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

The Texas Department of Housing and Community Affairs (the "Department") adopts the amendment of 10 TAC Chapter 10, Uniform Multifamily Rules Subchapter A §§10.1 - 10.4, concerning General Information and Definitions, with changes to the proposed text as published in the September 22, 2017, of the Texas Register (42 TexReg 4872).

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 Department accepted public comments between September 22, 2017, and October 12, 2017. The comments and responses include both administrative clarifications and revisions to the Housing Tax Credit Program Uniform Multifamily Rules 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 Uniform Multifamily Rules as presented to the Board in September, such changes are indicated.

The Board approved the final order adopting the amendments on November 9, 2017. The Board made modifications to §10.3(122) prior to adoption.

The Governor made no changes.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS

Public comments were accepted through October 12, 2017, with comments received from (4) Brownstone Affordable Housing, Leslie Holleman & Associates, Evolie Housing Partners, and Mears Development and Construction, Inc., (27) Foundation Communities, (28) New Hope Housing, (29) True Casa Consulting, (32) Texas Coalition of Affordable Developers, and (40) The NuRock Companies.

NOTE ON REASONED RESPONSE: In order to comply with the Texas Register's formatting guidelines, the formatting of the Department's Reasoned Response has changed. All comment summaries and reasoned responses that included strikethrough formatting have been removed; all comment summaries and reasoned responses that included underline formatting have been removed; and all language regarding the color of track changes has been removed. The Department's original Reasoned Response, which includes proposed changes using track changes formatting, can be located in the TDHCA Governing Board Book for November 9, 2017.

1. §10.2(c) - Subchapter A - General - Data (4)

COMMENT SUMMARY: Commenter (4) stated that the proposed changes relating to data sources used, specifically NeighborhoodScout, creates subjectivity in terms of which point in time such data source will be considered acceptable to the Department. Commenter (4) explained that an applicant could check the crime rate and make a decision to move forward with the site, only to have a competitor submit a Request for Administrative Deficiency indicating a higher crime rate after the point in time in which the applicant originally checked. Accordingly, commenter (4) recommended the following revision to this section:

"(c) Data. Where this chapter requires the use of American Community Survey data, the Department shall use the most current data available as of October 1, 2017, unless specifically otherwise provided in federal or state law or in the rules. All American Community Survey data must be 5-year estimates, unless otherwise specified. The availability of more current data shall be disregarded. Where other data sources are specifically required, such as Neighborhoodscout, the data available at the time of site selection will be permissible, provided Applicant's retain evidence of the applicable data on that date. The NeighborhoodScout data submitted in the Application must include the date on which the report was printed."

STAFF RESPONSE: In response to Commenter (4), staff does not find the proposed language for §11.1(e) ambiguous. For NeighborhoodScout crime rate data (and any data other than American Community Survey data), any data secured between October 1 and Pre-Application Final Delivery Date is permissible. Replacing this time frame with commenter (4)'s proposed phrase of "at the time of site selection" is ambiguous as it does not set a limit to when that site was selected, and staff has no way of confirming this date. The nature of the Department's Housing Tax Credit (HTC) rules is to judge sites according to point-in-time data, which require time parameters. The proposed rule states that the Applicant should include the NeighborhoodScout report in the Application as evidence of the data used by the Applicant, and the date on which that data was attained. If the data is updated after the Application is submitted, it would not impact the Application and will be disregarded.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

2. §10.2(d) - Subchapter A - General - Public Information Requests (4)

COMMENT SUMMARY: Commenter (4) suggested that the added language in this section could be used to limit transparency. Specifically, commenter (4) expressed concerns with the idea that an applicant can consider parts of an application confidential since applications and all associated third-party reports have always been public information.

STAFF RESPONSE: Staff generally agrees with Commenter. As proposed below, the changes to the rule as originally proposed may limit the availability of information publicly available. However, the need for this language change is motivated by recent changes in Texas law and the need to merge information protections with the policy embodied in Tex. Gov't Code §2306.6717(a)(2), that the entire Tax Credit Application and supporting documents and exhibits must be posted on TDHCA's website. To best accommodate these policies, Staff proposes to make use of the option available in the Texas Uniform Trade Secret Act ("TUTSA") for information owners to grant express or implied consent to disclose a trade secret. Accordingly, Staff proposes changes to the language as proposed, to require written certification from the Applicant that it has obtained consent from the authors of the reports containing any protected information, to publish those reports on the TDHCA website and to use the information for authorized purposes.

"(d) Public Information Requests. Pursuant to Tex. Gov't Code, §2306.6717, any pre-application and any full Application, including all supporting documents and exhibits, must be made available to the public, in their entirety, on the Department's website. The filing of a pre-application or Application with the Department shall be deemed as consent to the release of any and all information contained therein, including supporting documents and exhibits. As part of its certifications, the Applicant shall certify that the authors of the reports and other information and documents submitted with the Application have given their consent to the Applicant to submit all reports and other information and documents to the Department, and for the Department to publish anything submitted with the Application on its website and use such information and documents for authorized purposes."

BOARD RESPONSE: Accepted Staff's recommendation.

3. §10.3 - Subchapter A - General - Definition of Development Site and Use Throughout Rules (32)

COMMENT SUMMARY: Commenter (32) asserted that the definition of Development Site and its use throughout the Department's rules with regard to distances to either site amenities or undesirable site features, or its proximity within a census tract need to be consistent. Specifically, commenter (32) stated that all measurements or census tract determinations should include ingress/egress or other easements that are requirements for the development and that any inconsistencies between site control and development site should be addressed between pre-application and full application so that they are consistent at full application.

STAFF RESPONSE: The suggestion proposed by the commenter would require a thorough re-evaluation of all subchapters under Chapter 10 in order to determine what specific changes would need to be made to the definition of Development Site and the implication of those changes throughout the rule. Staff believes that such re-evaluation would be substantive and likely to garner additional public comment that is not able to be considered at this point in the rule-making timeline. This is something that could benefit from ongoing discussion throughout the upcoming program year.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

4. §10.3(122) - Subchapter A - Definitions - Supportive Housing (27), (28), (29)

COMMENT SUMMARY: Commenters (27), (28), (29) expressed support for the Department's work on the revisions to this definition to be reflective of true supportive housing but indicated that further modifications are necessary to ensure that the program works for developers that have a long track record and proven model of delivering this type of housing. Commenter (27) stated that the appropriate goal of many supportive housing residents isn't necessarily to move on to other housing and that the tax credit program supports permanent supportive housing and further suggested the reference to support services post residency be removed. Moreover, commenters (27), (29) indicated that 24-7 support services is cost prohibitive and atypical of many of these kinds of developments and that many can effectively serve such individuals without 24-7 support. Lastly, commenters (27), (29) stated that supportive housing developments are not financially feasible without additional sources of funding and that while project economics typically do not support amortizing permanent debt, "soft" cash flow loans are an essential tool to have available. In line with these suggestions, commenter (27), along with commenters (28), (29) recommended the following modifications to the definition:

"(122) Supportive Housing--A residential rental Development that is:

(A) intended for occupancy by households in need of specialized and specific non-medical services in order to maintain independent living;

(B) the provision of services are provided primarily on-site by the Applicant, an Affiliate of the Applicant or a third party provider. The service provider must be able to demonstrate an established and compliant track record of providing such services in residential settings for at least three years prior to the application date;

(C) the services offered must include case management and tenant services that either aid tenants in addressing debilitating conditions or assist tenants in securing the skills, assets, and connections needed for independent living. Resident populations primarily include the homeless and those at-risk of homelessness; and

(D) the Applicant, General Partner, or Guarantor must meet the following criteria:

(i) demonstrate that it, alone or in partnership with a third party provider, has at least three years experience in developing and operating housing similar to the proposed housing;

(ii) set aside at least 20% of the Units in the Development for households that meet the definition of "homeless" as defined by the McKinney-Vento Homeless Assistance Act, as amended by the Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act, 42 USC 11302 and 42 USC 11360;

(iii) provide evidence of a history of fundraising activities sufficient to fill unanticipated operating losses; and

(E) is not financed by any unaffiliated third-party permanent foreclosable, must-pay debt, unless the source of the debt is (i) federal funding, or (ii) a performance-based forgivable loan or grant to an affiliate of the Applicant which is re-loaned to the Applicant to re-characterize the grant as a loan consistent with the IRS Audit Technique Guide. Any amendment to an Application or LURA resulting in the addition of debt prohibited under this definition will result in the revocation of IRS Form(s) 8609."

STAFF RESPONSE: In response to the commenters, there is no established standard for what constitutes an established and compliant track record as it relates to services provided on-site. Staff proposes the following modification to subparagraph (B) of the definition:

"(B) the provision of services are provided primarily on-site by the Applicant, an Affiliate of the Applicant or a third party provider and the service provider must be able to demonstrate a record of providing substantive services similar to those proposed in the subject Application in residential settings for at least three years prior to the Application Acceptance Period;"

In response to those suggestions proposed by the commenters for subparagraph (C), staff agrees and has made the change accordingly. For those suggestions pertaining to (D)(ii), staff does not believe it is appropriate to effectively create a set-aside within a set-aside and believes the inclusion of such requirement is a new concept that would likely solicit additional public comment that would need to be considered. Staff believes the language under subparagraph (C) that speaks to resident populations primarily including those homeless or at-risk of homelessness generally addresses the comment raised.

As to the comments that pertain to subparagraph (E), staff is trying to prohibit putting any hard debt in a transaction and using an affiliate to do so. The language proposed by staff addresses this concern and the concern raised by the commenter. Staff does not believe the other changes proposed by the commenter are necessary and believes the definition as originally proposed captures how staff will evaluate the funding sources represented in the application. Moreover, staff has added the clarifying language proposed by the commenter regarding the issuance of 8609s if additional debt is provided that violates the provisions in this definition.

"(E) is not financed, except for construction financing, with any debt containing foreclosure provisions or debt that contains must-pay repayment provisions (including cash-flow debt). Permanent foreclosable, must-pay debt is permissible if sourced by federal funds, but the Development will not be exempted from Subchapter D of this chapter (relating to Underwriting and Loan Policy). Debt meeting this criteria may be provided by an Affiliate. Any amendment to an Application or LURA resulting in the addition of debt prohibited under this definition will result in the revocation of IRS Form(s) 8609."

BOARD RESPONSE: Accepted Staff's recommendation, but made the following revisions to subparagraph (E) of the Supportive Housing definition, in §10.3(122):

(E) is not financed, except for construction financing, with any debt containing foreclosure provisions or debt that contains must-pay repayment provisions (including cash-flow debt). Permanent foreclosable, must-pay debt is permissible if sourced by federal funds, but the Development will not be exempted from Subchapter D of this chapter (relating to Underwriting and Loan Policy). In addition, permanent foreclosable, cash-flow debt provided by an Affiliate is permissible if originally sourced from charitable contributions or pass-through local government non-federal funds. Any amendment to an Application or LURA resulting in the addition of debt prohibited under this definition will result in the revocation of IRS Form(s) 8609.

5. §10.3(98) - Subchapter A - Definitions - Unstabilized Development (40)

COMMENT SUMMARY: Commenter (40) recommended the following modification to the definition on the basis that it is too restrictive and removing the language will open up more markets for much needed affordable housing.

"(141) 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. 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."

STAFF RESPONSE: Staff believes that some indication of stabilized occupancy is necessary and achieving 90% occupancy should not be a one-time reflection. In response to the commenter staff has adjusted this definition to reflect 90% occupancy for at least 90 days and believes that the modification will still open up more markets.

BOARD RESPONSE: Accepted Staff's recommendation.

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

§10.1.Purpose.

This chapter applies to an award of multifamily development funding or other assistance including the award of Housing Tax Credits by the Texas Department of Housing and Community Affairs (the "Department") and establishes the general requirements associated in making such awards. Applicants pursuing such assistance from the Department are required to certify, among other things, that they have familiarized themselves with the rules that govern that specific program including, but not limited to, Chapter 1 this title (relating to Administration), Chapter 8 of this title (relating to 811 Project Rental Assistance Program Rule), Chapter 11 of this title (relating to Housing Tax Credit Program Qualified Allocation Plan), Chapter 12 of this title (relating to Multifamily Housing Revenue Bond Rules), Chapter 13 (relating to Multifamily Direct Loan Rule), and other Department rules. This chapter does not apply to any project-based rental assistance or operating assistance programs or funds unless incorporated by reference in whole or in part in a Notice of Funding Availability ("NOFA") or rules for such a program except to the extent that Developments receiving such assistance and otherwise subject to this chapter remain subject to this chapter.

§10.2.General.

(a) 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, rent and income limits, 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 multifamily rules 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 multifamily rules to each specific situation as it is presented in the submitted 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 independently perform the necessary due diligence to research, confirm, and verify any data, opinions, interpretations or other information upon which Applicant bases an Application. The provisions of the rules, including the Qualified Allocation Plan, are controlling and supersede any and all staff guidance. If there is a disagreement as to how a provision of a rule ought to be applied, it is the province of the Board, not staff, to make a final determination as to its interpretation of its rules.

(b) Board Standards for Review. Some issues may require or benefit from board review. The Board is not constrained to a particular standard, and while its actions on one matter are not binding as to how it will address another matter, the Board does seek to promote consistency with its policies, including the policies set forth in this chapter.

(c) Data. Where this chapter requires the use of American Community Survey data, the Department shall use the most current data available as of October 1, 2017, unless specifically otherwise provided in federal or state law or in the rules. All American Community Survey data must be 5-year estimates, unless otherwise specified. The availability of more current data shall be disregarded. Where other data sources are specifically required, such as Neighborhoodscout, the data available after October 1 but before the Application Acceptance Period, will be permissible. The NeighborhoodScout report submitted in the Application must include the report date.

(d) Public Information Requests. Pursuant to Tex. Gov't Code, §2306.6717, any pre-application and any full Application, including all supporting documents and exhibits, must be made available to the public, in their entirety, on the Department's website. The filing of a pre-application or Application with the Department shall be deemed as consent to the release of any and all information contained therein, including supporting documents and exhibits. As part of its certifications, the Applicant shall certify that the authors of the reports and other information and documents submitted with the Application have given their consent to the Applicant to submit all reports and other information and documents to the Department, and for the Department to publish anything submitted with the Application on its website and use such information and documents for authorized purposes.

(e) Responsibilities of Municipalities and Counties. In providing resolutions regarding housing de-concentration issues, threshold requirements, or scoring criteria, municipalities and counties should consult their own staff and legal counsel as to whether such resolution(s) 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, any current Assessment of Fair Housing, 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.

(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 or otherwise required in statute deadlines are based on calendar days.

§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. Adaptive Reuse Developments will be considered as New Construction.

(2) Administrative Deficiencies--Information requested by Department staff that staff requires to clarify or explain one or more inconsistencies; 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. A matter may begin as an Administrative Deficiency but later be determined to have constituted a Material Deficiency. Any missing item(s) relating to a scoring item will be deemed by staff to have constituted a Material Deficiency that supports the non-award of the points. By way of example, if an Applicant checks a box for three points for a particular scoring item but provides supporting documentation that would support two points, staff would treat this as an inconsistency and issue an Administrative Deficiency which might ultimately lead to a correction of the checked boxes to align with the provided supporting documentation and support an award of two points. However, if the supporting documentation was missing altogether, this could not be remedied and the point item would be assigned no points.

(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 have undertaken or 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 any 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, by way of illustration, 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 where such powers have been specifically delegated to one or more members, 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) 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.

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

(32) 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.

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

(34) 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 . The Developer may or may not be a Related Party or Principal of the Owner.

(35) 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.

(36) 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.

(37) 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)

(38) Development Consultant or Consultant--Any Person who provides professional or consulting services relating to the filing of an Application, or post award documents as required by the program.

(39) 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)

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

(41) 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.

(42) 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 provisions in Chapter 13 of this title (relating to Multifamily Direct Loan Rule) and the NOFA under which they are awarded, the Contract or the loan documents. The tax-exempt bond program is specifically excluded.

(43) 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.

(44) 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.

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

(46) 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 certain 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.

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

(48) 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.

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

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

(51) 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.

(52) 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.

(53) General Contractor (including "Contractor")--One who contracts to perform 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.

(54) 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.

(55) 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.

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

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

(58) Gross Demand--The sum of Potential Demand from the Primary Market Area ("PMA") and demand from other sources.

(59) 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.

(60) 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.

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

(62) HTC Property--See HTC Development.

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

(64) Historically Underutilized Businesses ("HUB")--An entity that is certified as such under and in accordance with Tex. Gov't Code, Chapter 2161.

(65) 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.

(66) 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).

(67) 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.

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

(69) 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.

(70) 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.

(71) 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)

(72) 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.

(73) 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.

(74) 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.

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

(76) 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.

(77) Market Study--See MarketAnalysis.

(78) 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.

(79) 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.

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

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

(82) 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.

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

(84) 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.

(85) 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.

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

(87) 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.

(88) Owner--See Development Owner.

(89) 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.

(90) 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.

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

(92) 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.

(93) Post Award Activities Manual--The manual produced and amended from time to time by the Department which explains the post award requirements and provides guidance for the filing of such documentation.

(94) 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.

(95) 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.

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

(97) Principal--Persons that will be capable of exercising 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.

(98) 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.

(99) 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.

(100) 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.

(101) 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.

(102) 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).

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

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

(105) 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.

(106) 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.

(107) 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.

(108) 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.

(109) 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.

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

(111) 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; and

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

(112) Report--See Underwriting Report.

(113) Request--See Qualified Contract Request.

(114) 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.

(115) 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.

(116) 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).

(117) 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.

(118) 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.

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

(120) 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.

(121) 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.

(122) Supportive Housing--A residential rental Development that is:

(A) intended for occupancy by households in need of specialized and specific non-medical services in order to maintain independent living;

(B) the provision of services are provided primarily on-site by the Applicant, an Affiliate of the Applicant or a third party provider and the service provider must be able to demonstrate a record of providing substantive services similar to those proposed in the subject Application in residential settings for at least three years prior to the Application Acceptance Period;

(C) the services offered must include case management and tenant services that either aid tenants in addressing debilitating conditions or assist tenants in securing the skills, assets, and connections needed for independent living. Resident populations primarily include the homeless and those at-risk of homelessness; and

(D) the Applicant, General Partner, or Guarantor must meet the following:

(i) demonstrate that it, alone or in partnership with a third party provider, has at least three years experience in developing and operating housing similar to the proposed housing;

(ii) demonstrate that it has secured sufficient funds necessary to maintain the Development's operations through the Affordability Period;

(iii) provide evidence of a history of fundraising activities sufficient to fill unanticipated operating losses; and

(E) is not financed, except for construction financing, with any debt containing foreclosure provisions or debt that contains must-pay repayment provisions (including cash-flow debt). Permanent foreclosable, must-pay debt is permissible if sourced by federal funds, but the Development will not be exempted from Subchapter D of this chapter (relating to Underwriting and Loan Policy). In addition, permanent foreclosable, cash-flow debt provided by an Affiliate is permissible if originally sourced from charitable contributions or pass-through local government non-federal funds. Any amendment to an Application or LURA resulting in the addition of debt prohibited under this definition will result in the revocation of IRS Form(s) 8609.

(123) 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).

(124) Target Population--The designation of types of housing populations shall include Elderly Developments, and those that are Supportive Housing. All others will be considered to serve general populations without regard to any subpopulations.

(125) 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.

(126) 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.

(127) 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.

(128) 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.

(129) 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 nonprofit 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.

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

(131) 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.

(132) Underwriter--The author(s) of the Underwriting Report.

(133) Underwriting 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.

(134) 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, 12 or 13 of this title that may be used, (but are not required to be used), to satisfy the requirements of the applicable rule.

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

(136) 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.

(137) 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.

(138) 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 ninety (90) days 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.

(139) 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 (116)(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.

(140) 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).

(141) 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 do not readily align with 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 8, 2017, 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 15, 2017, 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 14, 2017.

TRD-201705173

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: January 3, 2018

Proposal publication date: September 22, 2017

For further information, please call: (512) 936-7834


SUBCHAPTER B. SITE AND DEVELOPMENT REQUIREMENTS AND RESTRICTIONS

10 TAC §10.101

The Texas Department of Housing and Community Affairs (the "Department") adopts the amendments to 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 22, 2017, issue of the Texas Register (42 TexReg 4882).

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 Department accepted public comments between September 22, 2017, and October 12, 2017. The comments and responses include both administrative clarifications and revisions to the Housing Tax Credit Program Uniform Multifamily Rules 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 Uniform Multifamily Rules as presented to the Board in September, such changes are indicated.

The Board approved the final order adopting the amendments on November 9, 2017. The Board made modifications to §10.101(b)(8), prior to adoption.

The Governor made no changes.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS

Public comments were accepted through October 12, 2017, with comments received from (2) State Representative Garnet Coleman, (4) Brownstone Affordable Housing, Leslie Holleman & Associates, Evolie Housing Partners, and Mears Development and Construction, Inc., (5) Alyssa Carpenter, (6) Texas Affiliation of Affordable Housing Providers, (8) Tim Smith, (18) National Church Residences, (27) Foundation Communities, (28) New Hope Housing, (30) Lisa Vecchietti, (31) BETCO, (32) Texas Coalition of Affordable Developers, (34) Purple Martin Real Estate, (39) JES Dev. Co, (40) The NuRock Companies, and (41) Texas Low Income Housing Information Service.

NOTE ON REASONED RESPONSE: In order to comply with the Texas Register's formatting guidelines, the formatting of the Department's Reasoned Response has changed. All comment summaries and reasoned responses that included strikethrough formatting have been removed; all comment summaries and reasoned responses that included underline formatting have been removed; and all language regarding the color of track changes has been removed. The Department's original Reasoned Response, which includes proposed changes using track changes formatting, can be located in the TDHCA Governing Board Book for November 9, 2017.

6. §10.101(a)(2) - Subchapter B - Undesirable Site Features (4), (5), (6), (8), (28), (32), (34), (40), (41)

COMMENT SUMMARY: Commenter (4) requested there be a pre-determination process for unusual features that may or may not be deemed ineligible by the Board. Commenter (4) further suggested such pre-determinations be heard by the Board in January 2018 as reflected in 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 will be considered ineligible unless it is determined by the Board that information regarding mitigation of the applicable undesirable site feature(s) is sufficient and supports Site eligibility. Requests for pre-determinations on eligibility can be submitted beginning December 1, 2017, and will be heard by the Board in January 2018."

Commenters (4), (6), (8), (28), (32), (34), (40) recommended the undesirable site feature relating to high voltage transmission lines revert to 2016 language that referenced buildings within the easement of any such lines would be ineligible. Commenter (32) further suggested that Rehabilitation developments should be exempt from this requirement.

Commenter (4), (32) believed the 500 feet distance to an active railroad track is too large of a distance, particularly in urban core settings and recommended the distance be reduced to 100 feet since there can be effective mitigation for noise and safety concerns at that distance. Commenters (6), (8), (28), (32), (34), (40) similarly suggested a 100 foot distance and further indicated that HUD does not have a minimum distance but rather a decibel level requirement of less than 65 decibels which can be mitigated with the use of construction materials and/or architectural features.

Commenters (4) and (32) believed the added language to the heavy industry site feature relating to dust or fumes should be removed because it is overly broad and will create frivolous Requests for Administrative Deficiencies.

Commenter (5) indicated the added language relating to the high volume of rail or truck traffic to describe the heavy industry site feature is subjective particularly because it could describe a warehouse/distribution center or post office. Commenter (5) requested this site feature be clarified with a reference to local zoning because commercial areas and light industrial could also be construed to fall under this definition. Similarly, commenters (4), (6), (8), (28), (32), (34) expressed concern over the additional language on the basis that it is overly broad and seems to prohibit location of sites near job producing facilities such as retail distribution centers and suggested the language be removed.

Commenters (6), (8), (28) and (34) requested the language proposed to be added by staff as noted below, be removed.

"(2) Undesirable Site Features. Development Sites within the applicable distance of any of the undesirable features identified in subparagraphs (A) - (K) of this paragraph will be considered ineligible unless it is determined by the Board that information regarding mitigation of the applicable undesirable site feature(s) is sufficient and supports Site eligibility. 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…"

Commenter (5) stated the prohibition against developments located within 2 miles of oil refineries could affect the rebuilding of the Texas coast after Hurricane Harvey and specifically indicated the distance seems arbitrary and not based on safety and further recommended the distance be reduced or deleted.

Commenter (34) asserted that undesirable site features should not apply to rehabilitation developments with ongoing federal assistance and that subjecting existing developments to such features ignores the fact that such developments met applicable requirements at the time they were originally development and further prevents existing housing from receiving the rehabilitation it needs.

Commenter (41) expressed support for some of the proposed changes in this section but recommended the added language whereby the Department defers minimum separation distances to state or federal agencies who regulate proximity of the undesirable feature to residential development. Commenter (41) requested the language be modified to state that the Department only defer to such agency if that agency's minimum separation requirement is greater than that required by the Department.

STAFF RESPONSE: In response to commenter (4), the rule as drafted allows for an applicant to request a pre-determination regarding an undesirable site feature. As such requests are submitted to the Department, staff will review and present its recommendation to the Board at the next possible Board meeting. Staff does not believe binding such determinations to a specific Board meeting in the rule is necessary.

In response to commenters (4), (6), (8), (28), (32), (34), (40) regarding the high voltage transmission lines, staff believes the current language is appropriate since the 2016 language they requested is ineffective. The language would render development sites with buildings within the easement of such lines ineligible. Staff does not understand how there would ever be an instance where buildings are in the easement and believes the 100 feet distance from the residential building to the actual line to be most appropriate. In response to commenters (32), (3) who suggested that Rehabilitation developments should be exempt from this requirement, the rule currently allows for rehabilitation developments with ongoing and existing federal assistance to be granted an exemption by the Board. 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. Regarding commenters who suggested the language whereby staff could still recommend mitigation, as appropriate, for such rehabilitation developments, staff believes that with certain undesirable site features, this could be appropriate and considered on a case-by-case basis. For example, a property that receives ongoing federal assistance and could otherwise be granted an exemption, but that has a highly volatile pipeline on the development site, the requirement that the site conform to the Pipelines and Informed Planning Alliance could still be warranted.

In response to those commenters who believed the 500 feet distance to an active railroad track to be too large of a distance and recommended the distance be reduced to 100 feet, staff believes the 100 feet recommendation to be arbitrary and staff notes that this section includes an option for mitigation to be provided should the distance be less than 500 feet.

In response to commenters (4), (32) that requested the language to the heavy industry site feature relating to dust or fumes should be removed and for those commenters who believed the added language relating to the high volume of rail or truck traffic to describe the heavy industry site feature is subjective and should be clarified with a reference to local zoning, staff notes that the language in the rule that defers to federal or state agencies that regulate development in proximity to potential undesirable facilities, staff believes the added language relating to dust/fumes and high volume of rail or truck traffic can be removed and has modified this undesirable site feature description accordingly.

In response to commenter (5) who indicated the prohibition against developments located within 2 miles of oil refineries could affect the rebuilding of the Texas coast after Hurricane Harvey, staff does not believe it is appropriate to remove this undesirable feature completely from the rule in response to recent events, but that such developments be considered on a case-by-case basis by staff and the Board.

Staff appreciates the support expressed by commenter (41). Regarding the comments made by (41) and others, on the minimum separation distances by state or federal agencies who regulate proximity of the undesirable feature to residential development referenced in the rule, staff believes this to be appropriate in the absence of other evidence to indicate more appropriate separation distances.

BOARD RESPONSE: Accepted Staff's recommendation.

7. §10.101(a)(3) - Subchapter B - Undesirable Neighborhood Characteristics (2), (4), (5), (6), (8), (18), (28), (32), (34), (39), (41)

COMMENT SUMMARY: Commenters (4), (6), (8), (28), (32), (34), (39) recommended this section be removed in its entirety on the basis that the dismissal of the ICP litigation the Department should not continue to operate under the court-ordered Remedial Plan. Should the section not be removed in its entirety, then commenters (4), (6), (8), (28), (32), (34) recommended the following modifications be made:

"(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…

(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. Should neighborhoodscout.com indicate part I violent crime greater than 18 per 1,000 persons, the Applicant may present violent crime statistics 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, indicating that based on the population of the police beat or patrol area that violent crime is not greater than 18 per 1,000 persons. Such local law enforcement statistics will supersede the rating of neighborhoodscout.com and the Development Site will be not to have an undesirable neighborhood characteristic related to violent crime…

(vii) An assessment of school performance for each of the schools in the attendance zone containing the Development that did not achieve a 2017 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 or turnaround plan pursuant to 39.107 of the Texas Education Code in effect. This is not just the submission of the campus improvement plan, but an update to the plan or if such update is not available, information from a school official that speaks to the likelihood of achieving Met Standard rating by the time the Development is placed in service; and.."

Commenter (5) asserted there are serious discrepancies between NeighborhoodScout data and actual police data and suggested that applicants should not be required to spend hundreds of dollars a month on a third-party commercial website that has inaccurate data and further requested that all references and requirements to NeighborhoodScout be removed from the Department's rules.

Commenter (18) requested that all undesirable neighborhood characteristics be removed from the rule on the basis that they eliminate the ability to serve many low-income neighborhoods and communities. Commenter (18) further suggested that the increased cost and number of hours in staff and applicant time associated with compiling and reviewing the mitigation necessary is a barrier and disservice for such communities throughout the state.

Commenter (2) suggested educational quality as an eligibility item should be more flexible and further recommended an application not be considered ineligible if the following alternatives are applicable:

the school district certifies that the school will achieve a D or better rating within three years of the date of the application;

the overall academic environment for the school is to be enhanced by a Turnaround Plan;

the district will institute a shift to a K-8 structure to serve that same attendance zone within three years of the date of the application;

the district will implement extended day pre-K to serve that same attendance zone within three years of the date of the application; or

residents have the option of attending an elementary, middle, or high school of their choice within the same district that has a D or better rating.

Commenter (2) indicated that because the rating system used by which to evaluate schools is constantly changing, it would be fair to allow schools to meet threshold within three years because of the time it takes to adjust to education plans and standards. The shift to a K-8 structure, according to commenter (2) has been proven to improve educational quality because it creates a more coherent learning environment. Commenter (2) further asserted that if school choices exist to attend qualifying schools then such schools should be allowed to be used for purposes of eligibility.

Commenters (28), (34) requested that single room occupancy developments be exempt from the school requirement of meeting standards (for purposes of eligibility) similar to that of Elderly Limitation developments.

Commenter (41) expressed support for the undesirable neighborhood characteristics as a means of determining a site's eligibility. Commenter (41) stated that such characteristics are the only controls that staff has on what the locational priorities are in awarding non-competitive tax credits and other multifamily programs. Commenter (41) recommended the school quality characteristic be modified to include an Index 1 threshold based on the average score by Uniform Service Region in conjunction with the Met Standard rating to ensure access to high quality education and further suggested the mitigation reflected in this section be required in order to meet this Index 1 threshold. Commenter (41) believed that in making these changes it would add meaning to the eligibility item.

STAFF RESPONSE: Staff disagrees with the recommendation of several commenters that the undesirable neighborhood characteristics be removed in their entirety. 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. 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.

To those commenters who expressed concern over the assessment tool used (i.e. NeighborhoodScout) to trigger the need for disclosure, staff notes that recognizing that how local police departments report crime differs from city to city, NeighborhoodScout is the common benchmark by which such evaluation can be performed. The rule indicates that local police data can be submitted as mitigation and has worked well in those instances where the actual data does not rise to the level reported by NeighborhoodScout and; therefore, staff recommends no changes.

In response to the suggestions by commenter (2), staff does not believe it has the ability to evaluate the suggested alternatives on the basis of whether they would be effective in overcoming school performance. Regarding the modification proposed by commenter (2) that would allow a school to achieve the Met Standard rating within 3 years of the award, staff believes such consideration is currently contemplated in the rule. Should the school quality undesirable characteristic be triggered, the mitigation in the rule allows for a school official to make a representation that, based on their assessment of the school's performance, they believe the school will achieve the desired rating by the time the proposed development would be placed into service. Staff agrees with the suggestion by some commenters to include progress made under the turnaround plan as mitigation and has modified the section accordingly.

Staff appreciates the support expressed by commenter (41). Regarding their recommendation to introduce an Index 1 score as a means of determining eligibility, staff believes that such change would likely solicit additional public comment and introduces a new concept not contemplated under the proposed amendment. Staff believes that such substantive change is something that could be addressed in a future rule making cycle with more stakeholder input.

In response to commenters (28), (34) requesting Single Room Occupancy developments be exempt from school quality, staff has concerns regarding this 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.

BOARD RESPONSE: Accepted Staff's recommendation.

8. §10.101(b)(4) - Subchapter B - Mandatory Development Amenities (4)

COMMENT SUMMARY: Commenter (4) requested clarification regarding the proposed changes to the requirement that all areas of the units having heating and air-conditioning; specifically whether exterior storage space on the patio/balcony needs to be air-conditioned.

STAFF RESPONSE: It was not staff's intent that exterior storage space on the patio/balcony be temperature-controlled; however, for clarification purposes staff recommends adding the phrase "excluding exterior storage space on an outdoor patio/balcony" to the item.

BOARD RESPONSE: Accepted Staff's recommendation.

9. §10.101(b)(5) - Subchapter B - Common Amenities (4), (6), (8), (32), (34), (43)

COMMENT SUMMARY: Commenters (4), (32), (34) requested the Limited Green Amenities be re-instated because it incentivizes using healthy finishing products and other things that make a property more efficient to operate. Similarly, commenters (6), (8) believed they should be reinstated because they contribute to the quality and long-term maintenance of developments. Commenter (34) suggested that such Limited Green Amenities should not be mandatory but should remain as options since they provide value to a development.

Commenter (43) expressed that there are opportunities to create further incentives for builders and recommended that the Passive Haus Standard be added to the list of Green Building Features for a development that incorporates the associated standards for such certification. Commenter (43) further suggested that a new section be added that includes Disaster Resilient Building Features that could reduce the magnitude of damages following a disaster.

STAFF RESPONSE: In response to commenters (4), (6), (8), (32), (34) suggesting the Limited Green Amenities be re-instated staff notes that there is not a prohibition against incorporating such features in the design of the development. The requirement in prior years was to include only a handful of such features, many of which had become industry standard. The inclusion of such amenities in a rule for developments that will be placed into service two years later becomes outdated quickly and requires extensive staff resources to maintain and continuously modify the list. Staff believes the current list of common amenities are sufficient for applicants to utilize based on the size of their development without the inclusion of the Limited Green Amenities, and that green building is still an option, for points, that can be selected.

In response to commenter (43) the suggested changes are substantive in nature that would necessitate additional public comment.

Staff recommends no changes based on these comments.

BOARD RESPONSE: Accepted Staff's recommendation.

10. §10.101(b)(1)(6)(B) - Subchapter B - Unit Requirements (27)

COMMENT SUMMARY: Commenter (27) suggested modifications to the list that would provide more flexibility to provide amenities that make the most sense based on the particular development. Commenter (27) added that their proposed change to the LED lighting option offers the resident more benefit than just providing such lighting in kitchen and living areas and further stated that recessed and track lighting alone does not offer any additional benefit unless they're LED and are more costly than traditional surface-mounted lighting fixtures.

"(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 (may be garages or carports, attached or freestanding) and include 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) shelving unit (0.5 point);

(xiii) LED lighting in all areas of the Unit (1 point);

(xiv) Thirty (30) year roof (0.5 point);

(xv) 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);

(xvi) Breakfast Bar (a space, generally between the kitchen and dining area, that includes an area for seating although actual seating such as bar stools does not have to be provided) (0.5 points);

(xvii) Walk-in closet in master bedroom (0.5 points);

(xviii) Electric Vehicle Charging Station (0.5 points);

(xix) Ceiling fans in all bedrooms (0.5 points);

(xx) Kitchen pantries (0.5 points); and

(xxi) Photovoltaic/Solar Hot Water Ready, consistent with Enterprise Green Communities scoring criteria (2 points)."

STAFF RESPONSE: Staff disagrees with the suggestion regarding the LED lighting since it is already a mandatory amenity that there be Energy-Star rated lighting in all Units which may include compact fluorescent or LED light bulbs. Absent any other comment to remove or modify this option, staff does not recommend any changes. Staff agrees with including the electric vehicle charging station as an option for developments. Since having at least one Energy-Star rated ceiling fan in the unit is already a mandatory amenity, should an applicant decide to include a ceiling fan in all bedrooms, staff sees the value in associating points with such amenity and has included this on the list. Staff believes that the majority, if not all, units should automatically include a kitchen pantry and does not believe there should be points associated with such item. As it relates to the photovoltaic/solar hot water ready option staff is reluctant to include something that requires familiarity with Enterprise Green standards without further evaluating how staff would monitor for such amenity or what the long-term cost-savings or other benefits to the tenant would be.

BOARD RESPONSE: Accepted Staff's recommendation.

11. §10.101(b)(8) - Subchapter B - Development Accessibility Requirements (18), (30), (31)

COMMENT SUMMARY: Commenter (18) asserted that while Fair Housing and Accessibility requirements were supposed to be implemented in 1991 it has been their experience that many of these properties were not built compliantly and, therefore, it is either physically impossible or cost prohibitive to implement the proposed visitability language in this section. Commenter (18) recommended that if the language remains, such applications should be allowed to request a waiver.

Commenter (30), (31) indicated that according to the Fair Housing Act Design Manual relating to usable kitchens and bathrooms, it states that dwelling units must contain usable kitchens and bathrooms such that an individual who uses a wheelchair can maneuver about the space. Commenter (30), (31) further asserted that while a half bath (powder room) is exempt, any bathroom with a toilet, sink and tub/shower will have to be wheelchair accessible which seems to go beyond the intent of the Department's visitability rule as described at roundtable discussions and Board meetings. Commenters (30) and (31) recommended the following modifications to this section:

"(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) Regardless of building type, all Units accessed by the ground floor or by elevator ("affected units") must comply with the visitability requirements in clauses (i) - (iii) of this subparagraph. Buildings occupied for residential use on or before March 13, 1991 are exempt from this requirement.

(i) All common use facilities must be in compliance with the Fair Housing Design Act Manual;

(ii) There must be an accessible or exempt route, as provided for in the Fair Housing Design Act Manual, from common use facilities to the affected units;

(iii) Each affected unit must include the features in subclauses (a) - (e) of this clause.

(a) at least one zero-step, accessible entrance;

(b) at least one visitable bathroom or half-bath with toilet and sink on the entry level.;

(c) the bathroom or half-bath must have the appropriate blocking relative to the toilet for the later installation of a grab bar, if ever requested by the tenant of that Unit;

(d) there must be an accessible route from the entrance to the bathroom or half-bath, and the entrance and bathroom must provide usable width; and

(e) light switches, electrical outlets, and thermostats on the entry level must be at accessible heights."

STAFF RESPONSE: In response to commenter (18), staff encourages any applicant proposing a development that is unable to comply to review 10 TAC §10.207 regarding the waiver process and engage staff early in such discussions. In response to the other comments received, staff notes that the proposed language does not change any Fair Housing requirements relating to the accessible routes in a development. The common amenities and external routes to units are already governed by the Fair Housing Act Design Manual and are not a part of the development's accessibility requirements noted in this section. Staff has proposed removal of the word "visitable" under paragraph (B)(iii)(b) since such term is not defined in the rules. In response to comments to remove references to the adherence of bathroom or half-baths on the entry level to the Fair Housing Act Design Manual, the language does not change the specifications relating to bathrooms or half-baths under 2010 ADA standards. Under the proposed rule, the bathrooms/powder rooms on the entry level are not required to have the turning radius for individuals in a wheelchair, but rather they must be on an accessible route, have 32-inch nominal clear width doorways and have switches, outlets, and controls in accessible locations. The Fair Housing Act Design Manual goes into greater detail regarding three possible dimensions for clear floor space that would make the bathroom usable (i.e. visitable) by someone in a wheelchair; however, none of the three options require the turning radius that is covered under 2010 ADA. While the Fair Housing Act Design Manual would not require clear space if it is the only bathroom on the entry level, it is the Department's position that the bathroom should be made usable should someone in a wheelchair need to be accommodated.

BOARD RESPONSE: The Governing Board, at the November 9, 2017, Governing Board Meeting, made a revision to §10.101(b)(8)(B)(ii):

(ii) To the extent required by the Fair Housing Design Act Manual, there must be an accessible or exempt route from common use facilities to the affected units;

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

§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 will be considered ineligible unless it is determined by the Board that information regarding mitigation of the applicable undesirable site feature(s) is sufficient and supports Site eligibility. 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; however, depending on the undesirable site feature(s) staff may recommend mitigation still be provided as appropriate. 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. If a state or federal cognizant agency would require a new facility under its jurisdiction to have a minimum separation from housing, the Department will defer to that agency and require the same separation for a new housing facility near an existing regulated or registered facility. 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 facility or sanitary landfill facility or illegal dumping sites (as such dumping sites are identified by the local municipality);

(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 industry (i.e. facilities that require extensive use of land and machinery, produce high levels of external noise such as manufacturing plants, or maintains fuel storage facilities (excluding gas stations);

(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 or render the Site inappropriate for housing use 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. For Competitive HTC Applications, an Applicant must disclose at pre-application as required by 11.8(b) of this title (relating to Pre-Application Requirements). For all other Applications, 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. An Applicant's own non-disclosure is not appealable as such appeal is in direct conflict with certifications made in the Application and within the control of the Applicant. 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. Schools with an application process for admittance, limited enrollment or other requirements that may prevent a child from attending will not be considered as the closest school or the school which attendance zone contains the site. The applicable school rating will be the 2017 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 mitigation pursuant to 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 a 2017 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 or turnaround plan pursuant to §39.107 of the Texas Education Code in effect. This is not just the submission of the campus improvement plan, but an update to the plan or if such update is not available, information from a school official that speaks to progress made under the plan as further indicated under subparagraph (D)(iv) of this paragraph; 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 sustained job growth and employment opportunities, career training opportunities or job placement services, evidence of gentrification in the area (including an increase in property values) 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 submitted, 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 2016 and 2017 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, plans to implement early childhood education, 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) 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 common areas above the ground 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 total 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 and meet the minimum Rehabilitation amounts identified in subparagraphs (A)-(C) of this paragraph. Such amounts must be maintained through the issuance of IRS Forms 8609. For Developments with multiple buildings that have varying placed in service dates, the earliest date will be used for purposes of establishing the minimum Rehabilitation amounts.

