Industrial Development Bonds California cities, counties and state government have the authority to offer low interest financing to businesses locating in their communities through the use of tax-exempt industrial development revenue bonds. An eligible bond project can be the construction of a new plant, or replacement of all or part of an existing plant. Industrial activities eligible for financing include assembly, fabrication, manufacturing and processing.
The primary advantage of industrial development bonds is that the financing provided bears an interest rate significantly lower than conventional methods (the lower interest rate is the result of the tax exempt status of the securities), the bonds are long term 15-30 years maturity, and may be assumable.
Companies taking advantage of industrial development bond financing receive approval for a project through a local industrial development authority (IDA), a joint powers authority, or the California Infrastructure and Economic Development Bank. The project must also receive private activity bond allocation from the California Debt Limit Allocation Committee.
To qualify for industrial development bonds a borrower needs to meet certain eligibility criteria: 1) the firm must be engaged in a manufacturing, processing or value-added industry, 2) the total project cost should be at least $2 million and may not exceed $10 million, 3) the borrower must secure a letter of credit for 100 percent of the bond issue from a bank with a substantial credit base, 4) the capital expansion must provide a public benefit such as creating new jobs; and 5) the project must have city or county support.
The proceeds from a bond issue can be used to pay for virtually all costs incurred by the company for its project including the financing of land acquisition, building construction, machinery and equipment, and other incidental costs as well as a portion of the expenses associated with the financing and issuance of the bonds.
- Eligibility:
- Manufacturing or processing companies.
- Uses:
- Land, buildings, equipment, furnishings and issuance costs.
- Amounts:
- Limited to $10 million per applicant per jurisdiction including all capital expenditures made by company in the same jurisdiction 3 years prior and 3 years after.
- Rates/Terms:
- Rates average more than 2% below prime. 15 to 30 year maturities.
- Special Conditions:
- Company may not have any more than $40 million in IDB's outstanding nationwide. Letter of credit from a bank rated "A" or better. One job created or retained within two years of issuance for every $50,000 in bond financing.
For more information, contact :
California Infrastructure & Economic Development Bank
P.O. Box 2830
Sacramento, CA 95812-2830
Phone (916) 324-1299
Fax (916) 322-6314
www.ibank.ca.gov
