New development relies on public, private teamwork

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Given that we suffer from a bumpy economy, it is more important than ever for businesses and local government to work together to encourage new development and growth. |ret||ret||tab|

The good news is there are a variety of incentives in Missouri designed to motivate the public and private sectors to join forces.|ret||ret||tab|

While you might be familiar with the benefits of tax increment financing (TIF), private redevelopment through Chapter 353 abatement and land clearance for redevelopment land assembly, there are other incentives available that promote particular types of development that may be better suited to your needs.|ret||ret||tab|

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Chapter 100 financing|ret||ret||tab|

Chapter 100 financing is ideal for manufacturing and industrial development because it encourages the relocation or expansion of a business with a high number of employees and can be used to finance property improvement or major equipment acquisition. |ret||ret||tab|

Here's how it works: The local government issues revenue bonds under Chapter 100 to purchase the property. During the life of the bonds the local government holds title to the property in its name. The business enters into a lease for the property. If the property is equipment rather than real estate, the property is acquired with the local government's sales tax exemption certificate. At the end of the term of the bonds, the property is deeded from the local government to the business. A common practice in certain parts of the state is to provide payments in lieu of taxes to the local school district. These payments can be negotiable and are dependent on the district's relationship with the local government. |ret||ret||tab|

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Neighborhood improvement|ret||ret||tab|

Another incentive to encourage business development is to create a Neighborhood Improvement District (NID), which is used for public improvements. |ret||ret||tab|

Although not contributing directly to the relocation or expansion of a business, the improvements funded by the NID bonds may serve as an enhancement to the development. For example, a NID is appropriate for road construction and sewer extensions in an area that requires significant capital contributions for infrastructure. In developed parts of a community, a NID may be used to create parking garage or other public facilities like a downtown pavilion. |ret||ret||tab|

Under a NID, the local government issues bonds that are paid by special assessments on the land benefited. This permits the private sector to finance the improvements through the local government and spreads payment of the essential infrastructure over a period of years. The financing can be further enhanced by the local government contributing to the bond payments from general revenue. Those contributions can decrease the individual payments made by the business. In some cases, a NID may be combined with a TIF district and the increment from ad valorem taxes or from economic activity taxes can be used to offset individual special assessments.|ret||ret||tab|

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Transportation development|ret||ret||tab|

Also available in Missouri is the Transportation Development District (TDD) incentive. A TDD can be used to finance transportation facilities like bridges and streets. The process begins when a petition is filed in circuit court by registered voters, property owners or the local government. The petition identifies all qualified voters or property owners in the district by name and address; the boundaries of the district; a description of the project; the name of district; the number of board members and their term proposed for the district; and proposed funding method. |ret||ret||tab|

The circuit court hears the petition without a jury and determines the legal issues related to creation of the district. If the petition was filed by the local government or by the voters, the court will order an election to be held. If the petition was filed by property owners, the court will enter an order declaring the district organized and certifying the funding methods for election. |ret||ret||tab|

Construction of projects may be financed by the TDD through a variety of tools special assessment, property levy, business license tax, tolls or sales tax levy up to 1 percent on certain retail sales, and may be financed by revenue bonds for a period not to exceed 40 years.|ret||ret||tab|

Given the economy, it is important for local government and business to team together to encourage economic growth. These examples reflect only brief overview of a few incentives in Missouri designed to improve our state's business condition. |ret||ret||tab|

For more information, visit |bold_on|www. ecodev.state.mo.us. |ret||ret||tab|

|bold_on|(Randell Wallace and Kathy Hauser are attorneys at Lathrop & Gage LC and members of the firm's real estate practice group.)|ret||ret||tab|

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