Industrial Development Board
of the City of New Orleans, Louisiana, Inc.
P.O. Box 19996
New Orleans, Louisiana 70179
 

 PRESS RELEASE
June 12, 2009

INDUSTRIAL DEVELOPMENT BOARD ANNOUNCES MORE THAN $700 MILLION REMAINING IN GULF OPPORTUNITY ZONE BONDS FOR ECONOMIC DEVELOPMENT IN  ORLEANS PARISH

The Industrial Development Board of the City of New Orleans, Louisiana, Inc, a self-supporting non-profit public corporation, created to promote economic development within New Orleans, with members appointed by the Mayor and City Council., announces that more than $700 million in Gulf Opportunity Zone (“GO Zone) bonds remains untapped.    Serving as the conduit for these bonds, the IDB has approved virtually every qualifying application for GO Zone Bonds and takes this incentive very seriously.  The Board continually looks for every opportunity to assist as many projects as possible.  According to the president, Walter C. Flower, III, “Many projects that may have initially looked good on paper unfortunately have not proceeded with GO Zone financing because the project itself has turned out to not be financially feasible, even with the GO Zone subsidy.  Other worthy projects have been delayed due to the turmoil in credit markets generally, or the developers have chosen to take advantage of other programs.  We do not wish for New Orleans to have this $700 million allocation returned to a general pool”.

Since Hurricane Katrina, the IDB has authorized the issuance of almost $25 million “GO Zone Bonds” to finance new retail and commercial developments in New Orleans.   Also the IDB has approved bond issuance for 2,200 new apartment units (this has contributed to creating housing for former and new residents, including victims of Hurricane Katrina).

 A MISCONCEPTION……

There is a misconception that the GO Zone Bond program, enacted by Congress in the aftermath of the 2005 hurricanes, established a pool of "free" money for economic development projects.  However, no such pool of money exists.  Instead, Congress created a new category of tax-exempt bonds, known as GO Zone Bonds, to be issued by 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 to whom the bonds are issued.  The developer must arrange to sell or place the GO Zone bonds for their project based solely on their own creditworthiness and collateral, as there is absolutely no public guarantee, subsidy or investment of public money.  Interest on GO Zone Bonds is tax-exempt to investors, reducing the borrowing costs to the developers, usually by about 2%.  This is the "incentive" the GO Zone program offers.  “This could mean a great savings by a developer”, says the IDB president.

“Approximately $7.9 billion of GO Zone Bonds was allocated by Congress to the Louisiana State Bond Commission for developers in 31 parishes across southern Louisiana.  After the initiation of the program, the 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 Zone bonds (including the five IDB issues totaling $25 million) have 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,” according to IDB bond counsel, David Wolf. 

“That leaves approximately $740 million in unassigned GO Zone Bonds reserved for New Orleans through the end of 2009.  A concern of the Board is that unless the State Bond Commission extends that deadline, any unused allocation at year-end will be ‘up for grabs’ by projects outside of New Orleans.  It would be a shame for qualified developers not to take advantage of this incentive before the cutoff date”, an emphasis expressed by Mr. Flower, IDB President.

 THE IDB HAS MORE TO OFFER…….

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 bond limitations or deadlines.

Another incentive offered by the IDB, subject to the scrutiny of its Board, is an abatement or reduction of property taxes on new projects.  This rather complex financing mechanism involves the issuance of either taxable or tax-exempt bonds that include an ownership structure which results in the property tax reduction.  It requires a partial payment to taxing bodies, known as a "payment in lieu of taxes" or "PILOT" in an amount less than the property taxes that would otherwise be due.  The PILOT program permits the IDB to offer a different kind of economic incentive to projects that might not qualify for tax-exempt bond financing. 

The IDB is eager to receive applications for projects that qualify for one or more of its programs, and will continue to do everything it can to promote economic development in a fiscally prudent manner.

For more information about the IDB and its programs, interested parties should contact Sharon Martin at 658-4242 (phone) or by email at idbcno@earthlink.net.