OAR 123-011-0035: Determination of Eligibility

(1) The Department shall review the application. (2) The Department shall make a recommendation to the Finance Committee to either approve or deny the application for eligibility for Economic Development Revenue Bonds. The review of the application will be based upon the standards set forth in this rule: (a) The following Economic Development Projects are eligible for Economic Development Revenue Bonds, unless otherwise prohibited under this section: (A) Manufacturing or other industrial production; (B) Agricultural development or food processing; (C) Aquaculture development or seafood processing; (D) Development or improved utilization of natural resources; (E) Research and development; (F) Destination facilities other than retail or food service businesses; (G) Convention and trade centers; (H) Construction of buildings for corporate headquarters; (I) Product distribution facilities; (J) Transportation or freight facilities; (K) Scientific testing including, but not limited to, medical, clinical or engineering testing services; (L) Sports facilities not otherwise prohibited under paragraph (2)(b)(D) of this rule; (M) Nonprofit entities organized under Section 501(c)(3) of the U.S. Internal Revenue Code ; (N) Utilities, as allowed by ORS 285B.323(2); (O) Management of waste; (P) Other activities which represent a new technology or type of economic enterprise that the Finance Committee determines are needed to diversify the economic base of an area, or any other activities allowed by Federal law. (b) Activities or projects that will not be considered for the issuance of Oregon Economic Development Revenue Bonds include: (A) Retail businesses and shopping centers; (B) Food service not part of a convention center or destination resort; (C) Professional corporations for medicine, law, dentistry, or finance; (D) Athletic, racquetball, handball clubs, amusement parks, or similar endeavors; (E) Commercial office buildings except for corporate headquarters, unless the office building supports the eligible economic activities listed in (2)(a) of this section; (F) Activities that maintain private memberships; are not open to the general public; or do not serve a broad cross section of the general public; (c) The following serve as an elaboration and clarification of activities which qualify as Eligible Projects for Economic Development Revenue Bonds: (A) "Destination Facility" means a project which has a significant impact on the regional tourism economy and has the capacity to be marketed to national or international markets. Incidental food service facilities may be included. Sleeping accommodations without unique attraction capabilities are not eligible; (B) "Convention and Trade Centers" may include sleeping accommodations, but the majority of the total bond issue must be used for convention meeting facilities. Such facilities must have the capacity to seat a minimum of 300 people. However, the Finance Committee may approve financing for projects, as convention centers, consisting solely or primarily of sleeping accommodations, if the Applicant sufficiently demonstrates existing sleeping accommodations are inadequate for existing meeting facility space; (C) "Corporate Headquarters" may qualify if a minimum of 75 percent of the floor space is allocated to the corporate headquarter function. Corporate headquarters do not include professional corporations for medicine, law, dentistry, or finance or office space to be leased to others; (D) "Transportation" is not intended to include rolling stock or other highly moveable equipment operated by a carrier for hire; (E) In deciding whether or not to approve economic development revenue bonding for a utility project, the Finance Committee may consider all relevant factors including but not limited to the utility company's published tariff schedules and construction and extension procedures as filed with the Oregon Public Utility Commission; (F) "Pollution Control" equipment may qualify as part of projects that otherwise qualifies under this rule. Where pollution control equipment costs are incidental to the total capital investment of the project, the Finance Committee may qualify such equipment, provided the Oregon Department of Environmental Quality concurs; (G) "In-State Plant Relocations" not accompanied by an expansion of the Applicant's business or employment, may be considered when the Applicant is able to demonstrate that: (i) The relocation is caused by reasons beyond its control; or (ii) The relocation will not cause a resulting loss of employment at the former site of the business; or (iii) The relocation is necessary for the continued operation of the business. (H) "Nonprofit entities" do not include religious or fraternal organizations; (I) "Developer Project" may qualify. The Finance Committee shall have right of approval for each tenant occupying 25 percent or more of the leasable space. No more than 25 percent of the leasable space shall be leased to tenants relocating from another Oregon location, unless such relocation is accompanied by an expansion of the tenants' labor force. These conditions shall be incorporated into bond documents, shall survive closing and shall be enforceable for the term of the bond. (d) The following serves as an elaboration and clarification of the qualifications of an Eligible Project for which Economic Development Revenue Bond proceeds can be used: (A) The Applicant shall provide detailed information on the proposed uses of Bond proceeds for research and development costs. Research and development costs shall not represent a significant portion of the total amount of the Bonds, at the discretion of the Finance Committee. (B) The Applicant shall provide detailed information on how Bond proceeds will be used for operating expenses. Operating expenses shall not represent a significant portion of the total amount of the Bonds, at the discretion of the Finance