(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 bedrooms, the dining room and living room in Units must be wired with current cabling technology for data and phone;

(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 areas of the Unit (excluding exterior storage space on an outdoor patio/balcony) must have heating and air-conditioning; 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.

(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 all applicable accessibility standards, including those adopted by the Department, and where a specific space or size requirement for a listed amenity is not specified then the amenity must be reasonably adequate based on the Development size.. 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 and the amenities selected 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 available to all units via an accessible route.

(C) The common amenities and respective point values are set out in clauses (i) - (xxxi) of this subparagraph. 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 for entrance and exit areas, intended to provide access that is limited to the Development's tenancy (2 points);

(iii) Gazebo or covered pavilion w/sitting area (seating must be provided) (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). Grill must be permanently installed (no portable grills);

(vii) Swimming pool (3 points);

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

(ix) Furnished fitness center. Equipped with a variety of fitness equipment that includes at least one of the following for every 40 Units: stationary bicycle, elliptical trainer, treadmill, rowing machine, universal gym, multi-functional weight bench, stair-climber, or other similar equipment. Equipment shall be commercial use grade or quality. Fitness center must be located indoors or be a designated room with climate control. (2 points);

(x) Equipped business/computer center. Must be equipped with 1 computer for every 40 Units (maximum of 5 computers needed) loaded with basic applications/programs to enable email/internet access, word processing, Excel, etc., 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, board games, etc.) (2 points);

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

(xviii) 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);

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

(xx) 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 (xxi) of this subparagraph is not selected; or

(xxi) 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 (xx) of this subparagraph is not selected;

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

(xxiii) 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);

(xxiv) Community Theater Room equipped with a 52 inch or larger screen or projection with surround sound equipment; DVD player or a streaming service at no cost to tenants; and theater seating (3 points);

(xxv) Dog Park area that is fully enclosed (the perimeter fencing may be used for part of the enclosure) and intended for tenant owned dogs to run off leash (requires that the Development allow dogs) (1 point);

(xxvi) Wi-Fi (with coverage throughout the clubhouse and/or community building) (1 point);

(xxvii) Twenty-four hour, seven days a week monitored camera/security system in each building. Monitoring may be on-site or off-site. (3 points);

(xxiii) Bicycle parking that allows for, at a minimum, 1 bicycle for every 5 Units, within reasonable proximity to each residential building that allows for bicycles to be secured with lock (lock not required to be provided to tenant) (1 point);

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

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

(xxxi) 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 three categories: 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 two (2) points total under this clause.

(I) Enterprise Green Communities. 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.

(II) LEED. 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).

(III) ICC 700 National Green Building Standard. 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 (may be garages or carports, attached or freestanding) and include 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) shelving unit (0.5 point);

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

(xiv) Thirty (30) year roof (0.5 point);

(xv) 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);

(xvi) Breakfast Bar (a space, generally between the kitchen and dining area, that includes an area for seating although actual seating such as bar stools does not have to be provided) (0.5 points);

(xvii) Walk-in closet in master bedroom (0.5 points);

(xviii) Electric Vehicle Charging Station (0.5 points); and

(xix) Ceiling fans in all bedrooms (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) Regardless of building type, all Units accessed by the ground floor or by elevator ("affected units" must comply with the visitability requirements in clauses (i)-(iii) of this subparagraph. Design specifications for each item must comply with the standards of the Fair Housing Act Design Manual. Buildings occupied for residential use on or before March 13, 1991 are exempt from this requirement.

(i) All common use facilities must be in compliance with the Fair Housing Design Act Manual;

(ii) To the extent required by the Fair Housing Design Act Manual, there must be an accessible or exempt route from common use facilities to the affected units;

(iii) Each affected unit must include the features in subclauses (a) - (e) of this clause.

(I) at least one zero-step, accessible entrance;

(II) at least one bathroom or half-bath with toilet and sink on the entry level. The layout of this bathroom or half-bath must comply with one of the specifications set forth in the Fair Housing Act Design Manual;

(III) the bathroom or half-bath must have the appropriate blocking relative to the toilet for the later installation of a grab bar, if ever requested by the tenant of that Unit;

(IV) there must be an accessible route from the entrance to the bathroom or half-bath, and the entrance and bathroom must provide usable width; and

(V) light switches, electrical outlets, and thermostats on the entry level must be at accessible heights.

(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 (relating to Section 504 of the Rehabilitation Act of 1973 and the Fair Housing Act).

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 14, 2017.

TRD-201705174

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: January 3, 2018

Proposal publication date: September 22, 2017

For further information, please call: (512) 936-7834


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

10 TAC §§10.201 - 10.205, 10.207

The Texas Department of Housing and Community Affairs (the "Department") adopts the amendments to 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 - 10.205, 10.207 are adopted without changes to the text as published in the September 22, 2017, issue of the Texas Register (42 TexReg 4891) 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 Department accepted public comments between September 22, 2017, and October 12, 2017. The comments and responses include both administrative clarifications and revisions to the Housing Tax Credit Program Uniform Multifamily Rules 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 Uniform Multifamily Rules as presented to the Board in September, such changes are indicated.

The Board approved the final order adopting the amendments on November 9, 2017.

The Governor made no changes.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS

Public comments were accepted through October 12, 2017, with comments received from (19) Marilyn Hartman, (20) Disability Rights Texas, (21) Leslie Buck, (22) Meredith Blackburn, (23) Susan Raffle, and (24) Methodist Healthcare Ministries.

12. §10.204(16) - Subchapter C - Section 811 Project Rental Assistance Program (19), (20), (21), (22), (23), (24)

COMMENT SUMMARY: Commenter (19) indicated that removing the Section 811 program from threshold will directly hurt people with disabilities, including those with serious mental illness and further stated that there is a great shortage of housing with support services for such individuals. Commenter (19), (20) recommended that participation in the Section 811 program be reinstated. According to commenter (20) removing the program as a threshold item is a step backward in the state's efforts to move individuals with disabilities into the community and will result in a growing waiting list for such units. Similarly, commenters (21), (23) also requested participation in the program be reinstated as a threshold item. Commenter (22) indicated that eliminating the effort to increase the number of housing units would have disastrous effects on the severely mentally ill and asserted that there are negative consequences associated with cutting community-based resources such as the Section 811 program that will only cost taxpayers more and hinder much needed housing and services to the mentally ill. Commenter (24) suggested that applicants should be required to participate in the Section 811 program and that reducing the number of units available for Section 811 housing would only increase the state's waiting list for individuals who desperately need housing.

STAFF RESPONSE: In response to the concerns of the commenters, it is important to note that the Department is not closing the Section 811 PRA Program. Including the 811 as a threshold item resulted in federal regulatory consequences for Applicants and therefore has been removed from threshold requirements. Instead, staff has proposed moving the participation in the Section 811 PRA Program from Chapter 10 ("threshold") to the QAP and the Direct Loan Program ("scoring"). Given the competitive nature of the 9% HTC program and the Direct Loan program, staff believes that there is ample incentive for Applicants to participate in the program as Applicants that do not request the points may face a disadvantage in scoring. Staff expects the number of participating Applicants to continue at the same level as in previous years.

Staff recommends no changes based on these comments.

BOARD RESPONSE: Accepted Staff's recommendation.

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

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 14, 2017.

TRD-201705175

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: January 3, 2018

Proposal publication date: September 22, 2017

For further information, please call: (512) 936-7834


SUBCHAPTER E. POST AWARD AND ASSET MANAGEMENT REQUIREMENTS

10 TAC §§10.400 - 10.408

The Texas Department of Housing and Community Affairs (the "Department") adopts the amended 10 TAC Chapter 10, Subchapter E, §§10.400 - 10.408, concerning Post Award and Asset Management Requirements, with changes to text as published in the October 27, 2017, issue of the Texas Register (42 TexReg 5940).

REASONED JUSTIFICATION FOR THE RULE: The adopted rule further clarifies, corrects, and adds additional information to ensure accurate processing of post award activities and communicate more effectively with multifamily development owners regarding their responsibilities after funding or award by the Department. Post award activities include requests for action to be considered on developments awarded funding from the Department through the end of the affordability period.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS.

Comments were accepted from October 27, 2017, through November 27, 2017, with comments received from (1) Cynthia Bast on behalf of Locke Lord LLP, and (2) Jen Brewerton on behalf of the Texas Affiliation of Affordable Housing Providers ("TAAHP"). Comments are listed in order of appearance within the rule.

§10.405(b)(1)(A) - Non-Material Amendments

COMMENT SUMMARY: Commenter 1 stated that the rule is written in such a way to describe removal of the HUB itself from the LURA rather than describing removal of the LURA requirement for HUB participation. Commenter 2 agreed with the comments made by Commenter 1. Commenter 1 suggested clarifying the rule as follows:

"(A) HUB participation removal

(i) Removal of a HUB participation requirement will only be processed as a non-material LURA amendment after the issuance of 8609s and requires that the Executive Director find that:

(I) the HUB is requesting removal of its own volition or is being removed as the result of a default under the organizational documents of the Development Owner;

(II) the participation by the HUB has been substantive and meaningful, or would have been substantive or meaningful had the HUB not defaulted under the organizational documents of the Development Owner, enabling it to realize not only financial benefit but to acquire skills relating to the ownership and operating of affordable housing;

(III) where the HUB will be replaced as a general partner or special limited partner that is not a HUB and will sell its ownership interest, an ownership transfer request must be submitted as described in §10.406;"

STAFF RESPONSE: Staff agrees and adopts the suggested change as specified.

§10.406(f) - Ownership Transfers (Nonprofit)

COMMENT SUMMARY: Commenter 1 stated that participation by nonprofit organizations in a tax credit transaction where participation is worthy of points in the competitive process but does not result in the tax credits being awarded from the non-profit set-aside should be treated on the same terms as HUB participation that is worthy of points in the competitive process. Specifically, the rule makes clear that if a Development received tax credits from the non-profit set-aside, a Qualified Non-Profit Organization must participate in the ownership until the expiration of the extended use period. However, if the Development did not receive tax credits from the non-profit set-aside, the non-profit can withdraw from the ownership after the end of the 15-year Compliance Period, which is inconsistent with the treatment of HUBs.

Commenter 1 further states that if a HUB can withdraw from participation when it believes it is in its best interest, and given that the points for HUB participation and non-profit participation in the competitive process are derived from the same section of the QAP and are an "either/or" scenario whereby an Applicant receives points for HUB participation or non-profit participation, but not both, it seems inequitable to treat HUBs differently than non-profits. Commenter 1 requests that the rule be changed to allow a non-profit that is participating outside of the non-profit set-aside for tax credits be allowed to withdraw on the same terms that a HUB can withdraw.

STAFF RESPONSE: Staff considers the comment to be outside of the logical outgrowth of the published rule for public comment and that the implications could be significant without having provided the public an opportunity to comment on the proposed change. Therefore, staff is unable to make this adjustment at this time; however, staff will consider this comment in the coming year and will evaluate the concern expressed by the commenter. Staff recommends not change based on this comment.

Multiple Sections

COMMENT SUMMARY: Commenter 1 states that in various places throughout Subchapter E, staff has inserted language to the effect that any uncorrected issues of non-compliance "must be resolved to the satisfaction of the Department, or waived by the Board," before assistance is given. Commenter 1 states that recognizing that the Previous Participation Review rules in 10 TAC §1.301(a) acknowledges that certain uncorrected items will be excluded from consideration, it may be appropriate to have a cross-reference. Additional clarification from Commenter 1 revealed that the intent in making this comment was to tighten up the rule to reinforce that the events of noncompliance not taken into account for purposes of a Previous Participation review should also not be an impediment to requests for post award activities such as ownership transfers, amendments, etc.

STAFF RESPONSE: Staff believes that the rule as proposed, as well as the Previous Participation rule in 10 TAC §1.301(a) sufficiently addresses the commenter's concern. Staff recommends no change based on this comment.

The Board approved the final order adopting the amended 10 TAC Chapter 10, Subchapter E, §§10.400 - 10.408, concerning Post Award and Asset Management Requirements on December 14, 2017.

STATUTORY AUTHORITY. The amended sections are adopted pursuant to Tex. Gov't Code, §2306.053, which authorizes the Department to adopt rules.

The adopted amendments affect no other code, article or statute.

§10.400.Purpose.

The purpose of this Subchapter is to establish the requirements governing the post award and asset management activities associated with awards of multifamily development assistance pursuant to Tex. Gov't Code, Chapter 2306 and its regulation of multifamily funding provided through the Texas Department of Housing and Community Affairs (the "Department") as authorized by the legislature. This subchapter is designed to ensure that Developers and Development Owners of low-income Developments that are financed or otherwise funded through the Department maintain safe, decent and affordable housing for the term of the affordability period. Therefore, unless otherwise indicated in the specific section of this subchapter, any uncorrected issues of noncompliance outside of the corrective action period or outstanding fees (related to the Development subject to the request) owed to the Department, must be resolved to the satisfaction of the Department, or waived by the Board, before a request for any post award activity described in this subchapter will be acted upon.

§10.401.General Commitment or Determination Notice Requirements and Documentation.

(a) A Commitment or Determination Notice shall not be issued with respect to any Development for an unnecessary amount or where the cost for the total development, acquisition, construction or rehabilitation exceeds the limitations established from time to time by the Department and the Board.

(b) All Commitments or Determination Notices, whether reflected in the Commitment or Determination Notice or not, are made subject to full compliance with all applicable provisions of law and rule, including but not limited to the Qualified Allocation Plan, the Uniform Multifamily Rules, the Multifamily Housing Revenue Bond Rules, all provisions of Commitment and Contract, satisfactory completion of underwriting, and satisfactory resolution of any conditions of underwriting, award, and administrative deficiencies.

(c) The Department shall notify, in writing, the mayor, chief county judge, or other appropriate official of the municipality or county, as applicable, in which the Development is located informing him/her of the Board's issuance of a Commitment or Determination Notice, as applicable.

(d) The Department may cancel a Commitment, Determination Notice or Carryover Allocation prior to the issuance of IRS Form(s) 8609 (for Housing Tax Credits) or completion of construction with respect to a Development and/or apply administrative penalties if:

(1) the Applicant, Development Owner, or the Development, as applicable, fails after written notice and a reasonable opportunity to cure, to meet any of the conditions of such Commitment, Determination Notice or Carryover Allocation or any of the undertakings and commitments made by the Development Owner in the Application process for the Development;

(2) any material statement or representation made by the Development Owner or made with respect to the Development Owner or the Development is untrue or misleading;

(3) an event occurs with respect to the Applicant or the Development Owner which would have made the Application ineligible for funding pursuant to Subchapter C of this chapter (relating to Application Submission Requirements, Ineligibility Criteria, Board Decisions and Waiver of Rules if such event had occurred prior to issuance of the Commitment, Determination Notice or Carryover Allocation; or

(4) the Applicant, Development Owner, or the Development, as applicable, fails after written notice and a reasonable opportunity to cure, to comply with this chapter or other applicable Department rules, procedures, or requirements of the Department.

§10.402.Housing Tax Credit and Tax Exempt Bond Developments.

(a) Commitment. For Competitive HTC Developments, the Department shall issue a Commitment to the Development Owner which shall confirm that the Board has approved the Application and state the Department's commitment to make a Housing Credit Allocation to the Development Owner in a specified amount, subject to the feasibility determination described in Subchapter D of this chapter (relating to Underwriting and Loan Policy) and the determination that the Development satisfies the requirements of this chapter and other applicable Department rules. The Commitment shall expire on the date specified therein, which shall be thirty (30) calendar days from the effective date, unless the Development Owner indicates acceptance by executing the Commitment, pays the required fee specified in §10.901 of this Chapter (relating to Fee Schedule), and satisfies any conditions set forth therein by the Department. The Commitment expiration date may not be extended.

(b) Determination Notices. For Tax Exempt Bond Developments, the Department shall issue a Determination Notice which shall confirm the Board's determination that the Development satisfies the requirements of this chapter as applicable and other applicable Department rules in accordance with the §42(m)(1)(D) of the Internal Revenue Code (the "Code"). The Determination Notice shall also state the Department's determination of a specific amount of housing tax credits that the Development may be eligible for, subject to the requirements set forth in the Department's rules, as applicable. The Determination Notice shall expire on the date specified therein, which shall be thirty (30) calendar days from the effective date, unless the Development Owner indicates acceptance by executing the Determination Notice, pays the required fee specified in §10.901 of this chapter, and satisfies any conditions set forth therein by the Department. The Determination Notice expiration date may not be extended without prior Board approval for good cause. The Determination Notice will terminate if the Tax Exempt Bonds are not closed within the timeframe provided for by the Board on its approval of the Determination Notice, by the expiration of the Certificate of Reservation associated with the Determination Notice, or if the financing or Development changes significantly as determined by the Department pursuant to its rules and any conditions of approval included in the Board approval or underwriting report.

(c) Tax Credit Amount. The amount of tax credits reflected in the IRS Form(s) 8609 may be greater or less than the amount set forth in the Determination Notice based upon the Department's and the bond issuer's determination as of each building's placement in service. Any increase of tax credits will only be permitted if it is determined necessary by the Department, as required by §42(m)(2)(D) of the Code through the submission of the Cost Certification package. Increases to the amount of tax credits that exceed 110 percent of the amount of credits reflected in the Determination Notice must be approved by the Board. Increases to the amount of tax credits that do not exceed 110 percent of the amount of credits reflected in the Determination Notice may be approved administratively by the Executive Director and are subject to the Credit Increase Fee as described in §10.901 of this chapter.

(d) Documentation Submission Requirements at Commitment of Funds. No later than the expiration date of the Commitment (or no later than December 31 for Competitive HTC Applications, whichever is earlier) or Determination Notice, the documentation described in paragraphs (1) - (6) of this subsection must be provided. Failure to provide these documents may cause the Commitment or Determination Notice to be rescinded:

(1) for entities formed outside the state of Texas, evidence that the entity filed a Certificate of Application for foreign qualification in Texas, a Franchise Tax Account Status from the Texas Comptroller of Public Accounts and a Certificate of Fact from the Office of the Secretary of State. If the entity is newly registered in Texas and the Franchise Tax Account Status or Certificate of Fact are not available, a statement can be provided to that effect;

(2) for Texas entities, a copy of the Certificate of Filing for the Certificate of Formation from the Office of the Secretary of State; a Certificate of Fact from the Secretary of State and a Franchise Tax Account Status from the Texas Comptroller of Public Accounts. If the entity is newly registered and the Certificate of Fact and the Franchise Tax Account Status are not available, a statement can be provided to that effect;

(3) evidence that the signer(s) of the Commitment or Determination Notice have sufficient authority to sign on behalf of the Applicant in the form of a corporate resolution which indicates the sub-entity in Control consistent with the entity contemplated and described in the Application;

(4) evidence of final zoning that was proposed or needed to be changed pursuant to the Development plan;

(5) evidence of satisfaction of any conditions identified in the Credit Underwriting Analysis Report or any other conditions of the award required to be met at Commitment or Determination Notice; and

(6) documentation of any changes to representations made in the Application subject to §10.405 of this chapter (relating to Amendments and Extensions).

(7) for Applications underwritten with a property tax exemption, documentation must be submitted in the form of a letter from an attorney identifying the statutory basis for the exemption and indicating that the exemption is reasonably achievable, subject to appraisal district review. Additionally, any Development with a proposed Payment in Lieu of Taxes ("PILOT") agreement must provide evidence regarding the statutory basis for the PILOT and its terms.

(e) Post Bond Closing Documentation Requirements.

(1) Regardless of the issuer of the bonds, no later than 60 calendar days following closing on the bonds, the Development Owner must submit the documentation in subparagraphs (A) - (E) of this paragraph.

(A) a training certificate from a Department approved "property owner and manager Fair Housing trainer" showing that the Development Owner and on-site or regional property manager has attended at least five (5) hours of Fair Housing training. The certificate must not be older than two years from the date of submission;

(B) a training certificate from a Department approved "architect and engineer Fair Housing trainer" showing that the lead architect or engineer responsible for certifying compliance with the Department's accessibility and construction standards has attended at least five (5) hours of Fair Housing training. The certificate must not be older than two years from the date of submission;

(C) evidence that the financing has closed, such as an executed settlement statement;

(D) a confirmation letter from the Compliance Division evidencing receipt of the Electronic Compliance Reporting Filing Agreement and the Owner's Designation of Administrator of Accounts forms pursuant to §10.607(a); and

(E) initial construction status report consisting of paragraphs (1) - (5) as outlined in §10.402(h) of this chapter (relating to Construction Status Reports).

(f) Carryover (Competitive HTC Only). All Developments which received a Commitment, and will not be placed in service and receive IRS Form(s) 8609 in the year the Commitment was issued, must submit the Carryover documentation, in the form prescribed by the Department in the Carryover Manual, no later than the Carryover Documentation Delivery Date as identified in §11.2 of this title (relating to Program Calendar for Competitive Housing Tax Credits) of the year in which the Commitment is issued pursuant to §42(h)(1)(C) of the Code.

(1) Commitments for credits will be terminated if the Carryover documentation has not been received by this deadline, unless an extension has been approved. This termination is final and not appealable, and immediately upon issuance of notice of termination, staff is directed to award the credits to other qualified Applicants on the approved waiting list.

(2) If the interim or permanent financing structure, syndication rate, amount of debt or syndication proceeds are finalized but different at the time of Carryover from what was proposed in the original Application, applicable documentation of such changes must be provided and the Development may be re-evaluated by the Department for a reduction of credit or change in conditions.

(3) All Carryover Allocations will be contingent upon the Development Owner providing evidence that they have and will maintain Site Control through the 10 Percent Test or through the anticipated closing date, whichever is earlier. For purposes of this paragraph, any changes to the Development Site acreage between Application and Carryover must be addressed by written explanation or, as appropriate, in accordance with §10.405.

(4) Confirmation of the right to transact business in Texas, as evidenced by the Franchise Tax Account Status (the equivalent of the prior Certificate of Account Status) from the Texas Comptroller of Public Accounts and a Certificate of Fact from the Office of the Secretary of State must be submitted with the Carryover Allocation.

(g) 10 Percent Test (Competitive HTC Only). No later than July 1 of the year following the submission of the Carryover Allocation Agreement or as otherwise specified in the applicable year's Qualified Allocation Plan, under §11.2, documentation must be submitted to the Department verifying that the Development Owner has expended more than 10 percent of the Development Owner's reasonably expected basis, pursuant to §42(h)(1)(E)(i) and (ii) of the Code (as amended by The Housing and Economic Recovery Act of 2008), and Treasury Regulations, §1.42-6. The Development Owner must submit, in the form prescribed by the Department, documentation evidencing paragraphs (1) - (8) of this subsection, along with all information outlined in the Post Award Activities Manual. Satisfaction of the 10 Percent Test will be contingent upon the submission of the items described in paragraphs (1) - (8) of this subsection as well as all other conditions placed upon the Application in the Commitment. Requests for an extension will be reviewed on a case by case basis as addressed in §10.405(c) of this Subchapter and 10 TAC §13.12(1) of this title, as applicable, and a point deduction evaluation will be completed in accordance with Tex. Gov't Code §2306.6710(b)(2) and §11.9(f) of this title. Documentation to be submitted for the 10 Percent Test includes:

(1) an Independent Accountant's Report and Taxpayer's Basis Schedule form. The report must be prepared on the accounting firm's letterhead and addressed to the Development Owner or an Affiliate of the Development Owner. The Independent Accountant's Report and Taxpayers Basis Schedule form must be signed by the Development Owner. If, at the time the accountant is reviewing and preparing their report, the accountant has concluded that the taxpayer's reasonably expected basis is different from the amount reflected in the Carryover Allocation agreement, then the accountant's report should reflect the taxpayer's reasonably expected basis as of the time the report is being prepared;

(2) any conditions of the Commitment or Real Estate Analysis underwriting report due at the time of 10% Test submission;

(3) evidence that the Development Owner has purchased, transferred, leased, or otherwise has ownership of the Development Site. The Development Site must be identical to the Development Site that was submitted at the time of Application submission. For purposes of this paragraph, any changes to the Development Site acreage between Application and 10 Percent Test must be addressed by written explanation or, as appropriate, in accordance with §10.405 of this subchapter;

(4) a current survey or plat of the Development Site, prepared and certified by a duly licensed Texas Registered Professional Land Surveyor. The survey or plat must clearly delineate the flood plain boundary lines and show all easements and encroachments;

(5) for New Construction, Reconstruction, and Adaptive Reuse Developments, a certification from a Third Party civil engineer or architect stating that all necessary utilities will be available at the Development Site and that there are no easements, licenses, royalties, or other conditions on or affecting the Development that would materially or adversely impact the ability to acquire, develop, and operate as set forth in the Application. Copies of supporting documents may be required by the Department;

(6) for the Development Owner and on-site or regional property manager, a training certificate from a Department approved "property owner and manager Fair Housing trainer" showing that the Development Owner and on-site or regional property manager attended at least five (5) hours of Fair Housing training. For architects and engineers, a training certificate from a Department approved "architect and engineer Fair Housing trainer" showing that the lead architect or engineers responsible for certifying compliance with the Department's accessibility and construction standards has attended at least five (5) hours of Fair Housing training. Certifications required under this paragraph must not be older than two years from the date of submission of the 10 Percent Test Documentation;

(7) a Certification from the lender and syndicator identifying all known Guarantors. If identified Guarantors have changed from the Guarantors or Principals identified at the time of Application, a non-material amendment must be requested by the Applicant in accordance with §10.405 of this subchapter, and the new Guarantors or Principals must be reviewed in accordance with Chapter 1, Subchapter C of this title (relating to Previous Participation Reviews); and

(8) a Development Owner's preliminary construction schedule or statement showing the prospective construction loan closing date, construction start and end dates, prospective placed in service date for each building, and planned first year of the credit period.

(h) Construction Status Report (All Multifamily Developments). All multifamily developments must submit a construction status report. Construction status reports shall be due by the tenth day of the month following each reporting quarter's end (January, April, July, and October) and continue on a quarterly basis until the entire development is complete as evidenced by one of the following: certificates of occupancy for each building, the Architect's Certificate(s) of Substantial Completion (AIA Document G704) for the entire development, the final Application and Certificate for Payment (AIA Document G702 and G703), or an equivalent form approved for submission by the construction lender and/or investor. For Competitive Housing Tax Credit Developments, the initial report must be submitted no later than October 10th following the year of award (this includes Developments funded with HTC and TDHCA Multifamily Direct Loans), and for Developments awarded under the Department's Multifamily Direct Loan programs only, the initial report must be submitted 90 calendar days after loan closing. For Tax Exempt Bond Developments, the initial construction status report must be submitted as part of the Post Bond Closing Documentation due no later than 60 calendar days following closing on the bonds as described in §10.402(e) of this section. The initial report for all multifamily Developments shall consist of the items identified in paragraphs (1) - (5) of this subsection, unless stated otherwise. All subsequent reports shall contain items identified in paragraphs (3) - (5) of this paragraph and must include any changes or amendments to items in paragraphs (1) and (2) if applicable:

(1) the executed partnership agreement with the investor (identifying all Guarantors) or, for Developments receiving an award only from the Department's Direct Loan Programs, other documents setting forth the legal structure and ownership. If identified Guarantors or Principals of a Guarantor entity were not already identified as a Principal of the Owner, Developer, or Guarantor at the time of Application, a non-material amendment must be requested in accordance with §10.405 of this subchapter and the new Guarantors and all of its Principals, as applicable, must be reviewed in accordance with Chapter 1, Subchapter C of this title (relating to Previous Participation Reviews);

(2) the executed construction contract and construction loan agreement. If the loan has not closed, the anticipated closing date must be provided and, upon closing, the agreement must be provided to the Department;

(3) the most recent Application and Certificate for Payment (AIA Document G702 and G703) certified by the Architect of Record (or equivalent form approved for submission by the construction lender and/or investor); and

(4) all Third Party construction inspection reports not previously submitted. If the lender and/or investor does not require third party construction inspection reports, the Development Owner must hire a third party inspector to perform these inspections on a quarterly basis and submit the reports to the Department. Third Party construction inspection reports must include, at a minimum, current photographs of the construction site and exterior and interior of buildings, an estimated percentage of construction completion as of the date of the site visit, identification of construction delays and other relevant progress issues, if any, and the anticipated construction completion date;

(5) Minority Owned Business Report (HTC only) showing the 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 required and further described in Tex. Gov't Code §2306.6734.

(i) LURA Origination.

(1) The Development Owner must request a copy of the HTC LURA as directed in the Post Award Activities Manual. The Department will draft a LURA for the Development Owner that will impose the income and rent restrictions identified in the Development's final underwriting report and other representations made in the Application, including but not limited to specific commitments to provide tenant services, to lease to Persons with Disabilities, and/or to provide specific amenities. After origination, the Department executed LURA and all exhibits and addendums will be sent to the Development Owner to execute and record in the real property records for the county in which the Development is located. The original or a copy of the recorded LURA must be returned to the Department no later than the end of the first year of the Credit Period. In general, no Housing Tax Credits are allowed to be issued for a building unless there is a properly executed and recorded LURA in effect at the end of the first year of the Credit Period. Nothing in this section negates a Development Owner's responsibility for full compliance with §42(h)(6) of the Code. The Department will not issue IRS Form(s) 8609 until it receives the original or a copy of the properly-recorded LURA, or has alternative arrangements which are acceptable to the Department and approved by the Executive Director.

(2) LURAs for Direct Loan awardees will be prepared by the Department's Legal Division and executed at loan closing.

(j) Cost Certification (Competitive and Non-Competitive HTC, and related activities only). The Department conducts a feasibility analysis in accordance with §42(m)(2)(C)(i)(III) of the Code and Subchapter D of this chapter (relating to Underwriting and Loan Policy) to make a final determination on the allocation of Housing Tax Credits. The requirements for cost certification include those identified in paragraphs (1) - (3) of this subsection.

(1) Development Owners must file cost certification documentation no later than January 15 following the first year of the Credit Period, as defined in §42(f)(1) of the Code.

(2) The Department will evaluate the cost certification documentation and notify the Development Owner of any additional required documentation needed to complete the review. The Department reserves the right to request additional documents or certifications as it deems necessary or useful in the determination of the Development's eligibility for a final Housing Tax Credit allocation amount. Any communication issued to the Development Owner pertaining to the cost certification documentation may also be sent to the syndicator.

(3) IRS Form(s) 8609 will not be issued until the conditions as stated in subparagraphs (A) - (G) of this paragraph have been met. The Development Owner has:

(A) provided evidence that all buildings in the Development have been placed in service by:

(i) December 31 of the year the Commitment was issued;

(ii) December 31 of the second year following the year the Carryover Allocation Agreement was executed; or

(iii) the approved Placed in Service deadline;

(B) provided a complete final cost certification package in the format prescribed by the Department. As used herein, a complete final cost certification package means a package that meets all of the Department's criteria with all required information and exhibits listed in clauses (i) - (xxxvi) of this subparagraph, and pursuant to the Post Award Activities Manual. If any item on this list is determined to be unclear, deficient, or inconsistent with the cost certification review completed by the Department, a Request for Information (RFI) will be sent to the Development Owner. Failure to respond to the requested information within a thirty (30) day period from the date of request may result in the termination of the cost certification review and request for 8609s and require a new request be submitted with a Cost Certification Extension Fee as described in Subchapter G of this chapter (relating to Fee Schedule, Appeals and Other Provisions).

(i) Owner's Statement of Certification;

(ii) Owner Summary & Organization Charts for the Owner, Developer, and Guarantors;

(iii) Evidence of Qualified Nonprofit or CHDO Participation;

(iv) Evidence of Historically Underutilized Business (HUB) Participation;

(v) Development Team List;

(vi) Development Summary with Architect's Certification;

(vii) Development Change Documentation;

(viii) As Built Survey;

(ix) Closing Statement;

(x) Title Policy;

(xi) Title Policy Update;

(xii) Placement in Service;

(xiii) Evidence of Placement in Service;

(xiv) Architect's Certification of Completion Date and Date Ready for Occupancy;

(xv) Auditor's Certification of Acquisition/Rehabilitation Placement in Service Election;

(xvi) Independent Auditor's Report;

(xvii) Independent Auditor's Report of Bond Financing;

(xviii) Development Cost Schedule;

(xix) Contractor's Application for Final Payment (G702/G703) for the General Contractor and all prime subcontractors;

(xx) Additional Documentation of Offsite Costs;

(xxi) Rent Schedule;

(xxii) Utility Allowances;

(xxiii) Annual Operating Expenses;

(xxiv) 30 Year Rental Housing Operating Pro Forma;

(xxv) Current Operating Statement in the form of a trailing twelve month statement;

(xxvi) Current Rent Roll;

(xxvii) Summary of Sources and Uses of Funds;

(xxviii) Financing Narrative;

(xxix) Final Limited Partnership Agreement with all amendments and exhibits;

(xxx) All Loan Agreements and Promissory Notes (except for Agreements and Notes issued directly by the Department);

(xxxi) Architect's Certification of Fair Housing Requirements;

(xxxii) Development Owner Assignment of Individual to Compliance Training;

(xxxiii) TDHCA Compliance Training Certificate (not older than two years from the date of cost certification submission);

(xxxiv) TDHCA Final Inspection Clearance Letter or evidence of submitted final inspection request to the Compliance Division;

(xxxv) Completion Certificate (TDHCA Issued Bonds Only); and

(xxxvi) Other Documentation as Required, including but not limited to conditions to be satisfied at cost certification as reflected in the Development's latest Underwriting Report;

(C) informed the Department of and received written approval for all amendments, extensions, and changes in ownership relating to the Development in accordance with §10.405 of this chapter (relating to Amendments and Extensions) and §10.406 of this chapter (relating to Ownership Transfers (§2306.6713));

(D) paid all applicable Department fees, including any past due fees;

(E) met all conditions noted in the Department underwriting report, Determination Notice, and Commitment;

(F) corrected all issues of noncompliance, including but not limited to noncompliance status with the LURA (or any other document containing an Extended Low-income Housing Commitment) or the program rules in effect for the subject Development, as described in this chapter. Developments in the corrective action period and/or with any uncorrected issues of noncompliance outside of the corrective action period or that have had a monitoring review where noncompliance was identified, will not be issued IRS Form(s) 8609s until all events of noncompliance are assessed, corrected, or otherwise approved by the Executive Award Review and Advisory Committee;

(G) completed an updated underwriting evaluation in accordance with Subchapter D of this chapter based on the most current information at the time of the review.

§10.403.Review of Annual HOME/NSP and National Housing Trust Fund Rents.

(a) Applicability. For participants of the Department's Multifamily HOME and NSP Direct Loan program, where Commitment of Funds occurred on or after August 23, 2013, the Department is required by 24 CFR §92.252(f) and for all NHTF participants by 24 CFR §93.302(c)(2), to review and approve or disapprove HOME/NSP/NHTF rents on an annual basis. The Department is also is required by 24 CFR §92.219 and §92.252(d)(4) to approve rents where Multifamily Direct Loan funds are used as HOME match. Development Owners must submit documentation for the review of HOME/NSP/NHTF rents by no later than June 1st of each year as further described in the Post Award Activities Manual.

(b) Documentation for Review. The Department will furnish an Annual Rent Approval Request packet for this purpose that will include a request for Development information and an Owner's proposed rent schedule and will require submission of a current rent roll and an approved utility allowance letter from the Department's Compliance Division. The Department may request additional documentation to perform a determination, as needed, including but not limited to annual operating statements, market surveys, or other information related to determining whether rents are sufficient to maintain the financial viability of a project or are in compliance with maximum rent limits.

(c) Review Process. Rents will be approved or disapproved within 30 days of receipt of all items required to be submitted by the Development Owner, and will be issued in the form of a signed letter from the Asset Management Division. Development Owners must keep copies of all approval letters on file at the Development site to be reviewed at the time of Compliance Monitoring reviews.

(d) Compliance. Development Owners for whom this section is applicable are subject to compliance under §10.622 under Subchapter F of this chapter (relating to Special Rules regarding Rents and Limit Violations) and may be subject to penalties under §10.624 of this chapter (relating to Events of Noncompliance). Approval of rents by the Asset Management Division will be limited to a review of the documentation submitted and will not guarantee compliance with the Department's rules in Subchapter F or otherwise absolve an Owner of any past, current, or future non-compliance related to Department rules, guidance, Compliance Monitoring visits, or any other rules or guidance to which the Development or its Owner may be subject.

§10.404.Reserve Accounts.

(a) Replacement Reserve Account (§2306.186). The Department will require Development Owners to provide regular maintenance to keep housing sanitary, safe and decent by establishing and maintaining a reserve for replacement account for the Development in accordance with Tex. Gov't Code, §2306.186. The reserve account must be established, in accordance with paragraphs (3), (4), (5), and (6) of this subsection, and maintained through annual or more frequent regularly scheduled deposits, for each Unit in a Development of 25 or more rental units regardless of the amount of rent charged for the Unit. If the Department is processing a request for loan modification or other request under this subchapter, and the Development does not have an existing replacement reserve account, or sufficient funds in the reserve to meet future capital expenditure needs of the Development as determined by a history of uncorrected UPCS violations, ongoing issues related to keeping housing sanitary, safe, and decent, an account balance below the annual reserve deposit amount as specified in this section, or as indicated by the number or cost of repairs included in a PCA, the Development Owner will be required to establish and maintain a replacement reserve account or review whether the amount of regular deposits to the replacement reserve account can be increased, regardless of the number of units at the Development. The Department shall, through cooperation of its divisions responsible for asset management and compliance, ensure compliance with this section. The duties of the Development Owner under this section cease on the date of a change in ownership of the Development; however, the subsequent Development Owner of the Development is subject to the requirements of this section and any additional or revised requirements the Department may impose after reviewing a Development's compliance history, a PCA submitted by the Owner, or the amount of reserves that will be transferred at the time of any property sale.

(1) The LURA requires the Development Owner to begin making annual deposits to the replacement reserve account on the later of the:

(A) date that occupancy of the Development stabilizes as defined by the First Lien Lender or, in the absence of a First Lien Lender other than the Department, the date the Property is at least 90 percent occupied; or

(B) the date when the permanent loan is executed and funded.

(2) The Development Owner shall continue making deposits into the replacement reserve account until the earliest of the:

(A) date on which the owner suffers a total casualty loss with respect to the Development or the date on which the Development becomes functionally obsolete, if the Development cannot be or is not restored;

(B) date on which the Development is demolished;

(C) date on which the Development ceases to be used as a multifamily rental property; or

(D) end of the Affordability Period specified by the LURA, or if an Affordability Period is not specified and the Department is the First Lien Lender, then when the Department's loan has been fully repaid or as otherwise agreed by the Owner and Department.

(3) If the Department is the First Lien Lender with respect to the Development or if the establishment of a Reserve Account for repairs has not been required by the First Lien Lender or Bank Trustee, each Development Owner receiving Department assistance for multifamily rental housing shall deposit annually into a separate, Development-specific Reserve Account through the date described in paragraph (2) of this subsection:

(A) For New Construction Developments, not less than $250 per Unit. Withdrawals from such account will be restricted for up to five years following the date of award except in cases in which written approval from the Department is obtained relating to casualty loss, natural disaster, reasonable accommodations (but not for the construction standards required by the NOFA or program regulations), or demonstrated financial hardship; or

(B) For Adaptive Reuse, Rehabilitation and Reconstruction Developments, the greater of the amount per Unit per year either established by the information presented in a Property Condition Assessment in conformance with Subchapter D of this chapter (relating to Underwriting and Loan Policy) or $300 per Unit per year.

(4) For all Developments, a Property Condition Assessment ("PCA") must be conducted at intervals that are consistent with requirements of the First Lien Lender, other than the Department. If the Department is the First Lien Lender, or the First Lien Lender does not require a Third Party PCA, a PCA must be conducted at least once during each five (5) year period beginning with the eleventh (11th) year after the awarding of any financial assistance from the Department. PCAs conducted by the Owner at any time or for any reason other than as required by the Department in the year beginning with the eleventh (11th) year of award must be submitted to the Department for review within 30 days of receipt by the Owner.

(5) Where there is a First Lien Lender other than the Department or a Bank Trustee as a result of a bond trust indenture or tax credit syndication, the Development Owner shall comply with the lesser of the replacement reserve requirements of the First Lien Lender or the requirements in paragraph (3) of this subsection. In addition, the Department should be listed as a party to receive notice under any replacement reserve agreement entered into by the Development Owner. The Development Owner shall submit on an annual basis, within the Department's required Development Owner's Financial Certification packet, requested information regarding:

(A) the reserve for replacement requirements under the first lien loan agreement (if applicable) referencing where those requirements are contained within the loan documents;

(B) compliance with the first lien lender requirements outlined in subparagraph (A) of this paragraph;

(C) if the Owner is not in compliance with the lender requirements, the Development Owner's plan of action to bring the Development in compliance with all established reserve for replacement requirements; and

(D) whether a PCA has been ordered and the Owner's plans for any subsequent capital expenditures, renovations, repairs, or improvements.

(6) Where there is no First Lien Lender but the allocation of funds by the Department and Tex. Gov't Code, §2306.186 requires that the Department oversee a Reserve Account, the Development Owner shall provide at their sole expense an escrow agent acceptable to the Department to act as Bank Trustee as necessary under this section. The Department shall retain the right to replace the escrow agent with another Bank Trustee or act as escrow agent at a cost plus fee payable by the Development Owner due to breach of the escrow agent's responsibilities or otherwise with thirty (30) days prior notice of all parties to the escrow agreement.

