BILL REQ. #:  Z-1099.2 

Read first time 01/13/10.   Referred to Committee on Capital Budget.

     AN ACT Relating to the creation of a workforce housing program; amending RCW 43.180.160, 39.86.100, 39.86.120, 39.86.130, 39.86.140, 39.86.150, 39.86.170, and 39.86.190; reenacting and amending RCW 39.86.110; adding a new section to chapter 39.86 RCW; and repealing RCW 39.86.200.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 43.180.160 and 2009 c 291 s 1 are each amended to read as follows:
     (1) The total amount of outstanding indebtedness of the commission may not exceed ((six)) seven billion dollars at any time. The calculation of outstanding indebtedness shall include the initial principal amount of an issue and shall not include interest that is either currently payable or that accrues as a part of the face amount of an issue payable at maturity or earlier redemption. Outstanding indebtedness shall not include notes or bonds as to which the obligation of the commission has been satisfied and discharged by refunding or for which payment has been provided by reserves or otherwise.
     (2) One billion dollars of the outstanding indebtedness of the commission is for the primary purpose of implementing the workforce housing program to increase opportunities for nonprofit organizations and public agencies to purchase, acquire, build, and own real property to be used for affordable housing for low and moderate-income households. The workforce housing program is intended to provide these opportunities for public agencies and nonprofit organizations, including material participating nonprofit organizations or nonprofit managing members of a partnership, limited liability company, or equivalent organization, through the issuance of tax exempt or taxable revenue bonds issued by the commission in conjunction with a state subsidy necessary to make bond issues to finance affordable housing properties financially feasible. The program is intended to provide financing for affordable housing that will meet the following income and rent restrictions during the period of initial bond indebtedness and thereafter:
     (a) During the period of initial bond indebtedness under the program, the owner of the property must meet one of the following requirements: A minimum of twenty percent of the units will be occupied by households earning less than fifty percent of area median income and an additional thirty-one percent of the units will be occupied by persons earning less than eighty percent of area median income; or forty percent of the units will be occupied by households earning less than sixty percent of area median income and an additional eleven percent of the units will be occupied by households earning less than eighty percent of area median income.
     (b) After the initial bond indebtedness is retired, the rents charged for units in the project will be adjusted to be sufficient to pay reasonable operation and maintenance expenses, including necessary capital needs, and to make reasonable deposits into a reserve account with the intent of providing affordable housing to very low or low-income households for the remaining useful life of the property. The reasonableness of the rent levels must be periodically approved by the commission based on information provided by the owner of the property about income, expenses, and necessary reserve levels. The determination of the commission regarding the reasonableness of the rent levels will be final.
     (c) The commission will enter into a recorded regulatory agreement with the borrower at the time of the issuance of bonds under the program for the purpose of ensuring that the property will meet the income and rent restrictions established in this section. The commission may charge such compliance fees as necessary to ensure enforcement of the income and rent restrictions during the useful life of the property.
     (3) If no state subsidies are available to make the program in subsection (2) of this section feasible; then the commission may pass a resolution stating these facts and authorize the use of a portion of the one billion dollars of indebtedness intended for the program to support its other bond programs until such time as the one billion dollars is exhausted or state subsidies are available to make the program feasible.

Sec. 2   RCW 39.86.100 and 2001 c 330 s 1 are each amended to read as follows:
     The federal ((tax reform act)) internal revenue code of 1986 defined as "code" in RCW 39.86.110, imposes ((an annual)) ceilings on the aggregate amount of ((federally tax-exempt private activity)) certain types of bonds, including tax-exempt private activity bonds ((for housing, student loans, exempt facilities, small issue industrial, redevelopment, and certain public utility projects)) and other types, that may be issued during any calendar year by or on behalf of states and their political subdivisions. ((In 2001, the ceiling will be increased to sixty-two dollars and fifty cents per capita and in 2002 the ceiling will be increased to seventy-five dollars per capita, to be indexed annually, for 2003 and every year thereafter. However, a study by the department of community development indicates that the dollar amount of the state ceiling is considerably less than the anticipated dollar amount for which issuers would need an allocation from the state ceiling.)) The ((tax reform act of 1986)) code provides a formula for allocating the annual tax-exempt private activity bond ceiling among various issuers of private activity bonds for housing, student loans, exempt facilities, and redevelopment projects within a state, but permits each state to enact a different allocation method that is appropriate to that state's needs. In addition, congress might, from time to time, amend the code by authorizing state ceilings on additional types of bonds. The purpose of this chapter is to provide a flexible and efficient method of allocating the annual state ceiling in Washington in a manner that recognizes the need of the state and its political subdivisions to finance activities or projects that satisfy a substantial public purpose.

