“Stimulus” bond funds available for businesses and municipalities - for capital projects in Knox and Waldo Counties.
- $2.8 million for projects in Knox County
- $3.5 million for projects in Waldo County:
- Tax exempt/below market interest rates for businesses
- 45% interest rate subsidies for public/municipal projects
- Recovery Zone (RZ) Bond applications now available at FAME
As a part of the American Recovery and Reinvestment Act of 2009 (the “Stimulus” bill), tax exempt bonds are being made available to States to encourage private businesses and municipalities to undertake major capital development projects that they have been planning. This tax exempt bonding authority provides a significant incentive to participating lenders to provide favorable interest rates for major projects that qualify under the Recovery Zone (RZ) Bond program. To facilitate this process, the Finance Authority of Maine will manage the program much the same as they manage the other bond programs that fall under their jurisdiction. The idea is to provide enough financial incentives through these tax exempt bonds to encourage both private and public sector projects that may have been stalled or delay or dropped because of the economic downturn to proceed as soon as possible. To further encourage this process, the State Legislature passed emergency legislation last week that designates the entire state as a qualified Recovery Zone for this bond program.
Below are some basic facts about the Bond program – please note that the deadlines are coming up fast - so private businesses and municipalities that may be interested should act quickly.
What is the RZ Bond program?
- Bond funds for private sector and public sector projects now available
- For Private businesses -- Recovery Zone(RZ) Facility Bonds
- For Municipalities -- Recovery Zone (RZ) Economic Development Bonds
- Created by the American Recovery and Reinvestment Act of 2009 (the “Stimulus” bill), these bonds provide any business and municipality in the State making capital expenditures with access to tax-exempt bond financing. They are ideally suited to borrowers that can arrange their own financing.
- FAME is the Bond issuer
How much available for Knox and Waldo Counties?
- Private business capital projects. Knox: $ 1,742,000. Waldo: $ 2,116,000
- Municipal projects. Knox County: $ 1,161,000. Waldo: $ 1,411,000
What private business projects are eligible?
Any capital expenditures for an active business (not restricted to manufacturing -- may be Industrial, Commercial, Retail, Office, for- profit or 501c3) Not eligible -- rental property, residential real estate, a golf course, health club, country club, massage parlor, hot tub facility, racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off-premises. No refinancing of existing debt is allowed; however expenditures towards the capital purchases may be reimbursed if incurred after a Recovery Zone designation has been made.
What municipal projects are eligible?
- Capital expenditure for property
- Public Infrastructure
- Public Facilities
- Job training and education programs
This IS NOT Free Money.
- Borrowing must be secured through a participating private lender
- Application fee to FAME - $5,000 (nonrefundable)
- Issuance fee (to FAME) – 2% of amount issued (minimum fee $10,000)
- Legal cost may be somewhat higher than conventional financing (probably 1pt more)
- Security determined by participating private lender.
- May include assets being financed and/or a reserve.
Why should a private business consider this now?
- The bond funds are tax exempt for your lending institution. As such, your lender can offer you a much better interest rate than current rates (possibly 35% less than the taxable going rate)
- The RZ Bond can be used with other state and federal programs (SBA loans, Pine Tree Zone benefits, CDBG, TIFs, other revolving loan programs, etc.)
- May encourage a business with a planned capital project to proceed now – rather than wait
- Provides a new source of taxable bond funds for projects that may have been delayed.
- Lower rates · PLUS – 45% of the total interest is paid to the issuer (the municipality) as a cash subsidy – up front.
Timeframes: Bonds must be issued on or before December 31, 2010. Projects do not have to be finished or even started at that time. · Projects seeking RZ Bonds must be submitted to the County Commissioners by June 1, 2010. County Commissioners will review and approve projects. Completed RZ Bond Applications must be submitted to FAME before Sept 30, 2010.
The issuance of Recovery Zone Facility Bonds requires a multi-step procedure, including publication of required notices, a public hearing and the approval of a bond resolution by the FAME Board of Directors at a public meeting. Borrowers should anticipate that it will take 90 days from receipt of a complete application at FAME to the date of bond issuance and plan accordingly
Application - Click here to download an application.