CAN PUBLIC DEVELOPMENT AUTHORITIES ISSUE TAX-EXEMPT BONDS?
PDAs can issue tax-exempt bonds pursuant to RCW 35.21.735. As noted above, PDAs do not have taxing authority, and so can pledge only project, grant or other revenues to repay bonds. In order to access financial markets at attractive rates, PDA project revenue bonds are often backed by a city or county guarantee or contingent loan agreement. If the agreement is contingent in nature, it should not be a debt of the city or county for the purposes of constitutional and statutory debt limitations, but will need to be identified on the city or county financial statements. There are numerous federal tax law considerations that a PDA must take into account when financing a project with tax-exempt debt. For the bonds to be tax-exempt, the project must be used for a public purpose, as opposed to a private activity, and must be repaid from public funds and not private sources. Any private management contract must meet the safe harbor provisions under the federal tax code. All of these issues woul
