INDUSTRIAL DEVELOPMENT REVENUE BOND FINANCING IN MIAMI-DADE COUNTY
By definition, Industrial Development Revenue Bonds (qualified small issue bonds or IDBs) are securities issued by a local government agency for the purpose of acquiring or constructing capital facilities for use by private business and industry. Customarily, the facilities are then sold by the agency to qualifying industries for the installment purchase payments necessary to retire the bonds.The debt service on the bonds is paid solely from the revenues or payments received from the company, and there is no undertaking on the part of the local agency, county or any other governmental unit to make such payments other than from the installment payments received.
In its simplest form, IDB financing may be compared to ordinary mortgage financing, i.e., a private lender (bond purchaser) agrees to lend funds (buy bonds) to a private company. The facilities (capital project) which the lender’s funds are used to finance are typically mortgaged to secure the repayment of the loans (bonds). In many cases, the repayment schedule (debt service) is structured similarly to level debt amortization schedules for typical mortgage loans.
In the case of IDBs, the local issuing agency (Industrial Development Authority) serves as a conduit. The loan is made to the Authority; the Authority relends the bonds (bond proceeds) to the private company to pay the cost of the capital project. For IRS purposes, the action of passing the loan through the Authority results the loan being treated as a special obligationof a local governmental agency.