Committee hears bill to let Montana Facility Finance Authority issue conduit bonds for broader projects

Senator Roger Lammers, sponsor: Senator Roger Lammers opened the House Business and Labor Committee hearing on Senate Bill 104 on March 17, urging lawmakers to "unlock new economic opportunities and fuel growth across Montana" by broadening access to conduit private activity bonds.

Supporters told the committee the Montana Facility Finance Authority (MFFA) has decades of experience issuing conduit bonds for health care projects and could extend that role to manufacturers, housing developers and other projects that currently must rely on local governments to serve as conduit issuers.

The bill would amend eligible uses in existing statute and expand which nonprofit and private borrowers can access MFFA conduit financing, while preserving the principle that conduit debt is an obligation of the borrower, not the state or MFFA. "Conduit debt is not an obligation of the MFFA, the Montana Department of Commerce, the State of Montana, or local governments," the MFFA's executive director, Adam Gill, told the committee.

Why it matters: nut graf SB 104's supporters say the change addresses a gap that disadvantages rural counties and smaller borrowers. Proponents argued that when local governments lack capacity to act as conduit issuers, projects can be delayed or abandoned, reducing jobs and investment in Montana communities.

Key testimony and examples Adam Gill, executive director of the Montana Facility Finance Authority, described the MFFA as a self-supported enterprise fund attached to the Department of Commerce with a track record of issuing conduit bonds and stated the program has issued more than $4,000,000,000 in conduit bonds. Gill said the bill would not obligate taxpayers: participation would be voluntary for borrowers and lenders.

Turk Stovall, a rancher and agricultural business owner, described a planned expansion of a permitted feedlot near Shepherd that he said would add capacity and capture waste for digesters to produce renewable natural gas and contracted CO2. Stovall said the project depends on access to lower-cost capital and that tax-exempt conduit bonds can reduce interest rates and make such projects "workable." He urged support, saying the bonds would catalyze additional processing and value-added agriculture projects.

Healthcare and nonprofit proponents said SB 104 would let community health centers, tribal health organizations and nonprofits finance construction and renovations. Joel Rosette, CEO of Rocky Boy Health Center, told the committee his tribal clinic is planning expansions and assisted living projects but faces capital constraints in Indian country.

Technical explanations and committee questions Nathan Bilyeu, a public finance attorney who serves as bond counsel to the MFFA and multiple counties, explained that conduit private activity bonds can be tax-exempt under federal law (lowering interest costs) or, even when taxable, give smaller Montana entities access to national capital markets through tradable CUSIP securities. He said those federal tax and securities advantages are the core financing benefits.

Representative Steve Carter asked about fees and state liability. Gill said MFFA charges a sliding scale fee (for example, roughly 15 basis points on a $20 million issuance) to cover operating costs and a direct loan program; he emphasized MFFA is self-supporting and has not required state general fund appropriations. Gill also said in response to a question about defaults, "we've not had a single conduit issue or default in our history."

Supporters noted the bill would also adjust the statutory cap on taxable activity bonds, adding an "elevator" mechanism to raise the cap for inflation and avoid repeated statutory changes. Gill said the cap was originally set in 1984 and raised in 2007 and that indexing would reduce the need to return to the Legislature frequently.

What the bill does and does not do Supporters repeatedly emphasized limits: the bill would not obligate the state or force lenders or borrowers to participate; it would not allow bonding for operating funds or endowments; and market conditions would still determine whether lenders accept particular projects. The committee heard that conduit financing typically makes sense for larger capital projects because of transaction costs.

Remaining concerns and context Committee members asked about minimum project sizes, fee structures, default history and how smaller businesses would benefit. Counsel and MFFA staff responded that tax-exempt financings typically "pencil out" at higher sizes (several million dollars) but can be useful for larger-scale taxable financings and for giving smaller Montana borrowers access to national markets.

Next steps Senator Lammers closed by urging a favorable committee recommendation. The hearing record in this transcript does not include a committee vote; the bill remained in the hearing for further consideration.

Ending Proponents urged the committee to advance SB 104 as a self-funded measure to expand access to capital for health care, housing, manufacturing and other projects across Montana, particularly in rural areas.