The Mississippi Business Finance Corp. has asked the U.S. Treasury Department to permit it to issue tax-exempt bonds, which Northrop Grumman could use to finance expenses beyond the normally permitted time frame as a result of the company's rebuilding efforts following Hurricane Katrina.
The request was made in a letter sent to Treasury Secretary Henry Paulson March 3 by William Barry, executive director of the MBFC, the state agency responsible for issuing the state's Gulf Opportunity Zone bonds, which were authorized to provide financing for hurricane relief across the South.
At issue is the extent to which recovery expenses can be financed with tax-exempt bonds. As is typical of such laws, the GO Zone Act, which created the GO Zone bonds and allowed them to be issued to cover hurricane-related costs, comes with a "60-day rule," which stipulates that eligible costs can be financed with bonds up to 60 days before the law was signed.
However, Northrop Grumman and the MBFC told the Treasury that while the Gulf Opportunity Zone Act was signed on Dec. 18, 2005, Hurricane Katrina struck in August 2005, and expenses began shortly after that.
As a result, the parties are asking Treasury to waive the 60-day requirement in this case, so that GO Zone bonds can be issued to finance expenses incurred prior to those 60 days.
"A revenue ruling or revenue procedure waiving the 60-day notice requirement ... to cover expenditures made during a reasonable period of time following Aug. 29, 2005, would provide the required relief for Northrop Grumman and similarly situated businesses," the MBFC letter stated.
It is not clear how much Northrop Grumman could gain from an extension, and sources said the Mississippi agency and Gov. Haley Barbour would have to approve any projects to be financed with GO Zone bonds.
The Katrina program is modeled after the Liberty Zone incentives package in New York, which was established to provide tax breaks to aid recovery following the Sept. 11 terrorist attacks. Officials involved in the Northrop Grumman request said that a similar request was granted by the Treasury for the Liberty Zone program.