2004 APPLICATION WORKSHOP

1. 2004 APPLICATION WORKSHOP Georgia Department of Community Affairs Presented by the Office of Affordable Housing

2. 1. Project Feasibility & Conformance with QAP • LIHTC Policies • HOME Loan Policies • Rental Charts • Appraisals

3. Assumption for land purchase Identity of Interest between buyer/seller: appraisal required Building Basis Lesser of sales price or appraised value of building(s) Contractor Fee Limitation Overhead: 2%* (Construction Contract Amt. - Contractor Fees) General Requirements: 6% Includes Letter of Credit fee in lieu of payment & performance bond Builder’s Profit: 6% Construction Contingency New construction: 2%-5% of construction hard cost Rehabilitation: 5%-7% of hard cost LIHTC Policies

4. LIHTC Policies • Relocation Budget • Compliance Monitoring Fee • Based on Total # of units (USDA Sec. 538 - $600/unit) • Maximum Developer Fee Limitation • New construction/Rehab only: • 15% (TDC - DF - Land - Builder’s Profit*) • Acquisition & Rehabilitation: • Acquisition: 15% building acquisition cost • Rehab: 15%(TDC - DF - Land - Bldg. Acq.- Builder’s Profit*) • When Identity of Interest exists between Developer & Gen’l Contractor • Consultant Fee Limitation: 20% of Developer Fee • No Consultant Fee allowed if Identity of Interest btwn Consultant & Owner/Developer

5. LIHTC Policies • Tax Credit Percentages: 9% and 4% for application purpose • BMIR HOME Funding & QCT • 40-50 Rule (seek professional advice) • “9% credit”: not eligible for 30% basis boost • Per Unit Cost Limitation • Waiver due 3/1/04

6. LIHTC Policies • Terms tie back to documents (including government financial assistance) • Housing Credit Equity • Deferred Developer’s Fee • Must be payable within 10 years from cash flow • Not considered in GAP method of credit calculation

7. Rent Issues • Metro Atlanta maximum rent limit @ 54% eliminated • Fair Market Rents w/ HOME • Types of Employee Occupied Units • Common space: • No Rent can be charged • Must be occupied by employee • Employee does not have to be income qualified • Residential unit • Low-income unit: rent charged, must be occupied by an employee who is income qualified • Market rate unit: rent charged, no income or rent restrictions on employee resident • Public Housing units: tax credit/HOME cannot be used for public housing units except in mixed income projects.

8. Utility Allowance • Utility Allowance • USDA • Public Housing Authority • DCA

9. Operating Expense Budget • Minimum Annual Operating Expense Requirements • Urban: $3,000/unit • Rural County w/USDA funding source: $2,400/unit • Rural County: $2,600/unit • Operating Expense Waiver: due by March 1, 2004 or submit with Application • Replacement reserve • Rehabilitation: $300/year per unit • New Construction: $200/year per unit • Single Family: $400/year per unit

10. Operating Pro Forma • Trending • Income: 2% • Expenses and Replacement Reserves: 3% • Vacancy& Collection Loss: 7% • Debt Coverage Ratio • First year: 1.15 - 1.35 • Tax Credit projects: no less than 1.15 during 15 year compliance period • Tax Credit & HOME projects: no less than 1.15 during compliance period, period of affordability, or HOME loan term, whichever is longest

11. Project Feasibility for Scattered Sites • Scattered Site Projects • DCR requirements must be met by the project as a whole and for scattered site projects under section 10 B (1) (b) - 3 non-contiguous multifamily properties within 50 mile radius- each property must meet the criteria

12. Financial Adjustments • At DCA’s Discretion • For each adjustment, deduct 1 point. No limit on deduction.

13. HOME Policies Additional Policies Applicable to HOME Funded Projects

14. Eligible DCA HOME Loan Costs • New Construction – any project that includes the addition of dwelling units outside the existing walls of a structure is considered new construction • Rehabilitation – the improvement or modification of an existing structure • Reconstruction – refers to rebuilding, on the same lot, where housing is standing at the time of project commitment • The number of units on the lot may not change as part of the reconstruction project, but the number of rooms per unit may change

15. Non-Amortizing Loan - Excess Cash Flow • 1/2 of the Excess Cash Flow (income after secured debt service payment) Deposited in Account (Excess Cash Flow Account) • Used for Principal Reduction of HOME loan and Capital Improvements • Disbursements Require DCA Prior Approval • Funds Must Remain in Account until HOME Loan is Paid in Full

