Bond Cap Allocation Program 2022 Biennial Policy Report and Activity Summary (June 30, 2022)
Summary
Bond Cap Allocation Program biennial policy report and activity summary, per RCW 39.86.190, dated June 30, 2022, a report to the Legislature from the Washington State Department of Commerce for the 2020-2021 biennium. The executive summary states that since its inception in 1987 the program has approved more than $16.9 billion in tax-exempt private activity bond issuing authority. It states that the program authorized $1.8 billion in issuances through 60 projects during the biennium, and that Housing category projects used approximately 89% or $1.6 billion in bond cap. It reports that $851.3 million in new cap is available for 2022.
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Bond Cap Allocation
Program
2022 biennial policy report and activity summary, per
RCW 39.86.190
June 30, 2022
BOND CAP ALLOCATION
PROGRAM Report to the Legislature
Director Lisa Brown
V3.0
Acknowledgments
Washington State Department of Commerce
LOCAL GOVERNMENT DIVISION
Mark Barkley, assistant director
COMMUNITY ASSISTANCE AND RESEARCH UNIT
Tina Hochwender, managing director
RESEARCH SERVICES SECTION
Alice Zillah, section manager
BOND CAP ALLOCATION PROGRAM
Allan Johnson, program manager
Rebecca Duncan, project assistant
Jordan Laramie, project assistant
James Vogl, project assistant
Washington State Department of Commerce
Local Government Division
1011 Plum St. SE
P.O. Box 42525
Olympia, WA 98504-2525
www.commerce.wa.gov
For people with disabilities, this report is available on
request in other formats. To submit a request, please
call 360-725-4000 (TTY 360-586-0772)
Bond Cap Allocation Program Biennial 2022 Report
Table of Contents
Executive summary...................................................................................................................................... 2
Program overview........................................................................................................................................ 5
Bond cap policy issues .............................................................................................................................. 11
Bond cap categories .................................................................................................................................. 19
2020-2021 program activity summaries ..................................................................................................... 22
2020-2021 Bond Cap project highlights ..................................................................................................... 23
Summary of 2020-2021 public benefits...................................................................................................... 28
2022 initial allocations ............................................................................................................................... 32
Bond Cap trends ........................................................................................................................................ 33
Further information.................................................................................................................................... 39
Appendix A: 2020 Bond Cap issuances....................................................................................................... 40
Appendix B: 2021 Bond Cap issuances ....................................................................................................... 43
Appendix C: Small Issue category and Exempt Facility category issuances 2007-2021 ............................... 46
Appendix D: Annual bond cap 1987-2022 ................................................................................................... 47
Appendix E: Bond cap category allocations 1987-2021 ............................................................................... 49
Appendix F: Glossary ................................................................................................................................. 51
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 1
Executive summary
Overview
Since its inception in 1987, the Bond Cap Allocation Program (BCAP, or program) has approved more than
$16.9 billion in tax-exempt private activity bond issuing authority for a variety of economic and industrial
development, housing, hydroelectric power, exempt capital facility projects and student loans in Washington
state. The Washington State Department of Commerce (Commerce) administers the program.
BCAP authorizes the issuance of bonds under the federal bond volume cap but does not directly fund or
finance projects. Funds used for projects receiving permission to issue tax-exempt private activity bonds come
from private investors who purchase the bonds, not from governmental entities.
Every two years, the program must prepare a biennial report to the Legislature summarizing usage of the bond
allocation proceeds and any policy concerns for future bond allocations under the provisions of Revised Code
of Washington (RCW) 39.86, which guides the annual allocations of the private activity bond volume cap that
are made on a calendar year basis. This is the report for the 2020-2021 biennium.
2020-2021 allocations
BCAP authorized $1.8 billion in issuances through 60 projects located throughout the state during the most
recent biennium. These issuances of private activity bond volume cap (alternatively known as "bond cap,"
"volume cap" or "cap") exceeded the annual volume cap for these years by $125.9 million. This excess activity
was possible because of unused volume cap from previous years, preserved through designation as
carryforward.
Between 2020 and 2021, Housing category projects used approximately 89% or $1.6 billion in bond cap,
including:
$1.5 billion to create or preserve 9,530 units of affordable multifamily rental housing
$99.4 million for low-income, first-time homebuyer assistance that helped 735 first-time homebuyers
Housing category construction resulted in an estimated 15,343 short-term construction jobs and 4,193
permanent positions.
Non-housing category projects used $137.1 million in volume cap, with one Exempt Facility category project
comprising 37% of that amount. Small Issue category and Exempt Facility category projects resulted in an
additional 215 new permanent positions, the retention of 409 existing positions, and the creation of an
undetermined number of temporary/construction jobs as reported by applicants.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 2
Figure 1: Category Distributions for 2020-2021, in Millions
Exempt Facility,
$136.7
Small Issue, $0.4 - note:
not visible on chart
Housing, $1,635.8
During 2020 and 2021, all carryforward (the allocation of volume cap not used within the current year to a
qualified issuer) was allocated to the Washington State Housing Finance Commission (WSHFC) for affordable
housing.
2022-2023 allocations
A total of $851.3 million in new cap is available for 2022. An additional $151.9 million in multifamily cap was
carried forward at the beginning of the year. The volume cap for 2023 will not be determined until December
2022.
Anticipated demand for cap currently exceeds the new cap and carryforward amounts. However, based upon
similar circumstances in recent years, it is likely that a portion of allocated cap will not be issued before the
end of the year because typically some projects that are scheduled to close their bond sale late in the year face
delays and need to be moved to early in the next year. Cap that is allocated but not used by the end of the year
is then designated as carryforward to cover early bond sales the next year. Recent carryforward designations
have almost exclusively been made to the WSHFC.
Strong ongoing demand for volume cap is due in large part to issuances by the WSHFC and housing
authorities for Housing category projects, although multiple Exempt Facility category applications have
resulted in significant supplemental demand in recent years. Small Issue category applications have been
limited primarily to Beginning Farmer/Rancher projects in recent years.
While the first phase of the COVID-19 pandemic affected the timing and amount of project closings during the
last biennium, there has been no significant impact to the total number of Housing category and Exempt
Facility category projects receiving allocations over the past two years. There were relatively few Small Issue
category projects immediately prior to this biennium, so the pandemic does not seem to have altered
issuances in that category thus far.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 3
Policy discussion
The state continues to be challenged with significant affordable housing, economic development, and
infrastructure needs. The pandemic and other disruptive factors have exacerbated these demands over the
past two years. Demand for volume cap continues to significantly exceed supply. To meet this demand and
respond to increased needs, Commerce will continue to:
Work with our congressional delegation to increase the per-capita multiplier used to establish the annual
volume cap and increase the amount of 9% Low Income Housing Tax credits (LIHTCs) allocated to each
state.
Commerce will proceed with rule-making to:
Ensure consistency between the Revised Code of Washington (RCW) and the Washington Administrative
Code (WAC).
Allow Exempt Facility category projects to secure more than 30% of the initial set-aside prior to July to let
projects in this category have the opportunity to fully utilize the initial set-aside established in the RCW.
In addition, Commerce will continue to work with stakeholders to:
Convene a discussion group to strengthen partnerships, track bond cap trends, evaluate increases in
construction costs on projects, monitor economic conditions, discuss proposed federal legislation, and
investigate potential innovations or other measures such as bond cap recycling, new Exempt Facility
subcategories and innovative uses.
Conduct discussions with stakeholders regarding the accelerating demand for affordable housing,
accelerating costs of housing development and the impact of inflation and labor shortages on the ability of
developers to meet the increasing demand in order to identify possible responses and maintain, or stretch,
the ability of allocations to respond to these needs.
Expedite use of annual cap (and preserve any unused cap through carryforward) to maximize resources
available to address affordable housing, economic development, and infrastructure needs.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 4
Program overview
Private activity bonds are not usually eligible for tax-exempt status if the proceeds benefit businesses or
individuals. However, when issued under the authority of the bond cap allocation, many projects financed by
private activity bonds can access lower-cost, tax-exempt bond financing if the projects have substantial public
benefits.
This report contains many acronyms and technical terms that may be unfamiliar. For reference, see Appendix
F.
What is the bond cap?
The “cap” is a federal limit on the total volume of these tax-exempt private activity bonds issued annually in
each state.
The Internal Revenue Code allows states to determine how to distribute cap authority among five categories of
projects: Exempt Facility, Housing, Public Utility Districts (for specific hydroelectric projects), Small Issue and
Student Loans. Washington state law sets percentages for each category, criteria for allocation within the
categories, and timelines for bond cap that is set aside in some categories to encourage development in
Eastern Washington and distressed areas of the state.
The Bond Cap Allocation Program has authorized approximately $16.9 billion in tax-exempt private activity
bond issuances since its inception. These bonds have contributed to:
The development of thousands of affordable housing units and new jobs in Washington’s communities
Industry, infrastructure, and clean energy production across the state
Low-cost student loans to educate thousands of Washington’s residents
How much cap authority is available?
The total amount of tax-exempt private activity bond authority for each state is calculated using a per capita
formula. During the 2018-19 biennium, the multiplier, as established by the Internal Revenue Service, increased
from $100 to $105. For calendar year 2021, the multiplier increased from $105 to $110 per Washingtonian.
Based on annual population estimates provided by the U.S. Census Bureau, a total of $846.3 million in bond
cap authority was available in Washington in 2021. The multiplier remained at $110 per resident in 2022. Bond
cap authority is divided among the eligible categories by percentages described in state statute.1
What is a tax-exempt private activity bond?
A bond is a means for an investor to lend money to a corporate or governmental entity that borrows the funds
for a defined period at a specified interest rate. Because the bond investor is not required to pay federal taxes
on interest earned on tax-exempt bonds, these bonds can qualify for lower interest rates than conventional
financing, thus saving the borrower money.
For projects with benefits that are considered essentially public – for example, roads and most infrastructure –
tax-exempt bonds can be issued without cap authority. Bonds for projects with a high level of private benefit or
1 RCW 39.86.120
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 5
participation are not tax-exempt unless they meet specific IRS criteria and are issued under the authority of the
bond cap allocation. A bond is considered a private activity bond if it meets one of two tests:
1. Both of the private business use tests:
Greater than 10% of its proceeds are used for any private business purpose
and
Greater than 10% of its proceeds are secured by property used for private business purposes or are to
be repaid from private business sources
2. Or, it meets the private loan financing test:
Greater than 5% (or $5 million, whichever is less) of its proceeds are used for loans to persons other
than governmental entities.2
What types of projects are eligible?
The Tax Reform Act of 1986 established five categories of projects eligible to issue bonds under cap authority:
Exempt Facility: Certain types of capital transportation, waste management, energy and environmental
facilities as defined in the Internal Revenue Code. Multifamily low-income rental Housing category projects
are included in the Exempt Facility category under federal law. However, for the purposes of distribution,
Washington state law separates multifamily rental housing from the rest of the Exempt Facility category
and places it into a separate Housing category along with single-family homeownership projects, which are
not considered an Exempt Facility by federal law.
Housing: In Washington, this includes both affordable multifamily rental housing and single-family
homeownership projects.
The Alberta J. Canada Building in Tacoma's Hilltop Neighborhood (2019), a housing project
completed by the Tacoma Housing Authority. Photo courtesy of the Washington State
Housing Finance Commission and the Tacoma Housing Authority.
2 Federal Taxation of Municipal Bonds Deskbook; Third Edition; November 2017; LexisNexis, Newark, New Jersey; page 12; Referring to
26, U.S.C Section 141, Paragraph 2.01(a) and (b)
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 6
Small Issue: Industrial development projects needing less than $20 million in capital expenditures over six
years. Bonds are limited to $10 million in par value (the stated value or, in other words, the bond or the
amount that the bond issuer(s) agree to repay the purchaser(s) at the bond's maturity).
Student Loans: Higher education loans for qualifying students that are either studying at private or public
institutions in the state or are state residents studying at an institution outside of the state. These loans
can be used to pay for tuition, books, housing, food, utilities, equipment, and other education related
expenses.
Public Utility District (PUD): Efficiency and environmental enhancements for certain hydroelectric facilities.
Each state’s PUD volume cap was further limited in federal law, with Washington’s limited to a lifetime
maximum of $750 million. In 2007, Washington’s PUDs used the last of the $750 million cap, so the PUD
category no longer exists in the state.
How does Commerce decide which projects get cap allocations?
