BILL ANALYSIS

 

 

 

C.S.S.B. 2064

By: West

Pensions, Investments & Financial Services

Committee Report (Substituted)

 

 

 

BACKGROUND AND PURPOSE

 

Currently, the Bond Review Board has a task of collecting, analyzing, and formulating reports on the state debt, including debt that has been approved and issued. The board also is required to provide time-sensitive reports to the legislature.

 

C.S.S.B. 2064 amends current law relating to the issuance of state and local government securities, including the powers and duties of the board and the issuance of private activity bonds.

RULEMAKING AUTHORITY

 

It is the committee's opinion that rulemaking authority is expressly granted to the Bond Review Board in SECTIONS 14 and 16 of this bill.

ANALYSIS

 

C.S.S.B. 2064 amends the Government Code to change the deadline for the Bond Review Board's submittal to the legislature of a statistical report relating to state securities and bonds and other debt obligations issued by local governments from October 31 to December 31 of each even-numbered year. The bill authorizes the board to enter into a contract for the procurement of services related to the collection and maintenance of information on the indebtedness of local governments and state agencies necessary to prepare the statistical report.

 

C.S.S.B. 2064 changes the deadline for the board's submittal of the annual study regarding the state's current debt burden to the governor, the comptroller of public accounts, the presiding officer of each house of the legislature, and the Senate Committee on Finance and House Appropriations Committee from December 1 to February 15 of each year.

 

C.S.S.B. 2064 establishes that a project, for purposes of a reservation of a portion of the state ceiling for the issuance of private activity bonds, includes one or more eligible facilities that are proposed to be financed, in whole or in part, by an issue of bonds other than qualified residential rental project bonds, qualified mortgage bonds, or qualified student loan bonds.  The bill authorizes an application for the financing of sewage facilities, solid waste disposal facilities, and qualified hazardous waste facilities under provisions relating to private activity bonds to include multiple facilities in multiple jurisdictions that are proposed to be financed, in whole or in part, by an issue of bonds other than the bonds described above.  The bill authorizes the number of facilities, in such an application, to be reduced as needed without affecting their status as a project for purposes of the application.  The bill requires the application to be accompanied by a nonrefundable fee in an amount of $500 for each facility included in the application for the project.

 

C.S.S.B. 2064 provides that the portion of the state ceiling available for reservations becomes available for all applications for reservations in the order determined by lot on and after August 15, rather than on and after August 15 but before September 1. The bill requires the board, if all applicants for a reservation have been offered a portion of the available state ceiling, to grant reservations in the order in which the applications for those reservations are received. The bill removes a provision establishing that on and after September 1 that portion of the state ceiling available for reservations becomes available to any issuer for any bonds that require an allocation.

 

C.S.S.B. 2064 increases the computed amounts capping the amount of the state ceiling that may be reserved before August 15 by a housing finance corporation for the issuance of qualified mortgage bonds as follows:

·         if the local population of the housing finance corporation is 300,000 or more, the cap is $36 million, rather than $22.5 million, plus the product of the amount by which the local population exceeds 300,000 multiplied by $40, rather than $11.25;

·         if the local population of the housing finance corporation is 200,000 or more but less than 300,000, the cap is $32 million, rather than $20 million, plus the product of the amount by which the local population exceeds 200,000 multiplied by $40, rather than $22.5; 

·         if the local population of the housing finance corporation is 100,000 or more but less than 200,000, the cap is $24 million, rather than $15 million, plus the product of the amount by which the local population exceeds 100,000 multiplied by $80, rather than $50; or

·         if the local population of the housing finance corporation is less than 100,000, the cap is the product of the local population multiplied by $240, rather than $150.

 

C.S.S.B. 2064 increases from $25 million to $40 million the cap on the amount of a qualified mortgage bond issuance for which a housing finance corporation may receive an allocation. The bill provides that if two local governments that have a population of at least 50,000 each, rather than at least 20,000 each, and that have overlapping territory have created housing finance corporations that have the power to issue bonds to provide financing for home mortgages, the population of the housing finance corporation created on behalf of the larger local government is computed by subtracting from the population of the larger local government the population of the part of the smaller local government that is located in the larger local government.

