FOR IMMEDIATE RELEASE
FOR MORE INFORMATION:
Gene Eagle: 501.682.5905,
Build America Bonds Issued to Purchase 900 West Capitol Building
On March 2, 2010, the Arkansas Development Finance Authority (ADFA) authorized the sale of $19,520,000 in taxable Build America Bonds (BABís) to finance the acquisition, renovation and equipping of a LEED-certified facility located at 900 West Capitol. This LEED certified facility will be the new home for the Arkansas Development Finance Authority, the Arkansas Economic Development Commission, the Arkansas Science and Technology Authority, the Administrative Office of the Courts, and the Arkansas State Library.
An attractive average taxable interest rate of 5.39% will be paid to investors however; because the bonds are BABís, the federal government pays 35% of each interest payment. This federal interest rate subsidy lowers the borrowing cost to 3.53% fixed for 20 years for this state building acquisition.
When the American Recovery and Reinvestment Act (ARRA) was signed into law, this groundbreaking legislation provided for BABís, the first major modification to municipal finance in a quarter of a century. The taxable BABís for the 900 West Capitol Building are the first of their kind to be publicly offered in Arkansas. When a comparison is made between traditional tax-exempt financing and taxable BABís, the State of Arkansas will realize a savings of $1,176,000 over the term of the bonds.
Another important component of this bond issue it that it will also be the first state bond issue to benefit from federal legislation passed into law in October of 2009 for governmental bond issuers. It allows cities, counties and the state to issue bonds for projects that are currently blocked by Arkansasí Constitutional usury provisions. The federal interest rate cap preemption is set to expire at the end of 2010 and a proposed constitutional amendment will be put before voters of Arkansas this fall. It will seek a permanent rate cap removal for governmental bond issuers, such as ADFA, and Arkansas cities and counties.
"This federal legislation interest rate amendment was sponsored in Congress by Senator Blanche Lincoln, " said ADFA Vice President Gene Eagle. "Without the federal preemption, the State would not have been able to realize these savings of over $1 million. In these times; we need to be able to access the entire credit market and to be competitive among public bond issuing entities nationwide. "
The senior managing underwriter for the sale is Morgan Keegan and bond counsel is Rose Law Firm. Jim Fowler, senior manager of the transaction for Morgan Keegan, said, "Market investors were anxious to buy the Arkansas BABís issue". Fowler added that the issue was very well received by investors and that they accepted tighter spreads to U.S. Treasuries for the Arkansas paper.
LEED (Leadership in Energy and Environmental Design) is an internationally recognized building system providing third party verification that a building was designed and built using strategies aimed at improving: energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, and stewardship of resources and sensitivity to their impacts.
To find out more about Build America Bonds, Recovery Zone Economic Development Bonds and Recovery Zone Facility Bonds go to the ADFA web site atwww.arkansas.gov/adfa.
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