Missouri State Auditor

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Missouri State Auditor
auditor.mo.gov
Analysis of the Low Income Housing Tax Credit
Program
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Primary Findings

• Current Tax Credit Model is Costly and
  Inefficient
• Improvements Needed in Evaluation and Selection
  Process
• Project Cost Limits are High

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Current Tax Credit Model is Costly and Inefficient

• Only 16 states have a state low income housing
  tax credit (LIHTC)
• Missouri ranks 2nd in per capita LIHTC funding

4
Current Tax Credit Model is Costly and Inefficient

• Redemptions rapidly increasing
• fiscal year 2006 - 62 million
• fiscal year 2007 - 82 million
• fiscal year 2008 - 98 million
• no limits on how much could be issued
• Significant amount of credits outstanding
• fiscal year 2007 - 1.27 billion
• fiscal year 2020 2.3 billion projected

5
Current Tax Credit Model is Costly and Inefficient

• Significant inefficiencies
• Only 35 cents of every credit dollar issued goes
  directly toward project
• No competition in the initial sale of credits
• Options presented for improvement
• Models in place in Massachusetts, Minnesota and
  North Carolina referenced

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Improvements Needed in Evaluation and Selection
Process

• No established scoring methodology to select
  projects
• No project cost info made public prior to
  approval
• Perception of political influence exists

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Cost Limits are High

• Allowable project cost limits are high
• Limits set at 161 percent of HUD level, other
  states only allow average of 97.5 percent
• No review for unreasonable costs
• Developer fees and builder fees exceeded
  recommended limits
• Resulted in units which were very costly
• total development costs were at least double
  actual construction costs, usually more

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Weaknesses in Program Administration

• Economic impact reported overstated
• No long-range goals or performance measures have
  been established
• Potential recapture not attempted

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Audit Impact

• Significant press coverage
• Significant scrutiny by the State Committee on
  Tax Policy
• Housing Commission self-imposed a limit on the
  amount of credits being issued
• Housing Commission held accountable