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Economic Vitality
Incentives Overview
Department Goals
• Improving fiscal sustainability of the City by increasing the property and sales tax base
• Creating and retaining jobs that improve wages in the community
• Supporting businesses to start, grow, and locate in Springfield
• Taking a citizen-centered approach to increase economic opportunities for all:
– Provide and maintain public infrastructure
– Remove blight from the community
– Encourage new residents to move here
– Attract high-wage employers seeking a skilled work force
City Incentive Toolbox
• Special Taxing Districts
• Tax Increment Financing
• Commercial Loan Program
• Brownfields Program
• Property Tax Abatement
• Industrial Development Bonds
Presentation Roadmap
• What/Why/How
• Maps & Photos
• Case studies
• Compliance/oversight
• Key takeaways
Special Taxing DistrictsCommunity Improvement District (CID)
Neighborhood Improvement District (NID)
Transportation Development District (TDD)
What? Funding for public improvements or services
Why? • Facilitate private investment that generates new taxes• Support infrastructure for businesses or neighborhood• Improve quality of life with enhanced services (CID/TDD only)
How? New taxes collected and spent within a defined geographic boundary on eligible projects
Community Improvement Districts• Petition dictates specifics of the district
– Geographic boundaries
– Funding source
– Activities
– Lifespan
• Council must conduct a public hearing to determine if the Petition to establish the district is valid:
– Complies with state law
– Signatures of property owners representing over half of the assessed value, and over half of the owner groups
• Once formed, CIDs are separate political subdivisions, governed by board of directors
• Any CID tax must be approved by vote of CID residents
Commercial Street CIDEstablished: 2009, amended 2019
Term: Originally established for 10 years (2009-2019)Amended petition extended its term 15 years to 2034.
Source: 0.5% sales and use tax (authorized for up to 1%)
Purpose: • Supplemental police patrols• Street furniture• Sidewalk maintenance• Landscaping• Holiday lights• Trash removal• Advertising• Public transportation between
Commercial Street and Center City
CASE STUDY
Glenstone Marketplace CIDEstablished: 2015
Term: Up to 20 years or until CID Projects are fully reimbursed
Source: 1.0% sales and use tax
Purpose: • Demolition of a former hotel (declared blighted)
• Improvements to the frontage road
• Construction of RIRO access on Glenstone
• Relocate SW Power and CU transmission lines
CASE STUDY
Before
After
Southern Hills CIDEstablished: 2015
Life: Up to 25 years or until CID Projects are fully reimbursed
Source: Up to 29 cents per $100 of assessed valuation
Purpose: • Water quality testing• Annual treatments for algae • Future dredging • Water features to control algae and
odors• Landscaping and mowing• District signage• Liability insurance
CASE STUDY
Kansas Battlefield CID (Hy-Vee)Established: 2010
Term: Up to 15 years or until CID Projects are fully reimbursed
Source: 1.0% sales and use tax
Purpose: • Street improvements and traffic signal at Battlefield and Kansas Expy.
• Construct W. Montclair between Kansas Expy. & Kansas St.
• RIRO access off Kansas Expy.
Terminated: 2015 – improvements fully reimbursed; $225,200 overcollection transferred to City
CASE STUDY
After
CID Compliance/Oversight
• Reimbursable Projects – City staff verifies requests for reimbursement.
• Annual Budget – The CID must submit proposed annual budget to City Council.
• Annual Report – The CID must submit an annual report to the City Clerk and the Missouri Department of Economic Development.
• Audit – A CID may be audited by
Special Taxing District Take-aways
• District Boards are public entities that are subject to public meetings, open records, and Sunshine Law
• District funds may pay for approved projects only.
• No existing taxes are diverted for CID projects
• Other taxing jurisdictions should benefit from stabilized or increased property values due to improved public facilities and/or enhanced services
Increment FinancingAccess & Infrastructure Agreements (mini-TIF)
Tax Increment Financing (TIF)
What? Funding for public improvements
Why? • Support infrastructure for new or existing businesses• Facilitate private investment to generate new taxes• Redevelopment of blighted areas
How? Redirection of incremental increase in taxes generated by a new development
TaxIncrementFinancing
• TIF allows the capture of incremental increase in tax revenues resulting from redevelopment – 100% of local real property tax
increment– 50% of local economic activity tax
increment– 23 years or until fully repaid
• TIF revenues reimburse developer for infrastructure costs for the development.
How is TIF adopted?