(7) Penalties and Non-Compliance. If the Development Owner fails to comply with the replacement reserve account requirements stated herein, and request for extension or waiver of these requirements is not approved by the Department, then a penalty of up to $200 per dwelling Unit in the Development and/or characterization of the Development as being in default with this requirement, may be imposed:

(A) a Reserve Account, as described in this section, has not been established for the Development;

(B) the Department is not a party to the escrow agreement for the Reserve Account, if required;

(C) money in the Reserve Account:

(i) is used for expenses other than necessary repairs, including property taxes or insurance; or

(ii) falls below mandatory annual, monthly, or Department approved deposit levels;

(D) Development Owner fails to make any required deposits;

(E) Development Owner fails to obtain a Third-Party Property Condition Assessment as required under this section or submit a copy of a PCA to the Department within 30 days of receipt; or

(F) Development Owner fails to make necessary repairs in accordance with the Third Party Property Condition Assessment or §10.621 of this chapter (relating to Property Condition Standards).

(8) Department-Initiated Repairs. The Department or its agent may make repairs to the Development within 30 calendar days of written notice from the Department if the Development Owner fails to complete necessary repairs indicated in the submitted Property Condition Assessment or identified by Department physical inspection. Repairs may be deemed necessary if the Development Owner fails to comply with federal, state, and/or local health, safety, or building code requirements. Payment for necessary repairs must be made directly by the Development Owner or through a replacement Reserve Account established for the Development under this section. The Department or its agent will be allowed to produce a Request for Bids to hire a contractor to complete and oversee necessary repairs. On a case-by-case basis, the Department may determine that the money in the Reserve Account may be used for expenses other than necessary repairs, including property taxes or insurance, if:

(A) Development income before payment of return to Development Owner or deferred developer fee is insufficient to meet operating expense and debt service requirements; or

(B) Development income after payment of operating expenses, but before payment of return to Development Owner or deferred developer fee is insufficient to fund the mandatory deposit levels;

(C) In the event of subparagraph (A) or (B) of this paragraph, funds withdrawn must be replaced from Cash Flow after payment of Operating Expenses but before return to Development Owner or deferred developer fee until the mandatory deposit level is replenished. The Department reserves the right to re-evaluate payments to the reserve, increase such payments or require a lump sum deposit to the reserve, or require the Owner to enter into a separate Reserve Agreement if necessary to protect the long term feasibility of the Development.

(9) Exceptions to Replacement Reserve Account. This section does not apply to a Development for which the Development Owner is required to maintain a Reserve Account under any other provision of federal or state law.

(10) In the event of paragraph (7) or (8) of this subsection, the Department reserves the right to require by separate Reserve Agreement a revised annual deposit amount and/or require Department concurrence for withdrawals from the Reserve Account to bring the Development back into compliance. Establishment of a new Bank Trustee or transfer of reserve funds to a new, separate and distinct account may be required if necessary to meet the requirements of such Agreement. The Agreement will be executed by the Department, Development Owner, and financial institution representative.

(b) Lease-up Reserve Account. A lease-up reserve funds start-up expenses in excess of the revenue produced by the Development prior to stabilization. The Department will consider a reasonable lease-up reserve account based on the documented requirements from a third-party lender, third-party syndicator, or the Department. During the underwriting at the point of the Cost Certification review, the lease-up reserve may be counted as a use of funds only to the extent that it represents operating shortfalls net of escrows for property taxes and property insurance. Funds from the lease-up reserve used to satisfy the funding requirements for other reserve accounts may not be included as a use of funds for the lease-up reserve. Funds from the lease-up reserve distributed or distributable as cash flow to the Development Owner will be considered and restricted as developer fee.

(c) Operating Reserve Account. At various stages during the application, award process, and during the operating life of a Development, the Department will conduct a financial analysis of the Development's total development costs and operating budgets, including the estimated operating reserve account deposit required. For example, this analysis typically occurs at application and cost certification review. The Department will consider a reasonable operating reserve account deposit in this analysis based on the needs of the Development and requirements of third-party lenders or investors. The amount used in the analysis will be the amount described in the project cost schedule or balance sheet, if it is within the range of two (2) to six (6) months of stabilized operating expenses plus debt service. The Department may consider a greater amount proposed or required by the Department, any superior lien lender, or syndicator, if the detail for such greater amount is reasonable and well documented. Reasonable operating reserves in this chapter do not include capitalized asset management fees, guaranty reserves, or other similar costs. In no instance will operating reserves exceed twelve (12) months of stabilized operating expenses plus debt service (exclusive of transferred replacement reserves for USDA or HUD financed rehabilitation transactions). Operating reserves are generally for the term of the permanent loan. In no instance will operating reserves released within five (5) years be included as a cost.

(d) Special Reserve Account. If the funding program requires or allows for the establishment and maintenance of a Special Reserve Account for the purpose of assisting residents at the Development with expenses associated with their tenancy, this will be established in accordance with a written agreement with the Development Owner.

(1) The Special Reserve Account is funded through a one-time payment or annually through an agreed upon percentage of net cash flow generated by the Development, excess development funds at completion as determined by the Department, or as otherwise set forth in the written agreement. For the purpose of this account, net cash flow is defined as funds available from operations after all expenses and debt service required to be paid have been considered. This does not include a deduction for depreciation and amortization expense, deferred developer fee payment, or other payments made to related parties, except as allowed by the Department for property management. Proceeds from any refinancing or other fund raising from the Development will be considered net cash flow for purposes of funding the Special Reserve Account. The account will be structured to require Department concurrence for withdrawals.

(2) All disbursements from the account must be approved by the Department.

(3) The Development Owner will be responsible for setting up a separate and distinct account with a financial institution acceptable to the Department. A Special Reserve Account Agreement will be drafted by the Department and executed by the Department, Development Owner, and financial institution representative.

(4) Use of the funds in the Special Reserve Account is determined by a plan that is pre-approved by the Department. The Owner must create, update and maintain a plan for the disbursement of funds from the Special Reserve Account. The plan should be established at the time the account is created and updated and submitted for approval by the Department as needed. The plan should consider the needs of the tenants of the property and the existing and anticipated fund account balances such that all of the fund uses provide benefit to tenants. Disbursements from the fund will only be approved by the Department if they are in accordance with the current approved plan.

(e) Other Reserve Accounts. Additional reserve accounts may be recognized by the Department as necessary and required by the Department, superior lien lender, or syndicator.

§10.405.Amendments and Extensions.

(a) Amendments to Housing Tax Credit (HTC) Application or Award Prior to Land Use Restriction Agreement (LURA) recording or amendments that do not result in a change to the LURA (§2306.6712). The Department expects the Development Owner to construct or rehabilitate, operate, and own the Development consistent with the representations in the Application. The Department must receive notification of any amendments to the Application. Regardless of development stage, the Board shall re-evaluate a Development that undergoes a material change, as identified in paragraph (3) of this subsection at any time after the initial Board approval of the Development (§2306.6731(b)). The Board may deny an amendment request and subsequently may rescind any Commitment or Determination Notice issued for an Application, and may reallocate the credits to other Applicants on the waiting list.

(1) Requesting an amendment. The Department shall require the Applicant to file a formal, written request for an amendment to the Application. Such request must include a detailed explanation of the amendment request and other information as determined to be necessary by the Department, and the applicable fee as identified in §10.901(13) of this chapter (relating to Fee Schedule) in order to be received and processed by the Department. Department staff will evaluate the amendment request to determine if the change would affect an allocation of Housing Tax Credits by changing any item that received points, by significantly affecting the most recent underwriting analysis, or by materially altering the Development as further described in this subsection.

(2) Notification Items. The Department must be notified of the changes described in subparagraphs (A) - (F) of this paragraph. The changes identified are subject to staff agreement based on a review of the amendment request, and any additional information or documentation requested. Notification items will be considered satisfied when an acknowledgment of the specific change(s) is received from the Department.

(A) changes to Development Site acreage required by the City or other local governmental authority, or changes resulting from survey discrepancies, as long as such change does not also result in a modification to the residential density of more than 5 percent;

(B) minor modifications to the site plan that will not significantly impact development costs, including, but not limited to, relocation or rearrangement of buildings on the site (as long as the number of residential and non-residential buildings remains the same), and movement, addition, or deletion of ingress/egress to the site;

(C) increases in net rentable square footage or common areas that will not significantly impact development costs;

(D) changes in amenities that do not require a change to the recorded LURA and do not negatively impact scoring, including changes to outdated amenities that could be replaced by an amenity with equal benefit to the resident community;

(E) changes in Developers or Guarantors that do not include the addition of new entities or Principals not previously checked by Previous Participation review at the time of Application and do not result in the removal of all persons used to meet the experience requirement in §10.204(6) of this chapter (relating to Required Documentation for Application Submission);

(F) any other amendment not identified in paragraphs (3) and (4) of this subsection.

(3) Nonmaterial amendments. The Executive Director may administratively approve all non-material amendments, including, but not limited to:

(A) any amendment that is determined by staff to exceed the scope of notification acknowledgement, as identified in paragraph (2) of this subsection but not to rise to a material alteration, as identified in paragraph (4) of this subsection;

(B) changes in the natural person(s) used to meet the experience requirement in §10.204(6) of this chapter provided that an appropriate substitute has been approved by the Multifamily Division prior to receipt of the amendment request (relating to Required Documentation for Application Submission);

(C) changes in Developers or Guarantors (to the extent Guarantors were identified in the Application) not addressed in §10.405(a)(2)(E). Changes in Developers or Guarantors will be subject to Previous Participation requirements as further described in §10.204(13) and the credit limitation described in §11.4(a).

(4) Material amendments. Amendments considered material pursuant to paragraph (4) of this subsection must be approved by the Board. When an amendment request requires Board approval, the Development Owner must submit the request and all required documentation necessary for staff's review of the request to the Department at least forty-five (45) calendar days prior to the Board meeting in which the amendment is anticipated to be considered. Before the fifteenth (15th) day preceding the date of Board action on the amendment, notice of an amendment and the recommendation of the Executive Director and Department staff regarding the amendment will be posted to the Department's website and the Applicant will be notified of the posting. (§2306.6717(a)(4)). Material Amendment requests may be denied if the Board determines that the modification proposed in the amendment would materially alter the Development in a negative manner or would have adversely affected the selection of the Application in the Application Round. Material alteration of a Development includes, but is not limited to:

(A) a significant modification of the site plan;

(B) a modification of the number of units or bedroom mix of units;

(C) a substantive modification of the scope of tenant services;

(D) a reduction of 3 percent or more in the square footage of the units or common areas;

(E) a significant modification of the architectural design of the Development;

(F) a modification of the residential density of at least 5 percent;

(G) exclusion of any requirements as identified in Subchapter B of this chapter (relating to Site and Development Requirements and Restrictions) and Subchapter C of this chapter (relating to Application Submission Requirements, Ineligibility Criteria, Board Decisions and Waiver of Rules or Pre-Clearance for Applications); or

(H) any other modification considered significant by the Board.

(5) Amendment requests will be denied if the Department finds that the request would have changed the scoring of an Application in the competitive process such that the Application would not have received a funding award or if the need for the proposed modification was reasonably foreseeable or preventable by the Applicant at the time the Application was submitted, unless good cause is found for the approval of the amendment.

(6) This section shall be administered in a manner that is consistent with §42 of the Code. If a Development has any uncorrected issues of noncompliance outside of the corrective action period (other than the provision being amended) or otherwise owes fees to the Department, such non-compliance or outstanding payment must be resolved to the satisfaction of the Department, or waived by the Board, before a request for amendment will be acted upon.

(7) In the event that an Applicant or Developer seeks to be released from the commitment to serve the income level of tenants identified in the Application and Credit Underwriting Analysis Report at the time of award and as approved by the Board, the procedure described in subparagraphs (A) and (B) of this paragraph will apply to the extent such request is not prohibited based on statutory and/or regulatory provisions:

(A) for amendments that involve a reduction in the total number of Low-Income Units, or a reduction in the number of Low-Income Units at any rent or income level, as approved by the Board, evidence must be presented to the Department to support the amendment. In addition, for such changes prior to issuance of IRS Forms 8609 by the Department, the lender and syndicator must submit written confirmation that the Development is infeasible without the adjustment in Units. The Board may or may not approve the amendment request; however, any affirmative recommendation to the Board is contingent upon concurrence from Department staff that the Unit adjustment is necessary for the continued financial feasibility of the Development; and

(B) if it is determined by the Department that the loss of low-income targeting points would have resulted in the Application not receiving an award in the year of allocation, and the amendment is approved by the Board, the approved amendment will carry a penalty that prohibits the Applicant and all Persons or entities with any ownership interest in the Application (excluding any tax credit purchaser/syndicator), from participation in the Housing Tax Credit Program (for both the Competitive Housing Tax Credit Developments and Tax-Exempt Bond Developments) for twenty-four (24) months from the time that the amendment is approved.

(b) Amendments to the LURA. Department approval shall be required for any amendment to a LURA in accordance with this section. An amendment request shall be submitted in writing, containing a detailed explanation of the request, the reason the change is necessary, the good cause for the change, financial information if the change will result in any financial impact on the development, information related to whether the necessity of the amendment was reasonably foreseeable at the time of application, and other information as determined to be necessary by the Department, along with any applicable fee as identified in §10.901 of this chapter (relating to Fee Schedule). The Department may order or require the Development Owner to order a Market Study or appraisal at the Development Owner's expense. If a Development has any uncorrected issues of noncompliance outside of the corrective action period (other than the provision being amended) or otherwise owes fees to the Department, such non-compliance or outstanding payment must be resolved to the satisfaction of the Department, waived by the Board, before a request for amendment will be acted upon. The Department will not approve changes that would violate state or federal laws including the requirements of §42 of the Code, 24 CFR Part 92 (HOME Final Rule), 24 CFR Part 93 (NHTF Interim Rule), Chapter 1 of this title (relating to Administrative Requirements, Chapter 11 of this title (relating to Housing Tax Credit Program Qualified Allocation Plan), Chapter 12 of this title (relating to Multifamily Housing Revenue Bond Rules), Chapter 13 of this title (relating to Multifamily Direct Loan Rule), Tex. Gov't Code, Chapter 2306, and the Fair Housing Act., For Tax-Exempt Bond Developments, compliance with their Regulatory Agreement and corresponding bond financing documents. Prior to staff taking a recommendation to the Board for consideration, the procedures described in paragraph (3) of this subsection must be followed.

(1) Non-Material LURA Amendments. The Executive Director or designee may administratively approve all LURA amendments not defined as Material LURA Amendments pursuant to paragraph (2) of this subsection. A non-material LURA amendment may include but is not limited to:

(A) HUB participation removal. Removal of a HUB participation requirement will only be processed as a non-material LURA amendment after the issuance of 8609s and requires that the Executive Director find that:

(i) the HUB is requesting removal of its own volition or is being removed as the result of a default under the organizational documents of the Development Owner;

(ii) the participation by the HUB has been substantive and meaningful, or would have been substantive or meaningful had the HUB not defaulted under the organizational documents of the Development Owner, enabling it to realize not only financial benefit but to acquire skills relating to the ownership and operating of affordable housing;

(iii) where the HUB will be replaced as a general partner or special limited partner that is not a HUB and will sell its ownership interest, an ownership transfer request must be submitted as described in §10.406;

(B) a change resulting from a Department work out arrangement as recommended by the Department's Asset Management Division; or

(C) a correction of error.

(2) Material LURA Amendments. Development Owners seeking LURA amendment requests that require Board approval must submit the request and all required documentation necessary for staff's review of the request to the Department at least forty-five (45) calendar days prior to the Board meeting at which the amendment is anticipated to be considered. Before the fifteenth (15th) day preceding the date of Board action on the amendment, notice of an amendment and the recommendation of the Executive Director and Department staff regarding the amendment will be posted to the Department's website and the Applicant will be notified of the posting. (§2306.6717(a)(4)). The Board must consider and approve the following material LURA amendments:

(A) reductions to the number of Low-Income Units;

(B) changes to the income or rent restrictions;

(C) changes to the Target Population;

(D) the removal of material participation by a Nonprofit Organization as further described in §10.406 of this subchapter;

(E) a change in the Right of First Refusal period as described in amended §2306.6725 of the Tex. Gov't Code;

(F) any LURA amendment deemed material by the Executive Director.

(3) Prior to staff taking a recommendation to the Board for consideration, the Development Owner must provide notice and hold a public hearing regarding the requested amendment(s) at least fifteen (15) business days prior to the scheduled Board meeting where the request will be considered. Development Owners will be required to submit a copy of the notification with the amendment request. If a LURA amendment is requested prior to issuance of IRS Forms 8609 by the Department, notification must be provided to the recipients described in subparagraphs (A) - (E) of this paragraph. If an amendment is requested after issuance of IRS Forms 8609 by the Department, notification must be provided to the recipients described in subparagraph (A) - (B) of this paragraph.

(A) each tenant of the Development;

(B) the current lender and investor;

(C) the State Senator and State Representative of the districts whose boundaries include the Development Site;

(D) the chief elected official for the municipality (if the Development Site is within a municipality or its extraterritorial jurisdiction); and

(E) the county commissioners of the county in which the Development Site is located (if the Development Site is located outside of a municipality).

(4) Contents of Notification. The notification must include, at a minimum, all of the information described in subparagraphs (A) - (D) of this paragraph.

(A) the Development Owner's name, address and an individual contact name and phone number;

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

(C) the change(s) requested; and

(D) the date, time and location of the public hearing where the change(s) will be discussed.

(5) Verification of public hearing. Minutes of the public hearing and attendance sheet must be submitted to the Department within three (3) business days after the date of the public hearing.

(6) Approval. Once the LURA Amendment has been approved administratively or by the Board, as applicable, Department staff will provide the Development Owner with a LURA amendment for execution and recording in the county where the Development is located.

(c) HTC Extensions. Extensions must be requested if the original deadline associated with Carryover, the 10 Percent Test (including submission and expenditure deadlines), construction status reports, or cost certification requirements will not be met. Extension requests submitted at least thirty (30) calendar days in advance of the applicable deadline will not be required to submit an extension fee as described in §10.901 of this chapter. Any extension request submitted fewer than thirty (30) days in advance of the applicable deadline or after the applicable deadline will not be processed unless accompanied by the applicable fee. Extension requests will be approved by the Executive Director or Designee, unless, at staff's discretion it warrants Board approval due to extenuating circumstances stated in the request. The extension request must specify a requested extension date and the reason why such an extension is required. If the Development Owner is requesting an extension to the Carryover submission or 10 percent Test deadline(s), a point deduction evaluation will be completed in accordance with Tex. Gov't Code, §2306.6710(b)(2), and §11.9(f) of this title (relating to Competitive HTC Selection Criteria). Therefore, the Development Owner must clearly describe in their request for an extension how the need for the extension was beyond the reasonable control of the Applicant/Development Owner and could not have been reasonably anticipated. Carryover extension requests will not be granted an extended deadline later than December 1st of the year the Commitment was issued.

§10.406.Ownership Transfers (§2306.6713).

(a) Ownership Transfer Notification. All multifamily Development Owners must provide written notice and a completed Ownership Transfer packet, if applicable, to the Department at least forty-five (45) calendar days prior to any sale, transfer, or exchange of the Development or any portion of or Controlling interest in the Development. Except as otherwise provided herein, the Executive Director's prior written approval of any such transfer is required. The Executive Director may not unreasonably withhold approval of the transfer requested in compliance with this section.

(b) Exceptions. The following exceptions to the ownership transfer process outlined herein apply

(1) A Development Owner shall be required to notify the Department but shall not be required to obtain Executive Director approval when the transferee is an Affiliate of the Development Owner with no new Principals or the transferee is a Related Party who does not Control the Development and the transfer is being made for estate planning purposes.

(2) Transfers that are the result of an involuntary removal of the general partner by the investment limited partner do not require advance approval but must be reported to the Department as soon as possible due to the sensitive timing and nature of this decision. In the event the investment limited partner has proposed a new general partner or will permanently replace the general partner, a full Ownership Transfer packet must be submitted.

(3) Changes to the investment limited partner, non-Controlling limited partner, or other non-Controlling partners affiliated with the investment limited partner do not require Executive Director approval. A General Partner's acquisition of the interest of the investment limited partner does not require Executive Director approval, unless some other change in ownership is occurring as part of the same overall transaction.

(4) Changes resulting from foreclosure wherein the lender or financial institution involved in the transaction is the same resulting owner do not require advance approval but must be reported to the Department as soon as possible, due to the sensitive timing and nature of the decision.

(c) General Requirements.

(1) Any new Principal in the ownership of a Development must be eligible under §10.202 of Subchapter C (relating to Ineligible Applicants and Applications). In addition, Principals will be reviewed in accordance with Chapter 1, Subchapter C of this title (relating to Previous Participation).

(2) Changes in Developers or Guarantors must be addressed as non-material amendments to the application under §10.405 of this Subchapter.

(3) To the extent an investment limited partner or its Affiliate assumes a Controlling interest in a Development Owner, such acquisition shall be subject to the Ownership Transfer requirements set forth herein. Principals of the investment limited partner or Affiliate will be considered new Principals and will be reviewed as stated under paragraph (1) of this subsection.

(4) Simultaneous transfer or concurrent offering for sale of the General Partner's and Limited Partner's control and interest will be subject to the Ownership Transfer requirements set forth herein and will trigger a Right of First Refusal, if applicable.

(d) Transfer Actions Warranting Debarment. If the Department determines that the transfer, involuntary removal, or replacement was due to a default by the General Partner under the Limited Partnership Agreement, or other detrimental action that put the Development at risk of failure or the Department at risk for financial exposure as a result of non-compliance, staff may make a recommendation to the Board for the debarment of the entity and/or its Principals and Affiliates pursuant to the Department's debarment rule. In addition, a record of transfer involving Principals in new proposed awards will be reported and may be taken into consideration by the Executive Award and Review Committee, in accordance with Chapter 1, Subchapter C of this title (relating to Previous Participation), prior to recommending any new financing or allocation of credits.

(e) Transfers Prior to 8609 Issuance or Construction Completion. Prior to the issuance of IRS Form(s) 8609 (for Housing Tax Credits) or the completion of construction (for all Developments funded through other Department programs) an Applicant may request an amendment to its ownership structure to add Principals. The party(ies) reflected in the Application as having control must remain in the ownership structure and retain such control, unless approved otherwise by the Board. A development sponsor, General Partner or Development Owner may not sell the Development in whole or voluntarily end their control prior to the issuance of 8609s.

(f) Nonprofit Organizations. If the ownership transfer request is to replace a nonprofit organization within the Development ownership entity, the replacement nonprofit entity must adhere to the requirements in paragraph (1) or (2) of this subsection.

(1) If the LURA requires ownership or material participation in ownership by a Qualified Nonprofit Organization, and the Development received Tax Credits pursuant to §42(h)(5) of the Code, the transferee must be a Qualified Nonprofit Organization that meets the requirements of §42(h)(5) of the Code and Tex. Gov't Code §2306.6706, if applicable, and can demonstrate planned participation in the operation of the Development on a regular, continuous, and substantial basis.

(2) If the LURA requires ownership or material participation in ownership by a nonprofit organization or CHDO, the Development Owner must show that the transferee is a nonprofit organization or CHDO, as applicable, that complies with the LURA.

(3) Exceptions to the above may be made on a case by case basis if the Development is past its Compliance Period/Federal Affordability Period, was not reported to the IRS as part of the Department's Nonprofit Set Aside in any HTC Award year, and follows the procedures outlined in §10.405(b)(1) - (5) of this chapter (relating to LURA Amendments that require Board Approval). The Board must find that:

(A) the selling nonprofit is acting of its own volition or is being removed as the result of a default under the organizational documents of the Development Owner;

(B) the participation by the nonprofit was substantive and meaningful during the full term of the Compliance Period but is no longer substantive or meaningful to the operations of the Development; and

(C) the proposed purchaser is an affiliate of the current Owner or otherwise meets the Department's standards for ownership transfers.

(g) Historically Underutilized Business ("HUB") Organizations. If a HUB is the general partner or special limited partner of a Development Owner and it determines to sell its ownership interest, after the issuance of 8609s, the purchaser of that partnership interest or the general or special limited partner is not required to be a HUB as long as the procedure described in §10.405(b)(1) of this chapter (relating to Non-Material LURA Amendments) has been followed and approved.

(h) Documentation Required. A Development Owner must submit documentation requested by the Department to enable the Department to understand fully the facts and circumstances pertaining to the transfer and the effects of approval or denial. Documentation must be submitted as directed in the Post Award Activities Manual, which includes but is not limited to:

(1) a written explanation outlining the reason for the request;

(2) ownership transfer information, including but not limited to the type of sale, amount of Development reserves to transfer in the event of a property sale, and the prospective closing date;

(3) pre and post transfer organizational charts with TINs of each organization down to the level of natural persons in the ownership structure as described in §10.204(13)(A) of Subchapter C;

(4) a list of the names and contact information for transferees and Related Parties;

(5) Previous Participation information for any new Principal as described in §10.204(13)(B) of Subchapter C;

(6) agreements among parties associated with the transfer;

(7) Owners Certifications with regard to materials submitted further described in the Post Award Activities Manual;

(8) detailed information describing the organizational structure, experience, and financial capacity of any party holding a controlling interest in any Principal or Controlling entity of the prospective Development Owner;

(9) evidence and certification that the tenants in the Development have been notified in writing of the proposed transfer at least 30 calendar days prior to the date the transfer is approved by the Department. The ownership transfer approval letter will not be issued until this 30 day period has expired;

(10) any required exhibits and the list of exhibits related to specific circumstances of transfer or Ownership as detailed in the Post Award Activities Manual.

(i) Once the Department receives all necessary information under this section and as required under the Post Award Activities Manual, staff shall initiate a qualifications review of a transferee, in accordance with Chapter 1, Subchapter C of this title, to determine the transferee's past compliance with all aspects of the Department's programs, LURAs and eligibility under this chapter and §10.202 of Subchapter C (relating to ineligible applicants and applications).

(j) Credit Limitation. As it relates to the Housing Tax Credit amount further described in §11.4(a) of this title (relating to Tax Credit Request and Award Limits), the credit amount will not be applied in circumstances described in paragraphs (1) and (2) of this subsection:

(1) in cases of transfers in which the syndicator, investor or limited partner is taking over ownership of the Development and not merely replacing the general partner; or

(2) in cases where the general partner is being replaced if the award of credits was made at least five (5) years prior to the transfer request date.

(k) Penalties, Past Due Fees and Underfunded Reserves. The Development Owner must comply with any additional documentation requirements as stated in Subchapter F of this chapter (relating to Compliance Monitoring). The Development Owner, as on record with the Department, will be liable for any penalties or fees imposed by the Department even if such penalty can be attributable to the new Development Owner unless such ownership transfer is approved by the Department. In the event a transferring Development has a history of uncorrected UPCS violations, ongoing issues related to keeping housing sanitary, safe, and decent, an account balance below the annual reserve deposit amount as specified in §10.404(a) (relating to Replacement Reserve Accounts), or that appears insufficient to meet capital expenditure needs as indicated by the number or cost of repairs included in a PCA, the prospective Development Owner may be required to establish and maintain a replacement reserve account or increase the amount of regular deposits to the replacement reserve account by entering into a Reserve Agreement with the Department. The Department may also request a plan and timeline relating to needed repairs or renovations that will be completed by the departing and/or incoming Owner as a condition to approving the Transfer.

(l) Ownership Transfer Processing Fee. The ownership transfer request must be accompanied by the corresponding ownership transfer fee as outlined in §10.901 of this chapter (relating to Fee Schedule).

§10.407.Right of First Refusal.

(a) General. This section applies to Development Owners that agreed to offer a Right of First Refusal ("ROFR") to a Qualified Entity or as applicable a Qualified Nonprofit Organization, as memorialized in the applicable LURA. For the purposes of this section a Qualified Nonprofit Organization also includes an entity 100% owned by a Qualified Nonprofit Organization pursuant to §42(h)(5)(C) of the Code and operated in a similar manner. The purpose of this section is to provide administrative procedures and guidance on the process and valuation of properties under the LURA. All requests for ROFR submitted to the Department, regardless of existing regulations, must adhere to this process.

(1) The Development Owner may market the Property for sale and sell the Property to a Qualified Entity, or as applicable a Qualified Nonprofit Organization without going through the ROFR process outlined in this section unless otherwise restricted or prohibited and only in the following circumstances:

(A) the LURA includes a 90-day ROFR and the Development Owner is selling to a Qualified Nonprofit Organization;

(B) the LURA includes a two (2) -year ROFR and the Development Owner is selling to a Qualified Nonprofit Organization that meets the definition of a Community Housing Development Organization ("CHDO") under 24 CFR Part 92, as approved by the Department; or

(C) the LURA includes a 180-day ROFR, and the Development Owner is selling to a Qualified Entity that meets the definition of a CHDO under 24 CFR Part 92, or that is controlled by a CHDO, as approved by the Department. Where the Development Owner is not required to go through the ROFR process, it must go through the ownership transfer process in accordance with §10.406.

(2) A ROFR request must be made in accordance with the LURA for the Development. If there is a conflict between the Development's LURA and this subchapter, every effort will be made to harmonize the provisions. If the conflict cannot be resolved, requirements in the LURA will supersede this subchapter. If there is a conflict between the Development's LURA and Tex. Gov't Code Chapter 2306, every effort will be made to harmonize the provisions. A Development Owner may request a LURA amendment to make the ROFR provisions in the LURA consistent with Tex. Gov't Code Chapter 2306 at any time.

(3) If a LURA includes the ROFR provision, the Development Owner may not request a Preliminary Qualified Contract (if such opportunity is available under the applicable LURA and §10.408) until the requirements outlined in this section have been satisfied.

(4) The Department reviews and approves all ownership transfers pursuant to §10.406. Thus, if a proposed purchaser is identified in the ROFR process, the Development Owner and proposed purchaser must complete the ownership transfer process. A Development Owner may not transfer a Development to a Qualified Nonprofit Organization or Qualified Entity that is considered an ineligible entity under the Department's rules. In addition, ownership transfers to a Qualified Entity or as applicable a Qualified Nonprofit Organization pursuant to the ROFR process are subject to Chapter 1, Subchapter C of this title (relating to Previous Participation Reviews).

(5) Satisfying the ROFR requirement does not terminate the LURA or the ongoing application of the ROFR requirement to any subsequent Development Owner.

(6) The ROFR process is triggered upon:

(A) the Development Owner's determination to sell the Development to an entity other than as permitted in paragraph (1) of this subsection; or

(B) the simultaneous transfer or concurrent offering for sale of a General Partner's and limited partner's interest in the Development Owner's ownership structure.

(7) The ROFR process is not triggered if a Development Owner seeks to transfer the Development to a newly formed entity:

(A) that is under common control with the Development Owner; and

(B) the primary purpose of the formation of which is to facilitate the financing of the rehabilitation of the development using assistance administered through a state financing program.

(8) This section applies only to a Right of First Refusal memorialized in the Department's LURA. This section does not authorize a modification of any other agreement between the Development Owner and a Qualified Nonprofit Organization or Qualified Entity. The enforceability of a contractual agreement between the Development Owner and a Qualified Nonprofit Organization or Qualified Entity may be impacted by the Development Owner's commitments at Application and recorded LURA.

(b) Right of First Refusal Offer Price. There are two general expectations of the ROFR offer or sale price identified in the outstanding LURAs. The descriptions in paragraphs (1) and (2) of this subsection do not alter the requirements or definitions included in the LURA but provide further clarification as applicable:

(1) Fair Market Value is established using either a current appraisal (completed within three months prior to the ROFR request and in accordance with §10.304 of this chapter (relating to Appraisal Rules and Guidelines)) of the Property or an executed purchase offer that the Development Owner would like to accept. In either case the documentation used to establish Fair Market Value will be part of the ROFR property listing on the Department's website. The purchase offer must contain specific language that the offer is conditioned upon satisfaction of the ROFR requirement. If a subsequent ROFR request is made within six months of the previously approved ROFR posting, the lesser of the prior ROFR posted value or new appraisal/purchase contract amount must be used in establishing Fair Market Value;

(2) Minimum Purchase Price, pursuant to §42(i)(7)(B) of the Code, is the sum of:

(A) the principal amount of outstanding indebtedness secured by the project (other than indebtedness incurred within the five (5) -year period immediately preceding the date of said notice); and

(B) all federal, state, and local taxes incurred or payable by the Development Owner as a consequence of such sale. If the Property has a minimum Applicable Fraction of less than 1, the offer must take this into account by multiplying the purchase price by the applicable fraction and the fair market value of the non-Low-Income Units. Documentation submitted to verify the Minimum Purchase Price calculation will be part of the ROFR property listing on the Department's website.

(c) Required Documentation. Upon establishing the value of the Property, the ROFR process is the same for all types of LURAs. To proceed with the ROFR request, documentation must be submitted as directed in the Post Award Activities Manual, which includes:

(1) ROFR fee as identified in §10.901 of this chapter (relating to Fee Schedule);

(2) a notice of intent to the Department and to such other parties as the Department may direct at that time;

(3) evidence and certification that the residents of the Development have been provided with a notice of intent;

(4) documentation evidencing any contractual ROFR between the Development Owner and a Qualified Nonprofit Organization or Qualified Entity, along with evidence that such Qualified Nonprofit Organization or Qualified Entity is in good standing in the state of its organization;

(5) documentation verifying the ROFR offer price of the Property:

(A) if the Development Owner receives an offer to purchase the Property from any buyer other than a Qualified Entity or Qualified Nonprofit Organization that the Development Owner would like to accept, the Development Owner may execute a sales contract, conditioned upon satisfaction of the ROFR requirement, and submit the executed sales contract to establish fair market value; or

(B) if the Development Owner of the Property chooses to establish fair market value using an appraisal, the Development Owner must submit an appraisal of the Property completed during the last three (3) months prior to the date of submission of the ROFR request, establishing a value for the Property in compliance with Subchapter D of this chapter (relating to Underwriting and Loan Policy) in effect at the time of the request. The appraisal should take into account the existing and continuing requirements to operate the Property under the LURA and any other restrictions that may exist. Department staff will review all materials within thirty (30) calendar days of receipt. If, after the review, the Department does not agree with the fair market value proposed in the Development Owner's appraisal, the Department may order another appraisal at the Development Owner's expense; or

(C) if the LURA requires valuation through the Minimum Purchase Price calculation, submit documentation verifying the calculation of the Minimum Purchase Price as described in subsection (b)(2) of this section regardless of any existing offer or appraised value;

(6) description of the Property, including all amenities and current zoning requirements;

(7) copies of all documents imposing income, rental and other restrictions (non-TDHCA), if any, applicable to the operation of the Property;

(8) a current title policy or a down date endorsement not older than six months prior to the date of submission of the ROFR request;

(9) the most recent Physical Needs Assessment, pursuant to Tex. Gov't Code §2306.186(e) conducted by a Third-Party;

(10) copy of the monthly operating statements, including income statements and balance sheets for the Property for the most recent twelve (12) consecutive months (financial statements should identify amounts held in reserves);

(11) the three (3) most recent consecutive audited annual operating statements, if available;

(12) detailed set of photographs of the Property, including interior and exterior of representative units and buildings, and the Property's grounds (including digital photographs that may be easily displayed on the Department's website);

(13) current and complete rent roll for the entire Property;

(14) if any portion of the land or improvements is leased for other than residential purposes, copies of the commercial leases.

(d) Posting and offers. Within 30 business days of receipt of all required documentation, the Department will review the submitted documents and notify the Development Owner of any deficiencies. During that time, the Department will notify any Qualified Entity or as applicable any Qualified Nonprofit Organization identified by the Development Owner as having a contractual ROFR of the Development Owner's intent to sell. Once any deficiencies are resolved and the Development Owner and Department come to an agreement on the ROFR offer price of the Property, the Department will list the Property for sale on the Department's website and contact entities on the buyer list maintained by the Department to inform them of the availability of the Property at the agreed upon ROFR offer price as determined under this section. The Department will notify the Development Owner when the Property has been listed. The ROFR posting period commences on the date the Property is posted for sale on the Department's website. During the ROFR posting period, a Qualified Nonprofit Organization or Qualified Entity can submit an offer to purchase as follows:

(1) if the LURA requires a 90 day ROFR posting period with no priority for any particular kind of Qualified Nonprofit Organization or tenant organization, any Qualified Nonprofit Organization or tenant organization may submit an offer to purchase the property.

(2) If the LURA requires a two (2) -year ROFR posting period, a Qualified Nonprofit Organization may submit an offer to purchase the Property as follows:

(A) during the first six (6) months of the ROFR posting period, only a Qualified Nonprofit Organization that is a Community Housing Development Organization ("CHDO") under 24 CFR Part 92, or that is 100% owned by a CHDO, as approved by the Department, may submit an offer;

(B) during the next six (6) months of the ROFR posting period, only a Qualified Nonprofit Organization as described by Tex. Gov't Code §2306.6706, or that is 100% owned by Qualified Nonprofit Organization as described by Tex. Gov't Code §2306.6706, or a tenant organization may submit an offer; and

(C) during the final twelve (12) months of the ROFR posting period, any Qualified Nonprofit Organization may submit an offer.

(3) If the LURA requires a 180-day ROFR posting period a Qualified Entity may submit an offer to purchase the Property as follows:

(A) during the first sixty (60) days of the ROFR posting period, only a Qualified Entity that is a CHDO under 24 CFR Part 92, or that is controlled by CHDO, as approved by the Department, may submit an offer;

(B) during the second sixty (60) days of the ROFR posting period, only a Qualified Entity as described by Tex. Gov't Code §2306.6706, or that is controlled by Qualified Entity as described by Tex. Gov't Code §2306.6706, or a tenant organization such may submit an offer;

(C) during the final sixty (60) days of the ROFR posting period, any Qualified Entity may submit an offer.

(4) If the LURA does not specify a required ROFR posting timeframe, or, is unclear on the required ROFR posting timeframe, and the required ROFR value is determined by the Minimum Purchase Price method, any Development that received a tax credit allocation prior to September 1, 1997, is required to post for a 90-day ROFR period and any Development that received a tax credit allocation on or after September 1, 1997, and until September 1, 2015, is required to post for a 2-year ROFR, unless the LURA is amended under §10.405(b), or after September 1, 2015 is required to post for a 180-day ROFR period as described in Tex. Gov't Code, §2306.6726.

(e) Acceptance of offers. A Development Owner may accept or reject any offer received during the ROFR posting period; provided however, that to the extent the LURA gives priority to certain classifications of Qualified Nonprofit Organizations or Qualified Entities to make offers during certain portions of the ROFR posting period, the Development Owner can only negotiate a purchase contract with such classifications of entities during their respective periods. For example, during the CHDO priority period, the Development Owner may only accept an offer from and enter into negotiations with a Qualified Nonprofit Organization or Qualified Entity in that classification.

(f) Satisfaction of ROFR.

(1) A Development Owner that has posted a Property under the ROFR process is deemed to have satisfied the ROFR requirements in the following circumstances:

(A) the Development Owner does not receive any bona fide offers from a Qualified Nonprofit Organization or Qualified Entity during the required ROFR posting period;

(B) a bona fide offer from a Qualified Nonprofit Organization or Qualified Entity is received at or above the posted ROFR offer price, the Development Owner accepts the offer, the Qualified Nonprofit Organization or Qualified Entity fails to close the purchase, the failure is determined to not be the fault of the Development Owner, and the Development Owner received no other bona fide offers from a Qualified Nonprofit Organization or Qualified Entity during the required ROFR posting period;

(C) a bona fide offer from a Qualified Nonprofit Organization or Qualified Entity is received at or above the posted ROFR offer price, the Qualified Nonprofit Organization or Qualified Entity is not approved by the Department during the ownership transfer review due to issues identified during the Previous Participation Review process pursuant to Chapter 1, Subchapter C of this title, and the Development Owner received no other bona fide offers from a Qualified Nonprofit Organization or Qualified Entity during the required ROFR posting period;

(D) an offer from a Qualified Nonprofit Organization or Qualified Entity is received at a price below the posted ROFR offer price, and the Development Owner received no other bona fide offers from a Qualified Nonprofit Organization or Qualified Entity during the required ROFR posting period at or above the posted ROFR offer price; or

(2) A Development Owner that has posted a Property under the ROFR process does not satisfy the ROFR requirements in the following circumstances:

(A) a bona fide offer from a Qualified Nonprofit Organization or Qualified Entity is received at or above the posted ROFR offer price, and the Development Owner does not accept the offer;

(B) the LURA identifies a specific Qualified Nonprofit Organization or Qualified Entity to be the beneficiary of the ROFR, and such entity no longer exists or is no longer conducting business;

(C) a bona fide offer from a Qualified Nonprofit Organization or Qualified Entity is received at or above the posted ROFR offer price, the Development Owner accepts the offer, the Qualified Nonprofit Organization or Qualified Entity fails to close the purchase, the failure is determined to not be the fault of the Development Owner, the Development Owner received other bona fide offers from a Qualified Nonprofit Organization or Qualified Entity during the ROFR posting period and then fails to accept any of such other offers;

(D) a bona fide offer from a Qualified Nonprofit Organization or Qualified Entity is received at or above the posted ROFR offer price, the Development Owner accepts the offer, the Qualified Nonprofit Organization or Qualified Entity fails to close the purchase, and such failure is determined to be the fault of the Development Owner;

(E) a bona fide offer from a Qualified Nonprofit Organization or Qualified Entity is received at or above the posted ROFR offer price, the Qualified Nonprofit Organization or Qualified Entity is not approved by the Department during the ownership transfer review due to issues identified during the Previous Participation Review process pursuant to Chapter 1, Subchapter C of this title, the Development Owner received other bona fide offers from a Qualified Nonprofit Organization or Qualified Entity during the ROFR posting period and fails to accept any of such other offers; or

(F) an offer from a Qualified Nonprofit Organization or Qualified Entity is received at a price below the posted ROFR offer price, the Development Owner received other bona fide offers from a Qualified Nonprofit Organization or Qualified Entity during the ROFR posting period at or above the posted ROFR offer price, and the Development Owner fails to accept any of such offers.

