State investigates two TIF projects

State government officials are concerned Missouri’s tax increment financing system may exceed its legislatively placed $15 million annual cap.
Two Kansas City projects that have received oral commitments from the state for TIF money – the new H&R Block building downtown and the Bass Pro Shops Outdoor World store in suburban Independence – may put the state over its limit. Missouri Gov. Matt Blunt Feb. 1 ordered the Department of Economic Development to investigate whether the state can meet those commitments.
Jim Grebing, DED communications director, said it’s not certain whether the two projects, combined with other agreements, will cause the state to exceed its self-imposed limit at this point.
The amount each project will receive is based on projections of what future revenue the new projects will produce. Grebing said the state is not in danger of passing its limit now, because the two projects in question aren’t producing revenue and, therefore, aren’t receiving state TIF money yet. The potential problem, he said, might arise several years down the road.
Bass Pro spokesperson Larry Whiteley said removing the TIF money could alter the company’s Independence project.
“If the TIF money wasn’t there, sure, it would have an effect (on construction),” Whiteley said.
Whiteley added that the governor’s office hadn’t contacted Bass Pro about the situation, but he declined further comment.
While neither state TIF has been approved, applications filed with the DED request $2.7 million in tax increment financing annually for 23 years for H&R Block’s development and $69 million over 21 years for the new Bass Pro development. For fiscal year 2005, the state has issued $3.2 million in TIF money.

Written agreements
Projects that have received written commitments for state TIF money will not be affected by the DED investigation. The only project with a written agreement for state TIF money in Springfield is the Jordan Valley Park project.
Springfield Economic Development Director Mary Lilly Smith said the investigation does not threaten the city and its plans for Jordan Valley Park.
“In fact, before the announcement came out, we received a phone call from the Department of Economic Development, at the request of the governor’s office, saying that this would not affect us,” Smith said. “It was aimed solely at a couple of projects that were (proposed) after ours was approved.”
Springfield first received tax increment funding from the state for the Jordan Valley Park project in 2003. According to the city Web site, state TIF funds over the life of the project – which totals half of the state’s 3 percent general sales tax generated in the Jordan Valley Park TIF district – will be sufficient to retire $9 million in bonds.
Smith said the amount received each year should grow over the course of the TIF agreement because the funding is directly linked to sales tax revenue from the project.
“In the first couple of years (the amount) was relatively small,” she said. “What is going to kick in the greatest amount is when the arena comes on line and the area surrounding the TIF district is complete.”
The Branson Landing project also is receiving state TIF money. The project should receive about $32.3 million in state TIF funds over the span of its 19-year agreement with the state.

How TIF works
The state TIF system is based on allowing cities to use tax money created by redevelopment projects to pay for the construction of those projects.
“Local entities have tax increment financing, but what we’re talking about is state TIF,” Grebing said. “Local government can apply for a portion of the new state revenues that would be created by a project to cover the financing gap for certain redevelopment projects. You’re taking a portion of the new tax money created by the project and using it to finance the project.”
Not every project is eligible for a portion of the money. The project must be in a blighted area and have at least one building that’s more than 50 years old. Grebing said the state doesn’t offer funding until the city has exhausted all of its funding.
“In the case of the TIF, then, the local area needs to dedicate at least one-half of the new local sales tax and 100 percent of any new property tax revenue created by the project,” he said. “Then the applicant can also receive up to 50 percent of the net new sales tax revenue generated in the area, or up to 50 percent of the state income tax revenue from net new jobs in the project area. It can’t receive both.”
There are a couple of options for the state if it looks as if it will exceed its allotted amount of TIF commitments.
“At some point the cap could be raised by legislation, and there also could be some other adjustments made,” Grebing said. “I think that’s what we’re looking at right now. There’s a commitment to honor both the Bass Pro TIF in Independence and H&R Block that have been made. Right now the department is trying to determine how the cap would be exceeded and when, and what the remedies might be.”