C.S.S.B. 1664 78(R) BILL ANALYSIS
C.S.S.B. 1664
By: Averitt
Financial Institutions
Committee Report (Substituted)
BACKGROUND AND PURPOSE
The Texas Private Activity Bond Program is a federal program administered
by the Texas Bond Review Board ("the board") to assist in financing
eligible privately owned public-purpose projects. Eligible projects
include housing, student loans, industrial development, pollution control,
and certain "state-voted" issues which have been approved by Texas voters.
Each year, Texas is permitted to authorize an amount of private activity
bonds based on the state's population. In 2002, the state volume cap was
almost $1.6 billion, and the amount will continue to grow because of
Texas' population growth and inflationary adjustments. This state volume
cap is allocated among categories of projects based on statutory formulas,
and the board holds a lottery to determine which projects are funded
within each category. Applications for reservations of the state volume
cap far exceed the amounts available every year. For 2002, there were
more than $2.2 billion in unsatisfied requests.
C.S.S.B. 1664 is the result of the recommendations of the Joint Interim
Committee on Private Activity Bonds. The bill changes the allocation
among categories to better reflect the current needs of the state and
makes numerous changes to the administration of the program so that it may
be more fairly and efficiently operated.
RULEMAKING AUTHORITY
It is the committee's opinion that rulemaking authority is expressly
granted to the Texas Bond Review Board in SECTION 8 (Section 1372.0281,
Government Code) of this bill.
ANALYSIS
C.S.S.B. 1664 reenacts and amends Section 1372.022, Government Code, as
amended, to change the allocation of the state ceiling, when computed on
the basis of at least $75 per capita. Specifically, the bill adjusts the
allocation of reservations for
_Mortgage bonds to 28 percent from 29.6 percent;
_Small issue and enterprise zone facility bonds to 2 percent from 4.6
percent;
_Residential rental project bonds to 22 percent from 23 percent;
_Student loan bonds to 10.5 percent from 8.8 percent; and
_Other bonds to 29.5 percent from 26 percent.
The allocation of the state ceiling for state-voted issues is unchanged by
the bill at 8 percent. The bill deletes language relating to bonds issued
before September 1, 2003.
Mortgage Bonds
C.S.S.B. 1664 reduces the allocation of the state ceiling for qualified
mortgage bonds to 28 percent from 29.6 percent.
The bill amends Section 1372.028, Government Code to permit an issuer that
did not receive a reservation at the time of application for the lottery
to file a statement explaining any changes to its application in lieu of
filing a new complete application for the next program year. Such an
issuer must nonetheless pay the same application fee. The bill exempts
the Texas State Affordable Housing Corporation from certain requirements
to reserve half of its allocated funds for certain purposes for six
months.
Residential Rental Project Bonds
C.S.S.B. 1664 reduces the allocation of the state ceiling for qualified
residential rental project bonds to 22 percent from 23 percent. The bill
retains the current law set aside of 25 percent of this amount to the
Texas Department of Housing and Community Affairs (TDHCA) and 75 percent
to local housing finance corporations.
The bill amends Section 1372.0231, Government Code to alter the allocation
of private activity bonds allocated to local housing finance corporations
for reservations of issuers of qualified residential rental project bonds.
Before June 1 of each year, the board shall allocate the set aside to the
uniform state service regions on the basis of population, but only among
those regions within which an issuer has submitted an application on or
before March 1. Until May 15, for any such region which includes Austin,
Dallas, or Houston, the board shall reserve $15 million of the set aside
for each region for areas that lie outside of the applicable metropolitan
statistical area. The bill deletes language which required this
reservation to be population-based. The bill provides that an
application for an issuer that is submitted after the deadline shall have
a lower priority than every application submitted by that deadline.
The bill reenacts and amends Section 1372.0321, Government Code to alter
the criteria for which the board gives first priority in granting
reservations to issuers of qualified residential rental project bonds. In
lieu of the current criteria, the bill provides three specific types of
projects eligible for first-priority status based on maximum allowable
rent, occupant income limitations, and/or location, as applicable. The
bill retains the current criteria for second- and third-priority
designations.
The bill amends Section 1372.006, Government Code to increase the
nonrefundable fee that must accompany applications for qualified
residential rental project bonds $5,000 from $500. The board shall retain
$1,000 of this fee to offset the costs of administering the private
activity bond program and shall transfer the remaining $4,000 to TDHCA for
use in the affordable housing research and information program. The bill
clarifies that qualified residential rental project bonds, subject to the
priority system, are among the categories for which the board shall grant
reservations in the order determined by lot.
