Frequently Asked Questions
What is the I-Bank?
The California Infrastructure and Economic Development Bank (I-Bank) is a State-run financing authority, which was created in 1994 to promote economic revitalization, enable future development, and encourage a healthy climate for jobs in California. The I-Bank operates pursuant to the Bergeson-Peace Infrastructure and Economic Development Bank Act contained in the California Government Code Sections 63000 et seq. The I-Bank is within the Business, Transportation and Housing Agency and is governed by a five-member Board of Directors. The I-Bank has broad authority to issue tax-exempt and taxable revenue bonds, and provide loans to local governments for a wide variety of public infrastructure.
The I-Bank's current programs include the Infrastructure State Revolving Fund (ISRF) Program, and Conduit Revenue Bond Financing Programs that include the: 501(c)(3) Revenue Bond Program; Industrial Development Revenue Bond Program; Exempt Facility Revenue Bond Program; and Governmental Bond Program.
How are the I-Bank and its Programs Funded?
The I-Bank is a self-supporting governmental entity that pays its cost of operations from service fees and interest earnings on loans and investments.
The Infrastructure State Revolving Fund (ISRF) Program, a direct loan program, was originally funded with seed money from the State’s General Fund in the late 1990’s and early 2000’s, and later funded with the proceeds of tax-exempt revenue bonds described below. The I-Bank issued approximately $150 million of tax-exempt revenue bonds secured by the ISRF Program repayment revenues that provided additional ISRF Program funding. The bank has leveraged the initial State General Fund infusion to finance approximately $400 million in infrastructure projects over the life of the program.
What is the Infrastructure State Revolving Fund (ISRF) Program?
A statewide program that provides low-cost loans up to $10 million per project to local municipal governments for a wide variety of public infrastructure that provide local economic development benefits, such as:
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Who Can Apply for an Infrastructure State Revolving Fund (ISRF) Program Loan?
Eligible applicants include any subdivision of a local government, including cities, counties, special districts, assessment districts, joint powers authorities and non-profit corporations formed on behalf of a local government.
What is the Interest Rate and Term of Infrastructure State Revolving Fund (ISRF) Program Loans?
The interest rate on an ISRF Program loan is fixed for the term of the financing, set at a rate as of first of the month the I-Bank Board considers the financing request, and is subsidized at approximately 67% of an A-rated bond rate for a similar weighted average maturity. The term of the financing cannot exceed 30 years or the expected useful life of the project being financed. Often borrowers select a term of 20 or 30 years.
What Infrastructure Costs can Be Financed?
The Infrastructure State Revolving Fund (ISRF) Program loans finance capital costs of public infrastructure such as land, construction of facilities, the purchase and installation of equipment as well as project soft costs such a design, environmental, engineering, permits and construction management. The program does not finance operations and maintenance costs, and finances capitalized interest in certain cases.
Local government applicants submit a relatively short Preliminary Application that provides preliminary information about the applicant, the project, the proposed repayment stream, and the economic development and other public benefits of the project. If it appears that the proposed project and repayment source will likely meet the program’s threshold and supplemental criteria [insert Criteria link here], then the applicant will be invited to submit a Financing Application at such time as the project is ready to proceed with construction.
What Are the Conduit Revenue Bond Financing Programs?
The I-Bank facilitates access to funding from the private capital markets through its Conduit Revenue Bond Financing Programs, which provide tax-exempt bond funding for eligible economic development facility projects located throughout the State such as job-creating manufacturing facilities or facilities that support the mission of eligible 501 (c)(3) nonprofit organizations . The bonds are repaid by the private sector borrower, and are not a debt of the I-Bank or the State of California.
Who Can Apply for Conduit Revenue Bond Financing?
Eligible, privately-owned small and medium sized manufacturing and processing businesses, or 501 (c)(3) nonprofit organizations whose mission is to provide research, recreational, cultural, educational, utility or social welfare services.
What Is an Industrial Development Bond (IDB)?
Industrial Development Bonds (IDBs) are a type of conduit revenue bond issued by a governmental entity to provide financing for the acquisition, construction, rehabilitation and equipping of manufacturing and processing facilities for private companies. IDBs are issued by the I-Bank, as well as cities, counties and joint powers authorities.
What Is the Industrial Development Bond (IDB) Application Process?
The IDB issuance process involves a number of steps, most of which can be pursued concurrently with the private bank credit approval process. The business needs to assemble a bond finance team consisting of bond counsel, underwriter and typically a financial advisor. The finance team will take primary responsibility for completion of these additional requirements. The entire process can be easily completed within 90 days and should not be much different from conventional financing. The most frequent source of delay is, in fact, the letter of credit bank's credit approval process. [insert link to IDB process/procedures]
Who Can Apply for an Industrial Development Revenue Bond (IDB)?
Eligible Industrial Development Revenue Bond Program applicants include small and medium sized private businesses engaged in processing or manufacturing in the State of California.
What Types of Conduit Bonds are Issued for Nonprofit Organizations?
Eligible 501(c)(3),organizations utilize conduit revenue bonds to provide financing for capital expenditures such as the construction of or the purchase of a building that will assist the nonprofit entity to deliver services related to its mission. Conduit revenue bonds cannot be used for working capital. As with Industrial Development Bonds (IDBs), the conduit bonds issued by the I-Bank are repaid by the private sector nonprofit entity, and are usually backed by a bank letter of credit. The bonds are not a debt of the I-Bank or the State of California. For more information about the I-Bank’s 501(c)(3) Conduit revenue Bond Program, please click here.
Why Choose a Tax-Exempt Revenue Bond Over A Conventional Bank Loan?
