Budget Amendment ID: FY2017-S4-781-R1
Redraft ECO 781
Workforce Housing Production Program
Ms. Chandler, Ms. Forry, Mr. Eldridge and Ms. Donoghue moved that the proposed new text be amended by inserting after section 27 the following 5 sections:-
“SECTION 27A. Chapter 40V of the General Laws is hereby amended by adding the following section:-
Section 6. (a) For the purposes of this section, the following words shall have the following meanings unless the context clearly requires otherwise:
“Agency”, an agency for the issuance of bonds as determined by the secretary of administration and finance.
“Annual cash flow”, for a WHPP project, the amount of surplus cash remaining after all project operating costs have been paid, including interest and principal on any indebtedness, reserves for replacement, reserves for operations and the payment of the priority return, and after any payments required to be paid to the equity partner for federal historic tax credits, or FHTC, plus any reserves reasonably set aside to make anticipated exit payments after 5 years to the FHTC investors; provided, however, that the reserves for operations shall be as determined by the department and shall be calculated to retain in the project sufficient reserves to fund the payment of all accounts payable, accrued expenses, and the interest payments due for the subsequent month.
“Bonds”, when used in reference to an agency or other entity for the sale of Bonds, be any bonds, notes, debentures, interim certificates or other financial undertakings for the purpose of raising capital including, but not limited to, lines of credit, forward purchase agreements, investment agreements and other banking or financial arrangements issued or entered into by the agency.
“Eligible communities”, communities that are gateway city communities or smaller communities which have an industrial heritage, blight and deterioration in the designated areas, and a supply of historic buildings; provided, however, that HDIP districts for WHPP developments may be located in non-gateway city communities pursuant to regulations to be issued by DHCD.
“Eligible districts”, the areas comprising an approved HDIP district.
“Housing development tax credit”, a tax credit which a taxpayer is eligible to utilize deriving from the HDIP program.
“Priority return”, a cumulative amount equal to 8 per cent per year times the amount of any permanent cash equity investment made by the owners, members or partners of the ownership entity which shall be paid after the payment of the operating expenses for the project.
“Profits on sale or refinancing”, the amounts remaining upon a sale or refinancing after the repayment of existing indebtedness, payment of the costs of sale or refinancing, the repayment, if any, of any net cash equity investment on which the priority returns are paid, payment of any unpaid cumulative priority returns and other obligations of the ownership entity.
“Program costs”, the total amount of Massachusetts historic rehabilitation tax credits and housing development tax credits that the commonwealth allows with regard to WHPP projects approved by the department.
“Ready to commence construction”, for WHPP projects, the time when the project has received commitments for all financing required to commence construction, including a total allocation of Massachusetts historic rehabilitation tax credits equal to at least $300,000, and all local, state and federal permits necessary for a construction start are issued or are ready to be issued.
“WHPP project”, a real estate development project utilizing the components of the WHPP program which, at the option of the owner, is the subject of an application to the department for housing development tax credits in compliance with the requirements of the WHPP program.
(b)There shall be a workforce housing production program, or WHPP. All requirements of the HDIP program shall apply to WHPP projects, except as provided in this section. The WHPP program shall be available in all gateway cities and other eligible communities in which HDIP districts have been created and approved by the department. An HDIP district may be approved by the department to support WHPP developments in eligible communities that are not gateway cities. Such communities shall have:
(i) an industrial heritage;
(ii) an historic building suitable for conversion to market rate housing; and
(iii) blight and deterioration in the designated area.
(c) (1) At the option of the owner or developer of an eligible project in an HDIP district, the housing development tax credits in WHPP districts shall be an amount equal to 25 per cent of the qualified substantial rehabilitation costs. If the housing development tax credit is increased to 25 per cent pursuant at the option of the owner or developer, then the project shall be considered a WHPP project and this section 6 shall apply.
(2) In all WHPP projects, the commonwealth shall be paid a share of the cash flow and a share of the profits from the sale or refinancing of the development equal to 25 per cent. Such participation shall expire upon the sale of the property to a buyer with no affiliation with the initial owner or developer of the project.
