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STIMULUS INCENTIVES Daniel M. Mc. Rae, Partner Seyfarth Shaw LLP 1545 Peachtree St. , STIMULUS INCENTIVES Daniel M. Mc. Rae, Partner Seyfarth Shaw LLP 1545 Peachtree St. , N. E. , Ste. 700 Atlanta, GA 30309 404. 888. 1883 404. 892. 7056 fax [email protected] com [email protected] infio 1

FIRST HOUR- THE BASICS • Outline of Stimulus Incentives • Outline of ED Bonds FIRST HOUR- THE BASICS • Outline of Stimulus Incentives • Outline of ED Bonds and Facility Bonds • Allocations of Volume Cap • How Cities Can Participate 2

 • • SECOND HOUR- PUTTING IT INTO PRACTICE Guidelines for Recovery Bonds Other • • SECOND HOUR- PUTTING IT INTO PRACTICE Guidelines for Recovery Bonds Other Stimulus Bonds Templates and Best Practices Conclusion 3

RECOVERY ACT PROVIDES INCENTIVES • TO BORROW • TO LOAN THIS IS NOT “FREE RECOVERY ACT PROVIDES INCENTIVES • TO BORROW • TO LOAN THIS IS NOT “FREE MONEY” (STIMULUS GRANTS) 4

FEDERAL INCENTIVES TO BORROW • REFUNDS OF INTEREST PAID ON TAXABLE BONDS 5 FEDERAL INCENTIVES TO BORROW • REFUNDS OF INTEREST PAID ON TAXABLE BONDS 5

FEDERAL INCENTIVES TO LOAN • TAX-EXEMPT INTEREST ON BONDS • FEDERAL INCOME TAX CREDIT FEDERAL INCENTIVES TO LOAN • TAX-EXEMPT INTEREST ON BONDS • FEDERAL INCOME TAX CREDIT • NON-AMT INTEREST • BANK QUALIFIED BONDS AND OTHER BONDS FOR BANKS TO BUY 6

American Recovery and Reinvestment Act of 2009 Recovery Zone Bonds (next 15 slides are American Recovery and Reinvestment Act of 2009 Recovery Zone Bonds (next 15 slides are from GSFIC) WAIVER AND RE-ALLOCATION PROCESS GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 7 8/7/09

Recovery Zone (RZ) Bonds • RZ Bonds - History and Applicable Laws • Types Recovery Zone (RZ) Bonds • RZ Bonds - History and Applicable Laws • Types of Recovery Zone Bonds Overview • Allocation of RZ Bond Cap • Re-allocation of RZ Bond Cap • Timelines and Forms • Contact Information GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 8

Recovery Zones Applicable Law • Recovery Zone bonds were authorized in HR 1 (the Recovery Zones Applicable Law • Recovery Zone bonds were authorized in HR 1 (the “American Recovery and Reinvestment Act of 2009”) • IRS Notice 2009 -50 and 2009 -26 • HB 581 amended the powers of the Georgia State Financing and Investment Commission (GSFIC) in O. C. G. A 50 -17 -22 to: Overview (iv) Apply or arrange to participate in and take all actions the commission determines appropriate to obtain the benefits of federal programs which provide tax credits, incentives, or other inducements to the state or to holders of public debt; (v) Apply or arrange to participate in federal programs which require the allocation of funds or bonding authority among geographical areas, governmental jurisdictions and entities, or other categories, and perform such allocation unless another officer, agency, or instrumentality is explicitly authorized by state law to perform such allocation and all officers, agencies, or instrumentalities are required to provide such assistance, cooperation, and information as the commission directs related to any federal programs; and (vi) Apply or arrange to participate in any other federal program which provides benefits consistent with state law and supportive of functions of the commission. • May 6, 2009 GSFIC resolution designated DCA as the lead agency for coordinating the state’s role in the RZ allocation process 9 GEORGIA STATE FINANCING AND INVESTMENT COMMISSION

Recovery Zone Economic Development Bonds • Recovery Zone Economic Dev Bonds A sub-category of Recovery Zone Economic Development Bonds • Recovery Zone Economic Dev Bonds A sub-category of Build America Bonds (BAB) for public infrastructure and facilities in areas designated by state and local governments as areas with: a) significant poverty, unemployment, or home foreclosure rates, b) federally designated empowerment zones and renewal communities, and c) areas negatively impacted by military base closures. • • Option to issue as tax credit bond or “direct pay” taxable bond – BAB benefit to borrower is a 45% direct subsidy from the US Treasury on interest payments Proceeds must be used for a “qualified economic development purpose” defined as – Capital expenditures paid or incurred with respect to property located in a recovery zone, including • Land • Buildings • Equipment – Expenditures for public infrastructure and construction of public facilities GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 10