RCW 39.86.120 establishes a formula for initial allocations – set-asides of cap authority – for each category.
Since 2017, the initial set-aside allocations have been:
Exempt Facility: 20%
Housing: 42%, divided between:
WSHFC: 80% (that is, 33.6% of total cap)
Local housing authorities: 20% (that is, 8.4% of total cap)
Small issues: 25%
Student loans: 5%
Remainder: 8%
Commerce is responsible for taking applications, evaluating projects, authorizing bond issuances under the
cap and ensuring the state does not exceed its cap authority. The application period opens 90 days prior to the
start of the calendar year (October 3) and applicants may submit applications at any time during the year,
although the ability to obtain an issuance may be constrained by the amount of volume cap remaining and the
ability to close the bond sale prior to the designation of carryforward in late December.
State statutes and the Washington Administrative Code (WAC) establish timelines for some of the category
set-asides, and set restrictions to allocations for Exempt Facility category projects that exceed 30% of the
initial category set-aside. This per project restriction allows for multiple projects to apply, but historically only
one or two projects apply and need more bond capacity than the 30% limit. Exempt Facility category projects
that request amounts that exceed the 30% limit can only receive amounts in excess of this limitation after July
1 if there is sufficient cap available to fully or partially fulfill the request.
During the last biennium, Commerce completed a WAC change to move the date at which this restriction
ended from September 1 to July 1. This change was made to ensure the WAC was consistent with provisions
in the RCW that were changed through Engrossed Substitute House Bill 2753 in 2010 but were never adjusted
in the administrative rules.
A further change to the WAC, to move this date from July 1 to May 1, is being pursued during 2022 through
negotiated consensus. This change will allow Exempt Facility category applications to secure more than 30%
of the initial set-aside before the general release date. This will allow projects in that category to fully utilize the
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 7
initial set-aside established in RCW 39.86.120 and move forward to completion without an administrative
delay.
After July 1, unused cap from any category can be reallocated to any other category. Under WAC 365-135-035,
50% of any of this unused cap is prioritized for the Housing category. The authority in the Remainder category
can be used for any eligible project category at any time, thus creating flexibility in the program early in the
year.
Each category has a set of basic eligibility criteria in the Internal Revenue Code, state statute and WAC that
guides allocation decisions. These criteria help Commerce prioritize projects for allocations by assessing the
public benefit of each project.
Generally, projects that apply for an allocation of volume cap that meet all requirements will receive a full or
partial allocation if there is Remainder category, initial set-asides (subject to restrictions) or released amounts.
As a result, the program often makes allocations based upon the order in which it receives a valid application.
Who applies for cap authority?
Private activity bonds help finance projects with a significant non-governmental component and a qualified
public benefit. Private entities that use volume cap can include for-profit businesses or nonprofit charities,
including housing authorities. Nonprofit providers of affordable housing use a significant amount of cap every
year to expand housing opportunities throughout the state.
Companies can use up to $10 million in private activity bonds to support qualified industrial development
projects that do not exceed $20 million in total project cost. This allocation can create or expand
manufacturing businesses to support economic development.
Depending upon the category and type of project, up to 100% of the project cost may be covered by private
activity bond sale proceeds. Most multifamily Housing Category projects developed by private or nonprofit
entities must utilize private activity bond sale proceeds to cover at least 50% of their project cost in order to
access federal housing tax credits.
In addition, businesses such as waste management companies or private water purveyors can utilize private
activity bonds to provide utility services such as water lines, expand waste collection capacity, or to reduce
waste streams through the creation of value-added products. An allocation of cap can be used if a public entity
such as a port or municipality (a city, county, or special district) is expanding infrastructure to specific
businesses, rather than the public at large.
How does a project apply for cap authority?
Project developers work with an authorized state- or local-level government (or quasi-governmental entity such
as the WSHFC or WEDFA) to serve as their conduit bond issuer. The conduit bond issuer and project developer
make arrangements to finance the project through full or partial use of private activity bond proceeds. The
conduit bond issuer then applies to Commerce for authorization to issue the private activity bond. In certain
cases, the conduit issuer might also be the project developer (this often occurs, for example, with housing
authorities).
Applicants access information and application forms through the Bond Cap Allocation Program website. The
application must contain detailed information about the project such as location, project cost, supplemental
funding, and development timeline. Each category has a unique application and information requirements.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 8
Completed applications are submitted to Commerce along with required fees which are the greater of
0.000277 of the requested amount, or $500. During the last biennium, Commerce switched to an electronic
submittal process to help expedite the review process.
Upon receipt of an application, Commerce has 15 days to make a determination on issuance. This
determination is primarily based upon compliance with: application requirements; the terms of RCW 39.86; the
provisions of WAC 365-135; and the availability of cap. Compliance with federal requirements is affirmed
through attestation of the applicant's legal counsel and issuer. Projects in compliance with these requirements
will receive a full or partial allocation granted through a certificate from Commerce if sufficient cap is
available. An application may be deferred, denied in full or denied conditionally, but in such circumstances the
reasons must be articulated to the proponent with options identified for immediate rectification or resubmittal
at a later date.
Projects typically receive allocations on a "first come, first served" basis within the framework of the initial set-
asides and release dates. Allocations are made until all annual volume cap has been issued. In some
circumstances, an applicant may return the allocation to Commerce. In this case, the amount can be
reallocated to any projects that have not received a full or partial allocation.
The program works prior to annual application windows with potential applicants, WSHFC, Commerce
programs, and economic development organizations to educate about opportunities to apply.
How does Commerce allocate carryforward?
Allocating carryforward to a specific project carries the risk the cap will be lost if a project hits a snag and
cannot issue a bond within the time limit. Washington state has chosen to allocate nearly all carryforward on a
program basis, rather than to individual projects, to avoid the potential loss of cap. During most years,
carryforward amounts were allocated to WSHFC because it is able to use carryforward on a program basis. As
a sub-allocating agency of Commerce, it can reallocate Housing category cap to other issuers, such as local
housing authorities. However, those reallocations must be within the same bond cap category for which
WSHFC received the carryforward. For example, under federal law, carryforward allocated to WSHFC for
affordable multifamily rental Housing category can only be reallocated to other issuers of multifamily rental
Housing category bonds.
Carryforward is rarely allocated in the Exempt Facility category in unique circumstances because of the risks
associated with allocating to specific projects. For most years, including 2020 and 2021, Commerce allocated
carryforward to WSHFC.
Reducing initial allocations by carryforward amounts
When an issuer receives a carryforward allocation, the issuer’s initial allocation for the following year can be
reduced by the amount of the carryforward received and those amounts moved into the Remainder category.3
This allows additional flexibility in making allocations outside the set-aside structure early in the year.
WSHFC’s initial allocation was reduced by carryforward amounts several times in the history of the program.
That enabled local housing authorities and Exempt Facility category projects to get the cap they needed
without waiting for the release of category set-asides on July 1.
3 RCW 39.86.120(2)
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 9
In a recent adjustment to program administration, BCAP determined that reductions to the initial set-asides
based upon a designation of carryforward would only occur when multiple projects in separate categories
submitted complete applications prior to the start of the calendar year. This determination was made to
ensure predictability and consistency in application of this provision.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 10
Bond cap policy issues
At the time of development of the previous biennial report, BCAP was facing significant uncertainty regarding
the impacts of the COVID-19 pandemic on the utilization of tax-exempt private activity bonds. In addition, there
were important questions about the pandemic’s impact on housing affordability, unemployment and financial
markets. However, during the initial phase of the pandemic, which for the purposes of this report is considered
to correspond with the term of the 2020 and 2021 biennium, the use of bond cap remained similar in many
ways to the period immediately preceding.
The second phase of the pandemic, which for the purposes of this report is considered to correspond with the
biennium beginning in 2022, had supply chain delays, tight labor supply, price increases and shortages of some
building materials, in tandem with accelerating demand for housing, among other factors. This continues to
create an environment that is significantly altered from pre-2020 conditions. Applications for bond cap
allocations in 2022 indicate demand for an even higher amount of cap than in 2020 and 2021. This may be due
to increases in project costs. In this new environment, the program is currently focused on best responding to
these policy concerns.
Overview
The last biennium (2020 and 2021) saw overwhelming change both nationally and in Washington. Some of the
factors were pandemic related and others were not: supply chain issues, increasing homelessness, soaring
inflation, rent increases, rising home prices, and a surge in gasoline prices. The employment sector was
marked by high levels of volatility — two years ago, there was a massive increase in unemployment, while
unemployment rates at the end of the biennium were near historic lows. Many areas and industries, including
construction and specialty trade, are experiencing labor shortages.
Requests for allocations of bond cap in 2022 remain as strong or stronger in terms of request amounts as it
was in the spring of 2020. Demand for private activity bonds outpaces the amount of annual cap. The Housing
category consumes the most allocations of bond cap, and a steady flow of projects are proposed and
completed. The Exempt Facility category continues to require allocations, especially for projects for recycling
and repurposing solid waste streams. The Small Issue category continues to experience low utilization
compared to its initial set-aside, with only one Beginning Farmer/Rancher issuance during the most recent
biennium.
Some recent changes affected the program and its administration. In late 2021, the federal Infrastructure
Investment and Jobs Act was passed which created two new subcategories in the Exempt Facility category
that are partially subject to the volume cap (Broadband and Carbon Capture). Other proposed changes to
federal statutes remain largely stuck in Congress.
At the state level, Commerce initiated a change in 2021 to WAC 365-135 to bring it into conformance with a
2010 change to the RCW. In addition, a change to the WAC in 2022 proposes to adjust the date when an
Exempt Facility category project can receive more than 30% of the initial set-aside from July 1 to May 1.
The Bond Cap Discussion Group was revived in a remote attendance format and two meetings were conducted
thus far.
At the start of the 2020-2021 biennium, we knew there were significant challenges and questions that the
program would face. The outlook at the beginning of the 2022-2023 biennium is much more obscure. There
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 11
are conflicting predictions about the intensity and duration of current trends in factors such as inflation,
interest rates, gas prices, labor shortages, and the cost and availability of construction materials.
Any of these, or some combination of them, could result in changes to demand of the volume cap. And yet, at
the start of the last biennium, there were significant signs that volume cap would be affected by the pandemic,
but we experienced little change in overall demand and usage.
There is uncertainty if this could be the case again — where there is little change during the biennium in the
volume and type of bond cap projects — or whether we could see a new recession or other disruptions to
financial markets and construction capacity that results in a drop in usage of volume cap.
Because of this uncertainty, the program will need to remain vigilant and respond, as needed, to any marked
drops in utilization of volume cap. The previous biennial report concluded with a commitment by Commerce to
expedite the use of annual cap and preserve any unused cap through carryforward, maximizing resources
available to address affordable housing, economic development, and infrastructure needs. This approach
remains essential as the state continues to be challenged with unmet needs in these important policy areas.
Housing category discussion
The largest share of Washington’s bond cap authority has always gone to affordable housing, and in recent
years the amount of the state’s total bond cap used for affordable housing has approached or exceeded 90%.
This is largely due to the considerable unmet need for affordable housing, and to the unique way in which
affordable housing projects are dependent on bond cap allocations.
Housing affordability
Housing affordability is a fundamental challenge for most of the state’s low-income residents.
According to the National Low Income Housing Coalition (NLIHC), 70% of extremely low-Income households
(defined by NLIHC as 30% area median income [AMI] or poverty level, whichever is higher) in Washington are
severely cost-burdened. Data from the Washington Department of Social and Human Services (DSHS)
indicates a household with four individuals meets this income threshold if their annual earnings do not exceed
$32,450 in 2022. This group, which comprises 21% of households within the state, pays more than half their
incomes for rent or mortgage. Just over half of residents in this category are seniors, disabled or currently
attending school. Another 35% are in the labor force but have limited earnings.
Residents earning 50% or less than area median income also face significant housing challenges, with more
than one-third paying more than half their income for housing. The state’s most recent HUD Consolidated Plan
estimates that more than one quarter of households earn 50% or less than AMI which DSHS data identifies as
$54,084 for a family of four in 2022.
Housing development
Approximately 160,000 new affordable units need to be constructed to meet the housing needs of state
residents at affordable levels. Housing production, in general, has been a challenge over the years, especially in
the greater Seattle metropolitan area. A recent report determined that an additional 225,000 housing units
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 12
should have been constructed statewide between 2000 and 2015 to keep up with housing demand.4 This
supply shortage is one factor exacerbating housing affordability.
