BOOSTING manufacturing with bonds

Industrial Revenue Bonds serve as a tool to promote expansion of manufacturing across the country

Industrial revenue bonds were developed in the 1960s to assist the manufacturing industry, which has experienced continual declines. But due to lowered interest rates, high IRB fees and a lack of marketing on the part of issuing agencies, the federal program has dropped in popularity.

The Columbia River Economic Development Council is among the many local jurisdictions granted IRB issuing authority under the federal program. States and ports may also issue IRBs.

“(The program is) designed for companies in the manufacturing industry to help grow the manufacturing base in the country,” said Deb Wallace, CREDC director of business expansion, who starting pushing the program two years ago.

Wallace said a study conducted by the CREDC showed that of 50 manufacturers in the county, 75 percent of them said they expected to expand in the near future and several have started the process. Low interest rates for the past several years may have reduced interest in the program, she said.

Port of Vancouver Director of Finance Maggie Smith said the port has never issued an IRB to any business within the port district.

“We have never had any interest expressed from potential businesses,” she said.


The Port of Longview has issued many IRBs said Kathy Oberg, director of finance and administration. However, she said the port last issued an IRB in 1993. Oberg also attributes the lack of interest to low interest rates. She said the upfront fees associated with the bonds may not be as worthwhile a benefit today.

Bond attorney Doug Goe has worked with companies obtaining IRB financing across twelve states since 1982. In the 1980s, Goe said he would do five to 10 IRBs each year in Clark County when the program was “thriving.”

“It has ebbed and flowed since then,” said Goe. “It depends on interest rates, the banks’ appetite for this type of financing and the development of the tax codes – whether they are friendly or not.”

Today he does about two to five each year, he said. However, it may be back on the upswing.

“I am seeing a renewed interest in this type of financing,” said Goe. “There used to be a whole generation of lawyers, accountants and bankers very attune to this as a financing tool. There is a new generation of professionals realizing that this can be a valuable tool.”


Weyerhaeuser has taken advantage of IRBs at its plants across the country, including Longview. The company has about $400 million in IRBs issued in conjunction with local authorities throughout the country, said one Weyerhaeuser finance executive. The company financed various projects through IRBs issued by the Port of Longview, including pollution control, energy efficiency and for de-inking equipment – for reusing newspaper – at its port paper facility.

The company has not participated in the program in about four years because they have not had a project with the appropriate size or use. Financing a project of $5 million through an IRB would no longer be feasible, due to the cost and work involved, but for a smaller company that may be worthwhile.

“For any company it is a tool in your toolbox”, said the executive. “It’s a means of funding which can reduce costs for an appropriate project.”


Tax-exempt IRBs are restricted to projects of no more than $10 million. Additionally, Wallace said projects less than $2 million are unlikely candidates. The initial costs and process make IRB financing less beneficial for amounts under $2 million. Eligible companies benefit from lower interest rates than traditional financing – typically 2 to 3 percentage points below market rates, said Wallace. The lower rates are the result of tax-free interest for bond purchasers.

Taxable IRBs are further limited to projects such as solid waste disposal, sewage treatment and recycling and pollution control. And while rates are higher than tax-exempt financing, Wallace said they typically remain below market rate and are “still a good instrument.”

As an issuer of such bonds, CREDC’s Wallace assesses the eligibility of interested companies. Bond counsel must be retained to ensure the validity of the process and draft required documents. The borrowing company must obtain a letter of credit from an investment grade-rated bank. In the case of the CREDC, the county commissioners, acting as the Industrial Revenue Bond Public Corporation of Clark County approve all decisions regarding IRB transactions. Lastly, an underwriter is hired to sell the bonds. Fees vary between issuing authorities, but typically include an application fee and administration fee to the issuer, as well as fees to cover legal counsel, bank and underwriter fees. As much as 2 percent of the total bond amount can be applied to the cost of issuance of an IRB.

What is an IRB

An Industrial Revenue Bond, or IRB, is a bond used to finance the construction of manufacturing or commercial facilities for a private user.

IRBs are available in two forms and are limited to companies involved in manufacturing or processing. IRBs are available in tax-exempt and taxable forms. The taxable form is more restrictive in terms of its uses, but there is no cap on the amount issued.

IRBs can be used for land acquisition, building construction and acquisition of new equipment. Used equipment can be financed only if purchased as part of an existing plant. Improvements to land, buildings, docks, wharves, roads, parking, utilities and landscaping are also eligible.

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