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**Meeting Announcement **
The next regularly scheduled Private Activity Bond Authority Board Meeting will be held on Wednesday, April 2, 2008, at 9:00 a.m. (Please note the new date.) For a copy of the meeting agenda click here.
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What is PAB - Program Overview
The Private Activity Bond (PAB) is Utah's tax-exempt bonding authority creating a lower cost, long-term source of capital under the Federal Tax Act of 1986. As a result, the federal government allocates over $28 billion per year to states on a per capita basis, with Utah receiving $262,095,000 in 2008. Each state establishes its usage priorities by statute. The Utah Legislature has established its priorities for this important scarce resource in the following four accounts:
Small Issue Account
Volume Cap Amount: $62,902,800
Percent of Total Volume Cap: 24%
Users: Multi-family Affordable Housing (apartments) and Manufacturing Facilities (credit worthy with higher paying jobs; to build or buy a new building, equipment, and/or land)
Single Family Account
Volume Cap Amount: $110,079,900
Percent of Total Volume Cap: 42%
Users: Utah Housing Corporation for first-time single family homeowners
Student Loan Account
Volume Cap Amount: $86,491,350
Percent of Total Volume Cap: 33%
Users: Board of Regents for university and college students
Exempt Facility Account
Volume Cap Amount: $2,620,950
Percent of Total Volume Cap: 1%
Users: Pollution and Waste Control Projects
The Small Issue Account attempts to allocate this "Volume Cap" to meet two critical state needs: build essential multi-family housing and create high paying jobs that will support a family. Through use of Multi-family Housing Bonds and Manufacturing Facility Bonds (i.e. Industrial Development Bonds or IDBs), long-term capital is made available at 100 to 300 basis points (1 to 3 percentage points) less than market rates for periods of 20 to 40 years.
The Single Family Mortgage and Student Loan Programs lower thousands of Utahans' long-term costs annually for their first home mortgages or college student loans.
Why Use Tax-Exempt Bonds?
The owner of a tax-exempt bond does not need to pay federal income taxes on the interest received on such bonds; consequently, tax-exempt bonds bear interest at lower rates than bank loans or taxable bonds. This lower borrowing cost is passed on directly to the borrowing entity under the bonding program.
Why Should Manufacturers Use Tax-Exempt Bonds
Tax-exempt bonding will provide manufacturers in Utah with an alternative, low-cost source of funds to finance capital expenditures, which will in turn, increase employment or otherwise contribute to economic development.
Why Should Developers Use Tax-Exempt Bonds?
- Lower interest rates than conventional loans of comparable maturity.
- Higher loan amounts (greater leverage) due to lower interest rates.
- Access to greater variety of financing tools.
- Variable rate demand bonds to provide greater cash flow.
- Derivative products to customize financing to desired risk tolerance.
- Access to equity from 4% low-income housing tax credits ("LIHTCs").
- Provides 25% to 30% more capital as a source of funds.
- Easier and quicker path to obtain necessary authorization to proceed.
Volume Cap allocations require qualified bond counsel and an underwriter that result in tax-exempt bonds. Volume Cap is allocated by the Private Activity Bond Review Board in 90-day certificates at the regularly scheduled monthly meetings. Applications are submitted at least five weeks prior to the board meetings. For a copy of the current board meeting agenda, click on the link at the top of this page.
For more information on the individual programs and to receive applications, click here.
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