Some of the shortage is attributable to a drop in housing production during the Great Recession. Between 2001
and 2008, an average of roughly 46,000 housing units were constructed on an annual basis. In 2011 and 2012,
the state averaged just over 17,000 new units per year. The state did not recover to production levels
exceeding 46,000 units per year until 2020. A variety of factors likely resulted in this drop in production,
including tightening lending standards, shortages in skilled/construction labor, and drops in median household
income.
While preliminary data from the U.S. Census Bureau on building permits for residential construction indicate
new production in 2021 exceeds 2020 levels, there are indications that housing production is slowing again.
This is attributed to several factors, including the shortages in concrete and lumber/timber products, increases
in cost of labor, shortages of labor (especially in highly skilled trades), increases in mortgage rates, and delays
in supply chains. These factors appear to be substantially increasing the price of construction.5 6 7 8
The state’s population continues to grow, rising by approximately 124,000 residents over the last two years. As
a result, there is significant need for continued production of a high number of housing units that are
affordable to the state’s lowest income households. Affordable housing projects receiving an allocation of
volume cap are a significant component of this response. This report finds that bond cap Housing category
projects created or preserved over 9,500 affordable units in the most recent biennium.
Home ownership
While housing production has lagged and housing prices have increased, it is interesting to note that
homeownership rates have held relatively steady. Between 2019 and 2021, homeownership in Washington
state decreased only slightly, from 63.8% to 63.4%.9 However, the University of Washington’s Washington
Center for Real Estate Research calculates the Housing Affordability Index (HAI) for homebuyers in the state
fell slightly between 2020 and 2021 after rising between 2019 and 2020.10
Both state and local governments have made significant efforts to broaden the range of housing types that
can be constructed. These efforts to support “missing middle” housing can result in expanded opportunities
for homeownership through condominiums, townhouses, tiny homes, and prefabricated units that provide
choices beyond conventional large detached single-family homes. Data over the next biennium will help reveal
whether these changes are resulting in an expansion of homeownership opportunities.
4 Up for Growth, “New Report Details Washington’s 225,000 Home Shortage,” (January 10, 2020),
https://www.upforgrowth.org/news/new-report-details-washingtons-225000-home-shortage
5 National Association of Home Builders, “Supply Chain Issues Continue to Slow Housing,” (February 17, 2022),
https://www.nahb.org/blog/2022/02/supply-chain-issues-continue-to-slow-housing/
6 Ads Intelligence Marketing, “Supply Chain Disruptions Hamper Housing Market,” (March 22, 2022),
https://adsintelligence.marketing/2022/03/22/supply-chain-disruptions-hamper-housing-market/
7 ForConstructionPros.com, “2022 State of Construction: New Year Brings More Uncertainty with Supply Chain and Labor Concerns,”
(March 21, 2022), https://www.forconstructionpros.com/equipment/article/21993023/2022-state-of-construction-new-year-brings-
more-uncertainty-with-supply-chain-and-labor-concerns
8 MultiHousing News, “The Labor Shortage’s Impact on Multifamily Development,” (November 8, 2021),
https://www.multihousingnews.com/how-the-labor-shortage-impacts-multifamily-development/
9 Federal Reserve Bank of St. Louis, “Homeownership Rate for Washington,” (March 15, 2022),
https://fred.stlouisfed.org/graph/?id=WAHOWN
10 University of Washington Center for Real Estate Research, "Washington Market Highlights: Fourth Quarter 2021", (January 2022),
https://wcrer.be.uw.edu/wp-content/uploads/sites/60/2022/03/2021Q4MarketReport.pdf
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 13
Affordable housing need for bond cap
While Exempt Facility category and Small Issue category projects can benefit from lower interest rates created
by using a bond cap allocation, most can still go forward without bond cap – by using either a taxable bond,
conventional bank financing, supplemental private equity, or a combination thereof. Affordable housing
projects, on the other hand, usually require bond cap allocations to be feasible. Affordable housing projects
provide housing at rents or prices that are below that offered in the private market, and therefore do not supply
market rate rental revenue with which a housing developer could repay a lender. As a result, they do not qualify
for conventional financing.
To qualify for 4% Low Income Housing Tax Credits (LIHTCs), a project is required to have an allocation of bond
cap authority, which must comprise at least 50% of the project’s total cost. Federal Department of Housing and
Urban Development (HUD) grants or loans typically require a project to have a cap allocation guaranteed,
usually several years in advance of planned ground-breaking.
In addition, single-family homeownership assistance, whether in the form of mortgage revenue bonds or
mortgage credit certificates (a form of tax credit), also requires bond cap allocations under federal law.
Without a bond cap allocation, most affordable housing efforts – whether multifamily rental projects or single-
family homeownership programs – cannot go forward.
As of April 2022, 11 potential affordable Housing category projects may not be able to move forward this year
due to a lack of sufficient bond cap. These projects, which would create or preserve 1,565 units across the
state, need approximately $320 million in additional cap authority to proceed to closing and construction.
The WSHFC utilizes creative ways to help close this gap in funding through measures such as bond cap
recycling. But there remains a possibility that some affordable Housing category projects could miss
construction windows, lose other time-sensitive sources of financing, or experience cost increases.
Construction projects across the state are currently experiencing significant increases in costs due to
increases in material costs, construction/skilled trade wages, and interest rates. It is unclear if these impacts
will remain a factor affecting housing project cost and development in the upcoming biennium. But there is a
distinct possibility that rising costs will reduce the number of Housing category units that can be developed or
preserved with equivalent allocations of bond cap.
Affordable Housing Legislation
Several federal proposals currently under consideration in Congress contain a key method to expand the
availability of bond cap allocations to support affordable housing development. Among the proposals, the
methods that hold the most promise for allowing proposed affordable Housing category projects to move
forward are:
Increase the annual per capita multiplier at the federal level, which would result in an overall expansion in
annual cap for all categories including the Housing category
Increase the amount of 9% Low Income Housing Tax Credits allocated annually to each state, resulting in
expansion of the state’s capacity for affordable Housing category development
Reduce the threshold of funding required through bond cap allocations to 25% of a project’s total funding,
which could create an additional 1.4 million new affordable housing units nationwide over the next 10
years, according to estimates from Novoco in 2020.11
11 Novogradac, “Novogradac Analysis for NCSHA”, (May 15, 2020), https://www.novoco.com/news/novogradac-analysis-ncsha-
reduction-50-percent-bond-test-could-result-14-million-additional-homes
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 14
The first two approaches are supported by stakeholders based on results of the 2020 Stakeholder Survey
outlined in the 2020 Biennial Bond Cap Report. The third option did not gather consensus at that time.
The Build Back Better Act (HR 5376), Decent Affordable Safe Housing for All Act (S 2820), and the Affordable
Housing Credit Improvement Act (S 1136) all contain provisions that would effectively increase the capacity of
bond cap to support affordable Housing category development and preservation. Currently, these pieces of
legislation do not appear to be moving forward to final consideration. A survey of program stakeholders
conducted in 2020 revealed a mixture of support and opposition to these proposals, and if these proposals
begin to advance, the program will resolicit input to determine if perspectives have changed.
Maximizing bond cap utilization
A shift in the ratio of new affordable multifamily projects, affordable multifamily preservation projects, and low-
income homebuyer assistance could help minimize the gap in housing affordability, in addition to changes in
federal legislation. This initiative is beyond the reach of the Bond Cap Program and falls under the purview of
the WSHFC, housing authorities, affordable housing developers, and others.
Small Issue category and Exempt Facility category discussion
The Small Issue and Exempt Facility categories support qualified infrastructure and economic development
projects. These continue to be significant areas of need, especially in certain parts of the state.
Total employment
Washington’s economy faced a significant decline during the initial phase of the pandemic, losing 430,000 jobs
between February and May of 2020. Over the past two years, total employment in the state has slowly
rebounded and is now just 32,000 jobs short of the pre-pandemic high. Unemployment rates have returned to
relatively low levels in most parts of the state, although these rates vary significantly — from 2.5% in King
County to 10.6% in Ferry County. The statewide average is 4.2%, slightly higher than the national average of
3.6% and the pre-pandemic low of 3.9%.12
Manufacturing and agricultural employment
Manufacturing continues to experience a gradual decrease statewide. In 1980, manufacturing jobs comprised
17.8% of total employment. By 2019, this slipped to 8.5%, and in 2021, manufacturing jobs accounted for 8% of
the state labor force.13 Agriculture employment, conversely, has gradually increased, moving from just over
80,200 jobs in 2010 to 95,400 in 2020.
While automation and relocation of manufacturing functions is a long-term trend, disruptions related to
logistics and supply chains also appear to have compromised manufacturers' ability to operate at full capacity.
Exempt Facility category projects need for bond cap
Qualified facilities, including water furnishing facilities, mass commuting facilities, sewage facilities, private
solid waste disposal facilities, local electric energy or gas furnishing facilities, local district heating and cooling
facilities, and qualified hazardous waste facilities, are eligible for bond cap allocations. Other categories
12 Statistics are current as of May 2022.
13 Office of Financial Management, “Manufacturing employment as a percent of total,” (July 2, 2021), https://ofm.wa.gov/washington-
data-research/statewide-data/washington-trends/economic-trends/washington-and-us-wage-salary-manufacturing-
employment/manufacturing-employment-percent-total
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 15
partially subject to volume cap include private high-speed intercity rail facilities, and as of the passage of the
Infrastructure Investment and Jobs Act, private broadband projects and qualified carbon capture facilities.
Within the past five years, water, sewage, and solid waste facilities have applied for bond cap. The solid waste
category is an area where significant innovation is occurring to repurpose many parts of the waste stream into
recycled products or biofuels. The program has made allocations or responded to inquiries for projects that
would repurpose straw, plastic, cardboard, and wood waste. These types of projects provide an array of
benefits, including decreased demands on landfills, job creation, and reductions in environmental impacts.
Exempt Facility category legislation
The Infrastructure Investment and Jobs Act of 2021 allowed for further innovation in the provision of critically
needed infrastructure by expanding the Exempt Facility category. The new allowances require projects to
obtain an allocation of 25% of their par value to receive tax exempt bonds, greatly leveraging the impact of the
Bond Cap Allocation Program. As a result, a $100 million qualified carbon capture project or broadband project
would only need an allocation of $25 million of bond cap to make a tax-exempt bond sale covering the full
amount.
However, not all types of improvements will qualify under the Exempt Facility category. For example, a criterion
for a qualified non-public broadband project is to provide new service to areas showing lack of adequate
service, and that the project will meet targets for businesses and residences to access 100/20 megabytes per
second (mbps) service.
Washington’s Climate Commitment Act in 2021 reinforced the state’s commitment to cap or reduce carbon
emissions. In addition, the state recently passed the Statewide Broadband Act to improve internet access
throughout the state.
The COVID-19 pandemic increased demand for and awareness of the importance of reliable high-speed
internet for all residents, businesses, and governments for education, economic, public service, and other
needs. A recent statewide survey indicated 6% of residents have no internet access and 41% have download
speeds slower than 10 megabytes per second (mbps),14 well below the 25 mbps download speeds the Federal
Communications Commission defines as the minimum standard for high-speed internet.
Several proposed pieces of legislation would adjust how the Exempt Facility and Small Issue categories
operate and are utilized. These bills include the Build Back Better Act (HR 5376) and the Modernizing American
Manufacturing Bond Act (HR 1115). These proposals would fundamentally expand the eligibility of projects
that qualify for private activity bonds. One provision would increase the maximum industrial development bond
size from $10 million to $30 million. Another proposal would add electric vehicle charging stations to the list of
Exempt Facility category projects subject to the volume cap. However, as with the federal legislation related to
the Housing category, these pieces of legislation do not appear to be moving forward at this time. A survey of
program stakeholders conducted in 2020 revealed a mixture of support and opposition to these proposals. If
these proposals begin to advance, the program will resolicit input to determine if perspectives have changed.
14 KCPQ Channel 13 Fox News, “Digital Divide: Washington families struggle to get internet access,” (January 13, 2022),
https://www.q13fox.com/news/digital-divide-washington-families-struggle-to-get-internet-access
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 16
Administrative rule changes
Two changes to the Washington Administrative Code (WAC) were completed in 2021 and 2022. One
adjustment allows large Exempt Facility category projects to receive allocations exceeding 30% of the initial
set-aside amount on May 1, instead of July 1. This change builds upon amendments made to the WAC in 2021
that brought the administrative rules into conformance with changes made to RCW 39.86 in 2010. The WAC
changes in 2021 and 2022 were conducted through expedited rulemaking allowed when consensus has been
reached among stakeholders.
