FINAL BILL REPORT

SB 6535

                              C 50 L 90

BYSenators Lee and Smitherman

Revising provisions for private activity bond allocation ceilings.

Senate Committee on Economic Development & Labor

House Committe on Capital Facilities & Financing

SYNOPSIS AS ENACTED

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:  housing (25 percent); student loans (15 percent); exempt facilities (20 percent); public utility (10 percent); small issues (25 percent); and remainder and redevelopment (5 percent).

Industrial revenue bonds (IDB's) fall within the small issue category and have a maximum $10 million limit per any one project.  As a result of the federal government's Budget Reconciliation Act of 1989, the scheduled sunset of tax exempt industrial development financing was extended through September 30, 1990.  If small issues are discontinued after their sunset date, the current distribution formula must be modified.

SUMMARY:

The bond reserve amounts for 1989 are extended indefinitely as long as federal law permits tax exempt industrial development financing.  If federal law does not permit tax exempt industrial development financing, then the small issue reserve is reduced to zero and the reserve from this category is redistributed with 10 percent added to housing and 15 percent added to exempt facilities.

VOTES ON FINAL PASSAGE:

     Senate   47    0

     House 96  0

EFFECTIVE:June 7, 1990