DAR File No. 38859

Governor, Economic Development

Rule R357-8

Private Activity Bond Allocation of Volume Cap Amount

Notice of Proposed Rule

(New Rule)

DAR File No.: 38859
Filed: 09/11/2014 04:44:33 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This rule is created to outline the process by which applicant's request for bonding authority will be reviewed and the formula that is utilized to determine the allocation award given to the applicant.

Summary of the rule or change:

This rule provided definitions in addition to those provided for in statute. This rule outlines the formula utilized by the Private Activity Bonds Board to determine the allocation of the federally provided volume cap amount. The considerations and formula include: distribution being considered on a first come first served basis, illustrative lists of typical considerations made for each type of applicant, overall community need and impact, applicant's past ability to utilize the activity bonds allocated, etc.

State statutory or constitutional authorization for this rule:

• Subsection 63M-1-3004(7)

Anticipated cost or savings to:

the state budget:

This program is a self-funded program through fees. This rule does not alter the amount of fees received by the program and therefore there is no new cost or savings to the state.

local governments:

This program does not deal directly with or impact local governments. This rule does not change the non-existence of any interaction and therefore does not affect local governments. A small positive impact could be felt in increased local tax revenue provided by the applicants when utilizing bonds to create or grow their housing or manufacturing project in any given local municipality.

small businesses:

The impact to small business is minimal and positive as this provides a more streamlined and transparent process in an applicant ascertaining the viability of their application. Otherwise, there is no impact to small business because this rule does not address any general small business practices outside of offering a different financing mechanism.

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

Other persons impacted will most likely be housing developers. This rule will outline how their applications for allocation volume cap amount will be reviewed and how their allocation will be calculated.

Compliance costs for affected persons:

This rule does not address fees, which is the only source for compliance costs. Thus, this rule will not create any new compliance costs for affected persons.

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

The agency is excited to continue to offer an alternative financing source for specific industries in the state. The fiscal impact to businesses as a result of this rule is only positive in regards to the potential financing that some businesses can qualify for.

Val Hale, Executive Director

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

Governor
Economic Development
60 E SOUTH TEMPLE 3RD FLR
SALT LAKE CITY, UT 84111

Direct questions regarding this rule to:

• Jeffrey Van Hulten at the above address, by phone at 801-538-8694, by FAX at 801-538-8888, or by Internet E-mail at jeffreyvan@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:

10/31/2014

This rule may become effective on:

11/08/2014

Authorized by:

Val Hale, Executive Director

R357. Governor, Economic Development.

R357-8. Private Activity Bond Allocation of Volume Cap Amount.

R357-8-1. Purpose.

The purpose of this rule is to establish a formula for determining the volume cap amount allocated to each applicant applying for private activity bonds.

 

R357-8-2. Authority.

UCA 63M-1-3004 requires the office make rules establishing the manner for allocating the volume cap amount for private activity bonds.

 

R357-8-3. Definitions.

(1) "Applicant" means an entity which falls into one of the Allotment accounts created in Section 63M-1-3006 and who is applying for private activity bonds.

(2) "Available Volume Cap" means the unencumbered amount of private activity bonding authority provided by Section 146 of the IRS code.

(3) "Application" means either the State of Utah Federal Low-Income Housing Credit Consolidated Application Form, for multi-family applicants or the Private Activity Bond Authority Manufacturing Facility Application for the, manufacturing or exempt facility applicants.

(4) "Board" means the Private Activity Bond Review Board.

(5) "Project" means the Applicant's plan for which the Private Activity Bonds are being sought.

(6) All other terms are used as defined by UCA 63M-1-3002.

 

R357-9-4. Formula for Allocating Volume Cap Amount for Each Applicant.

(1) The allocation of the total volume cap amount under this section will be distributed over the course of the calendar year on a first come, first serve basis.

(a) First come, first serve will be based upon the date in which the applicant submits a completed application to the board or its designee. Thus, applicants who apply in January are more likely to receive their total amount requested.

(b) Under the first come, first serve policy, the applicant will receive up to their requested amount, so long as there remains available volume cap to meet their request.

(c) The applicant's total award for each application will be determined by the board based upon the applicant's ability to meet the criteria as outlined in subsection 2 below.

(2) The decision of the allocated volume cap amount awarded to each applicant for each application submitted will be determined by the board.

(a) When deciding the portion of volume cap allocated to each applicant during any given application review round , the board will consider the criteria outlined in 63M-1-3005 and may also consider the following criteria in determining the amount of volume cap to be allocated to each applicant (this list is merely illustrative of typical considerations and is not intended to be an exhaustive list):

(i) Multi-Family Housing applicants:

(A) Bonds per unit;

(B) Percentage of private activity bonds per percentage of total cost;

(C) Bonds per number of households served;

(D) Percentage of public financing;

(E) Total cost per unit;

(F) Percentage of developer fee contributed to project;

(G) Average Median Income rents;

(H) Number of special needs units;

(I) Cash flow per unit ;

(J) Percentage of taxable tail on bonds;

(K) Project location-stronger consideration is given to projects located in:

(I) Underserved areas

(II) Communities without projects

(III) Difficult to develop areas as defined by HUD

(L) Project characteristics;

(I) Day Care

(II) Education center

(III) Applicant's experience with bonds

(IV) Size of project developed

(ii) Manufacturing Facility Applicants:

(A) New job creation;

(B) Retention of jobs;

(C) Training and education of employees;

(D) Bond to jobs ratio;

(E) Jobs created and/or retained that provide above average wages when compared to the community average wage

(F) Demonstrated need for tax-exempt financing;

(I) Show of realistic cash flow for first three years of operation

(II) Explanation for selecting variable or fixed rates

(G) Community Support;

(I) Financial support

(II) Zoning approval

(III) Tax increment financing

(IV) Deferral of fees

(H) Competitive costs for construction and equipment related expenses;

(I) Ready-to-go Status;

(I) Manufacturing Facility zoned for use

(II) Proximity of infrastructure to site

(III) Need for special infrastructure

(IV) Environmental study, if required by lender

(V) Current title report and site plan of project

(VI) Building description

(J) Status of project's financing at time of application;

(K) Selection of bond counsel;

(L) Letter from bond counsel opining the project qualifies for Private Activity Bonds;

(M) Selection of investment banker or if private placement, buyer of the bonds;

(N) Detailed commitment letters from all financial entities involved.

(O) Ability to utilize bonds within the calendar year of issuance

(iii) All allotment account applicants:

(A) Overall community need and impact of the project;

(B) Applicant's past experience and utilization of Private Activity Bonds;

(b) When considering multiple applications during any given review round, the board may choose to award each applicant an equal share of the available volume cap, so long as they submitted their application prior to the deadline posted on the board's website.

(c) The board's staff will work with the applicant during a review period prior to the board review meeting to ensure that all materials necessary to be considered by the board are gathered and completed.

(i) The materials necessary to be considered are determined by the board and available on the board's website.

(ii) The applicant will not be considered unless and until all materials are provided and complete.

 

KEY: allocations, private activity bonds, volume caps

Date of Enactment or Last Substantive Amendment: 2014

Authorizing and Implemented or Interpreted Law: 63M-1-3004(7)