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Industrial
Development Revenue Bond (IDRB) |
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County Policy: |
MANATEE COUNTY,
FLORIDA |
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POLICIES
GOVERNING CONSENT TO ISSUANCE |
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OF INDUSTRIAL
DEVELOPMENT REVENUE BONDS |
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OR ENTERPRISE
FLORIDA BONDS |
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FOR MANATEE
COUNTY PROJECTS |
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The Board of County Commissioners of
Manatee County, Florida, reserves the right to review each application for
financing and provide consent to issuance based upon the best interests of
the County. The determination shall
be based upon review of the application and such other information as may
be requested or provided by the applicant for such financing and shall
include, but not be limited to consideration of:
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1) |
Environmental impacts |
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2) |
Jobs created |
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3) |
Relationship to economic development programs (e.g., location in
enterprise zone, employment programs, etc.) |
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4) |
Additional economic impacts (use of County services and
resources) |
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5) |
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Nature of commitment owners and developers
of the project are prepared to make to secure the commitment to provide
benefits to Manatee County (existing contracts, pledges to include County
enterprises in solicitation for goods and services for the development and
operation of the project, historical preference of company, etc.)
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6) |
Impact on public services and facilities (the ability of the
County to provide necessary services and facilities, utilities, etc.) |
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7) |
Consistency with the County’s lands development code and the
likelihood of obtaining zoning and land use and development approvals |
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8) |
Any
other matter having an impact upon the County or State |
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The County Administrator is directed to provide procedures for
the review of applications, including coordination of the review with the
Economic Development Council of the Manatee Chamber of Commerce. |
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WHAT ARE IDRB’S: |
Industrial Development Revenue Bonds are debt instruments issued
through a local governmental agency to a private business for acquiring or
constructing capital facilities for use in a manufacturing facility. The debt service on the bonds is paid
solely by the company. |
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In its simplest form, IDRB financing may be
compared to ordinary note and mortgage financing, i.e., a private lender
(bank) or other financial institution agrees to lend funds (buy bonds) to a
private company. The facilities
(capital project), which the lender’s funds are used to finance, are
mortgaged to secure the payment of the loan (bonds). The interest is tax free to the lender
who therefore is willing to accept a lower interest rate than through
conventional financing.
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TARGET USERS: |
Industrial
Development Bonds finance the cost of only manufacturing companies (generally
at least three years old) that will create new jobs |
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The Players - “public-private partnership” |
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1) |
Government entity issuing
the bonds |
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2) |
Private
sector lender (bank) or other financial institution |
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3) |
Bond counsel who drafts
bond documents |
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Eligibility- |
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Borrower
must have capacity to obtain commercial bank credit |
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Financial
ratios consistent with commercial bank standards |
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Positive
financial trends for last three years |
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Favorable bank references |
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LOAN TYPES: |
Plant Acquisition |
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1) |
For acquisition of land and buildings, construction of new
facility, and/or purchase of capital equipment |
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2) |
Amount: $1,000,000 to $10,000,000 (restricted by availability of
funds). |
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3) |
Terms - set by bank |
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4) |
Similar to conventional commercial real estate financing and
equipment financing |
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5) |
Five to 25-year amortization.
Bond maturity usually matches amortization period but may have call
options every five to ten years |
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6) |
Up to 100% financing depending on company’s financial strength,
nature of project and other conditions set by the letter of credit
underwriter |
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HOW TO APPLY: |
Contact the County Attorney for the current
application requirements. The general
requirements are listed below. |
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1) |
Prepare
loan request with the following information: |
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a) |
Dollar amount |
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b) |
Applicant’s background |
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c) |
Project description |
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d) |
Use of borrowed funds |
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e) |
Audited financial statements (if available) - past five years
and current interim. |
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f) |
Five-year financial
projections |
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g) |
Economic Impact - indicate how the community will benefit by the
project, i.e., new jobs created, existing jobs preserved, new taxes,
additional payroll, etc. |
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2) |
Present Application to
IDRB lender (bank) |
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3) |
Present application and payment of $6,000 ($1,000
non-reimbursable application fee and $5,000 deposit on County Attorney fees)
to Pat McVoy at Manatee County Government, 745-3750 |
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4) |
County either approves or declines bond issuance. (i.e. requires
the consent of the Board of County Commissioners who review the project.) |
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5) |
Bank must also approve
loan request |
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6) |
Bond counsel prepares
bond documents |
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7) |
Bonds
sold to purchaser by bank's underwriting group |
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8) |
Time
frame: about 4 months for complete
process |
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WHO’S
NOT ELIGIBLE: |
1) |
Start-up businesses |
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2) |
Non-manufacturing
companies |
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3) |
Manufacturers unable to demonstrate ability to service bond
payments |
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4) |
Companies who fail to meet the County policy requirements |
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ADVANTAGES: |
1) |
Interest Cost Savings |
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Industrial Development Bonds are considered
special obligations of a governmental unit, and if the project meets
qualifying conditions, part or all of the interest may be exempt from
federal income tax. Typically, the
rates range from 50% - 60% of the prime rate. This could offset any costs incurred, and
enable them to be recouped very quickly
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2) |
Up to 100% financing |
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DISADVANTAGES: |
1) |
Length of time from start to finish of the application process,
may be longer than conventional financing |
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2) |
Due to the number of parties involved, legal disclosing costs
may be higher than conventional financing |
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3) |
Minimum issue is about
$1,000,000 |
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4) |
Possible reduced federal
tax depreciation and tax credits |
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Source: Manatee County, December 2003 |
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