Gulf Opportunity Zone: States Are Allocating Federal Tax Incentives to Finance Low-Income Housing and a Wide Range of Private Facilities
Published: 2008-07-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 2005, Hurricanes Katrina, Rita, and Wilma devastated the Gulf Coast, destroying wide swaths of housing, key infrastructure, and numerous private businesses. In response, Congress granted the states a wide range of disaster relief, including billions of dollars of grants and tax incentives to revitalize the Gulf Coast. Specifically, the Gulf Opportunity (GO) Zone Act of 2005 (Pub. L. No. 109-135) provided tax incentives to individuals and businesses in certain presidentially declared disaster areas. Congress mandated that GAO review how state and local governments allocated and used federal tax incentives in the act and subsequent legislation. This report (1) identifies tax incentives in the GO Zone Act of 2005 and subsequent legislation for which state and local governments have allocation and oversight responsibilities, (2) describes the procedures state governments use in allocating the tax incentives, including how they plan to monitor compliance with federal laws, and (3) describes how tax incentives have been allocated and for what purposes. To address these objectives, GAO analyzed key documentation from GO Zone states and interviewed state officials, selected local officials, and representatives from private and nonprofit entities.
section_title: What GAO Found
paragraphs: States with GO Zones are responsible for allocating and overseeing the use of four tax incentives in the GO Zone Act of 2005. Alabama, Louisiana, and Mississippi received allocation authority for all four provisions. Florida and Texas each received $3.5 million in GO Zone low-income housing tax credit (LIHTC) authority, but did not receive allocations under the other incentives. With some process variations, the three eligible states with GO Zones generally allocated bond authority on a first-come, first-served basis without consistently targeting the allocations to assist recovery in the most damaged areas. Officials in Louisiana and Mississippi acknowledged that the first-come, first-served approach led to allocating bond authority to less-damaged areas at the start of the program. The five eligible state housing finance agencies used existing processes to award GO Zone LIHTCs, but differed in how they targeted these credits. For all three bond provisions, state officials and bond issuers said the borrower's bond counsel is generally responsible for ensuring that the bonds are compliant with applicable laws when issued. State housing finance agencies plan to use existing procedures to monitor compliance once units are placed in service. As of mid-June 2008, eligible states had allocated 87 percent of the GO Zone private activity bond authority, but bonds issued amount to about 50 percent of the total awarded allocation authority. The bonds issued will be used to finance a wide range of facilities, including manufacturing facilities, utilities, housing, retail facilities, and hotels. State housing finance authorities have awarded 95 percent of the GO Zone LIHTCs. Although few housing units are currently in service, state housing finance agency officials said planned units will be in service by the mandated deadline. GO Zone LIHTC-funded units will address about 17 and 45 percent of the rental housing units with major or severe damage in the states of Louisiana and Mississippi, respectively. The three eligible states with GO Zones used the tax credit bonds and additional advance refundings to varying degrees to provide debt relief. State officials said current economic conditions pose challenges for using both GO Zone bond and LIHTC financing.

section_title: Letter
paragraphs: In 2005, Hurricanes Katrina, Rita, and Wilma devastated areas along the  Gulf Coast in Alabama, Florida, Louisiana, Mississippi, and Texas. The  hurricanes destroyed wide swaths of housing, infrastructure, and  businesses, leaving more than 1,500 people dead and hundreds of  thousands displaced without shelter or employment. The size and scope of  the devastation caused by the Gulf Coast hurricanes presents the nation  with unprecedented rebuilding challenges. For perspective on the  magnitude, some estimates put capital losses at a range of $70 billion to  more than $150 billion. Currently, nearly 3 years after the 2005 Gulf Coast  hurricanes, the Gulf Coast and the nation continue to face the challenge of  rebuilding.
Current rebuilding activities, including the bulk of federal rebuilding  assistance, are directed primarily toward restoring the region’s stock of  livable housing and essential infrastructure. Additional efforts are directed  at economic recovery. Over the coming years, perhaps decades, significant  and complex challenges lie ahead. Major decisions will need to be made  regarding a wide range of issues including coastal restoration, levee  protection, infrastructure, land use, and economic recovery. All levels of  government, together with the private and nonprofit sectors will need to  play a critical role in this process. Agreeing on what rebuilding will be  done, where, how, and—particularly important—who will bear the costs,  will be key to moving forward with the rebuilding process.
In response to the Gulf Coast devastation, the federal government  committed a historically high level of resources through an array of grants,  loans, subsidies, and federal tax incentives. The bulk of federal rebuilding  assistance from 2005 through 2008 came from two key programs—the  Federal Emergency Management Agency’s (FEMA) Public Assistance  program ($10.4 billion as of April 2008) and the Department of Housing  and Urban Development’s (HUD) Community Development Block Grant  (CDBG) program ($19.7 billion as of May 2008). Federal recovery and  rebuilding assistance also includes payouts from the National Flood  Insurance Program as well as funds for levee restoration and repair. Also  to assist with recovery from the Gulf Coast hurricanes, the Gulf  Opportunity (GO) Zone Act of 2005 provided a range of tax relief and  incentives for individuals and businesses in the GO Zones.
Whereas some GO Zone tax incentives flow directly to taxpayers making  certain qualified investments, the act authorized the states to allocate  certain tax incentives such as additional low-income housing tax credits  (LIHTC) and tax-exempt bond financing. For these two provisions,  existing tax incentives were extended, granting additional authority to GO  Zone areas in addition to regular, annual allocations available to the  affected states. Each eligible state was responsible for setting up an  application process and selecting which qualified projects are to receive  allocations up to each state’s GO Zone allocation authority under the GO  Zone act.
The Small Business and Work Opportunity Tax Act, part of the U.S. Troop  Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability  Appropriations Act, 2007, mandated that we study state and local  practices in allocating and utilizing tax incentives in the GO Zone Act of  2005 and subsequent, amending legislation and report to Congress. On the  basis of discussions with the House Committee on Ways and Means and  the Senate Committee on Finance, our objectives were to (1) identify the  tax incentives in the GO Zone Act of 2005 and subsequent legislation for  which state and local governments had allocation and oversight  responsibilities; (2) describe the processes state governments use to  allocate the tax incentives, including how they ensure compliance with  federal laws and prevent fraud, waste, and abuse; and, (3) describe how  much of the tax incentives state and local governments have used and for  what purposes.
To identify the incentives in the GO Zone Act of 2005 and subsequent  legislation for which states had allocation and oversight responsibilities,  we reviewed the acts and Joint Committee on Taxation (JCT) explanations  of the acts. We also reviewed our past and ongoing work related to Gulf  Coast rebuilding. In addition, we interviewed officials from the Internal  Revenue Service (IRS) and HUD.
