Governor Culver Signs Executive Order 21
Governor Chet Culver has signed Executive Order 21, directing the Executive Director of the Iowa Finance Authority (“IFA”) to make certain determinations of loss and replacement of loss in connection with the issuance of tax-exempt bonds that finance projects in areas hit by the 2008 natural disasters. Executive Order 21 follows recent federal guidance that clarified, in a favorable manner for Iowa, use of tax-exempt bonding authority under the Heartland Disaster Tax Relief Act of 2008 (the “Act”). The Act provides Iowa with $2.6 billion of additional bonding authority for the issuance of tax-exempt Midwestern Disaster Area Bonds, for a broader array of potential projects than normally allowed under federal law for  tax-exempt bonds.

Impact of Executive Order 21 and Recent Federal Guidance
To access Midwestern Disaster Area Bond financing, a business using the tax-exempt bond proceeds must have suffered a loss attributable to the storms, tornados or flooding, or such business must be designated by the Executive Director of IFA as replacing a business that suffered a loss due to the storms, tornados or flooding. Because Iowa lost numerous businesses as a result of the devastation caused by the storms, tornados and flooding, many businesses locating, expanding or improving facilities in Iowa can be considered as replacing a business that suffered a loss.

Accordingly, potential borrowers of the proceeds of Midwestern Disaster Area Bonds include:

  • Businesses that did not suffer a loss from the 2008 disaster events but are designated by the
    Executive Director of IFA as replacing a business that suffered such a loss; and
  • Businesses that did suffer a loss from the 2008 disaster events, whether direct or indirect.

Eligible businesses can use the proceeds for new capital projects and to rebuild and repair facilities (including certain refinancing of prior expenditures used to rebuild and repair damaged facilities).

By way of example, Midwestern Disaster Area Bonds proceeds can be used to finance real property for projects such as manufacturing facilities, retail businesses and shopping centers, auto dealerships, restaurants, office buildings, warehouses and storage facilities, medical office buildings and other medical facilities, commercial development, and agricultural facilities and improvements.

IFA has adopted administrative rules detailing the process and requirements associated with obtaining an allocation of this bonding authority. Additional information about this recovery resource can be found at the IFA website: www.IowaFinanceAuthority.gov.

THE FOREGOING DISCUSSION IS INTENDED TO BE ONLY A BRIEF SUMMARY OF THE ACT AND THE EXECUTIVE ORDER. IT IS NOT INTENDED TO BE LEGAL ADVICE WITH RESPECT TO ANY SPECIFIC PROJECT OR FINANCING, AND IT MAY NOT BE RELIED UPON AS SUCH ADVICE.