CITY OF MARYLAND HEIGHTS APPENDIX B DEVELOPMENT TOOLS

Transcription

1 CITY OF MARYLAND HEIGHTS APPENDIX B DEVELOPMENT TOOLS

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3 INTRODUCTION Encouraging residential, commercial and industrial development or causing redevelopment of blighted or underutilized areas of the City can be enhanced or accelerated through a number of development tools which are available to Maryland Heights. These mechanisms are creations of Federal and State legislation and can be implemented or used via statutory procedures or application to county and Federal government entities. The following text provides a general outline of the principal development tools, which are readily available to the City of Maryland Heights for encouraging development and redevelopment projects. Two of the mechanisms, the Small Business Administrations (SBA) Loan programs and Industrial Revenue Bonds (IRBs) (which can be used for commercial projects) - are available through the St. Louis County Economic Council organizations. As will be noted later in this section, the St. Louis County Local Development Company administers the SBA programs, and the St. Louis County Industrial Development Authority administers the IRB programs countywide for the unincorporated areas and municipalities without an Industrial Development Authority. (The City of Maryland Heights has formed it own Industrial Development Authority under the statute provisions). These financing mechanisms and their associated advantages are available to any developer, business, or industry wishing to locate or expand in the City. However, recent changes in Federal Tax law may severely limit or curtail the use of IRB financing. The other mechanisms described in this section are State statutory development tools, which require steps on the City's behalf for creation of the mechanism. In some cases, the City must also establish operating authorities and grant powers to the authority or other parties created thereunder through a statutory process. In each case, these mechanisms also bring the potential use of eminent domain into the picture. Suburban communities have traditionally avoided the use of these methods for obvious reasons. The use of eminent domain is always a controversial matter and the granting of these powers to other authorities or parties is usually a controversial idea. Also in each case, in order to implement these methods, a declaration of blighting is required. Many elected officials and the public in general do not understand the actual definitions of blight under the Missouri statutory provisions governing these mechanisms, and hence are reluctant to categorize any portion of their community as blighted. It is recommended that the Maryland Heights Planning and Zoning Commission and City Council give a serious review to the potential advantages and disadvantages of each of the statutory mechanisms in their review of this planning document. Particularly with respect to the need to redevelop and remove blighting influences from some areas of the community. Whether or not the City ever uses any of the statutory mechanisms, it should be fully aware of the provisions of these statutes, which have been successfully used by many communities in Missouri and many other states. Some of the development tools outlined in the succeeding pages are oriented to development/redevelopment of specific areas (commercial or industrial districts, for example). Others have specific legislative prohibitions against use for certain kinds or types of projects. Also, some may not be applicable to Maryland Heights at this time or may not be available at some future time due to legislative revision or elimination. Knowing these mechanisms are available and the general ways in which they can be used may prove to be helpful to the Commission and Council during the future life span of this planning document. URBAN REVITALIZATION LOAN PROGRAM - SBA 503 The amended Small Business Investment Act of 1958 authorized the creation of the Small Business Administration (SBA) 503 Loan Program. It is designed to provide long-term fixed asset financing at reduced interest rates to assist small commercial and industrial firms that meet SBA's definition of a small business. These loans are available through St. Louis County's Local Development Company (LDC) and can be used for purchase of land, buildings, machinery and equipment and for construction or renovation and related costs. The financing package is a combination of private loan (50%); debentures issued by the County LDC and guaranteed by SBA (40%) and local equity. The equity provided by the small business is further reduced by an injection by the County LDC at a very low interest rate, so that the project is financed up to MARYLAND HEIGHTS COMPREHENSIVE PLAN - ADOPTED 1987 Page B.3

