This month John McMickle, CDFA lobbyist, provides us with the current view of opportunities in the congress for the advancement of CDFA's legislative agenda:
http://www.cdfa.net/cdfa/press.nsf/pages/821

This month we write about interest rate caps and collars. These are instruments that protect floating rate issuers/borrowers from a rise in interest rates that would otherwise increase their borrowing costs. Future Learning Corner articles will include a review of other areas of development finance. If you would like to contribute an article to the Learning Corner, please contact me at (501) 760-6000 or provus@hsnp.com. Stan Provus
http://www.cdfa.net/cdfa/press.nsf/pages/800

Do You Have an IRS Question?

If Do you have a burning question that you've always wanted to know the answer to, but were too afraid to ask? Well now you can. Send your tax related questions of a general nature to CDFA and we will submit it, under our name, to the IRS Tax Exempt Bonds Division, who will in turn send us an Information Letter, which we will publish in the next CDFA Updates. It's that simple! To submit your question, please send an email to info@cdfa.net or call 405-848-6059. Please note that an Information Letter is not considered a reliance document, not will it cover the specific aspects of a particular project..

Low interest rates and a weakened economy prompted the issuance of about 50% more in both student loan and multifamily housing bonds last year, while the issuance of small-issue industrial development bonds was cut by almost 50% in the face of a continuing burdensome statutory cap. Susanna Duff reports for the Bond Buyer:
http://www.cdfa.net/cdfa/press.nsf/pages/794

But Other Tax-exempt Borrowing is Booming

Historically low interest rates continue to fuel record tax-exempt borrowing, providing a silver lining to cities, counties, school districts and nonprofits facing cloudy budget pictures. John Share of the Twin Cities Business reports it's also creating a windfall for public finance underwriters:
http://www.cdfa.net/cdfa/press.nsf/pages/802

NGA: Weak Economy, Rising Costs Will Lead to Continued High Issuance

State bond issuance will continue at its current high level in the near future as the states struggle with rising costs and declining revenues, the executive director of a group representing governors predicted last week. Matthew Vadum of the Bond Buyer reports:
http://www.cdfa.net/cdfa/press.nsf/pages/817

Online Bond Trading Is Gaining, Despite the Bumps

Researching and trading stocks online became common in the long bull market. During the bond rally of the last three years, a small group of do-it-yourself investors has begun to assemble portfolios of bonds bought online. The story from Howard Isenstein of the New York Times:
http://www.cdfa.net/cdfa/press.nsf/pages/809

IRS Liberty Bond Clarification Could Move Projects Forward

Tax-exempt New York Liberty Bonds can finance qualified project costs similar to typical exempt-facility bonds, the Internal Revenue Service said in guidance it recently yesterday. Craig T Ferris and Michael McDonald also report in the Bond Buyer that the IRS said the bonds can be currently refunded, and refunding deals would not count against the $8 billion cap on the authorization:
http://www.cdfa.net/cdfa/press.nsf/pages/811

Tax Credit Eyed As Spur to Massachusetts Urban Redevelopment

A bill making its way through the Legislature would establish a 30 percent tax credit for developers who turn decrepit buildings that are more than 50 years old into residential or commercial space. Rhode Island used a similar credit to encourage renovation of old buildings in downtown Providence. Anthony Flint reports for the Boston Globe:
http://www.cdfa.net/cdfa/press.nsf/pages/819

Tale of Two State Budgets: Georgia Exercises Discipline; California Nears Crisis

On the surface, Georgia seems a lot like California and other states facing tough financial problems. The weak economy has cut into revenue. The political debate over taxing and spending is rancorous, reports Dennis Cauchon in USA Today. Bond ratings hang in the balance:
http://www.cdfa.net/cdfa/press.nsf/pages/812

As California Lawmakers Squabble, RDA Already Feels Pinch

Governor Gray Davis and Assembly and state Senate leaders are considering tapping deeper into local tax money, including funds of redevelopment agencies, to balance the state budget without an obvious tax increase. The latest proposal circulating in the Capitol would take $1.16 billion from local governments -- not just next year, but on an ongoing basis, according to legislators and lobbyists. The details of that idea are reported by Timothy Roberts in the Silicon Valley Business Journal:
http://www.cdfa.net/cdfa/press.nsf/pages/813

New Jersey Bond Bill Would Fund Grants $660M Targeted for Business Incentives

New Jersey could issue more than $660 million in state appropriation-backed debt to pay for incentive grants to companies that relocate or expand in New Jersey, under legislation supported by Governor James E. McGreevey and introduced as part of the state's $24.1 billion budget package. Martin Z. Braun of the Bond Buyer provides more detail:
http://www.cdfa.net/cdfa/press.nsf/pages/815

