East Bay Economic Development Alliance > Focus Area & Issues > ARRA Stimulus 2009-2010 > Stimulus - Recovery Zone Facility Bonds
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Stimulus
Recovery Zone Facility Bonds (RZFBs)
Click here for a Alameda County Facility Bond Application PDF Form Click here for a Alameda County Facility Bond Application Word 2003 Doc Form
The American Recovery and Reinvestment Act of 2009
(ARRA) authorized the issuance of a new type of
tax-exempt private activity bonds called Recovery Zone
Facility Bonds (RZFBs), that allow designated projects to
be financed with lower borrowing costs, promote job
creation and economic recovery in areas affected by
employment decline.
Alameda County has been issued a volume cap allocation
of $12,966,000
for Recovery Zone Facility Bonds and two cities in Alameda County
have Facility Zone Allocation available: Hayward,
$2,750,000; and Oakland,
$7,581,000.
Applications for Alameda County
allocation
should be submitted before June 1, 2010
Bonds sold before 11/30/2010 and capital
expenditures made before 1/1/2011
Recovery Zone Facility Bonds - Tax-Exempt Financing for
capital expenditures for businesses with almost no use
restrictions
Eligible Users: Any trade or business, with the exception of
residential rental, golf courses, country clubs, massage
parlors, hot tub and suntan facilities, racetracks,
facilities primarily used for gambling businesses or any
store, the principal business of which is the sale of
alcoholic beverages for off-premise consumption. Eligible Uses: Any depreciable property
that: 1. The original use of the equipment or facility must occur within the recovery zone; 2. Was acquired after the date of designation of a recovery zone (Alameda County’s was January 10, 2010) and before January 1, 2011;
3.
Substantially all of property must be used by
a qualified business in the active conduct of its
business; and
Because these bonds are sold with a bank Letter of
Credit guarantee (“publicly” sold facility projects or
very large equipment purchases) or smaller equipment
only (“private” placement with the bond purchaser (like
a leasing company), the business has to qualify for
conventional bank financing (that are currently quite
stringent) and projects have to be large enough to be
feasible.
1.
Credit worthiness - The business must be able to meet
the “current” credit requirements of a
a.
Business has been profitable for the last 2-3 years;
b.
Existing cash flow is sufficient to accommodate the
additional debt service; and
c.
Able to provide 25-30% equity on facilities and 10% for
equipment.
2.
Project size - there is a cost effective minimum for
bond sales:
a.
$2 million minimum for variable rate “public” placements
with bank Letters of Credit
b.
$1 million for fixed-rate, shorter-term equipment bonds
that are “privately” sold);
c.
Maximum – Alameda County and
it's city allocation establish the
Tax-exempt Interest Rates and Financing Terms
The bonds are sold as weekly variable rate, long-term
“public placements”, with a bank Letter of Credit (LOC)
guarantee (facilities and equipment) or as fixed rate,
shorter “private placements” bonds directly to bond
purchaser (like a leasing company).
Buildings (land costs paid
for with equity or covered with a taxable bond) with
equipment - 25-35 year term, weekly variable rate bonds
Contact Walter Vennemeyer, Progressive Capital, 415.388-1535 procap@jps.net Keith Sutton, Business Development Director, East Bay EDA 510.272-3885 keith@eastbayeda.org |