4 92%. Qualifying businesses are for-profit companies whose total assets are less than $9 million, total net worth is less than $6 million, and total net profit after taxes averages less than $2 million. The program offers terms up to 25 years, interest rates below conventional rates, low down payments, low closing costs and advantages for the private lender that finances only 50% of the project yet receives the first deed of trust. 7A GUARANTEED LOAN PROGRAM - SBA Another Small Business Administration program is the 7A Guaranteed Loan Program, which is designed to facilitate conventional financing of fixed assets, working capital, machinery and equipment. Small businesses can go through the St. Louis County Local Development Company to obtain a guarantee of up to 90% of the total bank loan. With a 90% guarantee by the SBA, the financial institution is encouraged to make loans which otherwise might not be made. INDUSTRIAL RVENEUE BONS (IRB S) The Industrial Development Authority Act (RS Mo. 349) authorizes a bond-financing program to attract business investment by reducing borrowing costs. Industrial Revenue Bonds are tax-exempt obligations secured by a company s credit and a mortgage on the property involved. The Maryland Heights Industrial Development Authority (IDA) issues bonds to finance industrial and commercial development. Bonds can be used to finance 100% of the project cost at interest rates 3% to 6% below conventional rates. The applicant must obtain bond counsel's legal opinion of eligibility and a commitment from a financial institution for bond purchase. Approvals by the IDA's board of directors, the County Council and any municipality involved are required. Money can be used for property acquisition, construction and renovation of factories, office buildings, warehouses and commercial businesses. CHAPTER 353 Chapter 353 of Missouri Law is a tool with which a community can use to attract development that would otherwise to elsewhere and/or to encourage redevelopment of blighted areas. As an incentive to revitalize blighted or underdeveloped areas, Missouri s Urban Redevelopment Law provides that tax abatement may be granted where a redevelopment corporation undertakes an approved development in an area that has been declared to qualify under this statute by the City Council. The law allows the City Council to grant tax abatements of up to 25 years, with real estate taxes levied on the assessed value of the land alone for up to 10 years and subsequently on only one-half of the normal assessed value of the improvements for the remaining period of up to 15 years. Under Chapter 353 the taxing bodies do receive real estate taxes based on the value of the property prior to redevelopment but payment of full taxes on the new development is delayed. The extent of the abatement within the statutory maximum is determined by the City Council, generally through negotiations with the developer. As a part of this process the developer may also be granted the power of eminent domain over the property to be developed for the purpose of assembling the site at fair market value. TAX INCREMENT FINANCING (TIF) Missouri s Real Property Tax Increment Allocation Redevelopment Act authorizes a local redevelopment program to eliminate blight, encourage private reinvestment and/or enhance the tax base. Tax Increment Financing (TIF) seeks to attract to a designated area new development, which will enhance the tax base and increase revenues. The increment is created by the difference in the real estate tax realized from the new development. Bonds are issue out-front to finance the land assembly, infrastructure improvements or other elements, which may be required to make the project work financially and physically. The bonds are then paid off on an annual basis from the incremental revenue resulting from the new development, which accrues to a tax increment fund. Uses of the fund may include land acquisition, demolition, public improvements and rehabilitation. Large improvements may be undertaken; for example, a tax revenue increment of $300,000 annually will support a $2 million bond issue. Under tax increment financing, as with abatement, the taxing bodies continue to receive taxes based on assessments prior to designation of the tax increment area. But rather than paying lower taxes, developers in the tax increment area bene- MARYLAND HEIGHTS COMPREHENSIVE PLAN - ADOPTED 1987 Page B.4

