LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 9, 2001
TO: Honorable David Sibley, Chair, Senate Committee on
Business & Commerce
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB3294 by Wise (Relating to the provision of housing and
related forms of assistance to residents of colonias and
residents of other underserved regions of this state.),
As Engrossed
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB3294, As Engrossed: negative impact of $(21,744,550) through *
* the biennium ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(10,947,275) *
* 2003 (10,797,275) *
* 2004 (10,797,275) *
* 2005 (10,797,275) *
* 2006 (10,797,275) *
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All Funds, Five-Year Impact:
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*Fiscal Probable Probable Probable Revenue *
* Year Savings/(Cost) from Savings/(Cost) from Gain/(Loss) from New *
* General Revenue Fund New Other/Mortage Other/Mortage *
* 0001 Revenue Bond Revenue Bonds *
* 2002 $(10,947,275) $(9,023,000) $9,023,000 *
* 2003 (10,797,275) (8,873,000) 8,873,000 *
* 2004 (10,797,275) (8,738,000) 8,738,000 *
* 2005 (10,797,275) (8,738,000) 8,738,000 *
* 2006 (10,797,275) (8,738,000) 8,738,000 *
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Technology Impact
None.
Fiscal Analysis
The bill would require the Texas Department of Housing and Community
Affairs (TDHCA) to undertake a study of specified under-served single
family mortgage markets, including households with lower credit ratings
than currently served through the First-Time Homebuyer Program. The bill
further would require TDHCA to allocate no less than 40 percent of its
single-family mortgage revenue bond loan volume to these sub-markets,
subject to a satisfactory market demand through the market study.
The bill would amend Section 2306.587, Government Code, relating to
funding self-help centers, by disallowing the use of community
development block grants (CDBG) as a funding source for the centers.
According to TDHCA, alternative funding would therefore need to be found
for the self-help centers required under existing statute. Because no
other existing TDHCA resources are currently available, General Revenue
would be needed to replace the current level of CDBG funding of contracts
for self-help centers.
The bill would add Subchapter GG to Chapter 2306, Government Code,
creating a Colonia Model Subdivision Revolving Loan Fund. TDHCA would be
allowed to provide a loan from the new fund to colonia self-help centers
and community housing development organizations. According to TDHCA this
limitation precludes the use of CDBG funds, which can be made only to
units of general local government in the forms of grants, not loans. As
with the self-help centers, TDHCA reports no other existing funding
source within the agency is available. Therefore, General Revenue would
be needed.
The bill would take effect September 1, 2001.
Methodology
TDHCA estimated the cost based on issuance of 40 percent of its $108.6
million private activity bond authority as sub-prime (based on 2001
volume). Costs reflect additional reserves needed for these types of
loans. Because sub-prime loans may produce more losses than prime loans,
rating agencies require additional Loss Coverage Reserves (LCRs) to
compensate for the additional risk. To minimize the LCR required, the
TDHCA used a lower loan-to-values rate.
According to TDHCA, merely granting the 20 percent in down payment
assistance most likely would result in higher LCRs than normally required
for an 80 percent loan-to-value mortgage, requiring the borrower to have
10 percent for down payment. TDHCA reports that granting only 10 percent
to borrowers would require at least $4.3 million at the 40 percent
set-aside proposed. TDHCA reports that they do not have sufficient funds
to finance this reserve and would have to rely on state General Revenue
funds. Although TDHCA may structure an issue that funds most of the LCR
requirement, another source of funds, most likely state General Revenue
funds, would have to be appropriated to finance the unfunded LCR
requirement of approximately $1.8 million per year.
The cost of the market study may be recovered from bond proceeds,
although TDHCA is not certain that more than approximately $200,000 may
be recovered without adversely impacting the mortgage rate.
According to TDHCA, total cost to the state would be $10,947,275 in
fiscal year 2002 and $10,797,275 in each subsequent year in General
Revenue, mainly for reserves.
Local Government Impact
No significant fiscal implication to units of local government is
anticipated.
Source Agencies: 352 Texas Bond Review Board, 332 Texas Department
of Housing and Community Affairs
LBB Staff: JK, DB, RT, ER