To identify the processes used by state governments to allocate federal GO  Zone tax incentives and efforts to monitor compliance with federal laws,  we obtained documentation, such as allocation plans for LIHTCs, bond  commission meeting transcripts, bond commission meeting status  updates, and state auditors’ reports, from state officials in Alabama,  Florida, Louisiana, Mississippi, and Texas, the five states with GO Zones  eligible to use the tax incentives, and we interviewed officials and bond  issuers in these states.
To determine how much of the GO Zone tax incentives were used and for  what purposes, we (1) obtained and analyzed documentation from the  relevant state governments, including GO Zone bond applications, official  bond documents made available to investors at the time the bonds are  sold, program status reports, and descriptions of planned low-income  housing developments; (2) interviewed state and selected local officials,  including selected bond issuers; and (3) held discussions with selected  private sector participants and nonprofit organizations. We obtained data  on the total GO Zone bond allocations as of mid-June 2008 and LIHTC  awards as of April 2008. We reviewed information on all bonds issued by  each state as of mid-June 2008, including summary information provided  by the states describing how bonds were used. Due to differences in the  way the bond type data were reported across the three eligible states, we  did not attempt to quantify aggregate use by categories across the states.  For LIHTCs, we reviewed the number of projects, units funded, and units  in service as of April 2008. During our visits to Louisiana and Mississippi,  the two states most directly affected by the Gulf Coast hurricanes, we  toured several low-income housing projects funded with GO Zone tax  credits. To provide perspective on the extent to which units have been  developed with GO Zone LIHTCs, we compared the number of planned  units to the number of units in service for each of the 5 states as of April  2008. Where data were available for selected parishes and counties in  Louisiana and Mississippi, we compared planned and in-service GO Zone  LIHTC units to rental housing units with major or severe damage by parish  or county; comparable data were not available for every GO Zone parish  and county in those two states or for Alabama, Florida, or Texas.
We assessed the reliability of the state level bond and housing data by,  when possible, comparing the data the states provided to official  documentation and interviewing state officials with knowledge of the data.  We determined that the data we used in this report were sufficiently  reliable for our purposes. We conducted this performance audit from  February through July 2008, in accordance with generally accepted  government auditing standards. Those standards require that we plan and  perform the audit to obtain sufficient, appropriate evidence to provide a  reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The Gulf Opportunity Zone Act of 2005 includes tax incentives to assist  recovery and economic revitalization for individuals and businesses in  designated areas in Alabama, Florida, Louisiana, Mississippi, and Texas  following Hurricanes Katrina, Rita, and Wilma in 2005. Some of the tax  incentives in the act are extensions of existing federal tax incentives (e.g.,  tax-exempt private activity bonds, new markets tax credits, low-income  housing tax credits, etc.). In some cases, the GO Zone Act liberalizes the  rules that taxpayers must follow to be eligible to claim the incentives. JCT  estimates indicate that these tax incentives will reduce federal revenue by  about $9 billion over the 10-year period from 2006 to 2015.
The act defined the GO Zones as those counties and parishes in the  presidentially-declared disaster areas that warranted additional, long-term  federal assistance. Rather than making the incentives available statewide  in the five states affected by the 2005 hurricanes, the act defined a  separate GO Zone for the three major 2005 hurricanes—Katrina, Rita, and  Wilma. Both Hurricane Katrina and Hurricane Rita affected certain areas  in Louisiana, so those GO Zones overlap in Louisiana. Figure 1 illustrates  the GO Zone areas in each of the five affected states. Tax provisions to  assist recovery vary by GO Zone, with the most assistance provided to  areas damaged by Hurricane Katrina, particularly in Louisiana and  Mississippi.
The GO Zone Act was broadly similar to legislation that created the New  York Liberty Zone following the September 11, 2001, terrorist attacks in  New York City. The Job Creation and Worker Assistance Act of 2002  contained various tax incentives designed for response and recovery for  the area of lower Manhattan designated as the New York Liberty Zone.
Similar to those in the Liberty Zone, individuals and businesses may claim  the GO Zone tax incentives as long as they meet specified federal  requirements. In these cases, the tax incentives essentially function as  open-ended entitlement programs that any eligible taxpayer may claim.  For GO Zone tax incentives such as claiming accelerated depreciation on  certain assets or partial expensing for certain clean-up costs, the full cost  to the federal government depends on how many taxpayers claim the  provision on their tax returns.
For certain tax incentives in the GO Zone Act of 2005, state governments  in states with GO Zones were authorized to establish processes and select  which qualified projects are to receive tax incentive allocations up to each  state’s allocation authority limit. As mandated by law, this report discusses  those tax incentives in the GO Zone Act of 2005 that state and local  governments play a role in allocating and overseeing.
Because the states are responsible for selecting which entities receive the  tax benefit up to the allocation authority provided by law, these GO Zone  tax incentives appear similar to traditional grant programs where  governments provide funds directly to grant recipients. For example, Gulf  Coast states have processes for allocating funds through FEMA’s Public  Assistance program and the CDBG program. In contrast with grant  programs, where funds come directly from the government, investors in  projects that have received GO Zone incentives are allowed to either claim  a credit against their tax liability, as in the case of the LIHTC program, or  exclude certain portions of the return on their investment, such as interest  earned, in GO Zone projects from their taxable income, as is the case for  tax-exempt bonds. Unlike traditional grant programs, the projects  receiving these tax incentives are financed with bonds that must be repaid  or equity provided by private investors, meaning developers, investors,  insurers and other participants have an additional incentive to ensure that  projects are financially viable and will remain compliant with applicable  laws.
Since the 2005 hurricanes, we are conducting ongoing work and have  completed a number of studies evaluating disaster relief and recovery  efforts along the Gulf Coast, including how states with GO Zones have  made use of federal resources. Appendix IV lists related GAO products.
section_title: States with GO Zones Are Responsible for Allocating Four Federal Tax Incentives under the GO Zone Act of 2005
paragraphs: Under the GO Zone Act of 2005, state and local governments are  responsible for allocating and overseeing the use of four GO Zone tax  incentives. According to our analysis of JCT estimates, these incentives  accounted for about 40 percent, or $3.5 billion, of the projected cost to the  federal government from the GO Zone Act over the 10-year period from  2006 to 2015. States with GO Zones were awarded authority to allocate    $14.9 billion in tax-exempt private activity bonds, resulting in an estimated  $1.6 billion reduction in federal revenue from 2006 to 2015;    $330 million in low-income housing tax credits (LIHTC), resulting in an  estimated $1.1 billion reduction in federal revenue from 2006 to 2015;    $350 million in tax credit bonds, resulting in an estimated $57 million  reduction in federal revenue from 2006 to 2015; and    $7.9 billion in additional advance refunding bonds, resulting in an  estimated $741 million reduction in federal revenue from 2006 to 2015.
Alabama, Louisiana, and Mississippi received authority for all three bond  provisions to use by the end of 2010 and increased LIHTC allocations each  year for 2006 through 2008. Florida and Texas did not receive allocation  authority for the bond provisions, but each received a onetime increase in  LIHTC authority of $3.5 million for 2006. Table 1 shows the amount of  allocation authority that each state received by provision.
