Industrial Development Revenue Bonds


 
Industrial Development Revenue Bond (IDRB)
County Policy: MANATEE COUNTY, FLORIDA
  POLICIES GOVERNING CONSENT TO ISSUANCE
  OF INDUSTRIAL DEVELOPMENT REVENUE BONDS
  OR ENTERPRISE FLORIDA BONDS
  FOR MANATEE COUNTY PROJECTS
   
  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:
  1) Environmental impacts  
  2) Jobs created  
  3) Relationship to economic development programs (e.g., location in enterprise zone, employment programs, etc.)
  4) Additional economic impacts (use of County services and resources)
  5) 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.)
  6) Impact on public services and facilities (the ability of the County to provide necessary services and facilities, utilities, etc.)
  7) Consistency with the County’s lands development code and the likelihood of obtaining zoning and land use and development approvals
  8) Any other matter having an impact upon the County or State
     
  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.
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.
  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.
TARGET USERS: Industrial Development Bonds finance the cost of only manufacturing companies (generally at least three years old) that will create new jobs 
  The Players - “public-private partnership”  
  1) Government entity issuing the bonds  
  2) Private sector lender (bank) or other financial institution
  3) Bond counsel who drafts bond documents  
     
  Eligibility-
  w Borrower must have capacity to obtain commercial bank credit
  w Financial ratios consistent with commercial bank standards
  w Positive financial trends for last three years
  w Favorable bank references  
LOAN TYPES: Plant Acquisition
  1) For acquisition of land and buildings, construction of new facility, and/or purchase of capital equipment
  2) Amount: $1,000,000 to $10,000,000 (restricted by availability of funds).
  3) Terms - set by bank  
  4) Similar to conventional commercial real estate financing and equipment financing
  5) Five to 25-year amortization.  Bond maturity usually matches amortization period but may have call options every five to ten years
  6) Up to 100% financing depending on company’s financial strength, nature of project and other conditions set by the letter of credit underwriter
HOW TO APPLY: Contact the Manatee County Economic Development Program Manager for the current application requirements.  The general requirements are listed below.
  1) Prepare loan request with the following information:
    a) Dollar amount  
    b) Applicant’s background  
    c) Project description  
    d) Use of borrowed funds  
    e) Audited financial statements (if available) - past five years and current interim.
    f) Five-year financial projections  
    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.
  2) Present Application to IDRB lender (bank)  
  3) Present application and payment of $6,000 ($1,000 non-reimbursable application fee and $5,000 deposit on County Attorney fees) to Karen Stewart, Manatee County Government, 749,3029, ext. 6832
  4) County either approves or declines bond issuance. (i.e. requires the consent of the Board of County Commissioners who review the project.)
  5) Bank must also approve loan request  
  6) Bond counsel prepares bond documents  
  7) Bonds sold to purchaser by bank's underwriting group
  8) Time frame:  about 4 months for complete process
WHO’S NOT ELIGIBLE: 1) Start-up businesses      
2) Non-manufacturing companies  
  3) Manufacturers unable to demonstrate ability to service bond payments
  4) Companies who fail to meet the County policy requirements
ADVANTAGES: 1) Interest Cost Savings    
    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.
  2) Up to 100% financing  
DISADVANTAGES: 1) Length of time from start to finish of the application process, may be longer than conventional financing
  2) Due to the number of parties involved, legal disclosing costs may be higher than conventional financing
  3) Minimum issue is about $1,000,000  
  4) Possible reduced federal tax depreciation and tax credits
Source:  Manatee County, February 2010