Quick Takes: HB 257- The “Death Sentence” and How To Avoid It
Compliance is the issue with HB 257, which will become law on July 1 unless vetoed by the Governor.
A development authority or other local government authority which fails to comply with it will not be able to issue bonds (incur any debt or credit obligations) or receive state funds until it is in compliance. Compliance means that the authority has filed its annual authority registration and its annual report of authority finances. DCA has indicated that, to be in compliance, at least the filings for the current year and the immediately preceding two years must have been filed.
Per this bill, the due date for the filing of authority finances (6 months from the end of an authority’s fiscal year) will be the due date for both filings.
I sometimes refer to barring a development authority from issuing bonds as the “death penalty.” Although noncompliance can be cured just by filing, it’s possible that the scramble to comply could be lethal to an authority’s locating a project that its community desperately needs. The authority might not be able to get into compliance in time to issue the bonds needed for the project’s incentives.
Whether you are scrambling or have plenty of time, the usual problem is reporting the outstanding balance of “conduit bonds.” These are bonds that represent borrowing by a company (or a bonds for title deal), not a borrowing by the authority. So, how do you know _what_ the balance is?
Fortunately, DCA has indicated that it plans administratively to remove the conduit debt section from the authority finances report, starting on July 1 of this year. When that occurs, you’ll still have to comply- but you’ll be able to!
Note that the old report form will still apply to “catch up” filings.
It will be a big help in due diligence for bond issues that the letter, which DCA issues to certify that an authority has filed its authority registration, will also cover filing of its finances report.