Sec. 3   RCW 39.86.110 and 2009 c 565 s 23 are each reenacted and amended to read as follows:
     The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Agency" means the department of commerce.
     (2) (("Board" means the community economic revitalization board established under chapter 43.160 RCW.
     (3))) "Bond use category" means: (a) Any of the following categories of bonds which are subject to the annual state tax-exempt private activity bond ceiling: (((a))) (i) Housing, (((b))) (ii) student loans, (((c))) (iii) small issue, (((d))) (iv) exempt facility, (((e))) (v) redevelopment, (((f) public utility; and (g))) and (vi) remainder; and (b) any other categories of bonds described in the code for which there is a separate ceiling, with the exception of bonds designated solely for school district purposes.
     (((4))) (3) "Bonds" means bonds, notes, or other obligations of an issuer.
     (((5))) (4) "Carryforward" is an allocation or reallocation of the state ceiling which is carried from one calendar year to a later year, in accordance with the code.
     (((6))) (5) "Code" means the federal internal revenue code of 1986 as it exists on May 8, 1987. It also means the code as amended after May 8, 1987, but only if the amendments are approved by the agency under RCW 39.86.180.
     (((7))) (6) "Director" means the director of the agency or the director's designee.
     (((8))) (7) "Exempt facility" means the bond use category which includes all bonds which are exempt facility bonds as described in the code, except those for qualified residential rental projects.
     (((9))) (8) "Firm and convincing evidence" means documentation that satisfies the director that the issuer is committed to the prompt financing of, and will issue ((tax exempt)) bonds for, the project or program for which it requests an allocation from the state ceiling.
     (((10))) (9) "Housing" means the bond use category which includes: (a) Mortgage revenue bonds and mortgage credit certificates as described in the code; and (b) exempt facility bonds for qualified residential rental projects as described in the code.
     (((11))) (10) "Initial allocation" means the portion or dollar value of the annual state tax-exempt private activity bond ceiling which initially in each calendar year is allocated to a bond use category for the issuance of private activity bonds, in accordance with RCW 39.86.120.
     (((12))) (11) "Issuer" means the state, any agency or instrumentality of the state, any political subdivision, or any other entity authorized to issue ((private activity)) bonds under state law.
     (12) "Original allocation" means any allocation of bond authority by a mandatory formula in the code, except for the initial allocations of the annual state ceiling on tax-exempt private activity bonds.
     (13) "Private activity bonds" means obligations that are private activity bonds as defined in the code or bonds for purposes described in section 1317(25) of the ((tax reform act)) federal internal revenue code of 1986.
     (14) "Program" means the activities for which housing bonds or student loan bonds may be issued.
     (15) (("Public utility" means the bond use category which includes those bonds described in section 1317(25) of the tax reform act of 1986.
     (16))) "Redevelopment" means the bond use category which includes qualified redevelopment bonds as described in the code.
     (((17))) (16) "Remainder" means that portion of the annual state tax-exempt private activity bond ceiling remaining after initial allocations are made under RCW 39.86.120 for any other bond use category.
     (((18))) (17) "Small issue" means the bond use category which includes all industrial development bonds that constitute qualified small issue bonds, as described in the code.
     (((19))) (18) "State" means the state of Washington.
     (((20))) (19) "State ceiling" means the volume limitation for each calendar year on ((tax-exempt private activity)) specific bond((s)) types, including tax-exempt private activity bonds and other bonds, as imposed by the code.
     (((21))) (20) "Student loans" means the bond use category which includes qualified student loan bonds as described in the code.

