Private Activity Bonds
The EIERA, in cooperation with the Missouri Department of Economic Development (DED), issues private activity bonds to provide funding for certain Missouri facilities. Private activity bonds issued by the EIERA are tax-exempt securities issued on behalf of a private company or not for profit entity for qualifying environmental, pollution prevention or energy related projects. Private activity bonds are repaid solely by the entity for which the EIERA issues the bonds. The EIERA is not liable for repayment of the principal or interest due on the bonds.
Since 1973, approximately $2.8 Billion in debt has been issued on behalf of private entities. Debt has been issued on behalf of more than 30 entities in almost 60 separate financings. Financing may be structured many ways including short term notes, intermediate or long term bonds and fixed or variable rates.
Eligibility
Projects financed on a tax-exempt basis with private activity bonds must comply with the Internal Revenue Code and its regulations. The EIERA is further limited in the private activity bonds it may issue by state law. An entity considering this type of financing should contact its bond counsel to determine whether the project is eligible; however, the EIERA may generally issue tax-exempt private activity bonds for:
-Facilities for the furnishing of water;
-Sewage facilities;
-Solid waste disposal facilities; and
-Environmental enhancements to hydroelectric generating facilities.
Financing with tax-exempt bonds requires strict compliance with a series of requirements and limitations established by the Internal Revenue Code. Additionally, federal securities rules have additional requirements and provide that in most instances the entity obligated to pay debt service on the bonds must annually provide operational and financial data to national information repositories sanctioned by the Securities and Exchange Commission.
In order to meet these and other tax and securities requirements, the entity must retain appropriate professional representation, including qualified bond counsel, underwriter and paying agent/ bond trustee. Other professional services may also be necessary. The entity is responsible for retention of and payment for all of its professional service providers.
Most entities that are eligible for tax-exempt bond financing are subject to the federally required annual volume cap which restricts the amount of certain tax-exempt private activity bonds that can be issued in any one state. Missouri’s allocation of the volume cap is administered by the DED. Allocations of volume cap are valid for sixty days unless bonds have been issued or the allocation is extended. Application for volume cap is made to DED by the EIERA on behalf of the entity seeking financing. DED is solely responsible for determining whether volume cap will be allocated to the entity.
Application
Applications for private activity bond financing may be obtained by contacting the EIERA at the number below. Due to the complexity of the tax and securities requirements for this type of financing, potential applicants are strongly urged to retain the services of bond counsel prior to requesting an application. An application fee of up to $2,500 is due when the application is filed with the EIERA. Additionally, the applicant will be required to pay that portion of the EIERA’s attorney’s fees and expenses related to the transaction that exceed $10,000 (if any). An issuance fee is due at the time the bonds are issued. The application and issuance fee schedules may be found in the Missouri Code of State Regulations (10 CSR 130-1.020).
