New tax-free financing available for business expansions
State officials are working to get the word out about new low-cost financing for business expansion and local economic development projects.
"We want to make sure Alaskan businesses will be able to use all of this financing that is available," said Ted Leonard, executive director of the Alaska Industrial Development and Export Authority, an independent state development corporation.
Municipalities and state agencies will be able to issue bonds that will be essentially tax-exempt, but there are tight deadlines if Alaskans are to take advantage of the program, Leonard said. Business owners have to have their applications into AIDEA by Aug. 31.
Low-cost financing was authorized under the federal American Recovery and Reinvestment Act passed last year. Alaska has been given an allocation of $135 million for tax-exempt private development financing and $90 million for economic development financing which would mainly be public infrastructure projects.
Because of special complications in Alaska, the Legislature passed Senate Bill 269 giving AIDEA and the Alaska Municipal Bond Bank authority to reallocate some of the low-cost bonding capacity among regions of the state.
Gov. Sean Parnell signed SB 269 into law on June 11.
The federal law restricted the program to census areas that had experienced sharp declines in employment in 2008, Leonard said. This doesn’t fit Alaska very well because the state’s larger population areas, such as Anchorage and the Matanuska-Susitna Borough, did not experience enough employment decline that year and many rural areas were already at rock bottom in terms of low employment and depressed local economies.
Also, a large percentage of the allocation went to census areas which have no government entity to issue the bonds.
The new state law gives AIDEA authority to reallocate some of the capacity for private development projects and to issue bonds if municipal governments decide they can’t issue bonds themselves, Leonard said.
The same is true for the municipal bond bank for local economic development bonds, which would be for public infrastructure like roads or docks that aid growth of the local economy, he said.
There are some tight deadlines, Leonard said. Municipalities will have had to informed AIDEA and the bond bank by June 30 if they intend to issue bonds themselves, he said.
AIDEA is preparing a set of regulations as to how it will implement its portion of the program, for private development bonds. Those are to be complete by mid-July, Leonard said.
For any private developers wishing to take advantage of the program administered through AIDEA, applications will have to be in to the agency by Aug. 31, Leonard said, and bonds to fund the projects will have to be issued by Dec. 31. Alaska’s allocation of tax-exempt capacity will expire in December, he said.
There are few limits on the kinds of private projects that can be funded, although projects considered luxuries, such as golf courses or health clubs, are not allowed to be financed under the program or federal statutes, Leonard said.