Bill Summary – FastDemocracy

HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #:     CS/HB 137 Florida Housing Financial Corporation Revenue Bonds
SPONSOR(S): Appropriations Committee, Roth
TIED BILLS:       IDEN./SIM. BILLS: SB 196
    REFERENCE                                                   ACTION                  ANALYST            STAFF DIRECTOR or
                                                                                                           BUDGET/POLICY CHIEF
    1) Ways & Means Committee                                   17 Y, 0 N               LaTorre            Aldridge
    2) State Affairs Committee                                  22 Y, 0 N               Smith              Williamson
    3) Appropriations Committee                                 24 Y, 0 N, As CS        Hicks              Pridgeon
                                              SUMMARY ANALYSIS
The Florida Housing Finance Corporation (Florida Housing) is a public corporation created by the Legislature
to assist in providing a range of affordable housing opportunities for Florida residents. Florida Housing
administers federal and state resources to make loans and guarantees of loans and to issue bonds to finance
the development and preservation of affordable homeowner and rental housing.
The bill makes the following amendments regarding Florida Housing bond financed transactions:
        Designates Florida Housing as the state fiscal agency to make the determinations required by s ection
         16, Article VII of the State Constitution, in connection with the issuance of Florida Housing bonds;
        Removes the authority of the State Board of Administration to authorize interest rates in excess of the
         maximum; and
        Removes the requirement that the claims-paying rating classification be consistent with rules adopted
         by the State Board of Administration.
The bill does not appear to have a fiscal impact on state or local governments.
The bill has an effective date of July 1, 2022.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
STORAGE NAME: h0137e.APC
DATE: 2/1/2022
                                                 FULL ANALYSIS
                                           I. SUBSTANTIVE ANALYSIS
    A. EFFECT OF PROPOSED CHANGES:
        Present Situation
        Florida Housing Finance Corporation
        The Florida Housing Finance Corporation (Florida Housing) is a public corporation created by the
        Legislature to assist in providing a range of affordable housing opportunities for Florida residents.
        Florida Housing administers federal and state resources to make loans and guarantees of loans and to
        issue bonds to finance the development and preservation of affordable homeowner and rental housing
        and assist homebuyers with financing and down payment assistance. 1
        Florida Housing Bonds
        Florida Housing facilitates the issuance of bonds by serving in a conduit capacity. Each bond indenture
        is for a single purpose entity and the bonds are secured solely by the revenues, assets and guarantees
        associated with each bond.2 The bonds are not an obligation of the state as they are not secured by the
        full faith and credit of the state.3
        Section 420.509, F.S., designates the State Board of Administration (SBA) as the state fiscal agency to
        make the determinations required by section 16, Article VII of the State Constitution, in connection with
        the issuance of Florida Housing bonds. The required fiscal determination is that in no state fiscal year
        will the debt service requirements of the bonds proposed to be issued, and all other bonds secured by
        the same pledged revenues, exceed the pledged revenues available for such debt service
        requirements. This section also authorizes Florida Housing to bear interest on the bonds that are
        issued. However, the rate or rates may not exceed the interest rate limitation set forth in section
        215.84, F.S., unless authorized by the SBA.4
        Before a bond is issued, the Florida Housing’s Board of Directors must approve the requirements for a
        bond financed development. Upon the Board’s approval, a cash flow analysis is prepared and
        submitted to the SBA for approval of fiscal determination. Once the cash flow analysis is received, the
        Governor, Chief Financial Officer (CFO), and Attorney General, functioning as the SBA Board of
        Trustees, place the report on the agenda of the next scheduled meeting for the SBA Board of Trustees.
        Upon approval by the SBA Board of Trustees, the bond transaction can proceed to closing.
        Florida Affordable Housing Guarantee Program
        The Florida Affordable Housing Guarantee Program (Guarantee Program or Program) was created in
        1992 by the Legislature. The purpose of the Guarantee Program is to stimulate private sector lending in
        an effort to overcome the lack of available credit enhancement for the production of affordable housing
        in Florida and, in turn, reduce the cost of financing housing projects.5
1 See Overview of Florida Housing Finance Corporation, FLORIDA HOUSING FINANCE CORPORATION,
https://www.floridahousing.org/docs/default-source/about florida/august2017/august2017/tab8.pdf (last visited December
1, 2021).
2 Affordable Housing Workgroup, Overview of the State’s Implementation of Rental Programs , FLORIDA HOUSING FINANCIAL
CORPORATION (August 2017), https://www.floridahousing.org/docs/default-
source/aboutflorida/august2017/august2017/tab7.pdf (last visited December 1, 2021). Chapter 2017-71, Laws of Fla.,
established the Workgroup to develop recommendations to address the state’s affordable housing needs.
3 Sections 420.509(15) and 420.51, F.S., and s. 16, Art. VII, Florida Constitution.
4 Section 420.509(4), F.S.
5 Guarantee Program, FLORIDA HOUSING FINANCE CORPORATION, https://www.floridahousing.org/ programs/developers-
multifamily-programs/guarantee-program (last visited December 1, 2021); section 420.5092, F.S.
