Organics #3: Finance and economics session   r seega
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Organics #3: Finance and economics session r seega Presentation Transcript

  • 1. Tax-Exempt Financing for Solid Waste Disposal Facilities March 29, 2011
  • 2. MassDevelopment: Who we are
    • Self-supported quasi-public finance and development agency
    • Offices in:
        • Devens Lawrence
        • Boston Worcester
        • Fall River Springfield
  • 3. MassDevelopment: What we do
    • Promoting livable, workable communities with creative financing and development solutions
    • Serving businesses, nonprofits, and municipalities
    • Primary tools
        • Tax-exempt bonds
        • Loans and guarantees
        • Planning and development services
  • 4. MassDevelopment and MassDEP
    • MassDevelopment supports MassDEP programs through
      • Brownfield site assessments and remediation financing
      • low cost tax-exempt financing
  • 5. Private Activity Bonds
    • State and local governments borrow at lower tax-exempt bond rates as permitted under the Federal tax code
    • Certain private entities can borrow tax-exempt IF
      • project fits within “qualified” bond categories, and
      • bonds are issued by a governmental entity
      • preliminary approval is received from the issuer within 60 days of incurring expenses which will be financed
    • Tax-exempt interest rates 1 - 2% lower than conventional loans
  • 6. Solid Waste Disposal Facility Bonds (Existing Regulations)
    • Includes any property used to collect, store, treat, utilize, process or finally dispose of solid waste
    • Solid Waste generally includes garbage, refuse, and discarded solid waste materials
    • Materials will not qualify as solid waste unless useless, unused, unwanted and discarded (no value test)
      • without any market or value in the form and at the location where it is collected
      • at the time of issuance of the bonds (not ongoing)
  • 7. Solid Waste Disposal Facility Bonds (Existing Regulations)
    • Facility will fully qualify if:
      • it converts or recycles solid waste into non-waste material; and
      • at least 65% of materials introduced are solid waste (weight or volume)
    • Otherwise may need to allocate a portion to taxable issue
    • Tax-exempt financing may be used up to the first “useful” product (or point where end product used or sold)
    • Facility not disqualified if it operates at a profit (i.e., by converting to a non-waste product)
  • 8. Challenges for Organics under Existing Regulations
    • “ No-Value Test”
      • Under existing regulations any material having value is not solid waste
        • Has been very controversial
        • IRS has generally taken the position that paying for handling and processing may create market value
        • Any type of payment for waste is being questioned as to whether the payment is evidence of market value or is for certain allowable expenses, e.g. transportation
    • 1 st Useful Product
      • processing often flows through several stages and if a product is produced that “could” be sold, any processing beyond that point does not qualify
  • 9. Proposed Regulations … which ones?
    • IRS issued proposed regulations in 2004 – never finalized and since withdrawn
    • Proposed new regulations in 2009
      • Awaiting final approval from IRS and Treasury
      • May be released at any time
      • May help some projects qualify
  • 10. Key Benefits of the Proposed Regulations
    • Provides new definition of “solid waste disposal facility” and “solid waste”
    • Eliminates the “no-value test”
    • Will be effective 60 days after final publication and once final Issuers may elect to apply retroactively
  • 11. Definitions under Proposed Regulations
    • Solid Waste Disposal Facility
      • Processes solid waste in a “qualified solid waste disposal process”,
      • Performs a preliminary function, or
      • Is functionally related or subordinate to the above
    • “ Qualified Solid Waste Disposal Process” includes the following:
      •   A final disposal process – any process that provides for the placement of solid waste in a landfill or its incineration or permanent containment.
      •  
      • An energy conversion process - any thermal, chemical, or other process that is applied to solid waste to create and capture useful energy, e.g. gas, heat, hot water, steam.
      •  
      • A recycling process - any process that reconstitutes, transforms, or otherwise processes the solid waste into a useful product.
  • 12. Definitions under Proposed Regulations
    • Solid Waste must be:
      • Used Material – material previously used in consumer, commercial or industrial products
      • Residual Material – byproduct or excess raw material remaining from production of agricultural, consumer, commercial or industrial products
  • 13. Definitions under Proposed Regulations
    • Preliminary Function
      • A preliminary function is a function to collect, separate, sort, store, treat, disassemble, or handle solid waste that is preliminary to and directly related to one of the qualified solid waste disposal processes described in the previous slide.
        •  
          • But … not if 50 percent or less of the materials that results from the function are not solid waste.
  • 14. Issuance Process
    • Completion of application and review of eligibility by bond counsel
    • Preliminary approval (“official action”) by MassDevelopment board (grandfathers expenses)
    • Structuring and documentation
    • Final approval
    • Closing
    • Timeframe can vary but should be able to complete within 45 - 90 days from application
  • 15. Placement Methods - Public vs. Private
    • Public Offering
      • Often credit enhanced with letter of credit
      • Investment grade borrower may issue unenhanced
      • Lower interest cost possible for larger issues
      • Both fixed and floating rates
    • Private Placement
      • Limited offering to accredited investors
      • May be used for difficult financings or to maintain greater confidentiality
      • Includes bank direct purchases
  • 16. MassDevelopment – Solid Waste Bonds
    • MassDevelopment programs reduce financing costs for
    • solid waste disposal facilities
    • Project Date Amount ($)
    • Devens Recycling/MacNamara 8/06 12,000,000
    • E. L. Harvey (Westborough) 10/06 5,000,000
    • TW Conroy (Stoughton) 2/07 7,100,000
    • Thomson Brothers (No. Andover) 6/07 7,350,000
    • Dominion Energy 12/08 50,000,000
    • Dominion Energy 12/10 235,000000
  • 17. Brownfields Redevelopment Fund
    • $30 million Fund created by the Commonwealth and managed by MassDevelopment
    • Mission to revitalize areas and “redevelop first”
    • Up to $100,000 for site assessments in unsecured, zero-interest loans. Up to $2,000,000 in cleanup loans with flexible terms for priority projects
  • 18.
    • For additional information, contact:
      • Bob Seega
      • 508-363-2799 ext. 132