| Industrial Revenue Bonds
 Industrial Revenue Bonds (IRBs) are a means of financing the acquisition,
construction, enlarging, or improving of industrial development facilities,
and involve the issuance of tax-exempt bonds by public corporations specifically
created for that purpose by local governments. The key advantage of industrial
revenue bonds lies in their tax-exempt status; interest paid to the buyer
of the bonds is not subject to federal income tax. As a result, the bond
buyer will accept a lower rate of interest on the bonds. There are two
programs available:
| "Industrial
Revenue" and "Exempt Facilities" Bonds: |
| Tax
Status |
Bond
interest is exempt from federal income tax (subject to AMT). |
| Eligible
Projects |
Manufacturing
and processing projects located in Washington. Feedstock for "exempt
facilities" projects must be classified as at least 65% solid
waste. |
| Eligible
Costs |
Land acquisition,
building construction and acquisition of new equipment. Used equipment
can be financed only if purchased as part of an existing plant. For "exempt facilities" projects, only that part of the project
which either qualifies as "solid waste disposal" or is functionally
related can be financed on a tax-exempt basis. |
| Project
Size |
For industrial
revenue bonds, $10 million maximum total capital expenditure for the project
including the proposed and any existing bond issues
measured over a period beginning three years before and ending three
years after bond issuance. For "exempt facilities" projects,
no set dollar limit; however, bond cap allocation is currently restricted
to 30% of initial category allocation (approx. $25.6 million) in a
given year. |
| Financing
Source |
National tax-exempt
credit markets; no governmental funds or guarantees are involved.
Bonds must be either sold on the open market or privately placed with
qualified institutional/individual investors. |
| Security
for the Bonds |
No governmental
financial support, either direct or indirect, is provided. Payment
of interest and principal is solely the responsibility of the borrowing
company. Publicly sold bonds must be credit-enhanced by a letter of
credit from an investment grade-rated bank. |
|
Consolidated
Taxable/Tax-Exempt Nonrecourse Revenue Bond Financing Program: |
| Tax
Status |
Interest
for "Taxable Tail" bonds is subject to federal income tax |
| Eligible
Projects |
"Taxable
Tail" bonds are normally used in conjunction with tax-exempt
"exempt facility" or industrial revenue bond financings
to allow the total project, both the parts eligible for tax-exempt
financing and those not so eligible - to be financed in one bond issuance
with the efficiencies and cost advantages of a melded rate and a single issuance. |
| |
Borrowing company
must be creditworthy, and project must be located in Washington. |
| Eligible
Costs |
(1) costs eligible
for tax-exempt financing but for which insufficient bond cap is available,
and
(2) costs not eligible for tax-exempt financing such as working capital,
capitalized R&D costs and capitalized interest.
Outstanding obligations incurred as a part of the project can also
be refunded. |
| Project
Size |
No set dollar
amount. WEDFA is restricted by statute from issuing more than $750
million of bonds in total. |
| Financing
Source |
National taxable
credit markets. No governmental funds or guarantees are involved.
The bonds must be either publicly sold or privately placed with qualified
investors. |
| Security
and Bonds |
No governmental
financial support is provided. Payment of interest for the principal
is the responsibility of the borrowing company. If the bonds are publicly
sold, the financing must be secured by a letter of credit from a commercial
bank rated investment grade by one of the major rating agencies. |
| Issuing
Authority |
Washington Economic
Development Finance Authority (WEDFA), a public corporation of the
state authorized by the legislature to issue nonrecourse tax-exempt/taxable
economic development revenue bonds. Additionally, public corporations
created by port districts, cities, towns, and counties can have issuing
authority. |
|
