State and Local governments are given certain powers and authority by the Florida Legislature. These powers include police powers, taxing powers, eminent domain and the ability to issue tax-exempt bonds. The FDFC, although not a state agency, has been given authority in Chapter 288, Part X of the Florida Statutes to act as a state-wide conduit issuer for bond financings. In essence, it serves as a borrower for the borrower. As a conduit issuer, the responsibility for the repayment of debt falls solely on the borrower. These bonds are not backed by the State, FDFC or any local government not does the FDFC Board provide project or entitlement approval (ie. zoning, future land use, site or building permitting, etc.), which can only come from the local jurisdiction where the project is located. It is also important to note that “tax-exempt” means the bond or debt instrument is exempt from federal income taxes. Tax-exempt bonds are neither a sponsorship nor subsidy since the government does not transfer part of its revenue to the borrower; rather the government has chosen to abstain from requiring that the borrower support the government (Walz v Tax Commission of the City of New York (1970).
Not every organization has access to the tax-exempt market to issue bonds. The IRS Code outlines certain borrowers or projects that qualify for tax-exempt financings. These non-governmental bonds are known as Private Activity Bonds (“PAB”). The federal government limits the amount of PAB’s that can be issued by allocating to each state a certain amount of PAB allocation. Within the State of Florida, the Division of Bond Finance is given the responsibility for receiving the annual allotment from the federal government and foe managing the process for PAB allocation. Certain projects, such as Small Manufacturers or Not-for-Profit organizations are not required to seek PAB allocation by having an exemption from this process.
Upon the submission of an application and fee for bond financing, FDFC staff will work with a borrower and their finance team to i) seek TEFRA approval (Tax Equity and Fiscal Responsibility Act of 1986) for tax-exempt financings only, ii) assist with Private Activity Bond Allocation, as necessary and iii) seek approval of bond documents from the FDFC Board. Depending on the complexity and type of offering, these processes can take between 3-9 months to close on a transaction.