Recovery Zone Economic Development Bonds • • No refundings or refinancings–new money only • Recovery Zone Economic Development Bonds • • No refundings or refinancings–new money only • Recovery Zone Economic Dev Bonds Proceeds can NOT be used for private activity Issuance costs limited to 2% of proceeds • Davis-Bacon wage and benefit requirements apply • US allocation of $10 billion allocated among the States in proportion to their relative 2008 job losses • Suballocations to counties and large municipalities within a State also made on the basis of relative job losses • Must be issued by 12/31/10 GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 11

Recovery Zone Facility Bonds • A new category of tax-exempt private activity bonds for Recovery Zone Facility Bonds • A new category of tax-exempt private activity bonds for financing economic development in recovery zones: Recovery Zone Facility Bonds a) significant poverty, unemployment, or home foreclosure rates, b) federally designated empowerment zones and renewal communities, and c) areas negatively impacted by military base closures • • Used to finance new capital improvements owned and used by almost any: – Industrial – Commercial – Retail – Office – Or other business activity located in a “recovery zone” Exceptions are rental housing, airplanes, health clubs, liquor stores, race tracks, luxury boxes, gambling massage parlors etc. GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 12

Recovery Zone Facility Bonds • • No refundings or refinancings–new money only • Recovery Recovery Zone Facility Bonds • • No refundings or refinancings–new money only • Recovery Zone Facility Bonds Issued for private projects Debt service is funded by the private business that owns and uses the property • Interest is tax-exempt (this is the sole subsidy) • No cash subsidy from Treasury • US allocation of $15 billion allocated among the States in proportion to their relative 2008 job losses • Suballocations to counties and large municipalities within a State also made on the basis of relative job losses • Must be issued by 12/31/10 GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 13

Designation of Recovery Zone • “Recovery zones” are designated by resolution/ordinance of the city/county Designation of Recovery Zone • “Recovery zones” are designated by resolution/ordinance of the city/county receiving an allocation – Option A – Early adoption of a resolution/ordinance designating the entire community (or significant portion) as a Recovery Zone – Option B –Designate Recovery Zone as projects become known Recovery Zone Bonds • Designating the zone should generally not be a barrier to use • For Recovery Zone Facility Bonds - only expenditures incurred after a Recovery Zone is designated can be reimbursed • For Recovery Economic Development Bonds – ordinary reimbursement resolution rules apply • Form resolution/ordinance will be available at www. dca. ga/gov/economic/financing/programs/RZB. asp • Local governments should consult with bond counsel GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 14

Recovery Zone Allocations and Process for Re-allocation Georgia RZ Economic Development Allocation $355, 785, Recovery Zone Allocations and Process for Re-allocation Georgia RZ Economic Development Allocation $355, 785, 000 Georgia RZ Facility Bond Allocation $533, 677, 000 Recovery Zone Bonds 111 counties, 3 consolidated governments and 2 cities received an allocation These local governments are referred to in the August 20, 2009 GSFIC resolution as “allocation designees” “Allocation designees” may: – Authorize a public entity such as a Development Authority to issue RZB’s. – Allocate all or a portion to an unrelated political subdivision within its jurisdiction (such as a city in a county) GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 15

Recovery Zone Allocations and Process for Re-allocation • • Recovery Zone Bonds The short Recovery Zone Allocations and Process for Re-allocation • • Recovery Zone Bonds The short lifespan (12/31/2010) may result in some entities not using all or a part of their allocation Many local governments with severe unemployment and economic distress did not receive an allocation • Some local governments may have large-scale, viable economic development projects that have regional impact and could benefit from lower cost financing • Some state-led economic development projects may benefit from lower cost of financing • The reallocation process will assure maximum use of the tool in the state and maximum economic impact for Georgia as a whole GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 16

Recovery Zone Allocation Waivers Waiver Process • • Recovery Zone Bonds Each “allocation designee” Recovery Zone Allocation Waivers Waiver Process • • Recovery Zone Bonds Each “allocation designee” may waive all or part of its allocation Waiver forms are provided by DCA and found at www. dca. ga/gov/economic/financing/programs/RZB. asp • Each allocation will be deemed waived on November 1, 2009 unless a Notice of Intent to Issue form is submitted to DCA (forms found at www. dca. ga/gov/economic/financing/programs/RZB. asp) • The Notice of Intent to Issue still applies when the allocation designee reallocates its allocation to another eligible entity • Allocation designees are not required to have specific projects or financing by November 1 in order to retain their allocation but should have plans and capacity to issue RZ bonds before July 1, 2010. GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 17

Recovery Zone Allocation Waivers Waiver Process (continued) • Each allocation designee must notify DCA Recovery Zone Allocation Waivers Waiver Process (continued) • Each allocation designee must notify DCA upon issuance of bond cap, including issuance of that allocation used by another eligible entity Recovery Zone Bonds • Governments intending to use all or a portion of their allocation must complete their financing by July 1, 2010 • Any allocation (either Recovery Zone Economic Development Bonds or Recovery Zone Facility Bonds) not used by July 1, 2010 is “deemed waived” and automatically recaptured by the DCA for reallocation by GSFIC • Extensions may be granted for viable projects GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 18

