Industrial Revenue Bond Program
The State of Texas Industrial Revenue Bond Program (IRB) is designed to provide tax-exempt or taxable financing for eligible industrial or manufacturing projects as defined in the Development Corporation Act of 1979 (Act). The Act allows cities, counties, conservation and reclamation districts to form non-profit industrial development corporations (IDCs) or authorities on their behalf. The purpose is to provide bonds for projects within their jurisdictions.
The IDC acts as a conduit through which monies are channeled. Generally, bond debt service is paid by the business under the terms of a lease, sale or loan agreement. As such, it does not constitute a debt or obligation of the governmental unit, the IDC or the State of Texas.
The Andrews Economic Development Corporation has the ability to issue Industrial Revenue Bonds for specific projects that have a positive economic benefit to Andrews.
- Preliminary Application for Financial Participation – The user company (the “User”) should first contact the proposed issuing authority (the “Authority”) to obtain specific application procedures required by that Authority. In the event the Authority does not have specific application procedures, First Southwest Company will provide an application format subject to the approval of the Authority. The User must then apply to the Authority for the passage of a reimbursement resolution (the “Resolution”) for an industrial project (the “Project”) and to notify the Authority of the proposed financing.
- Incurring Eligible Project Cost – Project costs eligible for inclusion in the proposed financing may not be incurred prior to the passage of the Resolution by the Authority. Upon passage of the Resolution, the User may proceed to purchase or construct items to be included in the Project. This practice is not uncommon if bond funding is assured or the User plans to complete the Project from other funds if bond funding is not available.
- Eligibility Questionnaire – A project eligibility questionnaire must be completed by the User in order to provide information necessary to commence drafting of the basic documents, such as the trust indenture, loan agreement and bond resolution. In some instances, completion of the eligibility questionnaire is a requirement of the application procedure in (1), above.
- Bond Purchase Commitment – A written bond purchase commitment describing in detail
the terms and conditions of the commitment must be provided in order to proceed with drafting the basic
documents. Specifically the bond purchase commitment should include the following:
- Principal amount
- Interest rate(s)
- Form of bond
- Bond denominations
- Principal maturity, frequency and amounts(debt service schedule)
- First interest due date
- Security agreements (mortgage or other)
- Credit enhancement (LOC or other)
- Any other terms or conditions agreed upon
- Drafting of Basic Documents – Upon obtaining the eligibility questionnaire and the bond purchase commitment, bond counsel for the Authority will proceed to draft the trust indenture, loan agreement and bond resolution. The documents will be distributed to all appropriate parties for review and comment.
- Preparation of the Deed of Trust and Security Agreement – The User and the bond purchaser are required to provide the agreements relating to security provisions stipulated as a condition of purchase. These documents must be submitted to bond counsel as well as all other appropriate parties, in order that approval may be obtained. Bond counsel may provide a suggested format for this document; however, the User and the bond purchaser have primary responsibility for all negotiations leading to, and the basic preparation of, the final document.
- Agreement on Basic Documents, Deed of Trust and Security Agreement – After each party has indicated that sufficient time has been allowed to review the documents and prepare comments, a meeting will be arranged, if necessary, to negotiate all proposed changes. Total agreement on documents must be obtained before work can proceed further.
- Bond Resolution – Once agreement on documents has been obtained, a request is made
by the User to the Authority for passage of a bond resolution. The action taken by the Authority in the
passage of the bond resolution must then be approved by the governing unit (the “Unit”) of the Authority.
Public Hearing Requirement: Effective January 1, 1983, all Industrial Revenue Bonds, including health, housing and “exempt-facilities” issues, must be subjected to a public hearing prior to final authorization by the Authority. Standard provisions regarding published/posted notice will apply.
- Preparation and Submission of the Texas Bond Review Board Application and Allocation Request (Tax-Exempt only) – Much of the preparation of the application to the Texas Bond Review Board (“BRB”) should be completed in anticipation of the passage of the bond resolution and the approval of the Unit. Submission of the application and request for allocation of the State volume cap to the BRB is accomplished immediately after approval of the Unit.
- Approval of BRB (Tax-Exempt only) – Once an allocation has been received; the BRB must issue a certificate of allocation, if applicable.
- Submission and Approval of Attorney General – As applicable, the bonds will be submitted to the office of the Attorney General for approval.
- Delivery Preparation – Bonds and various closing documents are prepared while awaiting the Attorney General’s approval. In order to avoid unnecessary delays, many closing documents may be executed in advance of actual closing. After receiving the Attorney General’s approval, all parties will agree upon the earliest date mutually acceptable and delivery of the bonds will take place.