• Build America Bonds (BABs)
  • Recovery Zone Economic Development Bonds (BABs subset)
  • Recovery Zone Facility Bonds (BABs subset)
• Qualified Energy Conservation Bonds (QECBs)

The State requested that municipalities submit a Notice of Intent by November 2 for the Recovery Zone Economic Development Bonds, the Recovery Zone Facility Bonds, and the Qualified Energy Conservation Bonds allocations to reserve their ability to issue the bonds, if projects are identified. Mayor Davison submitted the notices by the deadline.

build america bonds

Build America Bonds (BABs) authorizes state and local governments to issue these bonds as taxable municipal bonds to finance any governmental purpose for which they otherwise could issue tax-exempt government bonds (other than private activity bonds).

These bonds are designed to provide a federal subsidy for a larger portion of state and local governments’ borrowing costs than traditional tax-exempt bonds in order to stimulate the economy and to encourage investments in capital projects in 2009 and until December 31, 2010. Some municipal debt market observers are of the opinion that the authorization for these bonds may be extended beyond 2010 if the economy is not showing clear signs of recovery.

Staff is exploring the possibility of using this type of bond to finance a portion of the debt that is planned for jail construction.

Two subsets of Build America Bonds are Recovery Zone Economic Development Bonds and Recovery Zone Facility Bonds. ACCUG has two allocations available through the State of Georgia. Recovery Zone Economic Development Bonds ($1,086,000) and Recovery Zone Facility Bonds ($1,629,000).

Recovery Zone Economic Development Bonds (BAB subset)

Recovery Zone Economic Development Bonds can be used for qualified economic development purposes which include promoting development or other economic activity in a recovery zone designated by the issuer. ACCUG has an allocation of $1,086,000 available through the State of Georgia.

Recovery zones are:

• Any area with significant poverty, unemployment, or home foreclosure rates,
• Any area currently designated as an Empowerment Zones or Renewal Community, or
• Any area designated as economically distressed by reason of closure or realignment of a military installation pursuant to the Defense Base Closure and Realignment Act of 1990.

These uses include new money capital expenditures for property; public infrastructure or facilities that promote economic activity; and expenditures for job training and education programs.

A benefit to the bond issuer is a 45% interest subsidy. 100% of the proceeds (net of debt service reserve and 2% cost of issuance cap) must be used for a qualified economic development purpose.  Proceeds cannot be used for private activity.

A locality may waive its allocation for further distribution within the State or it may allocate a portion of the allocation to cities within the county or, in most cases, to development authorities within the county.

Recovery Zone Facility Bonds (bab subset)

Recovery Zone Facility Bonds are a new category of tax-exempt, private activity bonds for financing economic development in recovery zones. ACCUG has an allocation of $1,629,000 available through the State of Georgia.

The proceeds can be used to finance depreciable property used in a trade or business in a recovery zone that:

• was acquired, constructed, or renovated after the recovery zone designation date
• original use of which occurs in the recovery zone, and
• substantially all of the use of the property is in the active conduct of a qualified business (any trade or business except for residential rental facilities, golf courses, massage parlors, gambling facilities, etc.)

Issuers include those entities currently eligible under state law to issue private activity bonds. The debt service is funded by the private business that owns and uses the property.

"An allocation designee" may:

• waive its allocation for further distribution within the State
• authorize an eligible public entity such as a Development Authority to issue RZBs
• allocate all or a portion to an unrelated political subdivision within its jurisdiction (such as a city in a county.

The Federal Government allocated the Recovery Zone Economic Development and Facility Bonds among the States in proportion to their relative 2008 job losses. Sub allocations to counties and large municipalities within a State were made on the basis of relative job losses.

Qualified Energy Conservation Bonds (QECBs)

ACCUG has one other bond allocation in the amount of $1,187,100 available for use - Qualified Energy Conservation Bonds (QECBs).
 
QECBs are tax credit bonds. Unlike traditional tax-exempt municipal bonds, the investor receives a tax credit instead of interest. The investor tax credit is expected to result in an interest rate subsidy to the borrower of 70%. A supplemental coupon in the 1-3% range is anticipated for QECBs.

In order to qualify as QECBs, bonds must meet the following criteria:

• 1) 100 percent of the available project proceeds of such issue are to be used for one or more qualified conservation purposes.
• 2) The bond is issued by a state or local government, and
• 3) The issuer designates such bond for qualified conservation purposes.

Examples of qualified conservation purposes include capital expenditures that reduce energy consumption in public buildings by 20%; research in nonfossil fuels and technologies that capture and sequester carbon dioxide; mass commuting and related facilities that reduce the consumption of energy, including expenditures to reduce pollution from vehicles used for mass commuting; demonstration projects designed to promote the commercialization of green building technology; and public education campaigns to promote energy efficiency

Up to 30% of the proceeds for each jurisdiction may be used for private activity. Davis-Bacon wage and benefit requirements apply to projects funded with QECBs.

"Allocation designees" may:

• authorize an eligible public entity such as a Development Authority to issue QECBs.
• allocate all or a portion to an unrelated political subdivision within its jurisdiction (such as a city in a county)

Allocation designees were required to notify GEFA no later than November 2, 2009 of their intent to use their allocation or waive it to the State. However, allocation designees were not required to have specific projects or financing by November 2 in order to retain their allocation, but should have plans and the capacity to issue QECBs within the next 18 months.