HCS HB 289 -- MISSOURI DOWNTOWN ECONOMIC STIMULUS ACT

SPONSOR:  Dempsey

COMMITTEE ACTION:  Voted "do pass" by the Committee on Job
Creation and Economic Development by a vote of 20 to 0.

This substitute:

(1)  Allows municipalities to create a Downtown Economic Stimulus
Authority, as long as certain findings are made;

(2)  Establishes the State Supplemental Downtown Development
Fund, which will be administered by the Department of Economic
Development;

(3)  Defines "other net new revenues" as a percentage of state
sales taxes and state income taxes generated within the
development area.  Other net new revenues are the state's
contribution to the downtown development projects.  The state
income tax portion is based on the salaries and wages paid by
businesses in the development area to new employees in new jobs.
No more than 2% of these state income taxes can be deposited into
the State Supplemental Downtown Development Fund.  The
contribution of state sales taxes is the additional state sales
tax revenue collected by businesses in the development area in a
given year as compared to what was collected in the baseline
year.  For businesses that relocate to the development area, the
state sales tax contribution is the additional state sales tax
revenue collected in the development area as compared to what was
collected in the year prior to relocating to the development
area;

(4)  Requires the municipality to deposit 50% of the Economic
Activity Taxes (EATS) generated within the development area in
its special allocation fund.  EATS are the additional revenue
generated by taxes within the development area that are greater
than the taxes which were generated in the same development area
in the baseline year.  EATS do not include personal property
taxes, hotel/motel taxes, licenses, fees, or special assessments;

(5)  Requires Payments in Lieu of Taxes (PILOTS) that are
attributable to the increase in the current equalized assessed
valuation of real property that is over the initial equalized
assessed valuation to be deposited into the municipality's
special allocation fund;

(6)  Allows the General Assembly to annually appropriate up to
$150 million into the fund;

(7)  Requires the department to disburse financing from the fund
annually in amounts determined by the certificates of approval
for projects.  If the revenues in the fund are not sufficient to
equal the amounts indicated on certificates of approval, the
department will disburse revenues on a pro rata basis to all
approved projects;

(8)  Prohibits municipalities from obligating state funds prior
to receiving a certificate of approval from the department;

(9)  Allows municipalities to apply for money from the State
Supplemental Downtown Development Fund by submitting an
application to the Missouri Development Finance Board.  The
substitute explains the requirements of the applications;

(10)  Prohibits the amount of state supplemental downtown
development financing approved for a project from being greater
than the projected state benefit of the development project;

(11)  Prohibits the approved state contribution to the State
Supplemental Downtown Development Fund from exceeding $100
million annually;

(12)  Prohibits development projects from using both state
supplemental downtown development financing and tax increment
financing simultaneously;

(13)  Prohibits moneys from the State Supplemental Downtown
Development Fund from being used for the construction,
maintenance, or operation of sports stadiums;

(14)  Requires each authority to be governed by a board of
commissioners with from five to 14 members.  One board member
will be appointed by the school districts within the development
area and the remaining members will be appointed by the mayor or
chief executive officer of the municipality.  Initially, members
will serve staggered terms of one, two, and three years.
Thereafter, terms will be for three years;

(15)  Outlines the powers of the board;

(16)  Requires each municipality to establish a minority business
plan to ensure that minority-owned businesses are provided good
faith opportunities to participate in the procurement of goods
and services within the development project;

(17)  Explains the requirements of the development plan;

(18)  Allows the municipality or the authority to issue bonds for
the development project but prohibits the state from issuing
bonds for the development project;

(19)  Explains the manner in which ad valorem taxes and payments
in lieu of taxes will be divided among the affected taxing
districts;

(20)  Requires a joint committee of the General Assembly to
review the act every five years, beginning in 2008.  A report
must be issued to the Speaker of the House of Representatives and
the President Pro Tem of the Senate no later than February 1
following the year in which the review was conducted;

(21)  Requires each municipality to submit an annual report
concerning the status of the development plan to the Director of
the Department of Economic Development;