Small Issue category concerns
The Small Issue category will not see substantial allocations of volume cap unless there are changes to the
federal regulations. The Community Development Finance Authority’s most recent Annual Volume Cap Report
shows that national issuances in this category have been minimal since 2012. This mirrors trends seen in the
statewide utilization of this category, due to low interest rates, limitations on overall project size, and the
expiration of allowed uses (such as intangible assets) after the Great Recession. During this most recent
biennium, the only Small Issue category allocation was for a Beginning Farmer/Rancher project. The Beginning
Farmer/Rancher program was effectively suspended after the conclusion of an arrangement between the
WSHFC and the Northwest Farm Credit Service. A new issuer was established in 2021, and the Beginning
Farmer/Rancher issuances may see a resurgence during the next biennium.
Program administration issues
The program continues to improve stakeholder engagement, administrative processes, and program
guidelines.
Adjustment to application submittal, review and approval/denial
Due to remote work operations, the program now receives bond cap allocations solely through electronic
submittals. This accelerates the beginning of the review process and creates a more straightforward “time
stamp” indicating when an application is received. This is important as the program largely operates on a first-
come, first-served basis.
The program has not yet received more than one application simultaneously, but it is possible this could occur
in the future. Electronic submittal makes this occurrence more likely, especially on days such as the first date
allowed for early submissions. During the next biennium, the program will solicit stakeholder involvement to
determine if adjustments are needed for applications that arrive on the same calendar day. For example,
applications received outside of normal business hours be counted as received at 8 a.m. on the next business
day? Should the priority of applications received at the exact same minute, or perhaps even on the same
business day, be determined randomly? Does the electronic submittal process disadvantage applicants with
lower broadband speed, who might submit a proposal at the exact same time as an applicant with more robust
internet service?
Stakeholder outreach
One of the key recommendations of the previous Biennial Report was to convene the stakeholder group. The
Bond Cap Advisory Group has since met twice, in 2020 and 2021. The program anticipates hosting two or
more meetings per year during the next biennium.
During the next biennium, the Bond Cap Allocation Program will take actions to include perspectives from
outside the immediate bond cap stakeholder community. It will invite groups representing statewide interests
such as the Association of Washington Cities, Washington State Association of Counties, and Municipal
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 17
Research and Services Center. The discussion group will reevaluate the results of the 2020 stakeholder survey
to determine if perspectives have changed.
With the resumption of annual conferences, the Bond Cap Allocation Program anticipates participating and
making presentations at events previously used to conduct stakeholder outreach. These efforts include
involvement in annual gatherings of the Association of Washington Cities, Infrastructure Assistance
Coordinating Council, and Housing Washington.
Changes to rules, regulations and procedures
While no WAC or statute changes are proposed for consideration in 2023, the Bond Cap Stakeholders Group
may begin gathering input on the relevance of WAC provisions that are rarely or never used. An example of this
type of rule is WAC 365-135-060, which sets geographic limits on the issuance of Small Issue category
industrial revenue bonds. This requirement has never been used and is an example of extraneous criteria that
may cause confusion or inhibit a potential applicant from utilizing the program.
During the next biennium, the stakeholder group might consider the arrangement to make allocations to
housing authorities through the WSHFC. This approach appears to have worked well and can provide
advantages to housing authorities that need advanced assurances of cap allocations. If stakeholders express
support, the program will propose formalizing the current arrangement.
Finally, the Attorney General’s Office issued an administrative determination at the end of 2021 regarding the
designation of carryforward and calculation of initial set-asides. RCW 39.86.120 allows the initial set-aside to
be reduced by the amount of a carryforward designation completed at the end of the prior year. This allowance
was only utilized when competition exists for an allocation of volume cap. As a result, reductions occur in
years when competing applications for an allocation of bond cap are submitted prior to the start of the year.
This occurred at the end of 2021. As a result, the 2022 initial allocations were adjusted to reflect the 2021
carryforward allocation made to the Housing category. Per the provisions of the RCW, this amount was added
to the Remainder category set-aside and was available for immediate allocation to the first application
received for 2022 volume cap.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 18
Bond cap categories
Housing category - 42% initial allocation
In Washington state, the Housing category includes mortgage revenue bonds, mortgage credit certificates, and
Exempt Facility category bonds for qualified residential rental projects.
Under state law, 42% of the total cap is set aside for the Housing category — 80% to WSHFC (33.6% of the total
cap) and 20% to local housing authorities (8.4% of the total cap).
WSHFC’s allocation can be used by its Single-Family Homeownership Program or Multifamily Rental Housing
Program. WSHFC’s multifamily program issues bonds for both nonprofit and for-profit affordable housing
developers. The Single-Family Homeownership Program’s mortgage revenue bonds are used for single-family
low-income homebuyer assistance. Under IRS Code, 95% of mortgage revenue bond allocations must be used
to finance residences for first-time homebuyers.
Local housing authorities issue bonds for affordable multifamily rental projects – both their own projects and
to nonprofit developers of affordable housing.
Since 2007, bond cap allocations in the Housing category helped create or rehabilitate more than 54,675 units
of low-income, senior, and special needs housing statewide.
Small Issue category - 25% initial allocation
A Small Issue category project, as described in IRS Code, is an industrial development/manufacturing project
with a maximum of $20 million in capital expenditures over a six-year period – three years before and three
years after the issuance of the tax-exempt private activity bond. Allocation requests for a single project in this
category cannot exceed $10 million during the six-year period.
The state adopted legislation in 2006 to create the Beginning Farmer/Rancher, or “aggie bond,” Program, a
subset of the Small Issue category administered by WSHFC. Bonds to support new farming operations were
first issued in early 2008. Since then, aggie bonds have helped 34 families establish new agricultural
businesses. This program helps permanent residents start farms if they've never owned one or previously
owned a farm that was less than 30% of the county's median farm size.
The Beginning Farmer/Rancher Program resulted in the creation of 33 new farms and
ranches throughout the state since its creation in 2006. Photo courtesy of Adobe Stock
Photo.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 19
Aside from the Beginning Farmer/Rancher Program, activity in the Small Issue category has been slow since
the recession. Nevertheless, since 2007, bonds issued in the Small Issue category helped create or retain more
than 1,460 jobs in Washington communities.
Exempt Facility category - 20% initial allocation
Exempt Facility category projects are capital developments qualifying for tax-exempt status only if issued
under the bond cap because of a high level of private involvement or benefit. Exempt Facility category projects
include:
Solid and hazardous waste disposal
Wastewater/sewage treatment
Water facilities
Mass commuting facilities
Local district heating and cooling
Local furnishing of electricity or gas
Under federal law, the term “Exempt Facility" also includes low-income rental housing. However, for purposes
of distributing the state’s bond cap authority among projects, Washington considers low-income rental
housing in the Housing category.
The Columbia Pulp project prevents tons of wheat straw from entering the waste stream or pollution from
burning by turning straw into feed, pulp and erosion control. Photo by Allan Johnson.
In the Bond Cap Allocation Program’s history, tax-exempt private activity bonds in the Exempt Facility category
have financed innovative recycling, alternative energy and waste management projects in the Exempt Facility
category, such as the Columbia Pulp Project.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 20
In addition to removing tons of waste and pollution, creating value-added consumer products, and providing
power, sewer, and water facilities, Exempt Facility category projects have created or retained more than 3,756
jobs for Washington residents since 2007.
Student Loans category - 5% initial allocation
While the state issued bonds in this category before 2005, the issuance was suspended after the Student Loan
Finance Association (SLFA) assets were sold in late 2004 to a for-profit corporation. The Washington Higher
Education Facilities Authority (WHEFA) was appointed the new authorized Student Loans category bond issuer
in the state. Beginning in 2008, changes in federal financial aid procedures made it difficult or unnecessary for
the state to issue Student Loans category bonds. Depending on student financial aid developments at the
federal level, WHEFA is prepared to offer both federally insured Student Loans category loans and alternative
loans.
Remainder and Redevelopment category - 8% initial allocation
The Remainder and Redevelopment category, hereafter referred to as “Remainder category,” is a
miscellaneous category. It can be allocated to projects eligible under any of the other bond-use categories
throughout the year, as long as the initial allocation in the project’s category has been depleted or the
availability of cap for a specific project is limited by program timelines. At the beginning of each year, the
program reserves at least 8% of the state’s total bond cap authority for the Remainder category, providing
flexibility to make more allocations earlier in the year.
If bond issuers submit applications in separate categories before the start of the calendar year, initial set-
asides may be reduced by the amount of carryforward designated in the prior year. This amount is then added
to the Remainder category.
Most often, the Remainder category cap is used for Housing category projects, particularly for local housing
authority allocations over the initial set-aside. At times, Remainder category cap is used for Exempt Facility
category projects that are larger than the 30% of the initial allocation allowable for any one project early in the
year.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 21
2020-2021 program activity summaries
2020 and 2021 bond cap activity was characterized by continued high demand for Housing category cap,
moderate demand for Exempt Facility cap, and limited demand for Small Issue cap. While a significant number
of projects received allocations from carryforward, a large number of projects used current-year cap.
Affordable housing received the majority of bond cap issuances.
2020 Bond Cap issuances
The program approved private activity bond sales for 29 projects in 2020, using a total of $900.8 million in
bond cap authority. Of that amount, 93.1% went to Housing category projects that created or rehabilitated
more than 5,192 units of affordable housing and assisted 374 homeowners through the Single-Family Bond
program. There were $62 million in Exempt Facility category bonds issued in 2020. No Small Issue category
projects received bond cap during the year.
The year began with $278.9 million in accumulated carryforward; it ended with $177.7 million, a decrease of
36%. Increased issuances in the Housing and Exempt Facility categories led to a net decrease in carryforward
capacity going into 2021.
For details on specific issuances during 2020, refer to Appendix A.
2021 Bond Cap issuances
The program approved private activity bonds for 31 projects in 2021, using $872 million in bond cap authority.
Of that amount, 91.4% went to Housing category projects. A total of $433,500 was allocated for Small Issue
category bonds, while the Exempt Facility category used allocations of $75 million. Issuances in the Housing
category created or rehabilitated more than 5,320 units of affordable multifamily housing and helped 361 low-
to moderate-income families become homeowners.
With total issuances exceeding the annual cap, the carryforward capacity shrank from $177.7 million to $151.9
million. At the end of 2021, all of the carryforward for the single-family category was expended. As a result,
carryforward in the WSHFC multifamily program comprised all available carryforward going into 2022. If
issuances in 2022 exceed the annual cap, as they did in 2021, it is possible there could be little or no
carryforward allocation at the end of the 2022. This situation has happened only once in the program’s history,
at the end of 2007.
For details on specific issuances during 2021, refer to Appendix B.
Biennium summary
The program approved private activity bonds for 60 projects, using $1.8 billion in bond cap authority during the
biennium. There was one issuance of $433,500 for a Beginning Farmer/Rancher project. There were $136.7
million issued for Exempt Facility category projects, and $1.64 billion issued for Housing category projects.
For details on specific issuances during this biennium, refer to Appendices A or B.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 22
2020-2021 Bond Cap project highlights
Among the multiple projects that received allocations of bond cap over the last two years, several stand out for
their innovation, public benefits, community enhancement, and strength of partnership.
Longview: North Pacific Paper Company
Responding to a surge in the availability of wastepaper, the North Pacific Paper Company (NORPAC) is in the
midst of significantly expanding and modifying its Longview paper recycling and processing facilities.
In support of this expansion project, the Washington Economic Development Finance Authority awarded
NORPAC a nearly $48 million issuance of tax-exempt private activity bonds in 2020. The remainder of the total
project cost of $66 million was provided through private equity.
The company is making varied modifications to the plant, and the most substantial is the purchase and
installation of a new piece of machinery called a drum pulper. “It’s the critical element of the whole process,”
said NORPAC Project Manager Todd Brooks.
When bales of wastepaper arrive at the plant, they are fed into one end of the pulper — a long rotating cylinder.
As the drum slowly turns, the paper inside is agitated by tumbling. Aided by the addition of water, it begins to
separate into small fibers.
These fibers are collected into a mixture called a pulp slurry, which can be used to create recycled paper
products after additional cleaning steps. Contaminants like plastic and glass are screened out.