NEW SECTION.  Sec. 4   A new section is added to chapter 39.86 RCW to read as follows:
     Original allocations or any reallocations of state bond ceilings other than the tax-exempt private activity bond ceiling must be determined by formula as provided in the code, or by department rule if no formula is provided in the code.

Sec. 5   RCW 39.86.120 and 2001 c 330 s 2 are each amended to read as follows:
     (1) Except as provided in subsections (2) and (4) of this section, the initial allocation of the state ceiling shall be for each year as follows:

Sec. 6   RCW 39.86.130 and 1987 c 297 s 4 are each amended to read as follows:
     (1) In granting an allocation, reallocation, or carryforward of the state ceiling as provided in this chapter, the agency shall consider existing state priorities and other such criteria, including but not limited to, the following criteria:
     (a) Need of issuers to issue ((private activity)) bonds within a bond use category subject to a state ceiling;
     (b) Amount of the state ceiling available;
     (c) Public benefit and purpose to be satisfied, including economic development, educational opportunity, and public health, safety, or welfare;
     (d) Cost or availability of alternative methods of financing for the project or program; and
     (e) Certainty of using the allocation which is being requested.
     (2) In determining whether to allocate an amount of the state ceiling to an issuer within any bond use category, the agency shall consider, but is not limited to, the following criteria for each of the bond use categories:
     (a) Housing: Criteria which comply with RCW 43.180.200.
     (b) Student loans: Criteria which comply with the applicable provisions of Title 28B RCW and rules adopted by the Washington higher education ((coordinating board or applicable state agency dealing with student financial aid)) facilities authority.
     (c) Small issue: ((Recommendation by the board regarding how the amount of the state ceiling set aside for the small issue bond use category shall be allocated among issuers.)) Factors which may include:
     (i) The number of employment opportunities the project is likely to create or retain in relation to the amount of the bond issuance;
     (ii) The level of unemployment existing in the geographic area likely to be affected by the project;
     (iii) A commitment to providing employment opportunities to low-income persons in cooperation with the employment security department;
     (iv) Geographic distribution of projects;
     (v) The number of persons who will benefit from the project;
     (vi) Consistency with criteria identified in subsection (1) of this section; and
     (vii) Order in which requests were received((; and
     (viii) Requirements of the board's umbrella bond program)).
     (d) Exempt facility or redevelopment: Factors which may include:
     (i) State issuance needs;
     (ii) Consistency with criteria identified in subsection (1) of this section;
     (iii) Order in which requests were received;
     (iv) The proportionate number of persons in relationship to the size of the community who will benefit from the project; and
     (v) The unique timing and issuance needs of large scale projects that may require allocations in more than one year.
     (e) Public utility: Factors which may include:
     (i) Consistency with criteria identified in subsection (1) of this section; and
     (ii) Timing needs for issuance of bonds over a multi-year period.

