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Recovery Zone Facility Bond ProgramVEDA is pleased to invite eligible and qualified borrowers to apply for Vermont’s Recovery Zone Facility Bond (RZFB) financing. Applications are due by April 15. The RZFB Program offers tax-exempt financing for large fixed-asset projects such as manufacturing facilities, other commercial establishments and office buildings.
VEDA’s Tax-Exempt Recovery Zone Facility Bond Program (RZFB) was enabled by the American Recovery and Reinvestment Act of 2009 (ARRA) and is designed to aid certain businesses through the issuance of tax-exempt bonds. Tax-exempt bonds traditionally carry lower interest rates than conventional bank loans because income earned by purchasers of these bonds is exempt from federal and, in some cases, state tax.
In this program, VEDA acts as a conduit issuer, thereby enabling eligible borrowers to access the tax-exempt market. Revenue bonds generally make sense for qualified projects in excess of $2 million. The maximum amount of RZFB’s that can be issued for any project is $25 million, unless waived by VEDA.
Eligibility
- Many types of businesses are eligible;
- Federal tax code provisions must be complied with to assure eligibility for tax-exempt financing; please contact VEDA for more complete information.
Use of Proceeds
- Must be used 95% for the acquisition of depreciable capital assets, excluding land but including for example:
- Construction of new facilities;
- Purchase of new equipment;
- In certain cases the purchase of existing real property;
- Refinancing and working capital are not eligible uses of the funds.
Bonds Terms
- Payment terms and security requirements are negotiated between the borrower and the bond purchaser. The bonds are not guaranteed by the State of Vermont or VEDA; therefore, marketability of the bonds is based on the creditworthiness of the borrower;
- The bonds may be sold through a public offering or privately placed with financial institutions (usually banks) or other institutional investors.
- Bonds must be issued by December 31, 2010.
Fees
- Issuance fees are 0.625% of the bond face amount.
- Borrower is also responsible for bond and issuer counsel fees incurred in connection with the issuance of a bond.
Application Process
- All applications must be considered by the VEDA Board for approval. This is a two-step procedure;
- Preliminary approval (Inducement) must be obtained before any significant project expenditures are made;
- Final approval may be granted when the applicant has received permits for the project and bond documents have been finalized.
- Applications may be downloaded or obtained at the VEDA office;
- Applicants are advised to discuss their proposed project with VEDA Staff prior to submitting the application.
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