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Industrial Development Revenue Bond Program

High tech rubber plant

What are Industrial Development Bonds?

Industrial Development Bonds (IDBs) are tax-exempt securities issued up to $10 million by a governmental entity to provide money for the acquisition, construction, rehabilitation and equipping of manufacturing and processing facilities for private companies. IDBs can be issued by the I-Bank, local Industrial Development Authorities, or by Joint Powers Authorities.

General Eligibility Requirements

The use of IDBs is governed by both federal and state laws and regulations. The following are some of the key requirements:

  • Manufacturing Facility. The project financed by the bonds must be a facility used for the manufacturing, production or processing of tangible property (including the processing resulting in the change of such property). No more than 25% of the bond proceeds can be applied to ancillary office, warehouse or other space.
  • Qualifying Costs. At least 95% of the bond proceeds must be spent on qualifying costs. Qualifying costs are generally capital expenditures such as land, building and equipment and other depreciable property (and can also include capitalized interest during construction).
  • Land. No more than 25% of the bond proceeds can be used to acquire land.
  • Acquisition of Existing Manufacturing Facilities. The acquisition of an existing facility (including manufacturing equipment) can be financed if at least 15% of the portion of the bond amount used to purchase the facility is spent on eligible rehabilitation expenditures within a two-year period.
  • No Used Equipment. Except as part of the acquisition of an entire facility, bond proceeds cannot be used to acquire used equipment.
  • Maturity. The average maturity of the bonds cannot exceed 120% of the average economic life of the assets financed.
  • No Working Capital or Inventory. Bond proceeds cannot be used to finance working capital or inventory.
  • $20,000,000 Capital Expenditure Limitation. The capital expenditures for the project, when added to the company's other capital expenditures in the same public jurisdiction as the project for the three years immediately preceding and three years following the closing of the financing of the project, cannot exceed $20,000,000.
  • $40,000,000 Aggregate Limitation. A borrower and certain users may not be the beneficiary of more than $40,000,000 of certain tax-exempt bonds regardless of the location of the projects, during a three year period after the facility being financed is placed in service.
  • Public Benefits. The project financed by the bonds must meet certain public benefit criteria established by the California Debt Limit Allocation Committee (CDLAC), which include, among other things, the creation or retention of jobs. CDLAC's criteria for IDBs and other types of private activity bonds can be obtained at
  • Credit Requirements. Generally, the borrower needs to secure a letter of credit in the amount of the bonds from a bank with a long-term credit rating of at least "A3" from Moody’s Investors Service (Moody’s), or an “A-” from Standard & Poor’s (S&P) or Fitch Ratings, Inc. (Fitch). Bonds can also be sold directly to Qualified Institutional Buyers or Accredited Investors, without a rating, so long as IBank conditions for direct purchases or private placements are met.

Benefits of IDB Financing

  • Low Interest Rates - generally 20% to 30% below comparable commercial alternatives.
  • Long-Term Financing - longer than conventional financing, often up to 30 years (but subject to the maturity limit stated above).
  • Comprehensive Funding - funds can be used for construction and take-out financing for land, buildings and equipment, but cannot be used to refinance borrowings or costs incurred prior to issuer inducement resolution. While up to 100% of qualified costs may be funded, in most cases lenders or credit banks require a significant equity contribution.
  • Assumable - the bonds are assumable if the business is sold to an entity engaged in a qualified use.
  • No Prepayment Penalty in Some Cases. Determination as to prepayment penalty is made by lenders and letter of credit banks.

The IDB Process

The IDB financing process can generally be completed within 120 - 150 days. The I-Bank staff and a financing team, which typically consists of an underwriter, bond counsel and financial advisor, will assist the applicant through each stage of the process.

Stage 1 - Pre-Qualification

  • Pre-Application
  • Federal Requirements
  • State Requirements

Stage 2 - Approvals

  • Inducement Resolution by Issuer
  • Application to Issuer for Final Approval
  • Noticed Public Hearing ("TEFRA")
  • Letter of Credit Commitment from Bank
  • State Tax-Exempt Allocation Approvals

Stage 3 - Bond Issuance

  • Documentation
  • Final Resolution of Issuance by Issuer
  • Bond Sale
  • Funding

How to Apply

Applications are accepted on a continuous basis and the I-Bank Board of Directors normally meets each month to consider approval of complete applications received at least thirty days prior to the meeting date. For additional information, please call (916) 341-6600 or e-mail


Nothing contained herein should be construed or relied upon as legal advice. Instead, this information is intended to serve as an overview of the general subject of the use of tax-exempt bonds by manufacturing companies, from which better-informed requests for advice, both legal and financial, can be formulated.

Policies and Procedures for Conduit Revenue Bond Financing for Economic Development Facilities - Updated 08/2010

Post-Issuance Tax Compliance Policy for Tax Exempt Bonds

Industrial Development Revenue Bond Fees 

Application Deadlines

Application: PDF Version Word Document Version Please submit completed applications via email to or by mail to P.O. Box 2830 Sacramento, CA 95812-2830.

Request For Post-Bond Issuance Actions - Complete this request form if you wish for the IBank to take post-bond issuance actions in connection with outstanding IBank bonds.  Such actions include, but are not limited to, agreement modifications, Letter of Credit substitutions, mode conversions, redemptions, agent substitutions. 


Fariba Khoie, Bond Programs Manager
1325 J Street, 18th Floor, Sacramento, CA 95814

Mailing Address: P.O. Box 2830, Sacramento, CA 95812-2830

Telephone: (916) 341-6644
FAX: (916) 322-6314