Sec. 7   RCW 39.86.140 and 1987 c 297 s 5 are each amended to read as follows:
     (1) No issuer may receive an allocation of the state ceiling without a certificate of approval from the agency.
     (2)(((a))) For each state ceiling allocation request, an issuer shall submit to the agency, no sooner than ninety days prior to the beginning of a calendar year for which an allocation of the state ceiling is being requested, a form identifying:
     (((i))) (a) The amount of the allocation sought;
     (((ii))) (b) The bond use category from which the allocation sought would be made;
     (((iii))) (c) The project or program for which the allocation is requested;
     (((iv))) (d) The financing schedule for which the allocation is needed; and
     (((v))) (e) Any other such information required by the agency, including information which corresponds to the allocation criteria of RCW 39.86.130.
     (((b) Nothing in (a) of this subsection precludes a public utility issuer from filing and the agency from considering a request at such times as may be appropriate in order to meet the criteria set forth in RCW 39.86.130(2)(e)(ii).))
     (3) The agency may approve or deny an allocation for all or a portion of the issuer's request. Any denied request, however, shall remain on file with the agency for the remainder of the calendar year and shall be considered for receiving any allocation, reallocation, or carryforward of unused portions of the state ceiling during that period.
     (4) After receiving an allocation request, the agency shall mail to the requesting issuer a written certificate of approval or notice of denial for an allocation amount, by a date no later than the latest of the following:
     (a) ((Forty-five days from May 8, 1987;
     (b))) February 1st of the calendar year((, other than 1987,)) for which the request is made;
     (((c))) (b) Fifteen days from the date the agency receives an allocation request; or
     (((d))) (c) Fifteen days from the date the agency receives a recommendation by the board with regard to a small issue allocation request, should the board choose to review individual requests.
     (5)(a) For requests of the state ceiling of any calendar year, the following applies to all bond use categories except housing ((and student loans)):
     (i) Except for housing ((and student loans)), any allocations granted prior to April 1st, for which bonds have not been issued by ((September 1)) July 1st of the same calendar year, shall revert to the agency on ((September 1)) July 1st of the same calendar year for reallocation unless an extension or carryforward is granted;
     (ii) Except for housing ((and student loans,)) any allocations granted on or after April 1st, for which bonds have not been issued by ((December 15)) October 15th of the same calendar year, shall revert to the agency on ((December 15)) October 15th of the same calendar year for reallocation unless an extension or carryforward is granted.
     (b) For each calendar year, any housing ((or student loan)) allocations, for which bonds have not been issued by December 15th of the same calendar year, shall revert to the agency on December 15th of the same calendar year for reallocation unless an extension or carryforward is granted.
     (6) An extension of the deadlines provided by subsection (5) of this section may be granted by the agency for the approved allocation amount or a portion thereof, based on:
     (a) Firm and convincing evidence that the bonds will be issued before the end of the calendar year if the extension is granted; and
     (b) Any other criteria the agency deems appropriate.
     (7) If an issuer determines that bonds subject to the state ceiling will not be issued for the project or program for which an allocation was granted, the issuer shall promptly notify the agency in writing so that the allocation may be canceled and the amount may be available for reallocation.
     (8) Bonds subject to the state ceiling may be issued only to finance the project or program for which a certificate of approval is granted.
     (9) Within three business days of the date that bonds for which an allocation of the state ceiling is granted have been delivered to the original purchasers, the issuer shall mail to the agency a written notification of the bond issuance. In accordance with chapter 39.44 RCW, the issuer shall also complete bond issuance information on the form provided by the agency.
     (10) If the total amount of ((tax-exempt)) bonds issued under the authority of a state ceiling for a project or program is less than the amount allocated, the remaining portion of the allocation shall revert to the agency for reallocation in accordance with the criteria in RCW 39.86.130. If the amount of ((tax-exempt)) bonds actually issued under the authority of a state ceiling is greater than the amount allocated, the entire allocation shall be disallowed.

Sec. 8   RCW 39.86.150 and 1987 c 297 s 6 are each amended to read as follows:
     (1) Beginning ((September 1)) July 1st of each calendar year, the agency may allocate or reallocate any portions of the annual state tax-exempt private activity bond ceiling for which no certificate of approval is in effect. Reallocations may also be made from the remainder category at any time during the year.
     (2) Prior to the end of each calendar year, the agency shall allocate or reallocate any unused portions of the state ceiling among one or more issuers as carryforward, to be used within three years, in accordance with the code and relevant criteria described in RCW 39.86.130.
     (3) Reallocations of state bond ceilings other than the annual tax-exempt private activity bond ceiling may be made by the agency in accordance with the code or as established in agency rule when not specified in the code.

Sec. 9   RCW 39.86.170 and 1987 c 297 s 8 are each amended to read as follows:
     A fee schedule shall be established by rule by the agency to assist in support of bond allocation activities. Fees shall reflect costs actually incurred or expected to be incurred by the agency in its bond allocation and bond users clearinghouse activities.

Sec. 10   RCW 39.86.190 and 2009 c 518 s 19 are each amended to read as follows:
     By February 1st of each even-numbered year, the agency shall summarize for the legislature each previous year's bond allocation requests and issuance. Beginning in ((June of 1988)) February 2010 and thereafter in ((June)) February of each even-numbered year, the agency shall also submit a biennial report summarizing usage of the bond allocation proceeds and any policy concerns for future bond allocations.

NEW SECTION.  Sec. 11   RCW 39.86.200 (Ratification) and 1987 c 297 s 11 are each repealed.