Monday, September 26, 2016

Clean Manufacturers Can Qualify for Sales Tax Exclusion

Tesla used it.  So has Karma Automotive, fuel cell manufacturer Bloom Energy, biofuel producer CleanWorld and many other clean technology, alternative energy and recycled product manufacturers.

What they used is a little-known state of California program that allows certain manufacturers to avoid paying sales tax on manufacturing equipment.

With sales taxes running as high as 9% in many areas, the savings can be quite substantial.  Tesla, for example, has already received many millions of dollar in benefits.  For a relatively small manufacturers buying around $2 million in equipment, the benefit can approach $200,000.  This can make a huge difference for a new or growing company.

The California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) administers the program.  CAEATFA, chaired by state Treasurer John Chiang, can allocate up to $100 million in exclusions per year to qualified manufactures.

This tax benefit can be used by many types of manufacturers, including:
  • alternative energy such as solar photovoltaic, biogas, biomass, landfill gas, and renewable fuels;
  • advanced transportation such as electric vehicles; 
  • recycled feedstock users such as composters; and
  • advanced manufacturers, as defined

"We were successful last year to have the continuation of the sales tax exclusion program," says Treasurer Chiang in a recently posted video about the program.  "We think this is an important element in partnering with alternative energy and advanced transportation companies ... to make sure that we continue to spur innovation .. to spur growth in these advanced fields through the 21st century."

California State Treasurer John Chiang

Since it is a tax exclusion, companies receiving the benefit do not receive a check or a tax deduction.  Instead, they are authorized to avoid paying sales tax on qualified equipment.  The benefit doesn't come to them unless and until they actually buy manufacturing equipment.  CAEATFA Executive Director Deana Carrillo is quoted in a Los Angeles Times article  late last year explaining the basic mechanics of the program:

"We're not writing anyone a check.  We're the last dollar in. These guys have got to get their financing together, make their decision, buy their property, get ready to buy the equipment, and then we're giving them a benefit at the margin."  (Source:  here)
Some of the companies that have benefitted from CAEATFA Sales Tax Exclusion
(Note:  Tesla has benefitted from the exclusion under additional applications)  Source:  here


In 2016,CAEATFA reached the $100 million benefit cap early in the year and they are expected to reach the 2017 cap within the fist few months of the year.  They do, however, accept applications on a rolling basis, per the schedule posted on their website here.  Their next application deadline is October 14.  Applications are scored and the highest scoring applications will have the advantage when the 2017 exclusions are given out.

For more information, including application materials, FAQs, fee schedules and more, see the CAEATFA Sales Tax Exclusion website at:  http://www.treasurer.ca.gov/caeatfa/ste/index.asp.

Monday, September 19, 2016

California Green Muni Bond Issuances Top $1.6 Billion

Port of Los Angeles, Midpeninsula Open Space Issuances in September


California government agencies are continuing to expand their green bond issuances.   Two recent bonds pushed the California green muni bond total to over $1.6 billion (see chart below).

The Port of Los Angeles issued $35.2 million in green bonds as part of a larger debt refinancing successfully completed recently. The move marks the first time a U.S. port has entered the growing sustainability bond market where investors support projects and companies making positive social and environmental change.

 The Port’s green bonds underwent an independent review to ensure the transaction conforms to international social and sustainability principles. Sustainalytics, a global leader in sustainability research and analysis whose clients include Apple Inc. and Starbucks Corp., performed the third-party evaluation. The firm validated the integrity of the Port’s green bonds for three projects completed in recent years:
  • The Wilmington Waterfront Park: a 30-acre green space with walkways, bike paths and a children’s playground that also serves to buffer the community from Port traffic.
  • The Port of Los Angeles Police Headquarters: The structure’s environmental and energy-efficient features earned gold-level certification from the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED).
  • The Cabrillo Shallow Water Habitat: a 190-acre feeding area for fish and marine birds.
The Midpeninsula Regional Open Space District (Midpen) issued $54,490,000 in tax-exempt and $2,920,000 in taxable green bonds.  Midpen operates in the Silicon Valley region.  The new green bonds will refinance debt original used to acquire an 7,366 acres of open space within the District in the following preserves: Bear Creek Redwoods, El Corte de Madera Creek, El Sereno, Long Ridge, Miramontes Ridge, Monte Bello, Pulgas Ridge, Purisima Creek Redwoods, Russian Ridge, Saratoga Gap, Sierra Azul, Skyline Ridge, Tunitas Creek, Thornewood, and Windy Hill.

“We felt the ‘green’ designation perfectly reflects our mission to acquire, preserve and protect a greenbelt of open space, and to specifically target the growing sustainable and socially responsible investing movement,” said Stefan Jaskulak, Midpen Financial Officer. 

Midpen reports that the financing was well received in the market, generating orders of up to $150 million from both retail and institutional buyers nationwide. In a first, Midpen tapped into the local retail market, selling nearly $8 million to residents of San Mateo and Santa Clara counties, individual investors who may already be familiar with the district’s operations and work. 

“It was wonderful to see so many local residents directly investing in Midpen, many of who are constituents and active users of our open spaces,” said Yoriko Kishimoto, Midpen Board President. 

On August 18, 2016, the district received AAA credit ratings from both Fitch Ratings and Standard and Poor’s, the highest ratings available for financial performance. 

“This was a very exciting and successful effort for Midpen,” said Steve Abbors, Midpen General Manager, “We’re saving the public $15.7 million in future payments, paying bonds off three years early, and giving local residents a ‘green’ way to invest in their open space.”


California Green Muni Bond Issuances
Issuer
Date
Amount
General Purposes
State of California
10/7/2014
$300,000,000
Mass Transit, Clean Water, Energy Efficiency
San Francisco Public Utilities Commission
5/20/2015
$32,025,000
Renewable Energy
City of Los Angeles
6/4/2015
$188,755,000
Wastewater, Digester, Water Purification
East Bay Municipal Utility District
6/17/2015
$74,335,000
Clean Drinking Water, Conservation, Flood Protection, Renewable Energy, Biodiversity
City of Los Angeles
6/30/2015
$100,835,000
Wastewater, Water Purification, Digester
San Diego Unified School District
1/5/2016
$100,000,000
Energy Efficient Buildings, Renewable Energy
IBank
4/28/2016
$410,735,000
Clean Water, Water Pollution Control
San Francisco Public Utilities Commission
5/10/2016
$240,000,000
Clean water, wastewater
San Diego County Water Authority
6/23/2016
$98,945,000
Water Efficiency
Midpeninsula Open Space District
9/8/2016
$57,410,000
Open Space Acquisition, related
Port of Los Angeles
9/14/2016
$35,200,000
Open space, habitat, green building
Total
$1,638,240,000
(prepared by Michael Paparian 9/19/16)