Community and Culture, Housing and Community Development

Rule R199-9

Policy Concerning Enforceability and Taxability of Bonds Purchased

Notice of Proposed Rule

(Repeal)

DAR File No.: 36322
Filed: 06/05/2012 02:01:03 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

H.B. 139 (Department of Community and Culture Amendments) passed in the 2012 Legislative General session. The intent of this bill was to restructure the Department of Community and Culture into the new Department of Heritage and Arts, and to move the Housing and Community Development program to the Department of Workforce Services (DWS). The purpose of this repeal is to remove this rule as the content is now under DWS. (DAR NOTE: The proposed new rule is R990-9 published in the June 1, 2012, issue of the Bulletin under DAR No. 36217.)

Summary of the rule or change:

This rule is repealed in its entirety.

State statutory or constitutional authorization for this rule:

• Title 35A, Chapter 8

Anticipated cost or savings to:

the state budget:

There are no costs or savings associated with this proposed repeal. Responsibility for this program has been transferred to DWS which has filed a new replacement rule identical to this one.

local governments:

There are no costs or savings associated with this proposed repeal. Responsibility for this program has been transferred to DWS which has filed a new replacement rule identical to this one.

small businesses:

There are no costs or savings associated with this proposed repeal. Responsibility for this program has been transferred to DWS which has filed a new replacement rule identical to this one.

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

There are no costs or savings associated with this proposed repeal. Responsibility for this program has been transferred to DWS which has filed a new replacement rule identical to this one.

Compliance costs for affected persons:

There are no costs or savings associated with this proposed repeal. Responsibility for this program has been transferred to DWS which has filed a new replacement rule identical to this one.

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

There are no costs or savings associated with this proposed repeal. Responsibility for this program has been transferred to DWS which has filed a new replacement rule identical to this one.

Julie Fisher, Executive Director

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

Community and Culture
Housing and Community DevelopmentRoom 500
324 S STATE ST
SALT LAKE CITY, UT 84111-2388

Direct questions regarding this rule to:

• Keith Burnett at the above address, by phone at 801-538-8725, by FAX at 801-538-8888, or by Internet E-mail at [email protected]

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:

08/01/2012

This rule may become effective on:

08/15/2012

Authorized by:

Michael Hansen, Deputy Director

[R199. Community and Culture, Housing and Community Development.

R199-9. Policy Concerning Enforceability and Taxability of Bonds Purchased.

R199-9-1. 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.

 

R199-9-2. 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.

 

R199-9-3. 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: 1987

Notice of Continuation: September 13, 2007

Authorizing, and Implemented or Interpreted Law: 9-4-305]