200 KAR 15:010. Formula for allocation of private activity bonds.

 

      RELATES TO: KRS 103.200(1)(k), (l), (m), (n), (2), 103.2101, 103.286

      STATUTORY AUTHORITY: KRS 103.286(3), 26 U.S.C. sec. 146

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 103.286(3) requires the Secretary of the Finance and Administration Cabinet to promulgate administrative regulations to provide for the allocation of the state ceiling for the issuance of private activity bonds. This administrative regulation establishes the formula for that allocation.

 

      Section 1. Definitions. (1) "Affected bonds" means "private activity bonds" as defined by 26 U.S.C. sec. 146, excluding any obligations not subject to the state ceiling under the Code.

      (2) "Allocation" means the amount of volume cap that was approved by the Kentucky Private Activity Bond Allocation Committee for a local issuer or state issuer.

      (3) "Available volume cap" means the amount of volume cap remaining from the local issuer pool at the close of business on June 30.

      (4) "Bonds" is defined by KRS 103.200(2).

      (5) "Committee" means the Kentucky Private Activity Bond Allocation Committee.

      (6) "Eligible available volume cap applicants" means state issuers and local project applicants who file a notice of intent to issue relating to available volume cap.

      (7) "Issued" means delivered and paid for.

      (8) "Issuer" or "issuing authority" means the public or authorized governmental body which issues the bonds.

      (9) "Local issuer" or "local issuing authority" means a public or authorized governmental body which issues bonds on behalf of a local project.

      (10) "Local issuer pool" means the portion of the state ceiling from which allocations for local projects are made to issuers of affected bonds issued on behalf or for the benefit of an entity which is not a state agency.

      (11) "Local project" means a project, other than a project for creation or financing of residential single family or multifamily affordable housing which are included under the "state projects", for which bonds are issued on behalf or for the benefit of an entity which is not a state agency.

      (12) "Lottery" means any process of random selection utilized to allocate available volume cap and which is conducted:

      (a) By staff at a public meeting of the Committee; and

      (b) In accordance with Section 5 of this administrative regulation.

      (13) "Staff" means the Office of Financial Management of the Finance and Administration Cabinet.

      (14) "State ceiling" means the cap imposed by 26 U.S.C. sec. 146 on private activity bonds issued within the Commonwealth of Kentucky.

      (15) "State issuer pool" means the portion of the state ceiling from which allocations for state projects are made to issuers of affected bonds issued on behalf or for the benefit of a state agency.

      (16) "State project" means a project, including creation or financing of residential single family or multifamily affordable housing projects and student loans, for which bonds are issued by, on behalf, or for the benefit of a state agency.

      (17) "Year" shall mean calendar year.

 

      Section 2. Allocation of State Ceiling for Affected Bonds. On the first business day of January of each year, the state ceiling for affected bonds shall be divided into two (2) separate pools:

      (1) Eighty (80) percent of the state ceiling shall be allocated to the state issuer pool until December 15th. On or after December 15th, the remainder of any unallocated portion of the state issuer pool shall be allocated by the Committee as carryforward.

      (2) Twenty (20) percent of the state ceiling shall be reserved for the local issuer pool until June 30 or ninety (90) calendar days from the date of allocation. On July 1st, the remainder of any unallocated portion of the state ceiling shall become available volume cap.

 

      Section 3. Allocations For Local Projects. Allocations for local projects shall be subject to the following limitations:

       A local project, including a local project that is related to other local projects by virtue of the common or complimentary utilization of state ceiling, shall not receive an allocation of state ceiling in an amount greater than twenty-five (25) percent of the local issuer pool; however, local projects applied for by eligible available volume cap applicants shall also qualify for additional available volume cap allocations after July 1 in an amount not greater than twenty-five (25) percent of the local issuer pool.

 

      Section 4. Evaluation of Local Projects. Local projects seeking allocation from the state ceiling shall be ranked based on evaluation of the factors listed, and allocated according to the rankings:

      (1) Creation of new jobs, as well as preservation of existing jobs, by the project;

      (2) Average hourly wage and benefits of new employees proposed for the project;

      (3) Capital investment in Kentucky being made as a result of the project;

      (4) Unemployment rate in the county of the project;

      (5) State economic development incentives awarded to the company, if any; and

      (6) Previous state ceiling allocated to the benefited borrower within the last ten (10) years.

 

      Section 5. Allocation of Available Volume Cap. Allocations from the available volume cap shall be made to eligible volume cap applicants in an amount not greater than twenty-five (25) percent of the local issuer pool, as follows:

      (1) First, a lottery shall be conducted to determine the order of disbursement to local projects which did not receive an allocation from the local issuer pool.

      (2) Second, to the extent there is remaining available volume cap, a lottery shall be conducted to determine the order of disbursement to local projects which received an allocation from the local issuer pool, whether the allocation was issued or not.

