civil Statutes, Article 5190.14, Section 5A(h) or 5B(h)) for the conduct of the event as required by the site selection organization; or

(3) paying the principal of and interest on notes issued by an endorsing municipality or endorsing county under Texas Revised Civil Statutes, Article 5190.14, Section 5A(g), 5B(g) or 5C(g) as applicable.

(b) Disbursements from the trust fund may not be used to make payments to an applicant or any other entity that are not directly attributable to allowable costs as set forth in §184.44 (Allowable Costs). Disbursements are subject to verification or audit prior to or after payment by the Office to ensure compliance.

(c) The Office may issue guidance to establish, interpret, or clarify requirements for the disbursement requests for trust fund programs. Compliance with any such guidance shall be required by the applicant. Any such guidance must be consistent with all applicable statutes and this chapter.

§184.41.Documentation Required to Initiate Disbursement Process.

(a) To initiate the disbursement process, the applicant must electronically submit to the Office the following required documentation in a format required by the Office no later than 180 days after the last date of the event:

(1) a signed disbursement request in the form prescribed by the Office;

(2) a general explanation of the costs the disbursement request represents in the form prescribed by the Office;

(3) copies of any publications, printed materials, signage, or advertising to support any costs relating to those items that are included in the disbursement request;

(4) copies of the invoices, receipts, contracts, proof of payment, and other documents supporting the costs included in the disbursement request;

(A) Estimates of expenditures, proposals, or purchase orders will not be accepted to support the reimbursement of a cost unless accompanied by invoices or other documentation to support that the related cost was actually incurred;

(B) Acceptable forms of documentation must show itemized costs that are directly attributable to the event, including the invoice date and the date(s) the goods were delivered or the services performed. Allowable costs attributable to event staff shall include documentation sufficient to support how such costs were calculated and shall include the description of the work performed, the dates of service, rate of pay, and the number of hours worked per day, and an accounting of any overtime pay, if applicable;

(5) if an Applicant seeks reimbursement for expenses incurred by another entity because of an obligation specified in the event support contract, copies of the invoice(s) sent by the entity to the Applicant for the expenses, and proof of the payment to the vendor;

(6) for a request submitted by a local organizing committee, documentation showing the prior approval of the disbursement request by each contributing endorsing municipality and/or endorsing county;

(7) a statement indicating whether any disbursement information provided to the Office is confidential and exempt from public disclosure under the Texas Public Information Act (Government Code, Chapter 552), including the legal citation of the exception claimed; and

(8) a spreadsheet of event expenses.

(b) An applicant shall retain all records related to an event for at least seven (7) years following the last day of the event. Such records must be made available to the Office upon request.

§184.42.Extension of Time to Submit Disbursement Documentation.

If the applicant is unable to provide all the information required for a completed disbursement request by the 180th day after the last date of the event, the Office may extend the period of time for requesting disbursement upon the receipt of a timely request for an extension from the Applicant. Any such requests from the applicant must be submitted to the Office by the 180th day after the last date of the event and must be accompanied by a narrative justification for the proposed extension of time. The Office is not required to act on any request for an extension of time, and any extension granted is within the discretion of the Office.

§184.43.Disbursement of Trust Funds.

(a) The Office will only consider a disbursement request that:

(1) is supported by an event support contract;

(2) requests reimbursement for payments or obligations for allowable costs; and

(3) is complete, supported by proof of payment or internal billing documentation, and includes all event reimbursement costs being sought by the applicant for disbursement.

(b) The Office may request additional supporting documentation or justification regarding any costs submitted for a disbursement. The Office, at its sole discretion, may withhold disbursements for event costs pending the receipt of any information the Office considers necessary to appropriately document the applicant's entitlement to reimbursement.

(c) The Office shall not make any disbursements for event costs until all reporting requirements under Subchapter D (Required Reports) of this chapter are satisfied.

(d) Upon disbursement of all reimbursement payments, any unexpended balance remaining in the trust fund will be returned to each endorsing entity in proportion to the local share contributed by the entity, and any unexpended state share shall be returned to the Comptroller of Public Accounts.

(e) A disbursement made from the trust fund by the Office in satisfaction of an applicant's obligation shall be satisfied proportionately from the state and local share in the trust fund in the proportion of 6.25:1 of state funds to local share notwithstanding any agreements to the contrary made by an Applicant.