A tax-exempt revenue bond’s interest rate can be significantly lower than conventional bank financing. Over a long period of time, this can mean substantial interest cost savings to the borrower depending on the amount financed. For more information, please contact us.
What is the Interest Rate for Conduit Revenue Bond Financing?
Tax-exempt revenue bond rates are generally 80% of commercial interest rates. Bond financing interest rates are set by the market at the time the bonds are sold. Factors affecting the rate include the size of the bond issue, the maturity dates for the bonds, the credit rating of the credit enhancement (see What is a Letter of Credit below), whether the bond interest rate is fixed or variable for the term of the financing, or impacted by other financial market and economic conditions. To see a recent history of bond interest rates, check the Securities Industry and Financial Markets Association (SIFMA) website.
What is a Letter of Credit?
A Letter of Credit is a type of bond financing credit enhancement that is a guarantee by a bank that the bondholders will receive payment.
Where Do I Obtain a Letter of Credit?
Start with your current business bank. Otherwise, your Bond Counsel or Financial Advisor should be able to refer you to banks offering Letters of Credit for your type of financing. The I-Bank can also provide a list of lending institutions that offer Letters of Credit.
How Long Does the Financing Take Once the I-Bank Receives an Industrial Development Bond or 501(c)(3) Application?
Many factors influence the timing of a Industrial Development Bond or 501(c)(3)conduit revenue bond financing, such as the complexity of the issue, ability of the borrower to obtain a letter of credit, or status of additional approvals from state or local agencies. If all credit approvals are obtained and the draft financing and project documents are substantially complete, the I-Bank’s average time for application review for financing can take 60 to 90 days. It is important to note that the actual sale of the bonds could occur up to 30-90 days after I-Bank approval.
Where Can I Find A Financial Advisor, Bond Counsel Or Underwriter to Help Me with an Industrial Development Bond (IDB) or 501(c)(3) Conduit Revenue Bond?
A list of approved revenue bond finance team members can be found on the State Treasurer’s website at:
http://www.treasurer.ca.gov/bonds/pools/financialadvisor.asp
http://www.treasurer.ca.gov/bonds/pools/bondcounsel.asp
http://www.treasurer.ca.gov/bonds/pools/underwriter.asp
What is the I-Bank’s Credit Rating Requirement?
I-Bank bond policies require a minimum credit rating of “A-” based on the credit of the applicant or credit enhancement provider.
What is a Private Placement?
A private placement enables the borrower to “place” the bonds with a qualified institutional buyer or accredited investor who buys the bonds if certain requirements are met.
What are the Conduit Revenue Bond Programs Repayment Terms?
In general, conduit revenue bond repayment terms will be based on the useful life of the project being financed, the business’ financial condition and the credit arrangement with the Letter of Credit provider. A common repayment structure will include variable rate financings with weekly interest payments and twice a year principal payments. The length of the conduit revenue bond term generally matches the life of the asset to be financed; the term for land and buildings is generally 20 years
How much will the Bond Financing Cost Be?
In addition to the I-Bank’s issuer fee, conduit revenue bond transaction costs are generally about two percent (2%) of the bond amount, and can vary depending on complexity and other transaction issues. Other transaction costs include the State Treasurer agent for sale fee, fees for the bond counsel, underwriter, trustee, and financial advisor (if utilized) as well as letter of credit costs. Some of these costs can be included in the conduit revenue bond financing amount and amortized over the life of the bond.
What is the I-Bank’s Issuance Fee?
The I-Bank issuer fee is 0.25 % of the par amount for bonds under $10 million. There is a sliding scale fee for bonds larger than $10 million and less than $100 million. The maximum fee is $69,000.
My Project Doesn’t Fit Your Requirements. Where Else Should I Look For Financing For My Project?
Other economic development resources can be found on our website at: http://ibank.ca.gov/Resources/index.html.
- California Financing Coordinating Committee (CFCC)
The CFCC consists of state and federal agencies and departments that work together to offer coordinated and streamlined access to subsidized infrastructure financing for California's local communities. CFCC members conduct free Funding Fairs statewide each year to educate the public and potential customers about the different member agencies and the financial and technical resources available. - Governor's Office of Economic Development
The Governor’s Office of Economic Development is a one-stop shop to help businesses acquire the direction, information and resources they need to invest, succeed and expand in California. - California Workforce Investment BoardThe California Workforce Investment Board provides a comprehensive Business Services Resource Catalog Issue 3 that can be accessed at http://www.cwib.ca.gov/page/library/BSC%20021711for%20WEB.pdf
Does the I-Bank Provide Grants To Business Or Local Governments?
Grant funding is not available through the I-Bank.
Does the I-Bank Provide Working Capital or Start-Up Funds for Businesses?
Working capital is not eligible to be financed by private activity conduit revenue bonds issued by the I-Bank. Generally speaking, bond financing is not suitable for business start-up expenditures due to the difficulty of obtaining a letter of credit from a bank or other financial institution rated “A-” or better. Letter of credit banks analyze a financing with the similar standards used in making a direct loan. We recommend contacting your bank to determine its credit standards.
I Don’t Understand Bond Financing. Where Can I Go For More Information?
Information about bond financing can be obtained from the California Debt and Investment Advisory Commission or Council of Development Finance Agencies.
Why Choose the I-Bank as a Conduit Bond Issuer?
- I-Bank can issue conduit revenue bonds for projects in any area of the State of California.
- I-Bank issuer fees are often lower than other conduit bond issuer fees.
- I-Bank’s experienced professional staff helps demystify the process and can provide swift access to low-cost capital for your business expansion.
Where Can I Learn More about the I-Bank and its Financing Programs?
Please visit our programs page at http://www.ibank.ca.gov/programs_overview.htm or call us at (916) 322-1399.