Recovery Zone Process for Re-allocation Process • Economic Development allocation returned to the State Recovery Zone Process for Re-allocation Process • Economic Development allocation returned to the State can be: Recovery Zone Bonds – Used by the State to lower borrowing costs on general obligation bonds or authority revenue bonds for public projects in recovery zones – Re-allocated to other local gov’ts that have viable projects • Private activity allocation returned to the State can be: – “Banked” at the state level (if needed) for a State-led economic development project – Re-allocated to other local gov’ts that have viable projects GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 19

Recovery Zone Allocations and Process for Re-allocation Process • DCA will track amounts of Recovery Zone Allocations and Process for Re-allocation Process • DCA will track amounts of Recovery Zone Bonds – Issued at the local level – Waived to the State – Reallocated by GSFIC • Recovery Zone Bonds DCA RZ Re-allocation guidelines outline information requirements to apply for use of waived bond allocations • Applications for RZ allocation will be accepted up until December 1, 2010 • Local governments who initially waive their allocation are eligible to apply for re-allocation • Forms and procedures for rellocating RZ Bond cap within a County should be established – DCA advises contacting your bond counsel • Subsequent GSFIC action will be needed to approve any re-allocations GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 20

21 Timelines and Forms • • November 1, 2009 – due date for submitting 21 Timelines and Forms • • November 1, 2009 – due date for submitting Notice of Intent to DCA • Key Dates August 21, 2009 – notice to all local governments of RZ allocation November 1, 2009 – due date for submitting resolution waiving allocation (if applicable) • November 1, 2009 – allocations to governments NOT responding to notice of intent “deemed waived” • June 15, 2010 – deadline for submission of request for extension • July 1, 2010 –date of recapture of any un-used bond allocation • December 1, 2010 – last day to apply for RZ re-allocation • December 31, 2010 – last day to issue RZ Bonds GEORGIA STATE FINANCING AND INVESTMENT COMMISSION 21

ALLOCATIONS An allocation of “volume cap” is needed in order to use ED Bonds ALLOCATIONS An allocation of “volume cap” is needed in order to use ED Bonds or Facility Bonds Georgia Sub-Allocations per US Treasury Notice 2009 -50; June 12, 2009 22

Allocation Designee- Economic Development Bond Allocation-Facility Bond Allocation Athens-Clarke 1, 086, 000 1, 629, Allocation Designee- Economic Development Bond Allocation-Facility Bond Allocation Athens-Clarke 1, 086, 000 1, 629, 000 City of Atlanta 22, 776, 000 34, 163, 000 Augusta-Richmond 2, 418, 000 3, 627, 000 Columbus-Muscogee 2, 090, 000 3, 135, 000 City of Savannah 2, 205, 000 3, 307, 000 63, 000 94, 000 402, 000 603, 000 . Barrow County 3, 304, 000 4, 957, 000 . Bartow County 4, 440, 000 6, 660, 000 . Ben Hill County 536, 000 804, 000 . Berrien County 823, 000 1, 235, 000 . Bleckley County 358, 000 538, 000 . Brantley County 271, 000 406, 000 . Bryan County 572, 000 858, 000 . Burke County 260, 000 390, 000 . Butts County 982, 000 1, 473, 000 . Camden County 905, 000 1, 358, 000 . Carroll County 5, 162, 000 7, 743, 000 23 . Catoosa County 1, 915, 000 2, 872, 000 . Baker County. Baldwin County

. Charlton County 309, 000 . Chatham County 2, 374, 000 . Chattahoochee County. . Charlton County 309, 000 . Chatham County 2, 374, 000 . Chattahoochee County. Chattooga County 670, 000 . Cherokee County 10, 767, 000 . Clay County 183, 000 . Clayton County 13, 078, 000 . Cobb County 37, 197, 000 . Columbia County 1, 633, 000 . Coweta County 5, 838, 000 . Crisp County 1, 105, 000 . Dade County 451, 000 . Dawson County 1, 089, 000 . De. Kalb County 36, 349, 000 . Dodge County 1, 198, 000 . Dooly County 372, 000 . Dougherty County 1, 567, 000 . Douglas County 6, 292, 000 . Effingham County 982, 000 . Elbert County 1, 100, 000 . Emanuel County 1, 349, 000 . Fannin County 399, 000 . Fayette County 5, 244, 000 . Floyd County 8, 269, 000 . Forsyth County 8, 302, 000 . Franklin County 684, 000 464, 000 3, 562, 000 41, 000 1, 005, 000 16, 150, 000 275, 000 19, 617, 000 55, 796, 000 2, 450, 000 8, 756, 000 1, 658, 000 677, 000 1, 633, 000 54, 524, 000 1, 797, 000 558, 000 2, 351, 000 9, 437, 000 1, 473, 000 1, 649, 000 2, 023, 000 599, 000 7, 866, 000 12, 404, 000 12, 453, 000 1, 026, 000 62, 000 24

