FBI probes tax credit deals in Dallas

By Donna Kimura

(Affordable Housing Finance, August 19, 2005) Dallas – Mayor Laura Miller has shut down the development of new low-income housing tax credit (LIHTC) projects pending a major investigation involving City Hall officials and one of the state’s most prominent affordable housing developers.

Miller asked the Texas Department of Housing and Community Affairs (TDHCA), the state agency responsible for allocating the credits, to honor a moratorium on new projects in the city until the matter is resolved.

Miller has said the city won’t consider any tax credit deals in the meantime. In Dallas, developers need city approval for tax credit projects.

The move comes in the wake of an FBI probe into possible corruption that appears to involve Southwest Housing, owned by Brian Postashnik. The FBI searched the development firm’s office in June as well as the offices of Mayor Pro Tem Don Hill and others, according to local news reports.

An FBI official would not discuss details about the case, saying that the investigation is ongoing. The official, however, did confirm to Affordable Housing Finance that search warrants were executed.

Calls to Potashnik and attorney Barry Palmer were not returned.

In the meantime, Miller is moving cautiously.

“In light of the on-going FBI inquiry, I am writing to inform you that the city of Dallas is unwilling to receive, review or endorse any new applications for tax credit projects in the city of Dallas until the FBI’s work is completed,” Miller said in a letter to TDHCA.

This could potentially delay some projects from being approved, but developers had already turned in their 2005 tax credit applications to TDHCA.

 On July 27, TDHCA made its 2005 tax credit reservations. Southwest Housing had requested about $10 million in credits for a 310-apartment complex in Dallas. TDHCA, however, denied the project a reservation, pending the investigation. The project, however, may be eligible for funds at a later time.

As the investigation continued, the FBI was back at City Hall in August with a subpoena requesting various records, reported the Dallas Morning News.

Southwest Housing is one of the most prominent affordable housing developers in Texas. The firm’s portfolio of about 43 properties includes both family and seniors housing built with tax credits and/or bond financing.