COMPANIES MISS OUT ON DEVELOPMENT BONDS.Byline: John W. Cox Staff Writer Tens of millions of dollars in low-interest financing are going untapped by the state's small and medium-size manufacturers, despite recent interest rate cuts that make the program more attractive than ever. This year, $67 million was left unspent in the state's $115 million pool for industrial development bonds. That's a sharp turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. from years past, when demand was higher and competition among borrowers was more intense. State officials say that fewer companies are requesting the money because of a combination of two factors: a hesitancy hes·i·tan·cy n. An involuntary delay or inability in starting the urinary stream. to invest amid the recent economic downturn and a general lack of awareness of the bonds as a financing option. A handful of manufacturers in Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, have availed themselves of the bonds in order to expand their operations. These companies are now enjoying interest rates that are roughly half that of the nation's prime interest rate, which is the base rate for most business loans. The paperwork required for such deals is substantial, and completing the entire application process typically requires the services of an entire team of professionals. That raises the cost of the financing, but it still ends up being much less expensive than a standard business loan. ``Is it worth it? Of course it's worth it. Was it easy? No,'' says Bitsu Welderufael, controller for Studio Moulding in Carson, a 115-employee manufacturer of picture frames. On Thursday, after three months of paperwork and preparation, the company closed a deal for about $4 million in variable interest-rate industrial development bonds. The bonds' current interest rate is 1.15 percent, though with various fees, that rate works out to about 3 percent to 4 percent. Studio Moulding plans to use the money to move from a 50,000-square-foot plant in Carson to one nearby that measures about 95,000 square feet. Industrial development bonds are designed to promote expansion and increased employment among the state's small and medium-size manufacturers, such as furniture factories, metal finishing companies and food processing Food processing is the set of methods and techniques used to transform raw ingredients into food for consumption by humans or animals. The food processing industry utilises these processes. businesses. Bond guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. dictate TO DICTATE. To pronounce word for word what is destined to be at the same time written by another. Merlin Rep. mot Suggestion, p. 5 00; Toull. Dr. Civ. Fr. liv. 3, t. 2, c. 5, n. 410. that the money be used to create jobs or use vacant buildings. One stipulation An agreement between attorneys that concerns business before a court and is designed to simplify or shorten litigation and save costs. During the course of a civil lawsuit, criminal proceeding, or any other type of litigation, the opposing attorneys may come to an agreement requires that one new job be created for every $50,000 in proceeds. No more than $10 million is available to any individual borrower. To apply, companies contact a financial adviser who helps them put together the necessary paperwork and guides them through a roughly 90-day process that, if successful, leads toward what is known as conduit financing Conduit Financing A financing arrangement involving a government or other qualified agency using its name in an issuance of fixed income securities for a non-profit organization's large capital project. . The term refers to private financing through public means. Since the bonds are not guaranteed by the government, one of the key steps in the process is getting a private bank to issue a letter of credit. This is the insurance that state regulators need to sell the tax-exempt bonds Tax-exempt bond A bond usually issued by municipal, county, or state governments whose interest payments are not subject to federal and, in some cases, state and local income tax. tax-exempt bond See municipal bond. to private investors. Because of this step, this kind of financing is not usually available to small companies without an established line of credit. When all the paperwork is complete, the application is reviewed by a set of two panels within the state Technology and Trade Agency. If these panels approve the request, the bonds can then be issued by any of a number of public sources, such as city governments. The bonds are then sold at a federally subsidized sub·si·dize tr.v. sub·si·dized, sub·si·diz·ing, sub·si·diz·es 1. To assist or support with a subsidy. 2. To secure the assistance of by granting a subsidy. interest rate to private bond investors, whose income from the company's debt payments are tax exempt. Daniel J. Bronfman, a Santa Monica Santa Monica (săn`tə mŏn`ĭkə), city (1990 pop. 86,905), Los Angeles co., S Calif., on Santa Monica Bay; inc. 1886. Tourism and retailing are important, and the city has motion-picture, biotechnology, and software industries. financial adviser who handles an average of about a dozen industrial development bond deals yearly, says the bonds have been overlooked recently as a means of financing expansion. Even a few years ago, he says, so many companies were applying for the financing that competition was fairly intense. But now, he says, virtually any company that qualifies can tap the fund. ``The biggest thing is, people don't know Don't know (DK, DKed) "Don't know the trade." A Street expression used whenever one party lacks knowledge of a trade or receives conflicting instructions from the other party. (the money) is available,'' says Bronfman, who helped Studio Moulding gets its financing. Bronfman is paid through a percentage-based commission on the bond revenues. Cunico controller Gary Hubbard characterizes his company's bond financing as ``a hell of a deal.'' The company had been forced out of its former Wilmington plant because of an expansion project by the Port of Los Angeles The Port of Los Angeles is located on San Pedro Bay in the San Pedro neighborhood of Los Angeles, approximately 20 miles (30 km) south of downtown. Also called Los Angeles Harbor and WORLDPORT LA . In their search for a new home, Cunico executives were referred by redevelopment officials to Bronfman. He helped the company secure about $2 million to build a much larger plant at 1910 W. 16th St. in Long Beach. Hubbard said his only regret is that the company didn't ask for more bond money. Officials with the state Technology and Trade Agency say that although few applicants have filed for the bond financing in recent months, activity has recently picked up. They add that unspent money available for industrial development bonds is simply recycled into the pool of money available the following year. |
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