CHICAGO — The Indiana Finance Authority has advanced a pair of transactions that will launch the state’s first use of its $3.1 billion Midwestern disaster-area bond allocation to help redevelopment efforts following damaging storms two years ago.
The IFA Tuesday approved the issuance of $6.5 million of disaster bonds on behalf of a biotechnology company that wants to build a new plant in the city of Greenwood as part of its quest to develop generic insulin.
Last month the authority gave initial approval and is expected to give final approval next month to a $50 million issue on behalf of Printpack Bloomington LLC, a packaging manufacturer based in Monroe County.
Forty of Indiana’s 92 counties were declared disaster areas after the spring storms of 2008. Once a county is identified as a disaster area, private companies located there are eligible for tax-exempt financing for a broad range of projects. Though similar to private-activity industrial development bond issues, the program extends tax-exempt benefits to projects and developments that might otherwise run afoul of the tax code.
Greenwood will issue the $6.5 million of disaster bonds on behalf of the Zimmerman company. The IFA’s approval was needed to grant the city the disaster bond allocation.
The IFA will issue the bonds on behalf of Printpack Bloomington. The $50 million of bonds will be privately placed, according to Kendra York, the authority’s general counsel and chief operating officer. Printpack is expected to use its proceeds to build a new manufacturing plant.
Proceeds can be used to replace damaged property or property that is deemed to replace damaged property, she said.
“These two deals, and probably almost all of our deals, will likely fall in the 'deemed to replace,’ category,” York said. “It’s been so long [since the 2008 storms] and most of the businesses have found other ways to finance their improvements.”
York said the program is beginning to generate more interest and that the IFA plans to promote it on its Web site. “This is targeting a whole new borrower and kind of project, and [the IFA needs to] educate the public about these bonds and let them know they’re out there,” she said.
Congress included the new category of tax-exempt bonds in the Heartland Disaster Tax Relief Act for counties hit hard by severe storms and flooding between May 20 and Aug. 1 2008. The measure was signed into law in October 2008.
The program allocates tax-exempt private-activity bonds that don’t count against a state’s volume cap: $2.6 billion to Iowa, $3.8 billion to Wisconsin, $1.4 billion to Missouri, $1.5 billion to Illinois, $3.1 billion to Indiana, $849 million to Nebraska, and $957 million to Arkansas. The deadline for issuing bonds is Jan. 1, 2013.
In mid-2009, the Iowa Finance Authority was the first in the Midwest to issue the bonds, followed by the Wisconsin Health and Educational Facilities Authority.