“It’s almost like a horizontal washing machine at the laundromat,” said Brooks, describing the function of the
pulper.
While some of the machinery is new, the recycling process it supports is not. The Longview plant, which has
been in operation for over 30 years, was originally designed to recycle newspaper. It was retooled several years
ago to produce cardboard packaging instead of newsprint.
The new drum pulper, which should be ready to make its first production runs in mid-August 2022, will nearly
triple the amount of wastepaper the plant can process every year.
This increase in recycling capacity comes at a particularly important time for Washington state. Following
years of increasing restrictions on recycling imports, China issued a prohibition on the import of wastepaper in
December 2020, leading to a corresponding increase in the supply of that raw material, which NORPAC saw as
an opportunity.
“The timing was just about perfect for us to get started in the market with the availability of mixed-waste
paper,” said NORPAC Engineering and Maintenance Manager Nick Busch.
The expanded plant will give new life to a large quantity of recycled paper that would otherwise have ended up
as garbage. “With this new facility, we’ll be consuming about 1,700 tons per day,” continued Busch. “Most of
that would’ve ended up in the landfill.”
The expansion project has brought tangible economic benefits for the surrounding community as well, creating
122 new jobs and preserving 336 existing jobs at the plant. These jobs provide higher-than-average wages in
an area that has faced greater employment challenges than other parts of the state.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 23
In September 2020, the local unemployment rate was over 9%, compared to a state unemployment rate just
under 8%.
Providing a combination of environmental and economic benefits, the expansions to the NORPAC plant will
have an impact from the City of Longview and across the Northwest region, as a greatly increased amount of
wastepaper from several states will be recycled into useful products.
The North Pacific Paper Product project is intended to prevent tons of cardboard from entering the waste stream. Photos provided by North
Pacific Paper Product Company and the Washington State Economic Development Finance Authority.
Seattle: Africatown Community Land Trust, Community Roots
Housing
Feeling the impacts of gentrification and rising housing costs in the historic heart of Seattle’s Black
community, residents of the city’s Central District have been active in advocating and organizing for more
affordable housing to address the displacement of the area’s most marginalized residents.
Those efforts met with considerable success on the Africatown Plaza project, an affordable housing
partnership between nonprofits Africatown Community Land Trust (ACLT) and Community Roots Housing.
Just acquiring the land where the building will be constructed, at the corner of 23rd Avenue and East Spring
Street, required a concerted community effort. Before ACLT purchased it, the property, along with adjacent
parcels on the same block, had an uncertain future.
The entire block was first put up for sale in June 2015. Several tentative deals with various developers fell
through against a background of growing community concern over the displacement of existing residential
and commercial tenants, and a strong community desire for any future development on the site to include
affordably priced housing.
After a combination of public advocacy, extended negotiations, and assistance from outside partners, ACLT
acquired three parcels at the south end of the block in early 2017, securing the promise of additional
affordable housing units in the Central District.
“I think it’s a truly historic moment that community process, community organizing can lead to results,” said
ACLT VP of Real Estate Muammar Hermanstyne of the effort to gain ownership of the land.
In 2021, ACLT received an allocation of $30 million in private activity bonds through the Washington State
Housing Finance Commission to develop Africatown Plaza in collaboration with Community Roots Housing.
This allocation covers approximately half of the total development cost of $60 million. Other sources of
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 24
funding include municipal grants and low-income housing tax credits. The building will offer 126 new units of
affordable housing available to residents making up to 50% of area median income.
In addition to 59 studio and 36 one-bedroom apartments, Africatown Plaza will feature 18 two-bedroom and 13
three-bedroom apartments — more than similar projects have typically included. The nearby Liberty Bank
Building — another affordable housing partnership between ACLT and Community Roots Housing completed in
2019 — contains only 15 two-bedroom apartments and no three-bedroom apartments among its 115 total
units.
Africatown Plaza will also offer residents over 4,000 square feet of common areas and will provide a satellite
office space for ACLT.
According to Hermanstyne, Afrocentric design and context informed the building’s architecture, and many
elements of its physical construction are meant to convey symbolic meaning.
“The design of the building was very community-focused,” said Jeremy Wilkening, vice president of real estate
development for Community Roots Housing. “A lot of the design elements are representative of the pan-
African community.”
In addition to providing much-needed affordable housing in the Central District, Hermanstyne hopes that
Africatown Plaza, and the story of the land acquisition that made it possible, will serve as a model of
community-driven development that others can follow.
“As long as that building gets built, it’s a testimony to communities organizing and pushing forward to do great
things,” he said.
The Africatown housing project will provide affordable housing and community facilities in Seattle. Photos provided by Africatown Community
Land Trust, Community Roots Housing and the Washington State Housing Finance Commission.
Walla Walla: Housing Authority Preservation Project
Maintaining and upgrading existing units is an important part of providing high-quality affordable housing for
as many people as possible.
A 2021 allocation of $7 million in private activity bonds by the Washington State Housing Finance Commission
to the Walla Walla Housing Authority (WWHA) will help support the preservation of 96 of the authority’s
existing affordable housing units.
Those units are spread across three WWHA properties: Belmont Apartments, Marjorie Terrace, and Rosehaven
Cottages. The Belmont Apartments serve populations that require additional assistance, and Marjorie Terrace
and Rosehaven Cottages are both set aside to house people 55 years of age or older.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 25
Planned improvements and maintenance include upgraded energy efficiency in all units, new sewer lines and
cabinets at Marjorie Terrace, fresh interior and exterior paint in all units, and exterior maintenance on the
Belmont Apartments. To improve the energy efficiency of the three buildings, WWHA will replace roofs at the
Rosehaven Cottages, and upgrade hot water tanks, toilets, lighting and appliances across all three properties.
This round of upgrades and maintenance began with a $500,000 housing preservation grant in 2019 from the
Washington State Housing Trust Fund to make improvements to the Belmont Apartments.
WWHA Executive Director Renee Rooker said that the goal of the project is for these 96 units to remain a high-
quality affordable housing option for the next 30 years. With around 600 total units in the authority’s inventory,
this preservation effort represents a significant investment in the future of affordably priced housing in Walla
Walla.
When describing the state of affordable housing in the city, Rooker summed it up in one word: “Terrible.” She
cited significant challenges like high rents — up to $2,000 a month for a one-bedroom apartment in a new
private development — as well as a lack of dedicated affordable housing and difficulty accessing sufficient
funding for constructing new affordable housing.
In the face of those challenges, however, Rooker said the authority remains committed to providing as much
high-quality affordable housing as it can, a commitment she feels is reflected in this housing preservation
project.
“The feedback I get from the community is that they’re proud of the units we produce and how we maintain
them,” she said. “That’s very important to us.”
The Walla Walla Housing Preservation Project will provide upgrades to affordable housing assets in the community. Photos provided by the
Walla Walla Housing Authority and the Washington State Housing Finance Commission.
Everett: DevCo Four Corners
The former site of a defunct Kmart in Everett will soon be home to a new affordable housing development with
430 apartments and amenities like a recreation center and swimming pool.
In 2020, DevCo — the developer building the Four Corners Apartments — received a $71.5 million allocation of
private activity bonds from the Washington State Housing Finance Commission. An additional $17.9 million in
recycled volume cap and 4% tax credits provided by the Commission will also be used to the $154 million
project.
Standing on an over nine-acre lot, Four Corners will offer 150 one-bedroom, 115 two-bedroom, 80 three-
bedroom, 70 four-bedroom, and 15 five-bedroom apartments across five buildings. The development will
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 26
feature a mix of surface and underground parking, in addition to ground floor bike storage in each building and
two outdoor bike shelters.
Located at the major crossroads of Evergreen Way and the Boeing Freeway, the site was an ideal location for
an affordable housing project, said DevCo President of Development David Ratliff.
“It was clear that there was a ton of need in this particular area,” he said. “This represented a better location for
anyone who already lived in the neighborhood because of its proximity to transit on Highway 99, to Evergreen
Middle School, and to Cascade High School. It’s all walking distance right there.”
After over two years spent working out contract terms and price, DevCo acquired the property for around $18
million in 2020, seven years after Kmart shut its doors.
The property could also see the construction of additional apartments in the future, if Sound Transit builds a
light rail station nearby. Ratliff emphasized, however, that DevCo has no imminent plans for an expansion. An
existing dialysis facility that would be replaced by additional apartments has a long-term lease on its building.
Four Corners will feature five-over-one construction — five wood-framed floors over one concrete floor — which
is a style often used when the relative costs of concrete and land are such that it is more cost-effective to
expand a development up, opposed to out. DevCo has only been using this style of construction on affordable
projects for about three years, said Ratliff. The change was made possible by an increase in general financial
feasibility for higher density projects.
According to Ratliff, DevCo is expecting the first residents to move into Four Corners in the summer of 2023,
and all units will be available by the end of that year. Residents of the development will average no more than
60% of area median income.
More housing in this rental range is an important need in the community. The City of Everett’s draft 2020
Analysis of Impediments to Fair Housing estimated that the city will need over 3,500 new units available for
households making 51-80% of area median income by 2035.
With its 430 units, Four Corners will make a dent in that need, although Ratliff underscored that demand for
housing in the area continues to outstrip supply and developers have struggled to match the pace of that
demand with new construction.
Given the development’s proximity to Evergreen Middle School and Cascade High School, as well as the high
number of larger units, Ratliff hopes that Four Corners will be particularly impactful for families and people
who provide important local services.
“At the 60% income band we’re housing city employees, firefighters, nurses, and their families,” he said. “It’s a
lot of essential service providers in the community that need housing.”
The DevCo Four Corners project will result in 430 new affordable housing units and new community facilities. Photos provided by DevCo, the
Washington State Housing Finance Authority, Everett Herald and James Vogel.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 27
Summary of 2020-2021 public benefits
Tax-exempt private activity bond issuances must be used for projects with measurable public benefits. State
law and WAC provide guidance for evaluating the public benefit of projects applying for cap and for prioritizing
projects in case demand for cap exceeds the cap available.
Affordable housing units created or rehabilitated
One of the primary ways bond cap has been used historically is for the creation or rehabilitation of affordable
multifamily housing.
Bond cap authority used for affordable multifamily housing development typically leverages at least as much
in other project financing as the amount of bond cap allocated. In particular, a development needs a bond cap
issuance to qualify for federal 4% low-income housing tax credits (LIHTCs). To qualify for these tax credits, at
least 50% of the project’s financing must come from the tax-exempt bond cap issuance.
During 2020 and 2021, financing packages using tax-exempt private activity bonds created or rehabilitated
9,530 units of affordable multifamily rental housing.
This amount represents an 8.4% decrease from the 10,409 units developed during the previous two-year
period.
Table 1: Affordable Multifamily Rental Housing Units Created or Rehabilitated, 2020-2021
A. WSHFC/Local B. Housing units C. Bond Cap used D. Average. Bond Cap/Unit
Housing Authority =C÷B
(LHA)
WSHFC 7,407 $1,103,223,917 $148,943
Local Housing Authorities
2,123 $433,117,028 $204,012
Totals 9,530 $1,536,340,945 $161,211
Homeownership assistance benefits
As part of its Single-Family Program, WSHFC uses bond cap allocations to provide down payment assistance
and tax credits for qualifying homebuyers.
WSHFC issued a total of $99.6 million in down payment assistance and tax credits for qualifying homebuyers
in 2020 and 2021. WSHFC’s first-time homebuyer program, Housekey, served 374 households in 2020 and 361
in 2021. All Single-Family Program bonds issued during these years came from 2018 carryforward.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 28
WSHFC traditionally directs some of its bond cap to mortgage credit certificates (MCCs), particularly during
recession years. The placement of carryforward into the MCC program during recession years prevented any
carryforward from expiring before it was used. This practice has ended as low-income multifamily projects and
Housekey assistance have rebounded. This biennium did not see any issuances of MCCs.
Housing related job creation
Affordable multifamily rental housing development creates jobs in the construction, property management,
and social services industries, in addition to other public benefits.
The U.S. Bureau of Economic Analysis and the National Association of Home Builders (NAHB) published data
on the estimated job benefits of housing construction due to increased economic activity in a local area,
including both new construction and rehabilitation of existing buildings.
