SENATE BILL REPORT

HB 2661

BYRepresentatives Wineberry and Silver; by request of Department of Community Development

Revising provisions for private activity bond allocation ceilings.

House Committe on Capital Facilities & Financing

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 22, 1990

Senate Staff:Patrick Woods (786-7430)

AS OF FEBRUARY 20, 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 population.

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, the state bond ceiling will be distributed 25 percent housing, 15 percent student loans, 20 percent exempt facilities, 10 percent public utilities, 25 percent small issues, and 5 percent 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.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested