ISES Corporation FACILITY EINGINEERING & MANAGEMENT SERVICES
Copyright 2002 ISES Corporation
1 of 2
www.isescorp.com
FACILITY FINANCING
You have just completed a comprehensive Facility Condition Analysis. You have identified
the problems associated with your facilities and determined the cost of correcting these
deficiencies. Now comes the inevitable question, "How do I pay for all of these facility
improvements?" ISES Corporation is prepared to step into the breach and offer financial
solutions to your facilities funding dilemmas. We provide financial solutions for the renovation
and modernization of facilities and infrastructure. With over twenty years and $2 billion of
project finance experience, we can develop a customized and organized approach to funding
deferred maintenance and capital renewal for your facility.
FINANCIAL ANALYSIS
In order to develop financial solutions and create a financial master plan, we initially review
the facilities owner's last three years of audited financials. Federal, state, and local grant,
loan, and funding programs are evaluated in the context of determining what monies are
available to supplement the funds needed for facilities renovation and modernization. Tax,
legal, and accounting considerations are reviewed and evaluated within the context of your
long-range plan for operational use of the facilities.
STRUCTURING ANALYSIS
Owners are categorized as either taxable or tax-exempt entities. The primary benefit of tax-
exempt project finance is the lower cost of borrowing since interest is not subject to federal
taxation. Tax-exempt entities are those obligors who are subject to the Section 103 of the
Internal Revenue Code, as amended, and consist of state, county, municipal governments,
and public universities and colleges. Taxable entities generally borrow funds at commercial
interest rates unless they can avail themselves of tax-exempt project finance through the use
of public authorities such as state higher education and health authorities or industrial
development authorities.
Project financing can be structured either as conditional sales or operating leases. The
approach depends on the owner's goals. If the owner is a tax-exempt entity, no depreciation
is available and the project appears as a capital asset for accounting purposes. Title can
either reside with the owner or the financing entity, depending on state and local tax laws. If
the transaction is structured as an operating lease, it is viewed as a commercial borrowing
with the lender capable of depreciating the asset. For accounting purposes, the operating
lease eliminates the requirement to list the project as a capital asset which may have positive
implications for future borrowings by the owner.
Funds are available from both institutional and retail sources. Tax-exempt borrowings can be
structured as bonds or certificates of participation. The advantage of certificates of
participation is that they are legally defined as a current expense and not debt of the issuer
and can generally be originated and placed within three months of the issuance decision.
Commercial funds are available from institutional and private investor markets.