NAHB data show that the estimated one-year impacts (that is, during the first year after construction begins)
of building 100 new rental apartments in a typical local area include:
$11.7 million in local income
$2.2 million in taxes and other revenue for local governments
161 temporary construction jobs15
The Bond Cap Allocation Program calculates estimates of job creation for the first year after construction
begins by multiplying NAHB’s 161-jobs-per-100-units estimate by the number of units.
In addition to one-year impacts, construction of every 100 multifamily rental housing units provides recurring
community impacts, including:
$2.6 million in local income
$503,000 in taxes and other revenue for local governments annually
44 permanent local jobs16
The program calculates the recurring job creation impacts of construction of new affordable housing by
multiplying NAHB’s 44-jobs-per-100-units estimate by the number of units.
Table 2: Estimated job creation impacts of construction of new multifamily housing, 2020-2021
Estimated temporary
New construction jobs Estimated permanent jobs
housing 161 jobs x 100 new housing 44 jobs x 100 new housing
WSHFC/LHA17 units units units
WSHFC 7,407 11,925 3,259
LHA 2,123 3,418 934
15 National Association of Home Builders (NAHB); The Economic Impact of Home Building in a Typical Local Area – Income, Jobs, and
Taxes Generated; April 2015; https://www.nahb.org/-/media/NAHB/news-and-economics/docs/economics/economic-
impact/economic-impact-local-area-2015.pdf, page 2
16 NAHB, page 3
17 40 WSHFC: Washington State Housing Finance Commission; LHA: Local Housing Authorities
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 29
Estimated temporary
New construction jobs Estimated permanent jobs
housing 161 jobs x 100 new housing 44 jobs x 100 new housing
WSHFC/LHA17 units units units
Totals 9,530 15,343 4,193
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 30
In addition to jobs created by construction of new multifamily housing, year-one construction jobs are also
created by rehabilitating existing housing units. According to NAHB, the local community impacts of each $1
million spent on residential remodeling (rehabilitation) include:
$841,000 in local income
$71,000 in taxes and other revenue for local governments
11.5 temporary construction jobs18
Under federal law, the proceeds of the bond cap-authorized bond must finance at least 50% of project costs for
a housing project to qualify for tax-exempt status and 4% low-income housing tax credits. Because bond
proceeds are usually the most expensive portion of the financing for an affordable housing project, it is
unusual for the proceeds of the bond cap-authorized bond to finance much more than 50% of total project
costs. Therefore, to estimate job impacts, the total project costs are assumed to be twice the amount of the
bond cap allocation.
Table 3: Estimated jobs created by rehabilitation of affordable multifamily housing, 2020-2021
WSHFC/ Units Bond Cap Estimated total Estimated year-one
LHA rehabilitated used project costs temporary
Bond Cap used x 2 construction jobs
created (11.5 per $1
million)
WSHFC
7,407 $1,103,223,917 $2,206,447,834 25,374
LHA
2,123 $433,117,028 $866,234,057 9,962
Totals
9,530 $1,536,340,945 $3,072,681,891 35,336
Job creation impacts of Small Issue category and Exempt Facility
category projects
During 2020 and 2021, Exempt Facility category projects created 214 new permanent jobs and retained
another 409 jobs, in addition to creating many temporary construction jobs. In addition, a Beginning
Farmer/Rancher bond issuance in 2021 created one additional new agricultural job. These numbers represent
actual jobs created or retained in specific Washington businesses, as indicated on the projects’ applications
for bond cap authority. These figures do not account for indirect jobs creation or retention.
Following a very large issuance in the Exempt Facility category in 2017, activity in this category dropped but
still exceeded the 13-year average. Issuances were $62 million in 2020 and $75 million in 2021, continuing the
trend of robust bond cap activity in this category since 2019.
For a full list of annual Small Issue category and Exempt Facility category issuances, refer to Appendix C.
18 NAHB, page 3
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 31
2022 initial allocations
For 2021, the IRS increased the per capita multiplier to $110, which remains the multiplier for 2022. According
to official U.S. Census Bureau population estimates, Washington’s population grew to 7,738,692, increasing the
total cap available to the state to $851.2 million for 2022.
In 2017, the Legislature reduced the Student Loan category initial allocation to 5% and increased the Housing
category initial allocation to 42%. The housing category allocation is further divided – 80% (33.6% of the total
cap) to WSHFC and 20% (8.4% of the total cap) to local housing authorities.19
Table 4: Bond Cap initial allocations for 2022
State population of 7,738,692 x $110 per capita = $851,256,120 total bond cap
Initial allocation percent Amount of initial
Category
(per RCW 39.86.120) allocations
Exempt Facility 20% $170,251,224
Housing – WSHFC 34% $134,106,364
Housing – Local Housing Authorities 8% $71,505,514
Small Issue 25% $212,814,030
Student Loans 5% $42,562,806
Remainder 8% $220,016,182
Total 100% $851,256,120
For a full list of annual initial volume cap amounts, refer to Appendix D.
19 RCW 39.86.120 allows Commerce to reduce the initial allocation of a category by an amount equal to the amount of carryforward
that category received from the previous year. When a category’s initial allocation is reduced because of a carryforward allocation, the
initial allocation is moved into the remainder category. Although WSHFC has received a large amount of carryforward every year for
several years, Commerce has not used this provision since 2006 due to the high demand for housing cap and the overall low amount of
activity in the other bond cap categories. If demand for remainder cap early in the calendar year were to increase beyond the supply,
Commerce could potentially meet the need by moving some or all of WSHFC’s initial allocation into the remainder category.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 32
Bond Cap trends
Throughout the program’s history, the Housing category has traditionally used the largest share of the state’s
total bond cap authority. From the program’s start in 1987, the Housing category has used an average of 77.8%
of the state’s total cap. Since 2012, that amount has increased to an average of 92.9%, either in authorization
certificates through the course of a year or allocated as carryforward designated for Housing category
purposes at the end of a calendar year. The mixture of housing authority, nonprofit, and qualified for-profit
housing development results in a consistently high level of demand for allocations of cap. During this
biennium, the Housing category utilized 87.1% of the total cap, a slight decrease compared to the previous
eight years. However, in terms of dollar amount, this biennium was similar to total issuances in recent years.
Figure 2 depicts issuances by category in dollar amounts.
Figure 2: Category Distribution, 1987-2021
$900
$800
$700
$600
Millions
$500
$400
$300
$200
$100
$0 1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Housing Exempt Facility Small Issue PUD Student Loans
Limitations on project size, interest rates, and relative competitiveness with commercial loan rates affect the
Small Issue category, which nonetheless has occasionally experienced significant amounts of allocation
activity. In addition, this category is vulnerable to downturns in the economy, such as the Great Recession. The
biennium saw one Small Issue category project in 2021, a Beginning Farmer/Rancher issuance totaling
$443,500. This single project represented only a fraction of a percent of the total, well below the historical
average of 4.7%.
After several years of low or no issuances, the Exempt Facility category experienced a resurgence starting in
2017 when the Washington Economic Development Finance Authority (WEDFA) issued three Exempt Facility
category bonds totaling $178 million. The trend of significant issuances in the Exempt Facility category
continued, with $62 million issued in 2020 and $74.6 million issued in 2021, for a total of $136.7 million in
bond cap authority used during the biennium. This represents 12.7% of the total available cap, above the
historical average of 10.8% for this category.
For details on the annual issuances by category, refer to Appendix E.
During the 2020-2021 biennium, the Housing category accounted for just over 92% of total issuances, an
amount higher than the average proportion of bond cap allocated to that category over the program’s history
(see Figure 3). It is similar to the ratio allocated over the last 10 years (see Figure 4), but slightly higher than
the percentage of total issuances of the last five years (see Figure 5).
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 33
Exempt Facility category issuances composed 7.7% of issuances during the past two years. This amount is
similar to the 10-year average for that category, but less than the most recent five-year period.
Lastly, as in recent years, there were no issuances in other categories.
Figure 3: Bond Cap category distribution, 1987-2021
Student Loans, 3.1%
PUD, 3.5%
Small Issue, 4.7%
Exempt Facility, 10.8%
Housing, 77.8%
Figure 4: Bond Cap category distribution, past 10 years
Exempt Facility, 6.43% Small Issue, 0.65%
Housing, 92.91%
Figure 5: Bond Cap category distribution, past five years
Small Issue, 0.57%
Exempt Facility, 10.62%
Housing, 88.82%
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 34
Trends in total annual bond cap
Each year, the bond cap is derived using a multiplier supplied by the Internal Revenue Service in November and
an annual population estimate provided by the U.S. Census Bureau in December.
Starting in 2001, the IRS began adjusting the multiplier based on cost-of-living increases. The rate has been
adjusted about every two to three years since. Over that time, the multiplier has increased 76%, from $62.50
per resident in 2001 to $110 per resident at the end of this biennium. This increase exceeds the 58.7% increase
in inflation over this period provided by the Bureau of Labor Statistics Consumer Price Index (CPI) inflation
calculator. Meanwhile, population has increased by 30.5% over the same period. This has resulted in a 129.7%
increase in volume cap over a 20-year period (or about 6.5% annually).
In 2021, the multiplier increased from $105 per capita to $110 per capita. This resulted in a sizable increase of
5.8% in total cap between 2020 and 2021.
The population of the state continues to grow, however in 2021 the rate of growth slowed from just over 1%
annually to approximately 0.6%. As a result, the total cap increased at the same rate (there was no change in
the multiplier in 2022).
Between 2019 and 2021, the total amount of volume cap increased by 7%, about half the average rate
experienced over the past two decades. Most of this increase was due to adjustments in the multiplier.
Trends in overall bond cap use
The use of the cap among the categories – as well as the percentage of the cap used annually – has varied
over the years. For example, in the program’s first year, only 5% of the cap was allocated to the Housing
category under state law provisions for initial set-asides, compared with today’s initial allocation of 42%. In
2000, the Legislature adjusted the category divisions closer to the current configuration. Additional updates
occurred in 2007, after the completion of the public utility district (PUD) special allocation for hydroelectric
facilities, and in 2017, when the Legislature transferred 10% of the total cap from the Student Loans category
to the Housing category
Coming out of the Great Recession, the state had low annual utilization of volume cap with an all-time low in
2013. Multiple years of large carryforward resulted in large initial amounts of cap available at the start of each
year. In 2014, there was $2.4 billion in cap available, an all-time high. The next few years saw a surge in
issuances due to the use of carryforward for Mortgage Credit Certificates (MCCs) and Housing category
projects by a mix of housing authorities, housing nonprofits and for-profit housing developers. In 2017,
Washington state used an all-time high total volume of $1.3 billion in bond cap authority.
Total current-year use dropped in 2018 to $339.9 million while total issuances were $664.6 million, which was
less than the total cap available for 2018. As a result, carryforward increased to $437.7 million. In 2019, total
issuances surged to $951.7 million and far exceeded the total cap available. As a result, carryforward was
reduced to $278.9 million at the beginning of 2020.
Total current-year use increased in 2020 to $699.7 million with total issuances of $900.8 million, exceeding the
total available cap of $799.6 million. Accordingly, carryforward for 2021 decreased to $177.7 million. In 2021,
the program exceeded the available annual cap of $846.3 million with total issuances of $872 million.
Carryforward going into 2022 further decreased to $151.9 million.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 35
Figure 6: Total capacity, 2007-2021
$3,000
$2,500
$2,000
Millions
$1,500
$1,000
$500
$0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Figure 7: Percent of total capacity used, 2007-2021
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Figure 8: Total volume cap issued, 2007-2021
$1,400
$1,200
$1,000
Millions
$800
$600
$400
$200
$0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 36
Trends in category distribution
The Housing category has consistently been the most-used category for allocations of bond cap. Only in 1990
and 1992 did the Housing category trail behind other categories. In addition, the percentage of total cap
allocated to housing has generally trended upward over the years. Use of the state’s total cap allocation for the
Housing category has averaged:
77.8% since the program began in 1987
92.9% over the past 10 years
However, over the past several years, the Housing category percentage has somewhat decreased, due
primarily to the recovery in the Exempt Facility category. In 2018, the percentage for the Housing category rose
to 97.7%, but fell in 2019 to 91.2%. 2020 saw a modest increase to 93.1% in Housing category allocation as a
proportion of total annual cap. In 2021, Exempt Facility category projects took a higher share of total bond cap
allocation, with Housing category allocations accounting for 91.4% of bond cap activity.
