No. 43746 (New Rule): Rule R990-200. Private Activity Bonds

(New Rule)

DAR File No.: 43746
Filed: 05/30/2019 12:20:19 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This proposed rule outlines the criteria by which an applicant's request for bonding authority will be reviewed and private activity bond (PAB) volume cap is allocated or extended, and when allocation and bond authority may be revoked.

Summary of the rule or change:

This proposed rule provides definitions in addition to those provided for in statute. This rule outlines the application process, applicant qualification, and the criteria utilized by the PAB Review Board (Board) to determine the allocation of the federally-provided volume cap amount for each type of applicant. This rule also outlines the process for requesting extension of bond allocation or a Carryforward Certificate. This rule also describes the circumstances under which the Board may revoke allocation.

Statutory or constitutional authorization for this rule:

• Section 35A-8-2104

Anticipated cost or savings to:

the state budget:

This proposed rule is not expected to have any fiscal impact on state government revenues or expenditures because the 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 proposed rule is not expected to have any fiscal impact on local governments' revenues or expenditures because the program does not deal directly with or impact local governments. A small positive impact could be realized 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:

This proposed rule is expected to have indirect positive fiscal impact on small businesses' revenues or expenditures because it provides a more transparent process for an applicant ascertaining the viability of their application. Otherwise, there is no impact to small businesses because this rule does not address any general 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 proposed rule is expected to have indirect positive fiscal impacts on other persons' revenues or expenditures because it provides a more transparent process for an applicant ascertaining the viability of their application. Otherwise, there is no impact to such persons because this rule does not address any general business practices outside of offering a different financing mechanism.

Compliance costs for affected persons:

This proposed rule requires the submission of fees with applications and extension requests, as well as a certificate fee upon award of PAB allocation. The Board is required to charge reasonable fees pursuant to Subsection 35A-8-2104(8). The proposed rule does not establish the amount of the fees. Currently, there is a $1,500 to $3,000 first-time application fee for all those who apply for a PAB allocation. The fee is dependent on the amount of allocation sought. There is currently a $750 to $1,500 resubmission fee for projects that were previously submitted, approved, and which received an allocation of volume cap, but were not able to issue the bonds. There is currently a $300 per million dollars of volume cap received confirmation fee for applications approved by the PAB Board. There is currently a $0 to $4,000 extension fee, dependent on the number of extensions requested by the applicant.

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

The potential fiscal impact to businesses as a result of this rule is positive in regards to the potential financing that some businesses can qualify to receive.

Jon Pierpont, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office 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:

• Amanda McPeck at the above address, by phone at 801-517-4709, by FAX at , or by Internet E-mail at [e-mail]

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:

07/15/2019

This rule may become effective on:

07/22/2019

Authorized by:

Jon Pierpont, Executive Director

RULE TEXT

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs

FY 2020

FY 2021

FY 2022

State Government

$0

$0

$0

Local Government

$0

$0

$0

Small Businesses

$0

$0

$0

Non-Small Businesses

$0

$0

$0

Other Person

$0

$0

$0

Total Fiscal Costs:

$0

$0

$0

Fiscal Benefits

State Government

$0

$0

$0

Local Government

$0

$0

$0

Small Businesses

$0

$0

$0

Non-Small Businesses

$0

$0

$0

Other Persons

$0

$0

$0

Total Fiscal Benefits:

$0

$0

$0

Net Fiscal Benefits:

$0

$0

$0

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described in the narrative. Inestimable impacts for Non - Small Businesses are described in Appendix 2.

 

Appendix 2: Regulatory Impact to Non - Small Businesses

The impacts to small businesses were characterized above and the impacts to non-small businesses are described here. This proposed rule is expected to have indirect positive fiscal impacts on non-small businesses' revenues or expenditures because it provides a more transparent process for an applicant ascertaining the viability of their application. Otherwise, there is no impact to non-small businesses because this rule does not address any general business practices outside of offering a different financing mechanism.

 

The executive director of the Department of Workforce Services, Jon Pierpont, has reviewed and approved this fiscal analysis.

 

 

R990. Workforce Services, Housing and Community Development.

R990-200. Private Activity Bonds.

R990-200-1. Purpose.

The purpose of this rule is to establish criteria for allocating private activity bond volume cap to a qualified applicant, whether an allocation of private activity bond volume cap may be extended, and related matters.

