Application Instructions for Private Activity Bond (PAB) Cap from the Statewide Balance

Application Schedule

The Department of Local Affairs (DOLA) will accept applications for allocations from the Statewide Balance in three rounds:

Round 1:

• Application due date: March 1, 2025
• DOH staff review: March 2025
• PAB Allocations Committee presentation and award decisions: April 2025

Round 2, if cap remains after the first round:

• Application due date: June 1, 2025
• DOH staff review: June 2025
• PAB Allocations Committee presentation and award decisions: July 2025

Round 3, open to any issuing authority and to pipeline requests:

• Application due date: November 1, 2025
• DOH staff review: November 2025
• PAB Allocations Committee presentation and award decisions: December 2025

The Statewide Balance is available to (1) local issuers not receiving a direct allocation or (2) statewide authorities and designated local governments that need additional allocations. In the March and June rounds, only issuers that did not receive a direct allocation or issuers that have exhausted (Issued) their direct allocations prior to application deadline date(s), may apply. State Law requires that, prior to September 15, agencies in the second group must relinquish unused portions of their direct allocation to the Statewide Balance at the time of award.

Private Activity Bond Program Description

Private Activity Bonds are tax-exempt bonds that can be issued for specific purposes. The federal government grants annual allocations of this bonding authority to states under the Internal Revenue Code of 1986, as amended. The State of Colorado established its Private Activity Bond (PAB) allocation program by statute (24-32-1701 et seq, C.R.S.) to provide for the allocation of Colorado’s PAB authority. The program consists of two major elements:

Direct PAB Allocations

Fifty percent (50%) of the state ceiling is allocated directly to statewide authorities, typically the Colorado Housing and Finance Authority (CHFA) and the Colorado Agricultural Development Authority (CADA). Statewide authorities may utilize this allocation from January 1 through September 15 of each year.

The remaining 50% of the PAB ceiling is allocated directly to local governments. Governments whose populations warrant allocations of $1 million or more receive a direct allocation. These allocations are available to designated local governments from January 1 through September 15 of each year. The remainder is retained in the Statewide Balance.

If any portion of a direct allocation is not used by a statewide authority or local government (1) to issue bonds, (2) for a carryforward purpose, or (3) for a mortgage credit certificate election, the remaining allocation reverts to the Statewide Balance on September 15.

PAB Statewide Balance Eligible Project Types

The following types or projects are eligible for the statewide balance:

• Qualified residential rental projects:
  Bond proceeds are used to finance new construction or acquisition/rehabilitation of housing for persons with low and moderate incomes.
• Single-family mortgage revenue bonds (SFMRB):
  Bonds sold by local and state agencies, to be used for mortgages for persons with low and moderate incomes.
• Mortgage Credit Certificates (MCC):
  Local issuers can elect to use a bond allocation as mortgage credit certificates for qualified homebuyers.
• Student loans:
  Proceeds are used to provide low interest loans to eligible students at institutions of higher education.
• Manufacturing "small issue" industrial development bonds (not to exceed $10,000,000):
  Bonds sold for construction of manufacturing facilities that cause a change in the condition of goods or products.
• Qualified redevelopment bonds:
  Bonds sold to acquire property in blighted areas; prepare land for redevelopment; and relocate occupants of structures on the acquired property.
• Exempt facility bonds:
  Hazardous waste facilities, solid waste disposal facilities, water and sewer facilities, mass commuting facilities, local district heating and cooling facilities, local electric energy or gas facilities, and multifamily housing bonds.

DOLA requires that any project developer considering using PABs from the Statewide Balance seek the advice of bond counsel prior to submitting an application, to determine project eligibility under federal definitions for PABs.

