Tax
Exempt Bonds
Industrial Development Bonds and Empowerment Zone Bonds
Description: Industrial Development Bonds (IDBs) and Empowerment
Zone Bonds (EZ/EC) offer taxable and tax-exempt financing for commercial and
industrial developments through the issuance of municipal bonds or certificates
of participation. The bonds, sold to private investors, provide funds to businesses
at rates significantly below those of conventional financing. The Los Angeles
Industrial Development Authority serves as a conduit issuer for industrial
development bonds. These bonds provide low cost tax-exempt and taxable financing
for private business expansion in the State of California and the Los Angeles
Empowerment Zone. The program offers a finance team experienced in working
with manufacturers and standard documentation, in order to provide a timely
and cost effective issuance of these industrial development bonds.
Use of Funds: Funds may be used for property acquisition, equipment/machinery
purchase, and building improvements/construction. Tax-exempt IDBs are restricted
solely to manufacturing; EZ and taxable issues may be used for both manufacturing
and non-manufacturing projects.
Eligibility Criteria: Projects must result in public benefits,
such as job creation, for low- and moderate-income residents. For tax-exempt
IDBs, state law requires that one job must be created for every $50,000 in
bond funds issued. EZ bonds require 35% of a borrowers employees to reside
in the Empowerment Zone. The company must possess good credit and show evidence
of sufficient income to service the debt. The borrower must be able to secure
a letter of credit from a bank with a long term credit rating.
Funding Limits: IDBs issues range from $1,000,000 to $10,000,000 and EZ bonds
are limited to $3,000,000. In most cases, financing will cover the lesser of
75% of the project cost or the appraised value of the underlying property;
however, the letter of credit provider will determine funding limits. A single
bond issue may include both construction and permanent financing.
Term/Amortization: Terms range from 5 to 25 years, depending on the useful
life of the underlying collateral provided as security.
Collateral: Real Estate and equipment.
Subordinated Financing: Additional capital in the form of
subordinated debt may be available to qualifying borrowers under the LDC 504
ACE Fund program or other specialized capital access programs.
|
