State PAB Volume Caps Jump for 2014

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WASHINGTON — States will be allowed to issue 5.2% more of private activity bonds in 2014, freeing money for projects that would otherwise be ineligible for tax-exempt financing.

The increase to $34.891 billion from the $33.170 billion cap in 2013 is based on the latest population figures released Monday by the Census Bureau and a new PAB cap formula published by the Internal Revenue Service in November. Increasing populations and a more generous formula means that some states will see sharp increases, and no state will have a smaller cap.

Private activity bonds this year financed everything from water and wastewater infrastructure improvements to the Ohio River Bridges East End Crossing Project in Indiana, a public-private partnership that won The Bond Buyer's Deal of the Year Award this month.

The 2014 volume caps will be the greater of $100 per capita or $296.83 million, up from the $95 per capita or $291.88 million the IRS used to set the 2013 caps. States with small populations use the minimum cap, but states with more than about 2.97 million people effectively got a 5% increase over 2013 on top of any new population growth. All states can carry forward unused amounts of PAB capacity for up to three years.

The U.S. population rose to 316,128,839 from 313,873,685 last year, according to Census Bureau estimates. States using the $100 per capita formula rather than the minimum, and which also experienced sharp population increases, saw their PAB caps rise the most.

Colorado's 2014 PAB cap will climb 6.9% to $526.84 million from $492.82 million, after a 1.5% population increase in one year. Texas will benefit from a cap 6.8% higher than 2013's as its limit will rise to $2.645 billion from $2.476 billion thanks to the new formula and a population increase just under 1.5%.

Florida, Arizona, Washington, and South Carolina are the next biggest beneficiaries of the expanded PAB cap, and will have year-over-year increases of 6.6%, 6.44%, 6.4%, and 6.4%, respectively. The state with the largest cap, California, gets a 6% bump to $3.833 billion.

Even states and territories that experienced population declines were compensated by the increase in either the minimum or the per-capita limit. Puerto Rico's population declined by about 36,000 from 2012 but the island will still have a PAB volume cap nearly 3.8% higher next year.

Maine and West Virginia experienced population declines, but both will have PAB caps 1.7% higher next year because the new minimum rose that much.

The PAB volume cap figures for 2014 do not include four U.S. possessions — American Samoa, Guam, the Northern Mariana Islands and the U.S. Virgin Islands. They are not included in the Census Bureau's population estimates. These low-volume issuers rarely, if ever, reach their PAB caps.

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