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Using Tax-Exempt Financing to Help Attract Foreign-Direct Investment
If you are a manufacturer, bank, or economic-development organization (EDO), you need to know about Section 144 of the IRS Tax code: https://www.irs.gov/Tax-Exempt-Bonds/Section-144-Small-Issue-Bond-Defined-10000000-Limit-Manufacturing-Facility. This government-sponsored program is meant to help stimulate public and private investment from abroad and here locally. Manufacturers, assisted living, multi-unit, waste management, and other for-profit entities can take advantage of this […]
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If you are a manufacturer, bank, or economic-development organization (EDO), you need to know about Section 144 of the IRS Tax code: https://www.irs.gov/Tax-Exempt-Bonds/Section-144-Small-Issue-Bond-Defined-10000000-Limit-Manufacturing-Facility. This government-sponsored program is meant to help stimulate public and private investment from abroad and here locally. Manufacturers, assisted living, multi-unit, waste management, and other for-profit entities can take advantage of this tax-exempt financing.
Tax-exempt financing for manufacturers
Tax-exempt financing for manufacturers under Section 144 of the Internal Revenue Code can save borrowers nearly 35 percent on a loan through a bank. Tax-exempt financing is a broad term that also includes tax-exempt loans made by a bank or private lender to a private enterprise to finance the costs of capital projects. Tax-exempt financing is used for the purpose of investing in new facilities, production lines, machinery and equipment, and technological advancements that help bolster productivity and profit. When utilizing this program, a bank does not have to pay taxes to the federal government and in turn, can pass these savings on to the borrower, with an average savings of 35 percent.
Tax-exempt financing may be used to fund the following assets:
Land: Includes acquisition, site preparation, improvements, infrastructure development (e.g., water, sewer, & rail), and environmental testing.
Building: Includes acquisition, construction, rehabilitation, engineering, architectural, legal, and other related costs
Soft Costs: Includes legal, architectural, engineering, surveying, test boring, title insurance, appraisals, accounting, and financing costs for the project.
Equipment: Includes acquisition, delivery, and installation.
Company acquisition: The acquisition of a manufacturing company structured as an asset purchase can be financed with tax-exempt debt.
Helping foreign and domestic manufacturers expand and invest: Low-cost capital access remains the primary strength of tax-exempt financing. Across the United States, there are billions of dollars available every year for manufacturers to use to fund. However, most EDOs and banks are not aware of this unique way to help manufacturers get a lower rate.
Loan structure
Any loan structure can be used to accommodate a tax-exempt loan including a lease structure. Interest earned by the bank is exempt from federal and state income taxes. The bank, in turn, passes on a lower interest rate — typically, about 35 percent to 40 percent lower — to the borrower. This can translate into significant savings over the life of the loan.
Who’s helping manufacturers
That’s the dilemma? No one is. Most capital-market bankers know about tax-exempt financing but aren’t talking to manufacturers about it. Why? Because capital-market bankers like larger loans ($30 million to $300 million), and by law, a tax-exempt loan to a manufacturer cannot exceed $10 million. On the other hand, most commercial lenders are very interested in loans of
$10 million or less. Unfortunately, most commercial lenders are not aware that they can even offer a manufacturer a tax-exempt loan. The result is no one, neither the capital-market bankers nor the commercial lenders, is telling the manufacturers about the opportunities available with tax-exempt financing.
Why not an IDB?
Some of you may be asking, why not use an industrial development bond (IDB) to fund the debt? Bond-market transactions are actually more complicated and more costly than tax-exempt bank loans (TEBL). In a bond offering you have to pay:
The letter of credit cost alone can run 1.5 percent to 2 percent annually. That’s the same as a lender offering an interest rate 1.5 percent to 2 percent higher than their competitors.
In a TEBL, you do not need an underwriter, a trustee, a remarketing agent, or a letter of credit bank. TEBLs are not as complicated as a bond deal since a TEBL is simply a commercial loan with a tax-exempt interest rate.
The math of a tax-exempt bank loan
On a traditional commercial loan, a bank charges, say, 4 percent interest on that loan. On a $1 million loan for one year, the bank earns $40,000 in interest (of course a regular loan would amortize over a much longer period, like 25 years). If it’s paying 35 percent in taxes, from that $40,000 it pays $14,000 in taxes and keeps $26,000.
