The government bond program works as a local incentive for industrial projects | Editorials

The Fort Wayne Economic Development Commission on Thursday accepted Do Good Foods LLC’s plans to raise the amount of bonds it will market by $48 million to help fund a 150,000 square foot processing plant at 8645 Aviation. Drive.

Development officials see the bond program as another financial incentive that communities can offer for potential projects. The Indiana Finance Authority will issue the tax-exempt bonds, reducing Do Good Foods’ cost of funding even as rising interest rates threaten business expansion across the country.

According to Jonathan Leist, the city’s assistant director of redevelopment, only one approval was needed to increase the bond from $142 million to $190 million.

“When we make an obligation where the city actually makes every payment, it starts with the city council and then it goes back to both (the city and the Economic Development Commission) a second time,” Leist told the Journal Gazette.

“In this case, it only had to go to the Economic Development Commission. You don’t even have to go to the city council because these are really issued under the authority of the Indiana Finance Authority, as long as the project qualifies and there is room below the government bond ceiling.

The Indiana Finance Authority is authorized to issue bonds that can reduce financing costs for manufacturing projects, health care facilities, private institutions of higher education and other qualifying projects, its website says. Tax-exempt bonds are often structured similarly to term loans or mortgages, and interest rates vary depending on company finances, credit improvements, method of selling the bonds and the current market.

Leist said the Indiana Finance Authority’s bond program is available to provide relief to businesses facing high interest rates, which have soared since March. So far, the Federal Reserve’s four hikes have raised rates by a combined 2.25 percentage points, meaning consumers are now paying an extra $225 in interest on every $10,000 of debt.

If Do Good Foods financed its Fort Wayne project through a traditional lender, today’s rate would cost the company an additional $4.275 million in interest compared to five months earlier.

“Knowing what we’ve seen with interest rates over the last six months, I would expect us – until they start to come back the other way – that we’ll get a few (Indiana Finance Authority bond applications) per year, I guess,” Leist said.

“It’s basically a state program that we help administer locally,” he continued. “The financial authority must look into the issue of the cap, but apart from that there is also no commitment from the state. It is entirely the private company that bears the financial costs and makes the payments. So none of us have a lot of risk involved.

City Council Speaker Jason Arp acknowledged that city attorneys told members that Fort Wayne itself was not responsible for reimbursement if Do Good Foods defaults. Yet he was the only one to vote against the company’s initial bond application.

“I don’t support this stuff,” the city councilor told the Journal Gazette.

“Funding private companies through government participation is the essence of cronyism, with government picking champion companies, while snubbing others with excessive regulation. In a macro sense, these things are starting to crowd out real private investment and financing.

Do Good Foods was recruited with the help of Greater Fort Wayne and the Indiana Economic Development Corp. The New Jersey-based company collects excess food and food waste from supermarkets and converts it into animal feed, says Rosa Salter Rodriguez of The Journal Gazette. Food is given free to farmers and meat from the animals is marketed as sustainable farmed food for humans.

Indiana Finance Authority bonds are just another way for companies to finance industrial projects. Most importantly, it is a local incentive that Hoosier communities can offer businesses to attract jobs and expand their economic base without financial risk to taxpayers.

Ryan H. Bowman