State loan and investment board loans.

08LSO-0211.L1

FISCAL NOTE

This bill increases the maximum available loan program dollars from the Permanent Wyoming Mineral Trust Fund and other permanent funds to $60 million. The current maximum allocation for these loans is set at $30 million, and the outstanding balance on these loans as of 6/30/07 was approximately $8 million, which left about $22 million available for new loans as of 06/30/07. This bill also includes the University of Wyoming as an entity authorized to receive loans.

As the dollar amount of loans that would be made during FY 2009–11 is unknown, the amount of fiscal impact is indeterminable.  However, we can assume that any loans made during this time frame would be made from the Permanent Wyoming Mineral Trust Fund (PWMTF) and that the minimum interest rate on these loans would be six percent (6%).  The projected yield on the PWMTF is anticipated to be 3.52% for FY 2009, 3.53% for FY 2010 and 3.54% for FY 2011.  We assume these loans would be made at six percent (6%) for forty years (the maximum term allowed).  We cannot, however, predict what the yield on the PWMTF would be over a 40-year period, nor can we predict what the total rate of return on the permanent funds would be over a 40 years. 

Yield is defined as the actual cash or realized return on investment.  The total rate of return on the permanent funds is expected to be just under seven percent (7%) over the long-term (10 plus years).  Total return is defined as growth in the value of a fund including both yield and unrealized gains.

Revenue will also be generated from the prescribed 1% loan origination fees charged, however this revenue is specifically designated to be credited to the loan loss reserve account to repay the permanent fund investments in the event that a loan is deemed uncollectible.

Expenses may be incurred as a result of activities related to the collection of delinquent /uncollectible loans.  Historically the program’s delinquency rate has been less than .5% of the outstanding loan balance.  Legal expenses/filing fees, if incurred, would be paid from the loan loss reserve account and will not impact the Office of State Land & Investment's (OSLI) administrative operations budget. As of this date, this program has not incurred this type of expense. Program administration is absorbed through the Mineral Royalty Grant and Loan Program budget.

Prepared by:   Dean Temte, LSO    Phone: 777-7881

(Information provided by Sharon Garland, Treasurer's Office; 777-7408:

Jeanne Norman, Office of State Lands & Investments; 777-6644)