CEDATax-Exempt Revenue Bonds:Low-Interest Rate Financing for

Industrial, Commercial & Community Development

CEDAPresentation By:

Dan Bronfman, Growth Capital Associates, Inc.925-386-0760

Sam Balisy, Kutak Rock, LLP213-312-4000

Michael Sarina, Rogers Family Company

Moderated by: Mona Dmitrenko916-448-8252 x16

Agenda:

Overview

Interest Rate Advantage

Revenue Bond Structure

Revenue Bond Qualifications

Project Qualifications: Industrial Development BondsNon-Profit Bonds – 501 (c ) 3Recycling, Solid Waste Disposal Bonds

Overview:

Qualified projects undertaken by private companies can be funded with the proceeds of a tax-exempt revenue bond issue – “Private-Activity Bonds”.

Tax-Exemption results in low-interest rates; similar to rates paid by governmental entities.

Repayment of the bonds are not guaranteed by the government (i.e. City, State or Federal).

Borrower must be creditworthy and merit financing for the project.

Interest Rate Advantage (estimated)

Average Rate –1990 through

2010

Current RateAs of 04/13/2011

Variable Interest RateWeekly: (1)

2.59% 0.25%

Letter of Credit Fee: (2)

1.50% 1.50%

Ancillary Fees (rating, remarketing, trustee, etc.)

0.30% 0.30%

“All-In” Variable Rate: 4.39% 2.05%

(1) Securities Industry & Financial Markets Association Municipal Swap Index History

(2) Annual fee ranges from 1.25% to 1.75% for most borrowers.

Revenue Bond Structure Bonds are “issued” by a governmental entity to obtain tax-exempt

status. Proceeds are “loaned” to borrower to fund the project. The issuer acts as a “conduit” to the tax-exempt marketplace.

Bonds are not guaranteed by the government (city, county, state or federal). Bonds are a special, limited obligation of the Issuer. Borrower is directly responsible for repaying the bonds – principal and interest.

Funds are held by a Trustee until used for project costs. Unspent proceeds are invested in conservative investments such as money market funds, governmental securities.

“Credit Support” for the Bond Issue: Direct-Pay Letter of Credit – Payments of interest & principal to

bondholders are made via draws on the direct-pay letter of credit. Borrower reimburses the letter of credit bank for payment of these draws.

Tax-Exempt Loan or Private Placement – Bonds are sold directly to an institutional investor, bank or individuals. The investor evaluates the credit worthiness of the borrower / project.

Revenue Bond QualificationsEach project must meet qualifications established by

Congress and written in the Federal Tax Code – These rules don’t change; “don’t ask”.

State of California has created public-policy overlays for IDBs and solid waste programs, including job-creation/retention, living wages, target “distressed” communities, payment of insurance benefits, etc.

Generally, bond proceeds can only be used to fund acquisition of fixed, depreciable assets: land, building, and equipment.

Generally, expenses incurred prior to beginning the bond issuance process cannot be paid for with tax-exempt bond proceeds. Refinancing is permitted for non-profit borrowers.

Minimum financing need of about $2.0 million; bond proceeds must be spent over a 36 month period after issuance.

Industrial Development BondsAcquisition of Land, Buildings and/or New Equipment

Associated with Manufacturing or Value-Added Processing Operations.

Project size not to exceed about $15.0 million, including land, buildings and equipment.

Funds can be used for:

No location restrictions.

Purchase Land & Construct a Building

Purchase Land with Building and Rehabilitate the Building

Purchase & Rehabilitate a Leased Facility

Expand Existing Facilities

Acquisition of New Equipment

IDB Borrower Profile

Annual Sales Ranging from $10.0 to $25.0 million.

Most are Family-Owned and Operated

Financially Strong

In Business Over 10 to 20 Years.

Project Results in “Public Benefits”.

Target Projects in State Enterprise and Federal Empowerment Zones…but no location restrictions.

Non-Profit Bonds

Bond proceeds can be used to fund the acquisition/development of capital assets (i.e. real estate & equipment) that further the nonprofit goals of the organization.

Examples of potentially qualified non-profit organizations:

Able to refinance existing commercial debt with low-interest, tax exempt bonds; a limited amount of working capital can be financed with bonds.

Private Schools Health Clinics & Care Facilities

Health Care Facilities

Animal Care Facilities – SPCA, Humane Societies

Cultural & Arts Facilities

Housing Projects

Recycling /Solid Waste Disposal Bonds

Projects that divert solid-waste materials from the household or commercial waste stream.

Qualified Projects Include:

State has a grant (free $) program to pay transaction costs for waste financings.

Curbside Collection Facilities

Composting Facilities

Materials Recovery Facilities

Transfer Stations Landfills Waste to Energy Facilities