During its regular session last spring, the Texas Legislature authorized Gulf Coast Authority (GCA) to provide financial services nationwide with the passage of HB 2390.
HB 2390 modernizes GCA's current statutory authority to allow its Industrial Development Authority (GCIDA) to provide governmental conduit bond services nationwide and to provide financial services for Property Assessed Clean Energy (PACE) projects also nationally; both initiatives (or authorities) are focused on support of Texas' economic development.
Many industrial partners are familiar with governmental conduit bond services through Private Activity Bonds (PABs), which allow for the financing of significant private activity projects. With investment and growth in the state of Texas, GCA has seen an increase in inquiries regarding PABs for the funding of projects. These bonds can be issued as tax-exempt or taxable depending on the type of facility that is being financed.
GCA has the authority to issue tax-exempt bonds for Governmental Municipal Bonds and PABs. The types of tax-exempt PABs that GCA can issue include water supply facilities, sewage facilities, solid waste disposal facilities, local furnishing of steam or electricity, dock and wharf facilities, and airports, with the exception of water pollution and air pollution control facilities. Taxable PABs can be issued by GCA for water pollution control facilities and air pollution control facilities. In addition, water supply facilities (that are not governmental entities) where the water is not considered available for public use can qualify for these taxable bonds. Qualifications and further restrictions are defined in the federal tax code.
An industrial development corporation of GCA can also issue taxable bonds for the many types of facilities that are built for the creation of primary jobs. Examples of these types of facilities or jobs include R&D facilities; military facilities; transportation facilities; distribution centers; small warehouse facilities that serve as decentralized storage and distribution centers; primary job training facilities used by higher education institutions; regional or national corporate headquarter facilities; streets and roads, rail spurs, water and sewer facilities; electric utilities, gas utilities drainage, site improvements and related improvements; telecommunication and internet improvements; beach remediation along the Gulf of Mexico; projects for the creation or retention of primary jobs for the Coast Guard (subject to certain conditions); and projects suitable for use for a career center (subject to certain conditions).
The PACE program is an innovative financial program that provides low-cost, long-term financing for water and energy efficiency and conservation improvements, including distributed generation to commercial and industrial properties. In this program, the property owner can make qualified improvements using a property assessment as the repayment mechanism. Funds are provided by a private lender to pay for improvements. In exchange, the property owner voluntarily requests an assessment on the property until the assessment is paid in full. Depending on the project, PACE assessment payments can be offset by the project's utility cost savings. The term of the PACE assessments may extend up to the projected life of the improvement. Qualified projects under PACE must be permanently fixed to the real property and have a demonstrated ability to decrease water consumption or demand or energy consumption or demand. Approximately 33 projects in Texas have been funded using the PACE mechanism and these projects include water reuse in buildings, as well as various energy efficiency projects. As increasing attention is paid to water and energy consumption, many existing facilities will be assessing how to successfully decrease their water and/or energy profiles, and this financing tool may be useful.
To date, GCA has provided over $3.5 billion in PABs, obligations which have been paid for by the project sponsors. GCA infrastructure investments can create lower costs for its industrial partners, provide more options for project financing, and yield significant environmental and safety benefits to Texas.
For more information, contact GCA Financial Director Carrie Latimer at (281) 488-4115 or visit www.gcatx.org.
