Washington State

House of Representatives

Office of Program Research

BILL

ANALYSIS

Community Development, Housing & Tribal Affairs Committee

HB 2585

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Background:

The federal tax code allows states and local governments to issue tax-exempt private activity bonds for certain purposes, including housing, student loans, exempt facilities, small issue, public utilities, and redevelopment. The code sets a ceiling on how much a state can finance with tax-exempt bonds in a year.

Each state may enact its own method of allocating the annual state ceiling among each category of use. The state ceiling may be reallocated throughout the year. An allocation can carryforward up to three years for a dedicated project.

The Department of Commerce (Department) manages the tax-exempt private activity bond allocation for the state. The initial allocation of the state ceiling by category is set in statute as follows:

Housing - 32 percent
Small Issue - 25 percent
Exempt Facilities - 20 percent
Student Loans - 15 percent
Public Utilities - 0 percent
Remainder and Redevelopment - 8 percent

The Department can reallocate the initial allocation among categories based on state priorities and other criteria. If bonds allocated in one category are not issued by a certain date, then they revert to the Department for reallocation to another category.

The Housing Finance Commission (HFC) receives the state ceiling allocation for the housing category. The HFC is authorized under state law to issue revenue bonds in its own name, but its debt is not backed by the full faith and credit of the state. The HFC may use funding in coordination with federal, state, and local housing programs for the new construction and rehabilitation of single or multiple family homes, including the refinancing of debt and home purchases. The HFC may purchase mortgages or mortgage loans, including down payment assistance loans, from mortgage lenders.

Summary of Bill:

The initial allocation of the tax-exempt private activity bond state ceiling is adjusted to move 10 percent of the student loan category into the housing category. The housing category receives 42 percent of the state ceiling allocation and the student loan category receives 5 percent. The other categories are not changed. If the Department does not grant any allocations for student loans by February 1, the entire allocation for that category may be reallocated to the housing category.