PAB: Private Activity Bonds & Entitlement Financing Programs...

A PAB is a private activity bond.  In today's capital markets, PABs offer developers with the opportunity (in some cases) to obtain low-interest rate tax-exempt financing for the development, construction and/or permanent financing requirements of a for-profit business that meets certain threshold criteria the state may have.  In disaster areas, PABs are a blessing designed to jump-start new business development and create jobs.  Most states have requirements for private activity bond financing that include:

	Job creation goals.  The more jobs, the more likely your inducement resolution will garner the preliminary approval from the state bond commission.  Job creation is the engine that drives the monster even though developers and consultants frequently stretch the jobs creation numbers.  RMC can help; we prepare economic impact studies that define the jobs creation aspects of the proposal.
	Feasibility due diligence.  You need to provide solid due diligence documentation - market feasibility and financial feasibility.  We hope you will turn to RMC for these needs, but "the need" must be fulfilled with an arm's-length approach in most cases.  The project must demonstrate sufficient market and financial capacity to retire the bonds and provide an additional level of profitability (the debt service coverage ratio) necessary to give the investment bankers relief from heartburn.
	Size of issue.  Overly large and overly small projects are not going to typically be approved.  On the one hand the concern is lending risk concentration while on the other hand the concern is whether or not the financing represents a cost-effective solution.

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