Figure 9: Housing category percentage of total annual cap, 2007-2021
100%
95%
90%
85%
80%
75%
70%
65%
60%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
The Housing category aside, the Exempt Facility category (and the PUD category before its expiration) have
come the closest to using their initial allocations. Exempt Facility category projects have used 54% of initial
allocations over the program’s history. During this biennium, the Exempt Facility category accounted for 12.7%
of bond cap utilization, a significantly lower percentage than the historical average.
Only in 1990 and 1996 did the Small Issue category exceed its 25% initial allocation. Overall, the Small Issue
category has used only 5.2% of the total cap. An increase in the capital expenditures allowance for Small Issue
category projects from $10 million to $20 million occurred over six years beginning in 2007. That increase
made more projects eligible for allocations and caused a surge in Small Issue category bonds in 2007 before
the recession reduced demand.
Since 2004, federal changes to the Student Loans category have prevented an issuance of Student Loans
category bonds in the state.
Throughout the program’s history, Washington state has almost always used its entire cap allocation, whether
issued during the year or as carryforward within three years of allocation. Only very small amounts of cap have
been lost. Once the state began allocating all carryforward on a program basis, primarily to WSHFC, only a
minimal amount of cap has been lost through expiration.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 37
Trends in carryforward amounts
The percentage of the annual bond cap used varies depending on market factors, such as interest rates and
economic growth, as well as changes in federal policy. In slow economic times, less cap is used and more is
carried forward into future years.
For several years after 2008, economic factors, including low interest rates on conventional financing, caused
more cap to be carried forward than used during each allocation year. In 2014, only $6.6 million of that year’s
allocation was issued as bonds during the year, and in 2015, only $8.2 million was used. A turnaround began in
2016. In 2018, $339.9 million in that year's cap was used, and in 2019 that amount increased to $611.7 million.
This biennium, the Bond Cap Allocation Program issued nearly $700 million in current-year cap per year
($699.7 million in 2020 and $694.4 million in 2021).
In 2019, there was only $12,329 of unused/expired cap. In 2020, there was $3,771 of unused/expired cap.
Figure 10: Current-year allocations issued during the year and carried forward, 2012-2021
Current-year Issuance Carryforward
$900
$800
$700
$600
Millions
$500
$400
$300
$200
$100
$0
2012 2013 2014 2015 2016 2017 2018 2019* 2020* 2021
*2019 includes $12,329 of unused/expired cap
*2020 includes $3,771 of unused/expired cap
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 38
Further information
The Bond Cap Allocation Program webpage is available online.
The webpage includes links to the Revised Code of Washington (RCW) and Washington Administrative Code
(WAC) sections that guide governance of the program. Links to previous biennial reports are also available,
which contain supplemental background information.
The program webpage provides answers to Frequently Asked Questions (FAQs), updates on annual initial
allocations amounts, upcoming Bond Cap Discussion Group information, application forms, and contact
information for the program manager. It also includes historical records on program administration and
statistics.
Finally, multiple appendices are included in this report to provide additional detail and figures.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 39
Appendix A: 2020 Bond Cap issuances
Bond Cap Allocation
Date Issuer Project Amount Source
3/12/2020 Commission The Confluence $20,577,000 2019
Carryforward
3/31/2020 Commission La Madera Apartments $6,630,000 2019
Carryforward
4/14/2020 Renton Housing Authority Sunset Oaks $14,500,000 2020 Cap
4/28/2020 Commission Holly Ridge Apartments $19,450,000 2019
Carryforward
5/8/2020 Commission Cedar Crossing $48,500,000 2019
Carryforward
5/21/2020 Commission Polaris at SeaTac $61,000,000 2019
Carryforward
5/28/2020 WSHFC Single-Family Bond $21,624,978 2020 Cap and
2018 CF
5/29/2020 Commission Othello Park Apartments $17,943,092 2019
Carryforward
5/29/2020 Commission Othello Park Apartments $56,908 2020 Cap
6/5/2020 Commission The Orchard $5,400,000 2019
Carryforward
6/10/2020 Vancouver Housing Authority Anthem Columbia $36,996,144 2020 Cap
Portfolio
6/18/2020 Port of Sunnyside Exempt Facility - Sewage $14,058,000 2020 Cap
Project
6/30/2020 Commission Station by Vintage $35,940,000 2020 Cap
6/30/2020 WEDFA Exempt Facility - Norpac $47,970,000 2020 Cap
7/16/2020 Seattle Housing Authority Hinoki Apartments $42,755,901 2020 Cap
7/22/2020 Commission Pointe by Vintage $31,770,000 2020 Cap
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 40
Bond Cap Allocation
Date Issuer Project Amount Source
7/29/2020 King County Housing Abbell Portfolio $48,999,697 2020 Cap
Authority
7/29/2020 Commission Fort Vancouver Terrace $20,974,000 2020 Cap
7/29/2020 King County Housing Woodland North $21,999,462 2020 Cap
Authority
8/6/2020 Commission Quinn by Vintage $46,810,000 2020 Cap
8/28/2020 Commission South Wilbur Manor $5,370,860 2020 Cap
Apartments
9/29/2020 Commission Madison/Boylston - 4% $29,643,810 2020 Cap
9/29/2020 Commission Madison/Boylston - 4% $23,735,190 2020 Cap
11/3/2020 Commission Northaven Three $14,650,000 2020 Cap
11/24/2020 Vancouver Housing Authority Miles Terrace $7,800,000 2020 Cap
12/3/2020 Commission Auburn Court Apartments $1,592,998 2020 Cap
12/3/2020 Commission Auburn Court Apartments $33,532,002 2020 Cap
12/4/2020 Commission Meridian Court $27,175,000 2020 Cap
Apartments
12/8/2020 Commission Polaris at Lake City $43,000,000 2020 Cap
12/9/2020 Commission Four Corners $71,500,000 2020 Cap
12/16/2020 Commission Polaris at Together Center $38,100,000 2020 Cap
12/17/2020 Commission The Maddux $40,750,000 2020 Cap
Total bond cap used $900,805,042
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 41
Bond Cap Allocation
Date Issuer Project Amount Source
Carryforward Allocated
12/31/2020 Commission Housing - Multifamily $99,880,022 2020 CF
Program
12/31/2020 Commission Housing – Single-Family $77,808,000 2018 CF
Program
Total Carryforward $177,688,022 2018 CF and
2020 CF
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 42
Appendix B: 2021 Bond Cap issuances
Allocation
Date Issuer Project Bond Cap Amount Source
4/9/2021 Commission Uncle Bob's Place $24,492,000 2020
Carryforward
4/27/2021 Vancouver Housing Plum Meadows $22,500,000 2020
Authority Carryforward
4/29/2021 Housing Authority of the Baker Heights Legacy $22,000,000 2021 Cap
City of Everett Apartments
4/29/2021 Commission Mirabeau Place LLC $35,000,000 2021 Cap
5/17/2021 Community Roots Yesler Family Housing $41,500,000 2021 Cap
5/18/2021 WEDFA Exempt Facility - Columbia Pulp $23,864,269 2021 Cap
5/18/2021 WEDFA Exempt Facility - Pacific $0 2021 Cap
Northwest Renewable Energy
5/26/2021 Peninsula Housing Public Plaza LLLP $21,000,000 2020
Authority Carryforward
5/27/2021 Commission Garten Haus Apartments $7,000,000 2021 Cap
5/27/2021 WSHFC Single-Family Bond $30,000,000 2021 Cap and
2018 CF
5/28/2021 Commission Ovation at Meeker Apartments $32,000,000 2021 Cap
WSHFC Small Issue - Beginning $433,500 2021 Cap
6/8/2021
Farmer/Rancher - Colton D.
Miller
7/13/2021 WEDFA Exempt Facility - Mura Cascade $50,775,000 2021 Cap
7/27/2021 Seattle Housing Lam Bow Apartments $21,066,128 2021 Cap
Authority
7/28/2021 Commission 2021 Watermark - $2,271,600 2021 Cap
Supplemental Loan
7/28/2021 Commission Admiralty Apartments $8,500,000 2021 Cap
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 43
Allocation
Date Issuer Project Bond Cap Amount Source
7/28/2021 Commission Rose Street II $42,520,000 2021 Cap
8/10/2021 Commission Polaris at Eastgate 4% $31,888,022 2020
Carryforward
8/10/2021 Commission Polaris at Eastgate 4% $36,111,978 2021 Cap
8/26/2021 Walla Walla Housing WWHA Housing Preservation $7,000,000 2021 Cap
Authority Project
8/31/2021 Commission Ethiopian Village $15,450,000 2021 Cap
8/31/2021 Commission Solera Apartments $61,500,000 2021 Cap
10/7/2021 Commission Columbia Gardens $20,750,000 2021 Cap
WEDFA Exempt Facility - Pacific $0 2021 Cap
10/7/2021
Northwest Renewable Energy
(Supplemental)
10/25/2021 Community Roots Pride Place Senior Housing $23,400,000 2021 Cap
10/29/2021 Housing Authority of the Samish Commons Family $13,700,000 2021 Cap
City of Bellingham Housing
11/23/2021 Commission Nesbit Family Housing $19,225,000 2021 Cap
11/30/2021 Seattle Housing Sawara Apartments $37,899,696 2021 Cap
Authority
11/30/2021 WSHFC Single-Family Bond $47,808,000 2021 Cap and
2018 CF
12/9/2021 Vancouver Housing Fourth Plain Commons $20,000,000 2021 Cap
Authority
12/15/2021 Commission 192 Shoreline $47,414,457 2021 Cap
12/15/2021 Commission Linden $37,500,000 2021 Cap
12/22/2021 Commission Midvale Village $12,000,000 2021 Cap
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 44
Allocation
Date Issuer Project Bond Cap Amount Source
12/23/2021 Community Roots Africatown Plaza $30,000,000 2021 Cap
12/23/2021 Commission Elizabeth Thomas Homes $25,500,000 2021 Cap
Total bond cap used $872,069,650
Carryforward Allocated
12/31/2021 Commission Housing - Multifamily Program $151,915,692 2021 CF
$151,915,692
Total Carryforward
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 45
Appendix C: Small Issue category and Exempt Facility
category issuances 2007-2021
Small Issue
Farmer/Rancher Manufacturing Exempt Facility
Year Number Par Value Number Par Value Number Par Value
2007 0 $0 10 $59,856,000 5 $103,200,000
2008 6 $1,168,800 5 $16,240,000 3 $45,000,000
2009 7 $1,543,603 1 $1,928,000 2 $54,685,000
2010 7 $1,691,000 1 $5,200,000 1 $20,980,000
2011 2 $459,500 0 $0 0 $0
2012 1 $150,000 0 $0 0 $0
2013 0 $0 0 $0 1 $26,500,000
2014 1 $200,000 1 $6,400,000 0 $0
2015 1 $215,000 1 $8,200,000 0 $0
2016 2 $750,000 1 $10,000,000 * *
2017 0 $0 0 $0 3* $146,716,912*
2018 3 $1,279,255 0 $0 ** $14,000,000**
2019 3 $852,849 2 $18,448,457 2** $77,185,000**
2020 0 $0 0 $0 2 $ 62,028,000.00
$
2021 1 $433,500 0 $0 3
74,639,268.75**
Totals 34 $8,743,507 22 $126,272,457 17
$387,032,268.75
*A carryforward allocation of $28,724,180 was awarded in 2016 to WEDFA for the Columbia Pulp project. The three exempt facilities
issuances in 2017 include that carryforward amount along with current-year 2017 cap for Columbia Pulp and two additional projects.
