Governor Jim Doyle has made the needed designations for the first issuance of Midwestern disaster area bonds in the state, which is expected to occur in mid-December 2009.
The State of Wisconsin received the largest allocation — more than $3.8 billion — among the seven Midwestern states that Congress authorized to issue tax-exempt Midwestern disaster area bonds by its enactment of the Heartland Disaster Tax Relief Act of 2008. Now, it is possible for many private businesses in southern Wisconsin to benefit from this type of tax-exempt financing.
On August 7, 2009 the governor issued Executive Order #288 concerning Midwestern disaster area bonds, and on November 9, 2009, the State of Wisconsin Department of Commerce adopted emergency administrative rules to implement the executive order. An application for bond issuance must be submitted to the department for its review, and the department will request the governor to make the designations required by the tax code.
Thirty Counties Affected
Midwestern disaster area bonds may be issued for projects located in any of the following 30 Wisconsin counties, each of which was declared a disaster area as a result of severe storms, tornados, and flooding experienced in mid-2008 and which collectively cover nearly all of the southern half of the state:
Wide Range of Projects Eligible for Bond Issuance
The bonds must be issued - by a Wisconsin governmental unit or authority - no later than December 31, 2012. The bonds may be issued to finance several types of projects, including residential rental projects or the acquisition, construction, reconstruction, and renovation of nonresidential real property and improvements. With very limited exceptions, there is no restriction on the type or use of real property improvements financed with Midwestern disaster area bonds. Thus, this type of financing will be most advantageous for the many businesses that would not otherwise qualify for tax-exempt financing due to limitations on the type of project that can be financed with other tax-exempt bonds or due to capital expenditure restrictions that may otherwise apply.
It is not necessary that the business using the property have suffered a loss attributable to the severe storms, tornados, or flooding. Governor Doyle’s executive order provides that, because of the extent to which losses were suffered in the state, businesses may be designated by the governor - and thus qualify for tax-exempt financing - based on their economic development within the affected counties.
The Midwestern disaster area bond authorization is not the same as a source of funds. Arrangements need to be made with a buyer of the bonds and with an appropriate governmental bond issuer.
If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or the following individuals:
David B. Ryan