When the state Infrastructure and Economic Development Bank approved a $77 million rescue plan for Copia, the Napa Valley museum for food, wine and the arts, the nonprofit was deep in debt and in trouble with the Internal Revenue Service. Nonetheless, I-Bank, as it is known, agreed to help the museum restructure loans that it had secured for the museum just eight years earlier.

I-Bank never loaned money directly to Copia – not when the museum was launched in 1999 nor during last year's rescue attempt. Instead, bank officials say their role was to evaluate whether Copia met the IRS standard for tax-exempt status. Once made, that determination allowed the state to issue tax-exempt bonds on behalf of the museum, which the museum's agents then sold to private investors.

I-Bank's name is on the bonds along with Copia's, but no state money is involved. Unlike general obligation bonds, the kind state voters must approve, the bonds issued on behalf of Copia are not backed by the state. Nor is the state liable if Copia defaults. Still, it's worth asking why I-Bank got involved with Copia in the first place.

The involvement certainly looks imprudent. As a recent report by The Sacramento Bee's Andrew McIntosh makes clear, the business plan for the museum was shaky from the start. Museum operators predicted as many as a half-million visitors a year would plunk down $12.50 each to enter the 80,000-square-foot facility with its panoramic views of the Napa Valley. Visitor numbers never got close; attendance topped out at 146,000. Over the years losses mounted, eventually reaching more than $44 million.

An audit by the IRS turned up other problems. The center's for-profit restaurants and shops were encroaching on its not-for-profit museum space in violation of its tax-exempt status; the center was hit with a penalty of close to a quarter-million dollars.

In danger of defaulting on its loans, Copia returned to the I-Bank to get approval to restructure its loans. As bank officials explain it, when Copia approached them, the museum was "within two months of defaulting. … There was no perceivable benefit in allowing a swift default." The bank did not know that ACA Financial – Copia's insurer and the entity responsible for vetting the museum's creditworthiness – was just 10 weeks from collapsing itself.

Is the state at risk? Almost surely not for the millions in potential losses to bondholders if Copia defaults. But the state could be drawn into an expensive court battle.

The bigger question is whether I-Bank should lend the state's name and bonding authority to a speculative project that it has not independently vetted for economic viability.

The Legislature created the I-Bank in 1994 to promote economic revitalization, enable future development and encourage a healthy climate for jobs in California. Besides authorizing tax-exempt loans, it makes direct loans to local governments for things such as water systems, sewers and roads. In a recent report, the legislative analyst criticized I-Bank for making loans to projects that had "little or no economic development impact."

The Copia deal only adds to the questions that the LAO's report raises. The best way to answer those questions is for the Legislature to order an audit of I-bank and its true economic benefits for the state.