BWM C.S.H.B. 2798 75(R)BILL ANALYSIS FINANCIAL INSTITUTIONS C.S.H.B. 2798 By: Marchant 4-30-97 Committee Report (Substituted) BACKGROUND The Tax Act of 1986 restricted the private purposes for which tax-exempt debt could be issued and also the amount of private activity, tax-exempt debt which is issued in each state during each calendar year. This limitation is known as the "state ceiling" or "volume cap". The amount of the volume cap is calculated as $50 per capita each year. It is at each state's discretion as to how to allocate the volume cap to best serve the interest of the state. In Texas, the allocation is determined by statute (Article 5190.9a). The Private Activity Bond (PAB) Allocation Program is administered by the Bond Review Board. PURPOSE As proposed, HB 2798 increases the flexibility of the Bond Review Board by changing the amounts of sub-ceilings for some of the categories that have a reservation, creating a new subceiling for local issuers of student loan bonds. 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, Acts of the 70th Legislature, Regular Session, 1987 (Article 5190.9a Vernon's Texas Civil Statutes) effective January 1, 1998. Subsection (8). Amended to make clarifying changes by replacing all references to the word "governmental" with "government," and replacing "local governmental unit" with "local government." Subsection (12). Added to define "project" to clarify and to define jurisdiction as the jurisdiction as of the date of application. Subsection (16). Added to define "qualified student loan bond." SECTION 2. Amends Section 2, Chapter 1092, Acts of the 70th Legislature, Regular Session, 1987 (Article 5190.9a, Vernon's Texas Civil Statutes) effective January 1, 1998, by amending Sec. 2(b) & (f), adding 2(c), and renumbering and perfecting citations in subsequent sections. Sec. 2(b). Provides for an increase in the sub-ceiling for issuance of qualified mortgage bonds from 28% to 31.5%, a decrease in the sub-ceiling for state-voted issues from 17.5% to 13%, and an increase in the sub-ceiling for multi-family housing issues from 5% to 7.5% of the state's volume cap. Adds a new sub-ceiling for local issuers of student loan bonds in the amount of 11%. Decreases the "all other" category from 42% to 29.5%. Sec. 2(c). Provides that in the event applications for state voted issues received before January 2 are in excess of 13%, up to 17.5%, the incremental amount of excess will be removed from other issuers and the remaining amount will be used according to the percentages established in Sec. 2(b). Sec. 2(f). Adds subsection (6) to list of affected bonds under subsection (b) of this chapter. SECTION 3. Amends Section 3(c), Chapter 1092, Acts of the 70th Legislature, Regular Session, 1987 (Article 5190.9a, Vernon's Texas Civil Statutes) effective January 1, 1998. Sec. 3(c). Amended to change the application date from January 2-10 to October 10-20 of the year preceding the program year. Amended to change the priority system for single family housing to require the order of priority to correspond to the last date which bond proceeds were made available to any part of the population rather than the last date the issuer closed a bond issue. Amended to establish a priority system for the issuers of student loan bonds to create a rotating system within that category. SECTION 4. Amends Section 3(a), Chapter 1092, Acts of the 70th Legislature, Regular Session, 1987 (Article 5190.9a, Vernon's Texas Civil Statutes) effective January 1, 1998. Sec. 3(a)(2). Amended to set a limit of $75 million for the Texas Higher Education Board. Sec. 3(a)(4). Amended to set a limit of $15 million or 15% of the amount set aside for this purpose, whichever is less, for issuers of qualified residential rental project issues. Sec. 3(a)(5). Amended to set a limit of $35 million for any one project of the higher education authorities. SECTION 5. Amends Sections 3(d) and (e), Chapter 1092, Acts of the 70th Legislature, Regular Session, 1987 (Article 5190.9a, Vernon's Texas Civil Statutes) effective January 1, 1998. Sec. 3(d). Amended to specify that the deadline for submission and grant of reservations be December 1st of the current program year. Sec. 3(e). Amended to allow reservations be granted to an issuer on or after January 2nd if the applied for amount is available. SECTION 4. Amends Section 4(a), Chapter 1092, Acts of the 70th Legislature, Regular Session, 1987 (Article 5190.9a, Vernon's Texas Civil Statutes) effective January 1, 1998. Sec. 4(a). Amended to change the date of the beginning of the application period to correspond with Section 3(c). Sec. 4(a)(6). Amended to include language that includes an issuer's population to correspond with amendments to Section 3(c). SECTION 7. Amends Section 4(c), Chapter 1092, Acts of the 70th Legislature, Regular Session, 1987 (Article 5190.9a, Vernon's Texas Civil Statutes) effective January 1, 1998. Sec. 4(c). Makes perfecting changes in the language pertaining to restrictions on one project per particular site for any program year. SECTION 8. Amends Section 6(c), Chapter 1092, Acts of the 70th Legislature, Regular Session, 1987 (Article 5190.9a, Vernon's Texas Civil Statutes) effective January 1, 1998. Sec. 6(c). Amended to change the expiration of reservations for which documents and fees have not been provided from a 90-day period to the period described by Section 7(a) of this Act. SECTION 9. Amends Sections 7(a) and (c), Chapter 1092, Acts of the 70th Legislature, Regular Session, 1987 (Article 5190.9a, Vernon's Texas Civil Statutes) effective January 1, 1998. Sec. 7(a). Amended to allow 120 days to complete a bond issue and close on the transaction except for issuers that received a reservation of state ceiling from the category described by Section 2(b)(1) of this Act (qualified mortgage bonds), who must close on the transaction by the 180th day after the reservation date. Sec. 7(c). Amended to increase the time period from 120 to 150 days before an issuer may resubmit an application for the same project, or during the 210 day period starting on the reservation date of the cancelled reservation for Section 2(b)(1) issuers. SECTION 10. Effective immediately except as provided by this Act. SECTION 11. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The Committee Substitute to HB 2798 adds the definition of "qualified student loan bond," and changes the sub-ceiling percentages for the issuance of tax exempt private activity bonds. The Substitute also adds provisions to increase the percentage for state voted issues when needed. The Substitute changes the initial application period from January 2-10 to October 10-20 of the preceding year to allow the lottery be held in the Fall, and makes perfecting changes accordingly throughout the Act to reflect these new dates. The Substitute adds provisions prohibiting a housing finance corporation or its sponsoring local government from gaining an advantage by creating or disbanding from a housing finance corporation, and adds provisions to order the granting of reservations in the event two or more higher education authorities make applications. The Substitute adds an allowance of 180 days to close on the bonds for issuers of qualified mortgage revenue bonds. The Substitute does not include provisions found in the original bill adding residential rental project bonds to the portion available for qualified mortgage bond issuance exclusively to the Texas Department of Housing until August 25.