DALLAS -- The first issue by the newly created Texas Department of Housing and Community Affairs will be sold in October, but only after a cut of almost a third in the deal's size.
The department, the successor of the Texas Housing Agency, had originally proposed a new-money and refunding issue totalling $143.8 million. But last week, the Texas Bond Review Board cut the deal to $110 million.
Department officials had advocated the larger issue because of uncertainty over whether Congress will continue the mortgage revenue bond program next year.
Tom Pollard, executive director of the review board, said the five-member panel cut the proposed issue because of concerns that a bigger deal would use limited private-activity bond allocation on bonds that might not be needed for another two years.
"The board felt the new size was sufficient to meet the demands of their program," he said.
The agency had planned a $50 million refunding, but that was cut to $45 million and a new-money series was reduced from $93.8 million to $65 million. A private-activity bond allocation is required only for the new-money portion.
Reducing the state issue is expected to free up another $33.8 million of private-activity bond allocation for local housing authorities, where demand for an allocation is still seven times the extra cap.
Officials at the housing agency did not return several telephone calls seeking comment on the decision, but they had advocated a larger issue because of uncertainty over the future of mortgage revenue bonds in Congress.
"We feel like Congress should extend mortgage revenue bonds, but it will not be until May or June," said Scott McGuire, interim assistant director for housing finance. "Congress usually comes in after the fact and makes it retroactive, but that would be too late for us."
Because state law requires that volume cap allocations be made by March 1, a delay by Congress could cost the Texas agency its 1992 allocation.
But Mr. Pollard said the review board felt that with about $133 million in available proceeds from previous bond sales and the planned new-money issue, the agency would be able to continue its program for at least two years.
"They have been using about $100 million a year for their loan programs," he said. "The board's response was that with current proceeds, it would be sufficient."
The three series $110 million mortgage revenue bond issue is to be sold in a negotiated sale the week of Oct. 16 to a team co-managed by Donaldson, Lufkin & Jenrette Securities Corp. and Goldman, Sachs & Co.
In other actions last Thursday, the review board also authorized the Texas Agricultural Finance Authority to sell the remainder of its $25 million authorization for a taxable commercial paper note program.
The agency issued $10 million earlier this year to finance private agricultural enterprises and plans to sell the remaining $15 million of its constitutional authorization as it is needed to back loans.
Since starting the loan program, the finance authority has sold $4.7 million in commercial paper to fund three loans. An additional three loans total $2.98 million have been approved for guarantees.
Also, the review board approved two lease purchase agreements between the Texas Department of Criminal Justice and the city of Lockhart.
The lease-purchase agreements will be backed by bonds issued by the Lockhart Correctional Facilities Financing Corp., a conduit-financing corporation created by the city.
The issuer plans to sell $15.74 million of tax-exempt revenue bonds and $1.91 million of taxable debt to construct a work facility for the state's Pardons and Paroles Division.
Lease payments are subject to annual appropriations. The issue originally came before the review board in June, but approval was delayed until lawmakers finalized a two-year, $59.1 billion budget that included initial lease payments.
The taxable securities will be used because private businesses will use part of the facility for wage-paying jobs for some inmates. The bonds will be underwritten by Stephens Inc. of Little Rock.
