Industrial Revenue Bonds (IRBs) provide a source of tax-exempt or taxable bond finance for projects involving significant private activity that promote new and existing businesses, encourage employment, and expand the tax base of a community. IRBs are issued by Industrial Development Corporations sponsored by a government unit, but their proceeds are passed on to private businesses, which are generally responsible for debt service payment. Show Who Can Apply?Industrial Development Corporations (IDCs) or equivalent bodies whose creation by cities, counties or conservation and reclamation districts is authorized by the Development Corporation Act of 1979. IDC’s must issue IRBs on behalf of a city, county or conservation and reclamation district for the benefit of private companies for eligible projects within their jurisdiction. Another governmental unit outside of the IDC’s jurisdiction may request the IDC to issue bonds on its behalf. Type of IncentiveTax-exempt or taxable bonds issued on behalf of private companies for eligible projects, as defined in the Development Corporation Act of 1979. Generally, the bond debt service is paid by the private company under the terms of a lease, sale, or loan agreement. As such, the bonds do not constitute debts of or obligations of the sponsoring governmental unit, the IDC, or the State of Texas, except for Sales Tax Bonds. There are 5 types of IRBs available:
Eligibility DetailsPlease refer to the Development Corporation Act for definitions of eligible projects and eligible costs associated with those projects. The issuance of bonds is governed by the state and federal law, and qualified bond counsel should be consulted on all potential IRB issuances. ApplicationWith a rolling application period, we recommend contacting the Texas Bond Review Board to determine whether the state has remaining funds available under its tax-exempt volume caps. The process for issuing an IRB is generally as follows:
Program DocumentsChapter 501, Development Corporation Act Bond Financing Options IRB Administrative Rules Who backs revenue bonds?General obligation, or GO, bonds are backed by the general revenue of the issuing municipality, while revenue bonds are supported by a specific revenue source, such as income from a toll road, hospital, or higher-education system.
How does a revenue bond work?A revenue bond repays creditors from income generated by the project that the bond itself is funding, such as a toll road or bridge. While a revenue bond is backed by a specific revenue stream, holders of GO bonds are relying on the full faith and credit of the issuing municipality.
What secures revenue bond?The repayment of general obligation bonds is secured by all the revenues generated by an entity, including their tax revenues. The repayment of revenue bonds is guaranteed only by revenues obtained by the projects that were subsidized using the bonds. Tax revenues are not used at all.
Which of the following secures an industrial revenue bond IDR?The correct answer was: Corporate net lease payments. Corporate net leases back up IDRs, which means the credit of the bond is as good as the credit of the corporation that signs the net lease.
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