4th quarter 2008           

Economic development 101: IRBs an important financing option

Photo by David Tucker
Independent Revenue Bonds were used to purchase new equipment at Independent Printing in Daytona Beach.

Volusia County’s goal to attract capital investment and create new job
opportunities takes dedication on the part of the community to focus on a business recruitment strategy and to understand the financial resources its takes to make it happen.

In the past five years, more than 25,000 new jobs were created in Volusia County. Many of these jobs have supported the growing need for business and professional services, retail, services and education. However, it is the
wealth-generating sectors such as healthcare, manufacturing and technology-based companies that drive the local economy. Jobs created in these sectors provide higher average annual wages the community must have to produce diversity and long term economic vitality.

Industrial Revenue Bonds (IRB) program

The availability of competitive financing is among the key elements required to
create higher waged jobs for manufacturing and technology-based companies.

While traditional means of bank financing can be found among more than 20 area banks, Volusia County Government has created a means of providing tax-exempt capital loan financing to support the more tradition lending programs. The county’s tax-exempt Industrial Revenue Bond (IRB) program provides tax free status for capital loans originating within local banking community.

Administered by the Volusia County Industrial Development Authority (IDA), the IRB program provides an alternative tax-exempt financing vehicle for manufacturers and qualifying 501(c)3 nonprofits planning capital investment projects in Volusia County.

IRBs are considered a special obligation of a government unit with the interest not subject to federal or state income tax. This results in a lower net interest rate. The lower interest cost is then passed along to the borrower.

The tax exemption provided by an IRB allows the borrower to achieve interest
rates well below the prime lending rate or the prime-plus rates that more traditional forms of capital borrowing require.

Interest rates and terms generally are negotiated by the borrower and the bond purchaser and are based on an assessment of credit worthiness. Banks and institutional investors are traditionally the buyers of most bonds. Up to 100 percent of a qualifying project is eligible for financing. Even the legal and bond fees associated with the issuance of the bond are eligible as are architectural and engineering costs related to the project.

Qualifying companies include those engaged in manufacturing, distribution, warehousing, research and development along with corporate headquarters.

IRB financing covers all related capital expenses including land acquisition, new construction, acquisition or renovation of existing facilities, new additions, capital equipment and machinery.

The Volusia County Department of Economic Development has facilitated the issuance of more than $100 million in industrial revenue bonds for existing companies and those recruited from other parts of the country.

Bonds have been used for the purchase of new equipment and the construction of facilities for local manufacturing companies. Independent Printing, Daytona Beach, Florida Folder, Port Orange, and Management By Innovation Inc., DeLand, are companies that have used IRBs to expand.

IRB financing also was used to recruit and relocate companies to Volusia County, such as Ideal Aluminum Products and Intellitec Products Inc., both of DeLand. These two companies alone created more than 250 new jobs for the area.

Applications for Industrial Revenue Bond financing are available from the Volusia County Department of Economic Development, Daytona Beach International Airport, Suite 200, 700 Catalina Drive, Daytona Beach, Florida, 32114. The telephone number is 386/248-8048