501 (c)(3) Revenue Bonds
The City of Minneapolis provides low-cost, tax-exempt bond financing for capital improvement projects to nonprofit organizations. Projects can include land acquisition, new-facility construction, additions to existing facilities, purchase and renovation of existing structure and purchase of fixed equipment.
Typical borrowers include hospitals, nursing homes, health care providers, educational institutions, museums, performing arts organizations and other community organizations who are tax exempt under Section 501(c)(3) of the Internal Revenue Code.
How does the 501 (c) (3) Revenue Bond Program work?
- 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.
What are the 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.
What information do you need to provide?
- 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.
For more information, contact Charles Curtis at (612) 673-5069.
All programs and guidelines are subject to change without notice.
Online information from the City of Minneapolis at MinneapolisMN.gov/CPED
Last updated Feb 15, 2019