Low Income Housing Tax Credit Loan Program

DEPARTMENT OF BUSINESS, DEVELOPMENT, BUSINESS, ECONOMIC DEVELOPMENT, AND TOURISM TOURISM

Adoption of Chapter Chapter 15-320 Hawaii Administrative Rules Hawaii

October 3, 2011 October

SUMMARY

Chapter 15-320, Hawaii Chapter Hawaii Administrative Rules, entitled "Low Income Housing Tax Credit entitled 11 Credit Program Program"11 is adopted.

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HAWAII ADMINISTRATIVE RULES HAWAII

TITLE 15

DEPARTMENT OF BUSINESS, ECONOMIC DEVELOPMENT, AND TOURISM TOURISM

SUBT ITLE 14 SUBTITLE 14

HAWAII HOUSING HAWAII HOUSING FINANCE FINANCE AND DEVELOPMENT CORPORATION CORPORATION

CHAPTER 320

LOW INCOME HOUSING LOW HOUSING TAX TAX CREDIT LOAN LOAN PROGRAM PROGRAM

Subchapter 1 Subchapter General General Provisions

§15-320-1 Purpose §15-320-2 Definitions §15-320-3 Eligibility; minimum Eligibility; minimum requirements §15-320-4 Application fee

Subchapter 2 Subchapter Low Income Housing Tax State Low Credit Loan Program Credit Program

§15-320-20 availability; loan Funding availability; loan program program funding rounds S15-320-21 §15-320-21 application procedures Loan application S15-320-22 §15-320-22 Selection preferences and priorities Selection priorities §15-320-23 low income housing tax State low tax credit loan §15-320-24 Compliance with federal requirements §15-320-25 forgiveness Loan ,l:orgiveness §15-320-26 Asset management Asset management §15-320-27 Default Default

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§15-320-1 §15-320-1

SUBCHAPTER 11 SUBCHAPTER

GENERAL PROVISIONS GENERAL PROVISIONS

§15-320-1 Purpose. §15-320-1 Purpose. (a) The purpose of of this program program is encourage the development to encourage is to development and preservation preservatio n of rental of rental housing for low low income households by households cost-effective creating aa cost-effect by creating ive financing financing mechanism mechanism for for projects that are awarded state state low- low­ income housing income housing tax tax credits. (b (b intent of the corporation to the intent is the It is It to limit participation participati on in this in this loan program to program to owners of of qualified low-income qualified low-income buildings in state of in the state Hawaii of Hawaii have: that have: that (1)1) Been state low-income housing tax awarded state Been awarded tax credits; credits; (2 (2 Certified that Certified they have made that they faith good faith made aa good attempt to attempt syndicate, or to syndicate, or otherwise find find an for, their investor for, investor state low-income housing their state tax credits tax credits prior requesting aa loan prior to requesting to under loan under rules; these rules; these (3) Found (3) Found a a syndicator or syndicator or investor investor for their low-income housing tax federal low-income federal tax credits; and Demonstrated 4 Demonstrate readiness to d readiness to proceed with the development or development preservation or preservatio n of their rental rental project in housing project housing fashion. timely fashion. in aa timely (c (c It is also the It is also the intent of the corporation to to require projects require projects andand owners of qualified low-income buildings who buildings opt to who opt request aa loan to request these rules under these loan under rules comply with to comply to requirement all requirement with all s imposed by the Federal Federal housing tax low-income housing low-income tax credit credit program program underunder Section 42 42 the Code, of the of Code, section section 235-110.8, HRS, and rules and and requirementss thereof. requirement thereof. [Eff OCT f7 [Ef 27 2011 2011 ] (Auth: (Auth: 158, SLH Act 158, Act (Imp: Act §201H-4, (Imp: 2011; HRS §201H-4, SLH 2011; Act 158, 158, SLH SLH 2011) 2011)