 

R990-200-2. Authority.

Section 35A-8-2104 requires the Private Activity Bond Review Board (Board of Review) to make rules for the allocation of volume cap for private activity bonds.

 

R990-200-3. Definitions.

Terms used in these rules are defined in Section 35A-8-2102. Terms not defined in that Section or in these rules shall be defined as used and characterized in the Private Activity Bonds Application, Scoring Criteria and other Board of Review authorized documents. In addition:

(1) "Affordable" means at least 20% of the residential units in the project are set aside for families whose incomes do not exceed 50% of Area Median Income (AMI), adjusted for family size; or at least 40% of the residential units in the project are set aside for families whose incomes do not exceed 60% of AMI, adjusted for family size.

(2) "Applicant" means a borrower or issuing authority submitting an application for an allocation of volume cap or a project sponsor submitting an application on behalf of an issuing authority for an allocation of volume cap.

(3) "Available Volume Cap" means the unencumbered volume cap.

(4) "Application" means:

(a) the electronic state of Utah Federal Low-Income Housing Credit Consolidated Application for multi-family applicants;

(b) the Private Activity Bond Authority Manufacturing Facility Application for the manufacturing, redevelopment or exempt facility applicants; or

(c) the Private Activity Bond Authority Application for Single Family or Student Loan applicants.

(5) "Closed" or "close" means the time at which bonds are exchanged for funds.

(6) "Good standing" means the applicant or recipient has, for the immediately preceding five years:

(a) timely remitted any required fees and payments due,

(b) timely submitted any required reports,

(c) has not failed to close, and

(d) has not misrepresented an application or a previous or current project to the Board of Review.

(e) In addition, for multi-family projects, the applicant or recipient, for the immediately preceding five years:

(i) has not exceeded rent or income limits,

(ii) has not converted any affordable unit into a market rate unit, and

(iii) has rented designated affordable units only to qualified Low and Moderate Income tenants.

(7) "Project" means the applicant's plan for which the private activity bonds are being sought.

(8) "Recipient" means a borrower or issuing authority that has been awarded an allocation of volume cap.

(9) "Low and Moderate Income" means a household whose income upon initial occupancy does not exceed 140% of AMI adjusted for family size.

(10) "Market Rate" means housing units that are not affordable.

 

R990-200-4. Applicant Qualifications.

(1) An application will be presented to the Board of Review only if each project applicant, owner, developer, and manager:

(a) is in good standing;

(b) has not been disbarred by any state or federal agency within the previous ten years;

(c) has not been in bankruptcy within the previous ten years;

(d) has not been in default or breach of any mortgage or project-related contract within the previous five years; and

(e) is not subject to a pending fair housing or civil rights investigation or, within the previous ten years, a negative fair housing or civil rights determination.

(2) An application shall include documentation executed by each applicant, owner, developer, and manager certifying that each signatory meets each requirement identified in R990-200-4(1).

(a) An application shall include documentation supporting and verifying the accuracy of each certification.

(3) Each applicant shall provide any necessary and required materials and supporting documents not less than 30 nor greater than 120 calendar days before the Board of Review meeting when the application will be considered.

(4) Application forms and materials are available on the Department of Workforce Services Housing and Community Development website.

(5) An application will not be considered until any necessary and required materials are provided and complete.

(6) An incomplete application will be returned to the applicant without further action.

(7) No new, additional, or replacement documentation will be accepted after the application submission deadline specified in R990-200-4(3).

 

R990-200-5. Criteria for Allocating Volume Cap.

(1) Private activity bond volume cap allocations are made each calendar year based upon available volume cap.

(a) The decision whether to allocate volume cap to an applicant shall be determined by the Board of Review, in its sole discretion.

(b) Allocations are not made on a first-come-first-served basis.

(c) Each complete application submitted before the deadline will be evaluated and scored in comparison with other applications for the same type of project use. The weight each evaluation criteria is given is as identified on the score sheet approved by the Board of Review.

(d) The Private Activity Bond program staff and consultants under contract with the Board of Review will evaluate and score each application. In the event demand for funding exceeds the available volume cap, applications will be numerically ranked for the purpose of allocation.