With a TEBL, the bank doesn’t pay any income taxes on the interest it receives, so as long as it can still make that $26,000, the bank is just as happy. The manufacturer is much happier as it’s saving a lot of money. The interest rate the bank needs to charge on that $1 million to make $26,000 is, of course, 2.6 percent.
And remember, that’s only for a single year — which would never be the case with a manufacturing loan like this. Over a typical 25-year loan period, a manufacturer that borrows $10 million is looking at roughly $2.7 million in savings.
Mark Lesselroth is the principal of Brenner Business Development. Contact him at mark@brennerbd.com
How Trump got this far and why the pundits never saw it coming
A big question about Donald Trump is how did they get it so wrong? That is the pundits, the party elite, consultants, editorial writers, and the other candidates. How come they were so totally wrong about the rise of Trump? The answer is Joe the Plumber. He’s the guy who dared to question Barrack Obama
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A big question about Donald Trump is how did they get it so wrong? That is the pundits, the party elite, consultants, editorial writers, and the other candidates. How come they were so totally wrong about the rise of Trump?
The answer is Joe the Plumber.
He’s the guy who dared to question Barrack Obama during a campaign stop in 2008. Joe questioned Obama’s tax-policy proposals. He told the candidate he wanted to start a plumbing business. John McCain quickly made Joe the Plumber part of his campaign.
He did so because neither he nor any of the GOP establishment people behind his campaign knew a plumber. (To be sure, his running mate Sarah Palin did.) And, the establishment folks don’t know any plumbers today. They don’t know electricians, bartenders, and brick layers. They don’t know barbers and cops. They don’t know Army privates and machine operators. They don’t know truckers and waitresses.
Candidates want votes from these folks. So in every campaign, they assault us with fakery. The candidates bowl a strike at a bowling alley. Or raise a mug of suds with miners. Or drive a tank or tractor. Or eat a hot dog with county fair-goers.
But once the cameras quit, they don’t know these folks. They don’t sit in saloons with them. They don’t party with them at the Elks Club. They are not off to the church chicken supper tonight. This goes for the candidates as much as for the pundits, consultants, and commentators.
Because they don’t really know such folks, they did such a lousy job predicting how they will vote. Because they don’t really listen to such folks, they don’t know how angry many of them are about how this country is being run.
These are important voters, because many are on the blue-collar side of the Democratic Party. They’re not crazy about the intellectual side of that party. The academics and social workers don’t do much for them. A lot of these voters jumped ship and voted for Ronald Reagan for president twice. A lot of them are voting for Trump today.
Now, Trump’s support is broader than that. But if the pundit class had been slurping suds with plumbers over the years, they would have heard alarm bells. Bells so loud they would have known the noise would resonate well beyond the plumbers.
But they don’t hang out with the low brows; they don’t hear them. The establishment figures sip Sancerre with their fellows, and hear only what their fellows think. Instead of what the Great Unwashed think. Most of them haven’t gripped a calloused hand in years.
If Trump wins this battle, someone may declare it was won in the truck stops, greasy spoons, factory floors, saloons, and county fairs of this country. The very places the media and political elite meet and greet during campaigns. The very places they avoid between elections.
Now, I am not recommending these cats change their social habits. But in an election like this, they should hang up their predicting boots, because they’ve got no mud on those boots. And most of their predictions thus far have fizzled.
A few elections ago, a network media gal in the Big Apple made a big announcement. She wailed that she could not understand how Reagan got elected, because nobody she knew voted for him.
A few weeks ago, I saw a similar comment from a female movie star about The Donald. She does not know a single person who plans to vote for him.
Maybe she should attend one of her movies, and chat up the guy or gal who vacuums the popcorn between shows.
From Tom … as in Morgan.
