State reports offer new insights on volume cap!
In June 2016, the New York State legislature renewed the Private Activity Bond Allocation Act (PABA) for two more years. The renewal included two significant amendments recommended by CHPC in our report Pump Up the Volume: moving the recapture date earlier in the calendar year, and providing transparent information on the use of volume cap throughout the State. The recapture date was changed from October 15 to September 15, and the State is now required to make public three separate reports on how volume cap is used.
The first of these reports came out in September 2016. It shows how much volume cap initially allocated to Industrial Development Agencies (IDAs) was unused by the September 15 recapture date. Under PABA, one-third of the federal volume cap allocation to New York State is automatically allocated to IDAs. If an IDA does not use its allocation by the recapture date, the State recaptures that bond volume into a Statewide Bond Reserve and can re-allocate it to other local or state agencies that have greater bond issuing capacity or need.
Before the new reporting requirement, there was no public information showing how much of their allocations IDAs used, and how much the State recaptured. The September report shows that, in 2016, the State recaptured $303m of the $659m that was allocated to the IDAs under PABA. $130m of this was returned to the State by IDAs before the September 15 recapture date.
The report also clarifies some of the questions we could not definitively answer in Pump Up the Volume. Our study found that IDAs were responsible for issuing just 10% of all volume cap bonds in the State between 2005 and 2013, but we did not know how many IDAs issued those bonds or if they were used for housing, manufacturing or some other qualifying purpose. The new report shows that in 2016 only 10 IDAs (including New York City) used any amount of their initial allocations, and that in 7 of those cases it was for housing projects. Additionally, the report shows that the State made discretionary allocations worth $81m from the Statewide Bond Reserve to various local agencies for use exclusively on residential projects.
In January 2017 the State released a second report showing that no bond volume expired in 2016. Under federal law, any portion of the bond volume allocation that is not issued expires at the end of the year, although it can be carried forward for up to three years as long as a bond issuing agency and a qualifying purpose for the bonds have been identified. The report shows that $1.7bn of the $1.9bn federal allocation to New York State was issued in 2016, and an additional $200m was carried forward for use in future years.
Additional details on the use of volume cap in New York State should be available in June, when PABA requires a third report to be made public.