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ECONOMIC AND URBAN DEVELOPMENT MEMORANDUM <br /> Memo No. 09-100 <br /> December 2, 2009 <br /> TO: Honorable Mayor Michael T. McElroy and City Council <br /> FROM: Ryan P. McCrady, City Manager <br /> Greg C. Crowe,Assistant City Manal6 <br /> SUBJECT: Recovery Zone Economic and Facility Bond Authority <br /> SUMMARY RECOMMENDATION: Staff recommends approval of the attached ordinance <br /> designating the City as a City-Wide Recovery Zone and accepting the transfer of$3,469,000 of Recovery <br /> Zone Economic Bond authority and $5,204,000 of Recovery Zone Facility Bond authority from Macon <br /> County. <br /> BACKGROUND: As part of the American Recover and Reinvestment Act of 2009 (or ARRA) Macon <br /> County was allocated $3,469,000 of Recovery Zone Economic Bond authority and $5,204,000 of <br /> Recovery Zone Facility Bond authority. A Recovery Zone is any area designated as having significant <br /> poverty, unemployment, home foreclosures or general distress. The City will have until December 31, <br /> 2010 to use the Recovery Zone Bond allocations. <br /> Recovery Zone Economic Development Bonds (or RZEDBs)reduce borrowing costs through a direct <br /> federal subsidy to the issuer that is receivable on each interest payment date of the bonds. Like with <br /> traditional tax-exempt bonds, RZEDBs are issued for public purposes such as roads or county buildings, <br /> and are General Obligation or Revenue Bonds. The interest rates for RZEDBs are higher than those of <br /> tax-exempt bonds because the income for the investor is taxable. The higher interest rates on RZEDBs are <br /> then offset by the federal subsidy to the issuer,equal to 45% of interest payable. <br /> Recovery Zone Facility Bonds (or RZFBs) are private activity bonds issued on a tax-exempt basis. These <br /> bonds may be issued for a range of business activities. By offering project financing at a tax-exempt <br /> interest cost,RZFBs are intended to spur business development that would not otherwise happen. <br /> POTENTIAL OBJECTION: None. <br /> INPUT FROM OTHER SOURCES: The Macon County Board approved the transfer of the allocations <br /> to the City of Decatur on November 12, 2009. <br /> STAFF REFERENCE: Any additional questions may be forwarded to Greg Crowe at 424-2727 or at <br /> gcrowe@decaturil.gov. <br /> BUDGET/TIME IMPLICATIONS: N/A <br />