Industrial Revenue Bonds (IRB) 

Building construction, renovation, machinery and equipment of manufacturing facilities are eligible projects for industrial revenue bonds. Bonds are issued by a municipality in the name of the company. The applicant is responsible for all debt service. Bonds are exempt from federal income tax and, in some cases, state income taxes.

Description

The City of Milwaukee and its Redevelopment Authority issue tax–exempt industrial development revenue bonds to finance projects for manufacturers. Bonds issued through the Authority are double tax–exempt. The costs of land, facility construction or renovation, new equipment, architectural and engineering studies, site improvements and interest during construction are all eligible for financing.

This program has provided nearly $685 million in financing to more than 200 Milwaukee firms.

Uses

• Long–term financing depending upon life of assets.
• Advantages
• Fixed or variable rates.
• Fees
• $1,000 to Authority with initial application and .075% of the bond amount upon issuance. No fee for City issue.
• Participating underwriters will charge from 1 to 1.5% plus out-of-pocket costs.
• Certain banks purchase these instruments for their own accounts, thus eliminating the underwriter and related costs.
• Credit Enhancement

The bonds are typically backed by a bank letter of credit for a fee of approximately 1% of the outstanding balance annually. The Authority can provide similar enhancement through its Job Opportunity Bond Program. Bonds issued through that Program are backed by certain reserves of the Authority and the moral obligation of the City. These bonds have historically been rated A+ by Standard & Poor’s Corp.

Timing

Generally, a company should not incur project costs (except site purchase) prior to City or Authority’s adoption of an Initial Resolution. Under IRS code, only costs incurred no more than 60 days prior to the adoption of the initial resolution can be rolled into subsequent bond issue. Final bond issuance generally takes place 60 to 90 days later, depending on negotiations between underwriters, borrower and letter-of-credit bank.

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