. Fulton County. Gilmer County. Glascock County. Glynn County. Gordon County. Grady County. Gwinnett . Fulton County. Gilmer County. Glascock County. Glynn County. Gordon County. Grady County. Gwinnett County. Hall County. Hancock County. Haralson County 26, 441, 000 39, 662, 000 840, 000 1, 260, 000 19, 000 29, 000 1, 472, 000 2, 208, 000 1, 814, 000 2, 720, 000 708, 000 1, 063, 000 41, 186, 000 61, 778, 000 6, 842, 000 10, 262, 000 63, 000 94, 000 1, 250, 000 1, 875, 000 25

. Harris County 399, 000 599, 000 1, 329, 000 1, 994, 000 . . Harris County 399, 000 599, 000 1, 329, 000 1, 994, 000 . Heard County 473, 000 710, 000 . Henry County 9, 440, 000 14, 160, 000 . Houston County 1, 384, 000 2, 076, 000 . Irwin County 293, 000 439, 000 . Jasper County 624, 000 936, 000 . Jeff Davis County 224, 000 336, 000 . Jefferson County 233, 000 349, 000 . Jenkins County 1, 513, 000 2, 269, 000 . Johnson County 238, 000 357, 000 . Lamar County 766, 000 1, 149, 000 1, 461, 000 2, 191, 000 . Lee County 673, 000 1, 009, 000 . Lumpkin County 832, 000 1, 247, 000 . Mc. Duffie County 282, 000 423, 000 . Mc. Intosh County 191, 000 287, 000 . Madison County 268, 000 402, 000 . Marion County 82, 000 123, 000 919, 000 1, 379, 000 26 3, 835, 000 5, 753, 000 . Hart County . Laurens County . Meriwether County. Murray County

. Newton County 4, 478, 000 6, 717, 000 . Oconee County 309, 000 . Newton County 4, 478, 000 6, 717, 000 . Oconee County 309, 000 464, 000 . Oglethorpe County 129, 000 193, 000 . Paulding County 6, 448, 000 9, 671, 000 . Pickens County 1, 485, 000 2, 228, 000 . Pierce County 290, 000 435, 000 . Pike County 788, 000 1, 182, 000 . Polk County 1, 302, 000 1, 953, 000 . Putnam County 922, 000 1, 383, 000 . Quitman County 71, 000 107, 000 391, 000 587, 000 3, 906, 000 5, 859, 000 159, 000 238, 000 . Spalding County 2, 716, 000 4, 074, 000 . Stephens County 178, 000 267, 000 . Rabun County. Rockdale County. Screven County 27

. Talbot County 27, 000 41, 000 . Telfair County 2, 418, 000 3, . Talbot County 27, 000 41, 000 . Telfair County 2, 418, 000 3, 627, 000 . Terrell County 167, 000 250, 000 2, 883, 000 4, 325, 000 . Tift County 755, 000 1, 132, 000 . Towns County 397, 000 595, 000 . Troup County 2, 298, 000 3, 447, 000 . Turner County 211, 000 316, 000 . Union County 1, 234, 000 1, 851, 000 . Upson County 290, 000 435, 000 . Walker County 1, 773, 000 2, 659, 000 . Walton County 3, 994, 000 5, 991, 000 506, 000 759, 000 57, 000 86, 000 . Washington County 678, 000 1, 018, 000 . Wayne County 665, 000 997, 000 . Wheeler County 290, 000 435, 000 . White County 1, 124, 000 1, 686, 000 . Whitfield County 8, 562, 000 12, 843, 000 380, 000 570, 000 28 . Thomas County . Ware County. Warren County . Worth County

