TAX-EXEMPT FINANCING; CIBS
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|Infrastructure is front and center in light of the stimulus package, so we chatted with Arent Fox public finance experts Les Jacobowitz and Rick Krainin to get the attorneys' take. The big question: How the heck will it be financed in the current climate?|
|Les tells us the bill permits financings in economically distressed zones through tax-exempt bonds. Even though they've become more expensive, the market is still relatively cost-efficient. However, because of the significant difference between federal and state/local borrowing rates, there have been discussions about creating a federal issuer and/or funding a credit enhancer to lower costs.|
|Les says financings through these proposed entities should be secured by project revenue, if possible, to minimize use of U.S. credit. There are also other financing sources, such as pension and infrastructure funds, that have been instrumental in investment overseas and are eager to place money in the U.S.|
|Rick works with public sector and non-profit social infrastructure clients and says many of them are facing increased demand, while suffering a decline of federal, state and philanthropic support. He's working with them to analyze options to limit cost overruns, reduce project delivery time, and preserve capital. Rick pointed to provisions in the stimulus that increase the size of 501(c)(3) and governmental conduit bonds that will likely help qualified social infrastructure projects get financed.|