ARIZONA

By MARTHA BRIDEGAM

PHOENIX—For the second year running, Arizona’s Department of Housing (ADOH) has reorganized its tax credit competition without changing substantive goals.

Randy Archuleta, rental programs administrator, said the department was still looking for projects serving seniors and special-needs tenants and for acquisition-rehabs. Maximum credits per project are likely to increase from $900,000 to $1 million.

The draft 2008 qualified allocation plan (QAP) calls for tweaking a rural point category to help developers who are eligible for Sec. 538 financing but don’t apply for it. The QAP would also clarify that only new Rural Development financing could earn points; taking over old loans doesn’t count. It would create a new 10-point category for projects in areas without recent tax credits. Rural Development is a division of the U.S. Department of Agriculture.

The main revisions, though, would be to the application process. The proposed QAP calls for each project to seek credits in only one of six set-aside categories: urban, rural, special- needs populations, seniors, tribal, or nonprofit. Archuleta said it took too much staff time to analyze each project in multiple categories.

Theoretically, at least, the new one-category rule could cause lopsided application patterns.

For example, what if most Phoenix and Tucson nonprofits identify their projects as “urban?” Archuleta didn’t expect it to happen, but he said as a last resort he would consider filling an undersubscribed set-aside with a reject from a more popular category if the application met both categories’ criteria.

The 2008 draft QAP would call attention to separate disability access requirements for HOME financing. For the first time, it would require relocation plans for tenants displaced by acquisition-rehabs. Developers would have to maintain a six-month operating deficit reserve during lease-up or stabilization. Replacement reserves for new construction would increase from $250 to $300 per unit—a change some developers opposed.

The draft QAP would restrict “severe hardship” requests for extra credits to Jan. 1-March 1 of the allocation year. Arizona’s “severe hardship” reserve of credits, which was much in demand as construction costs ballooned in 2006, was not exhausted by its Aug. 15 deadline in 2007, Archuleta said. With costs now stabilizing, 'maybe it’s time for it to even go away," Archuleta suggested.

After late-October focus group sessions with developers, Archuleta said ADOH might drop a proposal to increase required pro forma budgets to 30 years from 15. He said he might make some adjustments to proposed increases in the already high standards for an optional 20-point "project readiness" category. The proposed changes would require a signed construction loan agreement before application.

Green building incentives are an unsettled area. Archuleta said some developers requested extra points for specific energy efficiency measures but "I’m still trying to get my arms around this whole renewable energy thing and make it quantifiable." He said Arizona does enforce energy-efficiency requirements that exceed Energy Star.

A new ADOH director, Fred Karnas Jr., succeeded Sheila Harris in October. Karnas’ experience includes overseeing AIDS and special-needs programs at the Department of Housing and Urban Development, and serving as an urban issues advisor to Gov. Janet Napolitano.

In 2007, ADOH reserved $13.03 million in 9 percent low-income housing tax credits, not counting $414,737 in supplemental credits for existing projects. Applicants had sought about $33 million, Archuleta said. The 870 tax credit units those credits will finance are mostly new construction, more rural than not, and about onethird for seniors. Targeting is about half for tenants at 50 percent of the area median income (AMI), about 30 percent for 40 percent of the AMI, and the rest at 60 percent of the AMI.

ADOH divided tax credit applications into three parts: projects receiving reservations, projects found eligible but unsuccessful (though some might get returned credits later), and projects found ineligible for failing threshold requirements.

Tax-exempt bonds

Archuleta said only two multifamily projects, accounting for 241 affordable units, sought tax-exempt privateactivity bonds in 2007, with $40.5 million awarded. One of the two requested 4 percent tax credits, and received about $435,000 worth. Arizona allocated at least $61 million in 2007 for single-family mortgage revenue bonds handled by the Arizona Housing Finance Authority.