Totals 355, 785, 000 533, 677, 000 29 Totals 355, 785, 000 533, 677, 000 29

How Cities Can Participate • • • Can a county transfer volume cap allocation How Cities Can Participate • • • Can a county transfer volume cap allocation to its county development authority? Yes, Notice 2009 -50 allows the reallocation of volume cap by counties to conduit issuers within the jurisdiction of such county. Can a “large municipality” transfer volume cap allocation to its city development authority? Yes, Notice 2009 -50 allows the reallocation of volume cap by a large municipality to conduit issuers within the jurisdiction of such “large municipality. ” Can a county transfer volume cap allocation to a “large municipality”[1] development authority within the county? Yes. Notice 2009 -50 provides counties, and large municipalities may use such volume cap themselves for eligible costs or may allocate such volume cap received to ultimate beneficiaries in any reasonable manner as they shall determine in good faith in their discretion for use, in the case of Facility Bonds, for eligible costs for qualified recovery zone property. Can a county transfer volume cap allocation to a “small municipality”[2] development authority within the county? Yes, for the same reason as provided in 3 above. Can a county issue bonds under its allocation to finance a project within a “large municipality” within such county? Yes. Notice 2009 -50 provides no prohibition against the use by a county of its volume cap within the jurisdiction of a “large municipality. ” The only jurisdictional limitations within Notice 2009 -50 are that, in the case of Facility Bonds, the eligible costs for recovery zone property financed with the proceeds of recovery zone facility bonds must relate to property that is located within, or attributable to, both the jurisdiction of the issuer of the bonds and the jurisdiction of the entity authorized to allocate volume cap to an issue of bonds. Can a county issue bonds under its allocation to finance a project within a “small municipality” within such county? Yes. Notice 2009 -50 provides no prohibition against the use by a county of its volume cap within the jurisdiction of a “small municipality. ” [1] A municipality with a population of more than 100, 000. [2] A municipality with a population of 100, 000 or less. 30

Guidelines for Recovery Bonds • A “Qualified Business” is any trade or business except Guidelines for Recovery Bonds • A “Qualified Business” is any trade or business except for the rental of residential rental property (i. e. , multifamily) or the operation of any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises. Only a Qualified Business can be financed with Facility Bonds. • The term “Recovery Zone” means: (1) any area designated by the issuer, in any reasonable manner and acting in good faith, as (a) having significant poverty, unemployment, rate of home foreclosures, or general distress, or (b) being economically distressed by reason of the closure or realignment of a military installation pursuant to the Defense Base Closure and Realignment Act of 1990, or (2) any area for which federal designation as an empowerment zone or renewal community was in effect as of the effective date of the Recovery Act. 31

Facility Bond FAQ’s • • • Incentives to Use Facility Bonds What incentive does Facility Bond FAQ’s • • • Incentives to Use Facility Bonds What incentive does the Recovery Act provide for using Facility Bonds? The interest on Facility Bonds is federally tax-exempt. This federal “subsidy” creates an incentive to finance private property constituting a Qualified Business within a Recovery Zone. Facility Bonds are essentially a new tool for private sector borrowing. Land Can Facility Bonds be used to finance the cost of land acquired after the designation of a Recovery Zone? No. Recovery Zone Facility Bonds can only finance depreciable property, and land is not depreciable. Refinancing a Building Can an owner refinance its debt on a new building with Facility Bonds after the designation of a Recovery Zone? No. Recovery Zone Property only includes property constructed, renovated or acquired by purchase after the designation of the Recovery Zone. Partially Constructed New Buildings After the designation of a Recovery Zone, can an owner use Facility Bonds to finance the completion of a partially constructed building? Yes, provided the post-designation construction costs are segregated from the pre-designation construction costs. Acquisitions of Used Buildings After the designation of a Recovery Zone, can a buyer use Facility Bonds to finance the acquisition of an existing building which has been used? No. The original use of Recovery Zone Property must commence with the taxpayer. 32

 • • Tenant Improvements After the designation of a Recovery Zone, can an • • Tenant Improvements After the designation of a Recovery Zone, can an owner or buyer use Facility Bonds to finance new construction or tenant improvements to an existing building? Yes, provided the new construction costs or tenant improvements are incurred after the designation of the Recovery Zone. Acquisition of New Building/Spec Building After the designation of a Recovery Zone, can a buyer use Facility Bonds to finance the acquisition from the owner of a new building constructed before the Recovery Zone designation? Yes, but only if the building has not yet been occupied. Facility Bonds cannot finance the acquisition of a used building. Owner- Occupied Buildings After the designation of a Recovery Zone, can an owner use Facility Bonds to finance the construction of a new building for use by the owner? Yes. Recovery Zone Property includes property constructed, renovated or acquired by purchase after the designation of the Recovery Zone. Developer-Owned Buildings After the designation of a Recovery Zone, can an owner sign a lease and use Facility Bonds to finance the construction of a building to be leased to a user? Yes, the rental of real property (other than residential real property) to others is a Qualified Business. Only a Qualified Business can be financed with Facility Bonds. Can a developer who has signed a lease with a user before the designation of a Recovery Zone, use Facility Bonds to finance the construction of the project after the designation of the Recovery Zone? Yes, to the extent the developer has not completed construction of the project before the Recovery Zone designation. 33

