LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 76th Regular Session
April 13, 1999
TO: Honorable Frank Madla, Chair, Senate Committee on
Intergovernmental Relations
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB 1112 by Shapleigh (Relating to the allocation of
programs maintained by the Texas Department of Housing
and Community Affairs to the state planning regions
based on population.), As Introduced
**************************************************************************
* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB1112, As Introduced: negative impact of $(5,200,000) through *
* the biennium ending August 31, 2001. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
**************************************************************************
General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2000 $(2,600,000) *
* 2001 (2,600,000) *
* 2002 (2,600,000) *
* 2003 (2,600,000) *
* 2004 (2,600,000) *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Savings/(Cost) from *
* General Revenue Fund *
* 0001 *
* 2000 $(2,600,000) *
* 2001 (2,600,000) *
* 2002 (2,600,000) *
* 2003 (2,600,000) *
* 2004 (2,600,000) *
*****************************************************
Fiscal Analysis
The bill would amend Section 2306, Government Code, requiring the Texas
Department of Housing and Community Affairs (TDHCA) to allocate housing
finance division funds to each geographic state planning region using a
formula developed by TDHCA based on the proportion of households in each
region that are in need of housing assistance.
The bill would take effect September 1, 1999.
Methodology
Currently, TDHCA receives approximately $100 million each year in
private activity bond cap authority through the Single Family Bond
Program which it uses to issue tax-exempt bonds that are bought by
private investors. TDHCA makes mortgage loans through local lenders
geographically dispersed across the state based on lender demand. The
loans are originated through lenders who apply to TDHCA and indicate
regions in which they will originate loans. Currently, the lender's
ability to make loans is considered to be the primary issue of importance
since this ensures the program's financial integrity.
Under the provisions of the bill, TDHCA estimates that 1,600 loans would
be issued by the department through the Single Family Bond Program and
that the cost per loan would increase by $125 per year as a result of an
interest rate increase of 20 basis points. The agency estimates a 13
year life span for each loan issued and that interest rates on these
loans would increase from 5.85% to 6.05% as a result of the risk
investors would associate with the regional allocation required by the
bill. TDHCA estimates that a demand for loans would not be reflected
through the regional allocation required by the bill and that bond
proceeds would be unused which would require TDHCA to repay unused
portions to bond investors. The agency estimates that $2,600,000 in
additional general revenue would be required each year to implement the
provisions of the bill by "buying down" the interest rate so that
borrowers would not pay additional risk premium costs and so that TDHCA
could ensure its ability to provide affordable loans below the market
rate.
It is assumed that implementing the provisions of the bill for the other
housing finance division programs would have no significant impact.
Local Government Impact
No significant fiscal implication to units of local government is
anticipated.
Source Agencies: 332 Department of Housing and Community Affairs
LBB Staff: JK, TL, RT, MW