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Manufacturers of tangible personal property acquiring, developing, renovating or equipping facilities for their own use can access triple tax-exempt bond financing and real estate, mortgage and sales tax reductions.
Manufacturers (companies engaged in the production of tangible personal property, per federal rules) seeking to acquire, construct, renovate or equip facilities for their own operations within New York City.
Projects that NYCIDA may assist are governed by its state authorizing legislation and federal rules regulating private activity bonds.
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, NYCIDA staff works with borrowers during their decision-making process prior to accepting applications.
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 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.
The 8.375 percent sales tax on materials used to construct, renovate or equip facilities may be waived.
Mortgage recording tax relating to the project financing, 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.
A borrower's total capital expenditures are limited to $20 million. This cap includes both the proposed project and capital expenditures during a six-year period beginning three years before and ending three years after the bonds are issued.
At least 95 percent of the bond proceeds must be spent on qualifying costs. Qualifying costs are generally capital expenditures for land, building, equipment and other depreciable property used for manufacturing, as well as certain ancillary property, and may also include capitalized interest during construction. 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 acquisition of an existing building (including the equipment) can be financed if funds equal to at least 15 percent of the portion of the bond amount used to purchase the facility is spent on rehabilitation of the building within a two-year period after issuance.
Less than 25 percent of the net bond amount may be spent on acquisition of land.
If bond proceeds are used to fund new equipment purchases, the company must opt to forego accelerated federal tax depreciation on the equipment and use straight-line depreciation. Acquisition of used equipment is not eligible to be financed with bonds.
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.
Companies must request NYCIDA assistance prior to entering into any facility lease, acquisition or renovation contracts, unless such contracts are contingent upon NYCIDA assistance.
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.
To convey the above-described benefits, approved companies must lease their properties to NYCIDA, which leases the site(s) back to the company for a 25-year term (equal to term of real estate tax reductions). This ‘lease-back’ structure should not prevent companies from obtaining federal tax depreciation benefits on the property owned by the applicant.