At its April meeting, the board of the Minnesota Housing Finance Agency discussed the tax credit allocation process, as well as tax credit prices. The board also received an update on the 2017 legislative session, approved grants for the Workforce Affordable Homeownership Development Program, and considered changes to the process of formulating the tax credit Qualified Allocation Plan for 2019.
The board met for an additional April meeting by phone to discuss the Agency’s debt management policy governing use of tax exempt bonds for conduit purposes.
In her opening remarks, Commissioner Tingerthal informed board members that Agency staff had reached out to recent tax credit awardees regarding the impact of the recent drop in tax credit prices. Staff are now developing recommendations for increased funding or changes in financing terms to help developers keep their projects on track. These recommendations will come before the board in May, although investors for a couple of projects might need earlier action and therefore necessitate a special board meeting via conference call.
Also related to tax credits, Tingerthal announced that the governor had recently signed the 2018 Qualified Allocation Plan amendments, now making them official. These requirements will be effective for development applications submitted mid-June. Starting with this year’s application cycle, Tingerthal said that the Agency will use an electronic “portal,” enabling on-line submission of applications for the Agency’s consolidated RFP.
State legislative session
Regarding the state legislative session, Tingerthal remarked that it was still unclear which conference committee would oversee housing appropriations. She also said that it continues to be a challenge to have major bonding and appropriations requests before the legislature during the same year.
Tingerthal concluded her remarks with a heads up to board members that a PBS Frontline documentary airing May 9 is expected to put the housing tax credit program in a harsh, negative light. The network bills the documentary as an examination of “Poverty, Politics, and Profit” in the affordable housing industry. In part, the documentary will focus on some serious fraud cases in Florida, she said. Tingerthal added that she was interviewed on-camera by the program producers on behalf of the National Council of State Housing Agencies. She was unsure whether that interview would appear in the program.
Workforce Affordable Homeownership Development Program
The board approved grants for the new “Workforce Affordable Homeownership Development Program,” which provides one-time grants for the development of workforce and affordable homeownership projects across Minnesota. This program received a one-time $750,000 appropriation during the 2016 legislative session. Staff received letters of interest for $6.4 million in project funding. Staff invited five of 27 applicants to submit full applications, and recommended four of the five to receive a funding commitment. Staff invited most of the other applicants to apply for project funding under the Agency’s Impact fund, which is part of the consolidated RFP. Staff selected two Greater MN and two Metro applicants for funding, consistent with the appropriations language requirement for fund distribution. One of awardees, Rebuilding Together Twin Cities, requested a grant for an apprenticeship program. Board member Craig Klausing asked if that was something the Agency could fund. Staff responded that Agency dollars would only be used for materials, not the training.
Landlord risk mitigation fund
Another program coming out of the 2016 legislative session is the landlord risk mitigation fund. The board agreed to staff’s recommendation to combine the $250,000 appropriated by the legislature with $100,000 in Agency funds freed up due to a change in administration of the Homeless Management Information System. The added funding would enable awardees to include housing navigation services, thereby increasing the likelihood of client success in securing housing. Following the legislative directive, the program will focus on individuals with difficult rental histories and/or criminal records. Staff provided an example of a program at Lakes and Prairies CAP, viewed as a model for a successful integrated reentry program. Funding requests are due May 31, after which the Agency expects to make 3-5 funding awards.
2019 Qualified Allocation Plan
The board heard staff-suggested changes for the formulation of 2019 tax credit Qualified Allocation Plan. These suggestions included discussing proposed changes to the QAP earlier in the process, prior to a formal adoption of a draft plan by the board. Minnesota Housing will host a webinar and meetings with stakeholder groups prior to developing the final draft. This final draft will likely come to the board at its May meeting and then go out for formal public comment. Staff is looking to streamline and simplify the application process in response to comments received over multiple years that the scoring structure for tax credits was overly complicated. Staff emphasized that the priorities would not be altered in any material way. Staff modeled their proposals using the 2017 applications and found that the proposal ranking would change for only one of 13 projects reviewed. One new criterion, however, would provide scoring points if the affordability period is extended to 35 or 40 years. Furthermore, the Agency would require that internet access be included all projects, and the maximum amount of credits per project would increase from $1 million to $1.2 million. Staff highlighted scoring simplifications made in these areas: greatest need targeting and duration, Greater Minnesota location efficiency, preservation, and leveraging of resource. The proposal also clarified what is meant by “planned community development.”
Report on Minnesota Housing Special Board Meeting
MHP’s report is based on a review of minutes from this meeting, minutes adopted without change at the regular April board meeting.
On Wednesday, April 5, the board held a special meeting, by phone, to discuss the Agency’s debt management policy governing use of tax exempt bonds for conduit purposes. Conduit bonds are those sold by the Agency where repayment is the obligation of and made by another party.
The review of the debt management policy comes after the March Agency board meeting when a number of presentations were made asking that conduit bonds be issued to support redevelopment by Dominium of the Fort Snelling Upper Post.
Staff told the board that the Agency rarely issues conduit bonds because it is not in the Agency’s best financial interest. Conduit bonding provides Minnesota Housing a one-time fee rather than a continuing income stream as is typical with other bond issuances.
Minnesota Housing’s debt management policy was adopted in 2009, and at that time the Agency had only authorized conduit bonds one time for the preservation of federally assisted housing (one of the criteria for use of these bonds). Since adoption of the policy, the Agency authorized the issuance of conduit bonds on one occasion when tax exempt bonding authority was plentiful.
Board members Rebecca Otto and Stephanie Klinzing stated that when resources are scarce there is a need to ensure the Agency’s financial security. Klinzing added that the Fort Snelling project would require several waivers from the Agency’s debt management policy.
Minnesota Housing attorney Tom O’Hern said that there is pending legislation that may materially affect the financial operations of the agency. (Author’s note: This was an apparent reference to the HAVEN proposal.) O’Hern asked what the board wanted staff to take into account in order to bring a waiver request to the board.
In closing the meeting, board chair John DeCramer asked board members whether they were in favor of retaining the conduit bond threshold condition that such bonds only be used for preservation projects. All board members in attendance (Otto, Thao, Johnson, Klinzing and DeCramer), stated that the policy should be left in place.