For GO Zone tax-exempt private activity bonds, the allocation amount that  can be used over the 5-year period from 2006 to 2010 is significantly  greater than the amount of qualified private activity bonds that may be  allocated subject to annual state volume caps. For perspective, in 2008,  state volume caps for tax-exempt private activity amounted to about $393  million, $365 million, and $262 million for Alabama, Louisiana, and  Mississippi, respectively. Similarly, GO Zone LIHTC allocation authority  in Alabama, Louisiana, and Mississippi exceeds regular LIHTC authority  for 2006 to 2008. Alabama, Louisiana, Mississippi, received a total of about  $27 million, $26 million, and $17 million, respectively, from their combined  regular state LIHTC allocations (credit ceilings) for 2006 to 2008.
subsections: section_title: Tax-Exempt Private Activity Bond Authority
paragraphs: The GO Zone Act of 2005 grants Alabama, Louisiana, and Mississippi the  authority to award tax-exempt bond allocations for qualified private  activities. Tax-exempt private activity bonds allow private business  owners and corporations to borrow capital at interest rates lower than  would otherwise be available. Governmental entities issue the tax- exempt private activity bonds, generally serving as conduits to provide the  bond proceeds to borrowers, including business owners and corporations  that have been awarded allocation authority from the state. The  borrowers’ payments on their loans are then used to repay principal and  interest on the bonds, and investors who purchased the bonds can  generally exclude interest earned on the bonds from their federal income  tax.
All states receive an annual tax-exempt private activity bond allocation  that is subject to a volume cap and is limited to certain types of facilities.  GO Zone bonds can be issued in addition to annual state volume caps in  eligible states and can be used for a broader range of facilities than tax- exempt private activity bonds subject to annual state volume caps.  According to the GO Zone Act of 2005, eligible states have the authority to  allocate an amount of GO Zone private activity bonds equal to $2,500 per  person in the GO Zone, based on prehurricane population counts. States  with GO Zone bond allocation authority must issue the bonds by  December 31, 2010. For the three eligible states, aggregate GO Zone  allocation authority over the period is between 6 and 22 times greater than  annual qualified private activity bond authority subject to state volume  caps. In contrast with qualified private activity bonds subject to annual  state volume caps, GO Zone tax-exempt private activity bonds are not  subject to the Alternative Minimum Tax.
While GO Zone bonds can be used for facilities that generally cannot be  built with tax-exempt private activity bond authority subject to annual  state volume caps, such as hotels and retail facilities, GO Zone private  activity bonds are subject to certain tax-exempt private activity bond  prohibitions against financing golf courses, massage parlors, gambling,  and liquor stores, among other prohibited uses. In addition, 95 percent of  the bond proceeds must be used for qualified projects in the GO Zone.
The liberalized use for GO Zone tax-exempt private activity bonds in  comparison to qualified private activity bonds subject to annual state  volume caps is broadly similar to private activity bond authority awarded  in the New York Liberty Zone. Whereas the Liberty Zone provision divided  the authority between the state and local levels and set specific limits on  retail and residential rental property, the GO Zone provision did not set  aside any portion to be allocated for specific localities or set dollar caps  on certain categories of use. The GO Zone Act of 2005 provided states with  broad discretion in allocating GO Zone tax-exempt private activity bonds.
section_title: Low-Income Housing Tax Credits (LIHTC)
paragraphs: The GO Zone Act of 2005 temporarily increased the amount of allocated  tax credits for the five states along the Gulf Coast by a total of about $330  million. The Tax Reform Act of 1986 authorized the LIHTC program to  provide an incentive for the acquisition and development or the  rehabilitation of rental housing affordable to low-income households. As  required under the Internal Revenue Code, state housing finance agencies  (HFA) must award credits to developers of qualified projects according to  their qualified allocation plans (QAP), which establish the agencies’  funding priorities and eligibility criteria. Developers either use the credits  or sell them to investors to raise capital (i.e., equity) for real estate  projects. In general, investors can claim credits on the qualified basis of  the property—that is, total development cost (excluding land and other  certain costs) of the low-income units. The investor receives  approximately 9 percent of the qualified basis in tax credits annually for 10  years. The equity raised by the tax credits reduces the need for debt  financing and as a result, these properties can offer lower, more affordable  rents.
GO Zone LIHTCs were provided to the five eligible states in addition to  their regular annual allocations. Under the regular LIHTC program in 2006,  each of the five states was allocated tax credits equal to $1.90 per capita.  The allocation claimed by Louisiana, Alabama, and Mississippi for 2006,  2007, and 2008 equaled $18.00 times each state’s prehurricane population  in the GO Zone. As a result of the increased per capita allocation, the  2006 through 2008 GO Zone LIHTC authority was about 75 percent, 567  percent, and 523 percent greater than the regular LIHTC authority that  Alabama, Louisiana, and Mississippi received in the same period,  respectively. While projects that receive LIHTCs must normally be placed  in service within 2 years of the credit allocation, GO Zone LIHTC-funded  units (as well as regular LIHTC units funded during 2006 through 2008 in a  GO Zone) must be placed in service before January 1, 2011. Unlike  regular LIHTC allocations, GO Zone credits generally cannot be carried  forward.
The GO Zone LIHTC provision also expanded the amount of credits  available to investors. To promote investment in areas where the need is  greatest for affordable housing, investors can receive additional credits if  the tax credit properties are located in distressed areas known as “difficult  development areas” (DDA). Investors in such “enhanced” tax credit  properties can claim credits for 91 percent (instead of the normal 70  percent) of the project’s qualified basis. The GO Zones are treated as  DDAs under the 2005 act, and LIHTC properties located in the GO Zone  are thus eligible for those enhanced LIHTCs.
section_title: GO Zone Tax Credit Bonds
paragraphs: The GO Zone Act of 2005 created a new category of tax credit bonds—GO  Zone tax credit bonds—which Alabama, Louisiana, and Mississippi were  authorized to issue to provide debt relief to state and local governments.  The GO Zone tax credit bonds must be general obligations of the state  and the bond proceeds must be used to make payments on existing state  and local debt. Tax credit bonds differ from tax exempt bonds in that  rather than receiving tax-exempt interest payments, bondholders are  entitled to a federal tax credit equal to a certain percentage of their  investment. Because the state does not pay interest on the GO Zone tax  credit bonds, they essentially serve as an interest-free loan while they are  outstanding. Under the act, states are required to match the GO Zone tax  credit bonds with funds from other sources, such as issuing additional  general obligation bonds or money from a state’s general fund. The three  eligible states were required to issue tax credit bonds by December 31,  2006, and must retire the bonds within 2 years of issuing them, meaning  that they provide only temporary debt relief to the state and local  governments that they benefit.
section_title: Additional Advance Refundings of State and Local Bonds
paragraphs: The GO Zone Act of 2005 permits one additional advance refunding for  certain existing tax-exempt bonds in Alabama, Louisiana, and Mississippi.  State and local governments typically refund, or refinance, bonds to  reduce interest costs and ease restrictions on the original bond contract.  However, state and local governments can generally only advance refund a  bond one time and, in certain cases, including most tax-exempt private  activity bonds, bonds cannot be advance refunded. The GO Zone  additional advance refunding provision provides Alabama, Louisiana, and  Mississippi the ability to reduce interest costs on existing debt that has  already been advance refunded one time or did not originally meet the  requirements to allow for advance refunding. The provision can be used by  any issuer in the state and is not limited to counties and parishes located  in the GO Zone. All additional advance refunding bonds must be issued by  December 31, 2010.
