NAICU Washington Update

Obscure Stimulus Tax Provision Could Help Small Colleges

March 09, 2009

In addition to the obvious higher education provisions in the recently signed economic stimulus law (see February 23 Washington Update), an additional small-issue bonding provision could also help colleges renovate and repair facilities.  Specifically, the provision will increase the availability of bank funds to colleges for building projects by raising the annual limit on borrowing from $10 million to $30 million - and this limit will apply to the borrower, not to the issuer, as it has in the past.

The $10 million limit has been in place since 1986, and has restricted the ability of small nonprofits to borrow money for renovations or repairs from local banks.  State bonding officials have been trying to get this limit increased for over a decade.  The provision in the stimulus law will allow an alternate mechanism for financing through community banks, instead of via the public market, in the hope that the change will get some immediate capital to our colleges.  It's possible that this could be especially beneficial to small private colleges, giving them access to small loans without the high expenses they have faced in the past.

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