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One of
the key funding programs supported by the federal government is in the
form of tax-exempt bond financings based upon a change in the IRS Code
to allow states to issue a defined amount of tax-exempt bond financing
to real estate development projects and programs. These
allocations are usually based on a per-capita formula that says each
state gets "X dollars of tax-exempt bond financing" each
fiscal year per resident in the state.
Most
of this funding is utilized for financing the development of low-income
housing (Section 42 of the IRS Code) for public housing, senior housing
and/or tract housing for low-income/median-income households. This
program has taken a lot of criticism from policy-makers as it seems to
result in an alarming number of slums and/or "blighted
communities" being created. On the
other hand, did you know that tax-exempt bond fundings can be used for
certain private enterprise activities? You didn't? Well
consider the following and see if something could be a fit for your
transaction:
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Transportation
Development Projects. Yep, the federal government acts as a
big-time market maker for transportation projects that connect a
community or major city into the national transportation net.
The focus is on rail projects and intermodal facility hub
projects. The federal government has over $35 billion
available for this sector. If you didn't get your share, then
you should be talking to RMC about it.
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Retail
Projects. It's almost too good to be true, but in many states
(especially states with "GO
Zones") you can access those cheap bond rates for your
project as part of a Private Activity Bond (or "PAB").
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Manufacturing/Distribution
Projects. The venerable Industrial Revenue Bond ("IRB")
is the ticket for providing cost-effective development financing for
manufacturing sector and distribution project development.
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Healthcare
Projects. If you are seeking to develop a healthcare facility,
the project may in fact qualify for financing pursuant to a host of
PAB titles. Hospitals and MOBs may qualify in certain
circumstances.
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Hospitality
Projects. If you are seeking to develop a hotel or motel,
there may be an allocation of PAB financing available to provide you
with the construction financing you need to make the project a
long-term success.
So,
what should be in your plan? Get some answers that will work for your
transaction.
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