1. Applicant prepares Redevelopment Plan, Blight Study, and Cost‐Benefit Analysis
2. Land Clearance for Redevelopment Authority (a City board) reviews Blight Study only
3. TIF Commission public hearing
4. City Council public hearing
5. City Council approves TIF Redevelopment Agreement with developer
6. City Council activates Redev. Project Area(s) to set base level
Composition of TIF Commission
6
2
2
1
Mayor & City Council County Commission
School District Other taxing jurisdictions
Springfield Plaza TIFEstablished: 2013
Activated: Project Area 1 – 2016 Project Area 2 – must be activated by 2023
Life: Project Area 1 – 2034 Project Area 2 – no later than 2041
Funding: Redirection of 50% of EATS and 75% of PILOTs(25% mandatory surplus of PILOTs to taxing jurisdictions)
Purpose: • Develop commercial retail and office for underserved area
• Reimburse developer for stormwater and sewer infrastructure, roadway improvements
CASE STUDY
Costco Infrastructure Reimbursement Agreement Approved: 2020
Life: 15 years after first reimbursement payment, or until Company is fully reimbursed for public improvements, whichever comes first
Source: Half of City sales tax (excluding pension tax) generated by the Costco Development
Purpose: Reimburse developer for the cost of public improvements related to development: • street improvements• traffic signals• regional stormwater
CASE STUDY
TIF Compliance/Oversight• Annual Report to DOR - status of each TIF
redevelopment plan
• Annual publication in newspaper
– PILOTs received and expended in that year
– the status of the redevelopment plan
– the amount of outstanding bond debt
• Public hearing every 5 years - status of each TIF redevelopment plan
TIF take-aways
• TIF does not add any new taxes to the area being
redeveloped.
• Instead, TIF generates revenue based on the increased
value of real property, new jobs, and new retail sales
within the redevelopment area as redevelopment occurs.
• Pre-development level of taxes continue to flow to taxing
jurisdictions, as well as half of new sales taxes and any
mandatory surplus PILOTs required by the TIF Plan.
• TIF funds may pay for approved TIF projects only.
Commercial Loan ProgramBusiness Incentive/Microenterprise Loan
Business Development Loan
What? Loans for businesses starting up, expanding, or purchasing or rehabilitating real estate.
Why? Assist businesses to create new jobs benefitting low-to-moderate income persons or remove slum and blight.
How? Since 1984, the City has operated a Commercial Loan Program, capitalized by the HUD Community Development Block Grant (CDBG) program. Revolving loan portfolio is $8.7M.
Business Incentive Loan
Eligible applicants:
• New or expanding businesses (city-wide)
Terms:
• Fixed interest Rate, 5%
• 10-year term
• First two years, interest-only payments
• Job creation is required
Eligible activities:
• Working capital
• Merchandise inventory
• Equipment
• Furniture/fixtures
• Infill improvements
• Other start-up costs
Kingdom Coffee
CASE STUDY
• 2010: Business Incentive (BI) loan to open on Boonville as a bike repair and coffee shop.
• 2014: BI loan for relocation to downtown and added employees.
• 2017: BI Loan funded purchase of coffee roaster
• 2021: BI Loan to fund opening 2nd location on Lone Pine.
Business Incentive
Loans
Business Development LoansTerms:
• Fixed interest rates, currently at 2.63%.
• Up to 20-year term
• Job Creation/Slum & Blight
• Prevailing wage
Eligible activities:
• Real estate acquisition
• Relocation expenses
• Demolition
• Building rehab
• New construction
• Business equipment
• Mixed use development
• Residential rental property development
Basilico Italian Café
CASE STUDY
• 2017: Business Development Loan to purchase building.
• 2019: Restaurant rebranded as Basilico Italian Café, to rave reviews.
• 2011: Business Incentive Loan to fund start-up costs for a bakery, deli and a rental kitchen (Sisters in Thyme)
• 2015: Restaurant moved to new location on Commercial St. and owner rented the upstairs loft to be her residence.
Commercial Loan Program Compliance/Oversight
• Security - Loans are secured by notes and other security instruments such as deeds of trust and UCC filings
• Verification of use of funds & job creation
• High level of staff involvement with loan applicants, before and after the loan is made.
• Low loan-loss rate (1%)
Loan Program Take-aways
• Job creation for low- and moderate-income individuals is the key goal of the program.
• Facilitates economic development through the establishment, stabilization and expansion of local small business owners.
• Loan program provides gap financing to make a project less risky for a bank or finances projects banks aren’t willing to take a risk on.
Brownfields
Environmental Site Assessments
Revolving Loan Fund for Clean-up Costs
What? Assess and clean-up sites with known or suspected environmental contamination within the city of Springfield.
Why? Facilitate the redevelopment of brownfields sites into healthy, economically productive properties.
How? The City receives grant funds from the U.S. Environmental Protection Agency (EPA) to carry out these activities.,
What are Brownfields?
"...real property, the expansion,
redevelopment, or reuse of which may be
complicated by the presence or potential
presence of a hazardous substance,
pollutant, or contaminant."