The additional advance refunding provision can only be used for bonds  where one bond is currently outstanding, whether that bond is the original  bond or the first advance refunded bond. To clarify, bonds being refunded  are often subject to a call date, or a date at which the bond issuer may  recall the original bonds and refund or retire them. For advance  refundings, a second set of bonds is often established in advance of the  call date with the proceeds from these bonds being dedicated to retire the  original bond when the call date is reached. Therefore, after the second set  of bonds are issued and before the call date on the original bonds is  reached, two sets of bonds are outstanding. GO Zone additional advance  refundings cannot be used in these instances.
Like GO Zone tax-exempt private activity bonds, GO Zone additional  advance refunding authority is similar to additional advance refunding  authority awarded in the New York Liberty Zone following the September  11, 2001, terrorist attacks. Liberty Zone advance refunding was limited to  certain debts of the state or New York City, including qualified hospital  501(c)(3) bonds.
section_title: With Some Variation in Their Processes, States with GO Zones Generally Allocated Bond Authority on a First-Come, First- Served Basis; States Relied on Existing Procedures to Allocate LIHTCs
paragraphs: With some variations in their processes, Alabama, Louisiana, and  Mississippi generally allocated the GO Zone bond provisions on a first- come, first-served basis, and all five eligible states used existing processes  to award GO Zone LIHTCs. For the most part, all three eligible states  allocated GO Zone tax-exempt private activity bond authority without  consistently targeting the allocations to assist recovery in the most  damaged areas, although Louisiana recently set aside some of its  remaining allocation authority for the most damaged parishes. Officials in  Louisiana and Mississippi acknowledged that the first-come, first-served  approach made it difficult for applicants in some of the most damaged  areas to make use of the bond provision at the beginning of the program.  While all eligible states followed existing, prehurricane procedures to  award LIHTCs and will use existing procedures to monitor for federal  compliance, the states exhibited some differences in how they targeted the  GO Zone LIHTC authority to the most damaged areas. Louisiana and  Mississippi adopted different approaches for issuing tax credit bonds and  identifying matching fund sources, and Alabama chose not to issue tax  credit bonds due to time constraints associated with issuing the bonds.  Similar to the case of GO Zone private activity bonds, when allocating  additional advance refunding authority the three eligible states generally  used a first-come, first-served approach.
subsections: section_title: States Generally Awarded Tax-Exempt Private Activity Bond Authority on a First-Come, First-Served Basis and Rely on Bond Counsel to Ensure Compliance with Federal Laws
paragraphs: To expedite bond processing, the three eligible states generally allocated  the GO Zone private activity bond authority and approved projects on a  first-come, first-served basis without consistently targeting the allocations  to assist recovery in the most damaged areas. Alabama and Mississippi  have similar processes for allocating GO Zone private activity bonds,  whereas Louisiana’s bond allocation process has changed over time. Some  state officials we interviewed said they were uncertain whether the GO  Zone bonds should be used quickly anywhere within the qualified areas to  provide an economic stimulus to the GO Zone, or if the bonds should be  more focused on recovery efforts in the damaged areas. State officials we  interviewed acknowledged that the first-come, first-served approach led to  awarding bond allocation to projects in less damaged areas in the GO Zone  because businesses in these areas were ready to apply for and issue bonds  before businesses in more damaged areas could make use of the incentive.  Counties and parishes in the most damaged coastal areas of Louisiana and  Mississippi faced challenges dealing with the immediate aftermath of  hurricane debris removal and helping those displaced. While potential GO  Zone private activity bond applicants in some of the most damaged areas  were not positioned to apply for allocations when they first became  available, applicants in those areas have been able to use the GO Zone  bonds more recently.
As with tax-exempt private activity bonds that are subject to state volume  caps, state officials said they rely on bond counsel to ensure that bond  applications meet program requirements before issuance. Issuers must  also file information return Form 8038 with the IRS. According to IRS  officials, post-issuance compliance costs often do not surface until as long  as 5 years after bonds have been issued. State officials and others we  interviewed did not identify any alleged cases of fraud, waste, or abuse  with GO Zone private activity bonds. However, the processes states used  to allocate GO Zone bonds introduced risks that could lead to inefficient  allocation of the federal assistance. For example, officials interviewed  indicated that some projects that may have been viable without tax- exempt financing received some tax-exempt bond authority.
subsections: section_title: Alabama and Mississippi Processes for Allocating GO Zone Tax-Exempt Private Activity Bonds
paragraphs: Alabama and Mississippi applied similar first-come, first-served  approaches to allocate GO Zone tax-exempt private activity bonds. In  accordance with the GO Zone Act of 2005, the governors of both states had  the authority to award GO Zone private activity bond allocations. Both  states outlined general criteria for making awards, but also acknowledged  that they did not specifically target certain areas within the zone to receive  set-aside amounts of GO Zone private activity bond allocations.
The Governor of Alabama initially identified four criteria for prioritizing  GO Zone bond authority: (1) replacing property damaged or destroyed by  Hurricane Katrina, (2) rebuilding infrastructure of cities or counties  damaged by Hurricane Katrina, (3) projects that substantially improve the  quality of life for the area, and (4) new economic development projects.  Beginning in April 2006, Alabama began awarding allocations based on the  Governor’s priorities. According to Alabama officials, the apparent  demand was for new economic development projects, and the state  decided to adopt a first-come, first-served approach for allocating GO  Zone private activity bond authority. According to the officials we  interviewed, one possible explanation why many potential GO Zone bond  borrowers in the first two categories generally did not apply for tax- exempt private activity bonds could be that they received insurance  settlements and federal grants and loans for rebuilding efforts. Unlike  regular private activity bonds subject to volume caps, Alabama did not  charge an application fee for GO Zone bonds. GO Zone private activity  bond applicants in Alabama submit applications to the Alabama  Department of Finance, Debt Management Division, which reviews the  applications for completeness and the applications are then submitted to  the Finance Director for his approval. The Governor did not set a  maximum amount of authority that may be allocated per project. In  Alabama, the bonds must be issued within 1 year of the time the borrower  receives final approval to issue bonds, but borrowers may request an  extension.
