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Background |
The Industrial Development Board of the
City of New Orleans
is a completely self-supporting, non-profit public corporation, created
to promote economic development within New Orleans, with members
appointed by the Mayor and City Council. One of the major incentives we
offer is low-interest bonds to developers of qualified projects. Since
its creation in 1973, the IDB has issued approximately
$550 million of bonds for more than 80 different commercial and
residential projects. Since Hurricane Katrina, the IDB has issued over
$120 million of bonds (including five issues of “Gulf Opportunity Zone
Bonds” or GO Zone Bonds” totaling almost $25 million) to finance several
new retail and commercial developments and about 2,200 new apartment
units.
After KATRINA, Congress created a new category of tax-exempt bonds,
known as GO Zone Bonds, to be issued ty economic development authorities
like the IDB as an incentive to stimulate economic development by
private developers in the areas affected by the storms.
Unlike traditional tax-exempt bonds that are issued for public projects
such as streets, utilities and public schools, GO Zone bonds are not
payable from taxes or any other public funds whatsoever, but instead are
payable solely by the private developer for whom the bonds are issued.
The developers must arrange to sell or place the GO Zone bonds for their
project based solely on their own creditworthiness and collateral,
because there is absolutely no public guarantee, subsidy or investment
of public money. Since interest on GO Zone Bonds is tax-exempt to
investors, the program reduced the borrowing costs to the developers,
usually by about 2%. That is the only “incentive” that the GO Zone Bond
program offers.
The IDB
can also issue non-GO Zone tax-exempt bonds for a few other very
limited purposes, including manufacturing facilities, multi-family
housing and certain dock and wharf facilities, to name a few. These are
not subject to the GO Zone limitations or deadlines.
Shortly after the initiation of the program, the Louisiana State Bond
Commission set aside approximately $1.3 billion of the state-wide
authority for projects in New Orleans. Of that amount, only $55.6
million of GO Zones bonds have actually been issued for eight New
Orleans projects and another $497 million has been earmarked to
developers who hope to complete financing of their projects in the near
future. |
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