Assigned to COM & FIN                                                                                              FOR COMMITTEE

 

 

 

ARIZONA STATE SENATE

Phoenix, Arizona

 

FACT SHEET FOR H.B. 2390

 

industrial development bond allocations

 

Purpose

 

Changes the allocation schedule for private activity bonds and creates an industrial development bond allocations study committee.

 

Background

 

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 (DOC). 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 DOC, 2) qualified mortgage revenue bonds (MRB) and qualified mortgage credit certificate programs (MCC), 3) qualified student loan projects, 4) manufacturing projects, and 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 DOC, 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).

 

H.B. 2390 changes the allocation formula for private activity bonds to allow for a 10 percent allocation for qualified residential rental projects.  These are multifamily dwelling projects that qualify as affordable housing projects according to federal regulations.  These projects already receive funds each year under other categories of the current allocation formula but receive no dedicated amount.

 

There is no anticipated fiscal impact to the state general fund associated with this measure.

 

 

Provisions

 

1.      Makes effective on January 1, 2004 and each year thereafter current statutory allocations for private activity bonds.

 

2.      Changes current allocations and creates new allocations for private activity bonds for calendar years (CY) 2002 and 2003 for the following industrial development projects:

 

a)      Projects designated at the sole discretion of the Director - 10% (currently 15%).

b)      Qualified Residential Rental Projects - 10% (currently no allocation)

c)      All other projects that are able to be financed through issuance of bonds - 10% (currently 15% )

 

3.      Maintains the current allocations for private activity bonds for CY’s 2002 and 2003 for the following industrial development projects:

 

a)      Qualified Mortgage Revenue Bonds and Qualified Mortgage Credit Certificate Programs-   35%

b)      Qualified Student Loan Projects - 20%

c)      Manufacturing Projects - 15%

 

4.      Subjects these temporary allocation requests to the same filing requirements that apply to current allocation requests.

 

5.      Establishes and prescribes the membership of a study committee (terminating December 31, 2001) on industrial development bond allocations charged with the following:

 

a)      Studying the utilization of private activity bonds for the past five years.

b)      Reviewing the process by which prospective users of private activity bonds are selected; and

c)      Evaluating and making recommendations for future allocations and methods for selecting bond recipients.

 

6.      Requires the committee to submit a report by December 1, 2001 to the Governor and Legislature that includes the recommendations of the study committee.

 

7.      Requires legislative staff, DOC and the Governor’s Agency on Housing or DOC Division of Housing and Infrastructure Development, whichever is operational, to provide assistance to the study committee.

 

8.      Provides for a delayed repeal date of December 31, 2003 for provisions relating to industrial development authority allocations.

 

9.      Provides for a delayed effective date of January 1, 2002 for provisions relating to current allocations.

 

 

 

 

House Action

 

CED                01/22/01                      DP                   6-0-4-0

WM                 2/20/01                        DPA                7-0-3-0

APPROP         3/6/01                          DPA                7-6-0-3

3rd Read           3/20/01                                                49-6-5-0

 

 

Prepared by Senate Staff

March 23, 2001