(3) A Development Owner with a LURA that identifies a specific Qualified Nonprofit Organization or Qualified Entity to be the beneficiary of the ROFR will satisfy the ROFR if:

(A) the identified beneficiary is in existence and conducting business;

(B) the Development Owner offers the Development to the identified beneficiary pursuant to the terms of the ROFR;

(C) if the ROFR includes a priority for a certain type of Qualified Entity (such as a CHDO) to have the first opportunity make an offer to acquire the Development, the identified beneficiary meets such classification; and

(D) the identified entity declines to purchase the Development in writing, and such evidence is submitted to and approved by the Department.

(g) Activities Upon Satisfaction of ROFR.

(1) If a Development Owner satisfies the ROFR requirement pursuant to subsection (f)(1) - (3) of this section, it may request a Preliminary Qualified Contract (if such opportunity is available under §10.408) or proceed with the sale to an entity that is not a Qualified Nonprofit Organization or Qualified Entity at or above the ROFR offer price.

(2) Following notice that the ROFR requirement has been met, if the Development Owner does not post the Property for Qualified Contract in accordance with §10.408 or sell the Property to an entity that is not a Qualified Nonprofit Organization or Qualified Entity within twenty-four (24) months of the Department's written indication that the ROFR has been satisfied, the Development Owner must follow the ROFR process for any subsequent transfer.

(3) If the Department determines that the ROFR requirement has not been met during the ROFR posting period, the Owner may not re-post under this provision at a ROFR offer price that is higher than the originally posted ROFR offer price until twenty-four (24) months has expired from the Department's written indication that the ROFR has not been satisfied. The Development Owner may market the Property for sale and sell the Property to a Qualified Nonprofit Organization or Qualified Entity during this twenty-four (24) month period.

(h) Sale and closing.

(1) Prior to closing a sale of the Property, the Development Owner must obtain Department approval of the transfer through the ownership transfer process in accordance with §10.406 of this chapter (relating to Ownership Transfers (§2306.6713)). The request should include, among other required transfer documents outlined in the Post Award Activities Manual, the final settlement statement and final sales contract with all amendments.

(2) If the closing price is materially less than the ROFR offering price or the terms and conditions of the sale change materially from what was submitted in the ROFR posting, in the Department's sole determination, the Development Owner must go through the ROFR process again with a revised ROFR offering price equal to the reduced closing price or adjusted terms and conditions based upon the revised terms, before disposing of the Property.

(i) Appeals. A Development Owner may appeal a staff decision in accordance with §10.902 of this chapter (relating to the Appeals Process (§2306.0321; §2306.6715)).

§10.408.Qualified Contract Requirements.

(a) General. Pursuant to §42(h)(6) of the Code, after the end of the 14th year of the Compliance Period, the Development Owner of a Development utilizing Housing Tax Credits can request that the allocating agency find a buyer at the Qualified Contract Price. If a buyer cannot be located within one (1) year, the Extended Use Period will expire. This section provides the procedures for the submittal and review of a Qualified Contract Request.

(b) Eligibility. Development Owners who received an award of credits on or after January 1, 2002, are not eligible to request a Qualified Contract prior to the thirty (30) year anniversary of the date the property was placed in service (§2306.185). Unless otherwise permitted in the LURA, Development Owners awarded credits prior to 2002 may submit a Qualified Contract Request at any time after the end of the year proceeding the last year of the Initial Affordability Period, following the Department's determination that the Development Owner is eligible. The Initial Affordability Period starts concurrently with the credit period, which begins at placement-in-service or is deferred until the beginning of the next tax year, if there is an election. Unless the Development Owner has elected an Initial Affordability Period longer than the Compliance Period, as described in the LURA, this can commence at any time after the end of the 14th year of the Compliance Period. References in this section to actions which can occur after the 14th year of the Compliance Period shall refer, as applicable, to the year preceding the last year of the Initial Affordability Period, if the Development Owner elected an Initial Affordability Period longer than the Compliance Period.

(1) If there are multiple buildings placed in service in different years, the end of the Initial Affordability Period will be based upon the date the last building placed in service. For example, if five buildings in the Development began their credit periods in 1990 and one began in 1991, the 15th year would be 2005.

(2) If a Development received an allocation in multiple years, the end of the Initial Affordability Period will be based upon the last year of a multiple allocation. For example, if a Development received its first allocation in 1990 and a subsequent allocation and began the credit period in 1992, the 15th year would be 2006.

(c) Preliminary Qualified Contract Request. All eligible Development Owners must file a Preliminary Qualified Contract Request.

(1) In addition to determining the basic eligibility described in subsection (b) of this section, the pre-request will be used to determine that:

(A) the Development does not have any uncorrected issues of noncompliance outside the corrective action period;

(B) there is a Right of First Refusal (ROFR) connected to the Development that has been satisfied;

(C) the Compliance Period has not been extended in the LURA and, if it has, the Development Owner is eligible to file a pre-request as described in paragraph (2) of this subsection; and

(2) In order to assess the validity of the pre-request, the Development Owner must submit:

(A) Preliminary Request Form;

(B) Qualified Contract Pre-Request fee as outlined in §10.901 of this chapter (relating to Fee Schedule);

(C) copy of all regulatory agreements or LURAs associated with the Property (non-TDHCA);

(D) copy of the most recent Physical Needs Assessment/Property Condition Assessment, pursuant to Tex. Gov't Code §2306.186(e), conducted by a Third Party. If the PNA/PCA identifies the need for critical repairs that significantly impact habitability and tenant safety, the identified repairs and replacements must be resolved to the satisfaction of the Department before the Development will be considered eligible to submit a Qualified Contract Request.

(3) The pre-request will not bind the Development Owner to submit a Request and does not start the One (1) Year Period (1YP). A review of the pre-request will be conducted by the Department within ninety (90) days of receipt of all documents and fees described in paragraph (2) of this subsection. If the Department determines that this stage is satisfied, a letter will be sent to the Development Owner stating that they are eligible to submit a Qualified Contract (QC) Request.

(d) Qualified Contract Request. A Development Owner may file a QC Request anytime after written approval is received from the Department verifying that the Development Owner is eligible to submit the Request.

(1) Documentation that must be submitted with a Request is outlined in subparagraphs (A) - (P) of this paragraph:

(A) a completed application and certification;

(B) the Qualified Contract price calculation worksheets completed by a Third-Party certified public accountant (CPA). The CPA shall certify that they have reviewed annual partnership tax returns for all years of operation, loan documents for all secured debt, and partnership agreements. They shall also certify that they are not being compensated for the assignment based upon a predetermined outcome;

(C) a thorough description of the Development, including all amenities;

(D) a description of all income, rental and other restrictions (non-TDHCA), if any, applicable to the operation of the Development;

(E) a current title report;

(F) a current appraisal with the effective date within six months of the date of the QC Request and consistent with Subchapter D of this chapter (relating to Underwriting and Loan Policy);

(G) a current Phase I Environmental Site Assessment (Phase II if necessary) with the effective date within six months of the date of the QC Request and consistent with Subchapter D of this chapter;

(H) a copy of the most recent Physical Needs Assessment of the property conducted by a Third Party, if different from the assessment submitted during the preliminary qualified contract request, consistent with Subchapter D of this chapter and in accordance with the requirement described in Tex. Gov't Code, §2306.186(e);

(I) a copy of the monthly operating statements for the Development for the most recent twelve (12) consecutive months;

(J) the three most recent consecutive annual operating statements;

(K) a detailed set of photographs of the development, including interior and exterior of representative units and buildings, and the property's grounds (including digital photographs that may be easily displayed on the Department's website);

(L) a current and complete rent roll for the entire Development;

(M) a certification that all tenants in the Development have been notified in writing of the request for a Qualified Contract. A copy of the letter used for the notification must also be included;

(N) if any portion of the land or improvements is leased, copies of the leases;

(O) the Qualified Contract Fee as identified in §10.901 of this chapter; and

(P) additional information deemed necessary by the Department.

(2) Unless otherwise directed by the Department pursuant to subsection (g) of this section, the Development Owner shall contract with a broker to market and sell the Property. The Department may, at its sole discretion, notify the Owner that the selected Broker is not approved by the Department. The fee for this service will be paid by the seller, not to exceed six percent of the QC Price.

(3) Within 90 days of the submission of a complete Request, the Department will notify the Development Owner in writing of the acceptance or rejection of the Development Owner's QC Price calculation. The Department will have one (1) year from the date of the acceptance letter to find a Qualified Purchaser and present a QC. The Department's rejection of the Development Owner's QC Price calculation will be processed in accordance with subsection (e) of this section and the 1YP will commence as provided therein.

(e) Determination of Qualified Contract Price. The QC Price calculation is not the same as the Minimum Purchase Price calculation for the ROFR. The CPA contracted by the Development Owner will determine the QC Price in accordance with §42(h)(6)(F) of the Code taking the following into account:

(1) distributions to the Development Owner of any and all cash flow, including incentive management fees and reserve balance distributions or future anticipated distributions, but excluding payments of any eligible deferred developer fee. These distributions can only be confirmed by a review of all prior year tax returns for the Development;

(2) all equity contributions will be adjusted based upon the lesser of the consumer price index or 5 percent for each year, from the end of the year of the contribution to the end of year fourteen or the end of the year of the request for a QC Price if requested at the end of the year or the year prior if the request is made earlier than the last year of the month; and

(3) these guidelines are subject to change based upon future IRS Rulings and/or guidance on the determination of Development Owner distributions, equity contributions and/or any other element of the QC Price.

(f) Appeal of Qualified Contract Price. The Department reserves the right, at any time, to request additional information to document the QC Price calculation or other information submitted. If the documentation does not support the price indicated by the CPA hired by the Development Owner, the Department may engage its own CPA to perform a QC Price calculation and the cost of such service will be paid for by the Development Owner. If a Development Owner disagrees with the QC Price calculated by the Department, a Development Owner may appeal in writing. A meeting will be arranged with representatives of the Development Owner, the Department and the CPA contracted by the Department to attempt to resolve the discrepancy. The 1YP will not begin until the Department and Development Owner have agreed to the QC Price in writing. Further appeals can be submitted in accordance with §10.902 of this title (relating to Appeals Process (§2306.0321; §2306.6715)).

(g) Marketing of Property. By submitting a Request, the Development Owner grants the Department the authority to market the Development and provide Development information to interested parties. Development information will consist of pictures of the Development, location, amenities, number of Units, age of building, etc. Development Owner contact information will also be provided to interested parties. The Development Owner is responsible for providing staff any requested information to assist with site visits and inspections. Marketing of the Development will continue until such time that a Qualified Contract is presented or the 1YP has expired. Notwithstanding subsection (d)(2) of this section, the Department reserves the right to contract directly with a Third Party in marketing the Development. Cost of such service, including a broker's fee not to exceed 6 percent, will be paid for by the existing Development Owner. The Department must have continuous cooperation from the Development Owner. Lack of cooperation will cause the process to cease and the Development Owner will be required to comply with requirements of the LURA for the remainder of the Extended Use Period. A prospective purchaser must complete all requirements of an ownership transfer request and be approved by the Department prior to closing on the purchase. Responsibilities of the Development Owner include but are not limited to the items described in paragraphs (1) - (3) of this subsection. The Development Owner must:

(1) allow access to the Property and tenant files;

(2) keep the Department informed of potential purchasers; and

(3) notify the Department of any offers to purchase.

(h) Presentation of a Qualified Contract. If the Department finds a Qualified Purchaser willing to present an offer to purchase the property for an amount at or above the QC Price, the Development Owner may accept the offer and enter into a commercially reasonable form of earnest money agreement or other contract of sale for the property and provide a reasonable time for necessary due diligence and closing of the purchase. If the Development Owner chooses not to accept the QC offer that the Department presents, the QC request will be closed and the possibility of terminating the Extended Use Period through the Qualified Contract process is eliminated; the Property remains bound by the provisions of the LURA. If the Development Owner decides to sell the development for the QC Price pursuant to a QC, the consummation of such a sale is not required for the LURA to continue to bind the Development for the remainder of the Extended Use Period.

(1) The Department will attempt to procure a QC only once during the Extended Use Period. If the transaction closes under the contract, the new Development Owner will be required to fulfill the requirements of the LURA for the remainder of the Extended Use Period.

(2) If the Department fails to present a QC before the end of the 1YP, the Department will file a release of the LURA and the Development will no longer be restricted to low-income requirements and compliance. However, in accordance with §42(h)(6)(E)(ii) of the Code, for a three (3) year period commencing on the termination of the Extended Use Period, the Development Owner may not evict or displace tenants of Low-Income Units for reasons other than good cause and will not be permitted to increase rents beyond the maximum tax credit rents. Additionally, the Development Owner should submit to the Department a request to terminate the LURA and evidence, in the form of a signed certification and a copy of the letter, to be approved by the Department, that the tenants in the Development have been notified in writing that the LURA will be terminated and have been informed of their protections during the three (3) year time frame.

(3) Prior to the Department filing a release of the LURA, the Development Owner must correct all instances of noncompliance at the Development.

(i) Compliance Monitoring during Extended Use Period. For Developments that continue to be bound by the LURA and remain affordable after the end of the Compliance Period, the Department will monitor in accordance with the Extended Use Period Compliance Policy in Subchapter F of this Chapter (relating to Compliance Monitoring).

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 15, 2017.

TRD-201705216

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: January 4, 2018

Proposal publication date: October 27, 2017

For further information, please call: (512) 475-2109


SUBCHAPTER G. FEE SCHEDULE, APPEALS AND OTHER PROVISIONS

10 TAC §10.901, §10.902

The Texas Department of Housing and Community Affairs (the "Department") adopts the amendments to 10 TAC, Chapter 10 Uniform Multifamily Rules, Subchapter G, concerning Fee Schedule, Appeals and Other Provisions, §10.901 and §10.902. Section 10.901 and §10.902 are adopted without changes to text as published in the September 22, 2017, issue of the Texas Register (42 TxReg 4907) and will not be republished.

REASONED JUSTIFICATION. The Department finds that the adoption of the rules 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 Board approved the final order adopting the amendments on November 9, 2017.

The Governor made no changes.

The Department accepted public comments between September 22, 2017, and October 12, 2017. The comments and responses include both administrative clarifications and revisions to the Housing Tax Credit Program Uniform Multifamily Rules 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 Uniform Multifamily Rules as presented to the Board in September, such changes are indicated.

Public comments were accepted through October 12, 2017, with comments received from (4) Brownstone Affordable Housing, Leslie Holleman & Associates, Evolie Housing Partners, and Mears Development and Construction, Inc.

13. §10.901(5) - Subchapter G - Third Party Deficiency Fee (4)

COMMENT SUMMARY: Commenter (4) recommended this fee be reduced to $100 on the basis that an earlier deadline to file Requests for Administrative Deficiencies ("RFAD") will result in more RFAD's being submitted because staff reviews may not have been completed or published by such deadline. With an increase in RFADs filed, commenter (4) believed the fee should be reduced.

STAFF RESPONSE: Regardless of whether there is an increase in RFADs filed as a result of the earlier deadline the workload of staff as it relates to processing, reviewing, corresponding, and presenting the RFADs to the Board remains the same. Staff does not believe the fee should be reduced on the basis that applicants may have to submit more RFADs if staff review of the RFADs will not change. Staff believes the $500 fee is still warranted.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

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

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 14, 2017.

TRD-201705176

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: January 3, 2018

Proposal publication date: September 22, 2017

For further information, please call: (512) 936-7834


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 amended 10 TAC Chapter 11 §§11.1 - 11.10, concerning the Housing Tax Credit Program Qualified Allocation Plan. Sections 11.1 - 11.10 are adopted with changes to the text as published in the September 22, 2017, issue of the Texas Register (42 TexReg 4909).

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 Department accepted public comments between September 22, 2017, and October 12, 2017. 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.

The Board approved the final order adopting the amendments on November 9, 2017. The Board made modifications to §11.9(d)(7)(A)(ii)(II) prior to final adoption.

As authorized by Tex. Gov't Code §2306.6724(b), the Governor made changes to the adopted rule on November 30, 2017, with modifications to 10 TAC §11.2, §11.9(c)(8), §11.9(d)(3), and §11.9(f)(5), and approved the modified rule on December 1, 2017.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS

Public comments were accepted between September 22, 2017, and October 12, 2017, with comments received from: (1) Mayor of Plano, Harry LaRosiliere, (2) Representative Garnet F. Coleman, (3) Representative Larry Phillips, (4) Brownstone Affordable Housing, Leslie Holleman & Associates, Evolie Housing Partners, and Mears Development and Construction, (5) Alyssa Carpenter, (6) Texas Affiliation of Affordable Housing Providers, (7) DMA Companies, (8) Tim Smith, (9) Dr. David Hicks, (10) David Baca, (11) Jim Sari, (12) Charles Holcomb, (13) Rural Rental Housing Association, (14) Marlon Sullivan, (15) Devin Baker, (16) Dennis Hoover, (17) Lucas & Associates, (18) National Church Residences, (19) Marilyn Hartman, (20) Disability Rights Texas, (21) Leslie Buck, (22) Meredith Blackburn, (23) Susan Raffle, (24) Methodist Healthcare Ministries, (25) Apolonio Flores, (26) Five Woods, LLC, (27) Foundation Communities, (28) NEW HOPE, (29) True Casa Consulting, (30) Lisa Vecchietti, (31) BETCO Consulting, (32) Texas Coalition of Affordable Developers, (33) Frazier Revitalization, (34) Purple Martin Real Estate, (35) Structure Development, (36) Miller - Valentine Group, (37) MGROUP Holdings, (38) Brad Forslund, (39) JES Dev Co, (40) The NuRock Companies, (41) Texas Low Income Housing Information Service, and (42) The Meals on Wheels Association of Texas.

NOTE ON REASONED RESPONSE: In order to comply with the Texas Register's formatting guidelines, the formatting of the Department's Reasoned Response has changed. All comment summaries and reasoned responses that included strikethrough formatting have been removed; all comment summaries and reasoned responses that included underline formatting have been removed; and all language regarding the color of track changes has been removed. The Department's original Reasoned Response, which includes proposed changes using track changes formatting, can be located in the TDHCA Governing Board Book for November 9, 2017.

1. §11--General Comment; (2), (15), (28), (29), (39)

COMMENT SUMMARY: Commenter (2) states his support for the moving of educational quality criteria entirely to 10 TAC Chapter 10, Subchapter B.

Commenter (15) states that he appreciates staff's involvement and the processes they have implemented to work with the development community.

Commenter (28) thanks staff for the extensive work they do throughout the development cycle.

Commenter (29) thanks staff for the thoughtful year-long planning process that occurred with this year's drafting of rules. Commenter (29) also thanks TDHCA for its past and current efforts to create and incent additional programming that provides integrated models to complement the LIHTC program.

Commenter (39) thanks staff for the time they put into drafting the 2018 Qualified Allocation Plan ("QAP") and Uniform Multifamily Rules ("Rules"), and also appreciates the monthly roundtables that were held. The roundtables have been a welcomed addition to the QAP development process, and Commenter (39) hopes staff will continue this in the coming years.

Commenter (42) applauds staff's efforts in working with stakeholders to craft the rules for 2018.

STAFF RESPONSE: Staff appreciates Commenter (2)'s explaining why he supports the placement of educational quality entirely within 10 TAC Chapter 10. His suggestions regarding mitigation plans for schools that do not have a TEA Met Standard rating are addressed by staff in the public comment reasoned response for 10 TAC Chapter 10, Subchapter B.

Staff thanks Commenters (15), (28), (29), (39), (42) for their support.

BOARD RESPONSE: Accepted Staff's recommendation.

2. §11.1(e)--Data; (4), (5)

COMMENT SUMMARY: Commenter (4) states that the proposed language regarding data, especially data from NeighborhoodScout, is unclear, too subjective, and opens the door to Requests for Administrative Deficiencies ("RFADs") during the Application process. Commenter (4) foresees the possibility of NeighborhoodScout's crime rate for a census tract increasing beyond the threshold limit set forth by Departmental rules after an Applicant has already selected a site, whose crime rates were below the specified rate, but before the Pre-Application Final Delivery Date, thereby invalidating that census tract's, and the proposed Development located in it, qualification for certain point items.

Commenter (4) proposes the following changes (blue) on top of staff's originally proposed changes (red):

(e) Data. Where this chapter requires the use of American Community Survey data, the Department shall use the most current data available as of October 1, 2017, unless specifically otherwise provided in federal or state law or in the rules. All American Community Survey data must be 5-year estimates, unless otherwise specified. The availability of more current data shall be disregarded. Where other data sources are specifically required, such as Neighborhoodscout, the data available at the time of site selection will be permissible, provided Applicants retain evidence of the applicable data on that date. The NeighborhoodScout data submitted in the Application must include the date on which the report was printed.

Commenter (5) asks staff to look more closely at the discrepancies between NeighborhoodScout data and local data sources when measuring violent and property crime rates. Commenter (5) notes that the rule as proposed requires the development community to spend hundreds of dollars monthly on a third-party commercial website that provides inaccurate data. Commenter (5) asks that NeighborhoodScout be entirely removed from the QAP and Rules.

STAFF RESPONSE: In response to Commenter (4), staff does not find the proposed language for §11.1(e) ambiguous. For NeighborhoodScout crime rate data (and any data other than American Community Survey data), any data secured between October 1 and Pre-Application Final Delivery Date is permissible. Replacing this time frame with Commenter (4)'s proposed phrase of "at the time of site selection" is ambiguous as it does not set a limit to when that site was selected, and staff has no way of confirming this date. The nature of the Department's Housing Tax Credit (HTC) rules is to judge sites according to point-in-time data, which require time parameters. The proposed rule states that the Applicant should include the NeighborhoodScout report in the Application as evidence of the data used by the Applicant, and the date on which that data was attained. If the data is updated after the Application is submitted, it would not impact the Application and will be disregarded

Staff recommends no changes based on this comment.

In response to Commenter (5), staff understands the frustration towards discrepancies in various sources of crime data. Unfortunately, crime data is not reported across jurisdictions according to uniform standards, and this lack of consistency makes it difficult to compare and contrast geographic units. Some jurisdictions do not even accurately record or report their crime data. NeighborhoodScout is not a perfect tool, but it does provide a uniform standard down to the census tract level. Applicants are not required to use NeighborhoodScout and are welcome to use local crime data if they wish to avoid incurring any costs associated with accessing the website, but any local crime data used must follow the same methods as NeighborhoodScout-a given time period's violent or property crime instances within the boundaries of a census tract, relative to the population of that census tract.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

3. §11.1(g)--Transparency; (4)

COMMENT SUMMARY: Commenter (4) asks that the majority of this language regarding the Administrative Deficiency process be moved to other sections of the QAP or Rules where it is either already addressed or more appropriately placed. Commenter (4) recommends moving the sentence pertaining to point changes during the Administrative Deficiency process to 10 TAC §11.9(a) - General Information. The language regarding the prohibition against changing any aspects of the Development during the Administrative Deficiency process is already addressed in 10 TAC §10.201(7).

STAFF RESPONSE: Staff believes that reinforcing these requirements at the front of the QAP serves the purpose of ensuring that the information is clearly and prominently communicated to Applicants.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

4. §11.2--Program Calendar for Competitive Housing Tax Credits; (4), (5), (32), (34)

COMMENT SUMMARY: Commenter (4) notes that, by May 1, 2017, only 29 of the 89 priority Applications had been reviewed. Therefore, Commenter (4) worries that, given the unknown outcome of Applications not yet reviewed by staff, other Applicants will be incentivized to file RFADs lest staff overlook a potential flaw in an Application. Commenters (32) and (34) make a similar point, and foresee more RFADs being filed because of this earlier deadline. Commenter (32) believes that staff's attempt to clarify definitions and Departmental expectations will help to address the RFAD issues seen late in the 2017 QAP cycle. Commenters (32) and (34) propose that the RFAD deadline revert to June 1, as it was in the 2017 QAP cycle.

Commenter (5) thanks staff for changing the Third Party Request for Administrative Deficiency date after receiving input from stakeholders as the 2018 QAP was initially crafted. That said, Commenter (5) believes that a May 1 deadline warrants a "Volume 4" review process whereby Applications are quickly assessed for scoring accuracy immediately after the Full Application Delivery Date. Such a review process may save staff time since it would correctly identify Applications' rankings before staff begins a deeper review of Application materials.

Commenter (5) also asks that staff correct the Carryover Documentation Delivery Date, which is currently listed as being in 2017 but should be in 2018.

STAFF RESPONSE: In response to Commenter (4), staff's primary responsibility is to ensure that Final Awards can be made by July. In order to meet this deadline, staff finds it prudent to address RFADs earlier in the application process, rather than later. Furthermore, having RFADs in hand at an earlier date assists staff in better reviewing Applications, as RFADs do at times point out issues that staff had not considered. With the proposed May 1 RFAD deadline, staff will be able to consolidate most Administrative Deficiencies into one request to an Applicant, which is beneficial for staff, the Applicant, and the Board.

Staff recommends no changes based on this comment.

In response to Commenter (5)'s noticing an inaccurate date for the Carryover Documentation Delivery Date, staff thanks Commenter (5) for noticing this error and will change it to "11/01/2018."

Regarding Commenter (5)'s proposal that staff conduct a limited review of Applications immediately following the Full Application Delivery Date, staff is considering changes to internal processes to improve accuracy and speed up the review process.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

5. §11.4(a)--Tax Credit Request and Award Limits; (4), (5), (8), (32), (33), (34), (35), (36), (40)

COMMENT SUMMARY: Commenters (4), (5), (32), (34), (36), (40) ask that staff revert to the 2017 QAP language and remove the proposed language that would allow staff, after June 29, to terminate non priority Applications once an Applicant faces the $3 million cap. Commenter (4) states that this suggested revision grants staff too much subjective discretion since any "non-priority" Application could suddenly become a priority Application as the pool of Applications changes. Furthermore, Commenters (4) and (32) note that Applications that receive awards sometimes do not secure a Carryover Allocation Agreement for many reasons, such as not securing zoning. In this instance, an Applicant should have the option to draw upon an Application on the waiting list to maintain his/her overall funding amount, which would still remain below $3 million. Commenters (5) and (32) note that, because an Applicant has paid an Application fee for each submitted Application, it should not be at risk of termination and should receive the same treatment as any other Application. Commenter (34) points out that the waiting list moves after the July Governing Board meeting. Commenter (5) points to important milestones for the Development at Commitment Notice and Carryover dates, as well as Real Estate Analysis ("REA") assessments throughout the review process.

Because of the concerns stated above, Commenters (32) and (36) propose that an Applicant with HTC requests exceeding the $3 million cap be required to notify staff of their preference by the June 29 date, but that the other Applications remain active, if some version of this provision must remain.

Commenters (5), (8), (32), (33), (34), and (35) also ask staff to reconsider the consultant or advisor fee in §11.4(a)(4), which has been set at $150,000 since 2004. Because staff has removed the alternative measure for a consultant or advisor fee-10% of the Developer Fee or 20% for Qualified Nonprofit Developments-Commenter (5) asks that staff raise the allowable consultant or advisor fee to $225,000 to account for inflation from 2004 to 2018. Commenters (32) and (35) request $250,000 to account for inflation, which accommodates 3-4% inflation per year since 2004. Commenters (8), (33), (35) are against the proposed change and ask that staff revert to the 2017 QAP language. Allowing larger payments to consultants has improved the quality of submitted Applications, and because the consultant fee comes from the Developer fee, no extra costs are added to the total project costs. If anything, high consultant fees ensure a quality Application.

Commenter (33) further explains that they are concerned that a consultant receiving fees more than the specified amount would then be subject to the $3 million cap applied to Applicants, Developers, or Guarantors. While Commenter (33) recognizes that some Applicants may attempt to circumvent these rules, as they were previously written, Commenter (33) believes that the Department can address this issue in a more targeted way during the Application review process. Commenter (34) makes a similar comment, noting that, if consultants have abused the $3 million cap, then TDHCA should simply address that problem directly through strict enforcement of the actual limit.

STAFF RESPONSE: Regarding the request from Commenters (4), (5), (32), (34), (36), (40) for revisions to the proposed $3 million cap requirements, each Application that is submitted carries the risk of not receiving an award, whether due to non-competitiveness or through the inability to meet required milestones after an award. In contrast to Commenter (4)'s suggestion that the proposed language "grants staff too much subjective discretion since any 'non-priority' Application could suddenly become a priority Application as the pool of Applications changes," allowing Applicants to maintain Applications in amounts beyond the $3 million dollar limit deprives Applicants on the waiting list of the ability to secure an award when an awarded Applicant fails to meet the requirements of the rules.

Staff recommends no changes based on this comment.

Regarding the request from Commenters (5), (8), (32), (33), (34), and (35) to increase the maximum consultant and advisor fee per Application, staff supports the logic of adjusting the previously stipulated amount of $150,000 according to inflation. In order to determine an appropriate rate of inflation between 2004 and 2017, staff turned to the U.S. Bureau of Labor Statistics' Consumer Price Index inflation calculator, and determined that $150,000 in January, 2004 dollars equals $199,907.40 in September, 2017 dollars. Staff will round up to $200,000 and adjust the amount in §11.4(a)(4).

In response to Commenters (33) and (34), consultants are not subject to the $3 million cap. So long as they do not exceed the cap on consultant fees and do not appear in the developer or ownership structure, they may work on multiple Applications.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

6. §11.4(c)--Increase in Eligible Basis (30 percent Boost); (4)

COMEMNT SUMMARY: Commenter (4) recommends reverting back to the 2017 QAP language in this subsection and removing the proposed language that reads, "In no instance will the boost exceed more than the amount of credits required to create the HTC rent restricted units, as determined by the Real Estate Analysis division of TDHCA." Commenter (4) argues that this language is vague and subjective, and without specific criteria in 10 TAC 10.301 specifying how the necessary amount of HTCs will be calculated and determined, the added language should be removed. Furthermore, Commenter (4) notes that this subsection already has language prohibiting the over sourcing of HTCs for a Development.

STAFF RESPONSE Staff does not agree that the proposed language is "vague and subjective." The language considers the requirements of Internal Revenue Code §42(d)(5)(B) in applying the boost, and §42(m)(2)(A) in ensuring that the credit amount allocated does not exceed the amount the housing agency determines necessary for the financial feasibility of the development. Applications will be underwritten using the same method to determine the amount of credits required that they have used for past application cycles. The difference is that when the boost exceeds the amount required, the amount of the boost will be reduced.

Staff recommends no changes based on this comment.

STAFF TECHNICAL CORRECTION:

Staff has updated the credit year regarding a Uniform State Service Region's Elderly Development credit maximum in §11.4(b), Maximum Request Limit (Competitive HTC Only). This subsection now reads as follows:

(b) Maximum Request Limit (Competitive HTC Only). For any given Development, an Applicant may not request more than 150 percent of the credit amount available in the subregion based on estimates released by the Department on December 1, or $1,500,000, whichever is less, or $2,000,000 for Applications under the At-Risk Set-Aside. In addition, for Elderly Developments in a Uniform State Service Region containing a county with a population that exceeds one million, the request may not exceed the final amount published on the Department's website after the release of the Internal Revenue Service notice regarding the 2018 credit ceiling. For all Applications, the Department will consider the amount in the funding request of the pre-application and Application to be the amount of Housing Tax Credits requested and will automatically reduce the Applicant's request to the maximum allowable under this subsection if exceeded. Regardless of the credit amount requested or any subsequent changes to the request made by staff, the Board may not award to any individual Development more than $2 million in a single Application Round. (§2306.6711(b))

BOARD RESPONSE: Accepted Staff's recommendation.

7. §11.5(2)(A)--Eligibility of Certain Developments to Participate in the USDA or Rural Set-Asides; (4)

COMMENT SUMMARY: Commenter (4) notes that this subparagraph cannot stand alone as "A" unless there is also a "B." Commenter (4) recommends combining this text with the immediately preceding paragraph, (2) USDA Set-Aside.

STAFF RESPONSE: Staff has considered the suggested change and determined that including this information outside the body of the preceding paragraph serves the purpose of ensuring that the information is clearly and prominently communicated to Applicants. Staff has revised the §11.5(2) to address the Commenter's concern:

(2) USDA Set-Aside. (§2306.111(d-2)) At least 5 percent of the State Housing Credit Ceiling for each calendar year shall be allocated to Rural Developments which are financed through USDA. If an Application in this set-aside involves Rehabilitation it will be attributed to and come from the At-Risk Development Set-Aside; if an Application in this set-aside involves New Construction it will be attributed to and come from the applicable Uniform State Service Region and will compete within the applicable subregion unless the Application is receiving USDA Section 514 funding. Applications must also meet all requirements of Tex Gov't Code, §2306.111(d-2).

(A) Eligibility of Certain Developments to Participate in the USDA or Rural Set-Asides. (§2306.111(d-4)) A proposed or Existing Residential Development that, before September 1, 2013, has been awarded or has received federal financial assistance provided under Section 514, 515, or 516 of the Housing Act of 1949 (42 U.S.C. Section 1484, 1485, or 1486) may be attributed to and come from the At-Risk Development Set-Aside or the Uniform State Service Region in which the Development is located, regardless of whether the Development is located in a Rural area.

(B) All Applications that can score under the USDA Set-aside will be considered Rural for all scoring items under this chapter. If a Property receiving USDA financing is unable to score under the USDA Set-aside and it is located in an Urban subregion, it will be scored as Urban.

BOARD RESPONSE: Accepted Staff's recommendation.

8. §11.5(3)--At-Risk Set-Aside; (4)

COMMENT SUMMARY: Commenter (4) asserts that subparagraph (c) of this paragraph does not contemplate all of the possible paths to being an At-Risk Development, according to the statutory requirements of 2306.6702(a)(5)(B)(ii).

Commenter (4) proposes changing the deadline for §11.5(3)(D)(i) from Carryover Documentation Delivery Date to, instead, 10 Percent Test Documentation Delivery Date. The current deadline doesn't comport with how HUD approves these types of transfers, which require a Mixed Finance Application that HUD only accepts after an allocation is made. The proposed early deadline is also problematic for Developments awarded off the waiting list.

STAFF RESPONSE: Regarding the first comment from Commenter (4), staff agrees and has made the following clarifying change to §11.5(3)(C):

(C) An At-Risk Development qualifying under Tex. Gov't Code §2306.6702(a)(5)(B) must meet one of the following requirements:

(i) Units to be Rehabilitated or Reconstructed must be owned by a public housing authority or a public facility corporation created by a public housing authority under Chapter 303, Local Government Code and receive assistance under §9, United States Housing Act of 1937 (42 U.S.C. section 1437g); or

(ii) Units to be Rehabilitated or Reconstructed must have been disposed of or demolished by a public housing authority in the two-year period preceding the application for housing tax credits; and

(iii) For Developments including Units to be Reconstructed, the Application will be categorized as New Construction; and

(iv) To the extent that an Application is eligible under Tex. Gov't Code §2306.6702(a)(5)(B)(iii), the Development must receive assistance through the Rental Assistance Demonstration ("RAD") program administered by the United States Department of Housing and Urban Development ("HUD"). Applications must include evidence that RAD participation is included in the applicable public housing plan that was most recently approved by HUD, and evidence (in the form of a Commitment to enter into a Housing Assistance Payment ("CHAP")) that HUD has approved the units proposed for Rehabilitation or Reconstruction for participation in the RAD program; and

(v) Notwithstanding any other provision of law, an at-risk Development described by Tex. Gov't Code § 2306.6702(a)(5)(B) that was previously allocated housing tax credits set aside under Subsection (a) does not lose eligibility for those credits if the portion of units reserved for public housing as a condition of eligibility for the credits under Tex. Gov't Code § 2306.6714 (a-1)(2) are later converted under RAD.

Regarding Commenter (4)'s second comment, staff believes that this suggestion would 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 2019 QAP.

Staff recommends no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

9. §11.6(4)--Waiting List; (4)

COMMENT SUMMARY: Commenter (4) asks that this subparagraph's language revert back to the 2017 QAP language. Staff's additional language added at the end of this item, Commenter (4) states, is already accounted for elsewhere in the QAP. Commenter (4) considers the language allowing the Department to select lower scoring Applications over higher scoring Applications in order to comply with required Set-asides to be highly subjective and denies higher-scoring Applicants appropriate process.

STAFF RESPONSE: The statutory requirements of Tex. Gov't Code §2306.6710(d) state that "the department shall continue to underwrite applications until the department has processed enough applications satisfying the department's underwriting criteria to enable the allocation of all available housing tax credits according to regional allocation goals and set-aside categories." Tex. Gov't Code §2306.111 further clarifies the awards methodology regarding Set-asides by stating that "In allocating low income housing tax credit commitments under Subchapter DD, the department shall, before applying the regional allocation formula prescribed by Section 2306.1115, set aside for at-risk developments, as defined by Section 2306.6702, not less than the minimum amount of housing tax credits required under Section 2306.6714." Staff finds the proposed language added to this subparagraph to be in compliance with the requirements and duties of statute.

Staff recommends no change based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

10. §11.7--Tie Breaker Factors; (4), (5), (6), (7), (8), (17), (18), (28), (30), (31), (32), (35), (37), (38), (39), (41)

COMMENT SUMMARY: Commenter (41) reflects on what constitutes effective tie-breaker factors, and asks staff to consider this logic as they respond to public comment. Effective tie-breaker criteria: 1) promote the best Applications; 2) are based on variable amounts that avoid simple binaries (yes/no, score/ did not score) and therefore actually break ties; and 3) are crafted in a way to discourage Development Site clustering.

Commenters (17), (30), (31), (39) support the current Tie-Breaker Factors and do not think any changes should be made. Commenters (30), (31), (39) share that Developers have already made their real estate decisions based on tie-breaker factors, and therefore the order and content should remain as written in order to provide stability.

Commenter (5) asks that Proximity to Urban Core be removed as a tie-breaker since it is already a significant scoring item. Also, there is no other scoring item that is also a tie-breaker factor. Commenter (38) asks that Proximity to Urban Core be removed for reasons explained under §11.9(c)(7), Proximity to Urban Core (namely, that qualifying cities are given too much weight by this measure). Commenter (41) states that Proximity to Urban Core should not be the first tie-breaker factor, as other criteria are more important than how close residents are to a city hall.

Commenter (7) accepts staff's proposed first tie-breaker-proximity to urban core-but asks that staff add the qualification that those proposed Developments closest to city hall win. Staff should consider this slight modification since proximity to urban core is now available to more cities and will be pursued by more Applicants.

Commenters (5) and (41) ask that staff revert to the 2017 QAP language for §11.7(2), since adding Concerted Revitalization Plan devalues high opportunity areas. Commenter (41) adds that, with the removal of Educational Quality from scoring criteria, equating CRP with Opportunity Index in tie-breaker factors may push Applicants to focus on lower opportunity area covered by CRPs, which could pose fair housing issues.

Commenters (5), (6), (7), (8), (18), (28), (31), (32), (41) express concern with the proposed third tie-breaker factor regarding HTC units per capita for a Place, since it will drive Developments to very small cities or Places that have never had a HTC allocation, irrespective of whether or not that Place has an adequate housing market to support the Development long-term. Commenters (6), (7), (18), (28) (31) and (32) also express concern with the fourth tie-breaker census tract with the lowest poverty rate. Commenters (6), (7) and (32) argue that, together, these two tie-breaker factors point Applicants to the same Places and census tracts, which creates upward pressure on land prices and discourages city governments from issuing resolutions of support. Second, these two factors push Developments to outlying and remote areas because they have either low poverty rates or no existing HTC property, the latter of which may mean that there is no market for HTC Developments. Commenters (6), (7), (8), and (28) therefore ask that staff entirely remove both tie-breakers (3) and (4), regarding HTC units per capita and census tract with the lowest poverty rate, respectively, and Commenter (28) also proposes removing the second tie-breaker factor. Commenter (18) asks that staff remove the poverty rate tie-breaker only. Commenter (5) proposes that tie-breaker (3) apply only to Urban subregions, and not Rural subregions. Commenter (41) does recognize the logic behind the third tie breaker, but proposes using a data set based on actual household need, such as HUD's Comprehensive Housing Affordability Strategy (CHAS) data.

Commenter (37) raises attendant concerns with the third tie-breaker factor, regarding HTCs per capita by Place. First, Commenter (37) expresses concern about the time constraints of American Community Survey ("ACS") population data, which for the 2018 QAP cycle will rely on 2011-2015 estimates. Some cities in Texas may already have populations higher than those ACS amounts, which may significantly alter the HTC / capita calculation. Second, Commenter (37) has noticed errors in the property inventory listed in the Department's Site Demographic Characteristics Report; sometimes Developments fall out of the HTC program but they remain listed on the property inventory. Third, reintroducing the geographic concept of Place under tie breaker factors pulls in Census Designated Places ("CDPs"), the boundaries of which are entirely subjective and based on the 2010 census mapping, which is now eight years old. Therefore, Commenter (37) asks that staff remove this tie breaker factor. If not, Commenter (37) asks that staff allow more recent population estimates from cities and that CDPs, first, only apply when entirely outside the boundaries of an incorporated City and, second, that all HTC Units within that CDP be accounted for.

Commenter (4) asks that staff further clarify tie breaker (3), regarding HTCs per capita. It is possible that a site might straddle jurisdictional boundaries, in which case the site could take one of two HTC per capita ratios. Commenter (4) proposes that the highest of the two or more applicable scores apply to the site.

Commenter (7) proposes a modification to the final tie-breaker factor-Applications proposed to be located the greatest linear distance from the nearest HTC assistant Development. Commenter (7) states that the focus should be on the population served-general or elderly-and not whether or not there is simply a HTC supported structure nearby.

Commenter (35) asks that, as is explained in the third tie-breaker, staff specify that the final tie-breaker-greatest linear distance from the nearest Housing Tax Credit assisted Development-will look to Development information located in the final Site Demographic Characteristics Report.

