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OLR Bill Analysis
SB 264
AN ACT CONCERNING THE BONDING AUTHORITY OF THE
CONNECTICUT MUNICIPAL REDEVELOPMENT AUTHORITY, THE
REPORTING OF MATERIAL FINANCIAL OBLIGATIONS BY STATE
AGENCIES, TAX-EXEMPT PROCEEDS FUND REFERENCES AND
THE NOTIFICATION OF THE SALE OR LEASE OF PROJECTS
FINANCED WITH BOND PROCEEDS.
SUMMARY
This bill limits the Municipal Redevelopment Authority’s (MRDA)
bonding authority, generally aligning it with other quasi-public
agencies. Among other things, the bill does the following:
1. repeals the law requiring that the state assume liability of and
make payment for MRDA debt if 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 the total amount of MRDA bonds that may be
secured by a SCRF.
The bill also makes the following unrelated changes:
1. eliminates redundant indemnification provisions that apply
specifically to MRDA (because existing generally applicable
provisions giving quasi-public officials and employees the same
protections already apply to MRDA (CGS § 1-125));
2. requires state employees, officers, agencies, boards, commissions
(including the UConn Health Care Finance Corporation), or their
agents to notify the state treasurer before incurring certain
financial obligations that must be reported under federal 2024SB-00264-R000386-BA.DOCX
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securities law;
3. explicitly requires that certain property sales, leases, or other
dispositions receive the state treasurer’s prior approval;
4. eliminates the requirement that the state treasurer, or his
designee, serve as a member of any study committee formed on
regional school district withdrawals or dissolutions (§ 13); and
5. eliminates obsolete statutory references to the Tax-Exempt
Proceeds Fund, which no longer exists (§§ 6-12 & 14-18).
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, 2024.
§§ 2 & 3 — 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
SCRF-backed bonds 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 before maturity, and (3) paying any premiums required to pay
off the bonds before maturity. It allows MRDA to limit SCRF
withdrawals so that the balance does not fall below the maximum (1)
principal and interest or required sinking fund installment due on
MRDA bonds maturing in the current or any future calendar year or (2)
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 2024SB-00264-R000386-BA.DOCX
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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
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
Office of Policy and Management (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
the following conditions are met:
1. it informs the OPM secretary and state treasurer, or their
deputies, 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 and
2. the OPM secretary and treasurer, or their deputies, approve 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. 2024SB-00264-R000386-BA.DOCX
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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.
§ 4 — PRIOR NOTICE T O TREASURER OF REPOR TABLE
FINANCIAL OBLIGATIONS
The bill requires state employees, officers, agencies, boards,
commissions (including the UConn Health Care Finance Corporation),
or their agents to notify the state treasurer before (1) incurring certain
financial obligations 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 state property or rights that are material to state
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 whether the information provided is adequate
for him to timely meet federal securities law disclosure requirements.
The treasurer may request more information that he finds 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 2024SB-00264-R000386-BA.DOCX
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disclosure obligations under federal securities law.
§ 5 — TREASURER APPROVA L OF CERTAIN STATE PROPERTY
TRANSACTIONS
The bill explicitly requires that certain property sales, leases, or other
dispositions receive the state treasurer’s prior approval. This
requirement applies to sales, leases, or other dispositions to, or uses by,
a nongovernmental entity of all or a portion of a project financed by tax-
exempt state bonds if the transactions 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
Government Administration and Elections Committee
Joint Favorable
Yea 19 Nay 0 (03/22/2024)