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Alternative Financing Options
When a municipality has had a successful bond vote and needs funds before the Vermont Municipal Bond Bank sale, interim financing can be obtained from commercial lenders. Other state and federal programs are available to assist municipalities with project funds.
Below are several interim or alternate financing options.
| Available Cash/Cash Flow | Under some circumstances, the municipality may use available cash to pay for such project costs and reimburse itself from the proceeds received from the VMBB. See your local bond counsel for more information.
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| Bond Anticipation Note | A short-term note issued in anticipation of the later issuance of bonds, usually paid from the proceeds of the sale of the bonds.
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| Capital Improvement Note | This type of short-term indebtedness requires voter approval, but the approval process is not as complicated as a bond election. These notes are issued through a local bank and generally finance low-cost capital improvements or those with a short useful life.
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| Qualified Zone Academy Bonds (QZABs) | QZABs allow local communities to finance school improvement or renovations (not new cosnmtruction) at little or no interest cost by giving bond buyers federal tax credits in lieu of interest. There are specific criteria that a school district must meet in order to qualify. For more infromation go to http://www.edfacilities.org/search/index.cfm
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Municipal Lease |
Municipal leases tend to be structured as installment contracts for the purchase of a piece of equipment or other asset. Interest rates are typically higher than bond rates and the payback period tends to be much shorter. However, they usually have minimal up front issuing costs and sometimes can provide a lower net cost than issuing bonds.
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| State Aid Anticipation Note | A short-term note issued in anticipation of the receipt of State Aid. Typically the note is paid back from the proceeds of the State Aid.
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| Tax Anticipation Note | A short-term note issued in anticipation of future tax collections.
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| Vermont Economic Development Authority | VEDA provides loans and other financial support to eligible and qualified Vermont businesses.
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| Vermont Municipal Equipment Loan Fund | Low or no interest loan program administered by the State Treasurer’s Office for the purchase of “heavy equipment”. 29 V.S.A. §§1601-1603.
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| USDA Rural Development | Financial programs to support essential public facilities and services such as water and sewer systems, housing, health clinics, emergency service facilities and electric and telephone service. |