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TO: BOARD OF SUPERVISORS/BOARD OF DIRECTORS, INDUSTRIAL DEVELOPMENT AUTHORITY
FROM: Harvey E. Bragdon
Director of Community Development
DATE: July 23, 1986
SUBJECT: Composite Industrial Development Bond Program
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SPECIFIC REQUEST(S) OR RECONMENDATION(S) & BACKGROUND AND JUSTIFICATION
RECOMMENDATION:
As the Board of Directors of the Industrial Development Authority of the County of
Contra Costa. Authorize the Director of Community Development to 1) undertake the
structuring of a composite Industrial Development Bond issue; 2) enter into a letter
agreement with Developing Systems, Limited specifying terms for the DSL Consortium to
undertake and assist the County implementing said program; and 3) designate and enter
into an agreements with bond counsel .
BACKGROUND:
By adoption of Ordinance 81-78 the Board of Supervisors established the Industrial
Development Authority of the County ' of Contra Costa. The Industrial Development
Authority is legally authorized to issue industrial development bonds (IDB' s)
pursuant to federal and state law. The Authority has adopted procedures and criteria
to govern prospective issuances of industrial development bonds. The Authority has
issued Industrial Development Bonds once - in 1984, to finance the acquisition of
rolled steel splitting equipment by Ferralloy West Company.
In 1985 my staff developed the concept of combining multiple industrial development
financing transactions into one bond issue, i .e. , a composite issue. The composite
issue approach has a number of advantages: 1) It is generally more cost effective
for the business entity because certain fixed costs relative to the financing can be
shared; 2) achieving a larger issuance size provides flexibility for the bonds to be
sold either publically or on a private placement basis; and 3) smaller and a more
diverse set of firms can be prospectively assisted: The efforts to market a
composite IDB issue in 1985 resulted in the identification of a small number of firms
that were prospectively interested, however none were sufficiently interested or
ready to proceed with an issuance of bonds. In part the reluctance to proceed on the
part of the business firms was the inability to get appropriate guidance from
individuals who understood their businesses. Additiona y, a rketing effort may
not have penetrated the private sector sufficiently to ac inter e ted parties.
CONTINUED ON ATTACHMENT: YES SIGNATURE:
_RECOMMENDATION OF COUNTY ADMINISTRATOR _RIrNDAT N T 0 D COMMITTEE
APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON August 12, 1986APPROVED AS RECOMMENDED x OTHER
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A TRUE
xUNANIMOUS (ABSENT zi ) AND CORRECT COPY OF AN ACTION TAKEN
AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD
ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN.
CC: Redevelopment Director ATTESTED /off /98'6
Auditor-controller PHILOATCHELOR, CLERK OF THE
County Administrator BOARD OF SUPERVISORS AND COUNTY
Community Development Director ADMINISTRATOR
BY eOZ�� ,DEPUTY
Page 2
Board of Supervisors
Composite Industrial Development Bond :Program
Recently a Washington D.C. based firm, Development Systems Ltd. (DSL) approached
staff regarding a composite IDB issue' in 1986. Unlike the County's prior attempt at
structuring a composite IDB prgram, the DSL approach would involve a consortium of
experts to assist businesses through the application process. DSL's coordinated
professional assistance would include financial and accounting expertise, economic
analysts, and legal assistance. DSL could market the program more intensively than
the County was able to in 1985, and would be able to provide adequate advise and
consultation with its consortium of experts.
Industrial development bonds may be subject to new rules and/or regulations due to
the pending tax reform discussions. The outlines of the likely new rules are
generally known at this time. The major unknown is the extent to which IDB's and
other so called "private-purpose" bonds are to be subject to volume limits. In
anticipation that competition for the limited volume authority could be keen, it
would make sense to initiate program marketing as quickly as possible.
FINANCIAL IMPACTS:
The bonds to issued would be revenue bonds, which would entail no financial
obligations on the part of the County. Costs incurred by DSL would be contingent
during the marketing phase. Upon filing of an application with DSL, business firms.
would pay to DSL a fee not to exceed 4% of the amount to be borrowed. The County
would not be obligated to pay DSL any compensation directly.
The County's costs incurred in the process of establishing the program, which would
be limited to staff time and minimal noticing costs, and would be covered by a
non-refundable filing fee, and additional fees paid upon final approval by the
Industrial Development Authority.
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