Industrial Revenue Bond
The process for applying for assistance for Industrial Revenue Bonds is designed to meet the requirements of various state and federal regulators.
An application is completed and submitted to the IDA of Jefferson County for consideration. Review and evaluation of each application is prompt and a presentation is made to the Board of Directors of the IDA. The Board meets on an as needed basis and applications for assistance are a priority for their meetings. If approved by the Board of Directors, the IDA will issue an “inducement resolution”. The passage of an inducement resolution stipulates that the issuer agrees to issue project bonds if a buyer can be found.
Normally, the issuance costs for a revenue bond transaction are financed through the issuance. There are standard costs associated with a bond issuance, most notably bond counsel fees; issuance fees; underwriting fees; trustee fees; and, other similar fees. These generally total approximately 5% of the net amount of the issuance. Again, these fees are added to the cost of the issuance and are financed through the twenty year term of the project.
The interest rate on revenue bonds depends upon several factors: the term of the issue; whether the rate will be fixed or floating; the creditworthiness of the applicant firm; and the current market conditions. In general, investors prefer shorter terms, floating rates, investment grade credit ratings (AA+ or better), and/or security that includes a letter of credit from a highly rated bank. For example, for a fixed rate AAA rated twenty year bond issue the rate would be about the same as a 20-year Treasury Bill.