Tom Morgan writes about political, financial, and other subjects from his home near Oneonta. Several upstate radio stations carry his daily commentary, Tom Morgan’s Money Talk. Contact him at tomasinmorgan@yahoo.com
A Better Alternative to Raising the Minimum Wage
With the deadline for the state budget approaching, one of the most contentious issues remaining is whether the state’s minimum wage should be increased to $15 an hour. This issue does not have to be included in this year’s budget, but rather could be accomplished in a standalone bill. However, the governor and Assembly majority,
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With the deadline for the state budget approaching, one of the most contentious issues remaining is whether the state’s minimum wage should be increased to $15 an hour. This issue does not have to be included in this year’s budget, but rather could be accomplished in a standalone bill. However, the governor and Assembly majority, which is dominated by Downstate legislators, believe their best chance of instituting the 67 percent increase in the minimum wage is to include it in the budget. This way, legislators who may be opposed to such a substantial increase in the minimum wage would be forced to vote for it or otherwise vote against other priorities such as increasing school aid or middle-class tax cuts, which they support.
Constituents who have reached out to my office on the proposed $15 an hour minimum-wage proposal have been overwhelmingly opposed. My office sent out a survey to business owners within my district, and of the nearly 100 responses we received back, about 90 percent of those opposed the increase. About 64 percent said that the wage hike would either force them to lay off workers or worse, close their doors.
My office has also heard from not-for-profits, particularly in the health-care field, who rely on government funding for revenue. They have indicated that unless we increase funding for them in tandem with the mandated wage increase (mainly through Medicaid reimbursement), they will not be able to provide the services they currently provide to our community. Farmers, who traditionally have very tight profit margins, have also been vocal in their opposition to the $15 an hour minimum wage.
It is difficult to comprehend how businesses won’t be forced to reinvent themselves in the face of such a mandated increase. Likely, the increase will force businesses to limit their hiring, cut employee hours, and automate, where possible.
In my mind, a better way to help those who are at the low-end of the pay scale would be to expand the earned income tax credit (EITC). The EITC is a federal and state tax credit for low- and moderate-income working families and individuals. The EITC is refundable so that if the credit exceeds a low-wage worker’s income-tax liability, both the state and federal government will refund the balance to the taxpayer. In order to receive the EITC, the taxpayer must have earnings from employment. New York’s EITC supplements the federal EITC and is equal to 30 percent of the federal EITC.
In contrast to a minimum-wage increase, an increase in the EITC on the state level directly targets low- and moderate-waged workers. Further, it encourages people to work, because in order to receive the EITC you must have a job. To help low-wage income earners lift themselves out of poverty, we should raise the state EITC to 45 percent of the federal EITC. This would provide additional incentive for people to find work and provide them with the earnings necessary to support themselves and their families.
William (Will) A. Barclay is the Republican representative of the 120th New York Assembly District, which encompasses most of Oswego County, including the cities of Oswego and Fulton, as well as the town of Lysander in Onondaga County and town of Ellisburg in Jefferson County. Contact him at barclaw@assembly.state.ny.us, or (315) 598-5185.

M&T Bank has promoted MELISSA S. BOLLMAN to administrative VP. She has been with M&T for 18 years, holding several position, most recently serving as VP. Bollman received bachelor’s degree in business management from SUNY Buffalo and is attending the CBA Executive Banking School at Furman University in Greenville, South Carolina.
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M&T Bank has promoted MELISSA S. BOLLMAN to administrative VP. She has been with M&T for 18 years, holding several position, most recently serving as VP. Bollman received bachelor’s degree in business management from SUNY Buffalo and is attending the CBA Executive Banking School at Furman University in Greenville, South Carolina.

First Niagara Financial Group, Inc. has named MICHAEL PRINCE first VP, senior retail manager in the CNY area. He has more than 16 years of experience in the financial-services industry and will manage 26 retail branches in Syracuse, Utica, and the North Country. Prince has been with First Niagara since 2012, where he was most
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First Niagara Financial Group, Inc. has named MICHAEL PRINCE first VP, senior retail manager in the CNY area. He has more than 16 years of experience in the financial-services industry and will manage 26 retail branches in Syracuse, Utica, and the North Country. Prince has been with First Niagara since 2012, where he was most recently the sales and service integration manager. He also has held leadership roles in credit and wealth management. Prince received his bachelor’s degree and MBA from the Rochester Institute of Technology.