Committee. (C) Unless the Finance Committee determines otherwise, Bond proceeds shall not be used to refinance outstanding financing, but may be used to reimburse approved Applicants for short-term financing for costs of Capital Assets. (D) Unless the Finance Committee determines otherwise, Bond proceeds may only be used for capitalized interest that accrued prior to completion of an Eligible Project and that is directly related to the financing of a Capital Asset. (e) Public Purpose. The Applicant must demonstrate that a public purpose is served by the proposed Economic Development Project through economic diversification, creation of new jobs including construction activity, construction occurring before it otherwise could or would, economic activity occurring during economic slumps, tax dollars remaining in the state, increased productivity, or other public health benefit as determined by the Finance Committee. The Applicant is encouraged to demonstrate as many public purposes for the proposed project as can be prudently shown.; The Finance Committee shall consider these public purposes in determining whether a proposed project will produce benefits substantially in Oregon, pursuant to OAR 123-011-0025(5)(b). (f) Prior to determining that an Economic Development Project is an Eligible Project, the Finance Committee shall: (A) Determine that the action is cost effective, considering both major public expenses and major public benefits, unless the Economic Development Project involves an Exempt Facility; (B) Find that the project involved is consistent with the Department's comprehensive policy and programs; (C) Find that the project will produce goods or services which are sold in markets for which national or international competition exists, unless the Economic Development Project involves an Exempt Facility; (D) Determine that, if the project is to be constructed and operated by a Non-profit Entity, the project will not compete significantly with local for-profit businesses; (E) Determine that the action is the best use of the moneys involved, considering other pending applications for those moneys; and (F) Provide for public notice of, and public comment on, the action. The public hearing is not a contested case hearing. Members of the public are invited to present written or oral testimony. Only Finance Committee members and department staff will ask questions. (G) Notify a senior official (such as mayor or city manager) of the city or county (if in unincorporated county property) in which the project will be located about the project and the potential use of Economic Development Revenue Bonds. (g) The Finance Committee may deny an application if the Applicant does not demonstrate, to the satisfaction of the Finance Committee, that the project is financially feasible. When bond proceeds for an Economic Development Project are to be used for research and development costs or operating expenses, the determination of financial feasibility may include one or more of the following criterion: (A) The adequacy of long-term equity investment in the project; (B) Collateral value of assets as supported by appraisals; or (C) Other valuations or factors determined to be necessary by the Finance Committee. (h) The Finance Committee may deny an application if the Applicant (or any of the principals in the Applicant) is subject to any existing, pending or threatened litigation or unasserted claim, unless such litigation or claim is fully disclosed to the Finance Committee and the arrangements for the settlement thereof are acceptable to the Finance Committee. In any case where such litigation or claim is unknown to the Finance Committee at the time project eligibility is granted or if such litigation or claim arises subsequent to a grant of project eligibility, the Finance Committee may rescind the project eligibility; (i) The Finance Committee may make any reasonable requirement of the Applicant related to the administration of the Oregon Economic Development Revenue Bond Program, including requirements that would survive closing and be enforceable for the term of the Bond. (j) If Bond proceeds for an Economic Development Project are to be used for research and development costs or operating expenses, the Finance Committee may require, regardless of the method of sale, that the proposed Bond issuance receive an investment grade rating from a nationally recognized rating agency (Moody’s Investors Service, Fitch Ratings or Stand and Poor’s Corporation) or receive an equivalent rating through the use of credit enhancement. However, the investment grade rating requirement may be waived for Applicants who are listed on the New York Stock Exchange (NYSE) or the National Association of Securities Dealers Exchange (NASDAQ). (k) If Bond proceeds for an Economic Development Project are to be used for research and development costs or operating expenses and research and development costs and operating expenses total more than 5% of the total amount of the Bonds, the Finance Committee shall approve the investment bankers, remarketing agents, and other finance team professionals, in addition to the approvals from Oregon State Treasury. (l) If Bond proceeds for an Economic Development Project are to be used for research and development costs or operating expenses, the Finance Committee may impose requirements on the resale of the Bonds. (3) The Finance Committee shall issue a Resolution for Project Eligibility for each economic development project determined to be an eligible project. The term of eligibility shall last 12 months unless extended by the department or the Finance Committee. (4) Administrative rules in effect at the time the Finance Committee determines a project to be eligible shall continue to govern the project until the bonds have been redeemed, notwithstanding any contrary provision in any subsequently adopted administrative rule. [Publications: Publications referenced are available from the agency.]