1.1                          A bill for an act 
  1.2             relating to housing; authorizing the cities of 
  1.3             Minneapolis and St. Paul to use certain bonds for 
  1.4             smaller units; changing restrictions on use of 
  1.5             low-income housing credits by the cities of 
  1.6             Minneapolis and St. Paul; amending Minnesota Statutes 
  1.7             1998, section 474A.047, subdivision 1; Minnesota 
  1.8             Statutes 1999 Supplement, section 462A.222, 
  1.9             subdivision 3. 
  1.10  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.11     Section 1.  Minnesota Statutes 1999 Supplement, section 
  1.12  462A.222, subdivision 3, is amended to read: 
  1.13     Subd. 3.  [ALLOCATION PROCEDURE.] (a) Projects will be 
  1.14  awarded tax credits in two competitive rounds on an annual 
  1.15  basis.  The date for applications for each round must be 
  1.16  determined by the agency.  No allocating agency may award tax 
  1.17  credits prior to the application dates established by the agency.
  1.18     (b) Each allocating agency must meet the requirements of 
  1.19  section 42(m) of the Internal Revenue Code of 1986, as amended 
  1.20  through December 31, 1989, for the allocation of tax credits and 
  1.21  the selection of projects. 
  1.22     (c) For projects that are eligible for an allocation of 
  1.23  credits pursuant to section 42(h)(4) of the Internal Revenue 
  1.24  Code of 1986, as amended, tax credits may only be allocated if 
  1.25  the project satisfies the requirements of the allocating 
  1.26  agency's qualified allocation plan.  For projects that are 
  1.27  eligible for an allocation of credits pursuant to section 
  2.1   42(h)(4) of the Internal Revenue Code of 1986, as amended, for 
  2.2   which the agency is the issuer of the bonds for the project, or 
  2.3   the issuer of the bonds for the project is located outside the 
  2.4   jurisdiction of a city or county that has received reserved tax 
  2.5   credits, the applicable allocation plan is the agency's 
  2.6   qualified allocation plan. 
  2.7      (d) For applications submitted for the first round, an 
  2.8   allocating agency may allocate tax credits only to the following 
  2.9   types of projects: 
  2.10     (1) in the metropolitan area: 
  2.11     (i) new construction or substantial rehabilitation of 
  2.12  projects in which, for the term of the extended use period, at 
  2.13  least 75 percent of the total tax credit units are single-room 
  2.14  occupancy, efficiency, or one bedroom units and which are 
  2.15  affordable by households whose income does not exceed 30 percent 
  2.16  of the median income; 
  2.17     (ii) new construction or substantial rehabilitation family 
  2.18  housing projects that are not restricted to persons who are 55 
  2.19  years of age or older and in which, for the term of the extended 
  2.20  use period, at least 75 percent of the tax credit units contain 
  2.21  two or more bedrooms and at least one-third of the 75 percent 
  2.22  contain three or more bedrooms, except that projects of the 
  2.23  cities of Minneapolis and St. Paul are not subject to the age or 
  2.24  bedroom limitations; or 
  2.25     (iii) new construction or substantial rehabilitation 
  2.26  projects in neighborhoods targeted by the city for 
  2.27  revitalization; 
  2.28     (2) outside the metropolitan area, projects which meet a 
  2.29  locally identified housing need and which are in short supply in 
  2.30  the local housing market as evidenced by credible data submitted 
  2.31  with the application; 
  2.32     (3) projects that are not restricted to persons of a 
  2.33  particular age group and in which, for the term of the extended 
  2.34  use period, a percentage of the units are set aside and rented 
  2.35  to persons: 
  2.36     (i) with a serious and persistent mental illness as defined 
  3.1   in section 245.462, subdivision 20, paragraph (c); 
  3.2      (ii) with a developmental disability as defined in United 
  3.3   States Code, title 42, section 6001, paragraph (5), as amended 
  3.4   through December 31, 1990; 
  3.5      (iii) who have been assessed as drug dependent persons as 
  3.6   defined in section 254A.02, subdivision 5, and are receiving or 
  3.7   will receive care and treatment services provided by an approved 
  3.8   treatment program as defined in section 254A.02, subdivision 2; 
  3.9      (iv) with a brain injury as defined in section 256B.093, 
  3.10  subdivision 4, paragraph (a); or 
  3.11     (v) with permanent physical disabilities that substantially 
  3.12  limit one or more major life activities, if at least 50 percent 
  3.13  of the units in the project are accessible as provided under 
  3.14  Minnesota Rules, chapter 1340; 
  3.15     (4) projects, whether or not restricted to persons of a 
  3.16  particular age group, which preserve existing subsidized 
  3.17  housing, if the use of tax credits is necessary to prevent 
  3.18  conversion to market rate use or to remedy physical 
  3.19  deterioration of the project which would result in loss of 
  3.20  existing federal subsidies; or 
  3.21     (5) projects financed by the Farmers Home Administration, 
  3.22  or its successor agency, which meet statewide distribution goals.
