Bond Cap Allocation Program

Since its inception in 1987, the Bond Cap Allocation Program has approved more than $15.3 billion in tax-exempt private activity bond issuing authority for a variety of projects in Washington state. The program 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.

Frequently Asked Questions

What Does the Bond Cap Allocation Program Do?

We are a federally-authorized program that regulates what are referred to as “tax-exempt private activity bonds.” That includes reviewing and approving projects within our state to ensure compliance with federal and state laws.

What is a Bond Cap?

It is a ceiling — or cap — on the amount of qualified tax-exempt private activity bonds a state may authorize each year.

What is a Tax-Exempt Private Activity Bond?

Tax-exempt private activity bonds provide lower-cost financing for eligible projects. Tax-exempt means the bond investor does not have to pay federal taxes on interest earned on the bonds. Private activity bonds are a financing option for projects that have a substantial benefit for private business or individuals, but also provide significant benefits to the public. Unless authorized under Bond Cap, private activity bonds do not qualify for tax-exempt status.

Who is Eligible to Apply to the Program?

Projects are eligible if they fit into one of four categories: Small-issue manufacturing, housing (both multifamily
and single family), exempt (capital) facilities, and student loans. Businesses or developers work with public authorities to develop projects and issue the bonds for financing.

What is the Application Process?

A private or government entity submits a request for bond financing to a bond issuing authority. The issuing authority
assesses the financing options. If the project qualifies for tax-exempt private activity bonds, the issuing authority submits an application to the Bond Cap Program. Generally the issuer will only submit the request after all other
financing is in place, the project is at an advanced stage of readiness, and they are confident the bonds will be sold. The Bond Cap Program reviews the application and, if it approves the project, awards a Certificate of Allocation to the issuing authority. The certificate allows the issuing authority to issue the tax-exempt bonds. The bonds must be issued by the deadline stated in the certificate, generally no later than December 15 of the same year. Go 
here for applications and other forms.

What State and Federal Laws Govern Bond Cap?

The federal bond cap laws, first enacted in 1986, specify the total volume of tax-exempt private activity bonds — and
other bonds with volume caps, such as Qualified Energy Conservation Bonds — that may be issued annually in each state. Federal law also describes what types of projects are eligible for each type of bond. 
See the right sidebar for links to statutes and rules. State law divides the state’s total bond cap by percentage among the eligible project types, and provides guidance for estimating the public value of projects and prioritizing allocations. State laws also regulate issuing authorities as well as the issuance of industrial development bonds, many of which use bond cap allocations.

Applying for Bond Cap

Bond Cap Updates

Washington's Allocation Grows by $8.3 Million

The federal government bases each state’s annual Bond Cap allocation on its population. Washington State’s population increased by 79,302 during 2019, according to the U.S. Census. Thus, our tax-exempt private activity bond authority available for the 2020 calendar year has increased by roughly $8.3 million to a total of more than $799 million.

Calculation for Washington's 2020 Allocation

Initial Allocations by Category

Exempt Facilities:20.0% of Allocation$159,912,753
Housing:33.6% of Allocation$268,653,426
Housing (Local Housing Authorities)8.4% of Allocation$67,163,356
Small Issue:25.0% of Allocation$199,890,941
Student Loans:5.0% of Allocation$39,978,188
Remainder and Redevelopment:8.0% of Allocation$63,965,101

The Bond Cap allocation is the total amount of borrowing that qualifying types of private projects are allowed to do each year at less expensive tax-exempt rates under federal law. The lenders (bond purchasers) for these projects are private investors. No governmental funds are involved.

For more information on how the allocation of private activity bond issuing authority works, see the Bond Cap Program’s 2018 Biennial Report (PDF) or contact Program Manager Allan Johnson.

Upcoming Bond Cap Discussion Group

The Bond Cap Allocation Program will be conducting a virtual Discussion Group on December 1, 2020, from 1:30 pm to 3:30 pm via Zoom. This meeting is intended to allow for a discussion amongst Commerce staff, program stakeholders, and other interested parties about recent and upcoming topics of interest including; recent issuances, upcoming allocation requests, carryforward designation, volume cap usage trends, recent reports, stakeholder outreach, national bond cap policy and program administration. If you are interested in attending this virtual meeting, please contact Allan Johnson, Program Manager, via email at allan.johnson@commerce.wa.gov or by phone at (360) 725-5033.

Project Highlight

picture of a hop fieldUsing an allocation from the private activity bond cap program’s small issue category to the Washington Economic Development Finance Authority (WEDFA), the Hops Extract Corporation of America (HECA) has been able to expand its hops extraction facility in Yakima by adding eight new extractors. The extractors take either leaf hops or hops pellets and extract the usable components, which have a longer shelf life than either leaf or pellets. Approximately $8.5 million in private activity bonds were issued in March, 2019 to support the HECA project. In conjunction with $1.9 million in private financing, this project will help retain 50 jobs at HECA’s production plant near downtown Yakima. In addition, three new jobs will be directly created. But just as important as the project’s direct impacts are the indirect supports it provides to a unique component of the state’s economy.

Washington state’s hops industry, primarily located in the Yakima valley, is the nation’s leader in hop production with almost 74% of all domestic production coming from our state. This local hops production is a key component in the state’s craft beer business, which was recently estimated to support 6,300 jobs and to contribute $1.4 billion in impact to the state economy.