(f) If the Office determines, based on information obtained from verifiable sources, including any monitoring, inspection, review or audit conducted by the Office or its authorized representatives, that the applicant received a disbursement in excess of the amount to which the applicant is entitled under applicable statutes and this chapter, or that the applicant provided erroneous information that resulted in an overstatement of the estimated incremental tax receipt increase for an event, then the Office may withhold, offset, recoup, or otherwise require the return of any excess disbursement amounts.

§184.44.Allowable Costs.

The following costs are supportive of the trust fund program goals and are generally allowable to the extent that such costs are supported by the event support contract and not otherwise unallowable in accordance with §184.45:

(1) planning for or conducting the event in accordance with the event support contract;

(2) the cost of any structural improvement or fixture for an event, as authorized by Texas Revised Civil Statutes, Article 5190.14, Sections 5A(k) or 5C(k).

(3) financing costs for event sites;

(4) fees charged by a site selection organization, which must be paid as a condition to holding an event, including hosting fees, sanction fees, participation fees, or bid fees, provided that the amount of all such fees is clearly stated in the application for participation in the trust fund program;

(5) performance bonds or insurance required for hosting the event;

(6) temporary maintenance to property impacted by the conduct of the event that is directly related to the preparation or presentation of the event;

(7) costs that are necessary (or desirable, as authorized by Texas Revised Civil Statutes, Article 5190.14, Section 5A(h) or 5B(h)) for the public health or safety of people or animals involved in hosting, attending, or participating in the event, including:

(A) water;

(B) security;

(C) professional fire marshal or engineer requirements for event facilities and other event related property or equipment;

(D) portable restrooms, trash receptacles, and other types of sanitation necessities;

(E) shade;

(F) lighting and sound equipment required for security or public safety;

(G) traffic planning and management;

(H) severe weather planning and mitigation;

(I) way-finding signage or staff;

(J) barriers;

(K) permits and professional or consulting services necessary (or desirable, as authorized by Texas Revised Civil Statutes, Article 5190.14, Section 5A(h) or 5B(h)) for acquiring permits;

(L) stand-by services, such as stand-by medical services;

(M) "Americans with Disabilities Act" (ADA) accommodations and compliance;

(N) public health or safety command center expenses;

(O) credentials; and

(P) costs needed for police, fire, and other emergency operations staff.

(8) event facility costs, including:

(A) cost to rent an event facility, including any internal billing, if the terms of the event support contract require the Applicant to either reimburse the site selection organization for the cost to rent a facility, or to provide the facility at no cost to the site selection organization; and

(B) the purchase or rental of seating or other furnishings, supplies and equipment that are reasonable and necessary (or desirable, as authorized by Texas Revised Civil Statutes, Article 5190.14, Section 5A(h) or 5B(h)) to conduct the event;

(9) an applicant's event staffing costs incurred for services directly attributable to conducting the event that are performed within a reasonable time prior to the event, during the event, and within a reasonable time after the event, including:

(A) hourly pay or overtime for personnel attributable to public health or safety for the event;

(B) compensation of non-health and safety staff hired or contracted specifically to meet the objectives of an approved event; or

(C) compensation for referees, score keepers, timers, and other similar officials required to meet the objectives of an approved event;

(10) an applicant's professional service costs for fulfilling specific obligations of the event support contract, including for:

(A) preparing event-related documents unless otherwise unallowable under §184.45 (Unallowable Costs);

(B) fulfilling specific obligations of the event support contract; or

(C) consulting on soliciting, preparing for, or hosting the event;

(11) market-area transportation and/or parking services, but excluding personal travel, within a reasonable time prior to the event, during the event, or within a reasonable time after the event that have not otherwise been compensated or recovered from event-related revenue earned from providing the transportation and/or parking;

(12) temporary signs and banners;

(13) advertising for the event which:

(A) occurs prior to or during the event;

(B) includes the event name and date, or event name and location; and

(C) are the Applicant's obligations in the event support contract;

(14) promotional items that are created specifically to promote the event to the extent that the per-unit costs of such items are nominal in value;

(15) production costs directly associated with the production of the main event, including staging, rigging, sound and lighting systems;

(16) uniforms for event staff that are created specifically for the event;

(17) costs directly attributable to inclement weather occurring immediately before, during, or immediately after an event, except costs of damages or lost revenue;

(18) any other direct costs resulting from requirements of the event support contract that are not otherwise unallowable by state law or regulations, including §184.45 (Unallowable Costs), and which are determined by the Office to be directly attributable to the preparation or presentation of the event;

(19) costs directly attributable to the performance of the national anthem of the United States or a foreign nation at the event;

(20) cost of a photographer or videographer that documents the event;

