What are Industrial Revenue Bonds?
Industrial Revenue Bonds, also known as “private activity bonds,” are an alternative method of financing. There are two types of bonds, taxable and tax-exempt. Although both kinds of bonds may be issued, it is generally the tax-exempt bonds that are of interest to a qualifying project.
The Internal Revenue Code is what creates tax-exempt bonds, which provide a source of long-term, below-market-rate financing. IRBs are securities sold to investors with the proceeds used to finance the project. The borrower pays the principal and interest on the debt. Because the interest is exempt from the federal income tax, the rate on this type of financing is generally lower than conventional debt financing. Tax-exempt IRBs allow certain types of business the opportunity to finance facility construction and related costs at an interest typically two or three percent below conventional financing rates. The bonds can be used for construction, demolition, new machinery and equipment, land purchase (up to 25% of the bond value), and other specified items.
Who can use IRBs?
Specific Project Qualifications:
Florida Statute §159.27(5) broadly define qualifying projects as including, without limitation, the following:
- Manufacturing or industrial plants
- Research and Development parks
- Warehousing and distribution facilities • Corporate headquarters facilities
- Tourism facilities
- Convention or trade show facilities
- Urban parking facilities
- Trade center facilities
- Health care facilities
- A motion picture production facility • A preservation or rehabilitation of certified historic structure
- Airport or port facilities Educational facilities
- Commercial projects in designated enterprise zones
- Pollution control, hazardous or solid waste facilities
- Correctional/detention facilities
- Water/wastewater facilities
- Mass commuting facilities
• Public restaurant/lodging facilities • Qualified 501(c)3’s
Process Flow
Most IRB issues processed through the CCDA will require approximately 90 to 180 days from the point of initial processing to closing when bond proceeds will be available.
Additional Information
Companies/organizations in Clay County that may be classified as a qualifying project as defined above may apply for an IRB through the CCDA. Ideally, IRB issuances should minimally be for $2M-3M. The cap for a tax-exempt IRB is $10M. The CCDA staff can provide additional information along with an application.