California Pollution Control Financing Authority is extending a program designed so that small businesses can save money if they use bonds to purchase equipment.
The financing authority, which acts as a conduit issuer, will extend the program enacted in 2010, and set to expire on April 8, until December 2014.
"The primary driver of this extension is to continue incentivizing California companies to accelerate equipment investments by offering an equipment-only bond financing program to encourage companies to issue bonds through CPCFA," said Bill Ainsworth, a spokesman for the State Treasurer's Office, which staffs the CPCFA.
The program had no takers during its first couple of years in existence, but when the financing authority polled potential users some said they actually had bond proposals under way, Ainsworth said.
The amendment to the regulations will first be adopted on an emergency basis by April 8. After that a 180-day rulemaking process including public hearings would occur, before the extension is more formally adopted.
Bonds issued through the program must have a final maturity of 12 years or less.
No more than $20 million of bonds may be issued per borrower under this program.
Close to 90% of bond proceeds must be used to purchase equipment with an economic life of 10 years or less.
Real estate improvements are ineligible.
To reduce costs, bond counsel and disclosure counsel fees are limited to $45,000, consultant fees and underwriter fees are each limited to 0.5% of par, and counsel and co-counsel fees are limited to $12,500 collectively. The financing authority waives its fee for this program.
"The idea behind it was to have a separate program for equipment, because creating an equipment-only bond would be less complex, and cheaper, because it's easier to determine the value of equipment," Ainsworth said.
Pre-existing programs allowed businesses to issue bonds for equipment, land or rolling stock, he said.