Why offer an IRB Most states and many local governments offer industrial revenue bonds (IRB) as a way to encourage relocations and expansions of companies that provide jobs and expand economic opportunities for residents and the community. IRBs are an incentive to encourage a company to invest in Albuquerque.What is an IRB?
An Industrial Revenue Bond, or IRB, is a loan to a company from a private financing entity to build or buy a facility or buy land and/or equipment. IRBs are one way local governments can provide tax abatements to encourage relocation and expansion of companies.
An Industrial Revenue Bond, or IRB, is a loan to a company from a private financing entity to build or buy a facility or buy land and/or equipment. IRBs are one way local governments can provide tax abatements to encourage relocation and expansion of companies.
How do they work?
The city issues the bonds but is not making the loan. The investor buying the bond makes the loan. The company must find its own bond purchaser. It can also buy its own IRBs. The city technically owns title to the facility built with IRBs and leases it to the company for up to 20 years. At the end of the term, title is transferred to the company.
The city issues the bonds but is not making the loan. The investor buying the bond makes the loan. The company must find its own bond purchaser. It can also buy its own IRBs. The city technically owns title to the facility built with IRBs and leases it to the company for up to 20 years. At the end of the term, title is transferred to the company.
Here’s an example: Company X wants to build a $15 million plant and buy $20 million in equipment. The city issues a $35 million bond for 20 years. During this period the company will repay the bond. The company gets a break on property taxes for land of $4.3 million over 20 years and a break on equipment property taxes of $1.15 million over 7 years. It’s not correct to say the company is getting $35 million in tax breaks. The $35 million represents the amount of money the company will invest in our community.
Do IRBs affect the city’s credit ratings?
No. Since the city is not responsible for the loan, the IRB does not have an impact on the city’s credit rating.
No. Since the city is not responsible for the loan, the IRB does not have an impact on the city’s credit rating.
THE GUARDIAN thought the explanation of how IRB's work was cut short in the IPT today. The above explanation came from the City of Albuquerque, NM.
With virtually every community trying to attract companies to their community I wonder how the oppressive property tax rates play with companies looking for a place to locate. Surely, the property taxes in Caldwell and Nampa are off putting when they do their due diligence.
ReplyDeleteLow property taxes, not Christmas lights and parades, will have more of an effect on the decision makers when looking for a business location.
ReplyDelete