Industrial Development Revenue Bonds (IDRB)

For projects that are approximately $1 million or larger, financing is available through Tax-Exempt Industrial Development Revenue Bonds (IDRB). Tax-exempt IDRB financing makes the cost of borrowing approximately 80 to 90 percent of the prime rate because the interest paid to the bond buyer is exempt from federal taxes (and state taxes in certain cases). The funds are limited to the purchase of land, buildings, new equipment, engineering costs, and infrastructure. Typically, the borrower is required to provide at least 10 percent equity or whatever the financial community, which underwrites the bonds, requires.

The downside of this program is the competitive nature for the funds. Because each State is allocated a portion of the total amount of tax exempt Industrial Revenue Bonds issued throughout the country, the project would need to compete for the state’s cap limit. In addition, there are specific legal and financial requirements for these funds which are applicable based on the type of project being undertaken. The limit on capital spending for each company is $20,000,000, for each locality, from three (3) years prior to three (3) years ahead and a $40,000,000 capital acquisition limit on the company as a whole. There are additional requirements for these funds which are applicable to the type of project it is. It is best to meet with a bond counsel if you wish to pursue this funding source further.

In Genesee County, applications for IDRBs are made to the Genesee County Economic Development Corporation. The Genesee County Economic Development Corporation will consider a resolution of intent and preliminary approval. This resolution establishes that the project accomplishes the public purposes; indicates the intent; authorizes the applicant to proceed with the project at its own risk; authorizes the publication of a Notice of Intent; and authorizes a request for the State Treasurer to set aside an allocation equal to the face amount of the proposed bond issue. A notice is then published in the newspaper and a public hearing is held. A resolution is adopted authorizing the terms of the bond issue and directing the issuance of the bonds. The bonds are delivered to the bond purchaser following a public or private sale and the bond proceeds are used to pay the applicants project costs.

Eligibility:

Bonds can be issued to finance land, building, machinery, and equipment. They also can be issued to fund bond issuance costs for facilities suitable and intended for a factory, mill, shop, processing plant, assembly plant, fabricating plant, warehouse, research and development facility, or engineering, architectural, or design facility, or tourist and resort facility. The EDC also may issue bonds for certain water and air pollution control facilities, and for solid waste disposal facilities.

For information regarding taxable bond options, please click here.