July 20, 2010
Bond Stimulus Provisions Expiring December 31, 2010!
Two important tax-exempt bond provisions, one applying to units of government and one to private entities, are set to expire December 31, 2010. These provisions, which are part of the American Recovery & Reinvestment Act of 2009, relate to Recovery Zone Facility Bonds and Recovery Zone Economic Development Bonds. Both offer low-cost financing to qualified borrowers.
RECOVERY ZONE ECONOMIC DEVELOPMENT BONDS
Recovery Zone Economic Development Bonds (RZEDBs) are available to governmental units for qualified economic development purposes, which include nearly any capital expenditure. Municipal and county hospitals may issue RZEDBs. RZEDBs are issued at taxable interest rates, but the U.S. Treasury rebates 45% of the interest costs incurred to the borrower. This rebate effectively reduces the borrower's net interest rate below that of traditional tax-exempt bonds. A limited allocation of RZEDBs is available on a county-by-county basis (and in some cases, within large cities) and, if not used, will expire on December 31, 2010. Local governmental officials administer the allocation. If your local city/county has not used up its RZEDB allocation, municipal or county hospitals may wish to request an allocation of RZEDBs to fund current capital expenditures.
RECOVERY ZONE FACILITY BONDS
Unlike RZEDBs, which apply only to governmental units, Recovery Zone Facility Bonds (RZFBs) apply to privately-owned projects. RZFBs are available to finance capital expenditures, at tax-exempt rates, that would otherwise not qualify for tax-exempt financing. Such uses might include medical office buildings, portions of health care facilities leased to or used by private entities, and equipment utilized by independent physicians. Like RZEDBs, the amount of RZFBs is limited and if not used by year's end, the allocation expires. To the extent you have capital expenditures planned that otherwise do not qualify for tax-exempt financing, you may wish to contact your local government officials regarding an allocation of RZFBs.
Action Steps
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Determine whether there has been an allocation of either type of bond in your area.
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Find out how much has been allocated and how much remains available.
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Compile your list of capital expenditures or other qualifying projects for which you need financing.
How Hall Render Can Help
Hall Render is prepared to help you with the following:
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Determine whether your proposed project qualifies.
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Ascertain whether your city/county has any unused allocation available.
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Request an allocation for your project.
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Serve as bond counsel for the issuance.
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Assure compliance with federal and state laws.
These bonds are subject to precise rules and regulations. To determine if you might be able to take advantage of these low-cost financing opportunities before they expire, please contact any of the following members of Hall Render's Public Finance group:
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