NIFA encourages investing private capital to stimulate economic activity, create jobs, provide health care facilities, and expand the tax base throughout the state. To do this, we provide technical assistance to project participants for financing through tax-exempt issuers such as NIFA, counties or cities.
Tax-exempt issuers, such as NIFA, cities, and counties, have the authority to issue revenue bonds or other debt instruments to raise funds used to finance eligible development projects. The bonds must meet certain federal and state law requirements, if the interest is intended to be tax-exempt from federal and state income taxes. The bond issues are repaid from the proceeds received by the issuer from the borrower under a revenue agreement such as a lease, loan agreement, or installment sale contract. The issuer does not use any of its own funds to pay principal, interest, or other costs with the financing.
The borrower seeking financing must find its own lenders (bond purchasers) either by direct placement with a financial institution or by public sale using an investment banker. Interest rates are negotiated between the borrower and lender and investment banker. These rates could be lower than those available through commercial sources because of the tax-exempt status of the bonds. Generally, the maximum bond amount is $10 million, unless the project qualifies as an "exempt facility" such as solid waste facilities, non-profit hospitals, or non-profit nursing homes.
Eligible projects for a development financing or industrial development bond financing generally include land, buildings, or other improvements, or real or personal property (new or existing). No more than 25% of the bond proceeds may be used to acquire land or an interest in land.
In addition, other than certain manufacturing or industrial enterprises, and projects related to hospitals, nursing homes or related facilities, projects must be owned by (or to be owned by) a non-profit entity. Non-profit entities are created for purposes unrelated to operating for profit which means no part of the income is distributable to its members, directors or officers. In order for interest on the bonds to be tax-exempt for federal income tax purposes, those non-profit entities must qualify as a 501(c)(3) corporation under federal law.
The types of projects that may be financed include:
When NIFA issues a bond, here are the typical steps:
1. The party seeking financing downloads and fills out a Tax-Exempt Financing Application. After completing this, the applicant submits the form, along with the application fee to NIFA. The application is reviewed by NIFA legal counsel to determine if the proposed project qualifies as an eligible project to be financed under the NIFA Act.
2. NIFA staff reviews the application to determine if NIFA program requirements are met and if appropriate amounts of volume cap are available for such a request. If so, the application is presented to the NIFA Board of Directors at a public board meeting.
3. If the project meets NIFA requirements, the NIFA Board will consider the adoption of an Intent Resolution. This is not final approval and does not bind NIFA to issue bonds. With certain exceptions, costs incurred more than 60 days prior to an Intent Resolution do not qualify for tax-exempt financing.
4. The applicant needs to contact a financial institution or an underwriter and make arrangements for the structuring and purchase of the tax-exempt bonds. If the bonds are privately placed with a financial institution, NIFA requires a completed Investor Letter. The applicant must contact and hire bond counsel to draft the necessary documentation for the financing. All documents must be submitted to NIFA's legal counsel for review prior to the adoption of a final Bond Resolution.
5. For each project that constitutes a “private activity bond”, an allocation from the State Bond Volume Cap must be obtained using the Private Activity Volume Cap Allocation Application. The State Bond Volume Cap resource is limited by federal law. Allocations from specific categories may be unavailable or previously reserved for specific purposes.
6. When documentation and all terms of the bond issue have been finalized, the applicant may request final approval from the NIFA Board. Prior to giving final approval, NIFA must hold a Public Hearing on the project. Publicized notice of the Public Hearing must be given by NIFA at least 14 days prior to the hearing. The Public Hearing and final Bond Resolution may occur at the same NIFA meeting. Then, NIFA may approve a final Bond Resolution.
7. All parties may execute documents and close the bond issue after adoption of the Bond Resolution, subject to approval of NIFA.
8. The applicant is responsible for all costs in connection with the financing. NIFA charges the following fees:
If you’re interested in financing a project through NIFA, please complete and submit the NIFA application form. The application must demonstrate that the proposed project meets all eligibility requirements by providing information that shows:
View the NIFA application forms: