Lancaster Industrial Development Authority

About LIDA

The Lancaster Industrial Development Authority (LIDA) is an organization dedicated to assisting in the financing of economic development in Lancaster County, Pennsylvania. LIDA’s activities are under the authority of the Pennsylvania Department of Community and Economic Development (DCED). LIDA meets on the third Wednesday of each month at 4 p.m. At Council Chambers City Hall Annex Building, 120 North Duke Street, Lancaster, PA.

Who we are

The Lancaster Industrial Development Authority was established in 1971 to act as a liaison for securing tax-free loans for industrial and commercial development in Lancaster County. Since its incorporation, LIDA has played a key role in assisting with the financing of construction and equipping of manufacturing and commercial buildings. We also have played an important role in the expansion of many existing businesses and nonprofit 501(c)(3) organizations.

LIDA serves as a conduit between a lender and an organization involved in construction or expansion. No government money is involved in the loans processed through LIDA. By preparing proper documentation, the loan from a lender or bondholders is made directly to LIDA, which in turn loans funds to the organization being assisted. Since the bonds or loans to LIDA are municipal authority debt, the interest paid is free tax-free to the lender or bondholder.

The Internal Revenue Code includes provisions to encourage economic development by providing for authorities such as LIDA to provide such loans at lower interest rates because the interest earned by the lender or bondholder is not subject to federal income tax.

Who may qualify for tax-free financing?

Nonprofit 501(c)(3) organizations can qualify for tax-free financing. In addition, manufacturing firms may qualify but there are restrictions such as limitations on the total amount of tax-free financing the firm has undertaken, a prohibition against financing used equipment, a limitation on the number of funds that can be used for land, and a requirement that the payback period on the loan cannot exceed 120% of the depreciable life of the financed assets. These are several of the principal limitations, and there are others.

Any manufacturing firm desiring to expand or construct new facilities can inquire about LIDA concerning the qualification of a specific project. Each project must qualify under the Internal Revenue Code and the Pennsylvania Economic Development Financing Law.

Available Programs

There are several ways in which LIDA can assist in financing qualified projects:

For projects involving a substantial amount of money, LIDA can issue bonds, the interest on which will be tax-free, and the proceeds of which will be loaned to the organization for the construction or acquisition desired.
LIDA is the access route for the Pennsylvania Economic Development Authority (PEDFA), a state program to accumulate small projects for tax-free financing with the bonds involved issued by PEDFA.
Nonprofit 501(c)(3) organizations can use bank-qualified financing, which involves a direct loan from a bank for the organization’s expansion. There are restrictions imposed by the Internal Revenue Code limiting the amount of such funding that any authority can issue and limiting the amount that any individual organization can use. Such an organization may also participate in PEDFA bond issues or proceed with a bond issue by LIDA.

Projects

Financing is available for qualified projects of manufacturing firms and nonprofit organizations that meet requirements under the Internal Revenue Code.

From LIDA’s incorporation in 1972 until 1986, qualifying projects also included commercial buildings and office buildings, in addition to manufacturing. In 1986, a change in the Internal Revenue Code limited the use of tax-free financing to deny its use in commercial projects. At that time, additional qualifications for manufacturing projects were also established.

Procedure

Since there are a great many conditions that have to be met to qualify for tax-free financing, it would be advisable to first describe your proposed project in a letter, email, or telephone call to the LIDA solicitor. A preliminary determination can then be made as to the qualification of the project under the Pennsylvania Act and the Internal Revenue Code.

If it seems probable that the project would qualify, then the detailed application forms required by the Pa. Department of Community and Economic Development would be completed. For most projects, the two forms required are the Single Application for Assistance and the IDA Application Appendix.