In Mississippi, the Governor’s Office grants the final approval of GO Zone  bond allocations on a case-by-case basis after reviewing recommendations  from the Mississippi Development Authority (MDA). The MDA reviews GO  Zone bond applications for information on the number of jobs the project  will create, its projected general economic effect, and the degree to which  the developer is willing to invest its own funds in the project. Mississippi’s  application for private activity bond authority includes a $1,000  application fee and applications are reviewed in the order in which they  are received. Recommendations for allocation are generally made by MDA  on a first-come, first-served basis. Mississippi officials indicated that they  have tried to ensure that the six most-damaged counties along the Gulf  Coast have benefited from projects with GO Zone private activity bond  allocations, but no portion of the GO Zone bond allocation authority was  set aside specifically for these counties. The Governor did not set a  maximum amount of authority that may be allocated per project. Once a  project receives final approval in Mississippi, bonds must be issued within  120 days.
section_title: Louisiana Process for Allocating GO Zone Tax- Exempt Private Activity Bonds
paragraphs: Louisiana’s process for allocating GO Zone private activity bonds has  changed over time, and as of June 2008, most of the bond allocation  authority has been awarded on a first-come, first-served basis with a  portion set-aside for the 13 most-damaged parishes.
The Louisiana State Bond Commission (SBC) in February 2006 planned to  set aside 50 percent of its allocation authority for the 13 most-damaged  parishes and 50 percent for the rest of the GO Zone. No single project  was to receive more than $250 million in GO Zone bond allocation  authority. In March 2006, the Louisiana Department of Economic  Development (LDED) began recommending that projects receive  allocations based on applications to the Louisiana SBC on a first-come,  first-served basis. Under the GO Zone Act of 2005, the Louisiana SBC had  authority to make GO Zone bond allocations. However, following SBC  approval of GO Zone bond allocations, the final step in the Louisiana  process included the Governor issuing an allocation letter to each GO  Zone bond recipient.
Louisiana state officials we interviewed stressed that they did not initially  believe they would have sufficient demand to use all of their $7.9 billion  allocation by the end of 2010, when the GO Zone bond authority expires.  Beginning in May 2006, Louisiana SBC staff provided status updates to  Louisiana SBC members on the amount of remaining and used GO Zone  bond authority for the 13 most-damaged parishes and the remaining  parishes at monthly Louisiana SBC meetings. By the end of June 2007, the  Louisiana SBC had granted final approval for almost $4.6 billion, or nearly  60 percent, of the state’s GO Zone bond allocation authority, and  preliminary approval to projects worth an additional $3.0 billion, leaving  roughly $300 million in allocation authority. The allocations approved  included projects exceeding the $250 million cap with two large projects  for $1 billion each.
According to bond commission meeting transcripts, some bond  commission members expressed concerns that the allocations had not  been effectively targeted to areas and businesses with the greatest need.  While the 13 most-damaged parishes in aggregate had received more than  50 percent of the final allocations, some of the most severely damaged  areas around New Orleans had received relatively little as of June 2007.  For example, as of June 2007, Orleans parish had only received about 2  percent of the GO Zone bond allocation authority that had been granted  final approval. According to Louisiana SBC officials, this was in large part  due to a lack of applications for potential GO Zone bond projects in the  most severely damaged areas. Around that time, the Governor’s office  declined to issue final allocation letters pending review of the state’s GO  Zone bond process, and the Louisiana SBC temporarily stopped awarding  final approval for GO Zone bonds. In September 2007, the Louisiana  Attorney General ruled that the Governor did not have the authority to  issue final approval letters for GO Zone private activity bonds because the  federal act specified that the state bond commission has final approval.
In September 2007, the Louisiana SBC, in conjunction with the Governor’s  Office and the LDED, revised the GO Zone allocation process and  established two pools of allocation authority—a “designated pool” for the  13 most-damaged parishes and a “competitive pool” for the rest of the GO  Zone parishes. While the designated pool resembled the SBC’s original  concept, the list of the 13 parishes targeted for GO Zone bond allocations  was updated based in part on FEMA data on businesses and infrastructure  damage and HUD data on major and severe housing damage. Each pool  was to receive half of the remaining GO Zone bond authority, or about $1.7  billion per pool. Further, each of the 13 parishes in the designated pool  was to receive GO Zone bond allocation authority in proportion to the  degree of damage sustained. In addition, projects that had received  preliminary approval earlier were put on hold and had to qualify for final  approval by satisfying certain criteria relating to the number of jobs  created and overall economic effect.
The Louisiana SBC announced allocation awards in October 2007,  awarding allocations for all remaining authority in the competitive pool  with about $900 million of allocation authority remaining in the designated  pool. From October 2007 to April 2008, GO Zone bond projects faced  difficulty obtaining credit due in part to changing market conditions  nationwide, and some GO Zone projects requested additional time to  complete their issuance. However, some bond commissioners expressed  concern that repeatedly extending the period to issue GO Zone bonds  allowed less viable projects to retain their allocations while other  applications were waiting for consideration.
On the basis of its March 2008 review of Louisiana’s GO Zone bond  process requested by the newly elected Governor, the LDED  acknowledged that the Louisiana GO Zone bond process lacked effective  prioritization mechanisms and lacked mechanisms to ensure selected  projects would be viable, and that the changing rules had led to  disappointment and confusion among some stakeholders. Therefore, the  LDED recommended that the Louisiana SBC revise its rules for allocating  the remaining private activity bond authority. In April 2008, the Louisiana  SBC adopted the LDED’s recommendations and, among other  recommendations, took the following actions:    Award authority in the competitive pool to applicants that applied before  November 2007 on a first-come, first-served basis. After making awards to  those existing applicants, future awards from the competitive pool will be  prioritized based on whether the LDED determines that the proposed  project is consistent with Louisiana’s longer-term economic development  strategy. However, even if the LDED does not designate a project as  consistent with Louisiana’s longer-term economic development strategy,  the projects are considered by the SBC on a first-come, first-served basis,  and, at the SBC’s discretion, may or may not be awarded an allocation.
Limit the amount of authority that any single developer can receive to $100  million going forward.
Allow local jurisdictions in the designated pool to recommend projects to  the Louisiana SBC for approval, and local jurisdictions may recommend  projects exceeding the $100 million limit, as long as the local jurisdiction is  located in a designated pool parish that has allocation authority remaining  and the parish approves the allocation.  Impose a 240-day period to issue bonds after receiving allocations.
Require, in addition to the regular application fee, that applicants must  submit a refundable deposit totaling 0.5 percent of the proposed allocation  with their application. This change also applied to the applicants that had  received allocations but had not yet issued bonds as a condition for them  to receive the full 240-day extension of their allocation time limit.