Commenters (31) and (41) believe that the 2017 QAP tie breaker factor of most high opportunity amenities resulted in some of the best sites found for Developments, and offer amenity-rich locations to residents. Commenter (41) asks that staff reconsider removing the 2017 QAP tie-breaker for most menu items "above the line." Commenter (41) believes that staff's efforts to clarify the menu items will resolve most issues faced by the Department in the 2017 competitive cycle.

Commenter (41) proposes that Opportunity Index be the first tie breaker, and words it as follows:

(1) Applications scoring higher on the Opportunity Index under §11.9(c)(4) of this chapter. For applications with the same score that have achieved the maximum Opportunity Index Score, the application with the highest number of points on the Opportunity Index amenities menu that they were unable to claim due to the 7 point cap on that item.

STAFF RESPONSE: Staff thanks Commenter (31) for proposing a logic that could define the crafting of tie-breakers, and asks that Commenter (31) reiterate this logic during the 2019 QAP planning process once staff and stakeholders begin planning the 2019 QAP.

In response to Commenters (30), (31), (39), such a stance would have the effect of defeating the purpose of public comment.

In regards to Commenters (5), (38), and (41), staff believes that the Department's goals of dispersion, resident choice, and proximity to meaningful amenities are well-served by the Proximity to Urban Core item. While Commenter (41) believes that residents more than likely do not care about being near their community's city hall, staff finds that city hall is a reliable indicator of the beneficial characteristics of a city. Staff believes that the goal of resident choice and HTC dispersion are served well through this item, which in the 2017 Competitive HTC cycle, only applied to 13 successful Applications out of 69 awardees (18.8% of the total).

Staff recommends no changes based on this comment.

In response to Commenter (7), in instances where two Applications or more have Urban Core points, they would move to subsequent tie breakers to break the tie.

Staff recommends no changes based on this comment.

In response to Commenters (5) and (41) and their concern about putting CRP on equal footing with Opportunity Index in the second tie-breaker, staff disagrees with their proposal to remove CRP from the tie-breaker. Such a revision would effectively bar CRP Developments from competing against Developments that score via the Opportunity Index. Given that the QAP's rules for CRP Developments help to ensure that a CRP is well planned and funded, a LIHTC Development in such an area can further catalyze revitalization, providing capital investments in communities that city officials believe really need it.

Staff recommends no changes based on this comment.

In response to the concerns of Commenters (5), (6), (7), (8), (28), (31), (32), (37), and (41) regarding the third tie breaker factor-lowest HTC units per capita for a Place, staff believes this measure promotes the Department's policy of dispersing HTC Developments. Applications in areas without previous Developments that lack amenities or sufficient market demand will not be successful in the Application process. In response to Commenter (37), the data provided by the American Community Survey ("ACS") is the most reliable information available at this time. While populations may have changed, there is not a reliable, consistent method to record that change for all cities across the state. Until that time when another data source is readily available, the Department will continue to rely on the ACS. Regarding Commenter (41)'s request that staff calculate a Place's need through use of another data set, this is a change that has not been contemplated and would represent too large of a change at this point.

Staff recommends no changes based on this comment.

In response to Commenters (4) and (37) regarding sites crossing jurisdictional boundaries and concerns regarding Census Designated Places, the Department has adopted a definition of Place that addresses Commenter (37)'s concerns. In the unlikely event that a Development Site is located in two jurisdictions, the Applicant should request a pre-determination from staff in order to understand how staff will evaluate the Application.

Staff recommends no changes based on this comment.

In response to the concerns of Commenters (6), (7), (18), (28) (31) and (32) regarding the fourth tie breaker factor-lowest poverty rate for a census tract, staff believes that Development locations in lower-poverty areas provide important advantages to residents of HTC properties.

Staff recommends no changes based on this comment.

In regards to Commenter (7)'s request to differentiate between population served when measuring the greatest linear distance from the nearest HTC-assisted Development, this concept was not presented in the draft rule and is too significant of a change to be included at this time

Staff recommends no changes based on this comment.

In regards to Commenter (35)'s request that staff specify the source of information for the fifth tie-breaker, as staff has done in tie-breaker 3, staff agrees and has made the necessary change, as demonstrated below.

(5) 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 according to the property inventory included in the HTC Site Demographic Characteristics Report. The linear measurement will be performed from closest boundary to closest boundary.

In regards to the request from Commenters (31) and (41) to revert to the 2017 QAP tie breaker factor of selecting the Application with the most Opportunity Index menu items, removal of this tie breaker factor was discussed extensively during QAP planning meetings in preparation for this draft rule. The tie breaker could be added back into future QAPs if future discussions provide reason for doing so.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

11. §11.9(a)--General Information; (4), (32)

COMMENT SUMMARY: Commenter (32) submits what they call a general comment, but it applies largely to §11.9(a) (and, by way of the competitive nature of the program, §11.7 regarding Tie-Breaker Factors). Commenter (32) believes that the definition of Development Site and its use throughout the QAP and Rules needs to be consistent, especially in regard to proximity to amenities (e.g., a public library) or geographic-based indicators (e.g., crime rates). Development Site should always include ingress/egress points and easements when making measurements or census tract determinations. Additionally, Site Control and Development Site should be the same at the time of full Application submission.

Commenter (4) proposes moving some of the proposed language under §11.1(g) to this subsection, which would read as follows:

(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. The Application must include one or more maps indicating the location of the Development Site and the related distance to the applicable facility. Distances are to be measured from the nearest boundary of the Development Site to the nearest boundary of the property or easement containing the facility, unless otherwise noted. For the purposes of this section, all measurements will include ingress/egress requirements and any easements regardless of how they will be held. Applicants should provide appropriate support substantiating all claims for representation made in the Application, such as claims for points, qualification for set-asides, or meeting of threshold requirement. Due to the highly competitive nature of the program, Applicants that elect points but fail to provide any supporting documentation to substantiate the election 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.

STAFF RESPONSE: In response to Commenter (32)'s request that Development Site, as a definition, be consistent throughout all Multifamily programs at TDHCA, staff believes that the definition of "Development Site" is sufficient for governing the requirements of the Department's various multifamily programs. However, specific rules may add additional requirements to that definition. In this instance, development site is defined differently in order to provide consistent transparency in scoring. The specificity of the particular requirement does not warrant changing the term's definition for all programs.

Staff recommends no changes based on this comment.

In response to Commenter (32)'s concerns about consistency between Site Control and Development Site at the time of full Application submission, staff believes that revisions to these requirements would 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 2019 QAP.

Staff recommends no changes based on this comment.

In regards to Commenter (4)'s proposal to shift the added language in §11.1(g) to §11.9(a), staff provided reasoned response above for §11.1(g), stating that staff believes that reinforcing these requirements at the front of the QAP serves the purpose of ensuring that the information is clearly and prominently communicated to Applicants.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

12. §11.9(b)(2)--Sponsor Characteristics; (18), (25)

COMMENT SUMMARY: Commenter (18) appreciates the changes made to this paragraph regarding the provision of long-term on-site tenant services by a nonprofit or HUB. That said, Commenter (18) asks that this paragraph's point value be increased from two points to three points by allowing Applicants to pursue the requirements of both subparagraphs, (A) and (B).

Commenters (25) and (26) claim that reducing a HUB's or Nonprofit Organization's combined ownership interest in the Development (whether through the General Partner structure, cash flow, or Developer Fee) from 80 percent to 50 percent is not justified. Commenter (25) claims that the HUB or Nonprofit Organization must materially participate, and therefore the combined ownership interest should remain, at minimum, 80 percent. Commenter (25) asks staff to consider the IRS definition of material participation. Commenter (26) commends staff on adding clarification for what constitutes "material participation," and also expresses support for distinguishing between two types of involvement in a Development and weighting those types appropriately. However, Commenter (26), like Commenter (25), worries that decreasing the baseline ownership percentage for a HUB will undermine the progress that HUBs have made in building capacity, increasing their participation, and gaining in-depth experience in Competitive HTC Developments. Commenter (26) also speaks in favor of the five percent threshold for each ownership category, stating that this requirement encourages meaningful participation.

STAFF RESPONSE: Staff thanks Commenter (18) for the support regarding staff's proposed changes. In regards to Commenter (18)'s request to allow an Applicant to score on both items, staff does not find it reasonable to reward the involvement of a HUB or nonprofit twice, especially since a Qualified Nonprofit potentially already has access to the Nonprofit Set-aside. Staff believes that, as written, the rule allows the Applicant to select a Nonprofit or HUB and select level of sponsorship. The point level for this item has already been increased from one point to two, and staff believes that the flexibility provided by this change is sufficient without further increasing the possible points.

Staff recommends no changes based on this comment.

Staff thanks Commenter (26) for supporting two proposed changes to this paragraph on Sponsor Characteristics. Regarding the concern from Commenters (25) and (26) about lowering the combined ownership interest for HUBs and Nonprofit Organizations from 80 percent to 50 percent, staff would like to emphasize that the Department is simply setting a minimum. Individual HUBs and Nonprofit Organizations are certainly allowed to hold higher ownership percentages when they partner with Applicants. Staff would also like to point out to Commenter (26) that, at minimum, a 5 percent ownership interest is still required for each ownership category-General Partner, Cash Flow, and Developer Fee.

Staff recommends no changes based on this comment.

In regards to Commenter (25)'s reference to IRS Code §42 and its statements on material participation, staff finds no correlation between these requirements and setting the combined ownership interest at a specified minimum. Staff believes that the combined ownership interest must reasonably reflect the value of the HUB's or Nonprofit Organization's involvement with the proposed Development.

Staff recommends no changes based on this comment.

STAFF TECHNICAL CORRECTION:

Staff has determined there is an error in §11.9(b)(2)(B). The descriptor "Qualified" will be struck from this subsection at publication of the final rule, and will read as follows:

(B) The HUB or Nonprofit Organization must be involved with the Development Services or in the provision of on-site tenant services during the Development's Affordability Period. Selecting this item because of the involvement of a Nonprofit Organization does not make an Application eligible for the Nonprofit Set-Aside. A Principal of the HUB or Nonprofit Organization cannot be a Related Party to any other Principal of the Applicant or Developer (excluding another Principal of said HUB or Nonprofit Organization). (1 point)

BOARD RESPONSE: Accepted Staff's recommendation.

13. §11.9(c)(2)--Rent Levels of Tenants; (5)

COMMENT SUMMARY: Commenter (5) asks that staff add an additional requirement to the point item regarding Supportive Housing, given that some Applicants may pursue Supportive Housing points when their Developments are not truly Supportive Housing. Commenter (5) proposes adding the following qualification: this point item only applies to "Supportive Housing Developments that meet the definition of Supportive Housing and select that Population in the Application."

STAFF RESPONSE: Staff appreciates Commenter (5)'s edits, but believes that adding this additional language would be redundant, given that the definition of Supportive Housing in 10 TAC §10.3, Definitions, has been revised.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

14. §11.9(c)(3)--Tenant Services; (5)

COMMENT SUMMARY: Commenter (5) asks that staff add an additional requirement to the point item regarding Supportive Housing, given that some Applicants may pursue Supportive Housing points when their Developments are not truly Supportive Housing. Commenter (5) proposes adding the following qualification: this point item only applies to "Supportive Housing Developments that meet the definition of Supportive Housing and select that Population in the Application."

STAFF RESPONSE: Staff appreciates Commenter (5)'s edits, but believes that adding this additional language would be redundant, given that the definition of Supportive Housing in 10 TAC §10.3, Definitions, has been revised.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

15. §11.9(c)(4)--Opportunity Index; (4), (5), (6) (8), (18), (30), (31), (32), (34), (36), (39), (40), (41), (42)

SUBPARAGRAPH (A) COMMENT SUMMARY: No comments on subparagraph (A).

STAFF RESPONSE: Not applicable.

SUBPARAGRAPH (B) COMMENT SUMMARY: Commenter (42) thanks the Department for including Meals on Wheels and similar programs as a menu item on the Opportunity Index for HTC Developments, and recommends no changes to the proposed language.

Commenter (5) finds the addition of language in §11.9(c)(4)(B) regarding membership fees to be arbitrary. Some gyms in high opportunity areas with extensive amenities may cost more than $50 per month per person. Staff should defer to the free market in setting price limitations for amenities, and so Commenter (5) therefore asks staff to remove this added language from the 2018 QAP. Commenter (34) makes a similar request, as high-fee amenities might indicate high opportunity areas.

Commenters (30) and (31) argue that the rule should allow a single site and its constituent amenities to qualify for separate scoring items across the board, and not just those scoring items where such "double-counting" is explicitly allowed by the Department. Having multiple amenities in one area may be more valuable than amenities' being dispersed.

Commenters (4) and (18) argue that, because an Applicant potentially only needs five points from the "menu items" for Opportunity Index, Applicants will avoid pursuing the items that require 2010 ADA compliance. In effect, most Applicants will cease to pursue proximity to parks and public transit. Commenter (4) suggests an approach where proximity to these items is worth one point and two points if the routes happen to be 2010 ADA compliant. Commenters (6), (8), (18), (30), (31), (32), (34), (39), (40) note that this requirement caused too much controversy during the competitive 2017 cycle, and creates unnecessary costs for Applicants. Commenters (6), (34), (40) understand the need for accessibility within the Development Site, but argue that accessibility to amenities offsite does not promote the housing policy goal of enhancing accessibility within housing Developments. Commenter (30) argues that it is outside the purview on an Applicant to manage offsite accessibility, as this duty belongs to a City. Commenter (40) notes that, oftentimes, the playground built on a Development Site as a resident amenity is itself ADA-compliant, so the Department's concern is somewhat already addressed by the Development itself.

Commenter (4) also asks that staff clarify the point structure of subclause III (urban), regarding a grocery store and a pharmacy, which appears to be worth potentially two points if both are present in the same facility. Commenter (40) thinks it would be clearer if staff just split this one item into two separate menu items, but specified in the pharmacy menu item that it can be located inside a grocery store.

Commenters (4), (32), (34), and (36) ask that subclause IV (urban) allow proximity to a primary care doctor or physician offices, the care from whom is far cheaper than an emergency room visit.

Commenter (41) proposes decreasing the distance for subclause IV (urban), regarding proximity to a health-related facility. As three miles, nearly the entirety of many larger cities is covered. Commenter (41) recommends two miles. Making a menu item more competitive decreases the chances of ties.

Regarding subclause VI (urban), which awards points to Development Sites located in census tracts where the property crime rate is at or below 26 per 1,000 persons, Commenter (4) asks that staff limit this item only to NeighborhoodScout data in order to facilitate an "apples to apples" comparison among Applications (but allow the use of alternative data sources for the purposes of 10 TAC Chapter 10 requirements regarding crime rates).

Commenters (30) and (31) ask staff to reference the Texas Library Association (TLA) Public Library Standards when setting stipulations for hours of operation. These standards state that a library should have either evening or weekend hours. Commenter (34) worries that the current language may inadvertently exclude legitimate libraries based on a few technicalities. Commenter (34) asks that this menu item allow for e-readers and operating hours that may not strictly adhere to an 8 a.m.-5 p.m. schedule. Commenter (40) asks that staff remove the requirement that there be indoor meeting space, as this condition is not integral to operating a library.

Commenters (4), (30), and (31) claim that the use of the Texas Higher Education Coordination Board to determine which universities and colleges are eligible is too narrow, and recommends that staff allow accreditation of an institution by any organization recognized by the US Department of Education, as long as the institution issues bachelor's or associate's degrees. Commenter (4) and (32) also ask that staff consider proximity to vocational or trade schools.

Commenter (41) proposes decreasing the distance for subclause VIII (urban), regarding proximity to an accredited university or community college. At five miles, nearly the entirety of many larger cities is covered. Commenter (41) recommends three miles. Making a menu item more competitive decreases the chances of ties.

Commenter (4) believes that subclause XIII (urban), regarding Meals on Wheels, belongs under subclause XII, regarding community, civic, or service organizations that provide services.

Commenter (18) asks that, for subclause XIII (urban), the meals be allowed to be delivered to residents in the Development's community room, as opposed to resident's homes, or individual units. Having a meal in the community room encourages socialization for senior residents, which aids residents in healthy living. Commenter (18) also believes that this opportunity index item should require a MOU with the service provider to be submitted at the time of Application.

Commenters (4), (30), (31) ask that §11.4(c)(4)(B)(ii)(VI), regarding proximity to a park for Rural Applications, revert back to 2017 QAP language, given the impracticality of asking that Rural Developments be on accessible routes to nearby parks and the unlikelihood of a Rural park having a playground, especially since most Rural Developments already provide a playground onsite.

Commenter (4) recommends the following language for §11.4(c)(4)(B):

(B) An Application that meets the foregoing criteria may qualify for additional points for any one or more of the following factors. Each amenity may be used only once for scoring purposes, unless allowed within the scoring item, regardless of the number of categories it fits. All members of the Applicant or Affiliates cannot have had an ownership position in the amenity or served on the board or staff of a nonprofit that owned or managed that amenity within the year preceding the Pre-Application Final Delivery Date. All amenities must be operational or have started Site Work at the Pre-Application Final Delivery Date. Any age restrictions associated with an amenity must positively correspond to the target population of the proposed Development. Any costs or membership fees associated with making use of a recreational amenity cannot exceed $50 per person per month (assume cost is for a single admittance per month and membership fee is for annual membership paid on a monthly basis):

(i) For Developments located in an Urban Area (other than Applicants competing in the USDA Set-Aside), 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: (up to 2 points)

(-a-) less than 1/2 mile from a public park with a playground; or (1 point)

(-b-) on an accessible route that is less than 1/2 mile in total length from the accessible playground equipment in a public park. The route and the playground both must be compliant with 2010 ADA standards by the Full Application Delivery Date. In order to qualify for point, the Application must include a map showing the complete accessible route and a report form a qualified third-party attesting to accessibility compliance of both the complete route (identified in the aforementioned map) and the playground itself. (2 point)

(II) The Development Site is located within a certain proximity of public transportation 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 service on Saturdays and Sundays. (up to 2 points)

(-a-) Development Site is less than 1/2 mile from a public transportation stop of station. (1 point)

(-b-) Development Site is on an accessible route that is less than 1/2 mile in total length from the entrance of a public transportation stop or station. Both the route and the public transportation stop must be compliant with 2010 ADA standards by the Full Application Delivery Date. In order to qualify for points, the Application must include a map showing the complete accessible route and a report from a qualified third-party attesting to accessibility compliance of both the complete route (identified in the aforementioned map) and the transportation stop itself. (2 points)

(III) The Development Site is located within 1 mile of a full-service grocery store and/or pharmacy. For purposes of this subclause, these amenities may be situated within the same facility. (up to 2 points)

(-a-) A full service grocery store which is 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)

(-b-) A retail pharmacy. (1 point)

(IV) The Development Site 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, or a primary care physician office. (1 point)

(V) The Development Site is within 2 miles of a center that is licensed by the Department of Family and Protective Services ("DFPS") specifically to provide a school-age program or to provide a child care program for infants, toddlers, and/or pre-kindergarten. The Application must include evidence from DFPS that the center meets the above requirements. (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 that has indoor meeting space, physical books that can be checked out and that are of a general and wide-ranging subject matter, computers and internet access, and that is open during regularly scheduled operating hours at least 6 days a week. The library must not be age or subject-restricted and must be at least partially funded with government funding (1 point)

(VIII) The Development Site is located within 5 miles of an accredited university or community college, as confirmed by the US Department of Education (https://www.ed.gov/accreditation). 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. The university or community college must have a physical campus, where classes are regularly held for students pursuing their degrees, 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 2011-2015 American Community Survey 5-year Estimate. (1 point)

(X) Development Site is located within 1 mile of an indoor recreation facility available to the public. Examples include a gym, health club, a bowling alley, a theater, or a municipal or county community center. (1 point)

(XI) Development Site is located within 1 mile of an outdoor, dedicated, and permanent recreation facility available to the public. Examples include swimming pools or splash pads, tennis courts, golf courses, softball fields, or basketball courts. (1 point)

(XII) Development Site is located within 1 mile of community, civic or service organizations that provide regular and recurring substantive services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club as long as they make services available without regard to affiliation or membership) (1 point)

(ii) For Developments located in a Rural Area and any Application qualifying under the USDA set-aside, 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. For purposes of this subclause, these amenities may be situated within the same facility. (up to 2 points)

(-a-) A full service grocery store which is 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)

(-b-) A retail pharmacy (1 point)

(II) The Development Site is located within 4 miles of health-related facility, such a full service hospital, community health center, or minor emergency center, or primary care Physician office. (1 point)

(III) The Development Site is located within 4 miles of a center that is licensed by the Department of Family and Protective Services ("DFPS") specifically to provide a school-age program or to provide a child care program for infants, toddlers, and/or pre-kindergarten. The Application must include evidence from DFPS that the center meets the above requirements. (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 law enforcement data sources. If employing the latter source, the formula for determining the crime rate will include only data relevant to the census tract in which the Development Site is located. (1 point)

(V) The Development Site is located within 4 miles of a public library that has indoor meeting space, physical books that can be checked out and that are of a general and wide-ranging subject matter, computers and internet access, and that is open during regularly schedule operating hours at least 5 days a week. The library must not be age or subject-restricted and must be at least partially funded with government funding (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 an accredited university or community college, as confirmed by the Texas Higher Education Coordination Board ("THECB"). 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. The university or community college must have a physical campus, where classes are regularly held for students pursuing their degrees, within the required distance; online-only institutions do not qualify under this item. (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 (1 point)

(IX) Development Site is within 3 miles of an indoor recreation facility available to the public. Examples include a gym, health club, a bowling alley, a theater, or a municipal or county community center. (1 point)

(X) Development Site is within 3 miles of an outdoor, dedicated, and permanent recreation facility available to the public. Examples include swimming pools or splash pads, tennis courts, golf courses, softball fields, or basketball courts. (1 point)

(XI) Development Site is within 3 miles of community, civic or service organizations that provide regular and recurring substantive services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club as long as they make services available without regard to affiliation or membership) (1 point)

Commenter (34) proposes revising some of the opportunity index menu items but not all, as summarized above. The exact language of Commenter (34)'s suggested revisions are included below:

(B)(i)(I) The Development Site is less than 1/2 mile from a public park with a playground. (1 point)

(B)(i)(II) The Development Site is located less than 1/2 mile on 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 (both Saturday and Sunday). (1 point)

(B)(i)(IV) The Development Site is located within 3 miles of a health-related facility, such a primary care physician office, 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)

(B)(i)(VII) The Development Site is located within 1 mile of a public library that has indoor meeting space, books that can be checked out and that are of a general and wide-ranging subject matter, computers and internet access, and that is open at least 5 days a week. The library must not be age or subject-restricted and must be at least partially funded with government funding (1 point)

STAFF RESPONSE: Staff thanks Commenter (42) for their support of including Meals on Wheels or similar services in the Opportunity Index.

Regarding Commenters (5) and (34)'s concerns about setting fee limitations on amenities, staff agrees and has removed this requirement. Staff's intent was to encourage Developments' proximity to useful amenities that do not require large membership fees. Staff will propose inclusion of this item for discussion in drafting the 2019 QAP. Staff has removed this proposed language from §11.9(c)(4)(B) regarding amenity costs or membership fees, and this part of §11.9(c)(4)(B) now reads as follows:

(B) An Application that meets the foregoing criteria may qualify for additional points for any one or more of the following factors. Each amenity may be used only once for scoring purposes, unless allowed within the scoring item, regardless of the number of categories it fits. All members of the Applicant or Affiliates cannot have had an ownership position in the amenity or served on the board or staff of a nonprofit that owned or managed that amenity within the year preceding the Pre-Application Final Delivery Date. All amenities must be operational or have started Site Work at the Pre-Application Final Delivery Date. Any age restrictions associated with an amenity must positively correspond to the target population of the proposed Development.

In regards to Commenters (30) and (31) and their request that one site be allowed to have many amenities, staff believes that such a change would defeat the intent of the Opportunity Index. In addition to seeking to encourage development in proximity to useful amenities for residents, the Opportunity Index's list of menu items also assumes that a larger number of amenities in proximity to each other would be indicative of a high opportunity area. If a single business establishment could claim five or more of the amenities, that business alone does not by itself represent a high opportunity area.

Staff recommends no changes based on this comment.

In regards to Commenters (4), (6), (8), (18), (30), (31), (32), (34), (39), and (40), staff agrees that requiring that Applicants do the necessary due diligence to certify that routes to parks and public transit be 2010 ADA compliant may be too costly for Applicants and may discourage the placement of LIHTC Developments near beneficial amenities. Development Sites themselves, of course, will continue to comply with all applicable local, state, federal laws, and Departmental rules regarding visitability and accessibility. Staff has removed language regarding 2010 ADA compliance and accessibility for routes to these amenities, for both urban and rural amenities (the revision to the latter incorporates another suggested change explained by staff below). However, staff has elected to preserve language that speaks to the need for a safe path from the Development Site to the park or public transit.

§11.9(c)(4)(B)(i)

(I) The Development Site is located on a route, with sidewalks for pedestrians, that is less than 1/2 mile from the entrance to a public park with a playground. The entirety of the sidewalk route must consist of smooth hard surfaces, curb ramps, and marked pedestrian crossings when traversing a street. (1 point)

(II) The Development Site is located on a route, with sidewalks for pedestrians, that is less than 1/2 mile from the entrance of a public transportation stop or station with a route schedule that provides regular service to employment and basic services. The entirety of the sidewalk route must consist of smooth hard surfaces, curb ramps, and marked pedestrian crossings when traversing a street. For purposes of this scoring item, regular is defined as scheduled service beyond 8 a.m. to 5 p.m., plus weekend service (both Saturday and Sunday). (1 point)

§11.9(c)(4)(B)(ii)

(VI) The Development Site is located within 4 miles of a public park with a playground. (1 point)

In response to Commenters (4) and (40)'s request that staff clarify the intent of the opportunity index menu item for a grocery store and pharmacy, staff has made a clarifying change to the pharmacy scoring item by separating it from the grocery store item. That change is detailed below, and it will apply to both urban and rural opportunity Index. Note that the subsequent menu items' roman numerals will change in light of this revision:

§11.9(c)(4)(B)(i)

(III) The Development Site is located within 1 mile of a full-service grocery store. 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 within 1 mile of a pharmacy. For the purposes of this menu item only, the pharmacy may be claimed if it is within the same building as a grocery store. (1 point)

§11.9(c)(4)(B)(ii)

(I) The Development Site is located within 4 miles of a full-service grocery store. 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 Site is located within 4 miles of a pharmacy. For the purposes of this menu item only, the pharmacy may be claimed if it is within the same building as a grocery store. (1 point)

Regarding Commenters (4), (32), (34), and (36)'s request that the intent of "health-related facility" be expanded to include primary care doctors or general physicians, 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 2019 QAP. Staff encourages Commenters (4), (32), (34), and (36) to suggest this revision during planning for the 2019 QAP.

Staff recommends no changes based on this comment.

In response to Commenter (41)'s proposal to decrease the distance for proximity to a health-related facility from three miles to two miles for urban subregions, 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 2019 QAP. Staff encourages Commenter to suggest this revision during planning for the 2019 QAP.

Staff recommends no changes based on this comment.

Regarding Commenter (4)'s request that staff exclude all data sources except NeighborhoodScout's for the purposes of calculating property crime rate as an Opportunity Index menu item, staff believes that Applicants should have a reasonable alternative to NeighborhoodScout through the use of local data, as long as the use of that local data is the same methodology as NeighborhoodScout's.

Staff recommends no changes based on this comment.

With Commenters (30), (31), and (34)'s request that staff alter the required days and hours of operation for public libraries, staff agrees with Commenters (30) and (31) that the Department should reference library standards promulgated by the Texas Library Association ("TLA"). For Urban Opportunity Index, the rule will require that a library be open 50 hours or more each week, which TLA recommends for communities of 25,000 - 49,999 people; for Rural Opportunity Index, the rule will require that a library be open 40 hours or more each week, which TLA recommends for communities of 5,000 - 9,999 people. Therefore, the rule will neither mention a specific number of days nor a specific range of operating times, but will mention the total number of operating hours.

§11.9(c)(4)(B)(i)

(VII) The development Site is located within 1 mile of a public library that has indoor meeting space, physical books that can be checked out and that are of a general and wide-ranging subject matter, computers and internet access, and that is open 50 hours or more per week. The library must not be age or subject-restricted and must be at least partially funded with government funding (1 point)

§11.9(c)(4)(B)(ii)

(V) The Development Site is located within 4 miles of a public library that has indoor meeting space, physical books that can be checked out and that are of a general and wide-ranging subject matter, computers and internet access, and that is open 40 hours or more per week. The library must not be age or subject-restricted and must be at least partially funded with government funding (1 point)

Regarding the request from Commenter (40) about striking indoor meeting space and the request from Commenter (34) about allowing a library with only e-readers, because the TLA standards do suggest that libraries have indoor meeting spaces for library programming and community groups and that all libraries have physical books that circulate through the community's library system, staff respectfully disagrees with the comments.

Staff recommends no changes based on this comment.

In regards to Commenters (4), (30), and (31)'s request that staff change from the Texas Higher Education Coordination Board ("THECB") to any accreditation institution authorized by the Department of Education when locating universities or colleges in Texas, staff believes that the comprehensive list published by this State of Texas agency does not exclude properly accredited schools. Staff does agree with these Commenters' proposal that the conferring of associates' degrees be permissible, and has changed the rule accordingly:

§11.9(c)(4)(B)(i)

(VIII) The Development Site is located within 5 miles of an accredited university or community college, as confirmed by the Texas Higher Education Coordination Board ("THECB"). 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, and to be considered for these purposes must confer at least associate's degrees. The university or community college must have a physical campus, where classes are regularly held for students pursuing their degrees, within the required distance; online-only institutions do not qualify under this item. (1 point)

§11.9(c)(4)(B)(ii)

(VII) The Development Site is located within 15 miles of an accredited university or community college, as confirmed by the Texas Higher Education Coordination Board ("THECB"). 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, and to be considered for these purposes must confer at least associate's degrees. The university or community college must have a physical campus, where classes are regularly held for students pursuing their degrees, within the required distance; online-only institutions do not qualify under this item. (1 point)

Regarding the request from Commenters (4) and (32) to include vocational and trade schools for the post-secondary education menu item, staff believes that the institutions included on the TCEHB list provide important benefits for the community beyond most technical and trade schools. Staff believes that these revisions would 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 2019 QAP.

Staff recommends no changes based on this comment.

In response to Commenter (41)'s proposal to decrease the distance for proximity to a university or community college campus from five miles to three miles for urban subregions, staff believes that this revision would 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 2019 QAP.

Staff recommends no changes based on this comment.

In regards to Commenter (4)'s belief that the Meals on Wheels or similar service menu item is redundant given the menu item for community, civic, or service organizations that provide regular and recurring substantive services, staff finds a difference between the two menu items. For Urban Opportunity Index, subclause XII speaks to organizations with physical meeting places which residents can go to. In contrast, subclause XIII-Meals on Wheels or similar nonprofit service-speaks to a service that comes to residents.

Staff recommends no changes based on this comment.

Regarding Commenter (18)'s request that, for subclause XIII (Urban), the meals be allowed to be delivered to residents in the Development's community room, as opposed to resident's homes or individual units, if allowed by the Development, residents could choose to take their meals to the community room. The Development may not require that residents receive their meals in a specific place or at a specific time.

Staff recommends no changes based on this comment.

With Commenter (18)'s suggestion that this opportunity index item should require a Memorandum of Understanding ("MOU") with the service provider and that MOU should be submitted at the time of Application, in general these services are provided directly to the residents, rather than through an arrangement with the Development. Therefore, a MOU is not necessary.

Staff recommends no changes based on this comment.

In response to Commenters (4), (30), and (31)'s request that staff return to the 2017 QAP language for the Rural menu item regarding proximity to a public park, staff, as stated above, has removed language regarding 2010 ADA standards and accessibility and returned to the four mile distance. However, staff has left language regarding inclusion of a playground because of its benefit to residents and the community.

(VI) The Development Site is located within 4 miles of a public park with a playground. (1 point)

STAFF TECHNICAL CORRECTION: Staff has realized that for both §11.9(c)(4)(B)(i)(I) and §11.9(c)(4)(B)(i)(II), stating that a public park or public transportation stop is "less than 1/2 mile" from the Development Site is not sufficient for the intent of this scoring item. Staff has changed the applicable language to "1/2 mile or less" in order to include distances that are exactly 0.50 miles between the amenity and Development Site.

(I) The Development Site is located on a route, with sidewalks for pedestrians, that is 1/2 mile or less from the entrance to a public park with a playground. The entirety of the sidewalk route must consist of smooth hard surfaces, curb ramps, and marked pedestrian crossings when traversing a street. (1 point)

(II) The Development Site is located on a route, with sidewalks for pedestrians, that is 1/2 mile or less from the entrance of a public transportation stop or station with a route schedule that provides regular service to employment and basic services. The entirety of the sidewalk route must consist of smooth hard surfaces, curb ramps, and marked pedestrian crossings when traversing a street. For purposes of this scoring item, regular is defined as scheduled service beyond 8 a.m. to 5 p.m., plus weekend service (both Saturday and Sunday). (1 point)

BOARD RESPONSE: Accepted Staff's recommendation.

15. §11.9(c)(5)--Underserved Area; (4), (5), (12), (18), (29), (32), (34), (38), (40)

COMMENT SUMMARY: Commenters (4), (32), (34) ask that staff clarify when the year count begins for subparagraphs (C), (D), and (E). Commenters (4) and (34) ask if staff means "x" years after the date of award or after the Placement in Service date. Commenter (32) adds that staff should clarify from what date Applicants are to count backwards "x" number of years. Commenter (5) thanks staff for making the subparagraphs of this paragraph more consistent among each other, but also states that the current language regarding Development age is ambiguous. Currently, it is not clear if staff means the age of the Development structure, the Placement in Service Date, or the date of award. Commenter (5) proposes that staff revise this scoring item to read, "The Development Site is located entirely within a census tract that has not received an HTC allocation within the last 30 or 15 years." Commenter (29)'s concerns mirror other Commenters', and calls attention to the different meanings of "Development" (a defined term that means both a Development awarded HTCs and a proposed Development not awarded HTCs) and also asks staff to clarify if the look back periods reference the date of Board approval or the year that credits were actually awarded. Commenter (34) proposes that the age of existing Developments be evaluated, first, according to their own board award date and, second, according to the 2018 Full Application Delivery Date. Also, Commenter (34) believes that an additional award of tax credits not associated with rehabilitation should be disregarded.

Commenter (5) also requests that staff clarify how they will review a census tract that has part of an existing Development, but that Development's census tract is listed differently since it is a scattered site. Currently, the Site Demographic Characteristics Report does not account for this scenario.

Commenters (12) and (18) ask that staff change the intent of subparagraphs (C), (D), and (E). Currently, they do not award points to proposed Developments near any Existing Residential Development. These Commenters ask that staff change the focus to Target Population. The phrase "targeting the same population" should be added after the phrase "does not having a Development."

Commenter (38) asks that staff remove subparagraph (E), which only applies to a city with a population greater than 150,000. This scoring item, along with proximity to urban core, disproportionately favors cities with large populations, Commenter (38) states. Removing this item puts larger cities on equal footing with all other cities, regardless of population. Another option, Commenter (38) proposes, is to do away with the minimum population requirement, and allow subparagraph (E) to be open to all cities, regardless of population.

Commenter (40) asks that staff place the year "2018" in front of "Site Demographic Characteristics Report" in subparagraphs (C), (D), and (E).

STAFF RESPONSE: In response to Commenters (4), (5), (29), (32), and (34), the year count for subparagraphs (C), (D), and (E) will be based on the year of award. A Development that is less than 30 years old would be one that was awarded in 1988 or later, and a Development that is less than 15 years old would be one that was awarded in 2003 or later. To make this intent more clear, staff has slightly amended these subparagraphs to read as follows:

(C) The Development Site is located entirely within a census tract that does not have a Development that was awarded less than 30 years ago according to the Department's property inventory tab of the Site Demographic Characteristics Report. (3 points);

(D) For areas not scoring points for (C) above, the Development Site is located entirely within a census tract that does not have a Development that was awarded less than 15 years ago according to the Department's property inventory tab of the Site Demographic Characteristics Report. (2 points);

(E) The Development Site is located entirely within a census tract whose boundaries are wholly within an incorporated area and the census tract itself and all of its contiguous census tracts do not have a Development that was awarded less than 15 years ago according to the Department's property inventory tab of the Site Demographic Characteristics Report. This item will apply in Places with a population of 150,000 or more, and will not apply in the At-Risk Set-Aside (5 points).

Regarding Commenter (34)'s request that Developments that received an additional award not associated with rehabilitation be "disregarded," staff referred to Tex. Gov't Code §2306.6725(b)(2), the statutory requirement upon which this scoring item is based, which states:

(b) The department shall provide appropriate incentives as determined through the qualified allocation plan to reward applicants who agree to: ... (2) locate the development in a census tract in which there are no other existing developments supported by housing tax credits.

Staff believes that since the statutory language includes the phrase "no other existing developments," the rehabilitation Development in the Application would not be considered in this scoring item. Any other Development would fall under the "other" category described in statute.

Staff recommends no changes based on this comment.

In response to Commenter (29), in scoring this item, staff will consider those Developments listed on the Property Inventory tab of the Site Demographic Characteristics Report, so proposed Developments that have not been awarded would not be considered for this scoring item.

Staff recommends no changes based on this comment.

In response to Commenter (5)'s request that staff clarify how they will resolve inaccuracies in the Site Demographic Characteristics Report-such as when only one census tract is listed for a scattered site Development when in reality that scattered site Development occupies two or more census tracts, the Applicant's best course of action would be to request a pre-determination in order to clarify how staff will evaluate an Application.

Staff recommends no changes based on this comment.

In regards to Commenters (12) and (18)'s proposal that the points of subparagraphs (C), (D), and (E) can be secured by proposed Developments serving a different target population than an existing HTC Development already located in that census tract, 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 2019 QAP. Staff encourages Commenter to suggest this revision during planning for the 2019 QAP.

Staff recommends no changes based on this comment.

In regards to Commenter (38)'s comments on subparagraph (E), 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 2019 QAP. Staff encourages Commenter to suggest this revision during planning for the 2019 QAP.

Staff recommends no changes based on this comment.

In regards to Commenter (40), staff refrains from including dates in the rules that are deemed to be the same as the applicable program year.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

16. §11.9(c)(6)--Tenant Populations with Special Housing Needs; (4), (5), (20), (21), (22), (23), (24), (31), (32)

COMMENT SUMMARY: Commenters (4), (5), (32) ask that staff include investor prohibition as a valid reason to receive points under subparagraph (B). Commenter (5) notes that this was an option in the 2017 QAP, but currently it is not permissible in the 2018 QAP or the new 10 TAC Chapter 8.

Commenter (31) proposed adding the following clarification at the end of subparagraph (A): "A HUB or nonprofit entity's portfolio of Existing Developments is exempt from the requirements of this subparagraph (A) unless the HUB or nonprofit entity is the proposed Managing General Partner of the Applicant requesting points under this paragraph (6)." Commenter (31) states that this language is needed so as to exclude non-affiliated Developers from participating in the 811 program just because a HUB or nonprofit they had partnered with in the past is now partnering with another Developer. This should not happen if a HUB partner neither has a controlling interest in the ownership structure nor is the Managing General Partner.

Commenter (20) states that the Section 811 Project Rental Assistance Program ("Section 811 PRA Program") needs to be returned to 10 TAC Chapter 10, Subchapter C, and should not be located in the QAP as a scoring item.

Commenters (21) and (23) ask that the Section 811 PRA Program be maintained. Commenter (22) claims that the proposed rule changes to the Section 811 PRA Program will eliminate the effort to increase the number of housing units and will have disastrous effects on the mentally ill. Commenter (22) points out that community-based resources-like affordable housing through the Section 811 PRA Program, are the cheapest and most effective avenue in offering mental health care to the mentally ill. A cut to this program will force people to seek help in institutions that ultimately cost taxpayers more, such as emergency rooms, homeless shelters, and prisons. It is community-based mental health services like the Section 811 PRA Program that allow individuals to regain their independence and to pursue productive lives. Staff should reconsider the implications of underfunding this program, Commenter (21) states.

Commenter (24) writes to express opposition to moving the Section 811 PRA Program to the QAP from the Rules, which means that Applicants now have the option to participate in the Program instead of being required to participate, as Applicants were in 2017. Commenter (24) states that this change would most certainly result in a reduction in the number of future development projects participating in the Section 811 PRA Program, thereby decreasing the number of available units to our most vulnerable citizens. Commenter (24) calls attention to the more than 259 low income individuals with disabilities and mental illness who are currently on the backlog for the Program. Commenter (24) makes the assertion that, currently, only 172 units are available for the program across the state, and yet the state of Texas was allocated funding for 650 units through the Section 811 PRA Program. Only 16 individuals have been housed to date, and 259 are on the waitlist. Ultimately, Commenter (24) shares that the proposed change to the rules regarding this Program are not in line with legislative changes and funding passed by the 85th Legislative session, nor with the Texas Statewide Behavioral Strategic Plan. Commenter (24) asks that staff and the Governing Board revert to the 2017 QAP policies regarding the Section 811 PRA Program.

Commenter (20) also asks whether or not the option delineated in subparagraph (C) requires an additional five percent of units devoted to residents with special needs, on top of the five percent already required by 10 TAC §10.101(b)(8)(A)? Or does meeting the requirements of the latter automatically qualify an Applicant for the two points under §11.9(c)(6)(C), so that ultimately only five percent of units need be set aside, potentially, for residents with disabilities?

Commenter (4) recommends the following language for §11.4(c)(4)(B):

(6) Tenant Populations with Special Housing Needs. (§42(m)(1)(C)(v)) An Application may qualify to receive two (2) points by serving Tenants with Special Housing Needs. For purposes of this paragraph, Existing Development has the meaning as defined in 10 TAC Chapter 8 and proposed Development is the subject of the Application.