(e) When considering multiple applications at a meeting, the Board of Review may choose to award each applicant an equal share, pro rata share, priority for multi-family housing or other classification, or other division of available volume cap.

(2) When deciding to allocate volume cap to an applicant, the Board of Review shall consider the criteria outlined in Section 35A-8-2105 and the following additional criteria:

(a) timely submission of completed application;

(b) timely payment of applicable fees;

(c) applicant's experience in successfully completing projects utilizing private activity bonds;

(d) project financing, including executed letters of intent for debt and equity funding;

(e) project readiness, including required public entity approvals, site ownership, and architect and construction contracts;

(f) timely response to any questions raised by the Board of Review and Private Activity Bond program staff;

(g) status of project's financing at time of application;

(h) appointment of bond counsel;

(i) letter from bond counsel opining the project qualifies for private activity bonds;

(j) appointment of investment banker or, if private placement, buyer of the bonds;

(k) detailed commitment letters from financial entities involved;

(l) ability to cause bonds to be issued within 12 months of allocation;

(m) past history of forfeited allocation commitments;

(n) length of tax-exempt bond amortization; and

(o) other factors considered appropriate by the Board of Review.

(3) Multi-Family Housing applicants must meet the criteria of the Low-Income Housing Tax Credit Program administered by the Utah Housing Corporation. In addition to the criteria in R990-200-5(2), the Board of Review shall consider the following criteria when deciding to allocate volume cap to Multi-Family Housing applicants:

(a) bond amount per unit;

(b) bond amount per affordable unit;

(c) the percentage, in relation to the group of applications currently being evaluated, of the private activity bond allocation being requested;

(d) percentage of public financing, including the value of grants, loans, fee waivers, and concessions, but excluding housing tax credits;

(e) total cost per unit and per unit square footage;

(f) percentage of developer fee contributed to project;

(g) percentage of affordable units;

(h) percentage of special needs units;

(i) cash flow per unit;

(j) percentage of taxable bonds;

(k) location, with preference for projects located in:

(i) underserved areas,

(ii) communities without the same type of projects, and

(iii) difficult to develop areas as defined by HUD;

(l) project characteristics, including:

(i) day care,

(ii) education center,

(iii) mixed income projects, with both affordable and market rate units, and

(iv) size of proposed project;

(m) mitigation of environmental issues, including installing radon gas extraction fans or removing the source of radon; and

(n) acquisition, rehabilitation, and remediation of buildings with Utah or federal historic designation, including removal of hazards and including appraisals and a relocation plan for current residents.

(4) In addition to the criteria in R990-200-5(2), the Board of Review shall consider the following criteria when deciding to allocate volume cap to Manufacturing Facility, Redevelopment and Exempt Facilities applicants:

(a) new full-time-equivalent job creation, including a list of new positions and wages, and excluding construction and other temporary jobs;

(b) retention of jobs;

(c) training and education of employees;

(d) bond amount to permanent full-time-equivalent jobs ratio;

(e) permanent full-time-equivalent jobs created or retained that provide above average wages when compared to other applicants' average wages and the community average wage;

(f) demonstrated need for tax-exempt financing, including:

(i) projected cash flow for the first three years of operation, including supporting documentation, and

(ii) explanation for selecting variable or fixed rates;

(g) community support, including:

(i) financial support,

(ii) zoning approval,

(iii) tax increment financing, and

(iv) deferral of fees;

(h) competitive costs for construction and equipment related expenses; and

(i) ready-to-go status, including:

(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, and

(vi) building description.

(5) Prior to considering an application, a Board of Review member shall disclose the substance of any communication the member has had outside of a public meeting with an applicant or other interested party regarding the project.

(6) The allocation certificate issued for Multi-Family Housing volume cap shall restrict the occupancy of market rate rental units to families whose incomes do not exceed 150% of Area Median Income (AMI), adjusted for family size, for at least 51 years from the date on which at least 50% of the residential units in the project are first occupied.

(a) Recipients and owners shall comply with any terms of the Certificate of Allocation, including any Additional Conditions approved by the Board of Review.

(b) Recipients and owners shall submit documentation to Private Activity Bond program staff within 15 days after the issuance of bonds, and at other times upon request, to verify compliance with the terms of the Certificate of Allocation.