ED Bond FAQ’s • • • Incentives to Use ED Bonds What incentive does ED Bond FAQ’s • • • Incentives to Use ED Bonds What incentive does the Recovery Act provide for using ED Bonds? The interest on ED Bonds is federally taxable. However, the federal government will make a direct payment, or “refund”, back to the bond issuer amounting to 45% of the issuer’s interest expense on the ED Bonds. This federal “subsidy” creates an incentive to finance public property (public facilities or public infrastructure) that promotes qualified economic development purposes within a Recovery Zone. ED Bonds can be issued as general obligation bonds or revenue bonds (or even as certificates of participation, or COPS). Land Can ED Bonds be used to finance the cost of land acquired after the designation of a Recovery Zone? Yes, assuming compliance with the other tax rules. Qualification as an Economic Development Project. What types of projects might qualify for ED Bond financing? The first ED Bond issue took place in Louisiana in July 2009, and financed streets, drainage and recreation areas. Other types of projects that might qualify for ED Bond financing include utilities, convention centers, educational and employment training facilities, parking, public safety facilities, cultural facilities, etc. 34

 • • • Public/Private Partnerships Can ED Bonds be used in connection with • • • Public/Private Partnerships Can ED Bonds be used in connection with financings for public/private partnerships? Yes, assuming compliance with applicable federal tax law and state statutory and Constitutional laws. For example, the U. S. Treasury Department in July 2009 addressed the use of ED Bonds to assist a Michigan manufacturer to relocate its foreign operations back to the United States. It said that ED Bonds “generally [are] only available for use for public or governmental projects rather than projects for private business use”, but went on to conclude: “One limited exception would allow a State or local government to subsidize costs of a private manufacturing project with [ED Bonds] if the State or local governmental issuer did not receive any significant payments from the private business for use of the project. ” (In Georgia, proper structuring would be needed to achieve this result in light of certain Constitutional provisions. ) The condition stated by the Treasury Department relates to the need to maintain the bonds’ status for tax purposes as governmental purpose, rather than private activity, bonds. There a number of ways to satisfy this condition while establishing various structures for public/private partnerships using new bonds or new bond features created by the Recovery Act. Can ED Bonds be used to finance property located outside of a Recovery Zone? Yes, assuming compliance with the requirements of the Recovery Act and other tax laws, including, without limitation, that the ED Bond-financed property in fact promotes economic activity in a Recovery Zone. Are there any other federal “strings” attached to the use of ED Bonds. Yes, among other things, the federal prevailing wage law (Davis-Bacon Act) applies to ED Bond-financed projects. See next question for more. 35

 • How are ED Bonds like Build America Bonds? ED Bonds are a • How are ED Bonds like Build America Bonds? ED Bonds are a variety of Build America Bonds (“BABs”). Both are “taxable” bonds which offer an interest “refund”, at the 45% rate for ED Bonds, or at the 35% rate for BABs (a tax credit for the BAB purchaser is an alternative, at the issuer’s option). However, ED Bonds have to promote a qualified economic development project, whereas BABs can be used to finance anything that tax-exempt governmental purpose bonds could finance. (Many Recovery Zone projects will be financed using both ED Bonds and BABs. ) Further, ED Bonds have some “strings” attached that are not attached to BABs; e. g. , territory and volume cap. Territory- ED Bonds are for economic activity in a Recovery Zone, whereas BABs are for financings anywhere in the issuer’s jurisdiction. Volume cap- the issuer must have and use an allocation of volume cap from the federal government for ED Bonds, whereas no volume cap of any kind is required for BABs. 36

OTHER STIMULUS BONDS 37 OTHER STIMULUS BONDS 37

High Tech Companies Used to be, if you weren’t actually manufacturing a tangible “widget” High Tech Companies Used to be, if you weren’t actually manufacturing a tangible “widget” of some kind, your high tech project was ineligible for tax-exempt financing using “small issue” industrial development revenue bonds (“IDBs”). Now, during the Recovery Period, a “manufacturing” facility includes a facility used in the manufacturing, creation or production of intangible property. “Intangible property” means any patent, copyright, formula, process, design, pattern, know-how, format, or other similar item. The definition of intangible property is intended to include, among other items, the creation of computer software, and intellectual property associated with bio-tech and pharmaceuticals. If your business needs new equipment or other facilities to produce that type of property, then you should consider “small issue” Stimulus Bonds for tax-exempt financing. 38

Nonprofits and For-Profits If you are a “nonprofit” recognized by the IRS as a Nonprofits and For-Profits If you are a “nonprofit” recognized by the IRS as a tax-exempt 501(c)(3) organization and have a number of projects, or a larger project, the Recovery Act makes your tax-exempt “qualified 501(c)(3) bonds” more attractive for purchase by a bank (or other financial institution). In addition to the benefit of not paying federal income tax on the interest it receives, the bank (or other financial institution) also gets an 80% interest expense deduction on deposits used for purchasing or carrying “bank qualified” (“BQ”) bonds. If your bonds are BQ bonds, the bank (or other financial institution) should quote you a lower interest rate. The old BQ limit was $10 million, and applied not just to your bonds, but to all qualified 501(c)(3) bonds and governmental purpose bonds issued by a particular bond issuer during each year. The Recovery Act raises this limit to $30 million for bonds issued during the Recovery Period. Moreover, the 501(c)(3) organization that uses the proceeds of the bonds is treated as the “issuer” of those bonds, and the bonds issued for such 501(c)(3) organization do not count against the issuer’s own $30 million BQ allowance. Thus, a bond issuer can, in each year, issue up to $30 million BQ governmental purpose bonds on its own behalf (if it is a governmental issuer), and issue up to $30 million of BQ bonds for each 501(c)(3) organization for which it issues such bonds. 39

