No-cost (to taxpayers) bonds benefit Jewish Center, RTI

Durham County commissioners approved bond issues of $32.5 million Monday night.
 
They won't cost taxpayers a cent, but they should save the Durham-Chapel Hill Jewish Federation and the Research Triangle Institute a good bit of money.

The commissioners’ approved “in principle” issuance of two “Special Purpose Project Revenue Bonds”: $7.5 million for the Jewish Federation’s planned Charlotte & Dick Levin Jewish Community Center on Cornwallis Road; and $25 million for RTI’s ninth office building.

"They're analogous to industrial development bonds," said attorney Mary Nash Rusher, the county's bond counsel, but intended to serve certain types of nonprofit institutions. The state extended eligibility to "special purpose projects" in 2000.

"It became apparent there were a number of nonprofits out there the state would be willing to help," she said -- museums, orphanages, auditoriums, gymnasia, research facilities and the like.

Issuing entity is the Durham County Industrial Facilities and Pollution Control Authority, but the bonds are not backed by the county's "faith and credit; and responsibility for paying them rests entirely with the borrower, County Manager Mike Ruffin said.

Before the bonds may be issued, state law requires the borrower have a buyer contracted for them; and county commissioners must approve them after a public hearing.

Because the bonds are government-issued, the buyer -- typically a bank -- pays no income tax on the return from its investment, she said. And because the buyer pays no income tax, it charges the borrower a lower interest rate than it would on a conventional construction loan.

"From the bank's perspective, it's probably a wash," Rusher said. "They're happy to get the loan."

Benefits aside, such issuances are "very rare," said Ruffin. In his nine years as the county's manager, "I think we've had maybe two.

"We had a lot in the '80s and '90s, but as credit markets changed their lending criteria they just went away. Now with the credit markets tightening we are beginning to see it again," he said.

Last year’s federal stimulus bill also simplified accounting for the bonds, making them more attractive to banks, Rusher said.