(a) Eligible activities.

1. (1)

   1. (A) As a general rule, bond proceeds can be used to purchase or construct fixed assets including:

(i) Land;

1. (ii) Buildings; and

   1. (iii) Equipment.
   2. (B) Certain limitations, as governed by the Internal Revenue Service tax code, 26 U.S.C. § 1 et seq., may apply.

2. (2) Experienced municipal bond counsel should be consulted as to eligible activities, but the following minimum restrictions must be adhered to:

   1. (A) When an existing building is purchased, fifteen percent (15%) of the purchase price must be expended on renovation; and
   2. (B) When proceeds are used to purchase used equipment, one hundred percent (100%) of the purchase price must also be expended to renovate that equipment.

(b) Sequence of events.

1. (1) There are a number of activities that must occur before a bond guaranty can be executed by the Arkansas Economic Development Commission.

2. (2) Following is a list of those activities:

   1. (A) Memorandum of intent by the governing body (city or county).

      1. (i) This step is not required by state law, but is often utilized to fulfill requirements by the Internal Revenue Service to show “intent” to use tax exempt revenue bond financing.
      2. (ii) The memorandum should be issued prior to the commencement of a project (the purchase of any land, building, or equipment to be financed).
      3. (iii) This process allows the company to recover any “out-of-pocket” expenditure from the tax-exempt funds.
      4. (iv) The company should contact an Arkansas licensed bond attorney to draft the memorandum;

   2. (B) Notice of hearing.

      1. (i) Ten (10) days prior to the hearing, notice must be given setting forth the date of the hearing.
      2. (ii) The notice must be published one (1) time in a newspaper of general circulation;
   3. (C) Public hearing. A public hearing must be held before the governing body, whether it is the city or county, prior to the adoption of an ordinance;

   4. (D) Referendum period of thirty (30) days.

      1. (i) The Arkansas Constitution requires that the governing body exercise a referendum period.
      2. (ii) This period is to allow time for a petition, if desired, by the general public requiring the issue to be subjected to a general election.
      3. (iii) This period is normally thirty (30) days in the case of a municipal issue; and

   5. (E) Execution of documents.

      1. (i)

(b) (b) At this time, the money is delivered.

1. (ii) It should be remembered, however, interim financing may be used to start the project without affecting the tax exempt status of the issue once the memorandum of intent has been issued by the governing body.