American Recovery and Reinvestment Act of 2009 Tax Credit Assistance Program (TCAP)

1. American Recovery and Reinvestment Act of 2009 Tax Credit Assistance Program (TCAP) Section 1602 Tax Credit Exchange Program www.in.gov/ihcda July 10, 2009 Webinar

2. Guidance Department of Housing & Urban Development – TCAP Department of the Treasury Section 1602 Exchange Program Released Frequently Asked Questions & Answers 7-9-09 *Policies & Procedures Are Subject To Revisions* Announced in Multi-Family Notices http://www.in.gov/ihcda/2520.htm

3. Located on the QAP Page

4. Availability of Funds TCAP $38 million IHCDA must commitment 75% by: February 16, 2010 Draw 75% by: February16, 2011 Draw 100% by: February 16, 2012 Section 1602 Exchange $164 million 100% of unused 2008 per capita credits 40% of 2009 per capita credits Draw 100% by: December 31, 2010

5. TCAP & 1602 Exchange • Timing • Application round is open • IHCDA will accept applications on a rolling basis • IHCDA will respond within 30 days • IHCDA Executive Director has received Board approval to award TCAP & 1602 Exchange Funds • Affordability Period • 30 years • Agree to waive Section 42 Qualified Contract Provision

6. TCAP Subject to Section 42 regulations, QAP, HUD’s CPD Notice 09-03, IHCDA legal agreements Threshold Eligibility 9% credits from 2008, 2009, or 2010 Must be eligible and demonstrate ability to meet federal requirements Expend 75% of TCAP funds by February 16, 2011 & 100% by February16, 2012 Continue to meet QAP’s criteria Market Financial feasibility Development team capacity Remain in Compliance

7. TCAP Eligible Use of Funds Capital Investment in eligible Section 42 Developments – Cost Must Be In Eligible Basis Subject to same Section 42 rules As required by IHCDA, including conditions to receive the tax credit reservation Set-Aside Threshold Scoring All other requirements of the ARRA of 2009

8. TCAP Application Process Demonstrate achievable construction timing TCAP Application Amount requested Sources & Uses Cost estimates for federal compliance (Davis-Bacon) Anticipated closing date Construction & Completion schedule Development Status Report Explanation of request Written explanation of efforts to obtain equity Readiness to proceed criteria documentation

9. TCAP Selection Criteria Meet Threshold Eligibility, Follow Application Process, Demonstrate Eligible Use of Funds Preference to Preservation & Elderly Set-Aside Demonstrate ability to draw 75% before 12-31-10 & PIS by 12-31-2011 Demonstrate “Readiness Criteria” items 1-10 Demonstrate Readiness to secure competitive equity within 120 days of commitment MUST CLOSE ON EQUITY BEFORE IHCDA WILL ENTER INTO AN AWARD AGREEMENT

10. TCAP General Requirements Underwriting Recently accepted application will remain in force Cost estimate to satisfy federal requirements (Davis Bacon) Other changes that are reasonable may be approved Post Awards Expend TCAP funds according to the Commitment Inability to meet ARRA expenditure requirements may result in de-obligation IHCDA will exercise remedies for loan default or other noncompliance issues

11. TCAP Loan Terms Deferred loan with no interest or principal loan for 30 years Construction loans Bridge loans Permanent loans

12. TCAP Loan Terms Continued Construction Financing for construction or rehabilitation Interest rate at 0% Amortized over 30 years Term not to exceed 24 months Full recourse against the borrower Portion of construction may remain in as a Bridge loan

13. TCAP • Loan Terms Continued • IHCDA will subordinate TCAP to first lien position • No prepayment will be allowed prior to 2-17-2012 • Disburse at closing or construction upon evidence of costs have been incurred

14. TCAP • Development Fee • Development Service Agreement • Inclusion of other fees to service providers must be supported (actually performed & not duplicative) • Other fees will not be paid to entities related to GP or Developer except for General Contractor • Waiver request – demonstrate cost saving to the development including third party cost comparison