      (3) Finally, any remaining available volume cap shall be allocated by the committee to one (1) or more state issuers for use during the year or as carry forward; and

      (4) The committee shall choose a reasonable method of random selection for the lottery process.

 

      Section 6. Committee Meetings. The committee shall meet as necessary to allocate the state ceiling. Special meetings may be held on the call of the committee chairman.

 

      Section 7. An issuer shall obtain a confirmation authorizing the issuance of affected bonds by filing with the committee a written notice of intent to issue bond ("Notice of Intent" form). The committee shall issue a confirmation ("Confirmation of Allocation of State Ceiling" form) allocating to the issuer a portion of the state ceiling. Affected bonds shall not be issued by any issuer prior to receiving confirmation by the committee of an allocation under the state ceiling. Confirmations shall be dated and numbered in the order issued.

 

      Section 8. Notice of Issuance. Local Projects. Confirmation Effective for Ninety (90) Days. A confirmation shall expire ninety (90) calendar days from the date of allocation by the committee, or December 15, whichever is earlier. The issuer shall deliver to the committee a notice that the affected bonds have been issued ("Notice of Issuance" form). The notice of issuance may be sent by any means but the committee shall receive it by the close of business on the 90th day after the confirmation. If the notice period ends on a Saturday, Sunday, or other day upon which state offices are closed for business, the notice period shall be extended to the next business day.

 

      Section 9. Notice of Issuance. State Projects. Confirmation effective until December 15. The issuer shall deliver to the committee a notice of issuance. The notice of issuance may be sent by any means but the committee shall receive it by the close of business on or before December 15. If the notice period ends on a Saturday, Sunday, or other day upon which state offices are closed for business, the notice period shall be extended to the next business day.

 

      Section 10. Issuance of Bonds in Lesser Amounts than Confirmation. Eighty-five (85) Percent Requirement. A confirmation of affected bonds shall be effective if issued in amounts less than the confirmation; if the face amount of the issued bonds is not less than eighty-five (85) percent of the original confirmation. The issuer shall notify the committee if the bonds issued are within the eighty-five (85) percent requirement and the unused part of the allocation shall revert to the local issuer pool, or if this reversion occurs after June 30 of any year, the amount shall become available volume cap.

 

      Section 11. Carry Forward Allocations. (1) In any year, the committee shall allocate any remaining state ceiling as carry forward allocations if the aggregate amount of affected bonds issued during the year is less than the state ceiling on December 15th. An issuer shall, in order to receive a carry forward allocation, file with the committee by December 15th:

      (a) A notice of intent; and

      (b) A carry forward election of unused private activity bond volume cap (U.S. Treasury Department Form 8328).

      (2) The carry forward of any unallocated portion of the state ceiling may be for any purpose authorized by 26 U.S.C. sec. 146(f).

      (3) The committee shall issue a confirmation of the notice and election to carry forward ("Confirmation of Carry Forward Allocation of State Ceiling" form).

      (4) The committee may consider, but shall not be required to allocate, a carry forward notice or election filed after December 15th.

 

      Section 12. The committee shall not confirm a notice of intent after the aggregate amount of bond confirmations, including carry forwards, have reached the state ceiling for that year.

 

      Section 13. Form and Manner. (1) The notice and confirmation forms required to be filed with and issued by the committee are incorporated by reference in Section 15 of this administrative regulation.

      (2) An issuer of a local project shall not:

      (a) File a notice of intent unless the issuance will be made within the ninety (90) day confirmation period established in Section 8 of this administrative regulation; or

      (b) Seek an allocation of the state ceiling in excess of the amount necessary to finance all costs of a local project.

      (3) An issuer of a state project shall not:

      (a) File a notice of intent unless the issuance will be made by December 15; or

      (b) Seek allocation of the state ceiling in excess of the amount necessary to finance all costs of a state project.

 

      Section 14. Delegation of Functions. The committee shall review and allocate all requests for state ceiling. The committee shall not delegate authority to make allocations of the state ceiling to staff except in cases of surplus or carry forward allocations. Any delegation of authority and the limit of that authority shall be recorded verbatim in the minutes of the committee meeting at which the delegation is made.

 

      Section 15. Incorporation by Reference. (1) The following material is incorporated by reference:

      (a) "Notice of Intent" application (March 2006);

      (b) "Confirmation of Allocation of State Ceiling" (March 1998);

      (c) "Confirmation of Carry-forward Allocation of State Ceiling" (March 1998);

      (d) "Notice of Issuance" (March 1998); and

      (e) "U.S. Treasury Department Form 8328".

      (2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Office of Financial Management, 76 Capitol Annex, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m. (15 Ky.R. 2125; eff. 5-11-89; Am. 22 Ky.R. 101; 715; eff. 9-28-95; 1334; eff. 2-20-96; 23 Ky.R. 462; 1927; eff. 10-24-96; 25 Ky.R. 400; eff. 10-22-98; 31 Ky.R. 610; 1053; eff. 1-4-2005; 32 Ky.R. 1460; 1904; eff. 6-2-06.)