  3.23     (e) Before the date for applications for the final round, 
  3.24  the allocating agencies other than the agency shall return all 
  3.25  uncommitted and unallocated tax credits to a unified pool for 
  3.26  allocation by the agency on a statewide basis.  
  3.27     (f) Unused portions of the state ceiling for low-income 
  3.28  housing tax credits reserved to cities and counties for 
  3.29  allocation may be returned at any time to the agency for 
  3.30  allocation. 
  3.31     (g) If an allocating agency determines, at any time after 
  3.32  the initial commitment or allocation for a specific project, 
  3.33  that a project is no longer eligible for all or a portion of the 
  3.34  low-income housing tax credits committed or allocated to the 
  3.35  project, the credits must be transferred to the agency to be 
  3.36  reallocated pursuant to the procedures established in paragraphs 
  4.1   (e) to (g); provided that if the tax credits for which the 
  4.2   project is no longer eligible are from the current year's annual 
  4.3   ceiling and the allocating agency maintains a waiting list, the 
  4.4   allocating agency may continue to commit or allocate the credits 
  4.5   until not later than the date of applications for the final 
  4.6   round, at which time any uncommitted credits must be transferred 
  4.7   to the agency. 
  4.8      Sec. 2.  Minnesota Statutes 1998, section 474A.047, 
  4.9   subdivision 1, is amended to read: 
  4.10     Subdivision 1.  [ELIGIBILITY.] (a) An issuer may only use 
  4.11  the proceeds from residential rental bonds if the proposed 
  4.12  project meets one of the following: 
  4.13     (1) the proposed project is a single room occupancy project 
  4.14  and all the units of the project will be occupied by individuals 
  4.15  whose incomes at the time of their initial residency in the 
  4.16  project are 50 percent or less of the greater of the statewide 
  4.17  or county median income adjusted for household size as 
  4.18  determined by the federal Department of Housing and Urban 
  4.19  Development; 
  4.20     (2) the proposed project is a multifamily project where at 
  4.21  least 75 percent of the units have two or more bedrooms and at 
  4.22  least one-third of the 75 percent have three or more bedrooms, 
  4.23  except in the cities of Minneapolis and St. Paul where no 
  4.24  specific bedroom allocation is required; or 
  4.25     (3) the proposed project is a multifamily project that 
  4.26  meets the following requirements: 
  4.27     (i) the proposed project is the rehabilitation of an 
  4.28  existing multifamily building which meets the requirements for 
  4.29  minimum rehabilitation expenditures in sections 42(e)(2) and 
  4.30  42(e)(3)(A) of the Internal Revenue Code; 
  4.31     (ii) the proposed project involves participation by the 
  4.32  Minnesota housing finance agency or a local unit of government 
  4.33  in the financing of the acquisition or rehabilitation of the 
  4.34  project.  For purposes of this subdivision, "participation" 
  4.35  means an activity other than the issuance of the bonds; and 
  4.36     (iii) the proposed project must be occupied by individuals 
  5.1   or families whose incomes at the time of their initial residency 
  5.2   in the project meet the requirements of section 42(g) of the 
  5.3   Internal Revenue Code. 
  5.4      (b) The maximum rent for a proposed single room occupancy 
  5.5   unit under paragraph (a), clause (1), is 30 percent of the 
  5.6   amount equal to 30 percent of the greater of the statewide or 
  5.7   county median income for a one-member household as determined by 
  5.8   the federal Department of Housing and Urban Development.  The 
  5.9   maximum rent for at least 75 percent of the units of a 
  5.10  multifamily project under paragraph (a), clause (2), is 30 
  5.11  percent of the amount equal to 50 percent of the greater of the 
  5.12  statewide or county median income as determined by the federal 
  5.13  Department of Housing and Urban Development based on a household 
  5.14  size with 1.5 persons per bedroom. 
  5.15     (c) The proceeds from residential rental bonds may be used 
  5.16  for a project for which project-based federal rental assistance 
  5.17  payments are made only if: 
  5.18     (1) the owner of the project enters into a binding 
  5.19  agreement with the Minnesota housing finance agency under which 
  5.20  the owner is obligated to extend any existing low-income 
  5.21  affordability restrictions and any contract or agreement for 
  5.22  rental assistance payments for the maximum term permitted, 
  5.23  including any renewals thereof; and 
  5.24     (2) the Minnesota housing finance agency certifies that 
  5.25  project reserves will be maintained at closing of the bond issue 
  5.26  and budgeted in future years at the lesser of: 
  5.27     (i) the level described in Minnesota Rules, part 4900.0010, 
  5.28  subpart 7, item A, subitem (2), effective May 1, 1997; or 
  5.29     (ii) the level of project reserves available prior to the 
  5.30  bond issue, provided that additional money is available to 
  5.31  accomplish repairs and replacements needed at the time of bond 
  5.32  issue.