Financing a project with triple tax-exempt bonds enables borrowers to initiate needed capital improvements at the lowest available costs and to better manage the timing of their capital investments.

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.

To assist borrowers in assessing the cost-effectiveness of financing their proposed projects with tax-exempt bonds, NYCEDC staff works with borrowers during their decision-making process prior to accepting applications.

• 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.
• The cost of the project and the organization’s debt repayment capacity dictate the amount borrowed.
• Borrowers work with financial advisors of their choosing to identify bond purchasers and to structure the proposed debt. Debt can be structured with variable, fixed or auction interest rates. Maturities typically depend on the useful life of the asset to be financed.
• To limit annual debt service, bonds can be repaid over a 20-30 year period.
• 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.
• Recover NYC debt is not an obligation of the City or the State, or any subdivisions of either.
• Recover NYC does not require bond issues to be rated by bond credit rating agencies.

Real Estate Tax Reductions

Land Taxes
Land taxes in an amount of $500 multiplied by each full-time employee or part-time equivalent at time of application, may be abated for 25 years. The full value of land taxes may be abated for project sites located within Empire and Empowerment Zones. A phase-out of the benefits begins in year 21 and continues through year 25 at 20 percent each year. In year 26, land taxes increase to full amounts.

Building Taxes
Building taxes may be stabilized at the pre-improvement assessed value for 25 years. A phase-out of the benefits begins in year 21 and continues through year 25 at 20 percent each year. In year 26, building taxes increase to full amounts.

Sales Tax Exemption

The sales tax on materials used to construct, renovate or equip facilities may be waived. The current rate is 8.375 percent.

Mortgage Recording Tax Waiver

Mortgage recording tax relating to the project financing, currently equal to 2.05 percent of the mortgage amount for mortgages of $500,000 or less, and 2.80 percent for mortgages greater than $500,000, may be waived.

At least 95 percent of the bond proceeds must be spent on qualifying property, or “Recovery Zone Property.” Recovery Zone Property is defined as property that is depreciable and meets the following additional criteria:  

1. the property must have been constructed, reconstructed, renovated, or purchased by the borrower after the date the applicable recovery zone was designated;
2. the original use of the property in the recovery zone must have commenced with the borrower; and
3. substantially all of the use of the property must be in the zone and in connection with the borrower's active conduct of a qualified business.

A "qualified business" is any trade or business except the rental to others of residential rental property and certain other uses including golf courses, country clubs, gambling facilities, and off-sale liquor stores, among others.

Of the remaining five percent of bond proceeds, two percent may fund the costs of bond issuance and three percent may fund other non-eligible project costs.

The first round of applications is due on July 13.  Staff will evaluate applications received and selected respondents will be required to submit all additional application materials by July 25.  Respondents with the most favorable and complete applications will commence the public review process and be presented for Board approval in the fall.  A second round of applications will be accepted on October 12, 2009 for Board presentation of successful applications anticipated in December.  Please note that these dates and timelines are subject to change.

The environmental condition of the project site(s) and the company’s liability and other insurance coverage must be satisfactory to NYCIDA and/or NYCCRC prior to closing.

NYCCRC provides additional flexibility in that the borrower/project company is not required to transfer an interest in its property.

*Note:  Preliminary Allocation does not guarantee an allocation will be held for specific projects.  All projects must perform to ensure timely issuance. Allocations for projects that do not perform will be redistributed in a third tranche.