O F F I C E O F L E G I S L A T I V E R E S E A R C H
P U B L I C A C T S U M M A R Y
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PA 24-62—SB 264
Government Administration and Elections Committee
Finance, Revenue and Bonding Committee
AN ACT CONCERNING TH E BONDING AUTHORITY OF THE
CONNECTICUT MUNICIPA L REDEVELOPMENT AUTH ORITY, THE
REPORTING OF MATERIA L FINANCIAL OBLIGATI ONS BY STATE
AGENCIES, TAX-EXEMPT PROCEEDS FUND REFER ENCES AND THE
NOTIFICATION OF THE SALE OR LEASE OF PRO JECTS FINANCED
WITH BOND PROCEEDS
SUMMARY: This act limits the Municipal Redevelopment Authority’s (MRDA)
bonding authority, generally aligning it with other quasi-public agencies. Among
other things, the act does the following:
1. removes a requirement for the state to assume liability of and make payment
for MRDA debt if the authority cannot pay for its bonds, notes, or other
obligations (§§ 1 & 3);
2. authorizes the authority to establish one or more special capital reserve
funds (SCRF) to secure the principal and interest payments on its bonds (§
3); and
3. caps at $50 million the total amount of MRDA bonds that may be secured
by its SCRFs (§ 3).
The act also makes the following unrelated changes:
1. eliminates redundant indemnification provisions that apply specifically to
MRDA’s directors, officers, and employees and people executing its bonds,
notes, and other obligations (§§ 2 & 3) (a separate law already indemnifies
them along with those at other quasi-public agencies (see CGS § 1-125));
2. requires state employees, officers, agencies, departments, boards,
commissions (including the UConn Health Care Finance Corporation), and
their agents to notify the state treasurer before incurring certain financial
obligations that must be reported under federal securities law (§ 4);
3. explicitly requires that certain property sales, leases, and other dispositions
involving state bond financed projects receive the state treasurer’s prior
approval (§ 5);
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.
O L R P U B L I C A C T S U M M A R Y
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§ 3 — MRDA SCRF-BACKED BONDS
SCRF Authorization
The act 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 act 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 a fund’s balance does not fall
below the (1) maximum principal and interest amount due at maturity or a required
sinking fund installment due on MRDA bonds outstanding 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”). However, this
withdrawal prohibition cannot apply to paying the principal and interest and
redemption premium on SCRF-backed bonds if other authority funding is not
available.
The act allows MRDA to decide not to issue new SCRF-backed bonds if the
required minimum capital reserve on its outstanding bonds and the bonds to be
issued will exceed the funds in the SCRF, unless it deposits enough funds into the
SCRF to keep its balance at or above the reserve amount.
Maintaining the Required Minimum Capital Reserve
For any SCRF with a balance below the required minimum capital reserve, the
act requires MRDA to deposit enough funds to meet the reserve amount for the
SCRF from any available resources not otherwise pledged or dedicated by
November 31 each year. By December 1 annually, but after MRDA has made these
deposits, the act automatically appropriates from the General Fund any funds
needed to meet the reserve amount 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 act requires
investments to be valued at 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 its bonds and notes, including interest, and all costs
and expenses incurred in connection with any action or proceeding by or on behalf
of the bondholders. O L R P U B L I C A C T S U M M A R Y
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Limitation on Issuing SCRF-Backed Bonds
Under the act, MRDA cannot issue bonds secured by a SCRF unless the
following conditions are met:
1. it informs the OPM secretary and state treasurer (with supporting
documentation), 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 act, 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 act specifies that these provisions do not preclude MRDA from establishing
other debt service reserve funds that are not SCRFs.
§ 4 — PRIOR NOTICE TO TREASURER OF REPOR TABLE FINANCIAL
OBLIGATIONS
The act requires state employees, officers, agencies, departments, boards,
commissions (including the UConn Health Care Finance Corporation), and 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
act, “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 act 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 act prohibits them
from incurring the financial obligation or entering into the agreement until they
have received this written acknowledgement. O L R P U B L I C A C T S U M M A R Y
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The act 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.
§ 5 — TREASURER APPR OVAL FOR CERTAIN TRANSACTIONS
INVOLVING STATE BOND FINANCED PROJECTS
The act explicitly requires that certain property sales, leases, and other
dispositions receive the state treasurer’s prior approval. This requirement applies to
sales, leases, and 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.