Industrial Development Authority (IDA)
An Industrial Development Authority is a corporation formed under chapter 349 of the Revised Statutes of Missouri to promote economic and industrial development in a city or county. IDAs have the power to:
- Issue bonds to finance projects
- Promote the development of commercial, industrial, agricultural, and manufacturing facilities
The Industrial Development Authority (IDA) of the St. Louis County has the power to issue revenue bonds to facilitate the financing of qualified projects located within unincorporated areas of St. Louis County and, with the permission of the applicable city, incorporated cities in St. Louis County.
Eligible Projects
Section 349.010, RSMo.: "Project" means the construction, extension, and improvement of public roads or the purchase, construction, extension and improvement of plants, buildings, structures, or facilities, whether or not now in existence, including the real estate, used or to be used as a factory, assembly plant, manufacturing plant, processing plant, fabricating plant, distribution center, warehouse building, public facility, waterborne vessels excepting commercial passenger vessels for hire in a city not within a county built prior to 1950, office building, for-profit or not-for-profit hospital, not-for-profit nursing or retirement facility or combination thereof, physical fitness, recreational, indoor and resident outdoor facilities operated by not-for-profit organizations, commercial or agricultural facility, or facilities for the prevention, reduction or control of pollution. Included in all of the above shall be any required fixtures, equipment and machinery. Excluded are facilities designed for the sale or distribution to the public of electricity, gas, water or telephone, together with any other facilities for cable television and those commonly classified as public utilities.
Common Examples
- Affordable Housing
- Nonprofit nursing homes and senior living
- Nonprofit recreational facilities (i.e., YMCA)
- Economic Development Projects (i.e., TIF and CID projects)
- Small Manufacturing Projects
Tax-Exempt Bonds and Tax-Exempt Loans
Overview
Tax-Exempt loans and bonds save manufacturers and 501 © (3) organizations money by lowering the interest rate on their financing for major projects. The Industrial Development Authorities of St. Louis City and County (Issuer) work with your bank to provide tax-exempt financing which lowers the overall rate. Tax-exempt financing can be up to 30% lower than traditional bank financing because investors are willing to accept a lower interest rate on tax-exempt bonds because of the tax advantage they receive.
Key Points About IDAs:
- Function:
- Primarily focused on issuing tax-exempt bonds to fund projects like building factories, warehouses, research facilities, and sometimes even infrastructure improvements needed for industrial development
- Funding Source:
- By issuing these bonds, the IDA can access capital at lower interest rates which can then be loaned to businesses at more favorable terms, encouraging investment.
- Governance:
- Typically managed by a board appointed by local government officials, with the responsibility to review and approve projects that align with the community’s economic development goals.
- Benefits for Communities
- Can lead to job creation, increased tax revenue from new businesses, and economic diversification.
Why a lower rate?
The reason why interest rates on tax-exempt bonds are typically lower than conventional financing is that interest income received by the investor is exempt from both federal and state income tax. Thus, the issuer of the tax-exempt bonds is able to pass the savings along to the borrower.