Workforce Services, Housing and Community Development

Rule R990-9

Policy Concerning Enforceability and Taxability of Bonds Purchased

Notice of Proposed Rule

(New Rule)

DAR File No.: 36217
Filed: 05/15/2012 04:31:32 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

H.B. 139 which was passed in the 2012 General Session moved the Division of Housing and Community Development from what was known as the Department of Community and Culture (DCC) to the Department of Workforce Service (DWS). This proposed new rule simply changes the rule numbering and moves it to DWS.

Summary of the rule or change:

This new rule text is the same as the old rule. The old rule number was R199-9 and will now be R990-9. The statutory references have been changed to reflect the new code provisions. The old department and division names were also changed to reflect the changes in H.B. 139. No other changes were made.

State statutory or constitutional authorization for this rule:

• Section 35A-8-1004

Anticipated cost or savings to:

the state budget:

There will be no costs or savings to the state budget by this new rule because the rule already existed and any costs or savings are as a result of H.B. 139 and not this new rule.

local governments:

There will be no costs or savings to any local government's budget by this new rule because the rule already existed and any costs or savings are as a result of H.B. 139 and not this new rule.

small businesses:

There will be no costs or savings to any small business by this new rule because the rule already existed and any costs or savings are as a result of H.B. 139 and not this new rule.

persons other than small businesses, businesses, or local governmental entities:

There will be no costs or savings to any persons other than small businesses, businesses or local government entitles by this new rule because the rule already existed and any costs or savings are as a result of H.B. 139 and not this new rule.

Compliance costs for affected persons:

There will be no costs or savings to any affected persons by this new rule because the rule already existed and any costs or savings are as a result of H.B. 139 and not this new rule.

Comments by the department head on the fiscal impact the rule may have on businesses:

There are no compliance costs associated with this change. There are no fees associated with this change. There will be no cost to anyone to comply with these changes. There will be no fiscal impact on any business.

Kristen Cox, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Workforce Services
Housing and Community Development
140 E BROADWAY
SALT LAKE CITY, UT 84111-2333

Direct questions regarding this rule to:

• Suzan Pixton at the above address, by phone at 801-526-9645, by FAX at 801-526-9211, or by Internet E-mail at spixton@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/02/2012

This rule may become effective on:

07/09/2012

Authorized by:

Kristen Cox, Executive Director

R990. Workforce Services, Housing and Community Development.

R990-9. Policy Concerning Enforceability and Taxability of Bonds Purchased.

R990-9-1. Enforceability.

In providing any financial assistance in the form of a loan, the (Board/Committee) representing the State of Utah (the "State") may purchase Bonds or other legal obligations (the "Bonds") of various political subdivisions (interchangeably, as appropriate, the "Issuer" or "Sponsor") of the State only if the Bonds are accompanied by a legal opinion of recognized municipal bond counsel to the effect that the Bonds are legal and binding under applicable Utah law.

 

R990-9-2. Tax-Exempt Bonds.

In providing any financial assistance in the form of a loan, the (Board/Committee) may purchase either taxable or tax-exempt Bonds; provided that it shall be the general policy of the (Board/Committee) to purchase Bonds of the Issuer only if the Bonds are tax-exempt and are accompanied by a legal opinion of recognized municipal bond counsel to the effect that interest on the Bonds is exempt from federal income taxation. This does not apply for Bonds carrying a zero percent interest taxation. This tax opinion must be provided by the Issuer in the following circumstances:

a. When Bonds are issued and sold to the State to finance a project which will also be financed in part at any time by the proceeds of other Bonds, the interest on which is exempt from federal income taxation.

b. When (i) Bonds are issued which are no subject to the arbitrage rebate provision or Section 148 of the Internal Revenue Code of 1986 (or any successor provisions of similar intent) (the "Code"), including, without limitation, Bonds covered by the "small governmental units" exemption contained in Section 148 (f) (4) (c) of the Code, and (ii) when Bonds are issued which are not subject to arbitrage rebate because the gross proceeds from the loan will be completely expended within six months after the issuance of the Bonds.

Notwithstanding the above, the (Board/Committee) may purchase taxable Bonds if it determines, after evaluating all relevant circumstances including the Issuer's ability to pay, that the purchase of the taxable Bonds is in the best interests of the State and the Issuer.

 

R990-9-3. Parity Bonds.

In addition to the policy stated above, it is the general policy of the (Board/Committee) that Bonds purchased by the (Board/Committee) shall be full parity Bonds with other outstanding Bonds of the Issuer. Exceptions to this parity requirement may be authorized by the (Board/Committee) if the (Board/Committee) makes a determination that

(i) the revenues or other resources pledged as security for the repayment of the Bonds are adequate (in excess of 100% coverage) to secure all future payments on the Bonds and all debt having a lien superior to that of the Bonds and

(ii) the Issuer has covenanted not to issue additional Bonds having a lien superior to the Bonds owned by the (Board/Committee) without the prior written consent of the (Board/Committee), and

(iii) requiring the Issuer to issue parity bonds would cause undue stress on the financial feasibility of the project.

 

KEY: grants

Date of Enactment or Last Substantive Amendment: 2012

Authorizing, and Implemented or Interpreted Law: 9-4-305; 35A-8-1004