Private-activity bond capacity in Massachusetts jumped by $333 million in 2009, with the state's total PAB volume increasing to $918 million compared to the $585 million available last year.
The hike in capacity is a result of a higher allocation from the Internal Revenue Service and $130 million of unused PAB volume from prior years due to limited market access in 2008, and $201 million of additional affordable housing borrowing allocated through the federal Housing and Economic Recovery Act of 2008, according to Jay Gonzalez, undersecretary of the Executive Office for Administration and Finance.
"The IRS changed the calculation and we got a little bit more this year," he said. "We also had $130 million of carry-over and that was largely a function of the fact that issuers couldn't access the bond market as easily last year."
Of the three bonding authorities that can issue private-activity bonds, the Massachusetts Housing Finance Agency will gain $342 million of capacity, the Massachusetts Development Finance Agency will receive $306.5 million, and the Massachusetts Educational Financing Authority will gain $270 million.
Officials anticipate the municipal bond market will continue to be volatile this year. In light of that, the office for administration and finance chose to temporarily eliminate many PAB restrictions in 2009, including decreasing the mandatory amount of affordable housing that multifamily projects must include, eliminating income-level ceilings on student-loan borrowings and single-family housing bonds, and removing the requirement that economic development projects create at least six jobs.
"We have a lot more volume cap to use this year and a much more difficult market to actually get bond issues done," Gonzalez said. "And so usually we have a situation where volume cap is very limited compared to the demand for it, and this year I think we're likely to have the opposite problem. We have a lot of volume cap and we need to try to get it used and invested in good projects, and so as a result of the change in the dynamic, this year we've taken away many restrictions."
Similar to last year, multifamily housing will get the biggest allocation, nearly $350 million, through MassHousing and MassDevelopment and any state-level PAB borrowing, including $46.5 million dedicated to public housing developments.
MassHousing's 2009 $342 million allocation includes $192 million for multifamily projects and $150 million for single-family homes. In 2008, the authority received $270 million of PAB capacity, with $170 million for multifamilies and $100 million for single-families.
Along with affordable housing projects, the state wanted to boost student-loan availability to help more students finance their college education given the current tight credit markets. The MEFA will gain $270 million of private-activity bond capacity this year, up from its $90.3 million and $154 million allocations in 2008 and 2007, respectively.
"The low-interest student loans that MEFA offers are incredibly important in this economy and in this market to ensure that schools are affordable for students in Massachusetts," Gonzalez said.
MassDevelopment's 2009 $306.5 million allocation includes $150 million for economic development and $110 million for multifamily housing. An additional $46.5 million for public housing projects will be issued through MassDevelopment or the commonwealth.
Last year, the authority's allocation totaled $185 million, with $100 million reserved for economic development and the remaining volume supporting multifamily housing.