Other Bonds for Banks to Buy The Recovery Act also creates a temporary 2% Other Bonds for Banks to Buy The Recovery Act also creates a temporary 2% safe harbor permitting banks (and other financial institutions) to purchase most tax-exempt investments without the corresponding interest expense disallowance. Even if your bonds are not BQ bonds (for example, if you are a for-profit business), the Recovery Act probably makes them more attractive for purchase by a bank (or other financial institution). Up to a point, a bank (or other financial institution) is permitted the same 80% interest deduction for most tax-exempt bonds it purchases. This new rule under the Recovery Act applies to the extent the average adjusted basis of this type of bond purchaser’s holdings of tax-exempt obligations is 2% or less of the average adjusted basis of its total assets. The 2% safe harbor applies only to bonds issued during the Recovery Period (and to bonds issued during the Recovery Period to refund such bonds). 40

Manufacturers and Developers What do those types of borrowers have in common? The Recovery Manufacturers and Developers What do those types of borrowers have in common? The Recovery Act removes a penalty, the Alternative Minimum Tax (“AMT”), that had artificially increased the interest investors charge on their taxexempt bonds. By doing so, it also deepens the pool of potential investors in these bonds. Recently, an airport refunded its AMT taxexempt floating rate bonds with non-AMT tax-exempt floating rate bonds, and saved 50 basis points (a 1. 5% rate dropped to 1%)! Spreads are even wider for longer term or fixed rate financings. For manufacturers, this benefits the “small issue” manufacturing IDBs mentioned above. For developers and owners, it benefits “exempt facility” bonds used to finance infrastructure or facilities for private projects, such as water furnishing facilities; sewage disposal components for a manufacturing project; solid waste disposal facilities; local electric and gas facilities; qualified hazardous waste facilities; and high-speed intercity rail facilities. This benefit actually applies to all “private activity” bonds, not just bonds for manufacturers and developers. 41

Non-Manufacturing Components of Manufacturing Projects For tax-exempt bond purposes, even if a project manufactures Non-Manufacturing Components of Manufacturing Projects For tax-exempt bond purposes, even if a project manufactures tangible products, the project is usually not all “core manufacturing. ” For example, a storage component or a warehouse is something that the IRS calls “directly related ancillary”, and if it comprises too large a part of the project, it can’t be financed tax-exempt. The Recovery Act liberalizes the rules applicable to this and other nonmanufacturing components of manufacturing projects. During the Recovery Period more than 25% of bond proceeds may be used to provide functionally related and subordinate facilities, so long as 95% of the net proceeds are used for core manufacturing and functionally related and subordinate facilities. Other examples of components for a manufacturing project that might now be eligible for tax-exempt financing include parking areas, facilities for heating and cooling, trash disposal equipment, property for maintenance personnel, and office facilities. The “ 2% limit” on payment of costs of issuance out of tax-exempt bond proceeds still applies. 42

Renewable Energy and “Green” Projects The Recovery Act increased the amount of volume cap Renewable Energy and “Green” Projects The Recovery Act increased the amount of volume cap for “Qualified Energy Conservation Bonds” (“Energy Conservation Bonds”), which are a type of tax-credit bonds that can be issued for “qualified conservation purposes” including, among other things, financing research in such areas as nonfossil fuels (e. g. , cellulosic ethanol); car batteries; carbon capture; etc. The Recovery Act also increased the amount of volume cap for New Clean Renewable Energy Bonds (“New CREBs”), which are a type of tax-credit bonds that can be issued to finance certain renewable energy facilities (generally, facilities that qualify for the federal production tax credit). New CREBs can be used by governments, public power providers, and nonprofit REA utilities. 43

Templates and “Best Practices” AT ITS WEBSITE (http: //gsfic. georgia. gov/00/channel_modifi eddate/0, 2096, 77323081_143399972, Templates and “Best Practices” AT ITS WEBSITE (http: //gsfic. georgia. gov/00/channel_modifi eddate/0, 2096, 77323081_143399972, 00. h tml), THE GSFIC PROVIDES THESE FORMS • Sample RZ Waiver Resolution • RZ Confirmation of Issuance • RZB Notice of Intent 44

