The state’s Emergency Board, which makes state funding decisions outside of the legislative session, will meet Thursday to formally reallocate private activity bonds to the Vermont Housing Finance Agency.
Private activity bonds allow certain state agencies, traditionally the VHFA, the Vermont Student Assistance Corp., and the Vermont Economic Development Agency, to issue bonds at tax-exempt rates.
This helps keep the cost of affordable housing loans and student loans down, because the agencies themselves are able to benefit from tax-exempt bond rates, and pass on savings to their customers.
Administration Secretary Jeb Spaulding said the reallocation was uncontroversial, with no opposition from lawmakers or the administration. Before the 2008 credit market implosion, explained Spaulding, discussions over how the roughly $284 million in bond capacity would be split could be heated; but since then, the agencies have had a higher bond capacity than they really need, and so allocations have been uncontroversial.
“We have more capacity than we know what to do with,” said Spaulding. “We don’t have the use for it right now. But that could change if the interest rate climate changes and the housing market comes back.”
The original bonding split between the three agencies and others is usually decided in January by the emergency board, for the upcoming year. This year, because VSHA had so much bonding capacity left unused from last year, it didn’t receive an additional allocation: under current law, it isn’t considered a current recipient, so VHFA is technically not allowed to receive allocations without this meeting.
The permissible uses for private activity bonds are set in federal code, and include items like affordable housing, student loans, and certain economic development activities. Spaulding described their uses as “fairly broad, again mainly used for public projects that ordinarily would require taxable finances.”
For more information on private bonds, cllick here.
In January 2011, the emergency board initially allocated $90 million in private activity bonds to VHFA, $50 million to VSAC, $20 million to VEDA, and $10 million to the Vermont Municipal Bond Bank, reserving $107 million for contingency purposes.
