HOUSE BILL REPORT

SB 5197

As Passed House ‑ Amended:

April 4, 2001

Title:  An act relating to Private Activity Bonds.

Brief Description:  Revising private activity bond provisions.

Sponsors:  By Senators Winsley and Prentice.

Brief History:

Committee Activity:

Capital Budget:  3/26/01, 3/28/01 [DPA].

Floor Activity:

Passed House ‑ Amended: 4/4/01, 92-0.

  Brief Summary of Bill

(As Amended by House)

$The bill adopts the increase in the Private Activity Bond cap under the federal tax code and reallocates the bonds among different types of projects.

HOUSE COMMITTEE ON CAPITAL BUDGET

Majority Report:  Do pass as amended. Signed by 18 members: Representatives Alexander, Republican Co‑Chair; Murray, Democratic Co‑Chair; Armstrong, Republican Vice Chair; Esser, Republican Vice Chair; McIntire, Democratic Vice Chair; Barlean, Bush, Casada, Hankins, Hunt, Lantz, O'Brien, Ogden, Poulsen, Reardon, Schoesler, Veloria and Woods.

Staff:  Charlie Gavigan (786‑7340).

Background:

Private Activity Bonds (PABs) are used to fund projects that contain more than 10 percent private participation.  Because of this private involvement, PABs are generally taxable.  However, if a project falls within one of the eligible categories established by federal tax law, and can demonstrate significant public benefit, the project may receive tax exempt status through an allocation of the state's bond cap.  The Tax Reform Act of 1986 established a cap on the dollar amount of tax exempt private activity bonds that states could issue, equal to $50 per state resident.  This year Congress amended that ceiling.  Beginning in 2001, the cap is $62.50 per capita; in 2002, $75 per capita, and the cap will be indexed each year thereafter.

States are free to allocate the total cap among issuers who develop eligible projects as each state sees fit.

Federal law established a dollar lifetime ceiling of $750 million for the category of ?Public Utility.@  That amount will be reached within the next few years, allowing for a possible reallocation of the issuing authority allocated to that category.

The current allocation was established in 1987 and provides as follows:

Housing                25 percent

Student Loans       15 percent

Exempt facility     20 percent

Public Utility        10 percent

Small Issue            25 percent

Remainder and

     Redevelopment  5 percent

Summary of  Amended Bill:

The allocation among the several categories of issuers is changed as follows:

20012002 andAlternative

thereafterAllocation

Housing    27.5 percent30.0 percent32.0 percent

Small Issue24.5 percent24.0 percent25.0 percent

Exempt Facility 19.5 percent19.0 percent20.0 percent

Student Loans 14.5 percent14.0 percent15.0 percent

Public Utility10.0 percent10.0 percent  0.0 percent

Remainder and

  Redevelopment  4.0 percent  3.0 percent 8.0 percent

The ?alternative allocation@ occurs upon the earlier of (a) exhaustion of the public utility current lifetime ceiling ($750 million) or congressional increase thereof, or (b) waiver of that authority due to alternative federal authority that does not use a state volume cap.

The revised federal caps are adopted; these are $62.50 per capita in 2001, $75 per capita in 2002, and are indexed thereafter.

Appropriation:  None.

Fiscal Note:  Not Requested.

Effective Date of Amended Bill:  Ninety days after adjournment of session in which bill is passed.

Testimony For:  This increases the state=s private bond cap which increases financing for facilities for housing, economic development and other purposes at no cost to the state.  This is an agreed-to proposal that ends a recurring dispute.

Testimony Against:  None.

Testified:  Senator Winsley, prime sponsor; Bill Cole, Office of Community Development; Kim Herman, Washington State Housing Finance Commission; Scott Taylor, Washington Public Ports Association; and Bob Mitchell, Washington Association of Realtors.