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        The cost savings are achieved by the Guarantee Program guaranteeing the payment of obligations
        made to finance or refinance the purchase, construction, or rehabilitation of eligible housing. 6 This
        includes guaranteeing mortgages that secure multifamily mortgage revenue bonds. 7 Florida Housing
        uses proceeds from the issuance of bonds to establish a “guarantee fund” to guarantee the payment of
        such obligations.8 Current law defines the guarantee fund, as the Affordable Housing Guarantee Fund
        created and established with proceeds of revenue bonds issued by Florida Housing to implement the
        Florida Affordable Housing Guarantee Program.9
        When combined with bond insurance, Guarantee Program enhanced securities typically received a
        “AAA” rating.10 The ratings are given by independent rating classification services, such as Standard &
        Poor’s, to rate a company’s fiscal soundness and strength and its ability to pay claims. 11 A “AAA” rating
        is typically the strongest financial strength rating.12
        Under current law, if the claims payment obligations under the affordable housing guarantees from
        amounts on deposit in the guarantee fund would cause the claims-paying rating assigned to the
        guarantee fund to be less than the third-highest rating classification on any nationally recognized rating
        service, which classifications being consistent with section 215.84(3), F.S., and rules adopted by the
        SBA, Florida Housing must certify to the CFO the amount of such claims payment obligations. 13 Upon
        receipt of certification, the CFO must transfer to the guarantee fund the amount certified as necessary
        to meet such obligations.14
        Effect of the Bill
        The bill amends section 420.509, F.S., to designate Florida Housing as the state fiscal agency to make
        the determinations required by section 16, Article VII of the State Constitution, in connection with the
        issuance of Florida Housing bonds, and removes the authority of the SBA to authorize an interest rate
        in excess of the maximum.
        The bill removes the requirement that the claims-paying rating classification be consistent with rules
        adopted by the SBA.
    B. SECTION DIRECTORY:
        Section 1:       Amends section 420.509, F.S., to designate Florida Housing as the state fiscal agency
                         to make determinations required by section 16, Article VII of the State Constitution, in
                         connection with the issuance of Florida Housing bonds; revises the authority for interest
                         rates on Florida Housing bonds; and removes the authority of the SBA to increase
                         interest rates in excess of the maximum.
        Section 2:       Amends section 420.5092, F.S., to remove the requirement that certain bond rating
                         classifications be consistent with rules adopted by the SBA.
6 Section 420.5092, F.S.
7 Guarantee Program, FLORIDA HOUSING FINANCE CORPORATION, https://www.floridahousing.org/ programs/developers-
multifamily-programs/guarantee-program (last visited December 1, 2021).
8 Section 420.5092(2)(e), F.S.
9 Id.
10 Having a “AAA” or strong financial rating, helps lower the overall cost of borrowing, which ultimately allows for a
reduction in the rents to individual earing lower incomes. Guarantee Program, FLORIDA HOUSING FINANCE CORPORATION,
https://www.floridahousing.org/programs/developers-multifamily-programs/guarantee-program (last visited December 1,
2021).
11 Intro to Credit Ratings, S&P GLOBAL, https://www.spglobal.com/ratings/en/about/intro-t o-credit-ratings (last visited
December 1, 2021).
12 Understanding Credit Ratings, S&P GLOBAL, https://www.spglobal.com/ratings/en/about/understanding-credit-ratings
(last visited December 1, 2021).
13 Section 420.5092(6)(b), F.S.
14 Section 420.5092(6)(b), F.S., requires the CFO upon receipt of certification to transfer funds to the guarantee fund from
the first available taxes distributed to the State Housing Trust Fund pursuant to s. 201.15(4)(c) and (d), F.S., during the
ensuing state fiscal year.
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       Section 3:     Provides an effective date of July 1, 2022.
                           II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
   A. FISCAL IMPACT ON STATE GOVERNMENT:
       1. Revenues:
           None.
       2. Expenditures:
           None.
   B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
       1. Revenues:
           None.
       2. Expenditures:
           None.
   C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
       None.
   D. FISCAL COMMENTS:
       None.
                                               III. COMMENTS
   A. CONSTITUTIONAL ISSUES:
       1. Applicability of Municipality/County Mandates Provision:
          Not applicable. The bill does not appear to affect county or municipal governments.
       2. Other:
          None.
   B. RULE-MAKING AUTHORITY:
       The bill does not provide rulemaking authority nor does it require executive branch rulemaking.
   C. DRAFTING ISSUES OR OTHER COMMENTS:
       None.
                           IV. AMENDMENTS/ COMMITTEE SUBSTITUTE CHANGES
   On January 31, 2022, the Appropriations Committee adopted one amendment and reported the bill
   favorably as a committee substitute. The amendment corrected a grammatical error on line 30 by inserting
   the comma between the words “revenues” and “exceed” instead of placing the comma after the word
   “exceed.”
   This analysis is drafted to the committee substitute as approved by the Appropriations Committee.
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DATE: 2/1/2022
Statutes affected: 
H 137 Filed: 420.5092
H 137 c1: 420.5092