Leasing and Off-Balance Sheet Financing

The Port Authority has experience with both capital leases and operating leases, and can partner with a business to finance a capital improvement project that obtains the desired accounting treatment for the business. A Port Authority revenue bond can utilize a capital lease structure that, subject to business’ accounting practices, will transfer the benefits and burdens of owning an asset and will constitute a debt of the business. A Port Authority revenue bond can utilize an operating lease structure that, subject to a business’ accounting practices, will avoid characterization of the lease as debt on the business’ balance sheet and preserve the business’ debt capacity for other projects.

Sales Tax Exempt Financings

The Port Authority is not required to pay certain state and local sales taxes on construction materials used to construct projects owned by the Port Authority. In order to claim ownership of a project, the Port Authority must have an ownership interest in the project to be constructed and an ownership interest in the real property on which the project is located. Transfer arrangements and leasing arrangements can be utilized to allow a private business to share the benefit of the Port Authority’s state and local sales tax exemption for its construction project.

Bond Financing Alternatives and Bank Placement Transactions

The Warren County Port Authority and its team of finance professionals can provide access to the capital markets for a borrower by issuing bonds and lending the bond proceeds to the borrower. Depending on the creditworthiness of the borrower, there are a number of ways in which the Port Authority can market its bonds on behalf of a borrower, for instance:

  1. A borrower with an investment-grade credit rating can request the Port Authority to sell bonds to institutional investors on the strength of the borrower’s credit.
  2. A borrower without investment-grade credit can seek credit enhancement such as a letter of credit from a financial institution in order to enhance their credit and access institutional investors. With credit enhancement, the Port Authority can sell bonds to institutional investors on the strength of the credit enhancement.
  3. A borrower without investment-grade credit can utilize the Port Authority to place bonds with the borrower’s lending institution. The borrower’s lending institution can simultaneously fund its loan to the borrower and purchase and hold the Port Authority’s bonds as evidence of loan repayment.
  4. A borrower without investment-grade credit can utilize the Port Authority to place bonds with an affiliate of the borrower willing to bear the risk of the investment.

The Port Authority has experience partnering with banks, equipment leasing companies, and other lenders to provide the customers of those lenders with access to tax-exempt markets, credit-enhanced financing for projects that the lender does not have enough credit to finance itself, and fixed-and variable-rate financing. A bank can purchase Port Authority revenue bonds, which can create earned income for a bank and may provide the bank with certain tax-favored results.