15. TCAP • Development Fee Continued: • 50% of the fee will paid: • 30% at closing of TCAP • 10% during construction – prorata w/const. Completion • 30% at Construction Completion • 30% at Stabilization & Final Inspection

16. TCAP • Developer Fee Continued: • Remaining 50% deposited into a controlled account • Paid out 1/10th over the next 10 years • Maintain 1.15:1.10 DCR • Remain in compliance with Section 42 & IHCDA

17. TCAP • Midwestern Disaster Credits • 2008 developments that received Midwestern Disaster Credits must request to exchange a nominal amount of credits prior to September 1, 2009 to be eligible for TCAP • 2009 developments will automatically receive a nominal amount of per capita credits

18. TCAP • Reporting & Compliance • Report due the day before the end of each quarter (October 1st) • IHCDA will collect data points with each draw • Completion status • Jobs created & retained • Other federal reporting requirements • Subcontractor awards (pending guidance) • Noncompliance is subject to recapture • Required to register for a • D-U-N-S number – www.grants.gov • Central Contractor Registration (CCR) – www.ccr.gov

19. TCAP • Loan Agreement • Will set-forth all TCAP requirements • Lien & Restrictive Covenant Agreement • Funds cannot be drawn in advance • Funds cannot be placed in escrow • Funds must be expended within 3 days

20. TCAP • Cross Cutting Federal Requirements This is not an all encompassing list • Environmental & Historic Review • Construction Contract Requirements • Davis-Bacon Labor Standards • Affirmative Marketing • Site & Neighborhood Standards • Fair Housing Act • Anti-Lobbying Restrictions • The Drug-Fee Workplace Act of 1988 • Lead Based Paint Requirements • Accessibility

21. QUESTIONS? Questions and answers from today’s webinar will be posted on IHCDA’s website at: http://www.in.gov/ihcda/2514.htm

22. Section 1602 Exchange Program Subject to Section 42 regulations, QAP, Treasury “Terms and & Conditions”, IHCDA legal agreements Threshold Eligibility 9% credits from 2008, 2009, or 2010 08 developments located outside of a MDA county are eligible to exchange up to 100% of their credit award List of MDA counties is located on page 2 Utilized IHCDA approved Financial Service Agent (FSA) All other developments from 08, 09, & 10 must demonstrate equity investment has been secured Investor must agree to share asset management reports Must be eligible and demonstrate ability to meet federal requirements

23. Section 1602 Exchange Program Threshold Continued: Owners must draw (expend) 100% before December 31, 2010 Final claim is due to IHCDA by December 1, 2010 Owner is responsible for sources to cover any part not drawn by December 1, 2010 Continue to meet QAP Criteria Development has not been issued IRS Form 8609

24. Section 1602 Exchange Program Application Process No Application Fee (Treasury Guidance in 7-9-09 Q &A, 5a) Demonstrate achievable construction timing Section 1602 Exchange Application Amount requested Sources & Uses Construction & Completion schedule Development Status Report Explanation of request Readiness to proceed criteria documentation Written explanation of efforts to obtain equity Current/Updated Phase 1, Market Study, CNA, Site Control

25. Section 1602 Exchange Program Eligible Use of Funds Capital Investment in eligible Section 42 Developments - cost must be in eligible basis Subject to same Section 42 rules As required by IHCDA, including conditions to receive the tax credit reservation Set-Aside Threshold Scoring All other requirements of the ARRA of 2009

26. Section 1602 Exchange Program Eligible Use of Funds: Treasury FAQ: 7-9-09 Question 4f: Which costs are eligible to be paid w/Section 1602 funds? Answer: Section 1602 follows the same requirements as LIHTC. Section 1602 funds may pay for development costs to the same extent as allowed under Section 42 of the IRC. For example, the acquisition of land is ineligible under Section 1602, as it is under Section 42.

