The American Recovery  & Reinvestment Act created a new bond program for economic development called the Recovery Zone Facility Bond (RZFB).  A total of $1.5 billion was included in the stimulus package for this purpose. Based on the state’s increase in unemployment compared to other states, California received the largest allocation with $1.2 billion. The counties and large cities within California (with populations exceeding 100,000) were then given a sub allocation.  Please see attached table for allocations.

The recovery zone bonds are intended to promote job creation and economic recovery in areas referred to as recovery zones.

What is a Recovery Zone?

Recovery zones generally include areas designated by the local jurisdiction as having the following characteristics:

•    Significant poverty, unemployment, rate of home foreclosures or general distress.
•    Areas impacted by a military base closure or realignment
•    Empowerment Zone
•    Renewal Community

The federal government has given the cities and counties some latitude as a recovery zone can be designated in any reasonable manner using its good faith and discretion.

RZFBs sunset on December 31, 2010

Recovery Zone Facility Bonds

Recovery Zone Facility Bonds is a new type of tax-exempt private activity bond available to both non-profits and for profit businesses.  Interest paid to bondholders of RZFBs is not subject to the federal or state income taxes.  This results in lower interest rates for the borrower. In general most types of businesses are eligible for this program except for those related to housing and any other specifically listed businesses – i.e.

Golf courses, massage parlors, sun-tanning facilities, etc. Proceeds from RZFBs must be used to purchase, construct or significantly renovate any depreciable asset.  The asset must be acquired after the date of designation of a “Recovery Zone” by the city or county.  Another important hurdle is that original use of the property commences with the qualified business.

CALIFORNIA ENTERPRISE DEVELOPMENT AUTHORITY

The California Enterprise Development Authority (CEDA) was founded to support economic development in the state of California.  We are staffed by a team of experienced finance professionals.  The very nature of this program and other private activity bonds demands our speed and rapid turnaround. CEDA can often respond within the very same day.  Issuing through CEDA also reduces the administrative burden required by both the federal and state governments.  

For more information on Recovery Zone Facility Bonds or other private activity bonds please contact:

Mona Dmitrenko, Executive Director, California Enterprise Development Authority,

Office: (916) 448-8252 ext.16  email: monad@caled.org