(A) An Applicant or Affiliate that Owns or Controls an Existing Development that is eligible to participate in the Department's Section 811 Project Rental Assistance Program ("Section 811 PRA Program") must do so in order to receive two (2) points under this paragraph for the subject Application. The same units cannot be used to qualify for points in more than one HTC Application. Once elected in the Application, Applicants may not withdraw their commitment to have the Existing Development participate in the Section 811 PRA Program unless the Department determines that the Existing Development cannot meet all of the Section 811 PRA Program criteria. In order to qualify for points, the Existing Development must commit to the Section 811 PRA Program at minimum 10 Section 811 PRA Program Units, unless the Integrated Housing Rule, 10 TAC §1.15, or the 811 Program Rental Assistance Rule ("811 Rule"), 10 TAC Chapter 8, limits the Existing Development to fewer than 10 Section 811 PRA Program Units.

(B) An Applicant or Affiliate that does not meet the Existing Development requirements of 10 TAC Chapter 8, or who's investors prohibit the Existing Development from participating in the Section 811 PRA Program, is eligible to receive two (2) points by committing Units in the proposed Development to participate in the Department's Section 811 PRA Program. In order to be eligible for points, Applicants must commit at least 10 Units in the proposed Development for participation in the Section 811 PRA Program unless the Integrated Housing Rule, 10 TAC §1.15, or the 811 Program Rental Assistance Rule ("811 Rule"), 10 TAC Chapter 8, limits the Development to fewer than 10 Section 811 PRA Program Units. The same Section 811 PRA Program Units cannot be used to qualify for points in more than one HTC Application. The Applicant will comply with the requirements of 10 TAC Chapter 8.

(C) Applicants that are unable to meet the requirements of subparagraphs (A) or (B) of this paragraph may qualify for two (2) points by meeting the requirements of this subparagraph, (C). 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 specifically market Units to Persons with Special Needs.

Commenters (5) and (32) ask that staff include the following language in §11.9(c)(6)(A):

"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." Commenter (32) adds the dependent clause "if they have eligible Units" at the end of this proposed sentence.

STAFF RESPONSE: In response to Commenters (4), (5), and (32)'s request that staff allow investor prohibition as a valid reason to receive points under subparagraph (B) and bypass the requirements of subparagraph (A) and in response to Commenter (31)'s proposed language that would absolve a nonprofit entity or HUB with no controlling interest in a General Partner from having to draw upon existing units in that General Partner's Development, staff agrees and has made the following amendments to 10 TAC §11.9(c)(6):

(6) Tenant Populations with Special Housing Needs. (§42(m)(1)(C)(v)) An Application may qualify to receive two (2) points by serving Tenants with Special Housing Needs. Points will be awarded as described in subparagraphs (A) - (C) of this paragraph. If pursuing these points, Applicants must try to score first with subparagraph (A) and then subparagraph (B), unless the Applicant can establish its lack of legal authority to commit Section 811 PRA Program units in a Development. Subparagraphs (A) and (B) pertain to the requirements of the Section 811 Project Rental Assistance Program ("Section 811 PRA Program") (10 TAC Chapter 8). Only if an Applicant or Affiliate cannot meet the requirements of subparagraphs (A) or (B) may an Application qualify for subparagraph (C).

In response to the concerns of Commenters (20), (21), (22), (23), and (24), it is important to note that the Department is not closing the Section 811 PRA Program. Including the 811 as a threshold item resulted in unforeseen federal regulatory consequences for Applicants and therefore has been removed from threshold requirements. Instead, staff has proposed moving the participation in the Section 811 PRA Program from Chapter 10 ("threshold") to the QAP ("scoring"). Given the competitive nature of the 9% HTC program, staff believes that there is ample incentive for Applicants to participate in the program as Applicants that do not request the points may face a disadvantage in scoring. Staff expects the number of participating Applicants to continue at the same level as in previous years.

Staff recommends no changes based on this comment.

In response to Commenter (20), 10 TAC §10.101(b)(8) refers to the accessibility requirements to be met by all Developments. The option delineated in subparagraph (C) requires that five percent of the Units in the Development be set aside for persons with disabilities. Depending on the type of disability involved, a specifically designed Unit or feature may not be necessary. In some cases, these may be the same units, and in others they will not.

Staff recommends no changes based on this comment.

In response to Commenter (4), 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 2019 QAP. Staff encourages Commenter to suggest this revision during planning for the 2019 QAP. Staff does accept some of the clarifying revisions and has revised the rule accordingly:

(A) An Applicant or Affiliate that Owns or Controls an Existing Development that is eligible to participate in the Department's Section 811 Project Rental Assistance Program ("Section 811 PRA Program") must do so in order to receive two (2) points. In order to qualify for points, the Existing Development must commit to the Section 811 PRA Program at minimum 10 Section 811 PRA Program Units, unless the Integrated Housing Rule, 10 TAC §1.15, or the 811 Program Rental Assistance Rule ("811 Rule"), 10 TAC Chapter 8, limits the Existing Development to fewer than 10 Section 811 PRA Program Units. The same Section 811 PRA Program Units cannot be used to qualify for points in more than one HTC Application. The Applicant or Affiliate will comply with the requirements of 10 TAC Chapter 8.

(B) An Applicant or Affiliate that does not meet the Existing Development requirements of 10 TAC Chapter 8 but still meets the requirements of 10 TAC Chapter 8.3 is eligible to receive two (2) points by committing Units in the proposed Development to participate in the Department's Section 811 PRA Program. In order to be eligible for points, Applicants must commit at least 10 Section 811 PRA Program Units in the proposed Development for participation in the Section 811 PRA Program unless the Integrated Housing Rule, 10 TAC §1.15, or the 811 Program Rental Assistance Rule ("811 Rule"), 10 TAC Chapter 8, limits the Development to fewer than 10 Section 811 PRA Program Units. The same Section 811 PRA Program Units cannot be used to qualify for points in more than one HTC Application. The Applicant will comply with the requirements of 10 TAC Chapter 8.

(C) Applications that are unable to meet the requirements of subparagraphs (A) or (B) of this paragraph may qualify for two (2) points by meeting the requirements of this subparagraph, (C). 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 specifically market Units to Persons with Special Needs.

BOARD RESPONSE: Accepted Staff's recommendation.

17. §11.9(c)(7)--Proximity to the Urban Core; (1), (38)

COMMENT SUMMARY: Commenter (1) expresses support for staff's lowering the population requirement from 300,000 or more to 200,000 or more for a city in order to qualify for proximity to urban core points. Commenter (1) notes that this item is an effective tool for urban infill and redevelopment.

Commenter (38) writes that, with the removal of educational excellence from the scoring criteria, urban core points are no longer necessary to give Urban Developments preferential scoring opportunities. Commenter (38) notes that this rewards only 13 out of Texas' 1,754 cities (.007 of all cities and only 44% of the state's population). In region 3 Urban's Competitive HTC Application round in 2017, three of the eight awardees had secured proximity to urban core points (37.5% of the awardees). With the population threshold decrease and the removal of educational quality, Commenter (38) worries that cities able to score on this item will receive the vast majority, if not all, of the awards. Commenter (38) asks that, if staff is unwilling to remove this item, staff not decrease the population threshold and revert to the 2017 QAP's language.

STAFF RESPONSE: Staff thanks Commenter (1) for his support for this scoring item.

In regards to Commenter (38)'s concerns with this scoring item, staff believes that the Department's goals of dispersion, resident choice, and proximity to meaningful amenities are well-served by the Proximity to Urban Core item. Staff believes that the urban core, when coupled with the other scoring criteria of the QAP, is a potential means to locate affordable housing near the beneficial characteristics of a city. In the 2017 Competitive HTC cycle, Proximity to Urban Core only applied to 13 successful Applications out of 69 awardees (18.8% of the total).

Staff recommends no changes based on this comment.

STAFF TECHNICAL CORRECTION: Staff has realized that for 10 TAC §11.9(c)(7), stating that the population of a Place should be "more than 500,000" is unclear for the intent of this scoring item. Staff has changed the applicable language to "500,000 or more" in order to include that rare instance where a Place's population is exactly 500,000.

BOARD RESPONSE: Accepted Staff's recommendation.

18. §11.9(d)(5)--Community Support from State Representative; (4), (7), (18), (41)

COMMENT SUMMARY: Commenter (4) states that the last sentence of this paragraph-"A letter from a state representative expressing the level of community support may be expressly based on the representative's understanding or assessments of indications of support by others, such as local government officials, constituents, and/or other applicable representatives of the community"-warrants clarification. Would a letter of this sort constitute a letter of support or a letter or neutrality, Commenter (4) asks? Commenter (41) states that this proposed language is confusing and opens a Representative's letter to interpretation, likely resulting in these letters being debated before the Governing Board. Commenter (41) therefore asks that this paragraph revert to the 2017 QAP language.

Commenters (7) and (18) ask that, when a proposed Development lies within a Representative's District when that office is vacant, that Applicant be eligible for eight points if that Application has received local government support under Section 11.9(d)(1).

Commenter (7) proposes the following sentence for this paragraph:

"If the office is vacant, the Application will be considered to have received a positive support letter, provided that the application has received local government support under Section 11.9(d)(1)."

STAFF RESPONSE: In regards to Commenters (4) and (41), staff believes that the currently proposed language regarding community support from a State Representative reflects the requirements of statute in Tex. Gov't Code §§2306.6710(b)(J) and 2306.6710(f).

Staff recommends no changes based on this comment.

In regards to Commenters (7) and (18), Tex. Gov't Code §§2306.6710(b)(J) and 2306.6710(f) do not provide an option for staff to award points for this scoring item absent a letter from a State Representative.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

19. §11.9(d)(4)--Quantifiable Community Participation; (5)

COMMENT SUMMARY: Commenter (5) thanks staff for clarifying the actual date for the valid existence of a neighborhood organization and its boundaries. However, Commenter (5) maintains concern about a neighborhood organization's ability to expand its boundaries to include the proposed Development site with the sole purpose of opposing the Development's Application. Commenter (5) also asks that staff add language under §11.9(d)(4)(D) that, if a challenge to neighborhood opposition is vindicated by a fact finder, then the Applicant be automatically eligible to instead secure four additional points through the requirements of §11.9(d)(6), Input from Community Organizations.

STAFF RESPONSE: In regards to Commenter (5)'s concerns about neighborhood organizations' changing their boundaries to include-entirely or partially-the Site of a proposed Development, staff believes that such concern is outside the purview of the Department. Regarding Commenter (5)'s request for additional points "if a challenge to neighborhood opposition is vindicated by a fact finder," 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 2019 QAP. Staff encourages Commenter (5) to suggest this revision during planning for the 2019 QAP.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

20. §11.9(d)(6)--Input from Community Organizations; (18), (32), (40)

COMMENT SUMMARY: Commenter (18) states that the language added to subparagraph (A) regarding proof of tax-exempt status and evidence that the community organization remains in good standing is too subjective and unclear, and it continues to make support from the community more difficult to secure. Commenter (32) asks staff to clarify what will be accepted as evidence of "good standing." Commenter (40) asks that staff remove this requirement of proving good standing as it may be too difficult to get from community organizations in a timely manner.

STAFF RESPONSE: In response to the concerns from Commenters (18), (32), and (40), staff has revised the rule to ensure that the requirement to provide evidence that the nonprofit organization remains in good standing regarding its exemption will cause no burden to the organization as the evidence of good standing will be provided by the Applicant from sources provided by the Department.

(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 Applicant must provide evidence that the community or civic organization remains in good standing by providing evidence from a federal or state government database confirming that the exempt status continues. An Organization must also provide evidence of its 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 as described in subparagraph C), or taxing entities.

BOARD RESPONSE: Accepted Staff's recommendation.

21. §11.9(d)(7)--Concerted Revitalization Plan; (4), (18), (27), (28), (32), (34)

COMMENT SUMMARY: Commenter (4) asks what staff means by "current" in §11.9(d)(7)(A)(V), which reads, "The plan must be current at the time of Application and must officially continue for a minimum of three years thereafter." Commenter (32) asks that staff explain what evidence will be accepted as proof, and if a letter from a city's staff will suffice.

Commenters (18), (27), (32), and (34) ask that this three year requirement be removed. Commenter (27) argues that subclauses (IV) and (V) of §11.9(d)(7)(A)(ii) contradict each another. Subclause (IV) states that there must be evidence that the problems identified within the CRP have been significantly mitigated and addressed prior to the Development being placed in service. Subclause (V), however, states that "the plan must be current at the time of Application and must continue for a minimum of three years thereafter." Commenter (27) therefore asks that the three year requirement be removed.

Commenter (18) asks that the requirement that the city adopt a resolution of support also be removed. The CRP language is already so restrictive and prescribed that it is at risk of missing true revitalizing and gentrifying areas, Commenter (18) says. Commenter (32) explains that it is unreasonable to ask a municipality to go on record affirming something that far in the future. Commenter (34) believes that such a requirement on a local jurisdiction is an overreach.

Commenter (5) asks why staff has added language in §11.9(d)(7)(ii)(II), allowing a municipality to select multiple CRPs for two additional points. Commenter (5) believes that this change opens doors to all Competitive HTC allocations going to CRP areas in a subregion. With the removal of Educational Quality from the QAP and the significance of Proximity to Urban Core as a scoring item and a tie-breaker factor, this change disadvantages high opportunity areas in urban subregions.

Commenter (27) states that they do not mind this change; however, Commenter (27) finds the current language to be ambiguous as it does not clearly specify if a city may only have one CRP that has multiple districts, or if a city may have multiple separate CRPs that can each secure a resolution of support. Commenter (27) asks that staff make revisions to this section for the purpose of clarity. Commenter (27) also notes that for Rural CRP Developments, the current language specifies that a resolution of support must come from the municipality or the county if the Development Site is completely outside of a city. Commenter (27) notes that this language clearly specifies that a county may not support a CRP proposed Development within a city's limits. However, such language is missing from §11.9(d)(7)(A)(ii)(II), regarding the resolution of support for Urban CRP proposed Developments. Commenter (27) asks that Urban CRP requirements mirror Rural CRP requirements regarding this resolution of support for a proposed Development within a city's limits.

Commenter (27) recommends that staff adopt the following language for Urban CRP:

For Developments located in an Urban Area:

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 Application must include a copy of the plan or a link to the online plan and a description of where specific information required below can be found in the plan. The concerted revitalization plan, which may be a Tax Increment Reinvestment Zone ("TIRZ") or Tax Increment Finance ("TIF") or similar plan, must meets the criteria described in subclauses (I) - (IV) of this clause:

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.

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;

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.

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.

Up to seven (7) points will be awarded based on:

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

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 municipality (or county if the Development Site is completely outside of a city) as contributing more than any other to the concerted revitalization efforts of the municipality or county (as applicable). A municipality or county may only identify one single Development during each Application Round for the additional points under this subclause, unless the concerted revitalization plan includes more than one distinct area within the city or county, in which case a resolution may be provided for each Development in its respective area. The resolution from the Governing Body of the municipality 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, unless the resolutions address the respective and distinct areas described in the plan; and

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).

Commenters (28) and (34) propose largely revamping the CRP language entirely, arguing that staff must do so to reduce barriers for local municipalities to implement and determine the best process for their own jurisdictions. Commenter (28) believes that staff has created overly restrictive requirements, despite the IRS having not provided any guidance on what benchmarks a CRP must meet, except to say that it should likely contain a QCT. Thus, Commenter (28) believes that a letter from an appropriate local official stating that a plan includes a public process, funding, and a stated objective for revitalization should supplant an actual Concerted Revitalization Plan itself. Commenter (34) states the same, and asks that TDHCA forego its onerous CRP requirements in light of Hurricane Harvey.

Commenters (28) and (34) recommend that staff adopt the following language for Urban CRP:

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 either the criteria described in subclause (I) or (II) is met:

Concerted revitalization areas have been developed as confirmed by a letter from the appropriate local official. Such letter states:

(-a-) that the areas were 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;

(-b-) objectives for the revitalization of the once thriving area; and

(-c-) funding to achieve revitalization exists within the areas.

a concerted revitalization plan has been developed and executed...

(-e-) The plan must be current at the time of Application

STAFF RESPONSE: In response to Commenter (4)'s request that staff clarify what is meant by a "current" Concerted Revitalization Plan, current is common usage language that refers to a plan still in effect as of the Full Application Delivery Date. Staff believes that the plan itself should speak to whether or not the CRP is still in effect. Per the requirements of §11.9(d)(7)(A)(i)(IV), staff would expect to see "committed funding to accomplish [the CRP's] purposes on its established timetable." That timetable will indicate that a plan is current. A letter from the local jurisdiction alone is not provide sufficient evidence for this requirement.

Staff recommends no changes based on this comment.

Regarding Commenters (18), (27), (32), and (34)'s request that the language requiring that a CRP continue for a minimum of three years after the time of Application, staff believes it is important that the capital injection provided by a LIHTC Development continue alongside the ongoing funding efforts of a CRP. Given that the typical construction timeline for a LIHTC Development is three years, it is reasonable to require that a CRP continue in a similar timeline. Staff encourages HTC stakeholders to work alongside local jurisdictions in implementing robust, meaningful, and impactful CRPs that serve the needs of local communities.

Staff recommends no changes based on this comment.

In regards to Commenters (18) and (34)'s suggestion that staff remove the requirement that a municipality offer a resolution of support for a CRP, staff believes that it is important that local governments weigh in on how capital investments will be made in areas that they have specifically sought to revitalize with public money and through a public planning process. CRPs are inherently public-private partnerships. Furthermore, given many local jurisdictions' requirements to comply with the Affirmatively Further Fair Housing Rule, it is paramount that local jurisdictions be given deference in matters of such importance. Therefore, this requirement is not overreach on the Department's part, but rather duly required deference to the judgment of local jurisdictions themselves.

Staff recommends no changes based on this comment.

Regarding Commenter (5)'s concern about staff's now allowing a local governing body to submit multiple resolutions for proposed CRP Developments that best meet the revitalization needs of the city or county, staff believes that the Department's goals of dispersion, resident choice, and proximity to meaningful amenities are well-served by this change.

Staff recommends no changes based on this comment.

Regarding Commenter (27)'s request that staff explicitly demarcate the jurisdictional involvement of cities and counties for Urban CRP, as staff has already proposed doing in Rural CRP, staff agrees and has made the necessary change. In response to Commenter (27)'s request that staff better clarify how §11.9(d)(7)(A)(ii)(II) actually works-whether one CRP can have multiple sites that can secure resolutions of support or if a city / county can have multiple CRPs that can each provide proposed HTC Developments that can secure resolutions of support-staff agrees that this section warrants clarification and has adjusted the language accordingly:

(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 municipality, or county if the Development Site is completely outside of a city, as being necessary for the concerted revitalization efforts of the municipality or county (as applicable). A municipality or county may only identify one Development per CRP area during each Application Round for the additional points under this subclause, unless the concerted revitalization plan includes more than one distinct area within the city or county, in which case a resolution may be provided for each Development in its respective area. The resolution from the Governing Body of the municipality 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 for the same CRP area, none of the Applications shall be eligible for the additional points, unless the resolutions address the respective and distinct areas described in the plan; and

Regarding the proposal from Commenters (28) and (38) to completely revamp the CRP language, 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 2019 QAP. Staff encourages Commenters (28) and (38) to suggest this revision during planning for the 2019 QAP.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendations, albeit for one revision that it made at the November 9, 2017, Governing Board Meeting. The language that was added in light of public comment regarding a CRP being inside a city and who can support it will be removed, as will the phrase "being necessary for." The language that was struck, "contributing more than any other to," will be added back in. This subclause now reads as follows:

(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 municipality, or county as contributing more than any other to the concerted revitalization efforts of the municipality or county (as applicable). A municipality or county may only identify one Development per CRP area during each Application Round for the additional points under this subclause, unless the concerted revitalization plan includes more than one distinct area within the city or county, in which case a resolution may be provided for each Development in its respective area. The resolution from the Governing Body of the municipality 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 for the same CRP area, none of the Applications shall be eligible for the additional points, unless the resolutions address the respective and distinct areas described in the plan; and

22. §11.9(e)(2)--Cost of Development per Square Foot; (3), (6), (7), (8), (9), (10), (11), (12), (13), (14), (15), (16), (17), (18), (27), (29), (30), (31), (32), (34), (35), (39), (40)

COMMENT SUMMARY: Commenters (27) and (29) state that SRO deals face a significant disadvantage in calculating Eligible Hard Costs compared to family developments. While this paragraph of the QAP allows for a Supportive Housing's NRA to include an additional 50 square feet per Unit for common area(s), Commenter (27) believes that it is not enough. Commenter (27) proposes adding the sentence "If the proposed Development is also Single Room Occupancy, the NRA will also include interior corridors." Commenter (27) states that this language was present in past QAPs but removed in 2014.

Commenters (4), (6), (7), (8), (31), (32), (34), (39), (40) state that, given either the steadily rising construction costs and pricing or the market effects of Hurricane Harvey, these cost per square foot thresholds should be raised. Commenters (4), (6), (8), (31), (34) recommend a 25% increase across the board. Commenter (7) recommends a 15% increase across the board. Commenter (40) states that it should be between 15% and 25%. Commenter (39) thanks staff for raising the cost per square foot threshold for the 2017 QAP, and asks that staff raise it by a similar percentage (2-3%) for the 2018 QAP.

Commenter (40) proposes replacing the concept of Net Rentable Area with gross square footage, presumably when calculating eligible basis for a Development's HTCs.

Commenters (3), (4), (6), (8), (9), (10), (11), (12), (13), (14), (15), (16), (17), (18), (30), (31), (32), (34), (35) express their concern with the suggested changes to proposed cost of development per square foot rule for Applications proposing Adaptive Reuse or Rehabilitation (but excluding Reconstruction) in subparagraph (E).

Commenters (3) and (35) worry that the reduction in cost per square foot for these types of Developments will have a negative effect on the rehabilitation and reuse of historic structures. Because these buildings tend to have antiquated systems, their rehabilitation costs should more closely resemble the costs of New Construction Developments. Commenter (35) explains that this reduction may actually be in opposition to the requirements of Chapter 42 Section (m)(1)(C)(x) of the Internal Revenue Code and Tex. Gov't Code Section 2306.6725(a)(6), both of which require that the historic nature of a proposed Development be considered by scoring measures-a requirement undone by this proposed change. By maintaining these lower cost thresholds, staff may be inadvertently creating a disincentive to restore and adaptively reuse historic buildings, Commenters (3), (9), (10), (11), (35) state, and therefore ask that staff reverse this change.

Commenter (18)'s concerns echo those above, and similarly, Commenter (18) asks that this subparagraph revert to the language of the 2017 QAP. Commenter (18) notes that, first, HUD properties are historically very small, with past units that they have renovated being only 413 and 526 square feet; second, the allowable rehab budget for such small units actually produces a maximum amount that is less than the TDHCA minimum required rehabilitation investment; third, the allowable rehab budget under these proposed guidelines are also too low for investor/lendor requirements; and, finally, the rubric for calculating the cost per square foot threshold is too complicated. Given that construction costs are rising (see exhibit provided by Commenter (18)), staff should consider raising cost thresholds.

Commenters (9), (10), (11), and (35) add that, when entities wish to revive an abandoned building on public property and place it back in service for a beneficial use, acquisition costs matter very little, and the Developer needs the entire cost per square foot threshold in order to adaptively reuse that structure. The current proposed cost threshold makes historic Adaptive Reuse infeasible, which would go against what TDHCA seeks to accomplish with its historic preservation provisions. A satisfactory and reasonable cost per square foot threshold for historic Adaptive Reuse better allows Developments to leverage federal and state historic tax credits, which makes the allocation of LIHTC more efficient. Commenter (10) adds that securing historic tax credits in Texas adds nearly an additional 40% equity to the Development, which would otherwise not be available if the structure were torn down and built as New Construction. Commenter (11) points to his previous work in Texas using TDHCA issued HTCs, and notes that in three similar projects, the cost per square foot exceeded $100. Copies of these Development's cost certifications are attached to Commenter (11)'s public comment. Commenter (11) also wishes to share that many other states besides Texas consider Adaptive Reuse on the same cost scale as New Construction, and Louisiana allows for higher costs than New Construction when doing historic Adaptive Reuse. Commenters (9), (10), and (11) ultimately propose that Adaptive Reuse have the same cost parameters as new construction, as the QAP has done every past year.

Commenters (12) argues that, with the proposed changes to §11.9(e)(2)(E) and the use of a square footage benchmark from which Applicants may either add or subtract additional dollars per square foot, staff has discriminated against USDA and Elderly rehabilitation. A 900 square foot unit across the board for an Elderly Development or USDA Development is untenable, and Commenter (12) notes that specific rules actually discourage such a unit size. For example, the maximum unit square footage on average for an elderly Development is 730 square feet, based on his calculations. Therefore, Commenter (12) asks that 730 square feet be the benchmark unit size for USDA or elderly Applications regarding this subparagraph. Commenter (12) also asks that staff clarify whether Applicants should use the fractional cent per square foot that results from this rule's calculation, or if Applicants should round down or up.

Commenters (13), (15), (16), (30) and (31) ask staff to reconsider the cost per square foot thresholds for Adaptive Reuse or Rehabilitation, and if higher amounts for cost and lower sizes for unit square footage cannot be adopted compared to what staff has proposed, then these Commenters ask staff to revert to the language of the 2017 QAP. Commenters (13) and (15), while recognizing staff's policy intention in removing acquisition costs from the cost per square foot calculation, argue that the final value must allow a Developer to perform a full rehabilitation of a viable property. Commenter (15) states that Developers want rules that incentivize the best possible housing for a community based on people's need, not the cost limitations of a rehab. Commenter (13) looked to its members' recent rehabilitation Developments to ascertain the most appropriate cost-roughly between $80 and $90. Commenter (14) submits similar cost estimates for Rehabilitation Developments, and also asks staff to consider the varying cost differences across the state. Commenter (15) expresses support for this $90 cost per square foot threshold for voluntary Eligible Hard Costs, but leans more towards reverting to the 2017 QAP language. Commenter (16) proposes a $65 - $75 range if staff wishes to remove acquisition costs. However, if staff reverts the language to the 2017 QAP, Commenter (16) requests that the cost per square foot threshold be raised to $125 for §11.9(e)(2)(E). Commenter (17) asks that the 2017 QAP cost thresholds for Rehabilitation and Adaptive Reuse by raised by 10%, given rising construction costs and Hurricane Harvey and given that costs in the QAP have not increased in the past three years. Commenter (31) proposes raising the cost thresholds by 25% if acquisition costs are left in.

If staff does not revert to the 2017 QAP language, then Commenters (13), (30), (31) recommend the following language for §11.9(e)(2)(E):

(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 that are less than $80 per square foot, plus or minus $1 per square foot for every 50 square feet above or below a 700 square feet unit.

(ii) Twelve (12) points for Applications which include voluntary Eligible Hard Costs that are less than $90 per square foot, plus or minus $1 per square foot for every 50 square feet above or below a 700 square feet unit, located in an Urban Area.

(iii) Eleven (12) points for Applications which include voluntary Eligible Hard Costs that are less than $90 per square foot, plus or minus $1 per square foot for every 50 square feet above or below a 700 square feet unit.

Commenter (16) recommends the following language for §11.9(e)(2)(E):

(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 that are less than $65 per square foot, plus or minus $1 per square foot for every 50 square feet above or below a 700 square feet unit.

(ii) Twelve (12) points for Applications which include voluntary Eligible Hard Costs that are less than $75 per square foot, plus or minus $1 per square foot for every 50 square feet above or below a 700 square feet unit, located in an Urban Area.

(iii) Eleven (12) points for Applications which include voluntary Eligible Hard Costs that are less than $75 per square foot, plus or minus $1 per square foot for every 50 square feet above or below a 700 square feet unit.

STAFF RESPONSE: Regarding Commenters (27) and (29) that the rules allow more square footage to be included in the eligible basis calculation for SROs, 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 2019 QAP. Staff encourages Commenters (27) and (29) to suggest this revision during planning for the 2019 QAP.

Staff recommends no changes based on this comment.

In regards to Commenters (4), (6), (7), (8), (31), (32), (34), (39), and (40)'s varying requests that staff raise the cost per square foot thresholds from anywhere from 2% to 25%, staff will rely on evidence in determining where thresholds should be set. During the 2017 Competitive HTC cycle, nearly 90% of the priority Applications specified in their Applications that their true costs were below the specified thresholds for calculating costs per square foot. Only 10% of Applications voluntarily limited their costs for the purposes of this scoring item. Further discussion regarding a raising the cost ceilings should be based on evidence of increased costs.

Staff recommends no changes based on this comment.

Regarding Commenter (40)'s proposal that net rentable area be replaced with gross square footage, 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 2019 QAP. Staff encourages Commenter to suggest this revision during planning for the 2019 QAP.

Staff recommends no changes based on this comment.

Staff agrees with Commenters (3), (4), (6), (9), (10), (11), (12), (13), (14), (15), (16), (17), (18), (30), (31), (32), (34), and (35) that the proposed cost per square foot thresholds for Adaptive Reuse and Rehabilitation (excluding Reconstruction) are too low. Because staff has proposed removing the cost of acquisition of the proposed Development from this cost per square foot calculation, the threshold amount was lowered from $104 to $50 for voluntary Eligible Hard Costs (12 points), $135.20 to $60 for voluntary Eligible Hard Costs in an Urban Area (12 points), and $135.20 to $60 for voluntary Eligible Hard Costs (11 points). In making these proposed changes, staff was attempting to realize a policy goal of excluding acquisition costs from the cost per square foot calculation, which then would only focus on the actual costs of Rehabilitation or Adaptive Reuse. Staff asks that the Department and stakeholders continue to discuss this policy goal in the coming year. This subparagraph will revert to the language of the 2017 QAP and will read as follows:

(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.

BOARD RESPONSE: Accepted Staff's recommendation.

21. §11.9(e)(3)--Pre-Application Participation; (30), (31), (40)

COMMENT SUMMARY: Commenters (30), (31), and (40) ask that staff revert subparagraph (E) to the 2017 QAP language. The proposed change decreases the allowable point variation between pre-application and full Application from six points to four points. Commenter (30) finds this spread to be too narrow, especially in regards to scoring items that are outside an Applicant's control, such as Representative support letters

STAFF RESPONSE: In regards to Commenter (30), staff reminds the Commenter that the point variation does not include those items not included in the Applicant's self-score, such as items outside the Applicant's control.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

23. §11.9(e)(4)--Leveraging of Private, State, and Federal Resources; (4), (6), (7), (8), (31), (32), (34), (40)

COMMENT SUMMARY: Commenter (4) states that requirements of clauses (ii), (iii), and (iv) are too restrictive given steadily rising construction costs, increased land prices, and the downturn in the equity markets, thereby leading to underleveraged Developments. Commenter (4) proposes a two percentage point increase (+ 2%) across each of these clauses' requirements. Commenters (6), (7), (31), (32), (34), and (40), with Commenter (8) deferring to Commenter (6)'s recommendations, also ask that this paragraph consider rising construction costs and/or Hurricane Harvey, and proposes, at the very least, a one percentage point increase, and perhaps a 2% increase, across each of these clauses' requirements.

STAFF RESPONSE: In regards to Commenters (4), (6), (7), (8), (31), (32), (34), and (40), 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 2019 QAP. Staff encourages these Commenters to suggest this revision during planning for the 2019 QAP, but asks that any policy proposals regarding the costs of Development be accompanied by sufficient evidence.

BOARD RESPONSE: Accepted Staff's recommendation.

24. §11.9(f)--Factors Affecting Eligibility in the 2019 Application Round; (18)

COMMENT SUMMARY: Commenter (18) requests that staff remove the added language in this subsection regarding future Application round penalties for Applications that received an award and failed to meet its original Carryover or 10 percent Test deadlines. There are a variety of factors beyond an Applicant's control that can affect that Applicant's ability to meet these deadlines. Commenter (18) notes that what matters most is that the Applicant comply with all federal tax credit dates. Future Application Round penalties should be associated only with egregious matters.

STAFF RESPONSE: Staff would like to point out to Commenter (18) that "will" was changed to "may." Thus, staff will evaluate each situation for its extenuating factors to determine whether or not a recommendation of future penalties is necessary, and if so, the matter could be presented to the Governing Board.

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

25. §11.10--Third Party Request for Administrative Deficiency for Competitive HTC Applications

COMMENT SUMMARY: Commenter (4) claims that the language added by staff to the end of this section-"Information received after the RFAD deadline will not be considered by staff or presented to the Board"-will force an Applicant to challenge all other Applications. This inclination is exacerbated by the proposed earlier RFAD deadline of May 1. Challenging all other Applications in one region can amount to a substantial cost for an Applicant. Because of this, Commenter (4) requests that the fee associated with filing a RFAD be lowered to $100 per RFAD.

Commenter (4) also asks that staff consider adding language to the rule that allows the submittal of information after the RFAD deadline when an Applicant has made misrepresentations in his or her Application or otherwise acted in a fraudulent manner.

STAFF RESPONSE: Regarding Commenter (4)'s concern about the earlier RFAD deadline, Applicants have the choice to challenge any Application for which the Applicant believes there to be an issue. Staff does not believe the earlier deadline impedes this ability. Staff's primary motive in making this change is to ensure that Application scores are finalized as early as possible to allow for appeals to the Board in time for Final Awards to be made by the statutory deadline of July 31. In order to meet this deadline, staff finds it prudent to address RFADs earlier in the application process, rather than later. Furthermore, having RFADs in hand at an earlier date assists staff in better reviewing Applications, as RFADs do at times point out issues that staff had not considered. With the proposed May 1 RFAD deadline, staff will be able to consolidate most Administrative Deficiencies into one request to an Applicant, which is beneficial for staff, the Applicant, and the Board. Regarding Commenter (4)'s request that the fees required to submit a RFAD be lowered, the staff time required to evaluate and process each request is reflected in the fee, multiple requests will not reduce that cost to the Department.

Staff recommends no changes based on this comment.

In response to Commenter (4)'s request that staff add language that allows the submission of information after the RFAD deadline when that information pertains to uncovering fraud, staff believes that the deadline for the submission of an RFAD should remain. Staff reminds the Commenter that "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." Information about an Application must be submitted within the RFAD timeline. Allegations of fraud would not be something for staff to handle as the subject of an Administrative Deficiency. Staff recommends that allegations of fraud be submitted according to the Department's existing protocols, which include information presented in 10 TAC Chapter 1, Subchapter A §1.2 and on the Department's website on the "Report Fraud, Waste, and Abuse" webpage (https://www.tdhca.state.tx.us/fraud-waste-abuse.htm).

Staff recommends no changes based on this comment.

BOARD RESPONSE: Accepted Staff's recommendation.

The Board approved the final order adopting the amended 10 TAC Chapter 11 concerning the Housing Tax Credit Program Qualified Allocation Plan on November 9, 2017.

STATUTORY AUTHORITY. The amendment is adopted pursuant to Tex. Gov't Code §2306.053, which authorizes the Department to adopt rules. Additionally, the amendments are adopted pursuant to Tex. Gov't Code, §2306.67022, which specifically authorizes the Department to adopt a qualified allocation plan.

§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. The Multifamily Programs Procedures Manual and Frequently Asked Questions website posting are not rules and are provided as good faith guidance and assistance, but in all respects the statutes and rules governing the Low Income Housing Tax Credit program supersede these guidelines and are controlling. 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.

(c) Competitive Nature of Program. Applying for competitive housing tax credits is a technical process that must be followed completely and correctly. Any person who desires to request any reasonable accommodation for any aspect of this process is directed to 10 TAC §1.1. 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, where permitted, 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) Data. Where this chapter requires the use of American Community Survey data, the Department shall use the most current data available as of October 1, 2017, unless specifically otherwise provided in federal or state law or in the rules. All American Community Survey data must be 5-year estimates, unless otherwise specified. The availability of more current data shall be disregarded. Where other data sources are specifically required, such as Neighborhoodscout, the data available after October 1, but before Pre-Application Final Delivery Date, will be permissible. The NeighborhoodScout report submitted in the Application must include the report date.

(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 or provided in statute, deadlines are based on calendar days.

(g) Documentation to Substantiate Items and Representations in an Application. In order to ensure the appropriate level of transparency in this highly competitive program, Applications and all correspondence and other information relating to each Application are posted on the Department's website and updated on a regular basis. Applicants should use the Application form posted online to provide appropriate support for each item substantiating a claim or representation, such as claims for points, qualification for set-asides, or meeting of threshold requirements. Any Application that staff identifies as having insufficient support information will be directed to cure the matter via the Administrative Deficiency process, unless the missing documentation is determined to be a Material Deficiency. Applicants are reminded that this process may not be used to increase a scoring item's points or to change any aspect of the proposed Development, financing structure, or other element of the Application. The sole purpose of this mandatory Administrative Deficiency will be to substantiate one or more aspects of the Application to enable an efficient and effective review by staff. Although a responsive narrative will be created after Application submission, all facts and materials to substantiate any item in response to such an Administrative Deficiency must have been clearly established at the time of submission of the Application,

§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)

§11.3.Housing De-Concentration Factors.

(a) Rules reciting statutory limitations are provided as a convenient reference only, and to the extent there is any deviation from the provisions of statute, the statutory language is controlling.

(b) Two Mile Same Year Rule (Competitive HTC Only). As required by Tex. Gov't Code §2306.6711(f), staff will not recommend for award, and the Board will not make an award to an Application that proposes a Development Site located in a county with a population that exceeds one million if the proposed Development Site is also located less than two linear miles from the proposed Development Site of another Application within said county that is awarded in the same calendar year. If two or more Applications are submitted that would violate this rule, the lower scoring Application will be considered a non-priority Application and will not be reviewed unless the higher scoring Application is terminated or withdrawn.

(c) Twice the State Average Per Capita. As provided for in Tex. Gov't Code §2306.6703(a)(4), if a proposed Development is located in a municipality, or if located completely outside a municipality, a county, that has more than twice the state average of units per capita supported by Housing Tax Credits or private activity bonds at the time the Application Acceptance Period Begins (or for Tax-Exempt Bond Developments, Applications submitted after the Application Acceptance Period Begins ), then the Applicant must obtain prior approval of the Development from the Governing Body of the appropriate municipality or county containing the Development. Such approval must include a resolution adopted by the Governing Body of the municipality or county, as applicable, setting forth a written statement of support, specifically citing Tex. Gov't Code §2306.6703(a)(4) in the text of the actual adopted resolution, and authorizing an allocation of Housing Tax Credits for the Development. An acceptable, but not required, form of resolution may be obtained in the Uniform Multifamily Application Templates. Required documentation must be submitted by the Full Application Delivery Date as identified in §11.2 of this chapter (relating to Program Calendar for Competitive Housing Tax Credits) or Resolutions Delivery Date in §10.4 of this title (relating to Program Dates), as applicable.

(d) One Mile Three Year Rule. (§2306.6703(a)(3))

(1) An Application that proposes the New Construction or Adaptive Reuse of a Development that is located one linear mile or less (measured between closest boundaries by a straight line on a map) from another development that meets all of the criteria in subparagraphs (A) - (C) of this paragraph shall be considered ineligible.

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

(B) The Development has received an allocation of Housing Tax Credits or private activity bonds for any New Construction at any time during the three-year period preceding the date the Application Round begins (or for Tax-Exempt Bond Developments the three-year period preceding the date the Certificate of Reservation is issued); and

(C) The Development has not been withdrawn or terminated from the Housing Tax Credit Program.

(2) Paragraph (1) of this subsection does not apply to a Development:

(A) that is using federal HOPE VI (or successor program) funds received through HUD;

(B) that is using locally approved funds received from a public improvement district or a tax increment financing district;

(C) that is using funds provided to the state under the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. §§12701 et seq.);

(D) that is using funds provided to the state and participating jurisdictions under the Housing and Community Development Act of 1974 (42 U.S.C. §§5301 et seq.);

(E) that is located in a county with a population of less than one million;

(F) that is located outside of a metropolitan statistical area; or

(G) that the Governing Body of the appropriate municipality or county where the Development is to be located has by vote specifically allowed the construction of a new Development located within one linear mile or less from a Development described under paragraph (1)(A) of this subsection. An acceptable, but not required, form of resolution may be obtained in the Uniform Multifamily Application Templates. 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.

(3) Where a specific source of funding is referenced in paragraph (2)(A) - (D) of this subsection, a commitment or resolution documenting a commitment of the funds must be provided in the Application.

(e) Limitations on Developments in Certain Census Tracts. An Application that proposes the New Construction or Adaptive Reuse of a Development proposed to 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 shall be considered ineligible unless the Governing Body of the appropriate municipality or county containing the Development has, by vote, specifically allowed the Development and submits to the Department a resolution stating the proposed Development is consistent with the jurisdiction's obligation to affirmatively further fair housing. The resolution 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.

(f) Additional Phase. Applications proposing an additional phase of an existing tax credit Development serving the same Target Population or Applications proposing Developments that are adjacent to an existing tax credit Development serving the same Target Population, shall be considered ineligible unless the other Developments or phase(s) of the Development have been completed and have maintained occupancy of at least 90 percent for a minimum six (6) month period as reflected in the submitted rent roll. If the Application proposes the Rehabilitation or replacement of existing federally-assisted affordable housing units or federally-assisted affordable housing units demolished on the same site within two years of the beginning of the Application Acceptance Period, this provision does not apply.

(g) Proximity of Development Sites. If two or more Competitive HTC Applications that are proposing Developments serving the same Target Population on contiguous sites are submitted in the same program year, the lower scoring Application, including consideration of tie-breaker factors if there are tied scores, will be considered a non-priority Application and will not be reviewed unless the higher scoring Application is terminated or withdrawn.

§11.4.Tax Credit Request and Award Limits.