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§15-320-2 §15-320-2

§15-320-2 Definitions. §15-320-2 Definitions. TheThe following following words words and and terms, when terms, when used used inin these these rules, rules, shall shall have have the the following meanings, following unless the meanings, unless the context context clearly clearly indicates otherwise: indicates otherwise: managementn" means "Asset management "Asset means monitoring eligible monitoring eligible projects and projects and owners owners under this program under this to ensure program to ensure compliance with compliance with allall applicable applicable Code Code requirements requirements inin conjunction with conjunction with corporation corporation compliance compliance monitoring monitoring procedures for procedures for thethe Federal Federal low-income low-income housing housing tax tax credit program. credit program. Board 11" means "11 Board means thethe board of directors board of directors ofof the the Hawaii housing Hawaii housing finance finance and and development development corporation. corporation. "ncoden Code " means means the the Internal Internal Revenue Revenue Code Code of of 1986, 1986, as amended, as amended, and and the the regulations regulations promulgated there promulgated there under. under. " "Consolidated application"" means application means the the consolidated consolidated application for application for financing financing prepared prepared by the corporation by the corporation and completed and completed by the project by the project owner owner during during the the original original low-income housing low-income housing tax tax credit credit application application process. process. "11 Corporation Corporation "11 means means the the Hawaii Hawaii housing housing finance finance and development and development corporation corporation established established pursuant pursuant toto chapter 201H, chapter 201H, Hawaii Hawaii Revised Revised Statutes. Statutes. " "Executive director"" means director means the the executive executive director director of the of the corporation corporation or or the the executive executive director's director's designated representative. designated representative. " Funding 11 Funding roundround"" means means the the competitive competitive selection selection process among process among projects projects awarded awarded state state low-income low-income housing tax housing tax credits credits by the corporation by the corporation in in aa specific specific calendar calendar year.year. HAR"" means "11 HAR means thethe Hawaii Hawaii Administrative Administrative Rules. Rules. "11 HRS HRS"11 means means thethe Hawaii Hawaii Revised Statutes, as Revised Statutes, as amended, and amended, and the the rules rules promulgated there under. promulgated there under. ""Owner" Owner " means means thethe owner owner or or owners owners of of qualified qualified low income low income housing housing units units or or investors investors in in such such units. units. "11 Project " Project means 11 qualified low means aa qualified low income income housing housing project project as as that that term term io is defined defined in in section section 42(g) 42(g) of of the Code. the Code.

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- §15-320-2

"Readiness to to ability to means the ability to proceed"11 means construction on a timely commence constructio timely basis. Evidence of readiness to to proceed can include, but not limited is not but is limited construction contracts, to, executed constructio building permits, permits, commitments for constructio binding commitment construction financing, and n financing, and compliance with, or or approved variances from, zoning from, zoning requirements requiremen ts. " State "11 means 11 means the State of Hawaii. Hawaii. "State low low income housing or "state credits" or tax creditsu tax "state credits" means tax credits" tax means thethe credits prescribed in in section section 235-110.8, HRS, against state HRS, for application against income state income tax liability. tax "State low low income housing tax loan" or credit loan" tax credit or "11 loan " means a loan made pursuant to loan means 11 pursuant to this chapter. [Eff OCT 2011 27 2011 OCT 27 SLH 2011; HRS ct 158, SLH uth : Act ] ( Auth: R §201H-4,) (Imp: Act SLH 2011) ct 158, SLH 2011)

minimum requiremen Eligibility;; minimum 15-320-3 Eligibility 15-320-3 requirementsts. (a) (a) low income housing tax state low Eligibility for state Eligibility tax credit credit is limited chapter is under this chapter loans under limited toto projects that that state low-income have been awarded state housing tax credits tax credits or after January 1, 2011. Projects that on or have been that have been state low-income awarded state housing tax tax credits prior prior toto January 1, 2011 shall notnot be eligible to to participat participate in this in program. (b) not apply for a loan Project owners may not Project the date following the months following until two months chapter until under this chapter under date state low-income of their state housing tax credit award. tax credit award. (c) To be eligible for considerat consideratio loan n for a loan ion this under this under chapter, project project owners shall certify certify andand on satisfactory documentation provide documentat the corporatio to the y to corporation n that: (1) They have found a syndicator or or investor for Federal low-income housing tax the project's Federal the tax credits;

