TIFAS: REFUNDING BONDS H.B. 5072 (S-3): FLOOR ANALYSIS
House Bill 5072 (Substitute S-3 as reported by the Committee of the Whole) Sponsor: Representative Gregory E. Pitoniak
House Committee: Local Government
Senate Committee: Economic Development, International Trade and Regulatory Affairs
The bill would amend the Tax Increment Finance Authority Act to enable tax increment finance authorities to refund obligations for which State and local school tax revenue may be captured, without losing that revenue as a result of the refunding; and to refund obligations that are eligible for State appropriations (commonly called “hold harmless” distributions), without compromising that eligibility. An authority could issue or incur such a “qualified refunding obligation” only if, generally speaking, it would have the effect of reducing the amount of principal and interest to be paid on the obligation being refunded, as well as the amount of school tax revenue captured by the authority and the amount of hold harmless distributions needed from State to repay the obligation being refunded. If an authority could issue a qualified refunding obligation and did not make a good faith effort to do so, the State Treasurer could reduce the amount of the authority’s hold harmless distributions or the amount of school tax increment captured.
The bill would amend the Act’s definitions of “eligible obligation” and “other protected obligation” to include qualified refunding obligations. Further, “other protected obligation” would include an obligation issued or incurred by an authority or a municipality on behalf of an authority to implement a project described in a tax increment finance plan approved by the municipality in accordance with the Act before August 19, 1993, that was located on land owned by a public university on the date the plan was approved and for which a contract for final design was entered into before December 31, 1993. The bill also would authorize tax increment finance authorities to issue bonds to refund bonds “in advance”. In addition, the bill would define “assessed value” as one of the following:
-- For valuations made before January 1, 1995, the State equalized valuation as determined under the General Property Tax Act.
-- For valuations made after December 31, 1994, the taxable value as determined under Section 27a of the General Property Tax Act (which implements the constitutional assessment cap pursuant to Proposal A).
The bill is tie-barred to Senate Bills 992 and 993, which would amend the downtown development authority Act and the Local Development Financing Act, respectively, to make the same changes as those proposed by House Bill 5072
MCL 125.1801 et al. Legislative Analyst: L. Burghardt
Local units, in which authorities refund obligations, and the State would realize decreased costs associated with refunding of the obligations. The saving would depend on the interest rate of the current obligations and the lower interest rate obtained.
Date Completed: 5-20-96 Fiscal Analyst: R. Ross
floor\hb5072
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.