(7) A recipient may not be awarded additional volume cap for a previously funded project. A recipient may relinquish allocated volume cap and submit a new application for the total amount requested.

 

R990-200-6. Fees.

(1) An application fee shall be submitted together with the application.

(2) An extension fee shall be submitted together with the extension request.

(3) A certificate fee shall be submitted upon award of allocation and before issuance of a certificate.

(4) An application, extension request, or other action may not be processed or added to the Board of Review agenda until required fees are paid.

(5) Fees are non-refundable.

 

R990-200-7. Extensions.

(1) A recipient that has not closed its volume cap allocation within 95 calendar days of the date of Board of Review approval may request an extension from the Board of Review.

(a) Manufacturing projects, qualified redevelopment projects, and exempt facility projects are not eligible to carry forward their volume cap allocation beyond the end of the calendar year in which they received the allocation. The bonds must close by the third Saturday in December in the same year the recipient received the allocation. Any volume cap not issued by this date is automatically relinquished back to the Board of Review.

(b) The Board of Review makes no representation as to whether an issuer will allow the allocation to be transferred to another project if the previously approved transaction fails.

(2) A recipient requesting an extension of a previously approved and current volume cap allocation shall submit a completed extension form to the Private Activity Bond program staff no later than 21 calendar days before the Board of Review meeting.

(3) An extension request will not be presented to the Board of Review if the request for an extension is received more than 20 months after the initial allocation.

(4) An extension request will not be presented to the Board of Review unless the recipient's account is in good standing.

(5) An extension request for a second or more extension will be evaluated, scored, and considered by the Board of Review, subject to the provisions of R990-200-7(8).

(6) An extension approval may not exceed ninety-five (95) calendar days or until the date of the next Board of Review meeting, whichever is sooner.

(7) A recipient requesting a second or more extension shall submit a completed extension request status report and extension fee, no later than 21 calendar days before the Board of Review meeting, on the form provided on the website of the Board of Review, together with each request.

(a) Private Activity Bond program staff shall perform a comprehensive progress review before the Board of Review meeting where an extension will be considered, and shall prepare a recommendation.

(b) The applicant may be required to reapply after the third extension review if there is no substantial evidence of being able to close the bonds.

(8) A recipient may not receive more than five extensions. A request for a sixth or more extension will not be presented to the Board of Review, and the previously allocated volume cap shall be revoked.

(9) A recipient requesting an extension shall attend the Board of Review meeting, prepared to update the Board of Review on the progress of the development and answer any questions

(10) A City or County issuer may submit a request for a Carryforward Certificate no later than 21 calendar days before the December Board of Review meeting.

(11) A City or County issued a Carryforward Certificate shall comply with the extension request requirements for each three month period after an allocation has been made to a project, including but not limited to:

(a) attendance at each Board of Review meeting, prepared to update the Board of Review on the progress of the development and answer any questions, and

(b) submission of a complete comprehensive progress report.

(12) Allocations to the Utah Housing Corporation, a municipality, a county, or a public university may be extended for no more than three years.

(a) Allocations that are not issued in the same calendar year may be carried forward but may not be extended.

(13) The Board of Review reserves the right to approve or reject an extension or Carryforward certificate in accordance with the criteria established by this Rule.

(14) In the event an extension or Carryforward Certificate request is untimely, denied by the Board of Review in its sole discretion, or otherwise not presented to the Board of Review in accordance with these Rules, the allocation shall be revoked.

 

R990-200-8. Revocation of Private Activity Bond Allocation.

(1) The Board of Review reserves the right to revoke a recipient's allocation and authority to issue the bonds if there is credible information that a material misrepresentation was presented to the Board of Review or any of its members.

(2) The Board of Review reserves the right to revoke a recipient's allocation if:

(a) the project's affordable units are reduced by 10% or more;

(b) the project's total number of units are reduced by 15% or more;

(c) the site location of the project is changed;

(d) total costs per unit are increased by 15% or more;

(e) total project costs are increased by 20% or more; or

(f) the Board of Review determines there is no substantial evidence the recipient will be able to close the bonds.

(3) A recipient in good standing may submit a new application with updated information for a volume cap allocation.

 

KEY: allocation, private activity bond, volume cap

Date of Enactment or Last Substantive Amendment: 2019

Authorizing, Implemented, or Interpreted Law: 35A-8-2104

---