House of Representatives

HB 2390

industrial development bond allocations

Sponsors: Leff: Knaperek

DP	Committee on Commerce and Economic Development
DPA	Committee on Ways and Means
X	Committee on Appropriations
	Caucus and COW
	As Passed the House

HB 2390 changes the allocations for tax-exempt Industrial Development Bonds and guarantees that qualified residential rental (multifamily) projects will participate in the program.

History

In 1986, the Legislature established a private activity bonding authority under the provisions of a 1984 federal Deficit Reduction Act. The federal program designates each state allotment of tax-exempt private activity bonds based on population. Up until 2000, the allocation has been $50 per capita. Congress recently passed the federal Community Renewal Act that increases the allocation amount beginning in 2001. This year, the allocation amount is $62.50 per capita and will rise to $75 in 2002. Beginning in 2003 and thereafter, the amounts will be adjusted for inflation. Projects financed with tax-exempt bonds must comply with the Internal Revenue Code and any applicable state laws.

The current private activity bond program in Arizona is administered through the Finance Division of the Department of Commerce. Private activity bonds are issued by or on behalf of a municipality or county to provide financing for projects used in the trade or business of a private user. The current state allocation is divided among five categories. The current categories are: 1) projects that are designated at the sole discretion of the Director of Commerce, 2) qualified mortgage revenue bonds (MRB) and qualified mortgage credit certificate programs (MCC), 3) qualified student loan projects, 4) manufacturing projects, 5) all projects not provided for in the other categories which include, but are not limited to qualified mortgage revenue bonds and qualified mortgage credit certificate programs for home improvement and rehabilitation.

Allocations are made on a first-come, first served basis for director’s discretion and MRB/MCC category. The student loan projects, manufacturing projects and the “all other” category are allocated on a lottery system. Qualified projects apply to the Department of Commerce, and a lottery is done in January of each year. Any unused allocations are then distributed in a lottery in June or July (there are no categories in the June/July allocation lottery).

HB 2390 changes the allocation formula to include qualified residential rental (multifamily) projects. However, it should be noted that these projects are already receiving funds each year through the current allocation formula, even without a guaranteed allocation. Attached to the summary is a table provided by the Department of Commerce regarding allocation amounts for 1997 – 2001.

Provisions

· HB 2390 changes the allocations for private activity bonds as follows:

ü Projects designated at the sole discretion of the Director - 12% [currently 15%].

ü Qualified Mortgage Revenue Bonds and Qualified Mortgage Credit Certificate Programs - 28% [currently 35%]

ü Qualified Residential Rental Projects - 20% [currently no allocation]

ü Qualified Student Loan Projects - 16% [currently 20%]

ü Manufacturing Projects - 12% [currently 15%]

ü All other projects that are able to be financed through issuance of bonds - 12% [currently 15%]

· Provides a definition of “qualified residential rental project” as having the same meaning as section 142 of the Internal Revenue Code. The Internal Revenue Code defines this as:

The term “qualified residential rental project” means any project for residential rental property if, at all times during the qualified project period, such project meets the requirements of subparagraph (A) or (B), whichever is elected by the issuer at the time of the issuance of the issue with respect to such project:

(A) 20-50 test – The project meets the requirements of this subparagraph if 20 percent or more of the residential units in such project are occupied by individuals whose income is 50 percent of less of area median gross income.

(B) 40-60 test – The project meets the requirements of this subparagraph if 40 percent or more of the residential units in such project are occupied by individuals whose income is 60 percent or less of area median gross income.

HB 2390 passed the Commerce and Economic Development Committee unamended

HB 2390 was amended in Ways and Means as follows:

· Further changes the allocation formula so that qualified residential rental projects receive 15% of the allocation instead of 20%. This allocation percentage is achieved by reducing the director’s discretion percentage from 15% to 5% and the “all other” category from 15% to 10%.

· The allocation amounts for student loans, manufacturing and single-family mortgage programs are returned to their current allocation percentages.

· 20% of the 15% for qualified residential rental projects must be for nonurban areas.

· The act will be effective beginning January 1, 2002.

· Technical and conforming changes are also made throughout the allocation statutes.

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45th Legislature

First Regular Session 3 March 5, 2001

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