** A single allocation of $14,000,000 in 2018 and two allocations of $43,060,000 and $1,125,000 in 2019 to the Columbia Pulp project
are included in the annual summary of par value but are not listed in the project count as that project is enumerated as one project in
2017.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 46
Appendix D: Annual bond cap 1987-2022
Total state private
Year Washington state activity volume/bond
population Per capita multiplier cap20
1987 4,444,333 $75 $333,325,000
1988 4,538,000 $50 $226,900,000
1989 4,619,000 $50 $230,950,000
1990 4,660,700 $50 $233,035,000
1991 4,761,000 $50 $238,050,000
1992 5,018,000 $50 $250,900,000
1993 5,136,000 $50 $256,800,000
1994 5,255,000 $50 $262,750,000
1995 5,343,000 $50 $267,150,000
1996 5,343,000 $50 $267,150,000
1997 5,532,939 $50 $276,646,950
1998 5,610,362 $50 $280,518,100
1999 5,689,263 $50 $284,463,150
2000 5,756,361 $50 $287,818,050
2001 5,894,121 $62.50 $368,382,563
2002 5,987,973 $75 $449,097,975
2003 6,068,996 $75 $455,174,700
2004 6,138,183 $75 $460,363,692
2005 6,213,682 $75 $466,026,165
20 The state’s total allocations do not equal the total amount of bond cap used. Abandoned or expired cap is rare in Washington, but
small amounts have occasionally been lost, at times due to changes in federal law.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 47
Total state private
Year Washington state activity volume/bond
population Per capita multiplier cap20
2006 6,294,460 $80 $503,020,720
2007 6,395,798 $85 $543,642,830
2008 6,468,424 $85 $549,816,040
2008 HERA21 – – $202,541,072
2009 6,549,224 $90 $589,430,160
2010 6,664,195 $90 $599,777,550
2011 6,724,540 $90 $638,831,300
2012 6,830,038 $95 $648,853,610
2013 6,897,012 $95 $655,216,140
2014 6,971,406 $100 $697,140,600
2015 7,061,530 $100 $706,153,000
2016 7,170,351 $100 $717,035,100
2017 7,288,000 $100 $728,800,000
2018 7,405,743 $105 $777,603,015
2019 7,535,591 $105 $791,237,055
2020 7,614,893 $105 $799,563,765
2021 7,693,612 $110 $846,297,320
2022 7,738,692 $110 $851,256,120
Total $17,741,716,742
21 In October 2008, an additional $202.5 million was the state’s portion of extra bond cap authority created by the federal Housing and
Economic Recovery Act (HERA) to be used for housing purposes.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 48
Appendix E: Bond cap category allocations 1987-2021
Exempt Student
Year Housing Small Issue Facilities Loans PUD22 Annual Total
1987 $195,755,000 $34,100,000 $0 $50,000,000 $53,470,000 $333,325,000
1988 $172,000,000 $31,900,000 $0 $0 $23,000,000 $226,900,000
1989 $150,200,000 $68,800,000 $0 $0 $12,000,000 $231,000,000
1990 $24,465,000 $60,350,000 $79,875,000 $0 $68,345,000 $233,035,000
1991 $120,045,000 $15,660,000 $77,910,000 $0 $24,435,000 $238,050,000
1992 $47,725,000 $14,350,000 $138,455,000 $0 $50,370,000 $250,900,000
1993 $62,965,000 $1,800,000 $149,355,000 $0 $42,680,000 $256,800,000
1994 $217,325,000 $15,125,000 $30,300,000 $0 $0 $262,750,000
1995 $40,061,000 $44,680,000 $182,409,000 $0 $0 $267,150,000
1996 $140,483,000 $76,852,000 $21,600,000 $0 $26,715,000 $265,650,000
1997 $151,602,000 $58,385,000 $19,000,000 $0 $47,660,000 $276,647,000
1998 $127,682,000 $64,786,000 $0 $60,000,000 $28,050,000 $280,518,000
1999 $173,368,000 $28,100,000 $50,850,000 $0 $32,145,000 $284,463,000
2000 $149,034,000 $39,425,000 $49,359,000 $50,000,000 $0 $287,818,000
2001 $151,252,563 $22,195,000 $60,915,000 $68,400,000 $65,620,000 $368,382,563
2002 $201,347,975 $17,520,000 $77,475,000 $107,850,000 $0 $404,192,975
2003 $251,609,700 $16,820,000 $46,365,000 $123,700,000 $16,680,000 $455,174,700
2004 $387,739,400 $3,191,141 $30,935,000 $68,650,000 $0 $490,515,541
2005 $338,374,187 $14,400,000 $44,850,000 $0 $98,678,853 $496,303,040
2006 $410,445,720 $28,290,000 $64,285,000 $0 $0 $503,020,720
22 The PUD category, which was specific to certain kinds of environmental enhancements of hydroelectric facilities, had a lifetime
limitation in federal law. Washington’s lifetime limitation was $750 million. The state’s hydroelectric facilities used the last of that
lifetime cap in 2007. So, beginning in 2008, that category no longer exists in the state. PUD hydroelectric bonds include $107.1 million
issued in 1986; that issuance is not reflected in the above table because it occurred before the 1987 adoption of the balance of the
bond cap category structure.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 49
Exempt Student
Year Housing Small Issue Facilities Loans PUD22 Annual Total
2007 $372,581,129 $59,719,365 $103,200,000 $0 $8,142,336 $543,642,830
200823 $688,948,312 $18,408,800 $45,000,000 $0 $0 $752,357,112
200924 $518,021,631 $3,472,203 $54,685,000 $0 $0 $576,178,834
201025 $562,886,550 $6,891,000 $20,980,000 $0 $0 $590,757,550
2011 $638,371,800 $459,500 $0 $0 $0 $638,831,300
2012 $648,703,610 $150,000 $0 $0 $0 $648,853,610
2013 $628,716,140 $0 $26,500,000 $0 $0 $655,216,140
2014 $690,540,600 $6,600,000 $0 $0 $0 $697,140,600
2015 $697,753,000 $8,415,000 $0 $0 $0 $706,168,000
2016 $677,560,920 $10,750,000 $28,724,180 $0 $0 $717,035,100
2017 $610,807,083 $0 $117,992,912 $0 $0 $728,799,995
2018 $762,323,790 $1,279,225 $14,000,000 $0 $0 $777,603,015
2019 $695,014,59826 $19,025,128 $77,185,000 $0 $0 $791,224,726
2020 $737,489,994 $0 $62,073,771 $0 $0 $799,563,765
$697,809,263 $2,000,000 $147,623,788 $0 $0 $847,433,051
2021
Total $13,141,007,965 $1,821,902,651 $793,899,362 $597,991,189 $528,600,000 $16,883,401,167
23 Housing totals from 2008 include an additional $202,541,072 in cap authorized by the Housing and Economic Recovery Act of 2008
(HERA).
24 The actual total of 2009 bond cap was $589,430,160. An IRS rule change in December 2010 caused two 2009 local housing authority
draw-down bonds to revert a portion of their 2009 cap that was originally recorded as having been issued in 2009. The portion of those
bonds that had not yet been drawn down by the end of 2009 is reflected in this table as $13,251,326 in abandoned 2009 cap. The same
amount in 2010 carryforward was allocated to those projects to cover the shortfall in cap authority
25 The actual total of 2010 bond cap was $599,777,550. An exempt facilities allocation late in 2010 reverted $9,020,000 after the
carryforward amounts were allocated; the reverted amount was abandoned.
26 $12,329 in 2019 Bond Cap expired due to a clerical error
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 50
Appendix F: Glossary
Acronyms
Below is a list of acronyms common to the Bond Cap Allocation Program.
AMI - Area Median Income
ARRA – American Recovery and Reinvestment Act of 2009
BCAP – Bond Cap Allocation Program
CDFA – Council of Development Finance Agencies
CFR – Code of Federal Regulations
CPI - Consumer Price Index
EDC – Economic Development Corporation
FTE – Full-Time Equivalent (2,080 staff hours per year)
HAI – Housing Affordability Index
HERA – Housing and Economic Recovery Act of 2008
IDB – Industrial Development Bond
IDC – Industrial Development Corporation
IRB or IDRB – Industrial (Development) Revenue Bond
IRC – Internal Revenue Code
IRS – Internal Revenue Service
LHA – Local Housing Authority
LIHTC – Low-Income Housing Tax Credits
LLC – Limited Liability Company
LP – Limited Partnership
MCC –Mortgage Credit Certificate
NABL – National Association of Bond Lenders
NAHB - National Association of Home Builders
OFM – Office of Financial Management (state)
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 51
PAB – Private Activity Bond
PUD – Public Utility District
QECB – Qualified Energy Conservation Bond
RCW – Revised Code of Washington
SLFA - Student Loan Finance Association
WAC – Washington Administrative Code
WEDFA – Washington Economic Development Finance Authority
WHEFA – Washington Higher Education Facilities Authority
WSHFC – Washington State Housing Finance Commission
Definitions
Allocation: For bond cap purposes, the total dollar amount of bond issuing authority available to the state
during a calendar year for any bond type limited or “capped” under federal law; or the amount available in a
specific bond use category that is awarded to a specific project or issuer.
Bond counsel: An attorney specializing in advising clients on bond issuances, especially on the Internal
Revenue Code (IRC) and tax implications of bond issuances. The bond counsel provides a legal opinion on
whether a particular project meets the criteria in federal law for a specific type of bond issuance as established
in the IRC and the Revised Code of Washington (RCW).
Bond use category: There are four categories of activities that could use tax-exempt private activity bond
financing, plus a “Remainder category” category that might be used if the initial allocation in another category
is depleted. The four categories are Housing, Student Loans, Small Issue and Exempt Facility. A fifth category,
Public Utility District, was officially retired after 2007.
Cap: The ceiling, or limit, on the total dollar amount of specific bond types that can be issued in the state
during a calendar year as defined in federal law (also “bond cap”).
Carryforward: Any portion of the cap that is not used during the allocation year but instead is carried forward
into subsequent years. Carryforward amounts expire after three years or as specified for the bond type in
federal law. Once expired, a carryforward cap is no longer available for use.
Exempt Facility: Certain types of transportation, solid-waste management, energy and environmental facilities
as described in the Internal Revenue Code. Some Exempt Facility category projects must be owned by a
governmental entity to qualify for tax-exempt private activity bonds.
Housing: In Washington state, for the purposes of the bond cap allocation, the Housing category includes
mortgage revenue bonds for homebuyer assistance, Mortgage Credit Certificates (a type of tax credit) and
Exempt Facility category bonds for multifamily rental housing.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 52
Initial allocation: The percentage of the state’s total annual tax-exempt private activity bond cap set aside for
each bond use category at the beginning of the calendar year.
Issuer: The state, any agency of the state, any political subdivision or any other public entity authorized to issue
private activity bonds under state law.
Mortgage Credit Certificate (MCC): A federal tax credit for homebuyers who purchase homes in specific
disadvantaged census tracts. These homebuyers can deduct the amount of the MCC from their income taxes.
Original allocation: An allocation granted by formula in federal law to a specific city or county for Recovery
Zone Economic Development Bonds, Recovery Zone Facility Bonds or Qualified Energy Conservation Bonds.
Originally awarded locality: A unit of local government granted an allocation by a formula in federal law for
Recovery Zone Economic Development Bonds, Recovery Zone Facility Bonds or Qualified Energy Conservation
Bonds.
Private activity: Any activity that has significant private involvement. The Internal Revenue Code describes
three tests to determine whether a project has significant private involvement for the purpose of a tax-exempt
bond issuance. A project needs to meet one of two tests to be considered a private activity:
1. It meets both of the private business use tests:
a. Greater than 10% of its proceeds are used for any private business purpose, AND
b. Greater than 10 % of its proceeds are either secured by property used for private business
purposes or are to be repaid from private business sources.
2. OR, it meets the private loan financing test:
a. Greater than 5% (or $5 million, whichever is less) of its proceeds are used for loans to persons
other than governmental entities.57
Reallocation: When an initial allocation goes unused, or an original allocation has been returned to Commerce
and Commerce has distributed it to another issuer.
Small Issue Aggie: Also known as the Beginning Farmer/Rancher Loan Program. Created by the Legislature in
2006, this program provides loans for first-time farmers and ranchers to establish their businesses. Bonds in
this category are issued by the Washington State Housing Finance Commission, and individual farmers or
ranchers apply to it for financing. Aggie bonds are in the Small Issue category. Federal law currently limits
individual loans under the program to $552,500 per family as of Jan. 1, 2020.27
Small Issue category manufacturing: Industrial development projects that have capital expenditures of $20.0
million or less during a six-year period – three years before and three years after the issuance of the tax-
exempt private activity bond. Small Issue category allocations are limited to $10.0 million per project.
Tax-exempt: Bond investors (who purchase the bonds, thus providing project financing) are not required to pay
federal taxes on interest earned on the bonds, which can be attractive to investors and might at times make
27 https://www.stateagfinance.org/types-of-state-ag-loan-programs
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 53
the bonds easier to sell. Tax-exempt bonds qualify for lower interest rates, which means lower costs for the
user of the bond proceeds.
Underwriter: A financial or investment institution, usually a large bank, which guarantees the purchase of a full
issue of bonds.
User: The governmental entity, business, or individual who is the primary beneficiary of the bond proceeds.
BOND CAP ALLOCATION PROGRAM BIENNIAL 2022 REPORT 54
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