2021-00565 - Year 2022-2023 Housing Tax Credit Program Qualified Allocation Plan (QAP) and Procedural Manual

Every year, CPED administers an allocation of 9% Low Income Housing Tax Credits (HTC), acting on behalf of the Minneapolis-St. Paul Joint Housing Finance Board. The HTC program provides a reduction in federal tax liability to investors in qualified low-income rental housing developments that comply with federally imposed rent and income restrictions for a minimum of 30 years. For 2021, CPED is administering an allocation of $1,453,552 in Year 2022 9% HTC within the City of Minneapolis.

The first step in this allocation process is the adoption of a Qualified Allocation Plan (QAP), which establishes selection criteria and communicates the City's HTC priorities to potential applicants. An HTC Procedural Manual is also approved, which describes how the City administers the HTC program and provides guidance for program participants. Both the QAP and Procedural Manual for the 2021 NOFA were approved by the City Council on May 28, 2021. Applications were due to the City on August 3, 2021.

For 2021, six applications were received, requesting a total of $9,118,183. The summary list of projects, amount of tax credits requested, and unit breakdown is shown in the attached exhibit – Year 2022 9% HTC Application Summary. The applications were scored according to the scoring criteria included in the QAP; scoring for each project is summarized in the attached exhibit—Year 2022 9% HTC Scoring Summary.

Based on staff's review of the submitted applications against the QAP, staff is recommending the Calvary Apartments project receive an allocation of $1,124,000. With staff’s recommended AHTF award, this project will have a majority of its funding commitments in place and will be well-positioned to move towards closing.

This leaves a balance of $329,552 in the 2021 application round. Staff evaluated the remaining applications for their ability to proceed to full funding with a small, partial award. Considering that the amount of the remaining balance, and the remaining projects are lower-scoring and have large HTC requests, awarding the balance will not enable another project to proceed feasibly to full funding. Therefore, staff is recommending that the balance be returned to Minnesota Housing for allocation through the State's HTC allocation pool. The City of Minneapolis and Minnesota Housing have a long-standing practice of collaboration in cases like this to make the most efficient use of 9% HTC resources and fund as many affordable housing projects as possible. The City Council approved a similar return of a small amount of 9% credits in 2020's funding round.

Staff's recommended project for Year 2022 9% Low Income Housing Tax Credits is summarized as follows:

1. Calvary Apartments – Ward 8 – Bancroft – Score 131

• 41 units (41 @ 30% AMI); historic preservation and adaptive reuse
• Financing structure: 9% HTC, Historic Tax Credits, MHFA deferred loan and grants
• Policy alignment and public benefit summary: Historic preservation and adaptive reuse for new deeply affordable housing, including 10 homeless units and units serving large families. All units have secured rental assistance.

This tax credit reservation is contingent upon the selected project meeting certain application and program requirements and deadlines. If these requirements are not met, staff will review projects that were not selected to determine the next project best able to receive a tax credit allocation and complete a carryover. Staff will continue to work with the applicants of such projects. The project data worksheet for Calvary Apartments (Calvary Apartments PDW) is attached to this report.

The tax credit amounts shown are based on estimates only. Final credit amounts are determined at the time the commitment is entered into or at the time the building is placed in service. In the unlikely event that credits are not allocated or are returned, they will be distributed among feasible, eligible projects as scored in the attachments, and any remaining credits after this step may be returned to Minnesota Housing.