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California Direct Financial Incentives 2012

California's economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include industrial development bonds, customized training, and enterprise zones.

Area Development Online Research Desk (2012)
(page 3 of 4)
Work Opportunity Tax Credit
The amount of the tax credit varies by target group. The tax credit for target groups A, B, C, D, E, G, and H is 40% of qualified first year wages up to $6,000 if the individual is retained for at least 400 hours. If the individual is retained less than 400 hours but at least 120 hours a 25% tax credit is available on qualified first year wages up to $6,000. The exception is target group F (summer youth). The maximum amount of wages to which the tax credit may be applied shall not exceed $3,000. The tax credit for target group I, long-term family assistance recipient, is 40% of first year qualified wages up to $10,000 and 50% of second year qualified wages up to $10,000. The individual must be retained at least 180 days or 400 hours. In certain circumstances you may be able to claim either the 40% of $6,000 tax credit or the 40% of $10,000 tax credit.
www.edd.ca.gov/Jobs_and_Training/WOTC_Target_Groups.htm

California Employment Training Panel
A skilled workforce is key to a company's ability to remain competitive. The Employment Training Panel (ETP) assists employer efforts to effectively train workers and maintain skilled workforces capable of responding to changing business and industry needs. ETP-funded training works because employers make decisions about their own training programs: training investments help companies become more profitable, and performance-based contracting ensures success. eTP job training funds are available to all California manufacturing companies, companies that face out-of-state competition and business are and expanding or relocating to California from other states or countries. In addition to the manufacturing industry, and California's small business employers, the Panel also prioritizes:
• Nanotechnology
• Biotechnology and Life Sciences
• Goods Movement and Transportation Logistics
• Aerospace and Defense
• Advanced Technology Information Services
• Multimedia/Entertainment
• Healthcare
• Construction
• Agriculture
• Renewables
For more information regarding ETP, visit their website at www.etp.ca.gov or e-mail them at www.etp.ca.gov or e-mail them at edu@etp.ca.gov

Financial Assistance
Industrial Development Bonds
Industrial Development Bond (IDB) financing maybe the most competitive financing option available for the acquisition of manufacturing facilities and equipment. IDBs provide a method for middle market manufacturers to access the private capital markets at tax-exempt rates. The IDB interest rate is significantly lower than bank financing because the interest paid to the investor is exempt from state and federal income tax, resulting in substantial savings to the borrower, depending on the amount financed.

The IDB issuance process can be pursued concurrently with the bank credit approval process. The entire process can be easily completed within 90 days and from the borrower's standpoint should not be much different than conventional financing. The most frequent source of delay is, in fact, the letter of credit bank's credit approval process.

The financing structure is fairly straightforward. A governmental entity will issue bonds and loan the proceeds to the company. The company's obligation to repay the loan is secured by a direct-pay Letter of Credit from a bank rated 'A' or better. The interest rate on the bonds is adjustable and is reset weekly by the underwriter in its capacity as remarketing agent.

IDBs can be issued by the California Infrastructure and Economic Development Bank (I-Bank), cities, counties, and joint powers authorities. IDB s do not constitute an obligation of either the state or the local government issuer.

The issuer's staff and the borrower's finance team of experienced professionals assist the business through each stage of the process. The finance team usually comprises a bond counsel, financial advisor (who assists in packaging and structuring the financing), letter of credit bank, underwriter, and trustee.

IDB Guidlelines:
• $10 million: maximum amount that can be borrowed as a tax-exempt industrial development bond. $10 million: maximum amount that can be borrowed as a tax-exempt industrial development bond.
• $20 million: limit on the company's capital expenditures for the three years before and after the bond issuance (intended to target the program to small and medium-sized manufacturers). $20 million: limit on the company's capital expenditures for the three years before and after the bond issuance (intended to target the program to small and medium-sized manufacturers).
• Low interest rate: 20-30% below conventional financing rates. Low interest rate: 20-30% below conventional financing rates.
• Primary business activity: manufacturing, processing, or fabrication. Examples include but aren't limited to: meat processing, vegetable dehydration, machine fabrication, car/truck parts manufacturing, wine-making, and lithographers. Distribution is not an eligible use. Primary business activity: manufacturing, processing, or fabrication. Examples include but aren't limited to: meat processing, vegetable dehydration, machine fabrication, car/truck parts manufacturing, wine-making, and lithographers. Distribution is not an eligible use.
• Primary use of bond funds: acquisition, construction, rehabilitation and equipping. Primary use of bond funds: acquisition, construction, rehabilitation and equipping.
• Comprehensive funding: the funds can be used for construction and/or takeout to finance land, buildings and equipment. Comprehensive funding: the funds can be used for construction and/or takeout to finance land, buildings and equipment.
• No prepayment penalty. No prepayment penalty.
• Repayment: if the company qualifies for a conventional bank loan, it should be able to qualify for a bank Letter of Credit. Repayment: if the company qualifies for a conventional bank loan, it should be able to qualify for a bank Letter of Credit.
• Federal and state requirements: because the bond financing provides a 'benefit' to business, borrowers must meet certain public benefit criteria as well as general eligibility requirements.
The project financed by the bonds must meet certain public benefit criteria established by the California Debt Limit Allocation Committee (CDLAC) located in the California's Treasurer's Office, which include, among other things, the creation or retention of jobs. The IDB financing process can generally be completed within 150 days. Federal and state requirements: because the bond financing provides a 'benefit' to business, borrowers must meet certain public benefit criteria as well as general eligibility requirements. The project financed by the bonds must meet certain public benefit criteria established by the California Debt Limit Allocation Committee (CDLAC) located in the California's Treasurer's Office, which include, among other things, the creation or retention of jobs.The IDB financing process can generally be completed within 150 days.
www.ibank.ca.gov
www.treasurer.ca.gov
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