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BOND FINANCING

Please be advised the London Interbank Offered Rate (LIBOR) index will be retired as of June 30, 2023, affecting EDA outstanding bonds issued with a LIBOR short term interest rate mode. Pursuant to 12 U.S.C. 5801 et seq. (the “Federal LIBOR Act”), LIBOR will be replaced with the SOFR (Secured Overnight Financing Rate) in LIBOR-based contracts when there is no alternative index agreed upon in the bond documents. EDA does not require any amendment to the bond documents to reflect the LIBOR to SOFR transition. Bond borrowers should contact counsel and bank/bondholder(s) to discuss the Federal LIBOR Act and whether to amend bond documents.  If it is determined that the bank/bondholder and/or counsel wishes to amend the bond documents to reflect the LIBOR to SOFR transition, borrower should fill out a bond modification application and e-mail it to bonds@njeda.com.

Creditworthy manufacturing companies, 501(c)(3) not-for-profit organizations, and exempt facilities in New Jersey may be eligible for long-term financing under the Bond Financing Program.

DOLLAR AMOUNT

$500,000 to $10 million in tax-exempt bonds for for-profit companies, up to 20 years for real estate and 10 years for equipment
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$500,000 with no dollar limit in tax-exempt bonds for qualified not-for-profit organization

BENEFITS

Longer terms
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Lower cost
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Fixed or variable interest rate

USES

Capital improvements and expansions
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Land and building acquisitions, new construction and renovations, and equipment purchases
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Projects owned and operated for local, county and state government bodies

NJEDA issues conduit tax-exempt private activity bonds, the proceeds of which are used to provide financing. 

PROGRAM DETAILS

Through a federally authorized program, the  NJEDA issues conduit tax-exempt private activity bonds, the proceeds of which are used to provide financing.

Taxable bonds are also available for a wide variety of businesses, such as manufacturing, commercial, warehouse, and distribution, etc. Taxable bonds offer similar flexibility in structuring rates and terms but are not subject to the restrictions placed on tax-exempt financing under the IRC.

Bonds are sold via direct purchase or public offering. A financial intermediary, typically a bank, will directly purchase bonds from the NJEDA once it has performed a credit review on the applicant’s project. The bank sets the interest rate, terms and other financial details. In a public offering, bonds are purchased by an underwriter and sold to private investors in the public marketplace and may be structured with a bank’s commitment to provide a letter of credit (LOC) or a municipal bond insurance policy. Market conditions will determine the interest rate, while the bond’s terms and other financial details are set by the LOC provider

ELIGIBILTY

Borrowers must meet the eligibility requirements outlined in the Internal Revenue Code (IRC) in order to qualify for tax-exempt bond financing, including:

  • Manufacturing/processing facilities
  • Governmentally owned public airports, docks, wharves
  • Facilities that furnish water, electric, and gas; sewer facilities; and solid waste disposal, including certain recycling facilities
  • Certain facilities for governmental bodies, which qualify as tax-exempt governmental obligations
  • Certain not-for-profit 501(c)(3) entities, including service organizations, educational institutions and health care facilities
  • Certain assisted living facilities, which qualify as residential rental projects.

Please be advised: New Jersey State law prohibits most cannabis license and certification holders from receiving or continuing to receive an economic incentive from the NJEDA. If the applicant, or any person who controls the applicant or owns or controls more than one percent of the stock of the applicant, has applied for or received a license or a certification from the New Jersey Cannabis Regulatory Commission (NJ-CRC), the applicant is ineligible for this program and should not proceed with an application. If an application is received from an applicant that meets this criteria, the application will be declined and the application fee will not be refunded. 

FEES

  • Application fee: $1,000
  • Application fee for Bond w/ Guarantee: $2,000
  • Closing fee for tax-exempt bonds: 0.5% of tax-exempt bond amount of up to first $15 million; 0.375% of the next $10 million and 0.5% of the bond amount in excess of $25 million
  • Closing fee for taxable bonds: one half of the closing tax-exempt bond fee noted above
  • Closing fee for not-for-profit corporations and governmental bodies: 0.5% of tax-exempt bond amount up to $10 million and 0.25% above this amount
  • Closing fees for conduit bond transactions, except for conduit bond transactions that support multi-jurisdictional, interstate projects: capped at $300,000
  • Guarantee fee: if required, will be up to 0.5% sized to percentage guarantee required, not to exceed 0.5%. (For example, 25% guarantee will require a 0.25% fee, 50% guarantee will require a 0.5% fee.

MORE INFO

Division of Taxation Tax Clearance Certificate required. 

Certificates may be requested through the State of New Jersey’s Premier Business Services (PBS) portal online.

Under the Tax & Revenue Center, select Tax Services, then select Business Incentive Tax Clearance.

If the applicant’s account is in compliance with its tax obligations and no liabilities exist, the Business Incentive Tax Clearance can be printed directly through PBS.

Please note:  It is the applicant/client’s responsibility to maintain a current and clear tax clearance certificate.  If a current and clear certificate is not evidenced to NJEDA at time of closing, NJEDA will not proceed with closing.

The list of Designated Bond Counsel Firms comprises private law firms designated based on particular experience and expertise in this specialized area of federal bond and tax law. Bond Counsel represents the Authority, drafting necessary resolutions and financing documents concerning the project. At the bond closing, Bond Counsel delivers an opinion that the project qualifies and the interest income earned on the NJEDA’s bonds is exempt from federal income taxes, subject to certain limitations.

At the time an application is submitted for the issuance of bonds, applicants must propose a firm from the list to act as Bond Counsel for their project. The NJEDA encourages applicants to utilize a competitive process to identify a law firm for to propose. The applicant’s proposed firm is subject to the NJEDA and the Division of Law review and approval. The Division of Law retains the Bond Counsel; retained Bond Counsel must comply with the Division’s Outside Counsel Guidelines.

Applicant is responsible for the cost of Bond Counsel, which may be financed with bond proceeds subject to certain limits. However, Bond Counsel invoices must be processed and paid as set forth in the Outside Counsel Guidelines.

You should consult with Authority staff concerning the details of Bond Counsel selection.

Applicants still need to have their own legal counsel to represent their interests in the transaction.

The list of Designated Bond Counsel can be found here under “ NJEDA Bond Counsel Pool (Conduit Financings).”

Projects utilizing NJEDA financial assistance for construction related costs are subject to state prevailing wage requirements.
 
Effective April 1, 2020 all construction contracts in which prevailing wage applies must provide proof of valid NJ Department of Labor Construction Registration Certification. Please email PWCR@dol.nj.gov if you have any questions about this requirement. Please be advised that a valid Contractor Registration Certificate is required to perform construction on this NJEDA financially assisted project