(21) food, the provision of which is directly related to the conduct of the event and that is provided on-site at the event to event participants or other personnel necessary to the conduct of the event (e.g. referees, judges, volunteers). The Office will only reimburse food costs up to $36 per person/per day;

(22) the cost of a non-monetary prize or other form of award for participation or competitive performance in an event that is reasonable and customary for that event; and

(23) the cost of an event participant's, coach's, referee's, judge's, or other similar person's lodging, automobile mileage, rental car, and commercial airfare that is directly related to the conduct of the event, provided that the participant, coach, referee, judge, or other similar person does not reside in the event market area. The Office will only reimburse:

(A) lodging and automobile mileage costs up to the allowable rates for state employees, found at: https://fmx.cpa.texas.gov/fmx/travel/textravel/rates/current.php (last visited on September 20, 2016);

(B) rental car costs up to the regular published rates for a standard full-size vehicle; and

(C) airfare costs up to the regular published rates for coach-class airfare on a commercial airline.

§184.45.Unallowable Costs.

(a) Disbursements for the following costs are prohibited, regardless of their inclusion in an event support contract:

(1) any tax listed in Texas Revised Civil Statutes, Article 5190.14;

(2) gifts of any kind, including tips, gratuities, or honoraria;

(3) grants to any person, entity, or organization;

(4) alcoholic beverages;

(5) food not specifically authorized in §184.44(21);

(6) travel not specifically authorized in §184.44(23);

(7) costs related to an applicant's application or participation in the trust fund program, including, but not limited to:

(A) representing any entity, including an applicant or related party, in front of the legislature for any reason;

(B) representing any entity, including an applicant or related party, in front of the Office for the purpose of applying to or seeking reimbursement from the trust fund;

(C) preparing an application to the reimbursement program, a disbursement request, or other event-related documents;

(D) preparing a pre-event or post-event economic impact study;

(E) preparing a pre-event attendance estimate or post-event attendance verification;

(F) conducting any pre-event or post-event survey; or

(G) costs associated with responding to requests for information relating to participation in the program, including requests for information from the Office, the Texas State Auditor's Office, or pursuant to the requirements of the Texas Public Information Act (Chapter 552, Texas Government Code).

(8) expenses related to:

(A) monetary compensation for participation or competitive performance in an event, including, but not limited to, cash, gift cards, or pre-paid service certificates;

(B) gaming;

(C) raffles; or

(D) giveaways that do not meet the requirements of §184.44(14) (allowable costs for promotional items);

(9) costs for any personal items and services;

(10) costs for entertainment, hospitality, appearance or talent fees, and "VIP" expenses, except as permitted under §184.44(19) of this chapter;

(11) reimbursement of any cost not incurred, such as for lost profit or for an exchange-in-kind or product;

(12) damages of any kind;

(13) any cost or expense of or related to constructing an arena, stadium, or convention center;

(14) any cost or expense related to conducting usual and customary maintenance of a facility;

(15) any amount in excess of 5.0% of the cost of any structural improvement made or fixture for an event that is added to a site that is privately owned property where the improvement or fixture is expected to derive most of its value in subsequent uses of the site for future events;

(16) costs that are not direct costs;

(17) any costs, the reimbursement of which, could result in a payment to and/or from a party with an inappropriate conflict of interest, as determined by the Office;

(18) the amount of any host fees or sanction fees charged by a site selection organization as a prerequisite to holding an event that is in excess of the amount stated in the application for participation in the trust fund program; or

(19) costs of any particular expense or obligation that was recouped or refunded, or that will be recouped or refunded from another entity under the event support contract or from event related revenue relating to the same expense or obligation, the reimbursement of which could result a net surplus to the applicant.

(b) The Office may deny a disbursement for any event, cost, expense, or obligation the Office deems fiscally irresponsible or not supportive of program objective.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 8, 2016.

TRD-201606402

James Person

Assistant General Counsel

Office of the Governor, Economic Development and Tourism Office

Effective date: January 1, 2017

Proposal publication date: July 22, 2016

For further information, please call: (512) 936-0275


SUBCHAPTER F. EVENT SUPPORT CONTRACTS

10 TAC §184.50, §184.51

Statutory Authority

The rules are adopted under Texas Revised Civil Statutes, Article 5190.14, Sections 3A, 5A(v) and 5C(p), which requires the Office of the Governor to adopt rules to ensure the efficient administration of the trust funds established under Article 5190.14, including rules related to application and receipt requirements.

Cross Reference to Statute

Article 5190.14, as amended by Senate Bills 293 & 633 and House Bill 26, 84th Regular Legislative Session.