5 fit from concentrated public improvements to support their new development. Use of tax increment financing requires that the local governing body designates a blighted or conservation area and approve a redevelopment plan. Obtaining developer commitments at the beginning of the process is the key to making tax increment financing work. This mechanism also provides for the use of eminent domain but only on the part of the municipality for the purpose of site assembly at fair market value and the removal of blighting influences. While this implementation tool is on the books, and several districts in Missouri are in effect, this legislation had not had a conventional test for institutionally. A potential test case is expected to result from a TIF District, created by the City of Kansas City. A resolution of this test case is anticipated in early At the present time, innovative exploration into the use of this redevelopment mechanism by Maryland Heights would be feasible and beneficial, as other St. Louis County communities have already initiated TIF programs designed to encourage high quality redevelopment of commercial areas, which are worthy of limitation elsewhere. LAND CLEARANCE FOR REDEVELOPMENT AUTHORITY Chapter 99 of Missouri Law authorizes municipalities and counties to form Land Clearance for Redevelopment Authorities to implement redevelopment plans where acquisition and clearance are necessary to remove unsanitary, blighting and deteriorating conditions. In communities of less than seventy-five thousand persons, the creation of a Land Clearance for Redevelopment Authority (LCRA) requires approval by the electorate. Principal advantages of the use of a Land Clearance for Redevelopment Authority are that it has the power to plan for the whole area, to issue bonds and to acquire property by eminent domain for redevelopment purposes. It operates in accordance with a workable program, updated from time to time, which is the official plan of action for treating deteriorated or underdeveloped areas. The law also contains provision s for granting tax abatements in Chapter-99-designated areas. The tax abatement provisions do not apply to smaller communities, however. LOCALLY DEVELOPED LOW INTEREST LOAN PROGRAMS Many communities in order to stimulate development/redevelopment in their commercial areas have established low interest loan programs. These programs are typically oriented to and loan programs. These programs are typically oriented to and reserved for smaller cost projects such as facade renovation, signage replacement, awning treatments, etc. These programs typically involve funds from two or three sources - Community Development Block Grant (CDBG) monies, special taxing district (STD) allocations, and local financial institutions. In typical form the loan programs once established (by the municipality or the business district organization) are operated by the financial institution. The businessperson wishing to undertake an improvement, which qualifies under the terms of the program, goes to one of the participating institutions to apply. The institution is actually making a loan at their conventional rate and term and the other funds (from the City CDBG or STD) are used to write down the interest rate. These programs have been used extensively and successfully by many communities for commercial district renovation. SPECIAL TAXING DISTRICTS Special taxing districts (STDs) have also been used extensively by many municipalities as an implementation tool. Although the STD terminology has become somewhat generic, there really are two different types of districts, which can be implemented. Special assessment districts generally are directed at accomplishing public improvement-type projects (sidewalk repair, parking lots, lighting, etc.) And are generally narrow in terms of the way funds are to be collected and the projects for which they may be used. The more common special taxing districts being adopted and implemented today have much broader development, services, and facilities provisions and have been used for both commercial and industrial areas. An excellent example of the activities which can be undertaken and financed with this methodology have been outlined by the Downtown Research and Development Center in Downtown Idea Exchange. Street Improvements: Benches, tree plantings, flowers, shrubs and bushes, planters, directional signs, lighting, decorative lighting, street furniture, kiosks, trash receptacles, awnings, canopies, information booths, landscaping, music systems, water features, phone MARYLAND HEIGHTS COMPREHENSIVE PLAN - ADOPTED 1987 Page B.5

6 booths, fire hydrants, display booths, display cases, display areas, fountains, aquariums, aviaries. Activity Places: Child care centers, play areas, washrooms, parks, malls, semi-malls, transitways, plazas, pedestrian skyways, underground walkways, swimming pools, restaurants, newsstands, recreational facilities, convention centers, arenas, auditoriums, stadiums, museums, marinas, meeting facilities. Promotional Work: Advertising, public information, Christmas lighting, decorative banners, special attractions, special events. Transportation Improvements: Parking lots, parking structures, pedestrian skyways, underground walkways, moving sidewalks, bus stop shelters, docks, harbors, marinas, vehicular ramps, vehicular tunnels, vehicular overpasses, buses, mini-buses, other transport, control of traffic, close streets, close alleys, widen streets, widen alleys, restrict traffic, airports, heliports, own common carriers, monorails, helicopters. Urban Arts: Sculpture, murals, paintings, fountains. District Operations: Operate or run the following: restaurants, cafes, buses, childcare centers, arenas, convention centers, museums, auditoriums, marinas, stadiums, etc. Run services like special police, street cleaning and trash handling, common carriers. Most legislation of this type is highly permissive and open and most special taxing district ordinances passed under Missouri s enabling legislation (RSMo. Sec ) is established with a particular development program in mind. MARYLAND HEIGHTS COMPREHENSIVE PLAN - ADOPTED 1987 Page B.6