HCS HB 589 -- TAX INCREMENT FINANCING (Rizzo)

This substitute makes a number of changes to Tax Increment
Financing (TIF) law.  In its main provisions it:

(1) Defines "redevelopment area," "special allocation fund,"
"gambling establishment", and "economic activity taxes", and
excludes certain sales and local use taxes from inclusion in
economic activity taxes for TIF projects;

(2) Requires projects approved on or after 8/28/97 to meet at
least 3 of the 15 factors outlined under the "conservation area"
criterion;

(3) Requires a two-year waiting period before new municipalities
can use TIF, effective August 28, 1997;

(4) Increases non-county TIF Commissions from 9 to 11 members,
with the 2 new members to be appointed by the county in which
the municipality is located.

(5) Allows at the option of the municipal TIF Commission
representatives, TIF Commission members representing the schools
or other taxing districts to be appointed to a definite term, or
to be appointed on a project-specific basis;

(6) Requires the municipality to execute an affidavit,
indicating that the evidence provided suggests the project would
not likely be developed without the use of TIF;

(7) Prohibits TIF plans and projects from including the
development or redevelopment of gambling establishments;

(8) Requires increased amounts of sales and use tax revenues to
be generated, if a facility relocates within the same county
within one year, and is a direct beneficiary of TIF ;

(9) Requires a cost-benefit analysis as part of the
redevelopment plan which enumerates the economic impact on
taxing jurisdictions if the project is not built, and is built
with TIF.  The cost-benefit analysis must also include a fiscal
impact study on every affected political subdivision, and
information indicating the financial history and status of the
developer;

(10) Requires municipalities or the TIF Commissions to establish
procedures for obtaining competitive bids and proposals for
implementation of the redevelopment projects;

(11) Provides that any surplus funds in the special allocation
fund be refunded to taxing districts on a proportional basis;

(12) Allows professional fees-for-service as a recoverable
redevelopment cost, but only if such fees are included as an
initial and up-front expense prior to the initiation of the TIF
project.  The administrative costs incurred by TIF Commissions
are recoverable professional costs;

(13) Provides that, for minor changes to the redevelopment plan,
project or area, additional public hearings are not required;

(14) Allows the clerk's or other official's costs for
administering TIF projects to be recouped by the municipality
incurring such costs;

(15) Requires municipalities to submit a copy of the required
public hearing notices to the Department of Economic Development
(DED);

(16) Requires municipalities to add information on the economic
activity taxes within the redevelopment area to the currently
required annual report submitted to the DED;

(17) Requires the DED to provide, when requested, information
and technical assistant to local jurisdictions, and to submit
summary information on TIF projects statewide to the General
Assembly, by each February 1;

(18) Establishes a joint legislative committee to review
existing TIF statutes, beginning in 1999 and every 5 years
thereafter.  The committee is to submit a report based on its
review, with any recommended statutory changes;

(19) Makes clear that any penalties and interest owed on
property taxes in a TIF district are to be collected in the same
manner as other penalties and interest are collected;

(20) Allows, beginning January 1, 1998, certain blighted TIF
areas to be eligible for 50% of state sales taxes not
constitutionally dedicated, and excluding School District Trust
Fund taxes, and sales and use taxes on motor vehicles, trailers,
boats and outboard motors.  Municipalities must apply to the
Department of Economic Development for the rebate of state sales
taxes.  An affidavit is required attesting that without the
rebate, the area is unlikely to be developed.  In addition, the
required cost-benefit analysis must include an assessment of the
impact on the state.  A new fund, the Missouri Sales Tax
Increment Financing Fund is created in the Department of
Revenue, for the purpose of rebating state sales taxes to
municipalities; and

(21) Changes the residency requirement for those appointed to a
Land Clearance for Redevelopment Commission so that taxpayers
who reside within the municipality or the county (rather than
the area of operation) for the required minimum 5 years may
qualify for commission appointment.

FISCAL NOTE:  Net Cost to General Revenue Fund* of $68,815 for
FY 1998, $71,218 for FY 1999, and $73,065 for FY 2000.  (* Does
not include losses due to sales taxes deposited to Missouri
Sales Tax Increment Financing Fund.)  Net Effect to School
District Trust Fund is Unknown for FY 1998, FY 1999, and FY
2000.  Net Effect on Missouri Sales Tax Increment Financing Fund
of $0 for FY 1998, FY 1999, and FY 2000.

HCS HB 589 -- TAX INCREMENT FINANCING

SPONSOR:  Rizzo

COMMITTEE ACTION:  Voted "do pass" by the Committee on Commerce
by a vote of 24 to 0.

This substitute makes a number of changes to Tax Increment
Financing (TIF) law.  In its main provisions it:

(1) Defines "redevelopment area," "special allocation fund,"
"economic activity taxes," and "gambling establishment";

(2) Requires projects approved on or after 8/28/97 to meet at
least 3 of the 15 factors outlined under the "conservation area"
criterion;

(3) Requires a two-year waiting period before new municipalities
can use TIF, effective 8/28/97;

(4) Increases non-county TIF Commissions from 9 to 11 members,
with the 2 new members to be appointed by the county in which
the municipality is located.