 

C.S.S.B. 2064 changes the range of utilization percentages used as a basis for determining a housing finance corporation's allocation of the state ceiling by decreasing the upper limit from 95 percent to 80 percent and setting a floor of 25 percent such that if a housing finance corporation's utilization percentage is less than 80 percent but at least 25 percent, the next time the corporation becomes eligible for a reservation of the state ceiling, the maximum amount of the state ceiling that may be reserved for the corporation is equal to the amount for which the corporation would otherwise be eligible multiplied by the utilization percentage of the corporation's last bond issue that used an allocation of the state ceiling. The bill establishes that if a housing finance corporation's utilization percentage is less than 25 percent, the next time the corporation becomes eligible for a reservation of the state ceiling, the maximum amount of the state ceiling that may be reserved for the corporation is equal to the amount for which the corporation would otherwise be eligible multiplied by 25 percent. The bill prohibits a housing finance corporation from being penalized in a program year if, by December 31 of the preceding program year, an amount equal to or less than 50 percent of the aggregate state ceiling available for reservations by issuers of qualified mortgage bonds has been used in connection with bond issues that have closed on or before that date or has had carryforward elections filed on or before that date. The bill establishes that an issuer that has carryforward available from the state ceiling created by the Housing and Economic Recovery Act of 2008 is not restricted by project limits for the state ceiling. The bill exempts an issuer who uses the carryforward to issue qualified mortgage bonds or mortgage credit certificates from the utilization percentage calculation in determining the amount of the issuer's reservation request.

 

C.S.S.B. 2064 changes the deadline for an issuer to submit an application for a program year from December 1 to November 15 of that year.

 

C.S.S.B. 2064 prohibits the board from granting a reservation of a portion of the state ceiling for a program year after November 15, rather than December 1, of that year.

 

C.S.S.B. 2064 raises the cap on the amount of a reservation that the board may grant for a single project before August 15 from $25 million to $40 million, if the issuer is an issuer of qualified mortgage bonds other than the Texas Department of Housing and Community Affairs (TDHCA) or the Texas State Affordable Housing Corporation, and from the lesser of $20 million, rather than $15 million, or 15 percent of the amount set aside for reservation by issuers of qualified residential rental project bonds, if the issuer is an issuer of those bonds.

 

C.S.S.B. 2064 requires an issuer of private activity bonds, in addition to any other fees required by provisions relating to such bonds, to submit to the board a nonrefundable fee in the amount of $500 before receiving a carryforward designation.

 

C.S.S.B. 2064 authorizes the board to establish and administer programs for the reservation, allocation, and carryforward designation of additional state ceiling in accordance with the federal law that establishes the additional state ceiling and, to the extent consistent with the federal law, as the board determines will achieve the purposes for which the additional state ceiling is authorized by federal law. The bill authorizes the board to adopt rules and procedures and to prescribe forms and applications the board considers necessary to effectively administer those programs. The bill authorizes the board to adopt emergency rules in connection with the programs when the board determines that the emergency rules are necessary for the state to obtain the full benefits of the additional state ceiling.

 

C.S.S.B. 2064 authorizes the board, on the last business day of the year, to assign as carryforward to state agencies, at their request and in the order received, any state ceiling that is not reserved or designated as carryforward and for which no application for carryforward is pending.

 

C.S.S.B. 2064 authorizes the applicable official to designate bonds as entitled to a portion of a miscellaneous bond ceiling or allocate a portion of a miscellaneous bond ceiling to an issuer of bonds in accordance with the federal law that establishes the federal subsidy for which the miscellaneous bond ceiling is established and to the extent consistent with the federal law, as the applicable official determines will achieve the purposes for which the federal subsidy is authorized by federal law. The bill authorizes the board to administer programs established by the applicable official for the allocation of a miscellaneous bond ceiling or the designation of bonds entitled to the federal subsidy limited by a miscellaneous bond ceiling. The bill authorizes the board to adopt rules and procedures and to prescribe forms and applications the board considers necessary to effectively administer programs established by the applicable official for allocation of a miscellaneous bond ceiling or for designating bonds as entitled to the federal subsidy limited by the miscellaneous bond ceiling. The bill authorizes the board to adopt emergency rules in connection with those programs when the board determines that the emergency rules are necessary for the state to obtain the full benefits of the federal subsidy that is limited by the miscellaneous bond ceiling. The bill establishes that these provisions relating to rules and procedures do not prevent an applicable official from adopting rules and procedures in connection with the allocations and designations when required by federal or state law or from administering a program independently of the board. The bill authorizes the board, in connection with programs established by the applicable official for the allocation of a miscellaneous bond ceiling or the designation of bonds entitled to the federal subsidy limited by a miscellaneous bond ceiling, to charge an application fee for each application it receives under these provisions.

