Conduit Bond Financing
The Lorain Port Authority can serve as the issuer for the purpose of making proceeds available to an entity in furtherance of a public purpose by way of Industrial Revenue Bonds, Hospital Revenue Bonds, Non-Profit Bonds and Housing Bonds
- Financial strength based upon credit of the company or non-profit organization
- Rated or non-rated bonds sold in capital markets or privately placed with banks
- Capacity to issue bank-qualified, tax-exempt debt
Tax Exempt 501 (c) (3) Bonds
501 (c) (3) non-profit organizations can utilize the Port Authority for tax-exempt financing. All 501 (c) (3) non-profit organizations are eligible for capital improvements, including buildings, building improvements, and equipment as long as their projects satisfy federal tax rules for tax-exempt 501 (c) (3) bonds. Specifically, 95% of the proceeds of any tax-exempt bonds must be used to pay the costs of capital improvements owned and operated by the non-profit organization.
The federal governments permits the LPA to issue tax-exempt “qualified small issue bonds” on behalf of manufacturing businesses. These bonds may be issued in principal amount of up to $10 million to fund assets used by the manufacturing businesses. The proceeds of “qualified small issue bonds” must be used according to two key restrictions:
- 95% of bond proceed must be used to pay the costs of depreciable assets used I the manufacturing process
- 75% of bond proceeds must be used to pay the costs of assets that are “core” assets of the manufacturing process
The Lorain Port Authority can provide bond financing of large construction projects with a Capital Lease Option that enables borrowers to take advantage of sales tax savings.
- Savings of State & Local sales tax on construction materials
- Lease payments will fully amortize debt
- Buyout option allows company to buy asset for $1 at the end of the lease
- Assets & liabilities are placed on the company’s balance sheet
- No prevailing wage requirement
- Reduces construction costs and improves Loan-to-Value
The Lorain Port Authority can secure fixed-rate Tax Increment Financing, TIF, for qualifying public projects to provide local communities better financing terms. Qualifying public works include Land Acquisition, Parking, Lighting, Sewer, Streets, Water, and Utilities. There are many benefits to using a TIF to fund a project, such as part, or all, of the project can be funded without a tax increase. The project will receive more favorable financing term based on its projected tax revenue, and its long-term economic development support. TIF projects generally can start earlier with quick closing and interim financing. There are no sales taxes on hard construction costs.
Property Assessed Clean Energy bonds are part of a federal initiative to encourage states to enact programs that allow for funding alternative energy and energy efficiency projects. In Ohio, PACE bonds allow local government entities to provide up-front, assessment-based financing for property owners who want to pursue qualifying projects but lack the capital. The Lorain Port Authority partners with NOPEC to issue PACE Bonds (See PACE Webpage). The local government entity must create an Energy Special Improvement District, which is currently the city of Lorain. The local government makes an assessment n the project site and the capital is generated by the revenue stream created by the assessment. Then, the property owner can request a conduit bond issuer, such as the Lorain Port Authority, to issue bonds.