FINAL BILL REPORT

SHB 739

                                  C 297 L 87

BYHouse Committee on Trade & Economic Development (originally sponsored by Representatives Vekich, Schoon, Wineberry and P. King; by request of  Department of Community Development)

Providing for the allocation of the private activity bond ceiling.

House Committe on Trade & Economic Development

Rereferred House Committee on Ways & Means/Appropriations

Senate Committee on Commerce & Labor

SYNOPSIS AS ENACTED

BACKGROUND:

The federal Tax Reform Act of 1986 reduced the annual state bond ceiling for tax-exempt private activity bonds by 50 percent. This reduction severely limits the volume of tax-exempt bonds that may be issued in Washington to finance industrial development, housing, student loans and public facilities with significant private participation.

The Tax Reform Act also increased the number of bond categories to be included under the reduced ceiling.  Housing bonds issued by the state Housing Finance Commission are now included under the ceiling.  Public facility bonds with private participation of less than 25 percent but greater than 10 percent are also added.

These provisions necessitate the development of a new state formula for allocating access to the available financing capacity under the state bond ceiling.  Determinations must be made regarding the allocation of the state ceiling among categories of bonds, including:  housing bonds, student loan bonds, exempt facility bonds, public utility bonds, and small issue industrial development bonds.  An allocation process and an allocating agency to administer this process must also be designated.

SUMMARY:

Initial allocations of the state bond ceiling are established for 1987 through 1990 and thereafter for categories of bonds, including:  housing bonds, student loan bonds, small issue bonds, exempt facility bonds, and public utility bonds.  Initial bond allocations are expressed as percentages of the annual state ceiling.  A 5 percent remainder is available for granting allocations for redevelopment bonds or any other bond category.

After September 1 of each year, unused allocations may be reassigned to other bond use categories.  Prior to the end of the year, any unused portion of the ceiling will be granted to one or more issuers as a carryforward amount, which must be used within three years.

The Department of Community Development will administer the allocation system.  Criteria are specified for bond allocation and reallocation.  Issuers may not issue bonds under the state ceiling unless granted a certificate of approval from the department.  Issuers may apply for an allocation up to 90 days before the beginning of the year.  Any request which is denied will be retained for possible allocation later in the year.  The department must submit an annual report to the legislature summarizing bond allocations and a biennial report detailing allocation usage and policy considerations.  The department is directed to establish a fee schedule to support the administration of the bond ceiling allocation program.

The governor is given interim authority to allocate the ceiling in the event that changes occur in the federal law when the legislature is not in session.  Any allocations made prior to the effective date of the act pursuant to an executive order will remain in effect.

VOTES ON FINAL PASSAGE:

      House 96   0

      Senate    47     1(Senate amended)

      House 95   0(House concurred)

EFFECTIVE:May 8, 1987