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§15-320-4

(2) A syndicator or or investor for thethe project's state state low-income housing tax tax credits: not be found; (A) Could not (A) (B) pricing below Reasonable quoted pricing below the price used in the in the the underwriting in the project in ' s consolidated project's consolidated application; or application; or state low-income housing (C) Quoted state tax credit tax credit pricing that does notnot allow the project allow project to to remain financially feasible; financially (3) low income housing tax The low tax credit credit loan loan is is necessary to to ensure that that their project project is is financially feasible; and financially project shall be completed by the (4 The project the forth by the deadline set forth the awarded Federal Federal low-income housing tax tax credit. (d) Project owners that receive a loan under Project under this chapter this chapter shall provide written notice to to the the director of their decision to executive director to return return their state low-income housing tax state tax credit credit award. Eff OCT 277 2011 [Eff 2011 ] (Auth:: Act Act 158, SLHSLH 2011; HRS §201H-4,) (Imp: Act Act 158, SLH SLH 2011)

§15-320-4 Application fee. corporation The corporation loan application shall charge a loan application fee fee of $500.00. [[Eff Eff OCT 27 2011 2011 ] (Auth: Act Act 158, SLH SLH 2011; HRS §201H-4,) (Imp: ActAct 158, SLH SLH 2011) 2011)

SUBCHAPTER 2 SUBCHAPTER

STATE LOW STATE LOW INCOME HOUSING HOUSING TAX TAX CREDIT LOAN PROGRAM PROGRAM

§15-320-20 Funding_availability; loan_program availability; loan program funding rounds. funding (a) availability of state The availability state low low tax credit income housing tax credit loans shall be subject subject to to the appropriation the appropriation of funds funds for this this program.

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§15-320-20 §15-320-20

(b) When, (b) When, in in the the executive executive director's director's sole sole discretion, discretion, itit is is determined determined that that sufficient sufficient funds are funds are available, the available, the corporation corporation shall shall establish loan establish aa loan program funding program funding round. round. The The funding funding round round shall shall be be limited to limited to owners owners and and projects projects awarded awarded state state low- low­ income housing income housing tax tax credits credits in in aa specific specific calendar calendar year, and shall year, and shall be be awarded awarded on on aa competitive competitive basis. basis. (c) The (c) The executive executive director director shall provide aa shall provide written notification written notification of of funding funding availability availability to to eligible project eligible project owners. owners. The The notification notification shall shall include, but include, but is is not not limited limited to,to, the the amount amount of of funds funds available for available for loans loans and and loan loan application application deadlines deadlines and and timetables. [Eff timetables. [Eff OCT OCT 2 277 2011 2011 1] (Auth: (Auth: Act Act 158, 158, SLH 2011; SLH 2011; HRS HRS §201H-4,) §201H-4,) (Imp: (Imp: ActAct 158, 158, SLH SLH 2011) 2011)

§15-320-21 Loan §15-320-21 Loan application application procedures. procedures. LoanLoan applicants shall applicants submit aa written shall submit written request request that that shall shall include, but include, but is is not not limited limited to, to, the the following following information: information: (1) Certification (1) Certification and and documentation documentation that that the the project meets project meets eligibility eligibility criteria criteria,.set forth set 'forth in section in section 15-320-3, 15-320-3, HAR; HAR; (2) (2) Written request Written request for for the the loan loan funds, funds, including aa description including description of the project's of the project's need for need for the the loan loan funds; funds; Amount of 3) Amount of loan loan funds funds requested; requested; (4) Revised (4) Revised project project budget, budget, including including aa line-by- line-by­ line comparison line comparison with with the the project project budget budget originally approved originally approved byby the corporation and the corporation and an explanation an explanation ofof any any changes changes thereto; thereto; Revised project 5) Revised project sources sources and and uses uses statement, statement, including aa comparison including comparison with with the the sources sources and and uses statement uses statement originally originally approved approved by the by the corporation and corporation and an an explanation explanation of of any any changes thereto; changes thereto; (6) (6) Detailed construction and Detailed construction and funds funds expenditure expenditure timeline; timeline;

