The Ohio Department of Development has announced the availability of $8,000,000 in grant funding for qualifying energy efficiency projects undertaken at existing multi-family, commercial, and institutional buildings. The goal of the program is to encourage the installation of energy efficiency equipment that will measurably improve the energy efficiency of existing multi-family, commercial, and institutional buildings. The program
Ohio’s Budget Bill, signed by Governor Ted Strickland on July 17, contained provisions authorizing Ohio’s first state-run New Markets Tax Credit, as well as substantially revising the state’s Historic Preservation Tax Credit. Here is a breakdown of each:
New Markets Tax Credit
Modeled after the federal New Markets Tax Credit, the state program allows up to a nearly $1 million cumulative, nonrefundable tax credit for an entity that holds an investment in a “qualified community development entity” over the next seven years. Like the federal Credit, the Program is intended to aid development in low-income areas where new projects are typically more difficult to finance.
Only insurance companies and financial institutions are eligible to receive the credit, and they may do so by holding a “qualified equity investment.” A “qualified equity investment” is an investment in a “qualified community development entity” (i.e. an entity with an allocation agreement under the Federal Credit that does business in Ohio) that: (1) is acquired solely for cash after July 17, 2009; (2) has at least 85% of its purchase price used to invest in low-income communities; and (3) is designated by the issuer as a qualified equity investment.
To receive the credit, the community development entity must invest in a “qualified active low income community business” (“QALICB”). The intention behind this provision is to ensure the credit is used for new projects that actively promote job creation in the state. The QALICB definition excludes from such businesses those that derive 15% of annual revenue from real estate, such as developers. The language may permit a developer to be a QALICB, however, if it is the end user of the property through a sale-leaseback transaction. The program permits investment in a special purpose entity (“SPE”), principally owned by the property user, if the SPE was formed solely to rent or sell the property back to the principal user. Therefore, a developer could form an SPE and lease the property to itself as the owner of a separate end user entity, so long as the user is not itself a real estate developer.
An eligible entity may receive the credit if it holds such an investment on the first day of January in 2010 through 2016. The Program credit is equal to the “applicable percentage” of the purchase price. In years 2010 and 2011, however, the applicable percentage is zero. In 2012, the credit is seven percent, and in 2013 through 2016 the credit is eight percent. At the end of seven years, the entity may receive a 39% credit on a statutorily capped maximum investment price of $2,564,000, for a total credit of up to $999,960. The total amount of credits allocated by the state under the Program each year may not exceed $10 million.
Ohio joins a number of states that offer a New Markets Tax Credit in conjunction with the federal Credit. The Program should be a useful tool, along with the Historic Preservation and Low Income Housing Tax Credits, for encouraging investment in underserviced areas.
In the past, we have spoken about grants and loans available through the Ohio Department of Development for advanced energy residential projects, such as solar and wind energy installation. Federal funding is also available for residential energy-reduction projects through The American Recovery and Reinvestment Act of 2009 (ARRA). A total of $250 Million from ARRA was allocated to HUD for its Assisted Housing Green Retrofit Program (GRP). Under GRP, HUD is offering up to $15,000 per residential unit for projects that reduce energy costs, reduce water use, and improve indoor environmental quality. HUD expects to fund about 25,000 units (approximately 300-350 properties), with an average $10,000 provided to each unit.
Beginning June 15, 2009, HUD is accepting applications for GRP funding on a first come, first served basis, and subject to allocations for project categories, geographic location and owner/affiliate concentration. HUD may offer either a Green Retrofit Grant or a Green Retrofit Loan repayable from a share of surplus cash and from sale and refinancing proceeds. The performance period for completing all Green Retrofits will generally be twelve (12) months, but in no event may it exceed twenty-four (24) months. The program requirements differ depending on the type of project-based assistance contract and depending on the owner entity (nonprofit or for profit).
The properties eligible to receive GRP funding are the following: Section 202 funded properties that have at least 32 units; Section 811 funded properties that have at least 8 units; properties receiving assistance pursuant to Section 8 with USDA Section 515 loans and which have at least 20 units; and all other Section 8 funded properties having at least 72 units.