BILL ANALYSIS C.S.H.B. 2726 By: Romo (Montford) Finance 5-16-95 Senate Committee Report (Substituted) BACKGROUND The Tax Reform Act of 1986 imposed a limit on the amount of "private-activity" tax-exempt debt that could by 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. Article 5190.9a, V.T.C.S., requires the bond review board administer the program in Texas. Furthermore it mandates that the list for the first eight months of the year the volume cap is divided by purpose into five subceilings: (1) single family housing (2) state voted issues (3) qualified small issues (4) residential rental projects and (5) all other issues requiring allocation. PURPOSE As proposed, C.S.H.B. 2726 clarifies and simplifies the allocation process of tax-exempt private activity bonds. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is granted to the Department of Housing and Community Affairs under SECTION 9 (Sec. 394.027(a), Local Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 1, Article 5190.9a, V.T.C.S., by amending Subdivision (14) and adding Subdivision (20), as follows: (14) Redefines "qualified small issue bond." (20) Defines "tax-exempt enterprise zone facility bonds." SECTION 2. Amends Sections 2, Article 5190.9a, V.T.C.S., by amending Subsections (b), (c), (e), and (f), and adding Subsections (g) and (h), as follows: (b) Provides that prior to September 1, 17.5 percent of the state ceiling is available exclusively for reservations by issuers of state-voted issues for the purpose of issuing a state-voted issue, and 7.5 percent of the state ceiling is available exclusively for reservations by issuers of qualified small issue bonds and tax-exempt enterprise zone facility bonds. (c) Deletes requirement that a portion of money be made available to the housing finance division. (e) Makes conforming and nonsubstantive changes. (f) Makes conforming changes. (g) Provides that $20 million in reservations for each year for the years 1996 and 1997 is available to the Texas Department of Housing and Community Affairs from that portion of the state ceiling that is available exclusively for reservations by issuers of qualified mortgage bonds for the purpose of issuing qualified mortgage bonds until August 25. (h) Requires a bond issued for the reservation made by Subsection (g) of this section to be used to finance or refinance single-family home construction, reconstruction, or acquisition or to finance or refinance contracts for deed for single-family housing, and target families that earn 60 percent or less of the median family income in a colonia, as defined by Section 916 of Pub. L. No. 101-625. SECTION 3. Amends Section 3, Article 5190.9a, V.T.C.S., by amending Subsections (a), (b), (c), (d), and (f) and adding Subsection (g), as follows: (a) Provides that no issuer prior to September 1 shall receive reservations in excess of certain amounts. (b) Prohibits a housing finance corporation from receiving an allocation for the issuance of qualified mortgage bonds in excess of $25,000,000, rather than 30,000,000. (c) Provides that a priority under category (1) of an issuer composed of more than one jurisdiction is not affected by the issuer's loss of a sponsoring governmental unit and that unit's population base if the dollar amount of the application has not increased. (d) Prohibits an application for a reservation from being submitted and a reservation from being granted after December 1. (f) Authorizes an issuer to refuse to accept a reservation for any amount if the reservation is granted after September 23. (g) Requires an issuer described by Section 2(b)(1) of this Act other than the Texas Department of Housing and Community Affairs to reserve for six months 50 percent of the funds available for loans outside the federally designated target areas to provide mortgages to individuals and families with incomes below 80 percent of the applicable median family income, as defined by Section 143(f)(4) of the code. SECTION 4. Amends Section 4, Article 5190.9a, V.T.C.S., as follows, (a) and (b) Make conforming changes. (c) Prohibits the bond review board from accepting applications for more than one project located at, or related to, a business operation at a particular site in any one calendar year. SECTION 5. Amends Section 7(d), Article 5190.9a, V.T.C.S., to require the issuer to submit to the board certain information by the fifth business day after the day on which the bonds are closed. SECTION 6. Amends Section 12, Article 5190.9a, V.T.C.S., to delete requirement that legislature appropriate the amount equal to the amount collected as fees. SECTION 7. Amends Section 394.023(b), Local Government Code, to require the local government to use amounts received under this subsection only to provide for the housing needs of individuals and families with incomes of less than 60 percent of the applicable median family income, as defined by Section 143(f)(4) of the Internal Revenue Code of 1986. SECTION 8. Amends Section 394.026(b), Local Government Code, to provide that the title to all funds and property owned by the corporation at the time of dissolution vests in the local government to be used exclusively by the local government to provide for the housing needs of individuals and families with incomes of less than 60 percent of the applicable median family income, as defined by Section 143(f)(4) of the Internal Revenue Code of 1986. SECTION 9. Amends Chapter 394C, Local Government Code, by adding Section 394.027, as follows: Sec. 394.027. ANNUAL REPORT. (a) Requires a housing finance corporation to file with the department a report in accordance with this section before January 31 of each year. Requires the department, by rule, to prescribe the form of the report. (b) Requires the report to include certain information for all single-family home mortgage loans made by the housing finance corporation or made as a result of the activities of the corporation during the preceding calendar year. SECTION 10. Sets forth the following changes in law made by this Act: (1) Makes application of this Act prospective regarding earnings that are received by and to funds and property that vest in a local government. (2) Makes application of this Act prospective regarding issues that close. (3) Makes application of this Act prospective regarding allocations or reservations. (4) Makes application of this Act prospective regarding project applications. SECTION 11. Effective date: immediately. SECTION 12. Emergency clause. Effective date: upon passage.