103 KAR 50:030. Commercially reasonable limits on financing costs

      Section 1. Definitions. (1) "Commercially reasonable" means financing costs at terms comparable to an arm’s length transaction, not to exceed The Bond Buyer 25 Revenue Muni Bond Index in effect as of the date established in the project grant agreement, plus three (3) percent.

      (2) "Financing costs" is defined by KRS 65.7045(17).

      (3) "Recent general market revenue bond transactions" means a bond or similar debt obligation issued:

      (a) By a governmental entity for the purpose of financing public improvements from which the revenues derived from the improvements will be used to retire the associated obligation; and

      (b) Within sixty days of the financing for the project with the terms (ratings, tax status, maturities, prices, yields and redemption provisions) of the financing publicly available.

 

      Section 2. Proof of Commercially Reasonable Financing Costs. An applicant requesting the Commonwealth’s participation in a signature project program shall establish that the financing costs for which recovery is sought under the project grant agreement are commercially reasonable.

      (1) If there are actual comparable financing transactions, the financing costs for the actual comparable financing transactions shall be submitted by the applicant and considered by the commission.

      (2) If there are no actual comparable financing transactions, the two (2) primary factors the commission shall consider when determining whether the financing costs are commercially reasonable shall be:

      (a) The degree of comparability between the financing costs for the project and recent general market revenue bond transactions; and

      (b) The quality of the data and assumptions used to explain the differential between the proposed financing costs and the recent general market revenue bond transactions used in paragraph (a) of this subsection.

 

      Section 3. Commercially Reasonable Limits. Only those financing costs that are determined by the commission to be commercially reasonable and that are approved by the commission may be recovered by the applicant. Financing costs not approved by the commission, or that are beyond those determined by the commission to be commercially reasonable, shall not be recoverable. (34 Ky.R. 889; Am. 1701; eff. 2-1-2008.)

Notation

      RELATES TO: KRS 65.7045, 65.7071, 65.7075, 65.7079, 65.7081

      STATUTORY AUTHORITY: KRS 65.7071(3)(b)

      NECESSITY FUNCTION AND CONFORMITY: KRS 65.7071(3)(b) requires the State Tax Increment Financing Commission to establish commercially reasonable limits on financing costs that may be recovered pursuant to KRS 65.7075. This administrative regulation establishes the commercially reasonable limits.