I CAN PROVIDE YOU WITH THE FOLLOWING “BEST PRACTICES” DOCUMENTS TO USE FOR A I CAN PROVIDE YOU WITH THE FOLLOWING “BEST PRACTICES” DOCUMENTS TO USE FOR A COUNTY TO DESIGNATE A RECOVERY ZONE AND TRANSFER VOLUME CAP TO A DEVELOPMENT AUTHORITY- 45

RESOLUTION OF THE BOARD OF COMMISSIONERS OF THE COUNTY APPROVING AND AUTHORIZING THE EXECUTION RESOLUTION OF THE BOARD OF COMMISSIONERS OF THE COUNTY APPROVING AND AUTHORIZING THE EXECUTION OF AN INTERGOVERNMENTAL CONTRACT FOR THE DESIGNATION OF A RECOVERY ZONE AND ALLOCATION OF VOLUME CAP BETWEEN THE COUNTY AND THE DEVELOPMENT AUTHORITY 46

RESOLUTION OF THE BOARD OF DIRECTORS OF THE DEVELOPMENT AUTHORITY APPROVING AND AUTHORIZING THE RESOLUTION OF THE BOARD OF DIRECTORS OF THE DEVELOPMENT AUTHORITY APPROVING AND AUTHORIZING THE EXECUTION OF AN INTERGOVERNMENTAL CONTRACT FOR THE DESIGNATION OF A RECOVERY ZONE AND ALLOCATION OF VOLUME CAP BETWEEN THE COUNTY AND THE DEVELOPMENT AUTHORITY 47

INTERGOVERNMENTAL CONTRACT FOR THE DESIGNATION OF A RECOVERY ZONE AND ALLOCATION OF VOLUME CAP INTERGOVERNMENTAL CONTRACT FOR THE DESIGNATION OF A RECOVERY ZONE AND ALLOCATION OF VOLUME CAP 48

CONCLUSION ED Bonds and Facility Bonds have to be issued before the end of CONCLUSION ED Bonds and Facility Bonds have to be issued before the end of 2010. Some other Stimulus Bond features expire then. So, plan now to take advantage of them! 49

The priorities established by GSFIC and DCA for awarding reallocated volume cap might also The priorities established by GSFIC and DCA for awarding reallocated volume cap might also help you in considering your priorities. Policy Guidelines (1) Special consideration shall be given to projects that promote or expand economic opportunities, with particular attention given to areas of economic distress and regional cooperation. (2) Special consideration shall be given to those projects that meet a severe and critical need and which can demonstrate a significant impact on the territorial area or region of the issuer in which the project will be carried out. (3) Special consideration shall be given to projects which the department has determined will enhance the public good and general welfare of the state as a whole. (4) Special consideration shall be given to those projects that demonstrate feasibility and readiness. (5) Special consideration shall be given to re-allocations requests for Recovery Zone Bond eligible projects that evidence a letter of support from a state agency whose duties include economic and community development activities. 50

MORE INFORMATION Capitalized terms used herein have the meaning ascribed to them in Public MORE INFORMATION Capitalized terms used herein have the meaning ascribed to them in Public Law 111 – 5, the American Recovery and Reinvestment Act of 2009 (the “Recovery Act”) or in the June 2009 newsletters mentioned below. “New” denotes unused. The guidelines below are only summaries and are qualified in their entirety by reference to the Recovery Act statute and I. R. S. guidance, and tax law generally. Compliance with all tax law requirements is needed, including, without limitation, timely adoption of an inducement resolution. This presentation is a quick-reference guide for economic developers, community developers, participants in the real estate and financial industries, company executives and managers, and their advisors. The information in this presentation is general in nature. Various points that could be important in a particular case have been condensed or omitted in the interest of readability. Specific professional advice should be obtained before this information is applied to any particular case. Any tax information or written tax advice contained herein (including any attachments) is not intended to be and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U. S. Treasury Regulations governing tax practice. 51

QUICK TAKES At http: //danmcrae. info/quicktakes. asp, you can find these issues of my QUICK TAKES At http: //danmcrae. info/quicktakes. asp, you can find these issues of my newsletter for more information • August 2009 -Quick Takes: Deadlines and Guidelines for Recovery Bonds • June 2009 -Quick Takes: Just Out- New Rules That Will Supercharge Recovery Bonds • June 2009 -Quick Takes: Stimulus Bonds. All About Recovery Bonds, Cash Refunds, 52 Tax Credits, and More

If you have any questions or comments on Recovery Zone Bonds or other types If you have any questions or comments on Recovery Zone Bonds or other types of Stimulus Bonds, please do not hesitate to let me know. Daniel M. Mc. Rae, Partner Seyfarth Shaw LLP 1545 Peachtree St. , N. E. , Ste. 700 Atlanta, GA 30309 404. 888. 1883 404. 892. 7056 fax [email protected] com [email protected] info 53