The Iowa Finance Authority (IFA) is finalizing the administrative details for two federal economic stimulus programs that will inject more than $90 million dollars into low-income housing tax credit (LIHTC) projects in the state.

Iowa’s cut of the Tax Credit Assistance Program (TCAP), $18.9 million of the $2.25 billion appropriated nationwide by the American Recovery and Reinvestment Act, will be used to help developers get affordable-housing projects off the ground. Any project approved by IFA for low-income housing tax credits between Oct. 1, 2006, and Sept. 30, 2009, is eligible to receive TCAP assistance, a zero percent cash-flow loan to be paid back over a 17-year period.

IFA is also eligible for nearly $73 million of financial backing under Section 1602 through the U.S. Treasury. The program will allow the agency to exchange a portion of its tax credits for cash grants, which it will in turn allocate to projects in lieu of loans. IFA has applied for the maximum amount of available dollars, with funds based solely on the number of people in the state.

The $90 million infusion is intended to jump-start LIHTC projects stalled across the state due to a lack of financing and investors.

“These funds can be used to fill that gap,” said Carla Pope, IFA’s affordable rental production director.

The agency has approved 39 LIHTC projects since October 2006, and 21 applications are currently under review.

Jim Rieker, president of Midwest Housing Equity Group Inc., an Omaha-based tax credit syndicator, said he believes the programs will help unclog a “logjam of deals,” but the real challenge is to find investors who actually need the tax credits right now.

“You can give them all the incentives you want with higher yields,” Rieker said, but investors dealing with decreased profits or losses have no need to purchase the tax credits. Investors can also be “gun shy,” he said, especially publicly traded companies fearful of losses stemming from soft debt and depreciation appearing on their balance sheets.

“A lot of the core investors just aren’t in the game right now,” he said.

Though developers won’t be required to sell their entire tax credit award to be eligible for TCAP financing, Pope said project owners must have a syndication agreement or direct investor in place.

Projects currently under construction or that have been completed are also eligible, Pope said, adding that there is “no limitation on the funds as long as the project has not completed the allocation process,” meaning the tax credit equity hasn’t been transferred to the owner’s bank account.

IFA has published a preliminary draft of TCAP’s criteria and selection process, which is available for public comment through Sunday. Pope said she will consider that feedback when writing a plan to implement Section 1602.

The agency is collecting information “to determine more completely what the need is for these funds,” she said. Then, based on the original tax credit application, the selection criteria will be applied and, beginning with the highest-scoring candidate first, IFA will distribute the money until it is gone.

“We need to get that money out the door so it can be spent,” Pope said, referring to a stipulation in the program that requires IFA to allocate at least 75 percent ($14.2 million) of its TCAP grant by Feb. 16, 2010. The agency must also demonstrate that all project owners have used 75 percent of the TCAP funds by Feb. 16, 2011.

IFA has a June 3 deadline to submit its final plan for TCAP to the U.S. Department of Housing and Urban Development; it plans to implement Section 1602 in mid-June.

Rieker said that due to the sheer amount of available funding, including almost $63 million in Heartland Disaster Tax Credits awarded to IFA in the 2008, 2009 and 2010 calendar years, caution must be taken not to overbuild in any given market. But he is confident that IFA knows the markets and is prepared for the task. “The timeline they have to do this is extremely quick,” he said.

The loss of oversight created as syndicators and investors recoil can make deciding where to allocate the funds even more difficult, Rieker said.

IFA has given considerable thought to how to make the new programs work, Pope said. When the agency meets with developers to discuss the feasibility of a particular project syndicators will be invited to the table. She said syndication agreements may be influenced by the funds offered by IFA and that investors’ commitment to affordable-housing projects could be strengthened by the possibility of making smaller investments with better returns.

“It’s pretty challenging,” Pope said, to balance Iowans’ need for affordable housing and the premise of the American Recovery and Reinvestment Act, which is to stimulate the economy and create jobs. “We have lots of objectives that we are trying to meet,” she said, such as encouraging investment, helping developers succeed and making sure the affordable housing that is created meets the needs of Iowans.

Pope said developers have already displayed a significant amount of interest in the program and imagines a “good deal” of the funding will be allocated before September.

“I think there is quite a bit of need for this money,” she said.