3.3.9.2 Small Manufacturing Facilities
TYPES OF FACILITIES FINANCED – Small-issue industrial development bonds (“qualified small issue bonds” under the Internal Revenue Code) may be issued to finance manufacturing facilities and directly related and ancillary facilities. California statutes may authorize the issuance of bonds to finance commercial facilities, but federally tax exempt bonds may no longer be issued for this purpose.
ISSUERS – Small issue industrial development bonds may be issued by charter cities, industrial development authorities established by a city or a county, JPAs with statewide geographic scope, or a state agency such as the California Pollution Control Financing Authority.
SPECIAL CONSIDERATIONS – Qualified small issue bonds may be issued in an aggregate face amount of not more than $1 million. The limitation on issue size may be increased to $10 million if the sum of the following items do not exceed $10 million during the 6 year period beginning 3 years before the date of bond issuance: (1) All capital expenditures made by the nongovernmental borrower or any related person for any facilities within the same political jurisdiction as the project, any other principal user of the facility being financed or any person (whether nor not a principal user) to benefit from the bond-financed facility, plus (2) the face amount of the bonds to be issued, plus (3) the remaining principal amount of all prior outstanding qualified small issue bonds issued to finance facilities in the same incorporated municipality (or in the same county but not in any incorporated municipality) as the project being financed, in which the nongovernmental borrower for the project being financed is the owner or a principal user.
Further, a nongovernmental borrower may not be the beneficiary of a qualified small issue bond financing if the total amount of all private activity bonds allocated to that nongovernmental borrower, plus the amount of the proposed issue, will exceed $40 million.
Small issue industrial development bonds are generally either privately placed or sold with credit enhancement.