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Release No. 98-09-19
September 17, 1998

CONGRESS GIVES PRELIMINARY APPROVAL FOR BOND CAP INCREASE

[Kansas City] -- The House Ways and Means Committee today gave preliminary approval for legislation that would increase the cap on Private Activity Bonds nationwide. Private Activity Bonds are tax-exempt bonds that finance many worthwhile public purposes.

The Missouri Housing Development Commission (MHDC) uses Private Activity Bonds for its Mortgage Revenue Bond Program to provide low-interest mortgages for first-time homebuyers in Missouri. Last year MHDC assisted 2,718 families and individuals in becoming homeowners with $167 million in Mortgage Revenue Bonds. It is estimated that MHDC could have utilized at least twice that amount of Mortgage Revenue Bonds for first-time homebuyers had additional authority for Private Activity Bonds been available.

In introducing his tax cut package to the full committee, Bill Archer, Chairman of the Ways and Means Committee, included a bill (HR 979) that had been sought by the MHDC and other state housing finance agencies for the last 18 months. Governor Mel Carnahan and State Treasurer Bob Holden, ex-officio members of the Commission, worked with the entire Missouri Congressional delegation in support of this legislation.

Richard G. Grose, Executive Director of MHDC, said "While this is only the first step toward passage, I would like to thank members of the Missouri Congressional Delegation who co-sponsored this legislation. I think the shear number of co-sponsors nationwide was a critical factor for Chairman Archer in deciding whether to include the Bond Cap increase in his bill." HR. 979 has 324 co-sponsors or three-quarters of the entire House of Representatives.

The state of Missouri currently receives over $270 million in Private Activity Bonds each year and this legislation would provide an additional $135 million in bond cap authority per year. The cap on Private Activity Bonds has been in place since 1986 with no adjustments, except for population growth. Meanwhile, it is estimated the purchasing power of the Private Activity Bond cap authority has eroded by nearly half during that time due to inflation.

Private Activity Bonds are also used to finance economic and job development initiatives; municipal water and sewer system improvements; student loans for higher education; and multifamily housing developments.

During 1997 over $54 million in Private Activity Bonds was allocated from the Missouri Department of Economic Development to finance 1,291 units of multifamily housing in Missouri. This method of financing multifamily housing developments has become increasingly common over the last few years and has resulted in even more competition for limited bond cap authority.

Members of the Missouri Congressional delegation who co-sponsored HR. 979 include: Congressman William L. Clay; Congressman Ike Skelton; Congresswoman Karen McCarthy; Congresswoman Pat Danner; Congresswoman Jo Ann Emerson; and Congressman Kenny Hulshof.

Contact Jim Torres, MHDC Legislative Liaison at (816) 759-6824, for more information.

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