(5) Allows at the option of the municipal TIF Commission
representatives, TIF Commission members representing the schools
or other taxing districts to be appointed to a definite term, or
to be appointed on a project-specific basis;

(6) Requires developers to submit a signed affidavit with the
redevelopment plan, indicating that the project would not be
developed without the use of TIF;

(7) Prohibits TIF plans and projects from including the
development or redevelopment of gambling establishments;

(8) Requires increased amounts of sales and use tax revenues to
be generated, if a facility relocates within the same county
within one year, and is a direct beneficiary of TIF ;

(9) Requires a cost-benefit analysis as part of the
redevelopment plan which enumerates the economic impact on
taxing jurisdictions if the project is not built, and is built
with TIF.  The cost-benefit analysis must also include a fiscal
impact study on every affected political subdivision, and
information indicating the financial history and status of the
developer;

(10) Requires municipalities or the TIF Commissions to establish
procedures for obtaining competitive bids and proposals for
implementation of the redevelopment projects;

(11) Provides that any surplus funds in the special allocation
fund be refunded to taxing districts on a proportional basis;

(12) Allows professional fees-for-service as a recoverable
redevelopment cost, but only if such fees are included as an
initial and up-front expense prior to the initiation of the TIF
project.  The administrative costs incurred by TIF Commissions
are recoverable professional costs;

(13) Provides that, for minor changes to the redevelopment plan,
project or area, additional public hearings are not required;

(14) Allows the clerk's or other official's costs for
administering TIF projects to be recouped by the municipality
incurring such costs;

(15) Requires municipalities to submit a copy of the required
public hearing notices to the Department of Economic Development
(DED);

(16) Requires municipalities to add information on the economic
activity taxes within the redevelopment area to the currently
required annual report submitted to the DED;

(17) Requires the DED to provide, when requested, information
and technical assistant to local jurisdictions, and to submit
summary information on TIF projects statewide to the General
Assembly, by each February 1;

(18) Establishes a joint legislative committee to review
existing TIF statutes, beginning in 1999 and every 5 years
thereafter.  The committee is to submit a report based on its
review, with any recommended statutory changes;

(19) Makes clear that any penalties and interest owed on
property taxes in a TIF district are to be collected in the same
manner as other penalties and interest are collected; and

(20) Allows, beginning January 1, 1998, certain blighted TIF
areas to be eligible for 50% of state sales taxes not
constitutionally dedicated.  Municipalities must apply to the
Department of Economic Development for the rebate of state sales
taxes.  An affidavit is required attesting that without the
rebate, the area is unlikely to be developed.  In addition, the
required cost-benefit analysis must include an assessment of the
impact on the state.  A new fund, the Missouri Sales Tax
Increment Financing Fund is created in the Department of
Revenue, for the purpose of rebating state sales taxes to
municipalities.

FISCAL NOTE:  Net Cost to General Revenue Fund of $68,815 for FY
1998, $71,218 for FY 1999, and $73,065 for FY 2000.  Net Effect
to School District Trust Fund is Unknown for FY 1998, FY 1999,
and FY 2000.  Net Effect on Missouri Sales Tax Increment
Financing Fund of $0 for FY 1998, FY 1999, and FY 2000.

PROPONENTS:  Supporters say that tax increment financing is a
valuable economic development tool which needs to be reformed
but not dismantled.

Testifying for the bill were Representative Rizzo; City of
Mexico; Missouri Association of Counties; City of Maryland
Heights; St. Charles County; City of Cameron; Jackson County
Legislature; Clay County Commission; and Jim Lehay.

OPPONENTS:  Those who oppose the bill say that tax increment
financing works well as outlined in the current statutes.

Testifying against the bill were Missouri Tax Increment
Financing Association; and City of Fulton.

Debra Cheshier, Research Analyst

HB 589 -- Tax Increment Financing

Sponsor:  Rizzo

This bill makes a number of changes to Tax Increment Financing
(TIF) law.  In its main provisions it:

(1) Defines "redevelopment area," "special allocation fund," and
"gambling establishment";

(2) Requires projects approved on or after August 28, 1997 to
meet at least 3 of the 15 factors outlined under the
"conservation area" criterion;

(3) Requires a two-year waiting period before new municipalities
can use TIF, effective August 28, 1997;

(4) Increases non-county TIF commissions from 9 to 12 members,
with the 3 new members to be appointed by the county in which
the municipality is located.  In Jackson County, the 3 new
members will be appointed by the county executive;

(5) Allows TIF commission members representing the schools or
other taxing districts to be appointed to a definite term, or to
be appointed on a project-specific basis;

(6) Requires developers to submit a signed affidavit with the
redevelopment plan, indicating that the project would not be
developed without the use of TIF;

(7) Prohibits TIF plans and projects from including the
development or redevelopment of gambling establishments;

(8) Prohibits businesses from using TIF to relocate within the
county in which an approved area is located, for 5 years;

(9) Requires a cost-benefit analysis as part of the
redevelopment plan which enumerates the economic impact on
taxing jurisdictions if the project is not built, is built with
TIF, and is built without TIF.  The cost-benefit analysis must
also include a fiscal impact study on every affected political
subdivision, and information indicating the financial history
and status of the developer;

(10) Requires municipalities or the TIF commissions to establish
procedures for obtaining competitive bids and proposals for
implementation of the redevelopment projects;

(11) Requires that any surplus funds in the special allocation
fund be refunded to taxing districts on a proportional basis;

(12) Allows professional fees-for-service as a recoverable
redevelopment cost, but only if such fees are included as an
initial and up-front expense prior to the initiation of the TIF
project;

(13) Provides that, for minor changes to the redevelopment plan,
project or area, additional public hearings are not required;

(14) Allows the clerk's costs for administering TIF projects to
be recouped by the municipality incurring such costs;

(15) Requires municipalities to submit a copy of the required
public hearing notices to the Department of Economic Development
(DED);

(16) Requires municipalities to add information on the economic
activity taxes within the redevelopment area to the currently
required annual report submitted to the DED;

(17) Requires the DED to provide, when requested, information
and technical assistant to local jurisdictions, and to submit
summary information on TIF projects statewide to the General
Assembly, by each February 1; and

(18) Establishes a joint legislative committee to review
existing TIF statutes, beginning in 1999 and every 5 years
thereafter.  The committee is to submit a report based on its
review, with any recommended statutory changes.