(a) Credit Amount (Competitive HTC Only). (§2306.6711(b)) The Board may not award or allocate to an Applicant, Developer, Affiliate or Guarantor (unless the Guarantor is also the General Contractor or provides the guaranty only during the construction period, and is not a Principal of the Applicant, Developer or Affiliate of the Development Owner) Housing Tax Credits in an aggregate amount greater than $3 million in a single Application Round. Prior to June 29, an Applicant that has Applications pending for more than $3 million in credit may notify staff in writing or by email of the Application(s) they will not pursue in order to bring their request within the $3 million cap. If the Applicant has not made this self-selection by this date, staff may make the selection. The methodology for making this determination will be to assign first priority to an Application that will enable the Department to comply with the state and federal non-profit set-asides and second to the highest scoring Application, including consideration of tie-breakers if there are tied scores. The Application(s) that does not meet Department criteria will not be considered a priority Application and will not be reviewed unless the Applicant withdraws a priority Application. The non-priority Application(s) will be terminated when the Department awards $3 million to other Applications. Any Application terminated for this reason is subject to reinstatement if necessary to meet a required set-aside. All entities that are under common Control are Affiliates. For purposes of determining the $3 million limitation, a Person is not deemed to be an Applicant, Developer, Affiliate or Guarantor solely because it:

(1) raises or provides equity;

(2) provides "qualified commercial financing;"

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

(4) receives fees as a consultant or advisor that do not exceed $200,000.

(b) Maximum Request Limit (Competitive HTC Only). For any given Development, an Applicant may not request more than 150 percent of the credit amount available in the subregion based on estimates released by the Department on December 1, or $1,500,000, whichever is less, or $2,000,000 for Applications under the At-Risk Set-Aside. In addition, for Elderly Developments in a Uniform State Service Region containing a county with a population that exceeds one million, the request may not exceed the final amount published on the Department's website after the release of the Internal Revenue Service notice regarding the 2018 credit ceiling. For all Applications, the Department will consider the amount in the funding request of the pre-application and Application to be the amount of Housing Tax Credits requested and will automatically reduce the Applicant's request to the maximum allowable under this subsection if exceeded. Regardless of the credit amount requested or any subsequent changes to the request made by staff, the Board may not award to any individual Development more than $2 million in a single Application Round. (§2306.6711(b))

(c) Increase in Eligible Basis (30 percent Boost). Applications will be evaluated for an increase of up to but not to exceed 30 percent in Eligible Basis provided they meet the criteria identified in paragraphs (1) - (3) of this subsection, or if required under §42 of the Code. Staff will recommend no increase or a partial increase in Eligible Basis if it is determined it would cause the Development to be over sourced, as evaluated by the Real Estate Analysis division, in which case a credit amount necessary to fill the gap in financing will be recommended. In no instance will the boost exceed more than the amount of credits required to create the HTC rent-restricted units, as determined by the Real Estate Analysis division of TDHCA. The criteria in paragraph (3) of this subsection are not applicable to Tax-Exempt Bond Developments.

(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 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 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; OR

(2) The Development is located in a Small Area Difficult Development Area ("SADDA") (based on Small Area Fair Market Rents ("FMRs") as determined by the Secretary of HUD) that has high construction, land and utility costs relative to the AMGI. For Tax-Exempt Bond Developments, as a general rule, a SADDA 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. Applicants must submit a copy of the SADDA map that clearly shows the proposed Development is located within the boundaries of a SADDA; OR

(3) The Development meets one of the criteria described in subparagraphs (A) - (E) of this paragraph pursuant to §42(d)(5) of the Code:

(A) the Development is located in a Rural Area;

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

(C) the Development meets the criteria for the Opportunity Index as defined in §11.9(c)(4) of this chapter (relating to Competitive HTC Selection Criteria);

(D) the Applicant elects to restrict an additional 10 percent of the proposed low income Units for households at or below 30 percent of AMGI. These Units must be in addition to Units required under any other provision of this chapter, or required under any other funding source from the Multifamily Direct Loan program; or

(E) the Development is in an area covered by a concerted revitalization plan , is not an Elderly Development, and is not located in a QCT. A Development will be considered to be in an area covered by a concerted revitalization plan if it is eligible for and elects points under §11.9(d)(7) of this chapter.

§11.5.Competitive HTC Set-Asides. (§2306.111(d))

This section identifies the statutorily-mandated Set-asides which the Department is required to administer. An Applicant may elect to compete in each of the Set-asides for which the proposed Development qualifies. In order to be eligible to compete in the Set-aside, the Application must meet the requirements of the Set-aside as of the Full Application Delivery Date. Election to compete in a Set-aside does not constitute eligibility to compete in the Set-aside, and Applicants who are ultimately deemed not to qualify to compete in the Set-aside will be considered not to be participating in the Set-aside for purposes of qualifying for points under §11.9(3) of this chapter (related to pre-application Participation). Commitments of Competitive HTCs issued by the Board in the current program year will be applied to each Set-aside, Rural regional allocation, Urban regional allocation, and/or USDA Set-aside for the current Application round as appropriate.

(1) Nonprofit Set-Aside. (§2306.6729 and §2306.6706(b)) At least 10 percent of the State Housing Credit Ceiling for each calendar year shall be allocated to Qualified Nonprofit Developments which meet the requirements of §42(h)(5) of the Code and Tex. Gov't Code §2306.6729 and §2306.6706(b). Qualified Nonprofit Organizations must have the controlling interest in the Development Owner applying for this Set-aside (i.e., greater than 50 percent ownership in the General Partner). If the Application is filed on behalf of a limited partnership, the Qualified Nonprofit Organization must be the Managing General Partner. If the Application is filed on behalf of a limited liability company, the Qualified Nonprofit Organization must be the controlling Managing Member. Additionally, for Qualified Nonprofit Development in the Nonprofit Set-aside the nonprofit entity or its nonprofit Affiliate or subsidiary must be the Developer or a co-Developer as evidenced in the development agreement. An Applicant that meets the requirements to be in the Qualified Nonprofit Set-aside is deemed to be applying under that Set-aside unless their Application specifically includes an affirmative election to not be treated under that Set-aside and a certification that they do not expect to receive a benefit in the allocation of tax credits as a result of being affiliated with a nonprofit. The Department reserves the right to request a change in this election and/or not recommend credits for those unwilling to change elections if insufficient Applications in the Nonprofit Set-Aside are received. Applicants may not use different organizations to satisfy the state and federal requirements of the Set-aside.

(2) USDA Set-Aside. (§2306.111(d-2)) At least 5 percent of the State Housing Credit Ceiling for each calendar year shall be allocated to Rural Developments which are financed through USDA. If an Application in this Set-aside involves Rehabilitation it will be attributed to and come from the At-Risk Development Set-aside; if an Application in this set-aside involves New Construction it will be attributed to and come from the applicable Uniform State Service Region and will compete within the applicable subregion unless the Application is receiving USDA Section 514 funding. Applications must also meet all requirements of Tex Gov't Code, §2306.111(d-2).

(A) Eligibility of Certain Developments to Participate in the USDA or Rural Set-asides. (§2306.111(d-4)) A proposed or Existing Residential Development that, before September 1, 2013, has been awarded or has received federal financial assistance provided under Section 514, 515, or 516 of the Housing Act of 1949 (42 U.S.C. Section 1484, 1485, or 1486) may be attributed to and come from the At-Risk Development Set-aside or the Uniform State Service Region in which the Development is located, regardless of whether the Development is located in a Rural area.

(B) All Applications that can score under the USDA Set-aside will be considered Rural for all scoring items under this chapter. If a Property receiving USDA financing is unable to score under the USDA Set-aside and it is located in an Urban subregion, it will be scored as Urban.

(3) At-Risk Set-Aside. (§2306.6714; §2306.6702)

(A) At least 15 percent of the State Housing Credit Ceiling for each calendar year will be allocated under the At-Risk Development Set-aside and will be deducted from the State Housing Credit Ceiling prior to the application of the regional allocation formula required under §11.6 of this chapter (relating to Competitive HTC Allocation Process). Through this Set-aside, the Department, to the extent possible, shall allocate credits to Applications involving the preservation of Developments identified as At-Risk Developments. (§2306.6714) Up to 5 percent of the State Housing Credit Ceiling associated with this Set-aside may be given priority to Rehabilitation Developments under the USDA Set-aside.

(B) An At-Risk Development qualifying under Tex. Gov't Code §2306.6702(a)(5)(A) must meet the following requirements:

(i) Pursuant to Tex. Gov't Code §2306.6702(a)(5)(A)(i), a Development must have received a subsidy in the form of a qualified below-market interest rate loan, interest rate reduction, rental subsidy, Section 8 housing assistance payment, rental supplement payment, rental assistance payment, or equity incentive. Applications participating in the At-Risk Set-Aside must include evidence of the qualifying subsidy.

(ii) Any stipulation to maintain affordability in the contract granting the subsidy pursuant to Tex. Gov't Code §2306.6702(a)(5)(A)(ii)(a), or any HUD-insured or HUD-held mortgage will be considered to be nearing expiration or nearing the end of its term if expiration will occur or the term will end within two (2) years of July 31 of the year the Application is submitted. Developments with HUD-insured or HUD-held mortgages qualifying as At-Risk under §2306.6702(a)(5)(A)(ii)(b) may be eligible if the HUD-insured or HUD-held mortgage is eligible for prepayment or has been prepaid.

(iii) Developments with existing Department LURAs must have completed all applicable Right of First Refusal procedures prior to the pre-application Final Delivery Date.

(C) An At-Risk Development qualifying under Tex. Gov't Code §2306.6702(a)(5)(B) must meet one of the following requirements:

(i) Units to be Rehabilitated or Reconstructed must be owned by a public housing authority or a public facility corporation created by a public housing authority under Chapter 303, Local Government Code and received assistance under §9, United States Housing Act of 1937 (42 U.S.C. section 1437g); or

(ii) Units to be Rehabilitated or Reconstructed must have been disposed of or demolished by a public housing authority in the two-year period preceding the Application for housing tax credits; and

(iii) For Developments including Units to be Reconstructed, the Application will be categorized as New Construction; and

(iv) To the extent that an Application is eligible under Tex. Gov't Code §2306.6702(a)(5)(B)(iii), the Development must receive assistance through the Rental Assistance Demonstration ("RAD") program administered by the United States Department of Housing and Urban Development ("HUD"). Applications must include evidence that RAD participation is included in the applicable public housing plan that was most recently approved by HUD, and evidence (in the form of a Commitment to enter into a Housing Assistance Payment ("CHAP")) that HUD has approved the units proposed for Rehabilitation or Reconstruction for participation in the RAD program; and

(v) Notwithstanding any other provision of law, an at-risk Development described by Tex. Gov't Code § 2306.6702(a)(5)(B) that was previously allocated housing tax credits set aside under Subsection (a) does not lose eligibility for those credits if the portion of units reserved for public housing as a condition of eligibility for the credits under Tex. Gov't Code § 2306.6714 (a-1)(2) are later converted under RAD.

(D) An Application for a Development that includes the demolition of the existing Units which have received the financial benefit described in Tex. Gov't Code §2306.6702(a)(5) will not qualify as an At-Risk Development unless the redevelopment will include at least a portion of the same site. Alternatively, pursuant to Tex. Gov't Code §2306.6702(a(5)(B), an Applicant may propose relocation of the existing units in an otherwise qualifying At-Risk Development if:

(i) the affordability restrictions and any At-Risk eligible subsidies are approved to be transferred with the units proposed for Rehabilitation or Reconstruction prior to the tax credit Carryover deadline;

(ii) the Applicant seeking tax credits must propose the same number of restricted units (e.g., the Applicant may add market rate units); and

(iii) the new Development Site must either qualify for points on the Opportunity Index under §11.9(c)(4) of this chapter (relating to Competitive HTC Selection Criteria); OR

(iv) the local Governing Body of the applicable municipality or county (if completely outside of a municipality) in which that Development is located must submit a resolution confirming that the proposed Development is supported by the municipality or county in order to carry out a previously adopted plan that meets the requirements of §11.9(d)(7). Development Sites that cross jurisdictional boundaries must provide a resolution from both local governing bodies.

(E) If Developments at risk of losing affordability from the financial benefits available to the Development are able to retain, renew, or replace the existing financial benefits and affordability they must do so unless regulatory barriers necessitate elimination of all or a portion of that benefit for the Development.

(i) Evidence of the legal requirements that will unambiguously cause the loss of affordability and that this will occur within the two calendar years after the year in which the Application is made must be included with the application.

(ii) For Developments qualifying under Tex. Gov't Code §2306.6702(a)(5)(B), only a portion of the subsidy must be retained for the proposed Development, but no less than 25 percent of the proposed Units must be public housing units supported by public housing operating subsidy. (§2306.6714(a-1)). If less than 100 percent of the public housing benefits are transferred to the proposed Development, an explanation of the disposition of the remaining public housing benefits must be included in the Application, as well as a copy of the HUD-approved plan for demolition and disposition.

(F) Nearing expiration on a requirement to maintain affordability includes Developments eligible to request a Qualified Contract under §42 of the Code. Evidence must be provided in the form of a copy of the recorded LURA, the first year's IRS Forms 8609 for all buildings showing Part II of the form completed and, if applicable, documentation from the original application regarding the Right of First Refusal. The Application must also include evidence that any applicable Right of First Refusal procedures have been completed prior to the pre-application Final Delivery Date.

(G) An amendment to any aspect of the existing tax credit property sought to enable the Development to qualify as an At-Risk Development, that is submitted to the Department after the Application has been filed and is under review will not be accepted.

§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 ("subregion") 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 subregion 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 subregion 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 based on the criteria described in §11.4(a) of this chapter. 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 and/or changes to the Application as necessary 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 (not including credit returned and reallocated under force majeure provisions), the Department shall first return the credits to the subregion 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 subregion and be awarded in the collapse process to an Application in another region, subregion 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 any remaining credits 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 as may be amended 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 subregions to award under the remaining steps;

(C) Initial Application Selection in Each Subregion (Step 3). The highest scoring Applications within each of the 26 subregions will then be selected provided there are sufficient funds within the subregion 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 subregions. 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)(iii)), 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 subregion") 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 subregion as compared to the subregion'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 subregion 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 subregion:

(i) the subregion with no recommended At-Risk Applications from the same Application Round; and

(ii) the subregion 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 subregion 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 subregion in the State compared to the amount originally made available in each subregion. 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 subregion. In the event that more than one subregion 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 subregion:

(i) the subregion with no recommended At-Risk Applications from the same Application Round; and

(ii) the subregion 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 subregion 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 subregion 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 as may be amended 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. The Department will evaluate all waiting list awards for compliance with requested Set-asides. This may cause some lower scoring Applications to be selected instead of a higher scoring Application. (§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 not be subject to the requirements of paragraph (2) of this section. Requests to allocate returned credit separately 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; and

(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.

§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. For the purposes of this section, all measurements will include ingress/egress requirements and any easements regardless of how they will be held. The tie breaker factors are not intended to specifically address a tie between equally underserved subregions 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) or Concerted Revitalization Plan under §11.9(d)(7) of this chapter (relating to Competitive HTC Selection Criteria) as compared to another Application with the same score.

(3) Applications proposed to be located in a Place, or if located completely outside a Place, a county, that has the fewest HTC units per capita, as compared to another Application with the same score. The HTCs per capita measure (by Place or county) is located in the 2018 HTC Site Demographic Characteristics Report.

(4) Applications proposed to be located in a census tract with the lowest poverty rate as compared to another Application with the same score.

(5) 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 according to the property inventory included in the HTC Site Demographic Characteristics Report. 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, subregions 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.

(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 the Application, pre-applications are subject to the same limitations, restrictions, or causes for disqualification or termination as Applications, 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, and a map of that census tract with an outline of the proposed Development Site;

(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)(3).:

(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 entire 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 municipality are required to notify both municipal 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 Public Notification Template provided in the Uniform 2018 Multifamily Application Template. The Applicant is required to retain proof of delivery in the event the Department requests 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 entire 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 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;

(iii) 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 or as a preference 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; and

(iv) Notifications or any other communications may not contain any statement that violates Department rules, statute, code, or federal requirements.

(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. The Application must include one or more maps indicating the location of the Development Site and the related distance to the applicable facility. Distances are to be measured from the nearest boundary of the Development Site to the nearest boundary of the property or easement containing the facility, unless otherwise noted. For the purposes of this section, all measurements will include ingress/egress requirements and any easements regardless of how they will be held. 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.

(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 either one (1) or two (2) points if it meets one of the following conditions. Any Application that includes a HUB must include a narrative description of the HUB's experience directly related to the housing industry.

(A) The ownership structure contains either a HUB certified by the Texas Comptroller of Public Accounts by the Full Application Delivery Date or it contains a Qualified Nonprofit Organization, provided the Application is under the Nonprofit Set-Aside. 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 50 percent and no less than 5 percent for any category. For example, a HUB or Qualified Nonprofit Organization may have 20 percent ownership interest, 25 percent of the Developer Fee, and 5 percent of Cash Flow from operations. 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. Material participation means that the HUB or Qualified Nonprofit is regularly, continuously, and substantially involved in providing services integral to the Development Team; providing services as an independent contractor is not sufficient. 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). (2 points)

(B) The HUB or Nonprofit Organization must be involved with the Development Services or in the provision of on-site tenant services during the Development's Affordability Period. Selecting this item because of the involvement of a Nonprofit Organization does not make an Application eligible for the Nonprofit Set-Aside. A Principal of the HUB or Nonprofit Organization cannot be a Related Party to any other Principal of the Applicant or Developer (excluding another Principal of said HUB or Nonprofit Organization). (1 point)

(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 entirely within 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 entirely within a census tract that has a poverty rate of less than the greater of 20% or the median poverty rate for the region and a median household income rate in the two highest quartiles within the uniform service region. (2 points)

(ii) The Development Site is located entirely within a census tract that has a poverty rate of less than the greater of 20% or the median poverty rate for the region, with a median household 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 point)

(B) An Application that meets the foregoing criteria may qualify for additional points for any one or more of the following factors. Each amenity may be used only once for scoring purposes, unless allowed within the scoring item, regardless of the number of categories it fits. All members of the Applicant or Affiliates cannot have had an ownership position in the amenity or served on the board or staff of a nonprofit that owned or managed that amenity within the year preceding the Pre-Application Final Delivery Date. All amenities must be operational or have started Site Work at the Pre-Application Final Delivery Date. Any age restrictions associated with an amenity must positively correspond to the target population of the proposed Development.

(i) For Developments located in an Urban Area (other than Applicants competing in the USDA Set-Aside), an Application may qualify to receive points through a combination of requirements in subclauses (I) through (XIV) of this clause.

(I) The Development Site is located on a route, with sidewalks for pedestrians, that is 1/2 mile or less from the entrance to a public park with a playground. The entirety of the sidewalk route must consist of smooth hard surfaces, curb ramps, and marked pedestrian crossings when traversing a street. (1 point)

(II) The Development Site is located on a route, with sidewalks for pedestrians, that is 1/2 mile or less from the entrance of a public transportation stop or station with a route schedule that provides regular service to employment and basic services. The entirety of the sidewalk route must consist of smooth hard surfaces, curb ramps, and marked pedestrian crossings when traversing a street. For purposes of this scoring item, regular is defined as scheduled service beyond 8 a.m. to 5 p.m., plus weekend service (both Saturday and Sunday). (1 point)

(III) The Development Site is located within 1 mile of a full-service grocery store. 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 within 1 mile of a pharmacy. For the purposes of this menu item only, the pharmacy may be claimed if it is within the same building as a grocery store. (1 point)

(V) The Development Site is located within 3 miles of a health-related facility, such as a full service hospital, community health center, minor emergency center, emergency room or urgent care facility. Physician offices and physician specialty offices are not considered in this category. (1 point)

(VI) The Development Site is within 2 miles of a center that is licensed by the Department of Family and Protective Services ("DFPS") specifically to provide a school-age program or to provide a child care program for infants, toddlers, and/or pre-kindergarten. The Application must include evidence from DFPS that the center meets the above requirements. (1 point)

(VII) 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 law enforcement data sources. If employing the latter source, the formula for determining the crime rate will include only data relevant to the census tract in which the Development Site is located. (1 point)

(VIII) The development Site is located within 1 mile of a public library that has indoor meeting space, physical books that can be checked out and that are of a general and wide-ranging subject matter, computers and internet access, and that is open 50 hours or more per week. The library must not be age or subject-restricted and must be at least partially funded with government funding. (1 point)

(IX) The Development Site is located within 5 miles of an accredited university or community college, as confirmed by the Texas Higher Education Coordination Board ("THECB"). 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, and to be considered for these purposes must confer at least associate's degrees. The university or community college must have a physical campus, where classes are regularly held for students pursuing their degrees, within the required distance; online-only institutions do not qualify under this item. (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 2011-2015 American Community Survey 5-year Estimate. (1 point)

(XI) Development Site is within 1 mile of an indoor recreation facility available to the public. Examples include a gym, health club, a bowling alley, a theater, or a municipal or county community center. (1 point)

(XII) Development Site is within 1 mile of an outdoor, dedicated, and permanent recreation facility available to the public. Examples include swimming pools or splash pads, tennis courts, golf courses, softball fields, or basketball courts. (1 point)

(XIII) Development Site is within 1 mile of community, civic or service organizations that provide regular and recurring substantive services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club as long as they make services available without regard to affiliation or membership). (1 point)

(XIV) Development Site is in the current service area of Meals on Wheels or similar nonprofit service that provides regular visits and meals to individuals in their homes. (1 point)

(ii) For Developments located in a Rural Area and any Application qualifying under the USDA set-aside, an Application may qualify to receive points through a combination of requirements in subclauses (I) through (XIII) of this clause.

(I) The Development Site is located within 4 miles of a full-service grocery store. 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 Site is located within 4 miles of a pharmacy. For the purposes of this menu item only, the pharmacy may be claimed if it is within the same building as a grocery store. (1 point)

(III) The Development Site is located within 4 miles of health-related facility, such as a full service hospital, community health center, or minor emergency center. Physician offices and physician specialty offices are not considered in this category. (1 point)

(IV) The Development Site is located within 4 miles of a center that is licensed by the Department of Family and Protective Services ("DFPS") specifically to provide a school-age program or to provide a child care program for infants, toddlers, and/or pre-kindergarten. The Application must include evidence from DFPS that the center meets the above requirements. (1 point)

(V) 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 law enforcement data sources. If employing the latter source, the formula for determining the crime rate will include only data relevant to the census tract in which the Development Site is located. (1 point)

(VI) The Development Site is located within 4 miles of a public library that has indoor meeting space, physical books that can be checked out and that are of a general and wide-ranging subject matter, computers and internet access, and that is open 40 hours or more per week. The library must not be age or subject-restricted and must be at least partially funded with government funding. (1 point)

(VII) The Development Site is located within 4 miles of a public park with a playground. (1 point)

(VIII) The Development Site is located within 15 miles of an accredited university or community college, as confirmed by the Texas Higher Education Coordination Board ("THECB"). 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, and to be considered for these purposes must confer at least associate's degrees. The university or community college must have a physical campus, where classes are regularly held for students pursuing their degrees, 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. (1 point)

(X) Development Site is within 3 miles of an indoor recreation facility available to the public. Examples include a gym, health club, a bowling alley, a theater, or a municipal or county community center. (1 point)

(XI) Development Site is within 3 miles of an outdoor, dedicated, and permanent recreation facility available to the public. Examples include swimming pools or splash pads, tennis courts, golf courses, softball fields, or basketball courts. (1 point)

(XII) Development Site is within 3 miles of community, civic or service organizations that provide regular and recurring substantive services available to the entire community (this could include religious organizations or organizations like the Kiwanis or Rotary Club as long as they make services available without regard to affiliation or membership). (1 point)

(XIII) Development Site is in the current service area of Meals on Wheels or similar nonprofit service that provides regular visits and meals to individuals in their homes. (1 point)

(5) Underserved Area. (§§2306.6725(b)(2); 2306.127(3), 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. The Application must include evidence that the Development Site meets the requirements.

(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) The Development Site is located entirely within the boundaries of an Economically Distressed Area (1 point);

(C) The Development Site is located entirely within a census tract that does not have a Development that was awarded less than 30 years ago according to the Department's property inventory tab of the Site Demographic Characteristics Report; (3 points);

(D) For areas not scoring points for (C) above, the Development Site is located entirely within a census tract that does not have a Development that was awarded less than 15 years ago according to the Department's property inventory tab of the Site Demographic Characteristics Report. (2 points);

(E) The Development Site is located entirely within a census tract whose boundaries are wholly within an incorporated area and the census tract itself and all of its contiguous census tracts do not have a Development that was awarded less than 15 years ago according to the Department's property inventory tab of the Site Demographic Characteristics Report. This item will apply in Places with a population of 150,000 or more, and will not apply in the At-Risk Set-Aside (5 points).

(6) Tenant Populations with Special Housing Needs. (§42(m)(1)(C)(v)) An Application may qualify to receive two (2) points by serving Tenants with Special Housing Needs. Points will be awarded as described in subparagraphs (A) - (C) of this paragraph. If pursuing these points, Applicants must try to score first with subparagraph (A) and then subparagraph (B), unless the Applicant can establish its lack of legal authority to commit Section 811 PRA Program units in a Development. Subparagraphs (A) and (B) pertain to the requirements of the Section 811 Project Rental Assistance Program ("Section 811 PRA Program") (10 TAC Chapter 8). Only if an Applicant or Affiliate cannot meet the requirements of subparagraphs (A) or (B) may an Application qualify for subparagraph (C).

(A) An Applicant or Affiliate that Owns or Controls an Existing Development that is eligible to participate in the Department's Section 811 Project Rental Assistance Program ("Section 811 PRA Program") must do so in order to receive two (2) points. In order to qualify for points, the Existing Development must commit to the Section 811 PRA Program at minimum 10 Section 811 PRA Program Units, unless the Integrated Housing Rule, 10 TAC §1.15, or the 811 Program Rental Assistance Rule ("811 Rule"), 10 TAC Chapter 8, limits the Existing Development to fewer than 10 Section 811 PRA Program Units. The same Section 811 PRA Program Units cannot be used to qualify for points in more than one HTC Application. The Applicant or Affiliate will comply with the requirements of 10 TAC Chapter 8.

(B) An Applicant or Affiliate that does not meet the Existing Development requirements of 10 TAC Chapter 8 but still meets the requirements of 10 TAC Chapter 8.3 is eligible to receive two (2) points by committing Units in the proposed Development to participate in the Department's Section 811 PRA Program. In order to be eligible for points, Applicants must commit at least 10 Section 811 PRA Program Units in the proposed Development for participation in the Section 811 PRA Program unless the Integrated Housing Rule, 10 TAC §1.15, or the 811 Program Rental Assistance Rule ("811 Rule"), 10 TAC Chapter 8, limits the Development to fewer than 10 Section 811 PRA Program Units. The same Section 811 PRA Program Units cannot be used to qualify for points in more than one HTC Application. The Applicant will comply with the requirements of 10 TAC Chapter 8.

(C) Applications that are unable to meet the requirements of subparagraphs (A) or (B) of this paragraph may qualify for two (2) points by meeting the requirements of this subparagraph, (C). 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 specifically market Units to Persons with Special Needs.

(7) Proximity to the Urban Core. A Development in a Place, as defined by the US Census Bureau, with a population over 200,000 may qualify for points under this item. The Development Site must be located within 4 miles of the main municipal government administration building if the population of the Place is 500,000 or more, or within 2 miles of the main municipal government administration building if the population of the city is 200,000 - 499,999. The main municipal government administration building will be determined by the location of regularly scheduled municipal 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 Applications under the At-Risk Set-Aside. (5 points)

(8) Readiness to proceed in disaster impacted counties. Application for a proposed development, located in a county declared by the Federal Emergency Management Agency to be eligible for individual assistance within the year proceeding the Full Application Delivery Date, that provides evidence they will close all financing and fully execute the construction contract on or before the last business day of October. Evidence may include, but is not limited to, loan or equity commitments with evidence of completed due diligence, permit-ready architectural plans, and construction contracts or permits. Applications must include evidence that appropriate zoning will be in place at award. The Board cannot and will not waive the deadline and will not consider waiver under its general rule regarding waivers. Failure to close all financing and provide evidence of an executed construction contract by the October deadline will result in penalty under 10 TAC §11.9(f), as determined solely by the Board. (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. Resolutions received by the Department setting forth that the municipality and/or county objects to or opposes the Application or Development will result in zero points awarded to the Application for that Governing Body. Such resolutions will be added to the Application posted on the Department's website. 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 that equals $500 or more for Applications located in Urban subregions or $250 or more for Applications located in Rural subregions for the benefit of the Development. The letter must describe the 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 current, valid existence with boundaries that contain the entire Development Site as of the Pre-Application Final Delivery Date. 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. Letters received by the Department setting forth that the eligible Neighborhood Organization objects to or opposes the Application or Development will be added to the Application posted on the Department's website. Written statements from the Neighborhood Organizations included in an Application and not received by the Department from the Neighborhood Organization will not be scored but will be counted as public comment.

(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 entire 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 should be prepared to provide additional information with regard to opposition.

(B) Technical Assistance. For purposes of this paragraph, 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, 2018. 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 express whether the letter conveys support, neutrality, or opposition. 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. Letters received by the Department setting forth that the State Representative objects to or opposes the Application or Development will be added to the Application posted on the Department's website. 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. If the office is vacant, the Application will be considered to have received a neutral letter. Neutral letters, letters of opposition, or letters that do not specifically refer to the Development will receive zero (0) points. A letter from a state representative expressing the level of community support may be expressly based on the representative's understanding or assessments of indications of support by others, such as local government officials, constituents, and/or other applicable representatives of the community.

(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 of support 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. Letters received by the Department setting forth that the community organization objects to or opposes the Application or Development will be added to the Application posted on the Department's website.

(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 Applicant must provide evidence that the community or civic organization remains in good standing by providing evidence from a federal or state government database confirming that the exempt status continues. An Organization must also provide evidence of its 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 as described in subparagraph C), 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 Application must include a copy of the plan or a link to the online plan and a description of where specific information required below can be found in the plan. The concerted revitalization plan, which may be a Tax Increment Reinvestment Zone ("TIRZ") or Tax Increment Finance ("TIF") or similar plan, must meet the criteria described in subclauses (I) - (V) 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.

(V) The plan must be current at the time of Application and must officially continue for a minimum of three years thereafter.

(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 municipality, or county as contributing more than any other to the concerted revitalization efforts of the municipality or county (as applicable). A municipality or county may only identify one Development per CRP area during each Application Round for the additional points under this subclause, unless the concerted revitalization plan includes more than one distinct area within the city or county, in which case a resolution may be provided for each Development in its respective area. The resolution from the Governing Body of the municipality 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 for the same CRP area, none of the Applications shall be eligible for the additional points, unless the resolutions address the respective and distinct areas described in the plan; 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 has been leased at 85% or greater for the six months preceding Application by low income households and which was initially constructed 25 or more years prior to Application submission as either public housing or as affordable housing with support from USDA, HUD, the HOME program, or the CDBG program. The occupancy percentage will not include units that cannot be occupied due to needed repairs, as confirmed by the PCA or CNA. 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 may receive (2) points in addition to those under clause (i) of this subparagraph if the Development is explicitly identified in a resolution by the municipality (or county if the Development Site is completely outside of a city) as contributing more than any other to the concerted revitalization efforts of the municipality or county (as applicable). Where a Development Site crosses jurisdictional boundaries, resolutions from all applicable governing bodies must be submitted. A municipality or county may only identify one single Development during each Application Round for each specific area to be eligible for the additional points under this subclause. If multiple Applications submit resolutions under this subclause from the same Governing Body for a specific area described in the plan, none of the Applications shall be eligible for the additional points; and

(iii) 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 by the pre-application Final Delivery Date. 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 four (4) 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)(3) 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 subregion or set-aside as determined by the application of the regional allocation formula on or before December 1, 2017.

(f) Factors Affecting Eligibility in the 2019 Application Round

Staff may recommend to the Board and the Board may find that an Applicant or Affiliate should be ineligible to compete in the 2019 Application Round or that it should be assigned a penalty deduction of one (1) point for each submitted Application (Tex. Gov't Code 2306.6710(b)(2)) because it made a deduction of up to five (5) points for any of the items listed in paragraphs (1) - (5) 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.

(5) If the Applicant or Affiliate fails to meet the deadline to both close financing and provide evidence of an executed construction contract under 10 TAC §11.9(c)(8) related to construction in specific disaster counties.

§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 by the requestor 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 takes any formal action to accept the report. The results of a RFAD may not be appealed by the Requestor. Information received after the RFAD deadline will not be considered by staff or presented to the Board.

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 14, 2017.

TRD-201705177

Timothy K. Irvine

Executive Director

Texas Department of Housing and Communuity Affairs

Effective date: January 3, 2018

Proposal publication date: September 22, 2017

For further information, please call: (512) 936-7834


CHAPTER 12. MULTIFAMILY HOUSING REVENUE BOND RULES

10 TAC §§12.1, 12.3 - 12.10

The Texas Department of Housing and Community Affairs (the "Department") adopts the amendments to 10 TAC, Chapter 12, Multifamily Housing Revenue Bond Rules, §§12.1, 12.3 - 12.10. Sections 12.1, 12.3 - 12.10 are adopted without changes to the text as published in the October 27, 2017, issue of the Texas Register (42 TexReg 5957) 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 Department accepted public comments between October 27, 2017, and November 12, 2017. The Department received no comments on the proposed rule. The Board approved the final order adopting the amendments on December 14, 2017.

STATUTORY AUTHORITY. The amendments are adopted pursuant to Tex. Gov't Code §2306.053, which authorizes the Department to adopt rules.

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 15, 2017.

TRD-201705214

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: January 4, 2018

Proposal publication date: October 27, 2017

For further information, please call: (512) 475-3929


CHAPTER 13. MULTIFAMILY DIRECT LOAN RULE

10 TAC §§13.1 - 13.13

The Texas Department of Housing and Community Affairs (the "Department") adopts amendments to 10 TAC §§13.1 - 13.12 and new 10 TAC §13.13 concerning the Multifamily Direct Loan Program Rule with changes as published in the October 27, 2017, issue of the Texas Register (42 TexReg 5962) and will be republished in its entirety. The adopted amendments and new section clarify program requirements.

REASONED JUSTIFICATION. The Department finds that the adoption of the rule will result in a more consistent approach to governing multifamily activity financed with the Department's loans, determining how applications are prioritized, how applications may score points, the post-award process including loan closing and disbursement requests, and the type of amendments that can be requested under the Multifamily Direct Loan program. The comments and responses include both administrative clarifications and revisions to the Multifamily Direct Loan 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. No comments resulted in recommended language changes to the Draft Multifamily Direct Loan Rule as presented to the Board in October.

SUMMARY OF PUBLIC COMMENT AND STAFF RECOMMENDATIONS. Public comments were accepted through November 27, 2017, with comments from Commenter (1) Foundation Communities.

§13.5(c)(1) - Award Process: Applications

COMMENT SUMMARY: Commenter (1) states that the proposed environmental clearance language to be included in a Purchase Contract or site control agreement submitted with the Application is burdensome on applicants, especially when the funds that may be awarded may not require environmental clearance. Commenter (1) proposes that this requirement be removed where not applicable.

STAFF RESPONSE: In response to Commenter (1), staff does not have the authority to remove or alter that requirement since the ultimate funding source may not be known at the time of application. Moreover, environmental clearance is required for all funding sources except TCAP Repayment Funds-which typically comprise approximately one third of the total amount available in a NOFA. And with the ability to use HOME funds in Individual Assistance counties (including Participating Jurisdictions which have typically been excluded from using HOME funds) in 2018, the Department will attempt to utilize federal funds that have strict commitment and expenditure deadlines before using TCAP RF to the extent possible.

Staff recommends no changes based on this comment.

§13.11(o)(1) - Post Award Requirements: Guarantees

COMMENT SUMMARY: Commenter (1) requested that the guarantee language that was added to this section of the Rule be modified to account for nonprofit organizations that do not have individuals within the limited partnership structure for tax credit layered transactions. The commenter stated that since nonprofits do not have any individuals that can personally guarantee a Direct Loan, nonprofit sponsors should be considered an acceptable guarantor. Commenter (1) proposes adding "Development Sponsor" as an alternative provider of a guarantee and striking the reference to "personal" guaranty.

STAFF RESPONSE: Staff does not believe any change is needed. The conditions that trigger the guaranty require the presence of an individual with legal power to exercise control.

STATUTORY AUTHORITY. The amendments and new section are adopted pursuant to Tex. Gov't Code, §2306.053, which authorizes the Department to adopt rules.

The adopted amendments and new section affect no other code, article, or statute.

§13.1.Purpose.

(a) Authority. The rules in this Chapter apply to the funds provided to Multifamily Developments through the Multifamily Direct Loan Program ("MFDL" or "Direct Loan Program") by the Texas Department of Housing and Community Affairs ("Department"). Notwithstanding anything in this Chapter to the contrary, loans and grants issued to finance the Development of multifamily rental housing are subject to the requirements of the laws of the State of Texas, including but not limited to Tex. Gov't Code, Chapter 2306 (sometimes referred to as the "State Act"), and federal law pursuant to the requirements of Title II of the Cranston-Gonzalez National Affordable Housing Act, Division B, Title III of the Housing and Economic Recovery Act (HERA) of 2008 - Emergency Assistance for the Redevelopment of Abandoned and Foreclosed Homes, Section 1497 of the Dodd-Frank Wall Street Reform and Consumer Protection Act: Additional Assistance for Neighborhood Stabilization Programs, Title I of the Housing and Economic Recovery Act of 2008, Section 1131 (Public Law 110-289) and the implementing regulations 24 CFR Part 91, Part 92, and Part 93, as they may be applicable to a specific fund source. The Department is authorized to administer Direct Loan Program funds pursuant to Tex. Gov't Code Chapter 2306, Subchapter I, Housing Finance Division.

(b) General. This Chapter applies to an award of MFDL funds by the Department and establishes the general requirements associated with the application and award process for such funds. Applicants pursuing MFDL assistance from the Department are required to certify, among other things, that they have familiarized themselves with all applicable rules that govern that specific program including, but not limited to this Chapter, Chapter 1 (relating to Administration), Chapter 2 (relating to Enforcement), Chapter 8 (relating to Section 811 PRA Program), and Chapter 10 of this Title (relating to Uniform Multifamily Rules). Chapter 11 of this Title (relating to Housing Tax Credit Program Qualified Allocation Plan ("QAP")) and Chapter 12 of this Title (relating to Multifamily Housing Revenue Bond Rules) will apply if MFDL funds are layered with those other Department programs. The Applicant is also required to certify that it is familiar with any other federal, state, or local financing sources that it identifies in its Application. Any conflict with rules, regulations, or statutes will be resolved on a case by case basis that allows for compliance with all requirements. Conflicts that cannot be resolved may result in Application ineligibility.

(c) Waivers. Requests for waivers of any program rules or requirements must be made in accordance with §10.207 of this title (relating to Waiver of Rules for Applications) and as limited by the rules in this Chapter. In no instance will the Department consider a waiver request that would violate federal program requirements or state or federal statute.

§13.2.Definitions.

The following words and terms, when used in this Chapter, shall have the following meanings, unless the context clearly indicates otherwise. Any capitalized terms not specifically mentioned in this section shall have the meaning as defined in Tex. Gov't Code, Chapter 2306, §§141, 142, and 145 of the Internal Revenue Code, 24 CFR Part 91, Part 92, Part 93 and 2 CFR Part 200, and Chapter 10 of this Title (relating to Uniform Multifamily Rules).

(1) Annual Income or Annual Incomes --"annual income" as defined at 24 CFR §5.609, which includes but is not limited to the list of income in HUD Handbook 4350, and specifically excludes those items listed in HUD's Updated List of Federally Mandated Exclusions from Income.

(2) Choice limiting activity--any transfer of title that occurs prior to a Development obtaining environmental clearance after an application for federal funds (HOME, NSP, and NHTF) has been submitted. Choice limiting activities also include closing on loans including loans for interim financing, signing of a contract, and commencing construction.

(3) Construction Completion--title transfer requirements and construction work have been performed as reflected by the Development's certificate(s) of occupancy and Certificate of Substantial Completion (AIA Form G704) and the final drawdown of funds has been disbursed. In addition, for Developments not layered with Housing Tax Credits, Construction Completion means all modifications requested as a result of the Department's Final Construction Inspection were cleared as evidenced by receipt of the Closed Final Development Inspection Letter.

(4) Community Housing Development Organization (CHDO)--a private nonprofit organization that has experience developing and/or owning affordable rental housing and that meets the requirements in 24 CFR Part 92 for purposes of receiving HOME funds under the CHDO set-aside. In addition, a member of a CHDO's board cannot be a Principal of the development beyond his/her role as a board member of the CHDO or be an employee of the development team, and may not receive financial benefit other than reimbursement of expenses from the CHDO (e.g., a voting board member cannot also be a paid executive.

(5) "Federal Affordability Period"--the period commencing on the date of Construction Completion and ending on the date which is the required number of years as defined by the federal program from the date of Construction Completion.

(6) HOME Match-Eligible Unit--a Unit in the Development that is not assisted with HOME Program funds, but would qualify as eligible for Match under 24 CFR Part 92. Unless otherwise identified by the provisions in the NOFA, TCAP-RF funds and matching contribution on NSP and NHTF Developments must be used on HOME-Match Eligible Units.

(7) Land Use Restriction ("LURA") Term--the period commencing on the effective date of the LURA and ending on the date which is the greater of the loan term or 30 years.

(8) Matching contribution (Match)--a contribution to a Development from non-federal sources that may be in the form of one or more of the following:

(A) Cash contribution (grant), except for cash contributions made by investors in a limited partnership or other business entity subject to pass through tax benefits in a tax credit transaction or owner equity (including deferred developer fee);

(B) Reduced fees or donated labor from certain eligible contractors, subcontractors, architects, attorneys, engineers, excluding any contributions from a party related to the Developer or Owner;

(C) Net present value of yield foregone from a below market interest rate loan;

(D) Waived or reduced fees from cities or counties not related to the Applicant in connection with the proposed Development;

(E) Donated land or land sold below market value, as evidenced by a third party appraisal, from an unrelated party.