In May 2008, the Louisiana SBC awarded GO Zone bond authority to  applicants in the competitive pool pending before November 2007 as well  as to all other pending applications on the basis of the prioritization policy  described above, effectively exhausting the competitive pool allocation  authority on a first-come, first-served basis. As of June 2008, parishes in  the designated pool have bond authority remaining to allocate. According  to Louisiana officials, if the designated pool parishes have not issued  bonds for all of their authority by the beginning of 2010, the remaining  authority will be available to both the competitive and designated pools  during 2010.
section_title: States Used Existing Procedures to Award GO Zone LIHTCs and Will Use Existing Procedures to Monitor Compliance with Applicable Federal Laws
paragraphs: The HFAs from the five eligible states used their existing procedures to  announce the availability of credits, process applications, and award GO  Zone LIHTCs. Three of the five states announced the availability of GO  Zone LIHTCs in their qualified allocation plans (QAP), which HFAs use to  announce the availability of credits, eligibility criteria, and information on  ranking applications. The Florida HFA had already finalized its QAP in  2006 (before the state received the extra GO Zone allocation), so the  availability of these funds was not announced in the QAP, but was  advertised at the beginning of the 2006 funding cycle. Similarly, the Texas  HFA announced the availability of GO Zone LIHTCs through a separate  policy because its QAP had already been published. Officials from each  state HFA stated that they used their existing procedures to process GO  Zone LIHTC applications and to award the credits. These processes  generally include scoring and ranking applications, reviewing market  studies and environmental assessments, underwriting, and making funding  recommendations to the boards.
States generally announced funding priorities for each funding cycle  through their QAPs. According to the 2006 through 2008 QAPs and HFA  officials, in some funding cycles the HFAs for Louisiana, Mississippi, and  Texas gave priority to projects that were to be developed in the GO Zone  counties with the most hurricane-related damage. For example, according  to the 2007/2008 QAP for Louisiana, at least 75 percent of the 2007 and  2008 GO Zone credits were reserved for parishes with significant numbers  of rental housing with damage from Hurricanes Katrina and Rita. While 13  specific parishes were targeted in Louisiana for GO Zone bonds, the QAP  targeted 8 parishes for GO Zone LIHTCs. The QAPs for Alabama and  Florida did not give any priority to projects in the most-damaged GO Zone  counties. According to the addendum to Alabama’s 2006 QAP, the HFA’s  priority was to balance the distribution of credits throughout the state in  terms of geographical regions, counties, and urban and rural areas.  Officials from the Florida HFA stated that the need to prioritize the GO  Zone counties with the most damage was mitigated by an agency policy to  prioritize the counties that were hardest hit by 2004 and 2005 hurricanes,  which already included some of the GO Zone counties.
HFAs are required to annually monitor LIHTC-funded projects for  compliance with the Internal Revenue Code once projects are complete  and in service, and report any instances of noncompliance to the IRS after  giving the owner time to correct the problem. As a part of this annual  monitoring process, officials review documentation to ensure that the  properties meet one of two tests that restrict both the amount of rent that  is assessed to tenants and the income of eligible tenants. In addition, at  least once every 3 years, HFAs must conduct on-site inspections of all  buildings in a project and, for at least 20 percent of the project’s low- income units, inspect the units and review income and rent records. For  example, the Alabama HFA’s compliance manual states that its staff will  perform annual file reviews, including site visits as needed, to ensure that  the owner is operating the project in compliance. Similarly, according to  the Louisiana HFA compliance manual, staff will annually review  compliance monitoring reports, which all project owners are required to  submit, and periodically conduct on-site visits. We did not assess the  extent to which monitoring policies have been followed since few GO  Zone LIHTC-funded units had been placed in service as of April 2008.
section_title: Louisiana and Mississippi Adopted Different Approaches for Issuing Tax Credit Bonds; Alabama Did Not Issue Tax Credit Bonds
paragraphs: The Louisiana SBC issued tax credit bonds matched by the state with  general obligation bonds and will retire the bonds by July 17, 2008, by  refunding them with tax-exempt general obligation bonds. The state  accepted applications from local entities to receive funds from the tax  credit bond proceeds. In Mississippi, the State Treasurer’s Office issued  tax credit bonds matched by state general fund money to provide  temporary debt relief at the state level. They will retire these bonds on  October 30, 2008. Both states rely on the state’s bond counsel opinions to  ensure that the tax credit bonds are issued in accordance with applicable  federal laws.
Alabama did not issue the tax credit bonds because officials in Alabama’s  Debt Management Division believed the deadline for issuing tax credit  bonds would expire before the state would be able to issue general  obligation bonds. Alabama officials said the state is required to amend its  constitution to issue general obligation bonds; as we noted earlier, states  are required to issue the GO Zone tax credit bonds as general obligation  bonds. As such, Alabama officials did not believe they would be able to  meet the deadline for issuing the tax credit bonds.
section_title: States Generally Allocated Additional Advance Refundings on a First- Come, First-Served Basis and Rely on Bond Counsel to Ensure Compliance with Applicable Laws
paragraphs: The Governor of Alabama delegated the responsibility to allocate advance  refundings to the Finance Director. Alabama allocated advance refundings  on a first-come, first-served basis as counties and bond authorities  submitted advance refunding applications to the Alabama Department of  Finance, Debt Management Division. According to Alabama officials, as  long as the bond issuer and bond counsel certified that the bonds qualified  for advance refunding, the state approved the application.
In Louisiana, additional advance refunding applicants were to apply to the  Louisiana SBC, with a copy being sent to the Governor’s Office.  Applications for additional advance refunding authority were approved on  a first-come, first-served basis. Louisiana indicated the state will approve  eligible advance refundings on a first-come, first-served basis until $1.5  billion of allocation authority remains and then will develop criteria to  allocate the remaining authority. The issuer’s bond counsel must indicate  in writing that the bonds meet applicable requirements.
The Mississippi State Treasurer’s Office, along with other state agencies,  made cities, counties, and other governmental debt issuers aware of the  additional advance refunding provision. It then allocated additional  advance refunding authority to entities that applied to the Treasurer’s  Office generally on a first-come, first-served basis after the issuer’s bond  counsel indicated the bonds met the eligibility requirements for GO Zone  additional advance refundings and the State Treasurer certified that the  issuer filed a completed application.
section_title: Most GO Zone Private Activity Bonds Have Been Allocated for a Range of Private Facilities and LIHTCs for Rental Housing; States Used Debt Relief Provisions to Varying Degrees
paragraphs: As of mid-June 2008, states with GO Zones had allocated 87 percent of  their authority for GO Zone tax-exempt private activity bonds and as of  April 2008 about 95 percent of their LIHTC authority. However, bonds  have been issued for only about half of the final allocations, representing  44 percent of the total GO Zone tax-exempt private activity bond authority,  and few LIHTC units were in service. As of those dates, Alabama,  Louisiana, and Mississippi used GO Zone private activity bonds to finance  a broad range of private facilities, including manufacturing facilities,  utilities, housing, retail facilities, hotels, and other facilities. Depending on  circumstances such as time frames for issuing the bonds and the number  of eligible bonds available, states’ use of GO Zone tax credit bonds and  additional advance refundings varied. States used these latter two  provisions to provide debt relief at the state and local level. State officials  identified some challenges in making use of all four provisions.
