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Industrial Revenue Bonds (IRB)
IRBs may be issued in one of two ways:
- A municipality or county may issue an IRB to finance privately-operated development projects. The private party initiates the process by requesting that the government unit issue the bonds (a political process done in accordance with local and state laws).
- Through the Statewide Economic Development Finance Act the Economic Development Department can recommend projects to the New Mexico Finance Authority for issuance of taxable and tax-exempt IRB’s.
The bonds do not constitute an indebtedness of the local government and the requesting party must arrange its own financing. The term of the bonds is limited to 30 years (shorter by local rule in some municipalities).
IRB financed projects are exempt from ad valorem tax for as long as the bonds are outstanding and title to the project is held by the issuing agency. New Mexico law exempts governmental agencies from paying property taxes. The IRB financing mechanism provides for an installment sales agreement or lease agreement whereby the issuer acquires the project and then sells or leases the project to the business. At the end of the installment sale or lease, the issuer conveys the project to the business for a nominal amount. Bonds may be issued in different series with variable principal amounts, interest rates and maturities to accommodate the acquisition of assets with different useful lives. The municipality or county must approve the project. The issuing agency is not responsible for the indebtedness; it serves only as a conduit to the financing. In addition to a property-tax abatement, tangible personal property (other than building materials and related construction services) in facilities financed with IRBs is effectively exempt from gross receipts and compensating tax.
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