Public Law 107-118 (H.R. 2869) - Small
Business Liability Relief and Brownfields
Revitalization Act, January 11, 2002
A Brownfield
property can be…
• Former
lumberyard
• Abandoned feed
mill from the
1950s
• Vacant lot where
the old factory
burned down
• Perception vs.
reality
• Fear of the
unknown
ASSESSMENT MAP
Clothing store to abandoned nightclub to History Museum on the Square
CASE STUDY
• Phase I & II environmental assessments
• $240,000 RLF Subgrant
• Chapter 99 Property Tax Abatement
• State and Federal Historic Tax Credits
• Private Donations
• Total $12M investment for first phase (Fox Theater is Ph. 2)
Historic gas station & factory to White River Brewing Co.
CASE STUDY
• Brownfields Phase 1 & 2 Assessments
• Tank Cleanup and Department of Natural Resources NFA Letter
• EPA Sustainability Pilot
• Project Highlights: Successful Microbrewery, Community Space, Green Infrastructure
Brownfields Compliance/Oversight
• Brownfields Program is made possible through federal funding and subject to all federal regulations.
• Reporting Requirements o Quarterly reports to EPA o Annual Federal Financial Reports o Final Close-Out Report at the end of the grant.
• Audit – Grants are subject to the City’s single audit and have been selected various times. EPA conducts periodic program monitoring. The Brownfields Program has never had any findings.
Brownfields Take-aways
• Key elements of Brownfields program are environmental assessment, remediations and technical assistance.
• Program is available city-wide.
• Community benefits include:• Adaptive reuse of
brownfields properties• Removing threats to human
health and environment • Creating jobs, housing, new
businesses, and increasing property values.
Property Tax Abatement for Blight Remediation
Land Clearance for Redevelopment Law (Ch. 99, RSMo.)
Urban Redevelopment Corporation Law (Ch. 353, RSMo.)
What? Abatement of some or all new property taxes generated by the redevelopment project for a set period.
Why? Encourage redevelopment of blighted/distressed areasFacilitate private investment that generates new sales and property taxes
How? Property taxes are held “flat” or reduced for a set period after redevelopment.
Ch. 99 Property Tax Abatement
Council findings required for approval:
• Redevelopment area is a “blighted area” pursuant to Chapter 99
• Redevelopment Plan is in conformance with City’s Comprehensive Plan
• Redevelopment Plan complies with the City’s Workable Program
“Blighted Area” Definition (Sec. 99.805, RSMo.)Now standardized for all economic development
incentives
“An area which, by reason of the predominance of– Insanitary or unsafe conditions, – Deterioration of site improvements, – Or the existence of conditions which endanger life or
property by fire and other causes, or any combination of such factors,
– Retards the provision of housing accommodations – Or constitutes
• An economic or social liability or• A menace to the public health, safety, or welfare
in its present condition and use.”
Springfield’s Workable Program• For a new/amended redevelopment plan proposed in an
existing blighted area:– New or updated blight study; and
– Written notification to property owner, impacted political subdivisions and registered neighborhood organizations
• But-For Test for Single-Project Redevelopment Plans
• Multi-Project Redevelopment Plans are exempted from the But-for Test. Council must renew the multi-project designation every 5 years or plan becomes void.
Ch. 99 Process
1. Applicant prepares Blight Study and Redevelopment Plan.
2. LCRA review and recommendation.
3. P&Z Commission public hearing – Redevelopment Plan conformance with Comp Plan.
4. City Council public hearing & vote on the Blight Study and Redevelopment plan.
5. LCRA approves Certificate of Abatement when project is under construction.
Example
313 South Avenue Downtown Redevelopment Area (Chapter 99)
Abatement Approved: 2004-2013
Benefit: 100% abatement of increased property taxes due to redevelopment
Purpose: Redevelopment of blighted property. Pre-development appraised value was $152,687.Current appraised value is $1,190,500
CASE STUDY
Example
1900 W. Kearney Kearney St Corridor Redevelopment Area (Chapter 99)
Abatement Approved: 2020-2029
Benefit: 100% abatement of property taxes on increased property value of due to redevelopment
Purpose: Redevelopment of blighted property. Pre-development appraised value was $90,900Redevelopment appraised value not yet determined
CASE STUDY
Example
1028 E St. Louis St. Aspen Springfield Redevelopment Area (Chapter 353)
Abatement Approved: 2017-2041
Benefit: Years 1-10: 100% abatement of property taxes on increased property value of due to redevelopmentYears 11-25: 50% abatement of property taxes on increased property value of due to redevelopment
Purpose: Redevelopment of blighted property. Pre-development appraised value was $986,600.After abatement ends, appraised value estimated to be $34.5M.