subsections: section_title: Gulf Coast States Have Allocated about 87 Percent of Private Activity Bond Authority for a Wide Range of Private Facilities, but Bonds Have Only Been Issued for about Half of the Awarded Authority
paragraphs: As of mid-June 2008, the three eligible states have allocated 87 percent of  the $14.9 billion in GO Zone private activity bond authority, and bonds  issued amounted to about 44 percent of the total allocation authority (see  fig. 2). Alabama, Louisiana, and Mississippi have allocated 88 percent, 89  percent, and 84 percent of their GO Zone private activity bond authority,  respectively. Bonds had been issued for about half of the allocation  authority that the states awarded. If applicants receiving private activity  bond allocations cannot issue bonds within required time frames, the  allocation authority is returned to the state to be reallocated. States have  used these bonds for a wide range of facilities as allowed under the act.  For example, states used GO Zone bonds for manufacturing facilities,  utilities, housing, hotels, conference centers, retail facilities, and a variety  of other private business activities. Under normal rules for tax-exempt  private activity bond financing, some of these uses, including hotels and  retail facilities, would not be allowed. For a listing of GO Zone private  activity bonds issued in Alabama, Louisiana, and Mississippi as of mid- June 2008, see appendix I.
In all three eligible states, larger bonds account for at least 69 percent of  the total GO Zone bonds issued. As of mid-June 2008, the 10 largest bonds  issued in Alabama, Louisiana, and Mississippi account for approximately  92 percent, 76 percent, and 69 percent of total bonds issued, respectively.  This is one indication that borrowers financing larger projects may have  been able to use the GO Zone tax-exempt private activity bonds to a  greater extent than borrowers financing smaller projects. Officials in  Louisiana and Mississippi said that smaller projects, such as those issuing  bonds for less than about $2 or $3 million, may have a more difficult time  using the GO Zone private activity bond provision because the issuance  costs, including fees for legal and financial advisors, begin to account for a  larger percentage of bond proceeds for smaller bonds than for larger  bonds.
Some GO Zone parishes and counties contained multiple projects that  received GO Zone bond allocations, with total amounts in the counties and  parishes ranging from less than $1 million to over $1 billion. The states  also awarded projects that were to benefit multiple GO Zone counties and  parishes. Alabama awarded 7 percent of its GO Zone private activity bond  authority to projects affecting multiple counties. Louisiana awarded 6  percent of its authority to projects affecting multiple parishes and  Mississippi awarded 29 percent of its authority in a similar manner. Figure  3 shows the range of GO Zone tax-exempt private activity bond allocations  by state and by county or parish as of mid-June 2008. Even though the  figure indicates that some of the most-damaged counties and parishes in  Mississippi and Louisiana did not yet have any specific projects that have  received GO Zone bond allocations as of June 2008, these counties and  parishes may have benefited from some of the projects affecting multiple  counties or parishes within that state.
Projects are experiencing challenges in issuing the GO Zone private  activity bonds. According to state officials and others we interviewed:    private businesses may need to combine tax-exempt bond financing with  other federal, state, or local subsidies for a project to be viable;  risks associated with financing projects in areas most vulnerable to future  natural disasters can make it difficult to sell the bonds;  insurance costs have risen since the 2005 hurricanes;  reduced availability of credit nationwide has made it more difficult to  issue bonds; and  the most heavily damaged areas in and around New Orleans, Louisiana,  may not be able to use their designated allocation authority before it  expires in 2010.
section_title: The Five States Combined Have Awarded 95 Percent of Their LIHTC Allocation; Few Planned Units Were In Service as of April 2008
paragraphs: The five eligible states have awarded 95 percent of the combined $330  million in additional tax credit allocation from 2006 through 2008 as  provided under the GO Zone Act of 2005. The state HFAs for Florida,  Mississippi, and Texas awarded all of the $113 million of the additional GO  Zone LIHTC allocations from 2006 through 2008. As of April 2008, the  Alabama HFA had awarded 74 percent of its $47 million GO Zone LIHTC  allocation for 2006 through 2008. The agency awarded all of its 2006 and  2007 allocations, and was in the process of awarding its nearly $16 million  2008 GO Zone LIHTC allocation. The Louisiana HFA had awarded all of its  GO Zone LIHTCs, but some have since been returned.
Few of the planned GO Zone LIHTC funded units were in service as of  April, 2008 (see fig. 4). While LIHTC-funded units are generally required to  be placed in service within 2 years of credit allocation, Congress extended  this requirement for units funded with GO Zone LIHTCs. GO Zone LIHTC- funded units (as well as regular LIHTC units funded during 2006 through  2008 in a GO Zone) must be placed in service before January 1, 2011.
Officials from the five HFAs that received GO Zone LIHTCs told us that  most units are anticipated to be in service within the required time frames,  but that they are working to address challenges to help ensure that all  units are placed in service by the deadline. One of the challenges that  some HFA officials stated that they are facing is the declining market value  of tax credits. As the value of tax credits declines, developers get less  equity from investors for each dollar in tax credits awarded. As a result,  developers must seek additional funding sources to make up for the equity  shortfall. HFA officials from Alabama, Louisiana, and Mississippi also  explained that they have encountered resistance from some communities  to the development of affordable rental housing. Such resistance generally  slows development, as developers try to work out such issues with local  officials. In addition, HFA officials noted that other challenges include the  need to address environmental issues, and increases in the total costs to  develop projects, due to increased costs for labor, materials, and land.
The number of planned GO Zone LIHTC-funded units, and units placed in  service as of April 2008, varies by GO Zone parish and county (see fig. 5  and app. II, table 5). As an example, the total number of planned and in- service units ranged from a low of 24 units in Washington County,  Alabama, to a high of 8,636 in Orleans Parish, Louisiana. In most counties,  from 1 to 150 units were either planned or in service as of April 2008. In  other GO Zone counties, no GO Zone LIHTC-funded units are planned. Our  analysis focuses on GO Zone LIHTC-funded units, and it is important to  note that other programs can also be used to fund affordable rental  housing, such as HUD programs and other state and local programs.
According to statewide HUD data, over 82,000 rental housing units in  Louisiana and over 20,000 rental housing units in Mississippi had major or  severe damage. Of these units, nearly 80,000 were in eight Louisiana  parishes and about 19,200 were in three Mississippi counties (see fig. 6). In  Louisiana and Mississippi, the number of rental units with major or severe  damage ranged from a low of 468 in Vermilion Parish, Louisiana, to a high  of nearly 52,000 units in Orleans Parish, Louisiana.