27. Section 1602 Exchange Program Eligible Use of Funds: Treasury FAQ: 7-9-09 Question 4h: What is the maximum amount of a subward? Answer: The amount of a subaward cannot exceed 85% of the amount of a building’s eligible basis as determined at the end of the first year of the credit period (as defined in Sect(f)(1) of the IRC) and, also for this purpose, eligible basis includes any increase for buildings located in high cost areas under Sect 42(d)(5)(B). The subawardee must maintain sufficient documentation to demonstrate that the allowable construction, acquisition, and rehabilitation costs of a qualified low-income building equal or exceed the amount of the subaward.

28. Section 1602 Exchange Program Selection Criteria Meet Threshold Eligibility, Follow Application Process, Demonstrate Eligible Use of Funds Preference to Preservation & Elderly Set-Aside Demonstrate competitive equity investment Draw 100% before 12-31-10: Readiness Criteria

29. Section 1602 Exchange Program Underwriting Request will be equal to anticipated equity Increase as a result to fund additional reserves Ensure amount necessary for financial feasibility Award will be no more than the eligible basis

30. Section 1602 Exchange Program Development Fee Development Service Agreement Inclusion of other fees to service providers must be supported (actually performed & no duplicative) Other fees will not be paid to entities related to GP or Developer except for General Contractor Waiver request – demonstrate cost saving to the development including third party cost comparison

31. Section 1602 Exchange Program Development Fee Continued: 50% of the fee will paid: 30% at closing of Section 1602 Exchange Funds 10% during construction – prorata w/const. Completion 30% at Construction Completion 30% at Stabilization & Final Inspection

32. Section 1602 Exchange Program Development Fee Continued: No Equity Investor Less than $300,000 developer fee 50% deposited into a controlled account Paid out 1/10th over the next 10 years Maintain 1.15:1.10 DCR Remain in compliance with Section 42 & IHCDA Developer fee exceeds $300,000 50% is deferred and paid out of cash flow

33. Section 1602 Exchange Program Developer Fee Continued: Development with an equity investor 50% deposited into a controlled account Paid out 1/10th over the next 10 years Maintain 1.15:1.10 DCR Remain in compliance with Section 42 & IHCDA

34. Section 1602 Exchange Program Types of Financing Awarded as a forgivable loan 30 year term with no interest or principal Subordinate to first lien holder Disburse funds upon evidence of incurred cost

35. Section 1602 Exchange Program Loan Agreement Will set-forth all Section1602 requirements Lien & Restrictive Covenant Agreement Funds cannot be drawn in advance Funds cannot be placed in escrow Funds must be expended within 3 days

36. Section 1602 Exchange Program Reporting & Compliance Report due the day before the end of each quarter (October 1st) Further guidance by Treasury in July (Q& A 8a) IHCDA will collect data points with each draw Completion status Jobs created & retained Other federal reporting requirements Subcontractor awards (pending guidance) Noncompliance is subject to recapture by Treasury Does not trigger cross cutting federal rules (Davis-Bacon, Environmental or Historic Review, URA) Treasury Q & A 4e (Section 504 does apply)

37. QUESTIONS? Questions and answers from today’s webinar will be posted on IHCDA’s website at: http://www.in.gov/ihcda/2514.htm The next section will cover the FSA component

38. Section 1602 Exchange Program Financial Service Agents (FSA) Assigned to developments without an investor Application submitted to IHCDA Owner request a FSA within application IHCDA assigns FSA & provides application Approved FSAs: City Real Estate Advisors, Inc. Brian McDonnell Great Lakes Capital Fund Jack L. Brummett House Investments Doug Sylvester

39. Section 1602 Exchange Program FSA Continued FSA Fee is equal to 4% of the total Exchange & TCAP award, not to exceed $125,000 Partnership will pay legal fees & third party reports Asset Management Fee will annually be the greater of $5,000 or $100 per unit. Pre-funded reserve established at closing.

40. Section 1602 Exchange Program FSA Continued: IHCDA will enter into a tri-party agreement with the owner and FSA Services will include: Due Diligence Services Underwriting Services Closing Service

41. QUESTIONS? Questions and answers from today’s webinar will be posted on IHCDA’s website at: http://www.in.gov/ihcda/2514.htm

42. Thank you J. Jacob Sipe Multi-Family Manager jsipe@ihcda.in.gov