Financing your capital project with revenue bonds
Nonprofit organizations can apply to receive low-cost financing for their capital improvement projects.
See if your project is eligible
- You must be a nonprofit organization doing a capital improvement project.
- Your organization must be tax exempt under Section 501(c)(3) of the Internal Revenue Code.
Projects can include:
- Land acquisition
- New-facility construction
- Additions to existing facilities
- Purchase and renovation of existing structure
- Purchase of fixed equipment
Typical borrowers include:
- Nursing homes
- Health care providers
- Educational institutions
- Performing arts organizations
- Revenue bonds are issued either free-standing or through the Common Bond Fund (CBF).
- Free-standing revenue bonds are issued with the strength of the project dictating terms and conditions of financing and interest rate.
- Bonds issued through the CBF are investment-grade instruments with an "A+" municipal-bond rating based on the security provided by the CBF, resulting in lower interest rates for the borrower.
- Revenue bonds are marketed to either institutional investors (insurance companies, banks and pension funds) through a private placement, or sold to the general public through a public offering of the bonds.
- A City staff person will handle the revenue bond request from initial inquiry through post-closing monitoring.
- The complete public approval process takes about 90 days.
- The City of Minneapolis approve revenue bond projects based on financial strength, credit worthiness and public purpose served.
Rates, terms and fees
- Tax-exempt revenue bonds can be issued below commercial-market interest rates because interest earnings to the purchaser are generally exempt from federal, state and local income taxes.
- Revenue bond issuance expenses include bond counsel, underwriter, corporate counsel, inspecting architect, title insurance and other fees. These fees may be financed through the revenue bond up to certain limits.
- Revenue bond financing can be fixed rate, with terms of 20 to 30 years, often at interest rates below or equal to market interest.
- Narrative on the organization.
- Financial statements for the past three years, any interim statements and projections for the next two years.
- General description of the proposed project, plans and estimates of project costs.
- Description of funding sources. Appraisals and environmental reports about the proposed project.
- Borrower must have 501(c)(3) status.