The state of Ohio, through adoption of the biennial budget, approved new language to expand the eligibility criteria, along with renewed funding, for one of Ohio Development Services Agency’s highly subscribed industrial development programs. The Rural Industrial Park Loan Program (RIPL) promotes economic development across rural areas in the state. The program provides low-interest loans to assist with financing the development and improvement of industrial parks and related off-site public infrastructure improvements and has been an extremely attractive tool in encouraging industrial development in rural communities. The current state operating budget enacted recently expands eligibility for loans from the RIPL to include projects that are located in any rural area, meaning any Ohio county that is not designated as part of a Metropolitan Statistical Area by the U.S. Office of Budget and Management, in addition to those located in distressed, labor surplus, or situational distress areas under continuing law. Under the expanded definition of “rural,” 48 Ohio counties are now eligible for the RIPL program. The bill provides $15,000,000 in each fiscal year for this purpose.
A Program Guidelines Summary for the Rural Industrial Park Loan Program includes:
The Rural Industrial Park Loan Program (“RIPL”) promotes economic development in eligible rural areas and promotes the economic welfare of the State by providing low-interest direct loans to assist eligible applicants in financing the development and improvement of industrial parks and related off-site public infrastructure improvements.
Eligible applicants include counties, municipalities, townships, non-profit organizations, port authorities, community improvement corporations, private developers, and other eligible applicants willing to develop eligible RIPL projects to improve the economic welfare of the people of the State of Ohio. Eligible applicants shall demonstrate to the Ohio Development Services Agency (“Development”) that it has the capacity to undertake and successfully oversee the project, providing evidence of past performance in economic development projects and a financial ability to complete the project.
Eligible RIPL projects include the development and improvement of industrial parks in rural areas designed to attract and retain businesses related to manufacturing, distribution and warehousing, research and development, high technology, industry and commerce. Development defines an industrial park as a site of 25 acres or more, zoned for or containing commercial or industrial users that is or will be adequately served by utilities and infrastructure. As a condition of receiving assistance under this program, an applicant shall agree, for a period of five years, not to permit the use of a site that is developed or improved with such assistance to cause the relocation of jobs to that site from elsewhere in the state without prior approval of Development.
Eligible Project Costs:
- Land and/or building purchase
- Machinery & equipment purchase
- Building construction and/or renovation costs
- Long-term leasehold improvements
- Infrastructure and site preparation
- Retention ponds and/or flood and drainage improvements
- Street, road and bridge construction and traffic control device installation
- Water, sewer line, and wastewater treatment plant installation
- Gas, electric, and telecommunication hook-up installation
- Waterway and railway access improvements
- Limited soft costs directly related to fixed asset expenditures
The following projects/costs are ineligible: Refinancing, retail projects, financing management buyouts or leveraged buyouts of an existing business, the purchase of company stock or goodwill, and working capital financing. RIPL financing is not available for projects that begin prior to the submission of a Financial Assistance Application.
Available Funding. The RIPL may finance up to 75% of allowable project costs with loans ranging in size from $500,000 to $2,500,000. Development requires a minimum of 10% equity contribution from the borrower in the eligible project, however a greater equity contribution may be required based on due diligence. The remaining eligible project costs shall be funded by the borrower either directly or indirectly through third-party investors and/or private lenders.
Term. The loan term shall be determined for each project considering factors such as the useful life of the property being financed with the RIPL proceeds and the term of the third-party financial institution loan in the project, if applicable. Regardless of a longer useful property life, the maximum term for real estate (only) loans is up to 20 years and the maximum term for loans used to acquire machinery and equipment is up to 10 years. There is no pre-payment penalty.
Interest Rate. The RIPL interest rate is determined by staff and may be as low as 0% for the first five (5) years. Interest rates shall be fixed at/or below local market rates at the discretion of Development. Payment of loan principal and interest may be deferred up to five (5) years to allow the applicant to market the property. If the principal and interest are deferred for any period of time, the balance of the loan shall be amortized within the remaining term of the loan. The sale or leasing of the project site or facility may trigger repayment, as determined by Development.
Disbursement of Funds. The RIPL is “take-out” financing. Eligible project costs/uses must be purchased with interim financing with the RIPL disbursing upon project completion.
Job Creation/Retention. Promoting economic development is one of Development’s key agency objectives, and as such, job creation and/or retention may be taken into consideration while reviewing proposed loans. While Development has no fixed job creation and/or retention requirements for this loan program, evidence should be provided to demonstrate how this project will attract new development, economic activity and job creation potential.
Partial Loan Forgiveness. At least 50% of the outstanding loan balance will be forgiven by Development upon successful completion of the project as described in the application and loan agreement. If the RIPL funds represent less than 50% of the total project costs, the percentage of loan forgiveness will be increased to an amount equal to 100% less the percentage of the project being funded by the RIPL.
Example: If the RIPL funds represent 30% of total project costs, the Borrower would be eligible for 70% forgiveness of the outstanding loan balance (100%-30%) upon successful completion of the project as described in the application and loan agreement.
RIPL Borrower Equity Contribution. Development requires a 10% minimum Borrower equity contribution towards the project costs/uses.
Security & Collateral. Development requires a first and/or shared first priority mortgage and/or lien position on project costs/uses financed with the RIPL proceeds. Development may require the following additional collateral or credit enhancements:
- Corporate/personal guarantees
- Full or partial letters of credit
- Pledged security interest in other revenue streams
- Life insurance on key business owners and/or managers
- Other types of credit enhancements, if necessary
Rural communities offer substantial industrial site opportunities and RIPL creates a large pot of funding that can help develop those sites. Montrose Group has successfully advocated for four RIPL awards and would be glad to discuss how they can assist your organization. Please contact Dave Robinson at [email protected].