Statement of State of Mississippi

The Gulf Opportunity Zone Act provides Mississippi with additional tax credits for 2006, 2007, and 2008.  These additional tax credits will provide much needed housing for Gulf Coast residents in the form of affordable rental units.

The GO Zone legislation provides that properties financed by tax credits placed in service in the calendar years 2006, 2007, and 2008 will be treated as Difficult to Develop Areas (DDA), which provides a 30% boost in eligible basis for the properties.  This boost in eligible basis provided by the DDA designation helps developers overcome increases in costs associated with development in the areas most affected by Hurricane Katrina.

The DDA designation for tax credit properties on Mississippi’s Gulf Coast helps offset the increased costs of insurance, labor, and materials.  Many insurance issues still wait to be resolved, and demand for labor outpaces the supply, thereby increasing the cost.

The DDA designation as written in the GO Zone legislation is set to expire on December 31, 2008.  It generally takes a developer 18 to 24 months from allocation of tax credits to placed in service status under ideal conditions.  The Go Zone deadline threatens to repeal the DDA status for any project not placed in service by December 31, 2008, thereby increasing the overall cost of development and reducing the affordability of the individual units.  For developments receiving tax credits in 2007 and 2008, the fastest development timeline of 18 to 24 months still places the placed in service date outside the timeframe provided by the GO Zone legislation.

In addition, there is one additional item that I would place as the highest priority to be addressed immediately so that the investment in affordable housing in Mississippi is not curtailed:

To alleviate the pressures, I ask you to extend until December 31, 2010 the deadline for placing Low Income Housing Tax Credit developments in service, as well as the deadline for benefits to these housing developments available through the GO Zone LIHTC Basis Boost.

This additional time would allow developers to overcome the increases in development cost while providing ample time to work with government agencies and local communities to provide affordable housing to areas of greatest need.