New Jersey companies creating as few as 10 jobs could be eligible for income tax rebates under a revamped business incentive program to be financed next year with $45 million in state bonds, reports Beth Fitzgerald in the Newark Star Ledger:
http://www.cdfa.net/cdfa/press.nsf/pages/804

Tax-exempt bond financing has long been one of New Jersey EDA’s more effective business development and job creation tools, says Caren Franzini. Since it was established in 1974, the Authority has arranged nearly $14.1 billion in low-cost tax-exempt financing for more than 4,700 business and not-for-profit projects throughout the state:
http://www.cdfa.net/cdfa/press.nsf/pages/808

Pennsylvania Biotech Firms Seek Credit Swaps

John George of the Philadelphia Business Journal reports that tucked into Pennsylvania Governor Ed Rendell's economic stimulus package is a proposal that has long topped the wish list of local biotechnology companies: Tradable tax credits:
http://www.cdfa.net/cdfa/press.nsf/pages/810

Enterprise Zone Program's End Means More Expenses for Participating Companies

When the Louisville Enterprise Zone program expires at the end of the year, it will bring an end to tax breaks and other incentives for the roughly 1,300 qualified businesses in the zone. And in the longer term, reports Toya Richards Hill in Business First of Louisville, the loss of the zone is expected to significantly hinder the metro area's ability to attract new businesses:
http://www.cdfa.net/cdfa/press.nsf/pages/796

Illinois in Surprise OK Merger Of 7 Bond Issuing Agencies

The clients, lawyers, bankers, and employees who work with seven statewide conduit borrowing agencies in Illinois were still scratching their heads this week as news spread of the General Assembly's 11th-hour approval of a bill that folds the authorities into one newly created entity on Jan. 1, 2004. Yvette Shields has the story for the Bond Buyer:
http://www.cdfa.net/cdfa/press.nsf/pages/803

Refinancing Bonds Saves $8.4 Million for Maryland County

Jamie Smith Hopkins of the Baltimore Sun reports that Howard County saved more than $8 million by refinancing bonds yesterday at the lowest interest rates it has seen since record-keeping began decades ago:
http://www.cdfa.net/cdfa/press.nsf/pages/805

Thanks to its burgeoning voluntary compliance program, an increasing number of issuers are approaching the Internal Revenue Service to tell the agency when they may have done something to put their tax-exempt bonds in jeopardy of being declared taxable. The payoff? As Susanna Duff of the Bond Buyer writes, peace of mind that they won't be audited and face a higher penalty:
http://www.cdfa.net/cdfa/press.nsf/pages/795

IRS Unveils Mediation Program for Tax-Exempt Audits

Craig T. Ferris of the Bond Buyer reports that the Internal Revenue Service has formally launched a pilot program designed to speed up the resolution of tax-exempt bond audits:
http://www.cdfa.net/cdfa/press.nsf/pages/799

IRS Issues Guidance on Private- Activity Volume Cap

The Internal Revenue Service issued three regulations yesterday that provide guidance on procedures governing allocation of the private-activity bond volume cap, assignment of the ceiling to other authorities, and correction of errors in filing forms to carry forward unused cap. Craig T Ferris reports for the Bond Buyer:
http://www.cdfa.net/cdfa/press.nsf/pages/816

IRS Ruling: 501(c)(3) Agreements Don’t Endanger Bonds’ Exempt Status

For the second time in two months, the Internal Revenue Service has released a private-letter ruling that finds a joint operating agreement entered into by 501(c)(3) organizations does not constitute private business use and would not jeopardize the tax-exempt status of bonds issued to finance a project operated by one of the organizations. Susanna Duff of the Bond Buyer provides details:
http://www.cdfa.net/cdfa/press.nsf/pages/806

SEC Studies Credit-Rating Agencies; Asks for Your Input

The Securities and Exchange Commission is considering new rules for credit-rating agencies, including possibly eliminating its designation of nationally recognized statistical ratings organizations, according to this report from the Arizona Republic:
http://www.cdfa.net/cdfa/press.nsf/pages/801

The SEC is requesting comments on the ratings agencies and the use of credit ratings under the Federal Securities Law. A copy of the concept piece can be accessed via the web at:
http://www.sec.gov/rules/concept/33-8236.htm

Environmental Finance Program: A Guidebook of Financial Tools

A Guidebook of Financial Tools: Paying for Sustainable Environmental Systems (April 1999 revision), has been produced by the Environmental Financial Advisory Board and the Environmental Finance Center Network

http://www.epa.gov/efinpage/guidebook/guidebooktp.htm