|
|||
Development BondsState and local economic development organizations use bond financing as a means for funding projects. Because some bonds are tax-exempt and others are subject to limited taxes, loans made through the sale of bonds can provide substantial savings to businesses taking advantage of these programs. Interest rates are typically lower than those available for other types of financial instruments. Bond programs also broaden the sources of capital in the state and can be effective tools for local economic development efforts. Broadly defined, a bond is a certificate of debt issued by a government or corporation to raise money with a promise to pay a specified sum of money at a fixed time in the future and carrying interest at a fixed rate. Generally, a bond is a promise to repay the principal along with interest (coupons) on a specified date (maturity). Bonds are debt instruments that might be sold above or below par (the amount paid out at maturity), and are rated by bond rating services such as Standard & Poor's and Moody's Investors Service. The federal government, states, cities, corporations and many other types of institutions sell bonds. Bonds are relatively more secured than equity and have priority over shareholders if the company becomes insolvent and its assets are distributed. Municipalities and counties issue bonds to raise capital for their day-to-day activities and for specific projects such as development of roads, sewer facilities, hospitals, etc. There are two common types of municipal bonds: general obligation and revenue. General obligation bonds are unsecured municipal bonds backed by the credit of the municipality. Revenue bonds are used to fund projects that eventually create revenue, such as a toll road or lease payments for a new building. Project revenues pay off the bonds. Other types of bonds, such as industrial revenue bonds, are backed by the industrial borrower's credit. Category Funding Sources
General Obligation Limited Tax Bonds (GOLTBs) The proceeds for GOLTBs are generally used to acquire or build a facility for manufacturing and industrial projects. Lease income from the facility is used to amortize the bonds. Due to the credit enhancement of the local municipality, GOLTBs can be used to finance 100% of a project's fixed assets. Market conditions determine the minimum loan amount. The tax levy cap available in the county or city establishes a maximum. Collateral for the bonds must be fixed assets such as land, buildings, machinery, and equipment. The Oklahoma State Legislature is authorized to establish the maximum interest rates on GOLTBs. Amortization terms generally extend to 20 years on land and building and 15 years on machinery and equipment. The fees associated with bond financing will vary based on the size of the bond offering, the market, and the assistance granted by the local development authority. Although not a specific requirement, the local jobs created may influence the endorsement of a project by the local industrial development authority. Eligibility Application Process Contact
Industrial Revenue Bonds (IRBs) The equity requirement is a credit issue for each individual project. No minimum is established. Loan amounts are determined by the market as bonds are sold. Rates are market driven, while amortization terms may range from 10 to 30 years. A first lien position is required on the company's assets. Although not a specific requirement, the jobs created by the applicant often influence the endorsement of a project by the local public trust. The fees associated with bond financing vary based on the size of the bond offering, the market, and the assistance granted by the local industrial development authority. Eligibility Application Process Contact Don Hackler Conduit Program Eligibility Application Process Contact:
Most private activity bonds must be sold on a taxable basis. However, the Internal Revenue Code grants exceptions when "Qualified Private Activity Bonds" can be sold on a tax-exempt basis. Such bonds are subject to the federal alternative minimum tax. Some categories of qualified private activity bonds include Small-Issue Industrial Development Revenue Bonds (small manufacturing facilities, some loans to beginning farmers); Mortgage Revenue Bonds (housing); Student Loan Revenue Bonds; Exempt Facilities Bonds (private water, wastewater, multifamily housing, etc.); and other purposes defined by the code. The code also imposes a limitation on the amount of qualified private activity bonds issued by a state in any calendar year. In Oklahoma, the Private Activity Bond Allocation Act provides for the distribution of the state's allocation. The State Bond Advisor's Office administers the Private Activity Bond Allocation Act. It also serves as staff to the Council of Bond Oversight and provides advice and assistance to the Governor and Legislature. Eligibility Application Process Contact |
The Oklahoma Development Finance Authority's Conduit Program was established to provide any entity (public or private) an avenue to issue revenue bonds, notes, certificates of participation or other evidence of indebtedness. Funds generated by such sale are then available for loans to qualified borrowers. In most instances, the Conduit Program provides an entity with more favorable rates than they normally could obtain on their own. The program uses ODFA's market presence to provide access to Wall Street, has no limits on dollar amount, and can be for tax-exempt or taxable obligations.| Home | FAQ Index | 800-879-6552 | RSS | Legal Notices | Contacts | Privacy Policy | © 2008 |