BILL ANALYSIS H.B. 2726 By: Romo 04-10-95 Committee Report (Unamended) BACKGROUND The Tax Reform Act of 1986 imposed a limit on the amount of "private-activity" tax-exempt debt that could be issued each calendar year in any one state. The volume cap or state ceiling is calculated for each state at $50 per capita, with a minimum of $150,000,000. For 1995, Texas has a cap of $918,900,000. Each state has the authority to administer the allocation of the volume cap. VATCS 5190.9a requires that the Texas Bond Review Board administer the program in Texas. The statute mandates that for the first eight months of the year the volume cap is divided by purpose into five subceilings as follows: #1)Single Family Housing 28.0% #2)State Voted Issues 17.5% #3)Qualified Small Issues(IRBs) 7.5% #4)Residential Rental Projects(multi-family housing) 5.0% #5)All other issues requiring allocation 42.0% With the exception of single family housing, which has a priority system established by Art. 5190.9a Section 3(c), applications are placed in line according to a number selected by lot. Following the lottery, applications are in line according to their application date. After September 1, all subceilings are combined and the remaining volume cap is allocated. PURPOSE If passed, House Bill 2726 will clarify and simplify the allocation process, thereby allowing the program to operate more efficiently. It will also make policy changes anticipated to achieve broader distribution of the volume cap by lowering the maximum application amounts and the number of eligible projects per site for each calendar year. Historically, the allocation program has been critically oversubscribed. Although each project would receive a smaller amount of volume cap, a greater number of projects would receive a reservation. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 1, Chapter 1092, Article 5190.9a, Vernon's Texas Civil Statutes by amending Subdivision 14 and adding Subdivision 20. Defines tax-exempt enterprise zone facility bonds (EZ Bonds) to be consistent with tax code. SECTION 2. Amends Sections 2(b) and (e) which allows the program to continue even if some types of bonds become ineligible at the federal level. The set-asides for those purposes would be reallocated to other subceilings. SECTION 3. Amends Section 3(d) which would move the deadline from December 14 to December 1 to be consistent with filing deadlines required by the Attorney General's office if a project is to close by December 24. Amends Subsection (f) which would allow an issuer to refuse a reservation without penalty if they have been given less than 90 days to close their transaction. SECTION 4. Amends subsection (d) which would allow five business days rather than calendar days to submit closing documents. This allows enough time for compliance, even if there is a holiday or long weekend following the closing. SECTION 5. Amends Section 12, by deleting language to make it consistent with the funds consolidation language. SECTION 6. Amends Chapter 1092, Article 5190.9a by amending subsection (a), (b) and (c), which would lower the maximum application amounts in three areas. Lowers Subceiling 1 from $30 million to $25 million, except for the Texas Department of Housing and Community Affairs, which remains at one third of the twenty eight percent dedicated to this subceiling. Lowers Subceiling 4 from $50 million to $15 million. Lowers Subceiling 5 from $50 million to $25 million. Subsection (c) allows for there to be no penalty for a multi-jurisdictional housing issuer if a sponsoring governmental unit withdraws from the issuer, and thus changes the issuer's population base. SECTION 7. Amends Section 4, Article 5190.9a by adding subsection (c) which limits the number of project applications at any one site to one each year. SECTION 8. Emergency Clause. SUMMARY OF COMMITTEE ACTION The committee considered HB 2726 in a public hearing on April 10, 1995. The following person testified neutrally on the bill: Jeanne Talerico. The bill was reported favorably without amendments, with the recommendation that it do pass and be printed and be sent to the Committee on Local and Consent Calendars, by a record vote of: 6 Ayes, 0 Nays, 0 PNV, 3 Absent.