Barton & Loguidice announced the following promotions. JOHANNA E. DUFFY was named managing environmental scientist. She is a graduate of SUNY ESF and the College of Agriculture and Technology at Cobleskill and is a certified wildlife biologist through the Wildlife Society. MATTHEW D. PATTERSON was named managing engineer QA/QC in the firm’s Bridge group. He
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Barton & Loguidice announced the following promotions. JOHANNA E. DUFFY was named managing environmental scientist. She is a graduate of SUNY ESF and the College of Agriculture and Technology at Cobleskill and is a certified wildlife biologist through the Wildlife Society.
MATTHEW D. PATTERSON was named managing engineer QA/QC in the firm’s Bridge group. He earned master’s and bachelor’s degrees from Syracuse University.
JILLIAN M. BLAKE was named managing engineer in the Solid Waste Group. She is a graduate of Rensselaer Polytechnic Institute.
JESSE D. SEMANCHIK was named managing engineer in Barton & Loguidice’s Water/Wastewater group. He holds a master’s degree from Villanova University and a bachelor’s degree from the University of Delaware.
BENJAMIN W. WERNER was named managing engineer in the Bridge Group. He is a graduate of Rensselaer Polytechnic Institute.
JESSE W. CARY was named senior project engineer in the Facilities group. He is a graduate of Binghamton University.
MICHAEL C. KOCHANEK was named senior project engineer in the Water/Wastewater group. He is a graduate of Syracuse University.
GINA L. MILLER was named senior project engineer in the Highway group. She graduated from Syracuse University.
LINDSAY R. REICHLEIN was appointed senior project engineer in the Environmental group. She is a member of Engineers Without Borders Syracuse Professional Chapter.
ERIC G. SCHULER has earned his professional engineers license and is promoted to project engineer in the firm’s Wastewater group. He graduated from Clarkson University.

BRANDON BARBA has joined the Syracuse branch of AXA Advisors, LLC. He holds a bachelor’s degree in history and secondary education from SUNY Oswego. Barba has also earned his Series 7, 63, and NYS Life and Health licenses.
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BRANDON BARBA has joined the Syracuse branch of AXA Advisors, LLC. He holds a bachelor’s degree in history and secondary education from SUNY Oswego. Barba has also earned his Series 7, 63, and NYS Life and Health licenses.

The Strebel Planning Group announced that VICKI PASTORE has accepted the position of financial planner assistant. She earned a degree in humanities from Eckerd College in Saint Petersburg, Florida.
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The Strebel Planning Group announced that VICKI PASTORE has accepted the position of financial planner assistant. She earned a degree in humanities from Eckerd College in Saint Petersburg, Florida.
State Senator John A. DeFrancisco (R-I-C, Syracuse) has hired JOHN D. MCBRIDE as his new district director in Syracuse. He replaces Isabelle Harris, who left the position in February. McBride has more than 25 years experience working in both the private and public sector, most notably serving as a banking officer in finance and commercial
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State Senator John A. DeFrancisco (R-I-C, Syracuse) has hired JOHN D. MCBRIDE as his new district director in Syracuse. He replaces Isabelle Harris, who left the position in February. McBride has more than 25 years experience working in both the private and public sector, most notably serving as a banking officer in finance and commercial lending. He holds a bachelor’s degree in political science from the State University of New York and a master’s degree from the Maxwell School at Syracuse University.
HONORA SPILLANE has joined the administration of Syracuse Mayor Stephanie A. Miner as deputy commissioner for Neighborhood and Business Development. Spillane most recently served as an economic-development specialist for the Onondaga County Office of Economic Development. Her previous jobs include stints as a law clerk for the New York State Department of Environmental Conservation, a
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HONORA SPILLANE has joined the administration of Syracuse Mayor Stephanie A. Miner as deputy commissioner for Neighborhood and Business Development. Spillane most recently served as an economic-development specialist for the Onondaga County Office of Economic Development. Her previous jobs include stints as a law clerk for the New York State Department of Environmental Conservation, a staff assistant for then-U.S. Senator Hillary Rodham Clinton, and a public-relations consultant. Spillane is a 2009 graduate of the Syracuse University (SU) College of Law and also received a master’s degree in public administration from SU’s Maxwell School of Citizenship and Public Affairs. She earned her bachelor’s degree from Boston University. In her new position, Spillane will report to Paul Driscoll, commissioner of neighborhood and business development.
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