Tax Free Bond Financing
What is it?
Tax Free Bonds Financing
The Western Illinois Economic Development Authority (WIEDA) acts as the issuer of the bonds, passing its DOUBLE tax-exempt status on to finance the acquisition of fixed assets including land, buildings, machinery and equipment. Because the interest on the bonds is not subject to state or federal income taxes, investors and lenders require a lower interest rate to achieve an equivalent after-tax return. Therefore, the borrower receives a preferential interest rate, generating substantial savings.
Eligibility
Major Requirements Include:
Manufacturing Bonds
Industrial Revenue Bonds are available for manufacturers of tangible goods At least 75% of the bond proceeds must be used for expenditures directly related to the manufacturing process. No more than 25% may be used for ancillary facilities such as warehouse or office space. The borrower’s capital expenditures cannot be greater than $20 million (except with a lease) in the city where the project is located. This $20 million is the amount spent over a defined six-year period: 3 years before financing and 3 years after.
Housing Bonds
Senior housing and multi-family housing bonds are available to for-profit developers. Developers must agree to set aside a portion of a financed project’s units for tenants at a certain income level.
Capital Improvements
The capital improvements must take place in the territory of WIEDA in the counties of Adams, Brown, Cass, Fulton, Hancock, Henderson, Mason, McDonough, Morgan, Pike, Schuyler, Scott and Warren.
Not-For-Profit Bonds
Tax-Exempt bonds are available for Not-For-Profit 501c(3) companies. Eligible borrowers are any 501c(3), which can include hospital systems, medical centers, behavioral health centers, medical clinics, continuing care centers, and YMCAs.
Fund Usage
Funds may be used to build a new facility, acquire land and buy new machinery and equipment. Funds can be used to acquire an existing facility as long as 15% or more is used to rehab the structure. Funds expended prior to sixty days before receiving initial approval from WIEDA may not be eligible.
Benefits
If Approved:
Lower Interest Rate
A WIEDA Double Tax-Exempt Bond is exempt from state and federal income taxes, making it an attractive investment for the bondholder. The interest rate available on these bonds is far lower than conventional financing, and a lender can expect an interest savings to range from 150 – 300 basis points lower than a conventional loan.
100% Financing
Finance up to 100% of the project cost – contingent upon meeting credit standards of a lender backing the bond.
Smooth Process
WIEDA has been described as a “Nimble Issuer” because of its flexible guidelines and an expedited approval process. We can assemble a team of IRB specialists who have a thorough understanding of all the legal and financial aspects of this type of transaction. We’ll work closely with you every step of the way, answering your questions, helping you avoid pitfalls, and making sure you get the financing that’s right for you.
