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Governor Carcieri Signs Legislation Authorizing More Than $240 Million in Recovery Bonds

Governor Donald L. Carcieri today signed legislation (H 7139 Substitute A, An Act Relating to Public Finance--The American Recovery and Reinvestment Act—Bonds, introduced by House Finance Chairman Steven Costantino and representatives Kenneth Carter, Helio Melo, Joanne Giannini, and Agostinho Silva) authorizing more than $240 million in tax exempt and tax credit bonds under the American Recovery and Reinvestment Act of 2009 (ARRA).

ARRA created several new types of tax-exempt bonds and tax-credit bonds available to state of Rhode Island, the City of Providence, and private industry. The issuance of tax-exempt and tax-credit bonds provide government the fiscal relief needed to help stimulate the local economy. Under Rhode Island General Law, only the Public Finance Management Board (PFMB) has the authority to allocate tax-exempt volume capacity in connection with bonds issued by the Rhode Island Industrial Facilities Corporation (RIIFC) in Rhode Island. The legislation gives the PFMB the required authority to allocate the volume cap authorized under ARRA.

ARRA bond programs in which Rhode Island is participating include Recovery Zone Economic Development Bonds, Recovery Zone Facility Bonds, and Energy Conservation Bonds.

“The Recovery Act allows states the ability to continue to make critical capital and infrastructure investments during this economic recession, and provides another financing option for our businesses in Rhode Island,” said Governor Carcieri. “If we are to come out of this recession stronger, we need to provide our business community, especially our small businesses, to ability to gain access to capital and financing.”

The Recovery Zone Economic Development Bond Program allows the state of Rhode Island and the City of Providence to obtain much-needed financing as an alternative to issuing traditional tax exempt general obligation bonds at lower borrowing costs for new capital projects and critical public infrastructure investment. Under the Recovery Zone Economic Development Bond program the US Treasury Department makes a direct payment to the state or local governmental issuer in an amount equal to 45 percent of the interest payment on the bonds resulting in a net borrowing cost which should be competitive or superior to tax-exempt bonds.

Under ARRA, the state of Rhode Island is authorized to issue $87 million, with the City of Providence authorized to issue an additional $13.9 million, in Recovery Zone Economic Development bonds. The State of Rhode Island expects to utilize $87 million in Recovery Zone Economic Development Bonds this year, rather than issue traditional government tax exempt bonds, allowing the state to save an estimated $10 million in interest payments over the life of the issue.

Recovery Zone Facility Bonds (Facility Bonds) are targeted to areas particularly affected by job loss obtain financing for much needed economic development projects. The Recovery Zone Facility Bonds will be managed through the Rhode Island Industrial Facilities Corporation and will be designated for new construction or expansion projects for existing and new companies in Rhode Island.

Facility Bonds may be issued to qualified businesses (any trade or business with the exception of residential rental and categorically excluded uses) in recovery zones for construction, renovation, reconstruction or acquisition of depreciable property after the designation of the recovery zone. Under the legislation, due to the high rate of unemployment and foreclosures, all of Rhode Island has been designated a “recovery zone.” The original use of the property has to commence with the taxpayer and substantially all of that use has to occur within the recovery zone. RIIFC will issue the Facility Bonds as tax-exempt “conduit” bonds, for which the private projects will be solely responsible for debt service.

"During this critical time in our state's economy it's imperative that we're able to provide businesses with direct access to capital and credit they need to continue to grow and succeed," said Keith Stokes, Executive Director of the Rhode Island Economic Development Corporation. "Beyond the tough economic climate Rhode Island businesses suffered the recent flooding and are in need of resources."

Rhode Island may also issue up to $10.9 million for Qualified Energy Conservation Bonds (QECBs) to finance initiatives designed to reduce greenhouse gas emissions. Qualified energy conservation bonds may be issued to make loans and grants for capital expenditures to implement green community programs. For projects benefitting private business, RIIFC, under the umbrella of the Rhode Island Economic Development Corporation, will issue the QECBs as tax-credit “conduit” bonds, for which the private projects will be solely responsible for debt service.

Businesses interested in learning more about Facility Bonds and Qualified Energy Conservation Bonds should contact the Rhode Island Economic Development Corporation at 401-278-9100.

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