Tax-Exempt Financing

General Rules for Manufacturing Facility Bonds

  • 95% Use Test Rule – 95% or more of the “net proceeds” (sales proceeds minus reserve fund) of the bond issue must be used to finance a manufacturing facility.
  • Manufacturing facility means any facility used in the manufacturing or production of tangible personal property (including the processing resulting in a change in the condition of such property).
  • Facilities directly related and ancillary to the manufacturing facility (e.g., office space) may be financed provided such facilities are located on the same site as the manufacturing facility and not more than 25% of the net proceeds are used to provide such facilities.
  • Bond Volume Cap Limits Apply Volume cap limits an issuing authority to a maximum amount of tax-exempt bonds that can be issued to finance a particular qualified purpose during a calendar year.
  • 2% Limit on Issuance Costs – Issuance costs are limited to 2% of the Sales Proceeds (amount of bonds issued)
  • Qualified Use Allocation – allocation of proceeds among the various project expenditures in a manner demonstrating compliance with the qualified use.
  • Subject to Arbitrage and Rebate Rules
  • Substantial User Prohibition – no person who is a substantial user of a facility financed with qualified private activity bonds, or any person related to such a user, can receive tax-exempt interest income as a holder of those bonds.
  • No direct or indirect federal guarantees except governmental entities administering federal insurance programs for home mortgages and student loans and the investment of bond proceeds in U.S. Treasury securities.
  • No prohibited facilities (skybox, gambling, liquor, etc.)
  • Weight average maturity of Bonds may not exceed 120% of useful life of asset financed. (ignore land; life of working capital equals zero.)
  • Proceeds toward Land. No more than 25% of net proceeds may go toward land.
  • Rehabilitation Requirement. Restrictions on acquisition of used property. (minimum of 15% rehabilitation required.)
  • Alternative Minimum Tax
Maricopa County IDA

Creighton University - $62,000,000

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