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.