Rebuilding the Gulf States with Special Financing Provisions
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The Gulf Opportunity Zone Act (GO Zone) of 2005 was signed into law by President Bush on Dec. 21, 2005 and establishes tax incentives and bond provisions to support the rebuilding of local and regional economies in the Gulf states that were devastated by the hurricanes of 2005.
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GO Zone bonds present a unique opportunity for private business owners and corporations to borrow capital through very favorable tax-exempt financing to acquire, construct, reconstruct or renovate non-residential real property, qualified residential rental projects, and public utility property in the affected areas.
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Previously tax-exempt bond issues have been restricted to governmental agencies or not-for-profit organizations. In an unprecedented move by Congress, the restrictions on tax-exempt debt have been raised to allow businesses and corporations this unique advantage for a limited time.
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The GO Zone encompasses 20 parishes in Louisiana, approximately 50 counties in Mississippi, and 11 counties in western and southern Alabama.
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Interest on GO Zone bonds is exempt from both federal and state income taxes, therefore the interest rate is lower than through conventional financing, historically saving a borrower 1.50% to 2.0%. Also, the borrower is typically accessing the debt capital markets at the short end of the yield curve where interest rates are usually at their lowest.
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Alternatively, GO Zone businesses have the opportunity to take accelerated depreciation in lieu of using the tax-exempt financing option. Depreciation is taken during the first year equal to 50% of the cost of new capital investments.
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Requirements for tax-exempt debt issues:
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95% or more of net proceeds are used for "qualified project costs" in the Zone
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Bonds must be designated by the State as qualified
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Bonds must be issued by Dec. 31, 2010
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Election for depreciation benefit expires at the end of the 2008 calendar year.
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Each state will have a designated amount that may be raised through
GO Zone bond issues (Louisiana $7.9 billion; Alabama $2.1 billion;
Mississippi $ 4.8 billion).
Advantages of Using Regions Bank and Morgan Keegan for GO Zone Financing
Together, Morgan Keegan and Regions Bank can offer a borrower a single point of contact for a GO Zone debt offering.
Morgan Keegan's bond professionals have extensive experience in the structuring, negotiation and remarketing of tax-exempt securities for our municipal, not-for-profit and corporate clients. Over the past five years, Morgan Keegan has consistently been ranked the No. 1 underwriter of tax-exempt bonds in Louisiana, Alabama and Mississippi. As the 11th largest underwriter of tax-exempt bonds nationwide, Morgan Keegan's investment banking expertise and strong distribution network are unmatched in the region.
With over $ 10 billion in capital and strong financial ratings, Regions Bank has both the capacity and financial strength to provide clients access to capital markets through the support of a Regions letter of credit. Regions Bank has provided letter of credit support for bond issues financing a wide variety of applications including municipal government, infrastructure, commercial, industrial, not-for-profit organizations, health care and educational institutions, among others.
Regions Morgan Keegan Trust is ranked as the nation's 33rd largest trust company with more than $21 billion in assets. Drawing on the strength of Regions Bank and the expertise of Morgan Keegan & Company, Regions Morgan Keegan Trust has the knowledge and experience to serve in the capacity of trustee under GO Zone transactions.
Both Regions Bank and Morgan Keegan are based in the South with strong ties to the hurricane affected areas. Together, the two firms provide the most extensive distribution network available for the placement of these bonds. We take great pride in bringing our collective knowledge and experience to bear to help business owners and corporations rebuild the Gulf Coast.