(22)  Requires the director to submit a report to the Governor,
the Speaker of the House of Representatives, and the President
Pro Tem of the Senate summarizing the information submitted by
the municipalities.  This report must be submitted by April 30 of
each year;

(23)  Defines "central business district" as that area which is
locally known as the "downtown" with a substantial percentage of
buildings that are 50 years or older;

(24)  Considers the reasonable costs incurred by the departments
of Economic Development and Revenue and the Office of
Administration for processing applications for funding to be
considered allowable development project costs.  These costs can
include the portion of salaries and expenses paid by the
departments of Economic Development and Revenue that can be
reasonably allocated to each development project; and

(25)  Prohibits lawsuits protesting the creation of an authority
or anything relating to the development plan, project, or area
from being brought more than 90 days after the effective date of
the ordinance creating the authority.

Relating to the Community Development Corporation Revolving Fund,
the substitute:

(1)  Requires Kansas City, St. Louis City, and St. Louis County
to establish a community development corporation revolving fund
for the purpose of providing funds to community development
corporations to stimulate economic development, housing, and
other public benefits leading to the development of economically
sustainable neighborhoods;

(2)  Requires that the fund be administered by a board with 13
members appointed by the mayor or chief executive officer of the
municipality.  Of these 13 members, one must be a member of the
local regional community development association and one must be
an owner of a minority business;

(3)  Allows the General Assembly to appropriate up to 5% of the
state sales tax increment portion of other net new revenues
generated by development projects certified for state
supplemental downtown development financing to be deposited into
the State Supplemental Downtown Development Fund for the purpose
of providing grants to Kansas City, St. Louis City, and St. Louis
County for community development corporation revolving fund
programs; and

(4)  Prohibits the sum of the grants from exceeding $1.5 million
annually.

FISCAL NOTE:  Estimated Net Transfer Out of the General Revenue
Fund of $0 in FY 2004, $0 to $150,000,000 in FY 2005, and $0 to
$150,000,000 in FY 2006.  Subject to appropriation.  Language in
the proposal indicates "may."  Estimated Net Effect to the State
Supplemental Downtown Development Fund of $0 in FY 2004, FY 2005,
and FY 2006.

PROPONENTS:  Supporters say that the bill allows cities to be
more flexible when attracting businesses to their downtown areas.
Specifically, the bill will help Kansas City revitalize its
downtown area, allowing the city to be competitive with Johnson
County, Kansas, when trying to attract businesses.  The bill is
an improvement on the State Supplemental Tax Increment Financing
Law, which has only produced seven projects.  The bill will allow
more projects to move forward in a more timely fashion.

Testifying for the bill were Representative Dempsey; Greater
Kansas City Chamber of Commerce; Economic Development Corporation
of Kansas City; City of Kansas City; St. Louis Regional Chamber
and Growth Association; St. Louis County Municipal League; Clay
County Commission, and Department of Economic Development.

OPPONENTS:  Those who oppose the bill say that it doesn't
properly target the use of incentives because terms used in the
bill aren't precisely defined.  The "development financing" in
the bill is really tax increment financing (TIF).  While TIF can
be a useful tool, it is easily misused for purposes other than
those for which it is intended.  The bill does not address the
problems acknowledged in the current TIF statute, such as the
ambiguous definition of "blight" and the loose "but-for" test.
It is this ambiguity which led to the TIF-funded development of a
Nordstrom's department store at the West County Mall in St. Louis
County.  Other key terms in the bill are not well defined, which
will lead to more misinterpretation and bad projects being
approved for financing.

The bill also diverts tax dollars from police departments,
schools, and infrastructure maintenance.  These are things which,
if properly funded, would help revitalize downtowns throughout
the state by reducing crime and increasing property value.

Testifying against the bill were the East-West Gateway
Coordinating Council; and Metropolitan Congregations United.

Alice Hurley, Legislative Analyst

Missouri House of Representatives
Last Updated July 25, 2003 at 10:11 am