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§15-320-22

(7) Financial updates based on the project Financial project 11 s application exhibits; and consolidated application (8) appliction fee. The $500 appliction [Eff OCT [Eff 2 7 2011 OCT 27 2011 ] (Aut Act 158, SLH (Auth: Act SLH 2011; HRS §201H-4,) (Imp: Act SLH 2011) Act 158, SLH

preferences and priorities. §15-320-22 Selection preferences priorities. (a) funding round, first preference shall In any loan funding be given toto projects that have been awarded low-income tax credits under housing tax under the state housing credit the state credit ceiling under ceiling under Section 42(h)(h) (3) (C) of the Code and section 235-110.8, HRS. section HRS. Under the (1 Under the first preference set forthforth in in subsection (a) above, eligible subsection eligible projects shall be scored in in accordance with the state's qualified state 1 qualified allocation plan for the low-income housing tax credit program. tax credit factors contained Scoring factors contained in qualified in the qualified including financial allocation plan, including structure, experience, reasonableness of project readiness, development costs, and project development overall component of the overall shall be a component evaluation, and notnot the sole determining factor for the awarding of of loans. (2) No earlier thanthan two months following an following eligible project's low-income housing tax eligible tax credit award, project credit project owners may request request an state low-income housing tax exchange of state tax program loan credits for program loan funds. The deadline to request such an exchange shall to request months following six months be six credit following the project's credit award date.

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§15-320-22

(b) If there {b) there are available funds remaining after loans for all first preference awardees have been reserved in funding cycle,, second preference may in the funding be given toto eligible eligible projects that ~avehave been ~een awarded allocated pursuant credits allocated pursuant to to Section Section 42(h) (h) (4) of the section 235-110.8, HRS. Code and section HRS. (1) Eligible projects under Eligible under the second scored in preference shall be scored in accordance state's qualified with the state's qualified allocation allocation plan for the low-income housing tax tax credit credit program. Scoring factors factors contained in in the qualified allocation qualified allocation plan, including including financial structure, experience, development costs, and reasonableness of development project readiness, shall be a component project component of overall evaluation, and not the overall not the sole determining factor for the awarding of loans. The corporation may may reserve loan loan eligible projects under funds for eligible under the second preference in in order order of priority, subject subject to to availability of the availability of funds in in the the funding funding round. (2) receiving a loan Projects receiving loan award under under the second preference will will be reviewed tenten receipt of the months after the receipt the award. The review the status and corporation shall review progress mademade by the project. The corporation may may rescind loan award with rescind the loan no further compensation to to the project project or or project owner project owner if it determines, in in its its sole discretion, that insufficient progress has been made. (c) project shall be eligible No project eligible to to compete in in than one loan more than loan program funding round... program funding CE£f [Eff OCT 2f77 2011 2011 )] (Auth: Act Act 158, SLH SLH 2011; HRS §201H-4,) (Imp: Act Act 158, 158, SLH SLH 2011)

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§15-320-24

§15-320-23 State §15-320-23 State low low income income housing housing tax tax credit credit loan. (a) loan. (a) Loans Loans under under this this chapter chapter shall shall not not exceed exceed the maximum the maximum loan loan amount amount as as determined determined utilizing utilizing the the following formula: following formula:

(Credit amount (Credit 10) xx $0.50. returned xx 10) amount returned $0.50.

(b) The (b) The corporation corporation reserves reserves the the right right to to make make smaller loan smaller loan awards awards based on on its its assessment assessment ofof the the project and project and the the available available funding funding sources. sources. (c) ·Loans {c) Loans may be provided subject may be subject to to any any additional conditions additional conditions setset forth forth in in this this section. section. (d) The corporation shall {d) shall set set forth forth the terms and conditions oof the and conditions the loan loan on on aa case-by-case case-by-case basis, basis, including the including the loan loan term, term, repayment repayment schedule, schedule, appropriate security, appropriate security, andand the the like. like. (e) The corporatioB The corporation shall shall ensure ensure that that loans loans provided under under this this section section are are secured secured to eguard to safeguard a change in the use or ownership against a change in the use or ownership of the against of the project, project, or or the the project project no no longer longer fulfilling fulfilling the the intended purpose for intended purpose for which the loan which the loan was was provided. provided. Loans may Loans may bebe secured secured through through use use of of aa forgivable forgivable oror subordinated.mortgage and subordinated.mortgage and aa regulatory regulatory agreement. agreement. 2011 [Eff OCT 277 2011 [Eff ] (Auth: (Auth: Act Act 158, 158, SLH SLH 2011; 2011; HRS HRS §201H-4,) (Imp: §201H-4,) (Imp: ActAct 158, 158, SLH SLH 2011) 2011)

