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Introduction
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Recovery Zone Facility Bonds (RZFB) are a new type of tax-exempt private activity bond created by the American Recovery and Reinvestment Act, passed by Congress in February 2009. They may be used to finance certain kinds of business development activities in areas of significant economic distress.
On June 11, 2010, Governor Parnell signed Senate Bill 269, giving the Alaska Industrial Development and Export Authority (AIDEA) the authority to administer the RZFB volume cap and to adopt rules by which to do so. AIDEA’s goal in administering RZFB allocations is to make the process as accessible and transparent as possible.
Deadline Dates Table
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Submit applications to RZFBonds@aidea.org or fax to: 907-771-3044 Attn: AIDEA Executive Director
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APPLICATION FORMS |
For Boroughs
Exhibit H: Notice of Borough Designation of Project for Waived Volume Cap
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For Private Projects
Exhibit E: Conduit Revenue Bond Application for Financing with Recovery Zone Facility Bond Volume Cap. This application form should accompany the AIDEA Conduit Revenue Bond application and should include the $500.00 processing fee.
Exhibit F: Loan Participation Program Application for Financing with Recovery Zone Facility Bond Volume Cap. This form should accompany your commercial lender's application to the Loan Participation Program.
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Questions
Q. What is a Recovery Zone?
Q. Who is eligible to issue Recovery Zone Facility Bonds
Q. What is AIDEA's role in distributing the allocations of RZFB volume cap?
Q. What can RZFBs be used for?
Q. How much bond issuing authority is available?
Q. What if my proposed project is not located in one of the above listed areas?
Q. How and when do I apply for an allocation of RZFB authority?
Q. Are there any other rules or obligations that I need to know about?
Q. If I still have questions, who do I contact to get more information?
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Q. What is a Recovery Zone?
- Recovery Zones are defined as:
- Any area designated by the issuer as having significant poverty, unemployment, rate of home foreclosures, or general distress.
- Any area designated by the issuer as economically distressed by reason of the closure or realignment of a military installation pursuant to the Defense Base Closure and Realignment Act of 1990.
- Any area for which a designation as an Empowerment Zone or Renewal Community is in effect.
Q. Who is eligible to issue Recovery Zone Facility Bonds?
- Under this program, entities allowed by federal law to issue conduit bonds may issue Recovery Zone Facility Bonds. In order for an entity to issue a Recovery Zone Facility Bond, the entity must have an allocation of RZFB volume cap.
Q. What is AIDEA's role in distributing the allocations of RZFB volume cap?
- If a borough does not plan to use all of its allocation, under AIDEA ’s regulations; the allocation may be waived and released to AIDEA to be reallocated to other jurisdictions and projects. AIDEA will track projects and monitor bond issuances to ensure that each jurisdiction and the state as a whole are able to make use of the state's total allocation and that we do not exceed the total allowable amount of bond issuing authority.
Q. What can RZFBs be used for?
- RZFBs may be used by taxpayers engaged in certain types of businesses to finance the purchase of depreciable business property within a Recovery Zone, provided the taxpayer acquires the property after the area has received the Recovery Zone designation. Some kinds of property specifically do not qualify under this program including land, rental property, and property used for certain kinds of activities such as golf courses, country clubs, and several others listed in federal tax regulations.
RZFBs do two things:
- The bank loaning money to the developer for the project will receive a bond designation which exempts the bank from having to pay both federal and state taxes on the interest accrued over the life of the loan to the developer.
- This will allow the bank to offer a reduced interest rate for the loan to the developer/project The difference between a taxable interest rate and a tax-exempt interest rate varies depending upon several circumstances, but it is not unusual for the difference to be as much as 2%.
Please note that this program allocates the authority to issue tax-exempt bonds to bond investors in order to finance Recovery Zone facilities; it is not a direct funding program that allocates public dollars.
Q. How much bond issuing authority is available?
- The total allocation for the state of Alaska is $135 million in RZFB issuing authority. That total has been subdivided by the Treasury Department into allocations for boroughs and census areas (see table below) by a formula based on employment declines in each jurisdiction compared with employment declines for the state as a whole during December 2007 through December 2008.
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As published by the U.S. Department of the Treasury
Borough/Census Area
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Original Allocation ($) |
Aleutians East Borough |
0 |
Aleutians West CA |
7,020,000 |
Anchorage |
0 |
Bethel CA |
22,906,000 |
Bristol Bay Borough |
369,000 |
Denali Borough |
0 |
Dillingham CA |
2,586,000 |
Fairbanks North Star Borough |
49,137,000 |
Haines Borough |
2,365,000 |
City/ Borough Juneau |
11,379,000 |
Kenai Peninsula Borough |
7,315,000 |
Ketchikan Gateway Borough |
5,616,000 |
Kodiak Island Borough |
3,399,000 |
Lake and Peninsula Borough |
2,956,000 |
Matanuska-Susitna Borough |
0 |
Nome CA |
2,660,000 |
North Slope Borough |
0 |
Northwest Arctic Borough |
1,330,000 |
Prince of Wales CA |
2,8882,000 |
City/Borough Sitka |
4,064,000 |
Skagway-Hoonah-Angoon CA |
1,478,000 |
Southeast Fairbanks CA |
0 |
Valdez-Cordova CA |
4,360,000 |
Wade Hampton CA |
0 |
Wrangell-Petersburg CA |
3,030,000 |
Yakutat Borough |
148,000 |
Yukon-Koyukuk CA |
0 |
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Q. What if my proposed project is not located in one of the above listed areas?
- Your project may still qualify for an allocation of RZFB volume cap. The areas listed above were designated by the Treasury Department. Other areas of the state may qualify as a recovery zone (see 3 AAC 99.907 Manual dated July 13, 2010, Sections 100 and 105). AIDEA can work with you and the local government in which your project is located to see if the area can be designated a recovery zone.
Q. How and when do I apply for an allocation of RZFB authority?
- AIDEA has adopted regulations (3 AAC 99.907) establishing the allocation and reallocation criteria, procedures, and timelines. Businesses with potential projects should contact AIDEA for instructions on how to apply for a reallocation. Applications forms are available for download above.
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DATE |
EVENT |
REGULATION SECTION |
August 31, 2010 |
All unused volume cap is waived to AIDEA |
25, 130 |
August 31, 2010 |
Application deadline for Round 1 |
90-120 |
September 15, 2010 |
Round 1 awards |
90(b) |
November 8, 2010 |
Expiration of Round 1 awards |
37 |
November 8, 2010 |
Application deadline for Round 2 |
90-120 |
November 15, 2010 |
Round 2 awards |
90 |
January 1, 2011 |
Federal Deadline for issuing bonds |
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Q. Are there any other rules or obligations that I need to know about?
- Project Developers and Bond issuers will need the advice of qualified bond counsel and tax counsel in order to ensure the project and the bond issuance are in compliance with all applicable federal bond and tax regulations.
- Specific federal tax regulations apply to projects financed under this program.
- Davis-Bacon wage standards do not apply to any projects financed with RZFBs.
Q. If I still have questions, who do I contact to get more information?
- Contact Mike Catsi by email mcatsi@aidea.org or call at 907.771.3060.
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