Utility Allowances: Texas and Everywhere Else #MAX17 #MAX17. Tuesday, October 3 10:45 am 11:45 am

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1 Utility Allowances: Texas and Everywhere Else Tuesday, October 3 10:45 am 11:45 am

2 Meet the Experts Collin Campbell George McMannis Stephanie Naquin Anthony Phillips Business Development/Sales Manager Zappling/2rw Consultants Vice President of Compliance and Operations BWI, LLC Multifamily Compliance Novogradac & Company, LLC Utilities Manager Herman & Kittle Properties

3 Utility Allowances Treasury Regulation Federally approved methodologies Recently revised March 3, Audit Guide, Chapter 18 Identifies compliance Texas Administrative Code, Chapter 10, Subchapter F, TDHCA s rule that details how methodologies are implemented in Texas

4 Utility Allowances Include utilities paid by the resident Paid directly to the utility provider Paid to, or through, the owner of the building Is the billing based on the tenant s actual consumption (Submetering)? If the billing based on a Ratio Utility Billing System (RUBS)?

5 Utility Allowances Considered Alternative Utility Allowance Methods Utility Allowance Methodologies 1. Rural Housing Services (RHS) 2. Housing and Urban Development (HUD) 3. Public Housing Authority (PHA) 4. Written Local Estimate 5. HUD Utility Schedule Model 6. Energy Consumption Model 7. Actual Use Method/Agency Estimate

6 Utility Allowances RHS Assisted Buildings RHS! Buildings with RHS Assisted Tenants

7 Utility Allowances Project Based Section 8 Public Housing HOME Units HUD- Regulated Buildings No RHS! Note These are NOT all the programs that would make a HTC Building HUD-Regulated. These are just the most common.

8 Utility Allowances Other Buildings Public Housing Authority (PHA) Utility Provider Estimate/Written Local Estimate HUD Utility Schedule Model (HUM) Energy Consumption Model Agency Estimate/Actual Use Method

9 Utility Allowances Include any flat fees Must be the most applicable Housing Authority to the development PHA Energy Efficient, Correct Building Types, etc Publishes a utility allowance for the Section 8 Housing Choice Voucher (HCV) Program

10 Utility Allowances Utility Provider Estimate Must be issued from a residential utility provider that provides service to the residential buildings Estimate for units of similar size & construction in the same geographic area Signed by the Utility Provider and include all Component Charges

11 Utility Allowances HUD excel Workbook Green discounts available HUSM Webbased version available Rates used must be within 60 days of effective date Uses property s zip code to determine climate data

12 Utility Allowances Energy Consumption Model calculated by a properly licensed engineer or other qualified professional Take into consideration building specific factors Rates used must be within 60 days of effective date Licensed Mechanical Engineer in Texas ONLY unit size, building orientation, design and materials, mechanical systems, appliances, characteristics of the building location, and available historical data

13 Utility Allowances Agency Estimate Only method that uses the actual consumption data for the tenants of the building limited to the building s consumption data for the 12-month period In general, the rates in effect no eelier that 60 days prior to the beginning of the 90 day notification period are applied to the consumption averages Includes all applicable component charges Monthly base charges Cost per unit of measure (e.g. kwh, gallons, etc ) Taxes

14 Utility Allowances Combining Methodologies With the exception of RHS buildings and HUD regulated buildings, owners may combine methodologies Be careful different methods have different annual review requirements and effective dates!

15 Utility Allowances Effective Dates RHS/HUD PHA Alternative Utility Allowance Methods Date prescribed under the applicable RHS or HUD program 90 days after the change is made available Can be implemented sooner Rent due 90 days after the date of posting Must wait the 90 days before implementing

16 Utility Allowances When doe the 90-day notification period begin? Methodology Beginning of 90 Days Utility Provider Estimate Date of letter from Utility Provider HUD Utility Model Schedule Energy Consumption Model Date entered as Form Date 60 days after the end of the last month which data was used to compute the estimate Agency Estimate Date allowance is approved by the Agency

17 Utility Allowances Annual Review Requirements RHS / HUD PHA Alternative Methods Comply with RHS/HUD Program Requirements Must check periodically for change Once a Calendar Year Must post for residents Agency approval required

18 3 ways to vet alternative Utility Allowances 3 rd party vendors (like Collin) *for portfolios of all sizes In-house with existing Compliance staff (like George) *for small to mid-sized portfolios In-house with a dedicated UA staff (like myself at HKP) *for larger portfolios

Housing Finance Agency Estimate Agency Provided Service Utility

19 Agency vs. Vendor Provided Services Public Housing Authority (PHA) Estimate State Housing Finance Agency Estimate Agency Provided Service Utility Company Estimate Energy Consumption Model (Engineered) Vendor Provided Service Actual Consumption Model HUD Utility Schedule Model (HUSM)

20 Engineered/Energy Consumption Model Utility Allowance Process Collect Building Plans Complete Simple Setup Form 15 Business Days to Complete and QA/QC Review Results with Owner Rep. Complete HFA Submission

