As a result of the economies of scale and pooled nature of the loan program, the costs of issuance and the interest rate of a loan are typically less than the costs associated with other types of borrowings. The loan program is intended to offer participants a more flexible, efficient and time saving means of borrowing money. Once a participant has been approved for entry into the loan program, it is quick and easy way to borrow.
The projects that are financed by a participant through the commercial paper loan program are typically capital improvement and infrastructure projects involving short-term and intermediate-term borrowing needs. Examples of these projects include construction loan financing, in which the loan will be repaid from the issuance of long-term bonds, or pay-as-you-go improvements for which sufficient monies are not available on the date of commencement of the construction. Participants have financed a variety of capital improvements over the years.
Eligibility for Participation
The Commission is authorized to loan proceeds of its commercial paper notes to cities, counties, school boards and special districts throughout the State of Florida. Entities that wish to participate in the loan program should contact the Florida Association of Counties. As part of the application process, a potential participant will be asked to send various financial information. The types of documentation generally required include the three most recent CAFRs, 3 years of audited financials, the most recently adopted budget and proposed budget, if applicable, capital improvement plan, and a schedule of non-ad valorem revenues and taxable values for the past 3 years.
If an entity is approved by J.P. Morgan Bank and the Florida Local Government Finance Commission for participation in the loan program, it will be required to have its governing body adopt a short resolution authorizing the form of a loan agreement pursuant to which the monies will be loaned from the commercial paper notes to the participant. The form of the loan agreement and resolution will be prepared by the Commission’s Counsel, Nabors, Giblin, & Nickerson, P.A.
Because of the pooled structure of the program, interest charged to participants is a blended rate of the commercial paper notes issued by the commission and outstanding in any particular month. Commercial paper is a short-term, fixed rate instrument ranging from one day to 270 days in duration. Rates for individual issues vary depending on market conditions on the day of the sale.
The Commission currently issues two series of commercial paper. Series A commercial paper is intended to fund loans for most general governmental projects for counties, cities, school boards, and certain special districts. Series B commercial paper are issued to fund loans, the interest payments on which may be subject to the federal alternative minimum tax.
These projects usually involve airports, seaports, resources recovery facilities and other projects with private ctivities.
All fees and the approval process are the same for both programs.