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Industrial Revenue Bonds

King George County EDA has the authority to approve Industrial Revenue Bonds to the guidelines outlined below.

Pursuant to Chapter 33, Title 15.1 of the Code of Virginia, the King George County Economic Development Authority (“KGCEDA”) has the authority to approve conduit tax-exempt revenue bonds (“EDA Revenue Bonds”) for the financing of qualifying capital projects for certain applicant organizations (each, an “Applicant”). Below are some facts to familiarize your organization with an overview on eligibility and the process.

What is an EDA Revenue Bond?

EDA Revenue Bonds are referred to as “industrial development revenue bonds” or “IRBs” due to being primarily used for manufacturing or other industrial projects.

To assist in the growth of industry in King George County KGCEDA has the legal authority to issue tax-exempt revenue bonds to be used in financing the acquisition, construction or equipping of various types of applicant capital projects and facilities.

Benefits:

The interest earned on the EDA Revenue Bonds is exempt from Virginia and Federal income taxation. The is also payable only from revenues of the Applicant and any security the applicant pledges to repay the bond. The tax-exemption on the interest on an EDA Revenue Bond allows a lender or investor to offer debt financing to the Applicant at a significantly lower rate of interest.

The KGCEDA and the Commonwealth of Virginia are ot responsible in any way for the repayment of the bonds.

Eligible organizations:

In order to qualify, an Applicant and it’s capital project must be one of the following: (A) a facility owned and used by a non-profit 501(c)(3) entity; or (B) a small, for-profit “manufacturing facility.”

What is the range of funding that can be borrowed by an EDA Revenue Bond?

There is no limit on the maximum amount of an EDA Revenue Bond financing for a qualified 501(c)(3) applicant’s project; other than any limit imposed by the lender of investor who is providing the tax-exempt financing.

For manufacturing facilities the Federal tax law-imposed limit on the size of EDA Revenue Bonds for qualified applicants is a maximum of $10,000,000.

For your consideration:

EDA Revenue Bond financing are somewhat more complicated than conventional financing-due to the required tax qualifications and KGCEDA and King George County approvals. It is somewhat more expensive to document and close them. It is not cost effective from a transaction costs to pursue EDA Revenue Bond financing for projects less than $5,000,000.

Public Process:

Notice of the Applicant’s request for the EDA Revenue Bond Financing will be published and advertised in the newspaper and considered a public meeting for the KGCEDA’s members. Furthermore, Economic Development staff will contact the King George County Board of Superevisors in whose district the project is located in to notify the Supervisor of the pending revenue bond request. Intent on being to identify any issues or concerns the Supervisor might have with the request prior to the schedule public hearing before the KGCEDA.

Following KGCEDA approval, KGCEDA bond counsel will coordinate with the County Administrators department to place the EDA Revenue Bond matter on the agenda of the Board of Supervisors for consideration at an upcoming meeting.

Fees Associated with an EDA Revenue Bond:

KGCEDA charges an issuance fee for all new money associated with EDA Revenue Bond requests processed through our office.

Why Pursue an EDA Revenue Bond rather than borrow directly?

Borrowing terms can be more favorable than, for example, a direct loan from a bank. Interest on qualified revenue bonds issued by the KGCEDA is exempt from taxation. The availability of this tax benefit generally results in a significantly lower interest rate for the user of the borrowed funds.

For more information contact King George County Economic Development Staff

Please send an e-mail to [email protected] or call
540-775-9181