The Bishop Paiute Tribe of California has terminated a housing project that received the first Native set aside in a Golden State tax credit program because of nearly $2 million in costs it said it did not know it would incur.
The Bishop Paiute Tribal Council said, in the November issue of its tribal newsletter, that it "made the decision to stop the project before incurring any further costs for the project." In addition, the Council said "there were other unknowns about this project that made going ahead a very scary endeavor for the tribe."
The Tribal Council said its understanding was "the tribe would receive a developer fee for the project in the amount of $1.4 million. This would be the tribe's profit and no other costs would be incurred by the tribe for this project."
But the Council said that on October 10 it found out it would be on the hook for a $1.9 million loan from Bank of America to finance construction of 30 homes and a community center in two subdivisions of the tribe's 879 acre reservation in California's Inyo County.
It said it "was faced with important decisions to make, and with very little time with which to make sound decisions." Under time pressure and on advice of the firm Travois, which advised the tribe on the project, the council approved investment firm Prestige Affordable Housing Equity Partners, Marlton, New Jersey, to buy the tribe's tax credits.
David Bland, CEO of Travois, said the tribe was right about the tight time constraints it faced in making crucial decisions. He also noted that a new tribal chairman and new tribal council members had been elected since the original decision.
The project won California's first tribal set aside for tax credits, the first part of a two-year pilot program. The set aside of $1 million a year is expected to help fund one Indian tax credit project a year, according to Travois, a Kansas City, Missouri firm that has helped raise more than $500 million for tribal housing development. The Bishop Paiute project was eventually awarded almost $4.5 million in state and federal tax credits.
Travois would like to see the California tribal set aside increased to help fund three housing projects a year. The initial state award to the Bishop Paiute came last summer.
“It was a real shame,” said Bland, of the deal falling through. The credits unused in the Bishop Paiute deal will not go to waste, but will also not go back to another project in Indian country. “They go back to the state and get reallocated to the next project in line,” he said.
Bland said no Indian country housing project has ever gotten tax credits in California, and that he has advocated for the Indian set aside for the past 15 years, even as his firm has tried and failed nine times to get them for tribal clients under the state's regular award system.
Bland said the award system as it is currently run in California is “stacked against the tribes.” For instance, the proposed housing must be within half a mile of a substantial grocery store, and within a quarter mile of a transit stop, unlikely in Indian country.
Though the Paiute deal is history, Bland said his firm would try again in the next cycle for tax credits for the Washoe tribe, which wants to rehab 24 housing units at its California-based band. He said he didn’t think the Paiute deal would bias the state Tax Credit Advisory Committee against Indian deals. The committee has a new director of allocations, and “everything we’re hearing tells us TCAC is absolutely committed to making the Native American apportionment work better.”
Bland conceded that $1 million in credits is not a huge amount in expensive California, and said “We’re going to try to get it increased.” He pointed out, however, that the $1 million credit is actually for each of ten years, making the total credits $10 million. He would like to see the yearly set aside boosted to $3.2 million.
Tax credits are a form of equity investment in housing projects. Firms that owe federal taxes can offset them through buying tax credits issued under the Low Income Housing Tax Credit (LIHTC) program. The money raised goes to housing developers who have put together projects for low-income people. The developer gets a substantial fee. And the investor may be able to buy a dollar of tax credit money for less than a dollar, depending on market rates, making for a potent double bonus.
The federal LIHTC program is funded on a per capita basis for each state, and is usually administered by a state agency like a Mortgage or Housing Finance Agency. But certain states also have state LIHTC programs. California's is run through the state TCAC. North Dakota and Arizona are the other two states with Indian LIHTC set asides currently.