 

C.S.S.B. 2064 establishes that an application is ineligible for consideration under the low income housing tax credit program if the applicant proposes to replace in less than 15 years any private activity bond financing of the development described by the application unless certain conditions are met, including that the applicable private activity bonds will be redeemed only in an amount consistent with their proportionate amortization, or if the redemption of the applicable private activity bonds will occur in the first years of the operation of the development and is required to comply with the Internal Revenue Code of 1986, the board determines on the date the certificate of reservation is issued that there is not a waiting list for private activity bonds in the same subpriority level established under state law or, if applicable, in the same uniform state service region that is served by the proposed development, and the applicable private activity bonds will be redeemed according to underwriting criteria established by TDHCA.

 

C.S.S.B. 2064 validates all reservations, allocations, and carryforward designations by the Bond Review Board of additional state ceiling authorized by the Housing and Economic Recovery Act of 2008, and by applicable officials of miscellaneous bond ceiling authorized by the Heartland Disaster Tax Relief Act of 2008, regarding Hurricane Ike disaster area bonds, or by the American Recovery and Reinvestment Act of 2009, before the effective date of this act. The bill establishes that an issuer that has carryforward available from additional state ceiling authorized by the Housing and Economic Recovery Act of 2008 is not restricted by the project limits for the state ceiling established by provisions of state law relating to private activity bonds. The bill exempts an issuer that uses the carryforward to issue qualified mortgage bonds or mortgage credit certificates from the utilization percentage calculation, established in provisions of state law relating to private activity bonds, in determining the amount of the issuer's reservation request.

 

C.S.S.B. 2064 defines "additional state ceiling," "applicable official," "federal subsidy," and "miscellaneous bond ceiling" and redefines "bonds."

 

C.S.S.B. 2064 repeals Section 1372.0235, Government Code, relating to the dedication of a portion of the state ceiling to the Texas Agricultural Finance Authority.

 

EFFECTIVE DATE

 

On passage, or, if the act does not receive the necessary vote, the act takes effect September 1, 2009.

COMPARISON OF ORIGINAL AND SUBSTITUTE

C.S.S.B. 2064 adds a provision not in the original establishing that a project, for purposes of a reservation of a portion of the state ceiling for the issuance of private activity bonds, includes one or more eligible facilities that are proposed to be financed by an issue of bonds other than qualified residential rental project bonds, qualified mortgage bonds, or qualified student loan bonds; authorizing an application for the financing of sewage facilities, solid waste disposal facilities, and qualified hazardous waste facilities to include multiple facilities in multiple jurisdictions that are proposed to be financed by an issue of bonds other than the bonds described above; authorizing the number of facilities to be reduced as needed without affecting their status as a project for purposes of the application; and requiring the application to be accompanied by a nonrefundable $500 fee for each facility included in the application.

 

C.S.S.B. 2064 adds a provision not in the original making an application ineligible for consideration under the low income housing tax credit program if the applicant proposes to replace in less than 15 years any private activity bond financing of the development described by the application unless such bonds will be redeemed only in an amount consistent with their proportionate amortization; or if the redemption of such bonds will occur in the first years of the operation of the development and is required to comply with the Internal Revenue Code of 1986, the Bond Review Board determines that there is not a waiting list for private activity bonds in the same subpriority level or in the same uniform state service region served by the proposed development, and the private activity bonds will be redeemed according to certain underwriting criteria.