Chapter 100 - Industrial Development Bonds
Sections 100.010 to 100.200 of the Revised Statutes of Missouri (“Chapter 100”), and Article VI § 27(b) of the Missouri Constitution, authorizes municipalities, counties, towns and villages to issue revenue bonds to finance industrial development and commercial projects for private corporations, partnerships or individual companies. Under Chapter 100, the city issues revenue bonds to finance real and/or personal property for eligible development projects. Eligible projects are established by law and include warehouses, distribution facilities, research and development facilities, office industries and manufacturing plants and commercial activities; and may apply to the financing of land, buildings, fixtures, and machinery.
Under this type of financing, the company passes title in the real or personal property involved to the city pursuant to a deed and/or bill of sale. The city will issue the revenue bonds in the amount necessary to finance the purchase, new construction, or expansion contemplated for the project. The city will retain ownership of the real and/or personal property and lease it to the company. The rent charged to/paid by the company will be an amount sufficient to pay the principal and interest on the bonds as they come due. Most commonly, the bonds are purchased by the company. The lease-purchase agreement will also provide for the company to resume or assume ownership of the real and/or personal property once the bonds have been paid off.
Because title to the property is held in the name of the city during the lease term, the property acquired with the bond proceeds is tax exempt, which effectively results in tax abatement for the company. Under the city’s program, the company will be required to make payments in lieu of taxes (PILOTs) for a portion of the taxes it would have otherwise been required to pay. This is described in more detail in the Abatement Guidelines section below. In addition to property tax abatement, the company may also benefit from a sales tax exemption for construction materials and/or equipment for the project.
According to Missouri law, the city must approve a “plan for industrial development” pursuant to Section 100.050 of the Revised Statutes for the State of Missouri (RSMo).
In addition to complying with the statutory requirements referenced above, the city has established several criteria that will be used to review and evaluate applications for Chapter 100 financing and tax abatement. Each of the following should be satisfied:
- Show a clear demonstration of public purpose and economic benefit through the advancement of the city’s economic development goals, which include expanding the tax base, creating new job opportunities, providing development absent or insufficient in the city and expanding the tax base from targeted industrial areas.
- Demonstrate the project would not occur “but for” the incentives offered. The incentive should make a difference in determining the decision of the business to locate, expand or remain in the city; and would not otherwise occur without the availability of the abatement.
- Demonstrate that the applicant has a sound financial base and has the capacity to complete the project. The amount of abatement provided will be influenced by the amount of investment being made, the number of high quality jobs being created and whether sales tax revenue will be generated as a result of the project for local jurisdictions.
- Not result in the city, county, Kearney School District or any other taxing jurisdiction affected by the incentive receiving less total real and personal property tax revenue from the property than was received prior to the granting of tax abatement.
- Comply with the city’s Comprehensive Plan and be appropriately zoned.
- Be environmentally compatible with the specific location and the surrounding area. The proposed use must be clean, nonpolluting and consistent with all development ordinances and codes. The applicant is responsible for providing a Phase I environmental audits for projects providing abatement to real property and taking any and all remedial action necessary as required by the city or any other governmental entity.
- Comply with statutory requirements set forth in Sections 100.010 to 100.200 RSMo. Applications that do not meet all of these criteria may be approved if the application clearly demonstrates that the project, as a whole, is of important economic interest to the city.
- The portion of property taxes not abated pursuant to this program shall be paid to the city as PILOTs for distribution to the appropriate taxing jurisdiction(s).
CITY APPLICATION & APPROVAL PROCESS
The authority and decision to issue revenue bonds and grant tax abatements is vested solely with the Kearney Board of Aldermen. The decision to issue revenue bonds and/or tax abatements is discretionary and shall be considered on a case-by-case basis. The Board of Aldermen is under no obligation to approve any requested bond issuance and/or tax abatement and reserves the right to deviate from the policies and criteria contained herein if, in the opinion of the Kearney Board of Aldermen, circumstances exist to warrant such deviation, as long as any deviation does not conflict with state law. Property owners, applicants and others are cautioned not to rely upon receipt of abatement until all steps for granting an exemption have been approved.
If the project meets the policy guidelines outlined above, a “plan for industrial development” as outlined under Section 100.050 RSMo will be developed. The “plan for industrial development” will then be considered for formal approval by the Kearney Board of Aldermen. Following approval of the “plan for industrial development”, the city and the applicant shall enter into a Chapter 100 performance agreement which will govern the terms of the abatement. The agreement shall require that an annual report be submitted to the city on or before March 1 following the end date of construction. Each year, the report shall cover the time period of January 1 through December 31 of the previous year and include a detailed accounting of the project, including certification on the number of employees (newly added during that period and existing) and associated wages and costs to complete the project.