(d) If a WHPP project is ready to commence construction but has not received the full allocation of Massachusetts historic rehabilitation tax credits for which the WHPP project is eligible but has received approval as an eligible project and has received an allocation of Massachusetts historic rehabilitation tax credits equal to at least $300,000, then the state secretary shall increase the amount of the allocated Massachusetts historic tax credits for the WHPP project to the full amount for which the project is eligible and such additional allocation shall be outside of and not count against the annual cap on the allocation of Massachusetts historic tax credits.
(e) All WHPP projects shall have prepared and shall submit to the department an audit certified by an independent certified public accountant of project construction and development costs, including rent-up and marketing costs, as of the date of the completion of construction, within 180 days after the completion of construction. Annually thereafter, within 120 days after the end of the project’s fiscal year, a report certified by an independent certified public accountant shall be submitted to the department on the annual financial and occupancy operations in accordance with regulations to be issued by the department.
(f)(1) In WHPP projects there shall be no limit on the per project amount of housing development tax credits that can be allocated and there shall there be no limit on the overall amount of housing development tax credits that may be awarded across the commonwealth except as may be limited by the bonding authority for each fiscal year.
(2) In WHPP districts, the 25 per cent housing development tax credits may be utilized for new construction in accordance with this section.
(3) In WHPP Districts, if rents for which any affordable units are projected to be rented are 90 per cent or more of the actual market rents at which other comparable units in the project are expected to be rented as determined by the department, then the housing development tax credits shall be calculated on the basis of the qualified substantial rehabilitation or construction costs of any such affordable units and on the market units.
(g) In any fiscal year, the secretary of housing and economic development may approve WHPP developments with total program costs equal to the amount of bond authorization for that fiscal year. If projects that are approved in a fiscal year are terminated or do not achieve a start of construction within 18 months after project approval, the secretary may substitute a WHPP project that is ready to commence construction to take up the unutilized bonding authority for the fiscal year of authorization.
SECTION 27B. Paragraph (1) of subsection (q) of section 6 of chapter 62 of the General Laws, as appearing in the 2014 Official Editions, is hereby amended by inserting before the prior second sentence a new second sentence: In the event that the certified housing development project is a workforce housing production project, or WHPP, pursuant to chapter 40V, then the credit to be allowed shall be increased from 10 per cent to 25 per cent.
“SECTION 27C. Said subsection (q) of said section 6 of said chapter 62, as so appearing, is hereby further amended by inserting after paragraph (5) the following paragraph: -
(5½) In the event the certified housing development project is a WHPP project, then paragraph (5) shall not apply and DHCD may authorize an amount of HD credits, which, when combined with the applicable state historic tax credits for the project, equal up to the bonding authorization for the fiscal year of project approval. The approval amounts may include substitute projects that may be approved because of termination or delays experienced by the projects approved in the applicable fiscal year.
SECTION 27D. Subdivision (1) of section 38BB of chapter 63 of the General Laws, as so appearing, is hereby amended by inserting before the prior second sentence a new second sentence: - In the event that the certified housing development project is a workforce housing production project, or WHPP, pursuant to chapter 40V, then the credit to be allowed shall be increased from 10 per cent to 25 per cent.
SECTION 27E. Said section 38BB of said chapter 63, as so appearing, is hereby further amended by inserting after subdivision (5) the following subdivision: -
(5½) In the event the certified housing development project is a WHPP project, then the subdivision 5 shall not apply and DHCD may authorize an amount of HD credits, which, when combined with the applicable state historic tax credits for the project, equal up to the bonding authorization for the fiscal year of project approval. The approval amounts may include substitute WHPP projects that may be approved because of termination or delays experienced by the projects approved in the applicable fiscal year.”; and
by inserting after section 77 the following section: -
“SECTION 77A. The secretary of administration and finance may arrange for the commonwealth or an appropriate agency to sell taxable or tax-exempt general obligation bonds for the WHPP projects pursuant to section 6 of chapter 40V of the General Laws that are approved in fiscal year 2017 in an amount equal to $25,000,000. The bonds shall have such characteristics and terms and shall be in such amounts and at such time as the secretary shall determine.”