PROGRAM DESCRIPTION

Companies planning major capital investments within the areas of Upper Manhattan and the South Bronx designated as federal Empowerment Zone (EZ) areas may be able to finance these projects with triple tax-exempt bonds issued by NYCIDA. Financing a project with triple tax-exempt bonds enables borrowers to initiate needed capital improvements at the lowest available cost and to better manage the timing of their capital investments. To limit annual debt service, bonds can be repaid over a 20-30 year period.

ELIGIBLE BORROWERS AND PROJECTS

Eligible companies are selected by the Upper Manhattan Empowerment Zone or the Bronx Overall Economic Development Corporation and include developers of commercial, industrial and retail facilities. Bond proceeds can be used to finance acquisition, construction, renovation and equipping of facilities. The principal user of a property financed with EZ bonds must be an enterprise zone business. The business can be a division or branch of a larger corporation.  Key requirements for an enterprise zone business include: Locating the project in the EZ. Having at least 50 percent of the gross income of the business derived from the active conduct of the business within the EZ. Having at least 35 percent of the employees employed at the facility be residents of the EZ. Having less than five percent of the tax basis of the assets of the borrower consist of securities or similar instruments (other than reasonable amounts of working capital held as cash or cash equivalents).

PROGRAM BENEFITS

TRIPLE TAX-EXEMPT FINANCING

Compared with conventional loans, advantages of triple tax-exempt bonds can include reduced interest rates, longer financing terms, lower equity contributions, and, depending on the project, the ability to obtain construction and permanent financing in a single loan. Borrowers obtain lower interest rates due to the fact that purchasers of triple tax-exempt bonds receive exemptions from federal, state and city income taxes on interest payments received. Due to transaction costs associated with bond issuances, NYCIDA assists borrowers to assess the cost-effectiveness of financing their proposed projects with NYCIDA bonds prior to accepting applications. The cost of the project and the organization's debt repayment capacity dictate the amount borrowed. Borrowings under $2 million may not be cost-effective. Borrowers work with investment banks of their choosing to identify bond purchasers and to structure the proposed debt. NYCIDA debt can be structured with variable, fixed or auction interest rates. Maturities typically depend on the useful life of the asset to be financed. The ability to sell EZ bonds will be based entirely upon the credit of the company, project and/or credit enhancement obtained by the company. Bond purchasers typically require the debt to be secured by the company's available collateral and a guarantee of the principals among other forms of security. EZ bonds issued by NYCIDA are not an obligation of the City or the State, or any subdivisions of either, the Upper Manhattan Empowerment Zone or the Bronx Overall Economic Development Corporation. NYCIDA does not require bond issues to be rated by bond credit rating agencies.

OTHER BENEFITS

Requests for other benefits, including waivers of mortgage recording and sales taxes, will be evaluated based on need.

SELECTION CONSIDERATIONS

All NYCIDA benefits are discretionary. Selection considerations include need for financial assistance and the impact of the proposed project on New York City's economy. Applicants must provide financing commitments for their proposed projects. The environmental condition of the project site(s) and the company's liability and other insurance coverages must be satisfactory to the NYCIDA prior to closing.  Special Considerations Financings will be subject to the availability of federally allocated bond issuance caps.

TRANSACTION STRUCTURE

To convey the above-described benefits, approved companies must lease their properties to the NYCIDA, which leases the site back to the company for the term of the financing. This 'lease-back' structure should not prevent companies from obtaining any available federal tax depreciation benefits.

CONTACT INFORMATION

New York City Industrial Development Agency (212) 312-3600 www.nycedc.com/NYCIDA  NYCIDA@nycedc.com Bronx Overall Economic Development Corporation (718) 590-3948 info@boedc.com Upper Manhattan Empowerment Zone (212) 410-0030 EZbonds@umez.org