HOUSE BILL REPORT

SB 6535

BYSenators Lee and Smitherman

Revising provisions for private activity bond allocation ceilings.

House Committe on Capital Facilities & Financing

Majority Report:  Do pass.  (13)

      Signed by Representatives H. Sommers, Chair; Rasmussen, Vice Chair; Schoon, Ranking Republican Member; Beck, Betrozoff, Bowman, Braddock, Fraser, Heavey, Jacobsen, Peery, Rector and Winsley.

House Staff:Bill Robinson (786-7140)

AS PASSED HOUSE MARCH 1, 1990

BACKGROUND:

The federal tax reform act of 1986 placed limits on the volume of tax-exempt bonds that may be issued in any state for private activity.  Private activity includes bonds to finance industrial development, housing, student loans and public facilities with significant private participation.  The private activity bond ceiling is based on a dollar amount per state populations.

The Department of Community Development has the responsibility for administering the state's private activity bond ceiling.  To assist the department in allocating the bond ceiling among the various competing users of bonds, a distribution formula was set in state law.  One category in the current distribution formula is scheduled for possible change by Congress:  the small issue category, which is used primarily for industrial development bonds.  If small issues are discontinued, the current distribution formula must be changed.

SUMMARY:

If the small issue category is permitted under federal law, volume of bonds issued under the state bond ceiling will be subject to the following distribution:  25 percent for housing,  15 percent for student loans, 20 percent for exempt facilities, 10 percent for public utilities, 25 percent for small issues, and five percent for redevelopment.  If the small issue category is not permitted, its 25 percent will be reallocated.  Ten percent will be added to housing and 15 percent will be added to exempt facilities.

House Committee ‑ Testified For:    Jean Ameluxen, Department of Community Development.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    This bill brings the state allocation system into conformance with federal rules on state tax exempt private activity bonds.

House Committee - Testimony Against:      None.