In an effort to encourage industrial growth, the City Council reactivated the Cambridge Industrial Finance Authority earlier this month.

The agency aims to promote business growth in the city by providing tax-exempt bonds for Cambridge's industries.

The authority will issue tax-free bonds for "the retention and expansion of Cambridge's businesses; the creation of jobs for Cambridge residents; and the stabilization of the city's tax base," according to the proposal submitted by City Manager Robert W. Healy.

Before its deactivation in 1986, the agency could only approve industrial projects, not issue bonds. From 1978 to 1986, it approved 50 projects worth over $100 million and created over 3800 jobs, according to Healy.

The issued bonds will not be taxable, but companies receiving bonds will have to pay interest at a reduced rate on any loan they receive.

"[The authority] allows the private companies who are building...or expanding in the city to secure some below market rate funding," said Councillor Jonathan S. Myers.

The plan was specifically designed to aid business expansion into the industrial zone created in February by the 80-acre Cambridgeport rezoning. But councillors said that other areas, such as Kendall Square, would also be benefitted by the authority.

The approved proposal also mandates the hiring of Cambridge residents, especially women and minorities, for construction and maintenance by industries receiving the tax-exempt bonds.

The agency will be headed by a five-member board of directors with experience in the areas of real estate, finance, city government and community affairs.