§15-320-24 Compliance §15-320-24 Compliance with federal federal requirements. requirements. Low income housing Low income housing taxtax credit credit loan loan recipients recipients shall shall comply with comply all laws, with all laws, rules, rules, regulations regulations applicable applicable toto low-income housing low-income housing taxtax credit credit projects. projects. Failure to Failure to comply with comply all applicable with all applicable requirements requirements may be may be construed as construed as aa default default ofof the the loan. loan. [Efff OCT 2 7 2011 OC 2011 ] ( Auth Act 158, {Auth:: Act 2011; HRS SLH 2011; 158, SLH HRS §201H-4, Imp:: Act §201H-4, Act 158, 158, SLH SLH 2011) 2011)

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§15-320-25

forgiveness. The corporation §15-320-25 Loan forgiveness. corporation may forgive forgive amounts remaining under under the loan to the loan to the project following eligible project owner of an eligible owner following thethe completion loan term, which shall be a minimum of the loan thirty minimum of thirty ' affordability project s affordability not exceed the project years and shall not 1

term commitment, provided that the project term project has been in in throughout the loan compliance with all requirements throughout loan term. responsible for solely responsible Project owners are solely Project determining and accommodating the potential potential financial impact of a forgiveness of impact debt of debt provision could have on the on the project project and its its owners. 2011 [Eff OCT 277 2011 [Eff ] SLH 2011; HRS §201H-4,) (Imp: Act 158, SLH (Auth: Act (Imp: ActAct SLH 2011) 158, SLH 2011)

Asset management. §15-320-26 Asset (a) The corporation shall monitor, or to be monitored, or cause to this under this issued loans under projects which have been issued chapter to chapter to ensure compliance with all applicable Code requirements for the term term of the loan. (b) under this issued loans under Applicants who are issued reporting and other shall comply with all reporting chapter shall chapter other requirements, as applicable. 26l [Eff OCT 277 2011 [Ef (Auth: Act SLH 2011; HRS §201H-4,) (Imp:•· ''Act Act 158, SLH Act SLH 2011) 158, SLH

§15-320-27 Default. Should the corporation, inin is owner is project owner its sole discretion, determine that a project its project to fulfill the project unable to completion requirement, the corporation may loan terms, the other loan or other or may recapture the loan award with no further compensation to loan the project to the project project owner. All or project or this chapter under this issued under All loans issued shall contain provisions providing for acceleration shall acceleration and repayment and repayment of the the loan event of default. in the event loan in [Eff 2011 277 2011 [Eff. OCT 2 ] (Auth: Act SLH 2011; HRS Act 158, SLH 1

§201H-4,) (Imp: Act SLH 2011) Act 158, SLH 2011)

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. . , .... DEPARTMENT OF BUSINESS, ECONOMIC DEVELOPMENT, AND TOURISM

Chapter 15-320, Hawaii Administrative Rules, on the Summary Page dated October 3, 2011, was adopted on October 3, 2011 following public hearings held on September 30, 2011 after public notice was given in the Honolulu Star-Advertiser, The Garden Island, The Maui Times, West Hawaii Today, and The Hawaii Tribune­ Herald newspapers on August 31, 2011.

The adoption of chapter 15-320 shall take effect ten days after filing with the Office of the Lieutenant Governor.

DAVID LAWRENCE, Chairperson Hawaii Housing Finance and Development Corporation

APPROVED:

NEIL&----- Governor State of Hawaii

Dated:

OVED AS TO FORM:

,.,,-..... .•

ey General .-; ,.

r��, -� :·.:;- �� Filed ']. •·-t

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