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OLR Bill Analysis
sHB 5502
AN ACT CONCERNING THE OPERATIONS OF THE STATE
TREASURER AND THE BONDING AUTHORITY OF THE
CONNECTICUT MUNICIPAL REDEVELOPMENT AUTHORITY.
SUMMARY
This bill limits the Municipal Redevelopment Authority’s (MRDA)
bonding authority, therefore, generally aligning it with other quasi-
public agencies. Among other things, the bill:
1. repeals the law requiring that the state assume liability of and
make payment for MRDA debt in the event that the authority
cannot pay for its bonds, notes, or other obligations;
2. authorizes the authority to establish one or more special capital
reserve funds (SCRF) to secure the principal and interest
payments on bonds; and
3. caps at $50 million dollars the total amount of MRDA bonds
secured by a SCRF.
The bill also:
1. eliminates or sunsets redundant indemnification provisions that
apply to MRDA, but retains existing provisions giving MRDA’s
officials and employees the same protections given to officials
and employees of other quasi-public agencies (CGS § 1-125);
2. requires state employees, officers, agencies, boards, and
commissions (including the UConn Health Care Finance
Corporation), or their agents, to notify the state treasurer of
certain financial obligations that must be reported under federal
securities law;
3. explicitly requires that certain property sales, leases, or other 2022HB-05502-R000605-BA.DOCX
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dispositions receive the state treasurer’s prior approval; and
4. eliminates obsolete statutory references to the Tax-Exempt
Proceeds Fund, which no longer exists (§§ 5-15).
EFFECTIVE DATE: Upon passage, except that the provisions on the
Tax-Exempt Proceeds Fund and the treasurer’s approval for certain
property sales, leases, and dispositions are effective July 1, 2022.
§§ 1 & 2 — MRDA SCRF-BACKED BONDS
SCRF Authorization
The bill allows MRDA to establish one or more SCRFs in connection
with its bonds. It allows MRDA to pay into the SCRFs (1) any state
appropriations for the SCRF; (2) proceeds from the sale of MRDA bonds,
if the MRDA resolution authorizing the bonds allows it; and (3) any
other funds the authority receives for a SCRF. The maximum amount of
bonds backed by a SCRF that MRDA may issue is $50 million.
Allowable Use of SCRFs
The bill requires the SCRF to be used only for (1) paying principal
and interest on SCRF-backed bonds, (2) buying SCRF-backed MRDA
bonds, and (3) paying any premiums required to pay off the bonds
before maturity. It allows MRDA to limit SCRF withdrawals so the
balance does not fall below (1) the maximum principal and interest or
required sinking fund installment due on MRDA bonds maturing in the
current or any future calendar year or (2) the maximum SCRF amount
required to preserve the bonds’ federal tax exemption (i.e., “required
minimum capital reserve.”
Minimum Capital Reserve
The bill allows MRDA to decide not to issue new SCRF-backed bonds
unless it deposits enough funds into the SCRF to keep its balance at or
above the minimum reserve. Before December 1 annually, MRDA must
deposit the full amount required to meet the minimum reserve from any
available resources not otherwise pledged or dedicated.
By December 1 annually, but after MRDA has made any required 2022HB-05502-R000605-BA.DOCX
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SCRF deposits, the bill automatically appropriates from the General
Fund any amount needed to maintain the minimum reserve balance in
the SCRF, as certified by MRDA’s chairperson or vice-chairperson to the
OPM secretary, state treasurer, and Planning and Development and
Finance, Revenue and Bonding committees. In evaluating the SCRF
balance, the bill requires investments to be valued as amortized cost.
Subject to its agreements with bondholders, MRDA must repay the
state from whatever funds are not needed for its other corporate
purposes within one year after meeting all its obligations from bonds
and notes outstanding on the date of the state allotment.
Limitation on Issuing SCRF-Backed Bonds
Under the bill, MRDA cannot issue bonds secured by a SCRF unless:
1. it determines that project revenues are sufficient to (a) pay the
bonds' principal and interest; (b) establish, increase, and
maintain any reserves it deems advisable to secure principal and
interest payments; (c) pay the project's maintenance and
insurance costs; and (d) pay other required project costs (it must
provide this determination to the OPM secretary and treasurer or
their deputies); and
2. the OPM secretary and treasurer, or their deputies, approves the
issuance.
Under the bill, OPM’s approval may waive or change any of the
SCRF-backed bond requirements described above if the secretary deems
it necessary or appropriate for the issuance, subject to any applicable
state or MRDA tax covenants.
Other Debt Service Reserve Funds
The bill specifies that these provisions do not preclude MRDA from
establishing other debt service reserve funds that are not SCRFs.
§ 3 — PRIOR NOTICE TO TREASURER OF REPORTABLE
FINANCIAL OBLIGATIONS
The bill requires state employees, officers, agencies, boards, and 2022HB-05502-R000605-BA.DOCX
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commissions (including the University of Connecticut Health Care
Finance Corporation), or their agents, to notify the state treasurer before
(1) incurring a financial obligation of the state or (2) entering into an
agreement to covenants, events of default, remedies, priority rights, or
other similar terms related to these state financial obligations. Along
with the notice, they must also submit any documents under which the
financial obligation or agreement is to be incurred or entered into.
These requirements apply to any “financial obligation” exceeding $1
million, or encumbering property or rights of the state material to its
operations. Under the bill, “financial obligation” has the same meaning
as under federal securities law, which is generally a (1) debt obligation;
(2) derivative instrument entered into in connection with, or pledged as
security or payment for, an existing or planned debt obligation; or (3)
guarantee for either of these obligations.
After receiving this notice and documentation, the bill requires the
treasurer to determine if the information provided is adequate for him
to timely meet federal securities law disclosure requirements. The
treasurer may request more information that he deems necessary to
make this determination. If he is satisfied that the information is
adequate to meet these disclosure requirements, the treasurer, or his
designee, must give written acknowledgement to the person or entity
seeking to incur the financial obligation or enter into the agreement. The
bill prohibits them from incurring the financial obligation or entering
into the agreement until they have received this written
acknowledgement.
The bill allows the treasurer to establish and revise exemptions from
these filing requirements as he determines are consistent with the state’s
disclosure obligations under federal securities law.
§ 4 — TREASURER APPROVAL OF CERTAIN STATE PROPERTY
TRANSACTIONS
The bill explicitly requires that certain property sales, leases, or other
dispositions receive the state treasurer’s prior approval. It applies to
sales, leases, or other dispositions to, or uses by, a nongovernmental 2022HB-05502-R000605-BA.DOCX
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entity of all or a portion of a project financed by tax-exempt state bonds
if doing so would cause the bonds to be treated as private activity bonds.
(Private activity bonds are federally tax-exempt bonds issued by the
state, municipalities, and quasi-public agencies to finance private
projects that serve a public purpose. Federal law limits the volume of
tax-exempt private activity bonds that can be issued each year.) As
under existing law, the treasurer may transfer all or a portion of the
transaction’s proceeds for specified purposes to maintain the bonds’ tax-
exempt status.
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable Substitute
Yea 51 Nay 0 (04/05/2022)