Industrial Revenue Bonds
The FCEDA, pursuant to Chapter 33, Title 15.1 of the Code of Virginia, has the authority to approve Industrial Revenue Bonds according to the guidelines outlined below.
In the course of reviewing the material included in the application, questions concerning the financial viability of the project, the status of the developability of the site (i.e., zoning, use permit, etc.), or other significant issues affecting the suitability of the project for approval by the Commissioners are raised, the staff member will seek to resolve the questions before the application is formally submitted to the Authority Commissioners. Unresolved questions will be noted on the executive summary of the application prepared by the staff.
The President will review the full package for the upcoming Authority meeting, which is to be sent to each Commissioner and FCEDA bond counsel. The Executive Summary for each proposal will be attached to the Agenda for that Authority meeting and sent via courier to Commission members and FCEDA bond counsel. This material will go out no later than four calendar days prior to that scheduled Authority meeting.
FCEDA staff will contact the Supervisor’s office in whose district the project is planned to notify the board member of this pending IRB request. The intent of this notification is to identify any issues or concerns the supervisor might have with this IRB request prior to the scheduled public hearing before the Authority.
FCEDA bond counsel will coordinate with the County Executive office to schedule the IRB on the Board of Supervisors Agenda and address any Board related issues.
Background Information for Applicants for Industrial Bond Financing
To carry out its purposes of promoting industry, developing trade, and promoting the safety, health and welfare of the inhabitants of Virginia, the Fairfax County Economic Development Authority (“EDA”) has the authority to issue revenue bonds to be used in financing the acquisition, construction or equipping of various types of facilities. In order to qualify, a facility must be one of the following: (1) a non-profit 501(c)(3) entity; or (2) a for-profit “manufacturing facility”, as defined by the IRS Code.
(As a general rule, all governmental and charitable organizations, defined as 501(c)(3) entities in the IRS Code, are eligible for tax-exempt financing. Thus, any facility, such as a medical facility or a private, accredited institution of collegiate, elementary or secondary education can be eligible for tax-exempt financing as long as it is a 501(c)(3) entity. However, for-profit businesses were essentially eliminated by the 1986 amendments to the IRS Code, with the exception of “manufacturing facilities” as that term is defined in the IRS Code and redefined by IRS regulations and interpretations. (In general, a “manufacturing facility” is any facility which is used in the manufacture or production of tangible personal property (including processing resulting in a change in condition of such property). A second exception to this general rule is that while state and local governments may be beneficiaries of tax-exempt financing, the federal government cannot.)
Interest on the qualified bonds issued by the EDA is exempt from taxation under the Internal Revenue Code. The availability of this tax benefit generally results in a lower interest rate for the user of the borrowed funds. It is important to note that the revenue bonds do not constitute a general obligation of the FCEDA, nor will the full faith and credit of Fairfax County or the Commonwealth of Virginia be pledged to the payment of any such bonds.
Applicants should understand that the EDA does not itself provide any funds for the financing of facilities. It is the applicant’s responsibility to locate a source of funding. The applicant can do so either by applying directing to financial institutions or by using the services of an underwriter.
Furthermore, the EDA cannot guarantee that the bonds that it issues will qualify for exemption from taxation under the Internal Revenue Code. All applicants are strongly encouraged to seek the assistance of bond counsel early in the application process to assure that the bonds, once issued, will be exempt from taxation. The EDA does not render tax advice or opinions to applicants.
Steps in the Application Process
While there may be some variation in the timing and sequence of events leading up to issuance of the bonds, the process normally proceeds as follows:
- The applicant decides to acquire, construct, or renovate real property in Fairfax County.
- The applicant consults with bond counsel to determine eligibility for tax-exempt financing.
- The applicant begins to arrange for financing, either through a financial institution or through an underwriter.
- The applicant meets with the EDA staff to review and discuss the project prior to application submission.
- The applicant submits an application requesting the EDA to issue bonds.
- Staff and counsel to the EDA review application for completeness. If the application is in order, the application is put on the agenda for a public hearing at the next EDA meeting.
- A newspaper notice of the public hearing is published once a week for two successive weeks. NOTE: State law requires that the public hearing take place no fewer than six nor more than twenty-one days after the second notice appears in the newspaper. The EDA Commissioners meet on the second Monday of the month. Accordingly, in order to comply with state law, the notice of the public hearing on the application must be published in a newspaper of general circulation on or before the two Tuesdays immediately prior to the Monday date for the public hearing.
- The EDA conducts a public hearing at its regularly scheduled monthly meeting. The applicant makes a brief presentation of the project to EDA Commissioners. The EDA Commissioners vote on a resolution to approve or deny the application and recommend that the Fairfax County Board of Supervisors approve or deny the issuance of the bonds.
- The Fairfax County Board of Supervisors adopts a resolution approving or denying the issuance of the bonds. NOTE: State law requires that the Board of Supervisors’ approval take place within sixty days of the public hearing by the EDA. The Fairfax County Board of Supervisors meets on Mondays that have been scheduled for the year.
- Simultaneously with the approval process outlined in Steps 7 and 8 above, bond counsel prepares the bond documents reflecting the financial transactions relating to issuance of the bonds. The documents are submitted to counsel for the EDA for review.
- The EDA adopts a final resolution authorizing the issuance of the bonds.
- Bond counsel conducts the bond closing. EDA officials execute bond documents in accordance with the terms of the resolutions passed by the EDA.