CASE STUDY
Example
138 Park Central Square Heer’s Redevelopment Area (Chapter 353)
Abatement Approved: 2016-2040
Benefit: Years 1-10: 100% abatement of new property taxes due to redevelopmentYears 11-25: 50% abatement of new property taxes due to redevelopment
Purpose: Redevelopment of blighted property. Pre-development appraised value was $161,500.After abatement ends, appraised value estimated to be $10.3M.
CASE STUDY
Chapter 99 Compliance/Oversight
• Certification Process – After approval of a Redevelopment Plan, the applicant must apply for a Certificate of Qualification from LCRA by presenting evidence that they are “substantially engaged in construction” and the construction plans match the Redevelopment Plan.
• Annual Report – City staff prepares an Annual Report of all current abatements and verifies that property condition and use is still compliant with Redevelopment Plan.
• GASB 77 – All property tax abatements are reported in the City’s Comprehensive Annual Financial Report (CAFR).
Chapter 99 take-aways• Purpose is to remediate blighted areas of the community.
• Pre-development level of taxes continue to flow to taxing jurisdictions.
• This incentive controls costs by holding property taxes level for a set period after redevelopment occurs.
• This cost-savings offsets the increased cost of redevelopment of an existing site compared to greenfield development.
Property Tax Abatement for Job Creation/Capital Investment
Industrial Development Bonds (Ch. 100)
Enhanced Enterprise Zone (EEZ)
What? 50% property tax abatement on the value of new improvements or equipment• 75% abatement is available for certified LEED Silver or high-paying job
creation projects
Why? Facilitate significant private investment that generates new jobs at guaranteed wage rates, new sales taxes or new property taxes
How? Property taxes are held “flat” or reduced for a set period after redevelopment. These programs do not require a declaration of blight.
CH. 100/EEZ ABATEMENT
Chapter 100 (personal property)
EEZ (real property)
Amount: $17M in new equipment $20M in new investment
Term: 10 years 10 years
Incentive Level:
75% 75%
Public Benefits:
92 new jobs at >/= 150% of average county wage
Significant investment by existing manufacturer
Enhanced incentive due to high-wage jobs
CASE STUDY
Chapter 100 Compliance/Oversight
• Bond Counsel – Experienced bond attorneys draft bond documents that protect City’s interest and ensure legal compliance.
• Performance Agreement – Negotiated agreement between applicant and City that ties incentive to level of capital investment, new jobs, wage rates, etc. Annual reporting is required.
• GASB 77 – All property tax abatements are reported in the City’s Comprehensive Annual Financial Report (CAFR).
EEZ/Chapter 100 take-aways• Purpose is to encourage capital investment and job creation
• This incentive controls costs by holding property taxes level for 10 years.
• Chapter 100 is the only incentive which provides personal property tax abatement and/or sales tax exemption.
• 50% of the increase in taxes is passed through to the taxing jurisdictions by the collection and distribution of Payments in Lieu of Taxes (PILOTs).
Putting it all togetherCombining incentives for maximum community benefit
Café Cusco• Brownfields Assessments
• City Business Incentive Loan
• City Acquisition Loan
• TIF – public improvements
• CID – landscaping, marketing & maintenance
• Project Highlights: – Contributing structure in
Historic District
– 10 full time jobs
– 12 part time jobs
– Added sidewalk café & art
– Owner has grown and opened 2 additional businesses
Sky 11• Brownfields Assessments & RLF Loan
• City Acquisition Loan
• Chapter 353 Property Tax Abatement
• Downtown CID – public safety, landscaping, marketing & maintenance
• $15M Project
Kraft Heinz• Chapter 100 Projects:
o 2012 – $26M investment – new equipment and building expansion
o 2015 – Kraft & Heinz merger
o 2016 – $36M investment – new equipment and 109 new jobs
o 2020 –$48M investment – new equipment and retooling
• These projects were competitive with capital investment requests by Kraft Heinz plants around the world.
• Kraft’s continuing investment in Springfield helps ensure future job stability and economic growth for the City
o $67M in annual payroll & benefits for 950 employees.
Property Tax Levy per $100• Springfield R-12 Schools $4.2727
• City of Springfield $0.6196
• Library $0.2434
• Ozarks Technical College $0.1996
• County Road $0.1248
• County General Revenue $0.1248
• County Senior Citizens' Services $0.0493
• County Dev Disability Programs $0.0467
• State of Missouri $0.0300Commercial Sur-tax and Blind Pension tax not captured by TIF
Sales Tax Levy in Springfield per $100
• State $4.2250
• City $2.1250
– 1-cent General Operations $1.000
– ¼-cent Capital Improvements $0.250
– 1/8-cent Transportation $0.125
– ¾-cent Public Safety (Pension) $0.750
• County $1.7500
• Total $8.1000
