Tax Exempt Bonds

The Warren-Washington IDA, in partnership with an underwriting financial institution(s), can provide certain types of tax-exempt financing for public and private organizations. Tax exempt ponds provide project applicants with a cost of borrowing cheaper than commercial loans. If properly structured, the bond interest can be exempt from both State and Federal income tax. The Federal exemption can be highly technical and tricky to structure. Hence the need for special bond counsel.

Qualified private activity bond categories include redevelopment, mortgage, 501 C 3, manufacturing (limited to $40 million), and exempt facility. Exempt facility categories are extensive and include airports, docks, wharves, mass commuting, water distribution, solid waste disposal, sewage, qualified residential rental projects, electric energy, gas energy, heating/cooling facilities, hazardous waste, intercity rail, hydro-electric, green building, and freight transfer.


If interested in learning more about IDA tax exempt bond opportunities, please contact the WWIDA to arrange a meeting with special bond counsel.

Issuance of industrial development revenue bonds:

  • Definition/what this means
  • Big picture view of WHO qualifies for this (EX: new developments, existing businesses looking to expand, etc.)
  • Qualifications (more detailed list of what is needed to get started)
  • Application/forms procedures that will be required
  • CTA to contact WWIDA about this

In order to promote economic development, the Counties of Warren and Washington IDA is authorized to issue both tax-exempt and taxable industrial development revenue bonds. The Agency issues these bonds for businesses that either wish to locate or expand their operations in the Counties of Warren or Washington. Typical projects eligible for financing include the purchase and rehabilitation of existing buildings, the construction of new buildings, or the construction of additions to existing facilities. Machinery and equipment may also be financed with IDA bonds. However, in most cases machinery and equipment is financed in conjunction with the purchase of an existing building or the construction of a new facility. The Agency acts as a financing conduit through which the transaction takes place. ALTHOUGH THE AGENCY ISSUES THE BONDS, IT DOES NOT ACTUALLY LOAN THE MONEY DIRECTLY TO A COMPANY. Rather, a financial institution loans the funds to an applicant, through the Agency. Typically, a bank or an underwriter will purchase the bonds and, in effect, make the loan. It is the responsibility of the company to discuss with lending institutions their interest in purchasing the Agency’s bonds to finance the project. However, an Agency representative can help arrange these discussions and suggest institutions which might be most receptive. The lending institution reviews the project and makes the credit decision as to whether or not to purchase the bonds. In addition, the company and financial institution negotiate the terms and conditions of the loan (its length, interest rate, etc.) independently of the Agency.

THE BONDS ARE SECURED BY THE FINANCIAL STRENGTH AND CREDIT OF THE APPLICANT. Normally, the loan is secured by a mortgage on the facility financed with the bonds. However, additional guarantees and collateral may be required by the lending institution similar to what may be the case in a conventional financing. This means that Agency approval of a project does not automatically result in funding being available. The applicant is responsible for the repayment of the bonds. NEITHER THE AGENCY, THE COUNTIES, NOR THE STATE GUARANTEE ANY SUCH INDEBTEDNESS. The Counties of Warren and Washington Industrial Development Agency issues both tax-exempt and taxable industrial development revenue bonds for the acquisition, construction, and equipping of manufacturing and commercial facilities. Tax-exempt bonds are regulated by federal tax law. The interest income on tax-exempt bonds is exempt from federal and state income tax. Interest income on taxable bonds is exempt from state income tax only. In addition to the reduced interest rate on the bonds, an Agency financed project is exempt from paying sales tax, mortgage recording tax, and is eligible for property tax exemptions.

There are four bond financing mechanisms available through the Agency:

  1. Tax-exempt manufacturing bonds – Manufacturing facilities can be financed with tax-exempt bonds.
  2. Taxable bonds – Commercial non-manufacturing projects such as office buildings, retail, and warehouse facilities, qualify for taxable bonds.
  3. Tax-exempt and taxable bonds – A combination of tax-exempt and taxable bonds can be issued for projects that include both manufacturing and non-manufacturing activities.
  4. Refunding bonds – Projects which were previously assisted with tax-exempt bonds may, under certain circumstances, be allowed to repay/refund the outstanding principal amount of the “old” bonds with new tax-exempt refunding bonds bearing a lower interest rate. Refunding at lower interest rates allows companies to remain competitive in Warren County and Washington County by reducing their facility costs.

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