16. Non-Amortizing Loans - Future Market Value • Outstanding Loan Balance at Maturity must be less than the Projected Appraised Value at Maturity • DCA Commissioned Appraisal Projects the Future Value of the Development • Interest and a Portion of Principal must be repaid in Each Year of the HOME Loan

17. Assumptions for Land Purchase and Existing Buildings No Identity of Interest • Cost limited to the lesser of sales price or appraised “as is” value Identity of Interest • Cost limited to the lesser of sales price or appraised “as is” value • Appraisal prepared by an appraiser that is a Georgia Certified Appraiser • Appraisal prepared within 6 months of application submission • Provide separate land and building values

18. Construction Contingency • New Construction 2% to 5% of Total Construction Cost • Rehabilitation 5% to 7% of Total Construction Cost

19. HOME Loan/Construction Contingency • DCA funds allocated to Contingency • DCA approves all change orders • Unused contingency used to reduce Senior Loan or HOME Loan

20. Construction Hard Cost Financing • Site Development • Unit/Building Construction • Contractor services • Builders overhead • Builders profit

21. Conversion • 24 months of HOME loan closing • Loan Agreements will set conversion date

22. Developer Overhead and Consultant fee(Drawn During Construction) • Lesser of 20% of the Maximum Allowable Developer Fee, or • 50% of the Total Developers Fee Requested • Developer Profit (80%) can not be disbursed prior to HOME Loan Conversion • Disbursement Condition reflected in HOME Loan Agreement and Other Funding Source Agreements

23. Identity of Interest Owner/Contractor, Developer/Contractor • Third Party Front End Analysis Required • Commissioned by DCA during Underwriting • Contractor Services must be reasonable as determined by DCA Owner/Provider of Other Service • Three Bids during Underwriting • Services must not exceed amount ordinarily paid • DCA will determine reasonableness

24. Syndicator Asset Management Fees • Paid - “After DCA Debt Service” • Paid - After Excess cash Flow Payment

25. Operating Deficit Reserve • No less than 6 times the secured monthly debt service plus no less than 6 months projected operating expenses • Funded at or prior to conversion • Held by DCA or Senior Lender • Required for Term of HOME Loan • Withdrawals must be Approved by DCA and Requested in Writing

26. Partnership Agreement • Must Reflect Terms of HOME Loan • Executed Prior to HOME Loan closing

27. Payment and Performance Bonds No Identity of Interest • Required on all Developments (100% bond required on all developments) • Include the cost of Payment and Performance Bond in 6% General Requirements

28. Payment and Performance Bonds Identity of Interest • Letter of Credit (LOC) or Construction Loan (CL) • LOC - at least 50% of Construction Cost including Profit and Overhead • Construction Loan - Amount equal to DCA Construction Loan • DCA will disburse $2,500 per Draw Request • Include the cost of LOC or Construction Loan in 6% General Requirements

29. Payment and Performance Bonds Waiver Process • Waiver Request must be submitted with Application • DCA Waiver (Form N-3) • Tab 2 Application Binder

30. Disclosure of Lobbying Activities(Byrd Amendment) • Each Owner who expects to receive a Home loan in excess of $150,000 must certify that the funds will not be used to lobby Congress • Submittals • Certification for Contracts, Loans and Cooperative Agreements (Form B-4) • Applicant/Recipient Disclosure/Update Report (Form B-5)

31. Disclosure of Lobbying Activities • In addition if an owner uses non-federal money to lobby Congress the owner must submit a Disclosure of Lobbying Activities Form SF-LLL (Form B-6)

32. Disclosure of Lobbying Activities • Developers, contractors, subcontractors (including architects, engineers and other consultants) who receive federal funds in excess of $100,000 for any HOME activity must disclose lobbying activities • Submittals • Certification for Contracts, Loans and Cooperative Agreements (Form B-4) • Applicant/Recipient Disclosure/Update Report (Form B-5) • Owners are responsible for meeting submission requirements

33. Disclosure of Lobbying Activities • All forms are located in the HOME manual and @ www.dca.state.ga.us/housing/rentalfin.html: • Submit disclosure forms in Tab 18 of Application Binder

34. Rent Charts • Low Income Units with No PBRA • Low Income Units with PBRA • Non LIHTC Units with PBRA • Market rate units