§184.50.Requirements for Event Support Contracts.

(a) An event support contract is required for any event that is participating in the Major Events Reimbursement Program, Events Trust Fund Program, or Motor Sports Racing Trust Fund Program. The parties to an event support contract shall include, at a minimum, the site selection organization and the applicant.

(b) The event support contract must establish the applicant's role and obligation in the preparation or presentation of the event, and shall set out the representations and assurances of the parties with respect to the selection of a site in this state for the location of an event, and the requirements and costs necessary (or desirable, as authorized by Texas Revised Civil Statutes, Article 5190.14, Section 5A(h) or 5B(h)) for the preparation or presentation of an event. The Office will not consider a disbursement request that is for a cost that is not supported by an event support contract.

(c) Any costs included in the event support contract that are anticipated to be paid, recovered, refunded, or offset from event-related revenue should be clearly identified.

(d) The event support contract should clearly identify any costs that are intended to be reimbursed from the event trust fund for structural improvements or fixtures for an event site where the improvement or fixture is expected to derive most of its value in subsequent uses of the site for future events.

(e) The applicant's obligations must be sufficiently described in the event support contract to allow the Office to determine the eligibility of event costs for reimbursement in accordance with Rule 184.44 (Allowable Costs). In order for the Office to make a disbursement for a cost, the event support contract must specify which types of goods, services, fixtures, equipment, facility or other property improvements, or temporary maintenance that are required to conduct the event.

(f) All requirements of the site selection organization must be set forth in the event support contract, and must be reasonable and necessary (or desirable, as authorized by Texas Revised Civil Statutes, Article 5190.14, Section 5A(h) or 5B(h)) for the preparation or presentation of the event.

§184.51.Contract Guidelines.

(a) In considering whether to make a disbursement from the trust fund, the Office will not consider a contingency clause in an event support contract as relieving an applicant's obligation to pay a cost under the contract, as mandated by Texas Revised Civil Statutes, Article 5190.14, Sections 5A(k) and 5C(k).

(b) The event support contract must not create or shift obligations or liabilities from the endorsing municipality, endorsing county, local organizing committee, or another party to the Office.

(c) The Office will not consider for reimbursement any cost that is identified in an event support contract in terms which are overly broad or too general in nature, such terms include:

(1) blanket "catch-all" terms, such as "any necessary fixtures or improvements;"

(2) references in terms such as "etc." or "miscellaneous" or "as needed" or "other;" and

(3) terms that reference the Office's decision making authority, such as "any expense allowed by Office" or "any expense allowed by statute."

(d) Regardless of whether a cost is included in an event support contract, the Office will only consider making a disbursement for direct costs that are allowable in accordance with §184.44 (Allowable Costs).

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 8, 2016.

TRD-201606403

James Person

Assistant General Counsel

Office of the Governor, Economic Development and Tourism Office

Effective date: January 1, 2017

Proposal publication date: July 22, 2016

For further information, please call: (512) 936-0275


SUBCHAPTER A. SPORTS AND EVENTS TRUST FUND

10 TAC §§184.100 - 184.106

Statutory Authority

The repeal is adopted under Texas Revised Civil Statutes, Article 5190.14, §§3A, 5A(v) and 5C(p), which requires the Office of the Governor to adopt rules to ensure the efficient administration of the trust funds established under Article 5190.14, including rules related to application and receipt requirements.

Cross Reference to Statute

Article 5194.10, as amended by Senate Bills 293 & 633 and House Bill 26, 84th Regular Legislative Session.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 8, 2016.

TRD-201606404

James Person

Assistant General Counsel

Office of the Governor, Economic Development and Tourism Office

Effective date: January 1, 2017

Proposal publication date: July 22, 2016

For further information, please call: (512) 936-0275


SUBCHAPTER B. EVENTS TRUST FUND

10 TAC §§184.200 - 184.206

Statutory Authority

The repeal is adopted under Texas Revised Civil Statutes, Article 5190.14, §§3A, 5A(v) and 5C(p), which requires the Office of the Governor to adopt rules to ensure the efficient administration of the trust funds established under Article 5190.14, including rules related to application and receipt requirements.

Cross Reference to Statute

Article 5190.14, as amended by Senate Bills 293 & 633 and House Bill 26, 84th Regular Legislative Session.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 8, 2016.

TRD-201606405

James Person

Assistant General Counsel

Office of the Governor, Economic Development and Tourism Office

Effective date: January 1, 2017

Proposal publication date: July 22, 2016

For further information, please call: (512) 936-0275