HB3534 - Relating to multifamily residential developments financed, owned, or operated by public facility corporations.

      By: Gates H.B. No. 3534       A BILL TO BE ENTITLED   AN ACT   relating to multifamily residential developments financed, owned,   or operated by public facility corporations.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 303.0421(b), Local Government Code, is   amended to read as follows:          (b)  Notwithstanding Section 303.042(c) and subject to   Subsections (c) and (d) of this section, an exemption under Section   303.042(c) for a multifamily residential development to which   Subsection (a) applies is available only if:                (1)  the requirements under Sections [ Section ]   303.0425, 303.0426 and 303.0427 are met;                (2)  at least:                      (A)  10 percent of the units in the multifamily   residential development are reserved for occupancy as lower income   housing units, as defined under Section 303.0425; and                      (B)  40 percent of the units in the multifamily   residential development are reserved for occupancy as moderate   income housing units, as defined under Section 303.0425;                (3)  the corporation delivers to the presiding officer   of the governing body of each taxing unit in which the development   is to be located written notice of the development, at least 30 days   before the date:                      (A)  the corporation takes action to approve a new   multifamily residential development or the acquisition of an   occupied multifamily residential development; and                      (B)  of any public hearing required to be held   under this section;                (4)  if a majority of the members of the board are not   elected officials, the development is approved by the governing   body of the municipality in which the development is located or, if   the development is not located in a municipality, the county in   which the development is located;                (5)  for an occupied multifamily residential   development that is acquired by a corporation and not otherwise   subject to a land use restriction agreement under Section 2306.185,   Government Code:                      (A)  not less than 15 percent of the total gross   cost of the existing development, as shown in the settlement   statement, is expended on rehabilitating, renovating,   reconstructing, or repairing the development, with initial   expenditures and construction activities:                            (i)  beginning not later than the first   anniversary of the date of the acquisition; and                            (ii)  finishing not later than the third   anniversary of the date of the acquisition; or                      (B)  at least 25 percent of the units are reserved   for occupancy as lower income housing units, as defined under   Section 303.0425, and the development is approved by the governing   body of the municipality in which the development is located or, if   the development is not located in a municipality, the county in   which the development is located; and                (6)  not less than 30 days before final approval of the   development:                      (A)  the corporation or corporation's sponsor   conducts, or obtains from a professional entity that has experience   underwriting affordable multifamily residential developments and   does not have a financial interest in the applicable development,   developer, or public facility user, an underwriting assessment of   the proposed development that allows the corporation to make a good   faith determination that:                            (i)  for an occupied multifamily residential   development acquired by a corporation, the total annual amount of   rent reduction on the income-restricted units provided at the   development will be not less than 60 percent of the estimated amount   of the annual ad valorem taxes that would be imposed on the property   without an exemption under Section 303.042(c) for the second,   third, and fourth years after the date of acquisition by the   corporation; and                            (ii)  for a newly constructed multifamily   residential development, the development would not be feasible   without the participation of the corporation; and                      (B)  the corporation publishes on its Internet   website a copy of the underwriting assessment described by   Paragraph (A).          SECTION 2.  Section 303.0426, Local Government Code, is   amended by adding Subsection (a-1) and (e-1) and amending Sections   303.0426(b), (c), (d), (e), (f), and (g) to read as follows:                 (a-1)     This section does not apply to a multifamily   residential development that:                       (1)     has at least 20 percent of its residential   units reserved for public housing units;                       (2)     participates in the Rental Housing   Assistance Demonstration program administered by the United States   Department of Housing and Urban Development;                       (3)     receives financial assistance administered   under Subchapter 2306, Government Code.          (b)  A public facility user of any [ a ] multifamily   residential development claiming an exemption under Section   303.042(c) [ and to which Section 303.0421 applies ] must annually   submit to the department and the chief appraiser of the appraisal   district in which the development is located an audit report for a   compliance audit, prepared at the expense of the public facility   user and conducted by an independent auditor or compliance expert   with an established history of providing similar audits on housing   compliance matters, to:                (1)  determine whether the public facility user and   development is in compliance with Sections 303.0421 and 303.0425 ,   if applicable ; and                (2)  identify the difference in the rent charged for   income-restricted residential units and the estimated maximum   market rents that could be charged for those units without the rent   or income restrictions.          (c)  Not later than the 60th day after the date of receipt of   the audit conducted under Subsection (b), the department shall   examine the audit report and publish a report summarizing the   findings of the audit. The report must:                (1)  be made available on the department's Internet   website;                (2)  be issued to a public facility user that has an   interest in a development that is the subject of an audit, the   comptroller, the applicable corporation, the governing body of the   corporation's sponsor, and, if the corporation's sponsor is a   housing authority, the elected officials who appointed the housing   authority's governing board; and                (3)  describe in detail the nature of any failure to   comply with the requirements in Sections 303.0421 and 303.0425 , if   applicable .          (d)  If an audit report submitted under Subsection (b)   indicates noncompliance with Sections 303.0421(b)(2),   303.0421(b)(5), or 303.0425 :                 (1)   a public facility user[ : ] [ (1) ]must be given[ :   (A) ] written notice from the department or appropriate appraisal   district that:                       (A)  [ (i) ]is provided not later than the 60th   [ 45th ] day after the date a report has been submitted under   Subsection (b);                       (B)  [ (ii) ]specifies the reasons for   noncompliance;                       (C)  [ (iii) ] for noncompliance with Section   303.0425:                             (i)   contains at least one option for a   corrective action to resolve the noncompliance; and                             (ii) [ (iv) ]   informs the public facility   user that failure to resolve the noncompliance will result in the   loss of an exemption under Section 303.042(c); and                 (2)     If the audit report indicates noncompliance for   noncompliance with Section 303.0425, a public facility user must   also be given:                       (A) [ (B) ] 60 days after the date notice is received   under [ this ] subdivision (1) , to resolve the matter that is the   subject of the notice; and                       (B) [ (C) ] if a matter that is the subject of a   notice provided under [ this ]subdivision (1) is not resolved to the   satisfaction of the department and the appropriate appraisal   district during the period provided by Paragraph (A) [ (B) ], a   second notice that informs the public facility user of the loss of   the exemption under Section 303.042(c) due to noncompliance with   Section [ Sections 303.0421 and ] 303.0425 . [ ; and (2) is considered   to be incompliance with Sections 303.0421 and 303.0425 if notice   under Subdivision (1)(A) is not provided as specified by   Subparagraph (i) of that paragraph. ]          (e)  An exemption under Section 303.042(c) does not apply to   a multifamily residential development owned by a public facility   corporation for a tax year in which :                 (1)     the department determines that the public facility   user for the development is not in compliance with the audit report   requirements of Subsection (b); or                 (2)     based on the audit conducted under Subsection (b),   the department complies with the applicable notice requirements in   Subsection (d) and:                       (i)     the department determines that public   facility user or development is not in compliance with the   requirements of Section 303.0425 and the matter is not resolved to   the satisfaction of the department within 60 days after the date   notice is received under Subsection (d); or                       (ii)     the department determines that the   development is not in compliance with the requirements of Sections   303.0421(b)(2) or 303.0421(b)(5).  [ a multifamily residential   development that i [Text truncated for display. 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