HOUSE BILL REPORT

SB 6574

BYSenators Lee, Smitherman, West, McCaslin, Murray, Williams, Amondson and Anderson

Changing the definition of housing under the Washington state housing finance commission.

House Committe on Housing

Majority Report:  Do pass.  (6)

      Signed by Representatives Nutley, Chair; Leonard, Vice Chair; Winsley, Ranking Republican Member; Anderson, Rector and Todd.

Minority Report:  Do not pass.  (1)

      Signed by Representative Padden.

House Staff:Kenny Pittman (786-7392)

Rereferred House Committee on Capital Facilities & Financing

Majority Report:  Do pass.  (13)

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

House Staff:      Bill Robinson (786-7140)

AS PASSED HOUSE MARCH 1, 1990

BACKGROUND:

The Washington state Housing Finance Commission was created in 1983 to assist in the financing of housing that is affordable to persons of low or moderate income.  The financing is accomplished through the issuance of either taxable or tax-exempt nonrecourse revenue bonds.  The issuance of the tax-exempt nonrecourse revenue bonds is authorized under the federal Internal Revenue Code.

Currently, the commission's definition of "housing" limits the use of the bond proceeds to the financing of single and multifamily residential dwelling units.  However, the commission has developed a program to assist in the financing of residential portions of congregate housing developments.

The Federal government, through the Internal Revenue Code, gives state and local governmental units the authority to issue tax- exempt bonds to finance activities of nonprofit corporations.  The Federal government requires the nonprofit corporation to be exempt from federal income taxation as a charitable organization under the Internal Revenue Code.

SUMMARY:

The definition of "housing" in the Washington state Housing Finance Commission's statute is amended to expressly include nursing homes licensed by the state of Washington.  The commission is authorized to sell tax-exempt revenue bonds to finance the construction, purchase, or rehabilitation of nursing homes.

The commission is granted the sole authority to issue taxable or tax-exempt nonrecourse revenue bonds (revenue bonds) for facilities owned and operated by nonprofit corporations in the state of Washington.  Nonprofit facilities are defined as a facility owned or used by a nonprofit corporation that qualifies for an exemption from federal income taxation as a charitable activity under the Internal Revenue Code.

The commission, under its "nonprofit corporation facilities" provisions can: (1) make secured loans to nonprofit corporations for temporary or permanent financing or refinancing nonprofit facilities; (2) issue revenue bonds to finance all or part of project costs of any nonprofit facility; (3) collect fees or charges to recover administrative costs; (4) execute financing documents; (5) accept gifts and grants; and (6) establish special funds within any financial institution for the investment of funds.

The nonprofit facilities must not be eligible for funding through programs of the Washington Health Care Facilities Authority, the Washington Higher Education Facilities Authority, the Washington State Housing Finance commission, or a local Public Housing Authority.

The owner of the nonprofit facility is not required to be the eventual user of the facility.  The commission's contract obligations must be assumed by parties that lease or purchase the facility built with financing through the commission.

Bonds issued by the commission are required to be secured by a trust agreement between the commission and a corporate trustee. The corporate trustee can be any trust company or bank having the powers of a trust company within or without the state.  The trust agreement may contain provisions protecting or enforcing the rights and remedies of the bond owners.

Appropriation:    None.

Fiscal Note:      Available.

House Committee ‑ Testified For:    (Housing)  Sallie Sweet, Washington State Housing Finance Commission and Karen Tynes, Washington Association of Homes for the Aging.

(Capital Facilities & Financing)  Dan Grimm, State Treasurer (testified for amendments).

House Committee - Testified Against:      (Housing)  No one.

(Capital Facilities & Financing)  No one.

House Committee - Testimony For:    (Housing)  This legislation would allow the Commission to provide financing to respond to nursing home concerns. Nursing homes operated by nonprofit organizations are in need of financing to rehabilitate the existing facilities. The Commission would be able to sell tax-exempt bonds and provide financing at below market value.

(Capital Facilities & Financing)  HB 2455 and SB 6654 authorize municipalities to create public corporations to issue tax-exempt bonds for non-profit organizations.  Issuing bonds for non-profit organizations should be done at the state level in order to apply stringent financial criteria that will guard against potential defaults.  This bill is the only vehicle to create a state level organization and accommodate amendments to allow the housing finance authority to issue tax-exempt bonds for general purpose non-profit organizations.

House Committee - Testimony Against:      (Housing)  None.

(Capital Facilities & Financing)  None.