RESOLUTION 2004-073  LIHTC

Financial Structures

Section 42 Tax Credit Units

Bayview Apartments/Seward

Parcel #149-150-15                                                         $405,000                                          Annual Tax Credit Proceeds 2001-2011*

Built 1979

                                                                                                               $1,250,000                                       USDA-RD 515 Financing 1% 50 year

                                                                                                               $ 150,000                                         AHFC 0% 30 Years

                                                                   $ 25,000                                          Owner Equity/Cash / This is a Rehab Project

                                                                                                               $1,425,000

Parkview Apartments/Soldotna

Parcel #059-091-11                                                     $115,927                                                 Annual Tax Credit Proceeds 2004-2014

Built 1983

                                                                                                        $1,257,000                                               USDA-RD 515 Financing 1% 50 year

                                                                                                        $ 750,000                                                 AHFC 105% 30 Years

 $75,000                                                                        OwnerEquity/Cash / This is a Rehab Project

                                                                                                        $2,082,000

* Within guidelines set by the Internal Revenue Service (IRS), state housing agencies such as Alaska Housing Finance Corporation (AHFC) administer the LIHTC program. AHFC reviews tax credit applications submitted by developers and allocates the credits. The IRS requires that state allocation plans prioritize projects that serve the lowest-income tenants and ensure affordability for the longest period.

Once the applicants secure a tax credit reservation, the developer must leverage the financial resources for the development. Under a typical LIHTC transaction, a developer must secure a conventional loan from a private mortgage lender or public agency, gap financing from public or private sources, and equity from the developer or private investor in exchange for the tax credits.

Once the project is built, AHFC ensures that it meets the LIHTC eligibility requirements. AHFC is responsible for monitoring LIHTC property owners by requiring them to certify on an annual basis that they are renting units to qualified low-income tenants. If property owners are found to be out of compliance, they can lose their credits.

Selling Credits:

Most developers sell the tax credits for cash, which is channeled into the development. The developer can either sell the tax credits directly to an investor or to a syndicator, who acts as a broker between the developer and investor.

The LIHTC is a complex income tax area, requiring owners and investors to comply with numerous administrative rules and regulations such as maintaining the required number of income-eligible tenants and ensuring that the appropriate documents and records are filed and maintained.