The bill extends the date by which an issuer of qualified residential
rental project bonds must close on the bonds by 30 days to the 150th day
after the reservation. The issuer must pay the full closing fee if the
bond is not issued and the application is not withdrawn before the 120th
day after the reservation.
Student Loan Bonds
C.S.S.B. 1664 increases the allocation of the state ceiling for qualified
student loan bonds to 10.5 percent from 8.8 percent.
The bill amends Section 1372.033, Government Code to provide that only a
qualified nonprofit corporation may apply for a student loan bond
allocation. The bill requires applications for a student loan bond
allocation to include an audited statement certified by an officer of the
applicant and notarized, and the bill outlines the content of this
statement. Each qualified nonprofit corporation applying for an
allocation is entitled to receive a floor allocation, with certain
exceptions. If the sum of all floor allocations is less than the total
amount to be allocated, each qualified applicant will receive a share of
the remaining allocation based on specified criteria. The bill prohibits
a recipient of a student loan bond allocation from transferring it to
another entity or loaning to any other entity (other than a student) any
proceeds from the allocation. The bill adds several definitions to
Section 1372.033, and it deletes all current language in Section 1372.033.
The bill adds new Section 1372.0281 to the Government Code to require
issuers of qualified student loan bonds to provide additional information
together with their applications, in accordance with a rule issued by the
board. The bill identifies additional information which may be required
by the board. The bill repeals Section 53.47(k), Education Code, which
would have sunset Subsection (a)(6) of that section, which defines
"qualified nonprofit corporation," and expanded the term to mean any
nonprofit entity authorized by a city to perform the functions of a
qualified nonprofit corporation.
State-Voted Issues
C.S.S.B. 1664 maintains the allocation of the state ceiling for
state-voted issues at 8 percent. The bill clarifies that any percentage
of state-voted issues requested in excess of 8 percent, and not 13
percent, is removed from other issuers and available for issuers of
state-voted issues. The bill reduces the maximum additional allocation
for state-voted issues to 8 percent from 13 percent of the state ceiling.
The bill amends Section 1372.037, Government Code to permit the board to
grant to the Texas Water Development Board a reservation of not more than
$100 million of the available state ceiling for a water development issue,
in addition to the $50 million currently permitted for a state-voted
issue. The bill adds a definition for "water development issue."
The bill extends the date by which an issuer of qualified residential
rental project bonds must close on the bonds by 60 days to the 180th day
after the reservation.
Research
C.S.S.B. 1664 adds new Section 2306.259 to the Government Code to
establish an affordable housing research and information program and
require TDHCA to contract for various periodic market studies and other
research. The research program is to be funded from the increased
application fees paid by issuers of qualified residential rental project
bonds.
Other Administration
C.S.S.B. 1664 amends Section 1372.036, Government Code to permit the board
to offer partial reservations once to each applicant until it is accepted
or additional volume is returned in an amount sufficient to grant a full
reservation.
The bill amends Section 1372.028, Government Code to move forward by five
days to October 5 the date after which an issuer may apply for a
reservation for the following program year. The bill amends Section
1372.039, Government Code to provide a three-day extension to the 35-day
period within which an issuer to certify the principal of the bonds.
Evidence regarding extenuating circumstances which prevented a timely
filing must be included, and the board may, upon reviewing the evidence,
permit the late filing.
The bill amends Section 1372.027, Government Code to require the board to
publish certain information about the state ceiling on its Internet site
at least weekly. The bill deletes the current requirement that it publish
this information at least biweekly in the Texas Register.
EFFECTIVE DATE
September 1, 2003. The bill's provisions apply to a reservation of the
state ceiling granted on or after January 1, 2004.
COMPARISON OF ORIGINAL TO SUBSTITUTE
The substitute adds language amending Section 1372.033, Government Code
regarding the priorities and reservations of qualified student loan bonds.
The substitute adds language amending Section 1372.036(b), Government Code
regarding the offering of partial reservations. The substitute adds the
exemption of the Texas State Affordable Housing Corporation from the
requirements of Section 1372.040, Government Code. The substitute adds
language moving the application date forward five days to October 5. The
substitute adds language requiring the board to publish certain
information on its Internet site. The substitute makes numerous other
technical corrections and clarifications.