Comparing the number of planned and in-service GO Zone LIHTC-funded  units to the number of rental housing units with major or severe damage  shows that about 17 percent of the rental housing units with major or  severe damage in the state of Louisiana, and 45 percent of the similarly  damaged units in the state of Mississippi, will be addressed by GO Zone  LIHTC units. While other programs can also be used to fund affordable  rental housing, our analysis focuses on GO Zone LIHTC-funded units. The  extent to which damaged units will be addressed varies by county and  parish (see fig. 7 and app. II, table 5).
section_title: Louisiana and Mississippi Exhausted Their Tax Credit Bond Allocation Authority
paragraphs: Louisiana and Mississippi issued a total of $300 million of GO Zone tax  credit bonds, exhausting their allocation authority. Louisiana issued its  $200 million of the tax credit bonds to distribute funds through a “Debt  Service Assistance Fund” to selected local government entities that  applied to the State Bond Commission. In all, 13 local government entities  in New Orleans and the surrounding area received bond proceeds from  Louisiana’s tax credit bonds and general obligation matching bonds. The  local governments used the funds to make premium and interest payments  on bonds issued before August 28, 2005. Mississippi issued $100 million of  the tax credit bonds to make debt service payments on state bonds for  fiscal year 2007.
As discussed above, Alabama did not issue tax credit bonds because state  officials did not believe they would be able to meet the requirements for  issuing general obligation bonds (tax credit bonds must be general  obligations of the state) before the provision expired.
Mississippi officials indicated that educating investors about the  mechanics of tax credit bonds—that investors receive a credit against tax  liability but no interest payments—proved to be one challenge in  marketing the bonds to investors.
section_title: Alabama Has Issued a Larger Percentage of the State’s Advance Refunding Authority than Louisiana or Mississippi
paragraphs: In total, Alabama, Louisiana, and Mississippi have issued GO Zone  additional advance refunding bonds accounting for 16 percent of their  total allocation authority. As of mid-June 2008, Alabama had issued 65  bonds and approved an additional 19 advance refundings, totaling $599  million, or about 53 percent of its allocation authority. In contrast,  Louisiana has issued 9 advance refundings, totaling $483 million, or about  11 percent of its allocation authority, and Mississippi has only issued 6  advance refundings, totaling $169 million, or about 8 percent of its  allocation authority. Appendix III lists the additional advance refunding  bonds issued in Alabama, Louisiana, and Mississippi.
Similar to the case of other tax incentives such as private activity bonds  and tax credit bonds, the states faced certain challenges in issuing  additional advance refundings. According to state officials in Louisiana  and Mississippi, some bonds for which the state may have been able to  approve an additional advance refunding still had both the original bond  awaiting its call date and the first advance refunding bond outstanding.  Under the GO Zone Act of 2005, such bonds are ineligible for an additional  advance refunding. Also, according to officials in Louisiana, some debt had  already been refunded before the hurricanes at lower interest rates than  those available after the 2005 hurricanes.
section_title: Agency Comments
paragraphs: We provided state officials in Alabama, Florida, Louisiana, Mississippi, and  Texas with portions of the draft report that addressed aspects of GO Zone  tax incentive allocation and use in their jurisdictions. We incorporated  their technical comments as appropriate. We also provided relevant  sections of the report to the Internal Revenue Service and the Office of  Tax Policy, Department of the Treasury.  We also incorporated their  technical comments as appropriate.
We are sending copies of this report to the interested congressional  committees, the Commissioner of Internal Revenue, the Secretary of  Housing and Urban Development, and other interested parties. We will  make copies available to others on request. In addition, the report will be  available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions on matters discussed in this report  or would like additional information, please contact me at (202) 512-9110  or at brostekm@gao.gov. Major contributors to this report are  acknowledged in appendix V.
section_title: Appendix I: Gulf Opportunity (GO) Zone Tax- Exempt Private Activity Bonds Issued
section_title: Appendix II: Low-Income Housing Tax Credit Uses by State
paragraphs: GO Zone LIHTC  units as a  percent of units  with severe or  major damage n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
GO Zone LIHTC  units as a  percent of units  with severe or  major damage n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
section_title: Appendix III: Additional Advance Refunding Bonds Issued, by State
paragraphs: Appendix III: Additional Advance Refunding  Bonds Issued, by State Alabama A&M University  The Public Building Authority of the City of Huntsville  Jasper Water Works & Sewer Board Inc.
Utilities Board of the City of Opp  Dale County Board of Education  Crenshaw County Public Building Authority  The Governmental Utility Services Corp. of Bessemer  The Hale County Health Care Authority  Lamar County Water & Fire Protection Authority Inc.
section_title: Appendix IV: Related GAO Products
paragraphs: Tax Policy: Tax-Exempt Status of Certain Bonds Merits Reconsideration,  and Apparent Noncompliance with Issuance Cost Limitations Should Be  Addressed. GAO-08-364. Washington, D.C.: February 15, 2008.
Tax Compliance: Federal Grant and Direct Assistance Recipients Who  Abuse the Federal Tax System. GAO-08-31. Washington, D.C.: November  16, 2007.
Tax Compliance: Some Hurricanes Katrina and Rita Disaster Assistance  Recipients Have Unpaid Federal Taxes. GAO-08-101R. Washington, D.C.:  November 16, 2007.
Gulf Coast Rebuilding: Observations on Federal Financial Implications.  GAO-07-1079T. Washington, D.C.: August 2, 2007.
Preliminary Information on Gulf Coast Rebuilding. GAO-07-809R.  Washington, D.C.: June 29, 2007.
Gulf Coast Rebuilding: Preliminary Observations on Progress to Date and  Challenges for the Future. GAO-07-574T. Washington, D.C.: April 12, 2007.
Tax Policy: New Markets Tax Credit Appears to Increase Investment by  Investors in Low-Income Communities, but Opportunities Exist to Better  Monitor Compliance. GAO-07-296. Washington, D.C.: January 31, 2007.
Empowerment Zone and Enterprise Community Program: Improvements  Occurred in Communities, but the Effect of the Program Is Unclear. GAO- 06-727. Washington, D.C.: September 22, 2006.
Government Performance and Accountability: Tax Expenditures  Represent a Substantial Federal Commitment and Need to Be  Reexamined. GAO-05-690. Washington, D.C.: September 23, 2005.
Elderly Housing: Federal Housing Programs That Offer Assistance for the  Elderly. GAO-05-174. Washington, D.C.: February 14, 2005.
Tax Administration: Information Is Not Available to Determine Whether $5  Billion in Liberty Zone Tax Benefits Will Be Realized. GAO-03-1102.  Washington, D.C.: September 30, 2003.
Federal Housing Assistance: Comparing the Characteristics and Costs of  Housing Programs. GAO-02-76. Washington, D.C.: January 31, 2002.
Tax Credits: Opportunities to Improve Oversight of the Low-Income  Housing Program. GAO/GGD/RCED-97-55. Washington, D.C.: March 28,  1997.
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the individual named above, MaryLynn Sergent, Assistant  Director; Dan Garcia-Diaz; Thomas Gilbert; Patrick Hatch; Suzanne  Heimbach; Lisa Moore; John McGrail; Cheryl Peterson; and Jessica  Thomsen made key contributions to this report.