Industrial Development Revenue Bond (IDRB) Program

WHAT IS IDRB FINANCING?
IDRBs are an attractive source of financial assistance to economic development projects in Michigan. They provide profitable firms with capital cost savings stemming from the difference between taxable and tax-exempt interest rates.

Public facilities which generate a revenue stream (parking structures, for instance) have traditionally been financed by municipalities through tax-exempt "revenue bonds." IDRBs apply this same tax-exempt finance mechanism to the "public purpose" of economic development. The governmental unit borrows money from private capital markets, secured only by the project’s revenues rather than the government’s full faith and credit. Interest income earned on bonds issued by a governmental entity to finance a project for a private company which has demonstrated a good public purpose is exempt from federal, state, and local income taxes, thereby reducing the cost of capital (including the cost of letters of credit, remarketing fees, etc.) to an average 75-85% of prime.

WHO IS ELIGIBLE?
The Michigan Strategic Fund (MSF) issues the IDRBs on behalf of the borrower and lends the bond proceeds to the borrower. These loans can be made for manufacturing projects and not-for-profit corporation projects and solid waste facilities.

For manufacturing projects, bond proceeds can only be used to acquire land, building and equipment directly related to the manufacturing process. Warehouse space and other "non-core" items are ineligible unless they are directly related to the manufacturing process, and then are limited to 25% of the project. At least 70% of bond proceeds must be spent on "core manufacturing" costs. If you acquire existing facilities, a minimum of 15% of the bond proceeds must be used to renovate the facility. Used equipment is generally ineligible. Loans for such purposes as working capital or inventory are not permitted.

The maximum size of bonds is limited to:

1. $1,000,000 free of any restrictions on capital expenditures, or,                            
2. $10,000,000 subject to the condition that the company’s total capital expenditures in the locality over the period of three years before and three years after the date of issuance do not exceed $10,000,000.

There is no limit on the size of bond issues to finance solid waste disposal facilities or nonprofit corporations.

WHAT’S THE APPLICATION PROCESS?
The following steps summarize the actions necessary to obtain tax-exempt bond financing through the Michigan Strategic Fund:

• Step 1 - Applicant prepares "Evaluation Request" and submits it to the MSF at least two weeks prior to the next MSF meeting date.                    
• Step 2 - MSF considers an inducement resolution at its public meeting recognizing the public purpose of the project.                    
• Step 3 - Applicant structures the financing and bond counsel begins to prepare documents.                    
• Step 4 - MSF staff: publish a public hearing notice at least 14 days prior to date of hearing; hold free public hearing in Lansing; and obtain required government approvals.                    
• Step 5 - Financing documents are prepared by counsel and reviewed and accepted by all parties to the transaction.                    
• Step 6 - MSF adopts bond resolution authorizing the issuance of the bonds.                    
• Step 7 - MSF, borrower, purchaser and counsel close on the project financing.

MSF Fee Schedule:
The application fee is non-refundable and is required when the evaluation request is filed. The fee structure is: $500 for $1,000,000 or less; $1,000 for over $1,000,000.

The issuance fee is required on or before the closing of the project financing. The fee structure is: 1/4 of 1% for $10 million or less; $25,000+1/8 of 1% for the amount over $10 million. The maximum issuance fee chargeable to nonprofit corporations is $40,000. Issuance fee for refunding issues is 1/8 of 1% of the bond issue with a minimum of $2,000 and a maximum of $40,000.

For more information contact the Michigan Economic Development Corporation Customer Assistance office at 517-373-9808. 

MICHIGAN STRATEGIC FUND
2006 BOARD MEETING DATES

NOTE: All Michigan Strategic Fund Board Meetings will be held at 9:30 a.m. in the MEDC Lansing Office:

Michigan Economic Development Corporation
Lake Michigan Room
300 N. Washington Square
Lansing, MI
517.241.2244

1. Wednesday, January 25, 2006
2. Wednesday, February 22, 2006
3. Wednesday, March 22, 2006 at 9:30am
4. Wednesday, April 19, 2006 at 2:30pm
5. Wednesday, May 24, 2006 at 9:30am
6. Wednesday, June 7, 2006 at 1:30pm
7. Wednesday, June 28, 2006
   
8. Please Note Special Meeting Date
   Thursday, July, 13, 2006
   at 9:30am
   
9. Wednesday, July 26, 2006
10. Wednesday, August 23, 2006
11. Wednesday, September 27, 2006 at 1:30pm
12. Wednesday, October 25, 2006 at 1:30pm
13. Wednesday, November 15, 2006 at 1:30pm
14. Wednesday, December 20, 2006 at 1:30pm
    

Application deadlines are on Monday, two weeks prior to the board meeting date.