21 2017 Result Comparisons Sample Location Birmingham, Alabama Miami, Florida Brookfield, CT Columbus, South Carolina Boston, MA Canton, Mississippi Albany, Georgia Denver, CO Elizabethtown, Kentucky Columbus, OH Public Housing Authority or HUD HUSM 1BR ($178), 2BR ($245), 3 BR ($336), 4BR ($424) Energy Consumption Model or Engineered Utility Allowance 1BR ($132), 2BR ($144), 3BR ($160), 4BR ($178) 2BR ($132), 3BR ($196) 2BR ($90), 3BR ($102) 2BR ($92), 2BR ($92) 2BR ($65), 2BR ($67) 2BR ($186), 3BR ($219) 2BR ($140), 3BR ($145) 1BR ($63), 2BR ($87), 3BR ($111) 2BR ($151), 3BR ($200), 4BR ($205) 1 BR ($45), 2BR ($55), 3BR ($67) 2BR ($95), 3BR ($123), 4BR ($161) 1BR ($48), 2BR ($57) 1 BR ($30), 2BR ($34) 1BR ($50), 2BR ($57), 3BR ($67) 1BR ($149), 2BR ($180), 3BR ($210), 4BR ($257) 1BR ($38), 2BR ($46), 3BR ($55) 1BR ($97), 2BR ($119), 3BR ($129), 4BR ($141) 3BR ($209), 3BR ($292) 3BR ($152), 3BR ($154) Average Additional Rent Revenue Per Month $142 per unit, $68 per unit, $28 per unit, $60 per unit, $31 per unit, $59 per unit, $21 per unit, $12 per unit, $78 per unit, $98 per unit,

22 Small Developer What are the costs?

23 Does it really matter? Bedroom Size Public Housing Authority Utility Allowance HUSM 1 Bedroom $98.00 $ Bedroom $ $68.00 Additional Rent Revenue Per Month $42 per unit, $63 per unit, One Bedroom: $55,440 Two Bedroom: $54,432

24 Implementation Three Step Process Step 1 HUSM Step 2 Energy Consumption Step 3 Portfolio Expansion and Maximization Partnerships State of Indiana (IHCDA) Industry Collaboration

25 Compare/Combine the Methods

26 Maintain the Schedule

27 Maintain the Process

The Results Current Utility Allowances vs. PHA HKP Portfolio as of 9.5.

28 The Results Current Utility Allowances vs. PHA HKP Portfolio as of Difference between UA implemented and PHA Utility Allowance Assumes: 100% Occupancy 12 Months use of UA Max Rents Tax Credit Properties: 106 Tax Credit Units: 9,340 UA Types: Electric, Water, Sewer, Natural Gas ~ $3.6MM in Potential Rental Revenue

29 The Results Current Utility Allowances vs. PHA HKP Portfolio as of Yearly $3,572,832 potential revenue $33,705 per property $383 per unit Monthly $297,736 potential revenue $2,808 per property $31.88 per unit Tax Credit Properties: 106 Tax Credit Units: 9,340

30 UA Methods: What the States Allow PHA Utility Allowance Utility Company Estimate HUD Utility Schedule Model Actual Consumption Estimate Engineer Estimate (Energy Consumption Model) Alabama YES YES YES NO YES Florida YES YES NO NO YES* Georgia YES YES YES YES YES Illinois YES YES YES YES YES Indiana YES YES YES YES YES Kansas YES YES YES YES YES Kentucky YES YES YES YES YES Louisiana YES YES YES YES YES Michigan YES YES YES YES YES Mississippi YES YES YES YES YES Ohio YES YES YES NO* YES Oklahoma YES YES YES NO YES South Carolina YES YES YES NO YES Texas* YES YES YES YES YES Wisconsin YES YES YES NO YES

31 Engineered Allowances by State

32 2017 Result Comparisons in Texas Location Public Housing Authority Utility Allowance Energy Consumption Model or Engineered Utility Allowance Average Additional Rent Revenue Per Month Dallas Area, TX 1BR ($94), 2BR ($124), 3BR ($174), 4BR ($214) 1BR ($84), 2BR ($109), 3BR ($136), 4BR ($159) $30 per unit, San Antonio Area, TX 1 BR ($94), 2BR ($124), 3BR ($174) 1BR ($83), 2BR ($109), 3BR ($136) $21 per unit, Fort Worth Area, TX 1 BR ($148), 2BR ($216), 3BR ($305) 1BR ($81), 2BR ($93), 3BR ($110) $128 per unit, Houston Area, TX 1BR ($113), 2BR ($126), 3BR ($137) 1 BR ($84), 2BR ($96), 3BR ($107) $29 per unit, Austin Area, TX 1BR ($47), 2BR ($61), 3BR ($74) 1BR ($22), 2BR ($23), 3BR ($25) $37 per unit,

33 Monthly And Annual Increases In Revenue Location (Number of Units) Average Additional Rent Revenue /Month Monthly Increase In Rent Revenue For Property Annual Increase In Rent Revenue For Property Dallas Area, TX (322) $30 per unit, $9,660/Month $115,920/Year San Antonio Area, TX (90) $21 per unit, $1,890/Month $22,680/Year Fort Worth Area, TX (140) $128 per unit, $17,920/Month $215,040/Year Houston Area, TX (96) $29 per unit, $2,784/Month $33,408/Year Austin Area, TX (140) $37 per unit, $5,180/Month $62,160/Year

34 Contact Us Collin Campbell George McMannis Stephanie Naquin Anthony Phillips tle.com

Utility Allowances

Utility Allowances 10.614 Treasury Regulation 1.42-10 Federally approved methodologies Recently revised March 3, 2016 8823 Audit Guide, Chapter 18 Identifies compliance 10TAC 10.614 TDHCA s rule that details how methodologies