2. Getting the Most Out of Alternative Financing Sources
Moderator:
Tom Dixon, Boston Capital
Panelists:
Raquel Favela, City of Dallas
Steve LeClere, Monarch Private Capital
Ray Miller, City of Houston

3. Tax Increment Reinvestment Zone (TIRZ) Tax Increment Financing (TIF)
TIRZs/TIFs are specified areas created by a municipality to attract new investment in an area.
TIRZs/TIFs help finance costs of redevelopment and encourage development in areas that would otherwise not attract sufficient market development
Taxes attributable to new improvements are set-aside in a fund to finance public improvements within the boundaries of the zone.

4. TIRZ Case Study
In Houston, a local TRIZ was used to finance $2M of public infrastructure that included sidewalks and other public improvements for a mixed use affordable housing development
The TIRZ will entered into a reimbursement at completion of the improvements ( at certificate of occupancy) and will provide increment reimbursements over a period of five years
No out of pocket expense incurred by the developer. Construction costs were bridged by the construction lender and the increment is bridged with a five year loan provided by the local housing finance agency.

5. Texas State Historic Credit ((§171.901, et. Seq)

6. Tax Credit and Equity Calculation
Texas State Historic Credit ((§ , et. Seq)
Tax Credit and Equity Calculation
Federal Historic
State Historic
Qualified Rehabilitation Expenditures
14,941,945
Applicable %
20%
25%
Calculated Annual Tax Credits
2,988,389
3,735,486
Investor / Special Member %
99.00%
100.00%
Fund Tax Credit Allocation
2,958,505
Tax Credit Price
0.85
Tax Credit Equity
2,489,582
3,200,311

7. B-Bonds
What are they?
Secondary (or tertiary) tranche of tax-exempt bonds. Purchasers are private individuals or entities – private equity.
How does it work?
Size A Bond Tranche to a 1.35 DSCR.
B Bond Debt Service is residual receipt, cash flow dependent debt. Any interest not paid currently accrues.
B Bonds are secured by a subordinate mortgage and are nonrecourse to the developer, general partner, and guarantor.
Rates vary but are typically basis points higher than agency permanent debt typical on 4% transactions.
Pros
Reduces dependence on public funds
Allows developers to fill gaps in sources & uses with subordinate debt.
Cons
Ability to Raise Funds
Exit Taxes – Limited Partners will have large negative capital accounts at end of Compliance Period.

8. B-Bonds Permanent Uses Land/ Acquisition 900,000 Construction Costs
900,000
Construction Costs
12,943,600
Construction Contingency
612,180
Construction Lender Costs
218,000
Construction Interest
395,345
Permanent Financing
180,000
Other Soft Costs
1,154,576
Lease-up Reserves
100,000
Operating Reserves
515,474
Developer Fee
2,341,305
Total Uses
19,360,480
Permanent
Sources
A Bonds
8,000,000
B Bonds
4,500,000
Tax Credit Equity
6,735,971
Deferred Development Fee
124,509
Total Sources
19,360,480

9. B-Bonds
Year
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
Net Operating Income
776,215
785,368
794,513
803,644
812,754
821,838
830,889
839,899
848,861
857,767
866,609
875,379
Cash Avail for Debt Service
Debt Service Coverage Ratio
1.42
1.43
1.45
1.47
1.48
1.50
1.52
1.53
1.55
1.57
1.58
1.60
Debt Service
(547,382)
Available Cash Flow for Fees
228,833
237,986
247,131
256,262
265,372
274,456
283,507
292,517
301,479
310,385
319,227
327,997
Subordinate Property Management Fee -
Asset Man. Fee LP
5,305
5,464
5,628
5,796
5,970
6,149
6,334
6,524
6,720
6,921
7,129
7,343
Remaining Cash Flow
223,528
232,522
241,503
250,465
259,402
268,307
277,173
285,993
294,759
303,464
312,098
320,654
B Bonds
315,000
Accrued Interest
5,654

10. Operating Partnership Level
B-Bonds
Operating Partnership Level
Capital
Income
LP Loss Share
Cash
Syndication
Ending
Theoretical
Minimum
Year
Contribution
(loss)
Distribution
Costs
Gain
2018
1,010,396 -
(35,000)
975,396
2019
4,041,583
(2,599,191)
2,417,788
2020
1,683,993
(541,882)
16,653
3,543,245
2021
(406,530)
3,136,716
2022
(401,243)
2,735,472
2023
(399,063)
2,336,410
2024
(415,604)
1,920,805
110,086
2025
(399,054)
1,521,752
507,709
2026
(386,288)
1,135,463
899,901
2027
(377,492)
757,971
1,286,298
2028
(414,418)
343,553
1,666,546
2029
(388,554)
(45,001)
2,040,267
2030
(366,959)
(411,960)
2,407,061
2031
(352,401)
(764,362)
2,766,504
2032
(342,713)
(1,107,075)
3,118,144
2033
(380,962)
(1,488,037)
3,461,505
2034
(352,427)
(1,840,464)
3,796,078
2035
(299,820)
(2,140,284)
4,121,324
2036
(279,600)
(2,419,884)
4,436,673

11. Tax Exemptions and Other Public Financing
Lever additional permanent financing with full or partial property tax exemption though joint venture partnerships with certain entities
CHDO – Eligible up to a 50% tax exemption applicable in certain counties
Housing Agency or Housing Authority
Loan and grants provided with other federal programs administered by state or local municipalities
Section 8
HOME
CDBG (eligible for acquisition costs)
Other local funding grants