0965 Industrial Dvlmt Financing Advisory Comm
Program Descriptions

10 - CALIFORNIA INDUSTRIAL DEVELOPMENT FINANCING ADVISORY COMMISSION

The core program area is the Industrial Development Bond (IDB) Program, under which CIDFAC, as required by state law, serves as the mandatory approval agency for local IDB issuers. Once potential borrowers (manufacturers, processing companies and knowledge-based businesses) apply through their local government agency for low cost tax-exempt financing, CIDFAC carefully reviews the public benefits generated by the proposed project, particularly those benefits associated with job creation, and determines whether these benefits will significantly outweigh any detrimental public effects. Eligible capital expenditures include the acquisition of land, building construction, building renovation, and the purchase of machinery and equipment. Bond proceeds also can be used to cover the cost of architects, engineers, attorneys, permits, and the cost of bond issuance. In addition, bond proceeds can also be used to produce intangible products such as patents, copyrights, formulas, processes, designs, trademarks, and know-how. The local issuer can be a city, county, economic development authority, redevelopment agency, or a joint power authority.

Federal law authorizes the issuance of IDBs in local Empowerment Zone Bonds (EZ Bonds). CIDFAC's EZ Bond Program augments the benefits of the IDB program to further support economic development in California's most distressed communities. The EZ Bond Program expands the eligibility of borrowers to manufacturers, retailers, and any service that operates in an Empowerment Zone. The EZ Bond program removes the maximum dollar restriction (applicable to IDBs) on the size of the issuance. There are five federally designated Empowerment Zones in California: Los Angeles, Santa Ana, San Diego, Fresno and an unincorporated section of Riverside County. These communities received this federal designation based on their high unemployment and high poverty rates.

The American Recovery and Reinvestment Act of 2009 (ARRA) created a new type of bond, the Recovery Zone Facility Bond (RZFB). RZFBs can be issued by counties and certain cities with populations that exceed 100,000. Projects financed with this type of bond must be located in an area formally designated as a "recovery zone" by the eligible city or county. To be designated as a "recovery zone," an area must suffer from significant poverty, unemployment, high home foreclosure rates or general economic dislocation. RZFBs issued by local industrial development authorities, or by eligible cities or counties that issue bonds under the California Industrial Development Act, are subject to a streamlined review and approval by CIDFAC. The RZFB program is scheduled to expire on December 31, 2010; however, legislation is currently pending before Congress to extend the program through 2011.