INDUSTRIAL DEVELOPMENT BONDS (IDBs) or INDUSTRIAL DEVELOPMENT REVENUE BONDS (IDRs)
Are issued by a municipality for a corporation for financing construction of such projects as pollution control facilities, industrial parks, sports stadiums, airports, or educational facilities.
The municipality issues the bond to investors as a municipal bond, tax-exempt, and sells the proceeds of the bond to the corporation (usually for $1). The corporation is responsible for paying the interest and the principal. The revenues to pay for the bonds come from the company’s revenues. These bonds are issued for private use, such as for equipment purchases or the construction of buildings, but not for land. The bond receives municipal status, regarding tax-free interest, because the bond is issued for the "best interest of the populace."
In some cases, the corporation gets laws passed that allow the municipality to issue bonds with municipal status, but most often, the bonds are for stadiums, convention centers, and so forth, The municipality issues the bonds for the corporation, which make the payments. Since these bonds are an obligation of the corporation, they take on the ratings of the corporation and not the rating of the municipality under which the bonds are issued.