35. Low Income units with No PBRA • Unit rent and income type 30/50/60 • PHA Units • Program Max Unit Rents LIHTC/HOME • Proposed Unit Rent (can’t exceed Program rent) • Unit Rent to Collect

36. PHA Units • Operating subsidy should be entered in the non occupancy based income part of the Other income sources section • Unit Rent to Collect should be reflected as 0

37. Low Income Units with PBRA • PBRA type: Government/Non government • Unit rent and income type (LIHTC) • Program max Unit rent (LIHTC/HOME) • Proposed unit rent • Unit rent to collect • Proposed unit rent without PBRA

38. Non LIHTC Units with PBRA • Used in rehabs • Tenants with income in excess of 60% less than 80% • Not market units because of PBRA units • Not tax credit because of income

39. Application instructions • New application instructions • Use your project specific question period

40. Appraisals(applicable to LIHTC and/or HOME Projects) • All appraisers must be certified by the Georgia Real Estate Appraisers Board and participate in continuing education • The appraiser should have at minimum, five years experience in a combination of affordable housing and multi-family projects • Appraisal Manual located in Section I of the Application Manual

41. Appraisals All HOME Projects • Commissioned by DCA or Senior Lender during Underwriting • Senior Lender Commissioned Appraisals must meet DCA Requirements as defined in the Appraisal Manual • DCA’s Cost of Appraisal Passed to Developer • If project does not meet DCA requirements, funding may be revoked

42. Appraisals Applicant Commissioned Appraisals required when there is an Identity of Interest between Purchaser and Seller • Appraisal Commissioned by Applicant • Appraisal must meet DCA Appraisal Manual Requirements • “as is” Value Required Scattered Site Projects: • Appraisal for each non-contiguous Parcel or Multifamily Property is Required

43. Appraisal Guidelines • Values - “Tax Credit”, As is” (Land and Building), “As Complete” (encumbered and unencumbered) • Unencumbered Value at Maturity of Loan (Non-Amortizing HOME Loan)

44. 2. Site Control Requirements • Warranty deed that conveys title to the subject property to the current Applicant or • a legally binding contract to purchase the proposed project site in the name of the Applicant (or which provides for an assignment to the Applicant) or • a binding long-term ground lease or an option for a binding long-term ground lease, with a minimum term of forty-five (45) years.

45. 2. Site Control Requirements • Contract must be executed prior to application submission date • Must include a legal description • Must provide legal control at least through September 15 • Requirement that a copy of warranty deed showing Seller has ability to convey has been eliminated

46. 2. Environmental All environmental matters must be resolved in a manner satisfactory to DCA • Every Project application must prepare a Phase I Environmental Site Assessment and include it in the application (See Tab Checklist #4) • For Scattered Site Projects, each parcel or each multifamily property must meet this threshold requirement

47. Phase I Requirements • Must be prepared by an Environmental Consultant • Must be prepared in accordance with DCA Guidelines • Must be conducted within 6 months of the Application Submission • Previous environmental studies must be included in the application • Must contain proof of insurance • Must have a Reliance letter

48. Environmental Consultant DCA defines a Environmental Consultant as: • a Professional Engineer ("P.E.") or • a Professional Geologist ("P.G.") who is licensed to practice engineering or geology, respectively, in the State of Georgia. • The P.E. or P.G. must be an employee or principal of the environmental consulting firm retained to complete the environmental assessment. • The Environmental Consultant must have at least five (5) years of experience conducting and/or reviewing environmental assessments.

49. Additional Environmental Issues • WETLANDS • DCA does not allow the disturbance of wetlands areas on the property in excess of 1/10 of one acre • DCA does not allow the disturbance of any areas of wetlands adjacent to the property • All areas of wetlands must be clearly documented with the appropriate maps • All areas of disturbance must be clearly defined • Additional requirements for documentation applicable to properties applying for HOME funds and will be discussed later this morning

50. Additional Environmental Issues • FLOODPLAINS DCA does not allow the placement of any new construction within a floodplain unless: • A FEMA Letter of Map Reclassification (LOMR) indicating the property is eligible for reclassification out of the floodplain is submitted • City or County provides written approval of the proposed reclassification • All floodplain areas must be clearly documented with the appropriate FEMA maps • Additional requirements for documentation are applicable to properties applying for HOME funds and will be discussed later this morning