(10) Section 234 Condominium Housing basic mortgage limits ("234 Condo Limits")--the per-unit subsidy limits for all MFDL funding. These limits take into account whether or not a Development is elevator served and any local conditions that may make development of multifamily housing more or less expensive in a given metropolitan statistical area. Currently, the high cost percentage adjustment applicable to the 234 Condo Limits for HUD's Fort Worth Multifamily Hub is applicable for all Developments that TDHCA finances through the MFDL Program.

(11) State Affordability Period--the LURA Term as described in the MFDL contract and loan documents and as required by Department in accordance with the State Act which is usually an additional period after the Federal Affordability Period.

§13.3.General Loan Requirements.

(a) Direct Loan funds may be made available through a Notice of Funding Availability ("NOFA") or other similar governing document that includes the basic Application and funding requirements.

(b) Direct loan funds may not be awarded if an underwriting report that has been issued by the Department Real Estate Analysis Division has become final and concludes that the Development does not need the MDFL funding for which it has applied because it is over sourced.

(c) Direct Loan funds are composed of annual HOME and National Housing Trust Fund allocations from HUD, repayment of TCAP loans, HOME Program Income, NSP Program Income, and any other similarly encumbered funding that may become available by Board action, except as otherwise noted in this Chapter. Similar funds include any funds that are required to be to be loaned or granted for the development of multifamily property and are not governed by another Chapter in this Title.

(d) Direct Loan funds may be used for the acquisition, new construction, reconstruction, or rehabilitation of affordable housing with suitable amenities, including real property acquisition, site improvements, conversion, demolition, or operating cost reserves, all subject to HUD guidance. Other expenses, such as financing costs, relocation expenses of any displaced persons, families, businesses, or organizations may be included. MFDL funds may be used to assist directly distressed developments previously funded by the Department when approved by specific action of the Department's Governing Board ("Board").

(e) While all costs associated with the Development and known by the sponsor must be disclosed as part of the Application, costs ineligible for reimbursement with Direct Loan funds in accordance with 24 CFR Part 91, Part 92, Part 93, and 2 CFR Part 200, as federally required or identified in the NOFA include but are not limited to:

(1) Offsite costs;

(2) Stored Materials;

(3) Site Amenities;

(4) Detached Community Buildings;

(5) Carports and/or garages;

(6) Parking garages;

(7) Swimming pools;

(8) Commercial Space costs;

(9) Reserve accounts not related to NHTF;

(10) TDHCA fees;

(11) Syndication and organizational costs;

(12) Delinquent fees, taxes, or charges;

(13) Costs incurred more than 24 months prior to the effective date of the Direct Loan Contract unless the Application is awarded TCAP Loan Repayment funds;

(14) Costs that have been allocated to or paid by another fund source;

(15) Deferred Developer fee; and,

(16) Other costs limited by Award or NOFA, or as established by the Board.

§13.4.Set-asides, Regional Allocation, and Priorities.

(a) Set-asides: Specific types of Applications or Developments for which a portion of MFDL funds may be reserved in a NOFA will be grouped in set-asides. The Supportive Housing/Soft Repayment set-aside, CHDO set-aside, and General set-aside, as described below, are fixed set-asides that will be included in the annual NOFA. The remaining set-asides described below are flexible set-asides and are applicable only when identified in the NOFA. The amount of a single award may be credited to multiple set-asides, in which case the depleted portion of funds may be repositioned into an oversubscribed set-aside prior to a defined collapse deadline. Applications under any and all set-asides may or may not be layered with other Department Multifamily programs except as provided in this section or as determined by the Board to address unique circumstances not addressed by these rules.

(1) Fixed Set-Asides:

(A) Supportive Housing/Soft Repayment Set-Aside. The Supportive Housing/Soft Repayment ("SH/SR") Set-aside will be limited by the unencumbered interest revenue generated by multifamily loan payments and any amount under the NHTF allocation received by the Department and not otherwise programmed. Supportive Housing and Soft Repayment may be two independent set-asides in the NOFA, in order to accommodate fund source requirements. The SH/SR set-aside is reserved for developments that are not able to support amortizing debt due to higher costs for supportive services and/or extremely low income and rent restrictions. Soft repayment loans may be provided with deferred payable, deferred forgivable or cash flow terms. Applicants seeking to qualify under this set-aside must propose Developments that meet either:

(i) the Supportive Housing requirements in 10 TAC §10.3(a) in the Uniform Multifamily Rules including the other underwriting consideration for Supportive Housing Developments 10 TAC §10.302(g)(3) of the Underwriting and Loan Policy; or

(ii) the requirements in subclauses (I) - (III), funding exclusively units targeting 30% Area Median Income (AMI) households;

(I) All units assisted with MFDL funds must be available for and have rents no higher than households earning 30% AMI or less.

(II) Any units assisted with MFDL funds may not also be receiving tenant-based voucher or rental assistance to the extent that there are other available units within the Development that the voucher-holder may occupy; and

(III) Units assisted with MFDL may not be restricted to 30% AMI by another Department program or any other fund source.

(B) CHDO Set-aside. Unless waived by HUD, a portion of the Department's annual HOME allocation, equal to at least 15%, will be set aside for eligible Community Housing Development Organizations ("CHDO") meeting the requirements of the definition of Community Housing Development Organization found in 24 CFR §92.2 and §13.2(a). Applicants under the CHDO Set-Aside must be proposing to develop housing in Development Sites located outside Participating Jurisdictions unless the award is made within a Persons with Disabilities ("PWD") set-aside or unless the requirement under Tex. Gov't Code §2306.111(c)(1) has been waived by the Governor as the result of a disaster declaration. CHDO funds are typically available as fully-repayable amortizing debt consistent with §13.4 of this Chapter relating to debt structure policy. In instances where an application submitted under the CHDO Set-Aside also qualifies under the SH/SR Set-Aside, CHDO funds may be structured in accordance with the SH/SR Set-Aside requirements. A CHDO operating expenses grant may be awarded in conjunction with an award of MFDL funds under the CHDO set-aside in accordance with 24 CFR §92.208. Applications under the CHDO set-aside may not have a for profit special limited partner within the ownership organization chart.

(C) General. The General set-aside is for all other applications that do not meet the requirements of the SH/SR, CHDO set-asides, or flexible set-asides, if any. A portion of the General set-aside may be repositioned into the CHDO set-aside in order to fully fund a CHDO award that meets or exceeds the set-aside amount.

(2) Flexible Set-Asides:

(A) 4% and Bond Layered. The 4% and Bond Layered set-aside is reserved for Applications meeting all MFDL requirements that are layered with 4% Housing Tax Credits and Private Bond funds that do not meet the definition of CHDO.

(B) Persons with Disabilities ("PWD"). The PWD set-aside is reserved for Developments restricting units for tenants who meet the requirements of Tex. Gov't Code §2306.111(c)(2). MFDL funds will be awarded in a NOFA for the PWD set-aside only to the extent sufficient funds are available to award to at least one Application within a Participating Jurisdiction under Tex. Gov't Code §2306.111(c)(1).

(C) 9% Layered. The 9% Layered set-aside is reserved for applications meeting all MFDL requirements that are layered with 9% Housing Tax Credits, and do not meet the definition of CHDO. Awards under this set-aside are dependent on the concurrent award of a 9% HTC allocation.

(D) Additional set-asides may be developed, subject to Board approval, to meet the requirements of specific funds sources, or to address Department priorities.

(b) Regional Allocation. All funds in the annual NOFA will be initially allocated to regions and potentially subregions based on a Regional Allocation Formula ("RAF") within the set-asides. The RAF methodology may differ by fund source. HOME funds will be allocated in accordance with Tex. Gov't Code Chapter 2306. The end date for the RAF will be identified in the NOFA, but in no instance shall it be less than 30 days from the date a link to the NOFA is published in the Texas Register.

(1) After expiration of the RAF, funds collapse but may still be available within set-asides as identified in the NOFA. All Applications received prior to these first two collapse period deadlines will continue to hold their priority unless they are withdrawn, terminated, or funded.

(2) Funds remaining after expiration of the RAF, which have not been requested in the form of a complete application, will be available statewide on a first-come first-served basis to Applications submitted after the collapse dates.

(3) In instances where the RAF would result in regional or subregional allocations insufficient to fund an application, the Department may use an alternative method of distribution, including an early collapse, revised formula or other methods as approved by the Board.

(c) Priorities for the Annual NOFA. Complete Applications received during the period of the RAF will be prioritized for review and recommendation to the Board, to the extent that funds are available both in the region and in the set-aside under which the application is received. If insufficient funds are available in a region to fund all Applications then the oversubscribed Applications will be evaluated only after the RAF and/or set-aside collapse and in accordance with the additional priority levels below, unless an Application received earlier is withdrawn or terminated. If insufficient funds are available within a region or set-aside, the Applicant may request to be considered under another set-aside if they qualify, prior to the collapse. Applications will be reviewed and recommended to the Board to the extent funds are available in accordance with the order of prioritization described in paragraphs (1) - (3) of this subsection.

(1) Priority 1: Applications not layered with 2018 9% HTC that are received prior to the 2018 9% HTC Application deadline as described in 10 TAC §11.2 Program Calendar for Competitive Housing Tax Credits. Priority 1 applications will be prioritized based on score within their respective set-aside and subregion or region. If the RAF has collapsed, Applications will be reviewed on a first-come first served basis within their set-aside.

(2) Priority 2: Applications layered with 2018 9% HTC will be prioritized based on their recommendation status and score for an HTC allocation. All Priority 2 applications will be deemed received on the Market Analysis Delivery Date as described in 10 TAC §11.2 Program Calendar. In order for an MFDL application layered with 2018 9% HTC to be considered complete, Applications for both programs must be timely received. Priority 2 applications will be recommended for approval at the same meeting when the Board approves the 2018 9% HTC allocations. Applications that are on the wait list for a 2018 9% HTC allocation are not guaranteed the availability of MFDL funds.

(3) Priority 3: Applications that are received after the 2018 9% HTC Application deadline are on a first come first served basis for any remaining funds until the final deadline identified in the annual NOFA.

(d) Other Priorities. The Board may set additional priorities for the annual NOFA, and for one time or special purpose NOFAs.

§13.5.Award Process.

(a) Notice of Funding Availability ("NOFA"). All MFDL funds from the annual allocation will be distributed through a NOFA that provides the specific collapse dates and deadlines as well as set-aside and RAF amounts applicable to the MFDL program, along with Application information. Other funds may be distributed by NOFA or through other methods approved by the Board. Set-aside, RAF, and total funding amounts may increase or decrease in accordance with the provisions herein without further Board action as long as the NOFA itself did not require Board action.

(b) Date of Receipt. Applications will be considered received on the business day of receipt. If an application is received after 5pm Austin Local Time, it will be determined to have been received on the following business day. Applications received on a non-business day will be considered received on the next day the Department is open. Applications will be considered complete at the time all required third party reports and application fee(s), in addition to the application, are received by the Department. Within certain set-asides, the date of receipt may be fixed, regardless of the earlier actual date a complete application is received. If multiple applications are received on the same date, in the same region, and within the same set-aside, then score and tiebreaker factors, as described in §13.6 for MFDL or 10 TAC §11.9 for Applications layered with 9% HTC, will be used to determine the Application's rank.

(c) Applications. MFDL Applicants must follow the applicable requirements in 10 TAC Chapter 10, Subchapter C, Application Submission Requirements, Ineligibility Criteria, Board Decisions and Waiver of Rules for Applications. Failure to timely respond to any notice of Administrative Deficiency will result in a reestablishment of the date of receipt of the Application to the final date at which the cure to the notice was received by the Department. If the date of receipt of the Application is reestablished, an Application could be de-prioritized in favor of another application received prior to the new application submission date.

(1) All applicants for MFDL funds, regardless of whether or not the Development Site is in a Participating Jurisdiction, must include the following language in the purchase contract or site control agreement: "Notwithstanding any other provision of this Contract, Purchaser shall have no obligation to purchase the Property, and no transfer of title to the Purchaser may occur, unless and until the Department has provided Purchaser and/or Seller with a written notification that:

(A) it has completed a federally required environmental review and its request for release of federal funds has been approved and, subject to any other Contingencies in this Contract,

(i) the purchase may proceed, or

(ii) the purchase may proceed only if certain conditions to address issues in the environmental review shall be satisfied before or after the purchase of the property; or

(B) it has determined that the purchase is exempt from federal environmental review and a request for release of funds is not required. The Department shall use its best efforts to conclude the environmental review of the property expeditiously."

(2) Applications also requesting 9% HTC may have the ability to revise financing prior to award should MFDL funds be oversubscribed in a set-aside. The Department will provide notice to all impacted Applicants in the case of over-subscription.

(d) Eligibility Criteria. The Department will evaluate the Application for eligibility and threshold at the time of full Application pursuant to the requirements of this Chapter and Chapter 10 of this title (relating to Uniform Multifamily Rules). If there are changes to the Application at any point prior to MFDL loan closing that have an adverse effect on the score and ranking order and that would have resulted in the application being ranked below another application in the ranking, the Department may terminate the Application.

(1) Applicants requesting MFDL as the only source of Department funds may meet the Experience Requirement under §10.204(6) of this Chapter or by providing evidence of the successful development, and operation for at least 5 years, of at least twice as many affordability restricted units as requested in the Application.

(2) Applications for Developments previously given awards from the Department, or where construction has already started or been completed, regardless of fund source and are not proposing acquisition and rehabilitation, must be found eligible by the Board. The Board may find other applicants eligible for good cause such as Developments assisted by the Department that have encountered adverse factors beyond their control that could materially impair their ability to provide the affordable housing. An application that requires a finding of eligibility by the Board must identify that fact in their application so that the staff may present the matter to the Board for an eligibility determination. A finding of eligibility under this section does not guarantee an award. In general, these applications will not be funded with HOME or NHTF funds.

(A) Requests for eligibility determinations under this paragraph must be received with the Application, so that staff may present the matter to the Board for an eligibility determination, and will not be considered more than 30 calendar days prior to the first Application acceptance date published in the NOFA.

(B) Criteria for the Board to consider would include clauses (i) - (iii) of this subparagraph:

(i) evidence of circumstances beyond the Applicant's control which could not have been prevented by timely start of construction; or

(ii) Force Majeure events; and

(iii) evidence that no further exceptional conditions exist that will delay or cause further cost increases.

(C) For applications for Developments previously given awards from the Department that have not yet achieved Construction Completion, Department funds will be evaluated at no more than the amount of Developer Fee proposed in the original Application. MFDL funds may not be used to fund increased Developer Fee, regardless of the allowability of the increase under other Department rules.

§13.6.Scoring Criteria.

The criteria identified in paragraphs (1) - (7) of this section will be used in the evaluation and ranking of applications to the extent that other applications were received on the same date and within the same set-aside and prioritization. There is no rounding of numbers in this section, unless rounding is explicitly indicated for that particular calculation or criteria. The scoring items used to calculate the score for a 9% HTC layered application will be utilized for scoring for an MFDL Application, and evaluated in the same manner except as specified below. Scoring criteria in Chapter 11 of this title will always be superior to Scoring Criteria in this Chapter to the extent that an MFDL Application is also concurrently requesting 9% housing tax credits:

(1) Applicants eligible for points under 10 TAC §11.9(c)(4) related to the Opportunity Index (7 points).

(2) Tenant Services. Applicants eligible for points under 10 TAC §11.9(c)(3)(A) related to Tenant Services (9 points) Applicants eligible for points under 10 TAC §11.9(c)(3)(B) related to Tenant Services (1 point).

(3) Underserved Area. Applicants eligible for points under 10 TAC §11.9(c)(6) related to Underserved Area (up to 5 points).

(4) Subsidy per Unit. An application that caps the per unit subsidy limit for all Direct Loan units regardless of unit size at:

(A) $100,000 per MFDL unit (4 points).

(B) $80,000 per MFDL unit (8 points).

(C) $60,000 per MFDL unit (10 points).

(5) Rent Levels of Tenants. An Application may qualify to receive up to thirteen (13) points for placing the following rent and income restrictions on the proposed Development for the entire Affordability Period. These Units may not be restricted to 30 percent or less of AMGI by another fund source.

(A) At least 20 percent of all low-income Units at 30 percent or less of AMGI (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 (12 points); or

(C) At least 5 percent of all low-income Units at 30 percent or less of AMGI (7 points).

(6) Tenant Populations with Special Housing Needs. An Application may qualify to receive two (2) points by serving Tenants with Special Housing Needs. Points will be awarded as described in subparagraphs (A) - (B) of this paragraph. If pursuing these points, Applicants must try to score first with subparagraph (A) and then subparagraph (B), both of which pertain to the requirements of the Section 811 Project Rental Assistance Program ("Section 811 PRA Program") (10 TAC Chapter 8).

(A) An Applicant or Affiliate that Owns or Controls an Existing Development that is eligible to participate in the Department's Section 811 Project Rental Assistance Program ("Section 811 PRA Program") will do so in order to receive two (2) points. In order to qualify for points, the Existing Development must commit to the Section 811 PRA Program at minimum 10 Section 811 PRA Program Units, unless the Integrated Housing Rule, 10 TAC §1.15, or the 811 Program Rental Assistance Rule ("811 Rule"), 10 TAC Chapter 8, limits the Development to fewer than 10 Section 811 PRA Program Units. The same Section 811 PRA Program Units cannot be used to qualify for points in more than one Application. The Applicant or Affiliate will comply with the requirements of 10 TAC Chapter 8.

(B) An Applicant or Affiliate that does not meet the Existing Development requirements of 10 TAC Chapter 8 but still meets the requirements of 10 TAC §8.3 is eligible to receive two (2) points by committing Units in the proposed Development to participate in the Department's Section 811 PRA Program. In order to be eligible for points, Applicants must commit at least 10 Section 811 PRA Program Units in the proposed Development for participation in the Section 811 PRA Program unless the Integrated Housing Rule, 10 TAC §1.15, or the 811 Program Rental Assistance Rule ("811 Rule"), 10 TAC Chapter 8, limits the Development to fewer than 10 Section 811 PRA Program Units. The same Section 811 PRA Program Units cannot be used to qualify for points in more than one HTC Application. The Applicant will comply with the requirements of 10 TAC Chapter 8.

(7) Tiebreaker. In the event that two or more Applications receives the same number of points based on the scoring criteria above, staff will recommend for award the Application that proposes the greatest percentage of 30% AMGI MFDL units within the Development that would convert to households at 15% AMGI in the event of a tie in the Tiebreaker Certification.

§13.7.Maximum Funding Requests.

(a) The maximum funding request for all applications will be identified in the NOFA, and may vary by development type, set-aside, or fund source.

(b) Maximum Per-Unit Subsidy Limits. The 234 Condo limits with the applicable high cost percentage adjustment in effect at the time of application are the maximum per-unit subsidy limits that an applicant may use to determine the amount of MFDL funds or other federal funds that may subsidize a unit. Stricter per-unit subsidy limits are allowable and incentivized as point scoring items in §13.6 Scoring Criteria. Per-unit subsidy limits as well as cost allocation analysis - ensuring that the amount of MFDL units as a percentage of total units is greater than the percentage of MFDL funds requested as a percentage of total development costs - will determine the amount of MFDL units required.

§13.8.Loan Structure and Underwriting Requirements.

(a) Except for awards made under the SR/SH set-aside, all Multifamily Direct Loans awarded will be underwritten as fully repayable (must pay) at not less than the Discount window primary credit rate published by the Federal Reserve (https://www.federalreserve.gov/releases/h15/) on the date of initial publication of the NOFA, plus 200 basis points and a 30 year amortization with a term that matches the term of any superior loans (within 6 months) at the time of application. If the Department determines that the Development does not support this structure, the Department may recommend an alternative that makes the development feasible under all applicable sections of 10 TAC §10.300 related to Underwriting Policy, and §13.8(c). The interest rate, amortization period, and term for the loan will be fixed by the Board at Award and can only be amended prior to closing by the process in §13.12 of this chapter.

(b) Changes to the total development cost and/or other sources of funds from the publication of the initial Underwriting Report to the time of loan closing must be reevaluated by Real Estate Analysis staff who may recommend changes to principal amount and/or repayment structure for the Multifamily Direct Loan that will allow the Department to mitigate any increased risk. Where the Department determines such risk is not adequately mitigated, the award may be terminated or reconsidered by the Board. Increases in the principal or payment amount of any superior loans after the initial Underwriting Report must be approved by the Board.

(c) Direct Loans through the Department must adhere to the following criteria as identified in paragraphs (1) - (7) of this subsection if being requested as construction-to-permanent loans:

(1) The term for permanent loans shall be no less than ten (10) years and no greater than forty (40) years and the amortization schedule shall be thirty (30) years. The Department's loan must mature at the same time or within six (6) months of the shortest term of any senior debt so long as neither exceeds forty (40) years and six (6) months.

(2) Amortized loans 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 or if a surplus cash flow structure is required for a loan from the SH/SR set-aside, 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.

(3) If the proposed first lien is a federally insured HUD or FHA mortgage that requires the Direct Loan to be subject to 75% of surplus cash flow, staff will require the debt service coverage ratio on both the federally insured loan and the Department's loan - as restricted to 75% of surplus cash flow - to continue to meet the minimum 1.15 in accordance with 10 TAC §10.302(d)(4)(D).

(4) Loans shall be secured with 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 superior to 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; 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.

(6) If the Direct Loan is the only source of Department funding for the Development:

(A) The Development Owner must provide equity in an amount not less than 20 percent of Total Housing Development Costs. (B) For Applicants proposing new construction, an "as completed" appraisal pursuant to 10 TAC §10.304 which results in total repayable loan to value of not greater than 80% must be provided.

(B) For Applicants proposing new construction, an "as completed" appraisal pursuant to 10 TAC §10.304 which results in total repayable loan to value of not greater than 80% must be provided.

(C) For Applicants proposing rehabilitation, the "as is" appraisal required by 10 TAC §10.205(4) may meet this requirement without needing an "as completed" appraisal provided the loan to value is not greater than 80%.

(7) All Direct Loan applicants where other third-party financing entities are part of the sources of funding must submit a proforma and lender approval letter evidencing review of the Development and the Principals in accordance with 10 TAC §11.9(e)(1). Where no third-party financing exists, the Department reserves the right to procure a third-party evaluation which will be required to be prepaid by the applicant.

(d) Direct Loans through the Department must adhere to the following criteria as identified in paragraphs (1) - (3) of this subsection if being requested as construction only loans:

(1) The term of the construction loan must be coterminous with any superior construction loan. In the event that the Direct Loan is the only construction loan, the term may not exceed 24 months;

(2) The minimum interest rate will be 2%; and

(3) Up to 75% of the construction loan may be advanced at loan closing should there be sufficient costs to reimburse that amount.

§13.9.Construction Standards.

All Developments financed with Direct Loans will be required to meet at a minimum all applicable state and local codes, ordinances, and standards; the 2012 International Existing Building Code ("IEBC") or International Building Code ("IBC") as applicable. Rehabilitation Developments must meet the requirements in paragraphs (1) - (6) of this section.

(1) recommendations made in the Environmental Assessment and any Physical Conditions Assessment with respect to health and safety issues, life expectancy of major systems (structural support; roofing; cladding and weatherproofing; plumbing; electrical; and heating, ventilation, and air conditioning) must be implemented;

(2) for properties originally constructed prior to 1978, the Physical Conditions Assessment and rehabilitation scope of work must be provided to the party conducting the lead-based paint and/or asbestos testing, and the rehabilitation must implement the mitigation recommendations of the testing report;

(3) all accessibility requirements pursuant to 10 TAC Subchapter B must be met;

(4) the broadband infrastructure requirements described in 24 CFR §92.251(a)(2)(vi) or (b)(1)(x) or 24 CFR §93.301(a)(2)(vi) or 24 CFR 93.301(b)(2)(vi) as applicable;

(5) properties located in the designated catastrophe areas specified in 28 TAC §5.4008 must comply with 28 TAC §5.4011(relating to Applicable Building Code Standards in Designated Catastrophe Areas for Structures Constructed, Repaired or to Which Additions Are Made On and After January 1, 2008); and

(6) should IEBC be more restrictive than local codes, or should local codes not exist, then the Development must meet the requirements imposed by IEBC.

§13.10.Development and Unit Requirements.

(a) The bedroom/bathroom/amenities and square footages for Direct Loan Units must be comparable to the bedroom/bathroom/amenities and square footages for the total number of Units in the Development based on the amount of Direct Loan funds requested as a percentage of total Direct Loan eligible costs. As a result of this requirement, the Department will always use the Proration Method as the Cost Allocation Method in accordance with CPD Notice 16-15 except as described in (b) of this section. Additionally, the amount of Direct Loan funds requested cannot exceed the per-unit subsidy limit. For example, in a 20 Unit Development composed of 6 1-bedroom, 10 2-bedroom, and 4 3-bedroom units, where the amount of Direct Loan funds requested is $1,000,000, and the total Direct Loan-eligible project costs are $4,000,000, 25 percent of each unit type must be a Direct Loan Unit ($1,000,000 Direct Loan divided by $4,000,000). In the example below, the square footages are the same for each unit that has the same number of bedrooms and all fractional units are rounded up to require the next whole number of MFDL Units. In this example, even though the amount of Direct Loan funds as a percentage of total Direct Loan-eligible costs (25 percent) would result in a minimum 5 units if the percentage was applied on a total unit basis, the 25 percent must be applied to each unit type with partial Units rounded up to the next whole number, resulting in 2 additional units for a total of 7 Direct Loan Units. Please see CPD Notice 16-15 for further guidance.

Figure: 10 TAC §13.10(a)(No change.)

(b) For HOME, NSP, and TCAP RF, Direct Loan Units must float throughout the Development unless the Development also contains public housing units that will receive Operating Fund or Capital Fund assistance under Section 9 of the 1937 Act as defined in 24 CFR §5.100. For NHTF, Direct Loan Units must float throughout the Development except as prohibited by 24 CFR §93.203. Floating Direct Loan units may only float among the Units as described in the Direct Loan Contract and Direct Loan Land Use Restriction Agreement ("LURA"), or as specifically approved in writing by the Department.

(c) The minimum affordability period for all Direct Loan Units awarded under a NOFA will match the greater of the term of the loan or 30 years unless a lesser period is approved by the Board and when assisting distressed developments.

(d) If the Department is the only source of funding for the Development, all Units must be restricted.

§13.11.Post-Award Requirements.

(a) Direct Loan awardees must execute an Award Letter and Loan Term Sheet provided by the Department within thirty (30) calendar days after receipt of the letter. The Award Letter and Loan Term Sheet will be conditional in nature and provide a basic outline of the terms and conditions approved by the Board.

(b) If a Direct Loan award is returned after Board approval, or if the Applicant or Affiliates fail to meet federal commitment or expenditure requirements, penalties may apply under 10 TAC §11.9(f) and/or the Department may prohibit the Applicant and all Affiliates from applying for MFDL funds for a period of 2 years if they have returned their funds or have failed to take necessary action specified in one or more agreement with the Department where the failure resulted in the Department's failure to meet federal commitment and expenditure requirements.

(c) Direct Loan awardees must obtain environmental clearance (if applicable) and meet all requirements for commitment of funds within 180 days after award. Direct Loan awardees that commit any choice limiting activities prior to obtaining environmental clearance may lead to termination of the Direct Loan award.

(d) Direct Loan awardees must execute a Contract within six (6) months of the Board approval date.

(e) Loan closing must occur and construction must begin no later than three (3) months from the effective date of a Contract.

(f) The Development Owner is required to submit quarterly construction status reports to the Asset Management Division as described and by the deadlines specified in §10.402(h).

(g) In addition to any other requirements as the result of any other Department funding sources, the Development Owner must submit a mid-construction development inspection request once the development has met 25% construction completion as indicated on the G703 Continuation Sheet. Inspection staff will issue a mid-construction development inspection letter that confirms that work is being done in accordance with the applicable codes, the construction contract, and construction documents. Up to 50 percent of the Direct Loan award will be released prior to issuance of the mid-construction development inspection letter.

(h) Construction must be completed, as reflected by the development's certificate(s) of occupancy and Certificate of Substantial Completion (AIA Form G704), and a final development inspection request must be submitted 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. The final development inspection letter will verify committed amenities have been provided and confirm compliance with all applicable accessibility requirements

(i) Receipt of a Closed Final Development Inspection Letter, indicating that all deficiencies identified in the Final Inspection Letter have been corrected, must occur within 24 months of the actual date of loan closing. The Final Development Inspection may be conducted concurrently with a Uniform Physical Condition Standards ("UPCS") inspection. However, any letters associated with a UPCS inspection will not satisfy the Closed Final Development Inspection Letter requirement.

(j) Extensions to any of the above benchmarks may only be made for good cause and approved by the Department if construction is timely started;

(k) Initial occupancy of all MFDL assisted Units by eligible tenants shall occur within six (6) months of the final Direct Loan draw. Requests to extend the initial occupancy period must be accompanied by documentation of marketing efforts and a marketing plan. The marketing plan may be submitted to HUD for final approval, if required for the MFDL fund source;

(l) Repayment will be required on a per Unit basis for Units that have not been rented to eligible households within eighteen (18) months of the final Direct Loan draw.

(m) Termination of the Direct Loan award and repayment of all disbursed funds will be required for any Development that is not completed within four (4) years of the effective date of a Direct Loan Contract.

(n) Closing Deadline: Awards will be made subject to closing deadlines established at the time of award by the Board subject to the conditions in §13.8(a), which may only be extended in accordance with §13.12 on the basis of delays caused by circumstances outside the control of the applicant or constraints in arranging a multiple source closing. An extension will not be available if an Applicant has:

(1) failed to timely begin or complete processes required to close; including

(A) finalizing all equity and debt financing; or

(B) the environmental review process; or

(2) made changes to the Development that require additional underwriting by the Department without sufficient time to complete the review.

(o) Loan Closing: In preparation for closing any Direct Loan, the Development Owner must submit the items described in paragraphs (1) - (7) of this subsection:

(1) Documentation of the prior closing or concurrent closing with all sources of funds necessary for the long-term financial feasibility of the Development.

(2) Due diligence determined by the Department to be prudent and necessary to meet the Department's rules and to secure the interests of the Department.

(3) Where the Department will have a first lien position and the Applicant provides personal guarantees from all principals as well as documentation that closing on other sources is reasonably expected to occur within three (3) months, the Executive Director or authorized designee may approve a closing to move forward without the closing on other sources. The Executive Director as the authorized designee of the Department must require a personal guarantee, in form and substance acceptable to the Department, from a Principal of the Development Owner for the interim period;

(4) When Department funds have a first lien position, assurance of completion of the Development in the form of payment and performance bonds in the full amount of the construction contract or equivalent guarantee in the sole determination of the Department is required. Such assurance of completion will run to the Department as obligee. Development Owners utilizing the USDA §515 program are exempt from this requirement but must meet the alternative requirements set forth by USDA;

(5) Documentation required for closing includes, but is not limited to:

(A) Draft Owner/General Contractor agreement and draft Owner/Architect agreement prior to closing with final executed copies required by the day of closing;

(B) survey of the Property that includes a certification to the Department, Development Owner, Title Company, and other lenders;

(C) plans and specifications for review by the Department's inspection staff. Inspection staff will issue a plan review letter that is intended to assist in identifying early concerns associated with the Department's final construction requirements;

(D) if layered with Housing Tax Credits, a fully executed limited partnership agreement between the General Partner and the tax credit investor entity (may be provided concurrent with closing);

(E) final Development information, including but not limited to a final development cost schedule, sources and uses, operating proforma, annual operating expenses, cost categories for the Direct Loan funds, updated written financial commitments or term sheets and any additional financing exhibits that have changed since the time of application;

(6) if required by the fund source, prior to Contract Execution, unless an earlier period is described in Chapter 10 of this title, the Development Owner must provide verification of:

(A) environmental clearance;

(B) Site and Neighborhood clearance;

(C) documentation necessary to show compliance with the Uniform Relocation Assistance and Property Act and any other relocation requirements that may apply; and

(D) any other documentation that is necessary or prudent to meet program requirements or state or federal law in the sole determination of the Department.

(7) The Direct Loan Contract as executed, which will be drafted by counsel for the Department. No changes proposed by the Developer or Developer's counsel will be accepted unless approved by the Department's Legal Division.

(p) Loan Documents. The Development Owner is required to execute all loan closing documents required by and in form and substance acceptable to the Department's Legal Division.

(1) Loan closing documents include but are not limited to a promissory note, deed of trust, construction loan agreement (if the proceeds of the loan are to be used for construction), LURA, Architect and/or licensed engineer certification of understanding to complete environmental mitigation if such mitigation is identified in HUD's environmental clearance or the Real Estate Analysis Division (REA) Underwriting Report and assignment and security instruments whereby the Developer, the Development Owner, and/or any Affiliates (if applicable) grants the Department their respective right, title, and interest in and to other collateral, including without limitation the Owner/Architect agreement and the Owner/General Contractor agreement, to secure the payment and performance of the Development Owner's obligations under the loan documents. In the event the Development receives funding that requires the Department's funding to be in a subordinate position, the individual who is able to control the Development (all such individuals if more than one possesses such power jointly and severally) will execute a personal guaranty in favor or the Department that in the event that the Development fails to fulfill its requirements of affordability for the required period, and as a result the Department is required to repay funds to the U.S. Department of Housing and Urban Development using non-federal funds and the net proceeds available to the Department after a foreclosure, deed in lieu of foreclosure, or similar disposition of the Development are insufficient to make such repayment, the guarantor(s) will jointly and severally guarantee repayment of that amount.

(2) Repayment provisions will require repayment on a per unit basis for units that have not been rented to eligible households within eighteen (18) months of the final Direct Loan draw; termination and repayment of the Direct Loan award in full will be required for any Development that is not completed within four (4) years of the date of Direct Loan Contract execution.

(3) Loan terms and conditions may vary based on the type of Development, Real Estate Analysis underwriting report, and the set-aside under which the award was made.

(q) Disbursement of Funds. The Borrower must comply with the requirements in paragraphs (1) - (11) of this subsection in order to receive a disbursement of funds to reimburse eligible costs incurred. Submission of documentation related to the Borrower's compliance with these requirements may be required with a request for disbursement:

(1) All requests for disbursement must be submitted through the Department's Housing Contract System, using the MFDL draw workbook or such other format as the Department may require.

(2) Documentation of the total construction costs incurred and costs incurred since the last disbursement of funds must be submitted. Such documentation must be signed by the General Contractor and certified by the Development architect and is generally in the form of an AIA Form G702 or G703;

(3) Disbursement requests must include a down-date endorsement to the Direct Loan (mortgagee) title policy or Nothing Further Certificate that includes a title search through the date of the Architect's signature on AIA form G702. For release of retainage the down-date endorsement to the Direct Loan title policy or Nothing Further Certificate must be dated at least thirty (30) calendar days after the date of the construction completion as certified on the Certificate of Substantial Completion (AIA Form G704) with $0 as the work remaining to be completed. Disbursement requests for acquisition and closing costs, or requests for soft costs only, are exempt from this requirement;

(4) At least 50 percent of the funds will be withheld from the initial disbursement of loan funds to allow for periodic disbursements;

(5) The initial draw request for the development must be entered into the Department's Housing Contract System no later than ten business days prior to the one year anniversary of the effective date of the Direct Loan Contract;

(6) Up to 75 percent of Direct Loan funds may be drawn before providing evidence of Match. Thereafter, the Borrower must provide evidence of Match being credited to the Development prior to release of the final 25 percent of funds;

(7) Developer fee disbursement shall be limited by paragraph (10) of this subsection and further conditioned upon:

(A) for Developments in which the loan is secured by a first lien deed of trust against the Property, 75 percent shall be disbursed in accordance with percent of construction completed. 75 percent of the total allowable fee will be multiplied by the percent completion, as documented by the construction contract and as may be verified by an inspection by the Department. The remaining 25 percent shall be disbursed at the time of release of retainage; or

(B) for Developments in which the loan is not secured by a first lien deed of trust or the Development is also utilizing Housing Tax Credits, developer fees will not be reimbursed by the Department except as follows. If all other lenders and syndicator in a Housing Tax Credit development (if applicable) provide written confirmation that they do not have an existing or planned agreement to govern the disbursement of developer fees and expect that Department funds shall be used to fund developer fees developer fees shall be reimbursed in the same manner as described in subparagraph (A) of this paragraph; and

(C) the Department may reasonably withhold any disbursement in accordance with the Loan Documents and if it is determined that the Development is not progressing as reasonably necessary to meet the benchmarks for the timely completion of construction of the Development as set forth in the loan documents, or that cost overruns have put the Development Owner's ability to repay its Direct Loan or complete the construction at risk in accordance with the terms of the loan documents and within budget. If disbursement has been withheld under this subsection, the Development Owner must provide evidence to the satisfaction of the Department that the Development will be timely completed and occupied in order to continue receiving funds. If Disbursement is withheld for any reason, disbursement of any remaining developer fee will be made only after construction of the Development has been completed, and all requirements for expenditure and occupancy have been met;

(8) expenditures must be allowable and reasonable in accordance with federal and state rules and regulations. The Department shall review each expenditure requested for reasonableness . The Department may request the Development Owner make modifications to the disbursement request and is authorized to modify the disbursement procedures set forth herein and to establish such additional requirements for payment of Department funds to Development Owner as may be necessary or advisable for compliance with all program requirements;

(9) table funding requests will not be considered unless the Direct Loan Contract has been executed and all necessary documentation has been completed and submitted to the Department at least ten (10) calendar days prior to planned closing;

(10) Following fifty percent construction completion, any funds will be released in accordance with the percentage of construction completion, not to exceed ninety percent of award, at which point funds will be held as retainage until the final draw request. Retainage will be held until all of the items described in subparagraphs (A) - (G) of this paragraph are received:

(A) Certificate of Substantial Completion (AIA Form G704) with $0 as the cost estimate of work that is incomplete;

(B) A down date endorsement to the Direct Loan title policy or Nothing Further Certificate dated at least 30 calendar days after the date of completion as certified on the Certificate of Substantial Completion (AIA Form G704);

(C) For Developments not layered with Housing Tax Credits, a Closed Final Development Inspection Letter from the Department;

(D) For Developments subject to the Davis-Bacon Act, evidence from the Senior Labor Standards Specialist that the final wage compliance report was received and approved;

(E) Receipt of Certificates of Occupancy;

(F) Development completion reports, which include, but are not limited to, documentation of full compliance with the Uniform Relocation Act/104(d), Davis-Bacon Act, Match Documentation requirements, and Section 3 of the Housing and Urban Development Act of 1968, as applicable to the Development, and any other applicable requirement; and

(G) If applicable to the Development, certification from Architect or a licensed engineer that all HUD and REA environmental mitigation conditions have been met.

(11) The final draw request must be submitted within 24 months from loan closing. Extensions to this deadline may only be granted in accordance with §13.12(3) of this chapter.

§13.12.Pre-Closing Amendments to Direct Loan Terms.

The Executive Director or authorized designee may approve amendments to loan terms prior to closing as described in paragraphs (1) - (6) of this section. Board approval is necessary for any other changes prior to closing.

(1) extensions of up to 6 months to the loan closing date specified by the Board in accordance with §13.11(m) of this Chapter. An Applicant must document good cause;

(2) changes to the loan maturity date to accommodate the requirements of other lenders or to maintain parity of term;

(3) extensions of up to 12 months for the construction completion loan conversion date, and/or final draw deadline date based on documentation that the extension is necessary to complete construction and that there is good cause for the extension. Such a request will generally not be approved prior to initial loan closing;

(4) changes to the loan amortization or interest rate that cause the annual repayment amount to decrease less than 20 percent or any changes to the amortization or interest rate that increase the annual repayment amount;

(5) decreases in the Direct Loan amount, provided the decrease does not jeopardize the financial viability of the Development. Increases will generally not be approved unless the Applicant competes for the additional funding under an open NOFA; and

(6) changes to other loan terms or requirements as necessary to facilitate the loan closing without exposing the Department to undue financial risk.

§13.13.Post-Closing Amendments to Direct Loan Terms.

(a) Except in cases of Force, changes to federal awards will only be processed after the Development is reported to the federal oversight entity as completed and the last of the MFDL funds have been drawn.

(b) The Executive Director or authorized designee may approve amendments to loan terms post-closing as described in paragraphs (1) - (3) of this subsection. Board approval is necessary for any other changes post closing.

(1) Changes to the amortization or maturity date to accommodate the requirements of other lenders or maintain parity of term, provided the changes result in the Direct Loan continuing to meet the requirements of §13.8(c)(1) and (3);

(2) Resubordination of the Direct Loan in conjunction with refinancing provided the conditions in subparagraphs (A) - (E) are met:

(A) The Borrower is current with loan payments to the Department, and no notice has been given of any Event of Default on any MFDL loan. Histories of late or non-payment on any other MFDL loan may result in denial of the request;

(B) The refinance does not propose payment of outstanding debt or profit directly to any of the Development Owner or Developer parties (including the Limited Partners);

(C) A proposal for partial or full repayment of the MFDL lien is made with the request; and

(D) The new superior lien is in an amount that is equal to or less than the original senior lien and does not negatively affect the financial feasibility of the Development.

(E) Changes to accommodate refinancing with a new superior lien that is in an amount that exceeds the original senior lien and which will be directly applied to property improvements as evidenced by the loan or security agreements (exclusive of fees associated with the refinance and any required reserves) will be considered on a case by case basis.

(3) Changes required to the Department's loan terms or amounts that are part of an approved Asset Management Division work out arrangement.

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 15, 2017.

TRD-201705213

Timothy K. Irvine

Executive Director

Texas Department of Housing and Community Affairs

Effective date: January 4, 2018

Proposal publication date: October 27, 2017

For further information, please call: (512) 475-0538