This summary information is available as a Microsoft Word doc format of    Municipal-Finance-Bond-Tax-Opportunities-ARRTA-ARR  or PDF document pdf format of    Municipal-Finance-Bond-Tax-Opportunities.pdf  .

Common Questions and Answers



Who can issue these bonds?

State, local governments and/or conduits can issue on behalf of RZEDBs; RZ defined as areas having (i) significant poverty, unemployment, foreclosures, (ii) distressed due to base closure, (iii0 designated federal empowerment zone or renewal community

What can they be used for?

RZEDBs may be used to finance certain "qualified economic development purposes" meaning any expenditures for purposes of promoting development or other economic activity in a RZ, including (i) capital expenditures paid or incurred with respect to property located in the RZ, (ii) expenditures for public infrastructure and construction of public facilities, and (iii) job training and educational programs. RZEDB may not be issued to refund outstanding bonds. 100% of proceeds must be used to promote development or other economic activity in a RZ, reasonably required reserve and costs of issuance (up to 2%); cannot be for private activity; cannot be for refunding outstanding bonds.

How are they subsidized by the feds?

Issuer sells taxable bonds and the US Treasury pays the issuer 45% of the interest cost when due. (See example on page 3 to see how it works with a 35% subsidy)

What are the benefits?

Interest cost on taxable bonds is reduced by 45% direct federal subsidy

Are there special reporting requirements?

Same information requirements as tax-exempt state or local government bonds

How long will these bonds be available?

RZEDBs must be issued before 1/1/2011

Is there a cap?

Yes. National cap is $10 billion which has been allocated to states in proportion that each state's 2008 employment decline bears to all states. See Massachusetts allocation on page 7. Since counties in Massachusetts cannot issue bonds, presumption is that the county allocations will be allocated to the Commonwealth for further re-allocation for recovery zones in those counties

Where can I find more information?

Section 1401 of ARRTA; Guidance Issued 6/12/2009; US Treasury website http://www.irs.gov/newsroom/article/0,,id=206044,00.html

Information provided by the Executive Office for Administration and Finance