Tax Abatement Chapter 353 - Redevelopment
Chapter 353 tax abatement is an incentive allowed by Missouri law to encourage the redevelopment of blighted areas through the abatement of real property taxes and, where appropriate, the use of eminent domain. To be eligible for tax abatement, either the city or a private entity must form a 353 Urban Redevelopment Corporation (353 Corporation) pursuant to the Urban Redevelopment Corporations Law (Chapter 353) of the Revised Statutes of Missouri.
Under Chapter 353, tax abatement on real property taxes is available for a period up to 25 years. During the first 10 years, the property may be exempt from paying real property taxes except in the amount of real property taxes assessed on the land, exclusive of improvements, during the calendar year preceding the calendar year during which the 353 Corporation acquired title to the real property. During the next 15 years, the real property may be assessed up to 50% of its true value. Under Chapter 353, tax abatement is not available for personal property taxes such as equipment or machinery. The length of time abatements shall be permitted will be outlined for each area or project designated.
Payments in lieu of taxes (PILOTS) may be imposed on the 353 Corporation or private entity by contract with the city. PILOTS are paid on an annual basis to replace all or part of the real estate taxes which are abated.
Tax abatement is only available to a 353 Corporation pursuant to the Urban Redevelopment Corporations Law. In order to implement a Chapter 353 tax abatement district, the city may establish the Kearney Municipal Redevelopment Corporation or, if appropriate, the property owner may establish its own Urban Redevelopment Corporation. Tax abatement is only extended to real property that has been found to be a “blighted area” by the city. Real property may be found to be blighted even though it contains improvements, which by themselves do not constitute blight. Tax abatement may also be extended to a tract of real property, which by itself does not meet the definition of a blighted area if such tract is necessary to the redevelopment project and the area on a whole constitutes a blighted area.
In accordance with Missouri law, the City of Kearney will consider in its discretion the granting of Chapter 353 partial real property tax abatement within established boundaries approved by the Board of Aldermen. In addition to this statutory requirement, each of the following criteria 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 quality jobs, providing development absent or insufficient in the city, and spurring development or redevelopment in targeted city locations.
- Demonstrate the project would not occur “but for” the incentives offered. The incentive should make a difference in determining the decision of the property owner to improve the property.
- Include evidence that the property owner has the financial ability and capacity to complete the project.
- Include a capital investment as outlined within the abatement guidelines of each Redevelopment Area established by the Board of Aldermen.
- Be 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 conducting all necessary environmental audits and taking any and all remedial action necessary as required by the city or any other governmental entity.
- The improvements included within the request for abatement for commercial properties shall be at least 50% exterior improvements so as to be visible to the public.
- Payments in lieu of taxes (PILOTS) may be imposed by the city and paid by the property owner if deemed appropriate for the project. PILOTS are paid on an annual basis to replace all or part of the real estate taxes, which are abated. PILOTS shall be made to the County Collector by December 31st of each year. The City Clerk shall furnish the Collector with a copy of the agreement by which the PILOTS are imposed. The PILOTS must be allocated to each taxing district according to their proportionate share of ad valorem property taxes. 353.110.4, RSMo.
- Comply with the statutory requirements set forth in Sections 353.010 – 353.150 RSMo.
- Properties receiving tax abatement must be maintained in compliance with minimum standards, codes, and ordinances of the city.
- Upon determination that the provisions within the development plan are not being satisfied (i.e. use, operate, maintain), the city may proceed with revocation of tax abatement.
- Subject to the statutory requirements of Chapter 353, applications for Chapter 353 partial real property tax abatement may be approved where not all of the above criteria are met if the application clearly demonstrates that the project, as a whole, is of important economic interest to the city. Because the approval of such partial real property tax abatement is granted within the discretion of the Board of Aldermen, an application’s satisfaction of the above criteria does not guarantee that Board of Aldermen approval will be granted. Projects that produce other forms of additional revenue (e.g., an increase in city’s sales tax revenue) may be considered for a longer tax abatement period upon Board of Aldermen approval.
GENERAL ABATEMENT PROCEDURES
Development Plan: Urban redevelopment corporations have the power to operate one or more redevelopment projects pursuant to a development plan which has been authorized by the city after holding a public hearing. The city may assist in the preparation of a development plan. The city must make a finding of blight regarding the area included within the development plan.
It is anticipated that each redevelopment area may have several projects; the number, location and construction details of which may not be determined at the time of the application. Developers and/or property owners shall prepare a project plan for each project that will implement the development plan approved for the redevelopment area. Each project plan will require its own public hearing and approval by the Board of Aldermen. The city may require that substantial changes to the overall development plan after the development plan is approved must be accomplished by an amendment to the development plan.
Tax Impact Analysis: The Missouri State Statute requires the governing body to hold a public hearing regarding any proposed development plan. Before the public hearing, the governing body must furnish to the political entities whose boundaries include any portion of the property to be affected by tax abatement notice of the scheduled public hearing and a written statement of the impact on ad valorem taxes such tax abatement will have on the taxing entities. When establishing a redevelopment area with several properties, a tax impact analysis will be prepared at the time the specific project is considered by the Board of Aldermen.
Abatement Program: Once a project has been approved, and the redevelopment corporation has taken title to real property, that real property shall not be subject to assessment or payment of general ad valorem taxes for a period of 10 years after the date upon which the corporation became owner of such property, except the amount of the assessed value of the land exclusive of improvements determined by the County Assessor during the calendar year preceding the calendar year in which the corporation acquired title to the property.
The city may, as included within a project’s development performance agreement allow abatement for up to the next 15-year period of 50% of the actual assessed value on land and improvements. The Board of Aldermen shall determine the length of time for this period of abatement based upon the amount of investment and adherence to the policy guidelines. A standard abatement period during this second period shall be from 1 to 5 years except as allowed within the policy guidelines above.
CITY APPLICATION & APPROVAL PROCESS
Applications for the program will be accepted by the city staff on behalf of the 353 Corporation. A final application may then be submitted to the city for processing.
A development performance agreement, among the city, the property owner and the 353 Corporation, will be required to describe the obligations to carry out the development plan. Among the provisions that are included in the development performance agreement are procedures for acquiring property, the tax abatement period, the schedule for construction, and procedures for the transfer of title to the property. 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 that the abatement is in place, a report must be submitted to the city on or before March 1. The report shall cover the time period of January 1 through December 31 of the previous year and include a detailed accounting and status of the project.