On August 1, Congressman Randy Hultgren (R-IL) and Congressman Richard Neal (D-MA) introduced the Modernizing American Manufacturing Bonds Act of 2014, H.R. 5319.
"Our tumultuous, increasingly global and technology-based economy poses tremendous challenges to Illinois manufacturers. Unfortunately, antiquated, decades-old policies governing a key tool that manufacturers use to expand operations no longer address today's challenges, needlessly impeding growth and job creation in the Illinois manufacturing sector," said Rep. Hultgren. "MAMBA is a bipartisan bill that sensibly reforms these outdated rules at little cost to the taxpayer. I am pleased to be joined in this effort by Rep. Neal and I look forward to working in the House to pass this bill. Illinois manufacturers and their employees need relief."
"Investing in our economy and our helping American manufacturers remains a top priority for me", Rep. Richard E. Neal said. "The Modernizing American Manufacturing Bonds Act (MAMBA) is a common-sense, bipartisan initiative that updates decades-old policies to help American manufacturing businesses secure funding to expand their businesses which ultimately grows the economy. I am pleased to work with my colleague, Randy Hultgren to pass this critical piece of legislation."
H.R. 5319, supported by the Council of Development Finance Agencies (CDFA) and hundreds of issuers throughout the country, is a comprehensive package that will modernize and revolutionize Qualified Small Issue Manufacturing Bonds, more commonly known as Industrial Development Bonds (IDBs) or simply manufacturing bonds. The four reforms in the bill will expand the capacity and usability of manufacturing bonds to help create American jobs immediately.
"The introduction of the Modernizing American Manufacturing Bonds Act represents a bold and courageous commitment by Congressman Hultgren and Congressman Neal to support American manufacturing." said Toby Rittner, CDFA President & CEO. "CDFA is proud to support this legislation and looks forward to passage in both the House and Senate in the coming months."
The changing manufacturing landscape has prompted a renewed effort to provide expanded support for American manufacturers. At the forefront of this movement is an effort to unlock access to capital. Low-cost, affordable, flexible, and efficient capital access is the number one concern for the manufacturing sector. For small- to mid-sized manufacturers, access to capital remains elusive and problematic.
Manufacturing bonds have not been modernized in nearly thirty years, causing stagnation and decline in the bond finance industry. Over the past decade, manufacturing bond issuances have substantially declined due in major part to the outdated rules and regulations that govern the use of these bonds. H.R. 5319 will help manufacturing bonds re-emerge as the go-to tool for financing small to mid-sized manufacturers.
The four simple fixes in the Modernizing American Manufacturing Bonds Act will expand access to capital for manufacturers throughout the country and support America's most productive industry.
The Modernizing American Manufacturing Bond Act At A Glance:
Reform 1: Expand the Definition of Manufacturing to Include both Tangible and Intangible Manufacturing Production for Manufacturing Bonds
The measure would broaden the definition to include facilities that manufacture, create, or produce intangible property. The expanded definition would be sufficiently broad to cover software, patents, copyrights, formulas, processes, designs, patterns, know-how, format, and similar intellectual property. Under this new definition, knowledge-based businesses could access low-cost, tax-exempt IDB financing. This updated definition would align the growing high-tech manufacturing sector with the tools necessary to finance industry growth and expansion.
Reform 2: Eliminate the Restrictions on "Functionally Related and Subordinate Facilities" for Manufacturing Bonds
This change would allow manufacturers to develop projects that support modern business practices, provide for a better quality-of-life work environment, and diminish the complexity of using low-cost bond financing. This change would also expand project possibilities and give manufacturers the resources to think about long-term capital improvements, investment, workforce development, and job creation.
Reform 3: Increase the Maximum Bond Size Limitation from $10M to $30M for Manufacturing Bonds
This relatively small change would have virtually no impact on the federal treasury as Qualified Small Issue Manufacturing Bonds remain under the national volume cap and cannot exceed total nationwide issuance beyond the total cap. In other words, this change will give manufacturers a new and improved resource for making investments and creating jobs for an investment already accounted for by the federal government.
Reform 4: Increase the Capital Expenditure Limitation from $20M to $40M for Manufacturing Bonds
This modest change will align this important limitation with the realities of the economy and cost of doing business in the United States. This change will open the door for hundreds of new manufacturing projects that have long-term expansion objectives, and will spur ongoing investment and create jobs.