Several developers of low-income housing in the Springfield area have been approved to receive nearly $5.7 million this year in state and federal tax credits through the Missouri Housing and Development Commission, but the overall value of the awards is much greater.
In January, the MHDC board commission approved seven projects to tap tax-credit support in the Springfield area. A total of six local developers out of 17 projects across the state were approved to receive tax credits of 9 percent of the project’s estimated cost. Statewide, the credits, which are doled out during a 10-year period, have a total value of $126.6 million. Locally, the value of the credits exceeds $51 million.
In addition, seven developers across the state – one in Springfield – are slated to receive this year $5.6 million in 4 percent low-income housing tax credits. Developments receiving an allocation of tax-exempt bond financing from the Department of Economic Development are eligible to receive the 4 percent credits.
The Kitchen Inc. is behind one such development, and the social services nonprofit is slated to receive $924,000 in state and federal low-income housing credits for its Beacon Village project northwest of Chestnut Expressway and West Bypass on Eldon Street. The sale of these credits is estimated to generate $6 million for the $6.6 million project. The Kitchen CEO Rorie Orgeron said the nonprofit is working with Springfield-based Housing Plus LLC to bring the 44-unit affordable apartment community to fruition.
He said the credits would help to keep the rents down. To become eligible for credits, a developer must rent at least 20 percent of its units to families earning 50 percent of the median family income or at least 40 percent of its units to families earning 60 percent of median family income.
“There is a huge need for low-income housing,” Orgeron said, pointing to Housing Plus’ 71-unit single-family residences under the banner of Fulbright Springs in northwest Springfield, which has a waiting list of more than 100 residents. “There is more need out there than the community knows about.”
The area developments approved to receive low-income housing tax-credit support by the MHDC, which administers both state and federal tax credits, range from a 4 percent credit of $582,840 to renovate the John B. Hughes Apartments in Springfield, to $1.05 million in credits for another phase of elderly community The Greens at Branson Hills.
In the case of The Kitchen, Orgeron said conversations with Housing Plus owner Debbie Shantz Hart during the last two years led to the current plans.
Hart said she is working as a consultant on the application process with The Kitchen, and Housing Plus would act as property manager when construction is complete.
“(The Kitchen) has a wonderful mission, wonderfully supportive services, but it didn’t know how to put a tax credit application together,” said Hart, who served as general counsel for Springfield-based John Q. Hammons Hotels 1995–2008.
Hart said the MHDC has reserved the tax credits for The Kitchen, and funding would come through the buyer of the credits, which is typically a large insurance company or institutions with a national footprint such as U.S. Bank and Google.
“Now, the real work for us begins. We are actually in the throes of putting together the firm submission, which is a process where we submit detailed budgets to MHDC confirming what our construction estimates were at the time of the application,” Hart said. “We’ll do environmental testing at this point to make sure the property has no environmental issues. We’ll do soil boring to make sure we don’t have sinkholes. We go through a whole due diligence list, and then we will close simultaneously with MHDC and the tax credit syndicator.”
The syndicator, or broker, sells the credit to an investor, generating equity for the project.
Mark Gardner, president of Springfield-based Gardner Capital Inc., has more than 10 years of experience as a tax-credit syndicator in which he serves as partner on the projects. Even after the sale of credits to other investors, Gardner said it’s his role to see that developers follow through on the approved plans to protect his and his client’s investments.
He said it can be hard to measure the value of such credits, because beyond the social good the credits do, communities that don’t have affordable housing often miss out on attracting new employers.
“It can be an economic deterrent not to have affordable housing in your community,” Gardner said.
According to a 2007 study conducted by MHDC in cooperation with BKD LLP and Missouri State University, the 327 projects supported by low-income housing tax credits between 2000 and 2005 helped produce 21,250 housing units and 41,800 full-time equivalent jobs as a result of construction and annual operations. According to an economic analysis by the Missouri DED, for every $1 million in low-income housing tax credits awarded, during the following three-year period, $1.77 million in general revenue is generated.
However, tax-credit opponents have been arguing the state’s housing and historic renovation credits should be scaled back, even if there is no consensus among state lawmakers on how much tax credit assistance should be available. In December, the bipartisan Missouri Tax Credit Review Commission submitted its second report on the effectiveness of the state’s 61 tax credit programs following two years of no decisive action from legislators after the commission’s initial report.
An increase in tax credit awards in recent years has driven the need to examine their effectiveness. In fiscal 2010, when the commission first met, redemptions for Missouri’s tax credit programs totaled $522.9 million. During fiscal 2012, redemptions rose 15 percent to a record high of $629.3 million.
The federal 9 percent low-income credits are capped annually by the IRS based on the population of the state, according to DED Communications Director John Fougere. This year, the cap is $185 million, he said.
In addition to federal and state tax credits, Hart said The Kitchen would have funds at its disposal through the U.S. Department of Housing and Urban Development’s Shelter Plus Care Program to help pay rents of select individuals as they transition into new housing.
Hart said the application process is challenging to navigate, which is why The Kitchen officials reached out to her and Housing Plus. In all, Hart has utilized tax-credit support on five projects in southwest Missouri through Housing Plus and Sustainable Housing Solutions, including Fulbright Springs, the 71 single-family development on Highway 13 just north of Norton Road.
She said a groundbreaking on the first phase of Beacon Village should occur around mid-May.[[In-content Ad]]
