**Meeting Announcement **The next regularly scheduled Private Activity Bond Authority Board Meeting
will be held on Wednesday, July 8, 2009, at 9:00 a.m. Please click here for a copy of the agenda. Private Activity Bond Program Overview For a printable "PAB General Information" sheet, please click here. (Word) (PDF) 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 $273,270,000 in 2009. Each state establishes its usage priorities by statute. Small Issue Account Volume Cap Amount: $65,584,800 Single Family Account Volume Cap Amount: $114,773,400 Student Loan Account Volume Cap Amount: $90,179,100 Exempt Facility Account Volume Cap Amount: $2,732,700 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 Utahns' 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? State and federal laws allow a manufacturing company to ask a government entity, a city or county, to use their name and tax-exempt financing status to issue tax-exempt bonds; the same way cities and counties finance themselves. However, instead of using the proceeds for a public purpose or a public activity (streets, buildings, schools, etc.) the bonds are used to benefit a private user like a manufacturer, hence the bonds are called "private activity bonds." The tax-exempt status of the bonds is obtained by having a government entity issue the bonds. Securities that a government issues, assuming they meet all the tax requirements, are exempt from state and federal income taxes. Private users of qualified private activity bonds benefit because the interest rates of tax-exempt bonds are lower than the rates of taxable bonds. Although private activity bonds are issued by governmental entities, there is no guarantee, debt, liability, obligation or pledge of faith by the city or county. Essentially, the governmental entity lends its name as the issuer enabling the manufacturing entity to realize the tax-exempt interest rate. Tax-exempt bonding provides manufacturers in Utah with an alternative, low-cost, source of funds to finance capital expenditures, which, in turn will create jobs and other public benefits to the state's economic development. Why Should Developers Use Tax-Exempt Bonds?
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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