Santa Ana Approves $6.5-Million Bond Issue to Finance New Electronics Plant
The Santa Ana City Council on Monday approved a $6.5-million tax-exempt bond issue to finance the purchase of a new research and development facility by Newport Electronics, a manufacturer of digital measuring instruments.
The bonds’ low interest rate was a key element in the company’s decision to remain in Santa Ana, said Newport Electronics president Barret Weekes.
“It was certainly a tremendous inducement to stay,” Weekes said. “The approximate interest rate will be about 7.5%, versus 11.5% if we went to an insurance company or bank.”
The company, which reported sales last year of about $15 million, will be moving to a facility almost 75% larger than its current plant on East Young Street. It also expects to add 120 employees to its 165-member work force over the next five years, Weekes said.
The new facility, which the company plans to expand to a total of 61,000 square feet, is on South Yale Street and is now vacant. About $4.8 million of the bond proceeds would be used for the purchase and improvement of the facility, with the remainder being used to buy equipment, Weekes said.
Strict Controls
The industrial development bond issue, which still must be approved by two state finance commissions, would be the first by a city in Orange County since Congress placed strict controls on such programs in 1986.
Before that year, several California cities, Santa Ana among them, used industrial development bonds to finance commercial projects such as hotels and shopping centers. Santa Ana had, for instance, planned to use a $40-million bond issue to pay for the construction of the proposed Westdome sports arena, but resident opposition defeated the project.
In 1985, Santa Ana ranked third among California cities in obtaining industrial development bonds. The city has authorized 21 separate issues for a total of $117 million since the program began in 1982, said Karen Erickson, economic development specialist for the city.
But the federal tax code adopted in 1986 limits tax-exempt bond financing to projects involving manufacturing or “the production of a tangible good,” Erickson said.
Industrial development bond issues have dropped markedly statewide since then, plummeting from a total of $248 million in 1984 to $52 million in 1987, said Don Backstrom, executive secretary for the California Industrial Development Financing Advisory Commission.
So far this year, the state has issued $37.8 million in industrial development bonds, Backstrom said.
A city such as Santa Ana serves as conduit for the bonds, incurring no liability and providing none of the funds itself, Backstrom said.
In the case of Newport Electronics, Privatbanken of Denmark, parent of National Bank of Long Beach, will issue an irrevocable letter of credit guaranteeing the bonds, which will be sold privately by the Bank of America.
