SUBJECT: A Resolution Authorizing Assignment To The Colorado Housing And Finance Authority Of A Private Activity Bond Allocation Of The Town Of Erie Pursuant To The Private Activity Bond Ceiling Allocation Act
DEPARTMENT: Finance
PRESENTER: Steve Felten
FISCAL INFORMATION:
Cost as Recommended: $0
Balance Available:
Budget Line Item Number:
New Appropriation Required: No
STAFF RECOMMENDATION: Staff recommends the Board of Trustees approve the resolution that authorizes allocation of its PAB allocation to the Colorado Housing and Finance Authority
SUMMARY AND BACKGROUND OF SUBJECT MATTER:
Private activity bonds (PAB’s) are tax-exempt bonds issued by or on behalf of local or state government for the purpose of providing special financing benefits for qualified projects. The financing is most often for projects of a private user, and the government generally does not pledge its credit. These bonds are used to attract private investment for projects that have some public benefit. There are strict rules as to which projects qualify (e.g., single-family mortgage revenue bonds sold by local or state agencies, low-income housing projects, hazardous waste facilities, small-issue manufacturing industrial development bonds for construction of manufacturing facilities, among others). This type of a bond results in reduced financing costs because of the exemption from federal tax.
Each year the IRS publishes the maximum amount of PAB’s each state may issue, referred to as its “cap”. For 2016, Colorado’s cap was approximately $546 million. Pursuant to Federal legislation, each state is authorized to allocate rights to issue PAB’s to various state agencies, county and local governments. In Colorado, just under half of the State cap is allocated to the Colorado Housing and Finance Authority (CHFA). The remaining cap is allocated to the State’s counties and municipalities that exceed a minimum population size. 2016 was the first year that the Town of Erie received an allocation, in the amount of $1,040,950.
Allocations of PAB expire each September 15th unless one of two actions is taken. If a specific project is planned that will utilize PAB’s, the local government can roll over its allocation for up to three years. Alternatively, the local government can reallocate its allocation to CHFA, which then can use the allocated PAB cap in the furtherance of its mission “to increase the availability of affordable, decent, and accessible housing for lower income Coloradans.” Currently the Town has only one possible project that could benefit from the PAB program, the potential sale and expansion of the housing authority assets to Brothers Redevelopment. Brothers has determined that use of PAB’s would not be beneficial to their plans.
CHFA has formally requested that the Town reallocate its PAB allocation to CHFA. Staff recommends that the Board authorize allocation of the Town’s 2016 private activity bond allocation of $1,040,950 to the Colorado Housing and Finance Authority.
ATTACHMENTS:
Resolution 16-###
Assignment of Allocation
Town Attorney Certificate