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Thursday, April 24, 2014

IFP Contacts

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SANDRA ALLEN
Director, Technical Advisory Services

518-402-7461

 

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Eligibility

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In evaluating various funding sources, business and industry are faced with difficult decisions regarding their approach to funding.  At EFC, our mission is to promote environmental quality by providing low-cost capital and technical assistance.  If the intended construction project is for environmental improvements, EFC may fit the bill.  As stated earlier, Section 142 of the Internal Revenue Code describes the types of projects eligible for tax-exempt bonds.  Bond Counsel opinions as to eligibility are usually required.

There are other requirements for participation in the IFP and restrictions on the issuance of tax-exempt debt.  Please contact EFC or fill out the Preliminary IFP Eligibility Determination in order to determine if your project may be eligible for IFP financing.

NOTE:  This determination is only preliminary and must be confirmed by Bond Counsel after a complete application package is submitted.


The IFP may finance the following types of facilities on a tax-exempt basis if 95 percent or more of the net proceeds are used to fund these following types of facilities.  Generally, projects must have a public benefit in order to qualify for tax-exempt status.
  • Solid waste facilities and equipment for the handling, disposal, transportation and recycling of solid waste such as municipal solid waste landfills, construction and demolition landfills, ash-fills, hauling/transport equipment and transfer stations; resource recovery facilities, such as incinerators and medical waste management facilities; and recycling facilities and equipment.  Bond Counsel opinions as to eligibility are usually required.
  • Sewage treatment facilities for privately owned wastewater treatment facilities serving the public, including sewers, piping, force mains, pumps, clarifiers and sludge handling facilities (below B.O.D. limits);
  • Drinking water supply and management facilities such as mains, piping, wells, treatment works, finished water reservoirs and other storage facilities for public use;
  • Industrial hazardous waste disposal facilities for landfill and incineration of hazardous waste, and capital costs associated with Brownfields site remediation.

Other types of environmental facilities can be financed with taxable IFP bonds.  In certain cases, the most economical way to finance a particular project may be to use funding from both the IFP and EFC’s New York State Clean Water State Revolving Fund or Drinking Water (DWSRF) State Revolving Fund Programs.  Please contact EFC for more information.

Industrial Finance Program

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The Industrial Finance Program (IFP) assists clients in managing their wastes, control pollution, building and improving drinking water, waste water and solid waste facilities, and complying with environmental regulations.  IFP low-cost loans are financed through proceeds of special obligation revenue bonds issued by EFC and are backed by the credit of the borrower. Through IFP, EFC has loaned over $740 million to New York businesses for projects that manage waste, control pollution, and build drinking water and wastewater treatment facilities to help clients comply with environmental regulations.

Depending on the particular facilities financed, the interest on these bonds is generally exempt from federal, state and local income taxes, thereby resulting in lower interest rates for the borrower. Section 142 of the Internal Revenue Code (IRC) describes tax-exempt eligibility requirements for various projects, or contact EFC with your questions.

Subject to certain federal and state law requirements and approvals, including obtaining state tax-exempt bond volume cap, there is usually no limit on the amount of an IFP bond offering.  However, the minimum cost-effective amount of an IFP financing is approximately $10 million (due to closing costs associated with issuing bonds).  IFP bonds may be amortized for a term of up to 40 years, depending on the useful life of the facilities financed and other factors.

EFC's special obligation revenue bonds are not obligations of the State of New York or any political subdivision thereof, and are only limited obligations of EFC.  The client and the project are generally the source of revenue for repayment of principal and interest on the IFP bonds.

Eligible expenses for an IFP loan may include:

  • purchase of land
  • project design and engineering
  • construction or acquisition of project facilities, including buildings
  • equipment purchase and installation
  • appurtenant facilities
  • other capital costs
  • legal fees and other related costs

Advantages of IFP loans:

  • Bonds are exempt from federal, state and local taxes, resulting in lower interest rates
  • EFC does not take title to the projects it finances
  • No job creation requirements
  • One loan can finance multiple projects at various locations throughout NYS
  • EFC staff expertise and assistance
  • EFC is non-regulatory, our purpose is public service
  • If only a certain portion of the project financing qualifies for tax-exempt status, EFC can issue both tax-exempt and taxable bonds to fund the entire project

Important Documents:


IFP Application
Tax Exempt Bond Training Manual

Application and Loan Process Steps

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IFP applications are accepted on an ongoing basis.  A non-refundable application fee of $2,500 is required with application submittal to cover administrative fees and credit reports.  EFC strives to establish a financing schedule designed to best meet the client's needs.  Due to the process steps and notification requirements, an IFP closing schedule averages approximately 4 to 6 months to fully complete, once all project permitting and New York State Environmental Quality Review Act (SEQRA) requirements are completed.

There are a number of steps that must be completed before a bond issuance can be completed.  Some of these are:

  • Client submits completed application for the project and financial information to EFC with $2,500 application fee
  • EFC prepares a project application summary and initial credit report; and requests Volume Cap from NYS Division of Budget
  • Inducement Resolution is passed by EFC's Board of Directors, which establishes eligible expenses for the IFP financing (soft costs plus hard costs incurred 60 days prior to inducement)
  • Client completes SEQRA requirements, including environmental assessment forms, and obtains appropriate state permits, etc., for the projects being financed; forwards copies of documents to EFC
  • Funding team is set up between Client and EFC, including Bond Counsel, Underwriter, Financial Advisor, Trustee, etc.
  • EFC conducts a public hearing for the project under the Federal Tax Equity and Fiscal Responsibility Act (TEFRA)
  • New York State Public Service Commission (PSC) approval of water and other public utility projects may be required
  • EFC requests project compliance certifications from the New York State Departments of Environmental Conservation and/or Health
  • Approval of project in the form of a Bond Resolution by EFC's Board of Directors is required
  • EFC seeks New York Public Authorities Control Board (PACB) and Comptroller approvals
  • Bond documents are completed and circulated to the funding team
  • EFC coordinates the marketing and pricing of bonds with the project Underwriter
  • Closing of bond transaction, distribution of bond proceeds and payment of issuance and closing costs complete the process
IFP Loan Costs and Expenses
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