Statewide Balance Program Purposes

The primary purpose of Colorado’s PAB program is to meet federal requirements in the Tax Reform Act of 1986. The program is designed to accomplish the following:

• Establish an orderly and equitable process of allocating tax-exempt PAB issuance authority.
• Encourage private investment in creating and sustaining housing, higher education, jobs, solid and hazardous waste treatment, and water and sewer facilities.
• Encourage development in areas of the state where housing, higher education, jobs, and certain infrastructure improvements are most needed.
• Encourage the increase or maintenance of the local tax base.
• Maximize the use of the State's tax-exempt PAB allocation.

Colorado Statewide Balance Program Priorities

The State Housing Board has established the following priorities for potential uses of PABs from the Statewide Balance, in the following rank order:

1. Rental Housing, For-Sale Housing.
2. Industrial Development Bonds, Exempt Facility Bonds.

Statewide Balance Application Review Criteria

Each PAB application will be reviewed for completeness, eligibility, and financial feasibility.

Preference will be given to applications that demonstrate the following:

1. The ability to close in the current calendar year (or the following year, for year- end awards). DOH will give preference to projects that are ready to underwrite (i.e. can complete an application to DOLA/DOH for grant/loan funds or to CHFA for tax credits) over pipeline requests.
2. That the issuing authority has no uncommitted PAB. The amount of uncommitted PAB held by the issuing authority will be deducted from the potential Statewide Balance award amount. If the project intends to close in a future year, the potential amount of PABs that the issuing authority will receive in a direct allocation or as an assignment from a local government may also be deducted from the Statewide Balance award amount.
3. Efficient use of PAB allocation, such as LIHTC projects that only require PAB to cover 55% or less of their aggregate basis.
4. Leverage of equity sources such as the 4% Low Income Housing Tax Credits and State Housing Tax Credits.
5. Community support through financial commitment of local PAB allocation, other local financial subsidies or reduced fees.
6. The impact of the PAB-financed project or program on a demographic or economic need. Indicators of need may include: low housing vacancy rates, increasing gap between housing costs and local wages, high unemployment, or economically distressed areas.
7. Consistency with local development plans. Proposed projects should support local development priorities and avoid any adverse impact on neighboring jurisdictions. This criterion does not apply to programs that do not involve real estate development, such homeownership programs.
8. Communities that have insufficient local PAB available, such as smaller, rural communities or issuers who received PAB but failed to carry forward sufficient cap from the current year.

Private Activity Bond Allocations Committee

The Private Activity Bond Allocations Committee is established in Colorado State law to advise the Executive Director of the Department of Local Affairs (DOLA) on statewide priorities for the allocation of the Statewide Balance. Inferred in this is the duty to review and advise the Executive Director on specific allocation proposals. The Committee is chaired by the Executive Director and includes eight other members appointed by the Governor. Four members represent units of governments, one of whom must be from the western slope; three members are citizens residing in Colorado, one of whom must be from the western slope. One member represents statewide authorities. All members are appointed to three-year terms except the chairperson and the statewide authority representative, both of whom serve at the pleasure of the Governor.

Application Fee and Administrative Fees

The Statewide Balance application fee is $750 per proposal. The fee must accompany the application, and it is non-refundable. Statewide authorities are exempt from this fee.

The application fee is $750. Please mail a check payable to "Colorado Department of Local Affairs" for this fee to: Colorado Department of Local Affairs, Division of Housing, Attention: Antoninette Estrada, 1313 Sherman Street, Rm 320, Denver, CO 80203.

In addition, an issuance fee is due for the portion of the issuance that was allocated from the Statewide Balance. It is due to the Colorado Department of Local Affairs within five working days of the bond closing or the commencement of a Mortgage Credit Certificate program. An issuance fee also applies to direct allocations of PABs from statewide authorities or local governments. This fee is also due within five days of bond issuance or when a Mortgage Credit Certificate program begins.

For more detail, please see the Fee Notice on the PAB Website.

Contact

For assistance in the Private Activity Bond Program application process, contact:

Lisa Blakeney, PAB Program Manager
DOLA_PAB@state.co.us
720-557-2112

Application Submission

Completed applications and supporting materials should be emailed to DOLA_PAB@state.co.us