Property Tax Abatement
Missouri cities and counties may offer property tax abatement to private companies for certain urban redevelopment or industrial development projects.
Chapter 353 Redevelopment
Abatement of incremental real property taxes is available within areas deemed “blighted” under Chapter 353 tax abatement programs. “Incremental” property tax refers to the amount of increase in tax due to higher property valuations occurring in the project area after the completion of redevelopment. The increase or increment is based on the amount of property tax that was paid in the project area in the “base year” which is usually the year before work on the redevelopment began.
An Urban Redevelopment Corporation is created under the general corporations laws of Missouri and, once created, it has the power to operate one or more redevelopment projects pursuant to a redevelopment plan approved by the governing body of the local municipality in which the project(s) is located. The corporation must take title to the property to be redeveloped.
During the first 10 years after the “base year,” 100% of the incremental property taxes may be abated. During the next 15 years, up to 50% of the incremental property taxes may be abated, in effect, creating a redevelopment plan in which the municipality provides tax abatement to the Redevelopment Corporation for up to 25 years.
Chapter 100 Industrial Development
Missouri Law (Sections 100.010 to 100.200 Missouri Revised Statutes) authorizes municipalities to issue Industrial Development Bonds (IDBs) to finance industrial development projects for private corporations, partnerships or individuals (the “Company”). IDBs issued by a municipality do not require voter approval, and may be issued as tax-exempt or non tax-exempt (taxable). It is upon the issuance of taxable Chapter 100 IDBs that local ad valorem taxes on bond-financed property may be abated, resulting in a significant financial incentive package your community may offer to new industrial prospect companies.
The government of the local municipality (city, town, county, etc.) issues the IDBs, and must maintain legal ownership of the property while the bonds are outstanding in order for the property to be eligible for tax abatement.
Typical Budget Items
IDB’s are issued to finance various industrial projects, including:
- Costs of industrial plants, warehouses, distribution facilities
- Research and development facilities, office industries, services facilities providing interstate commerce
- Agricultural processing industries
- Land, buildings, fixtures and machinery in connection with the IDB-financed development project
Full or partial abatement of real property or personal property tax on the industrial development project for up to the total period the IDB’s are outstanding. The municipality and the company may determine partial tax abatement is desirable, and the company may agree to make “payments in lieu of taxes to the municipality under a negotiable grant agreement. In a typical IDB transaction, the company will convey to the municipality fee simple title to the site on which the industrial development project will be located. At the same time, the municipality will lease the project site, together with all improvements thereon back to the company pursuant to a lease agreement. Included in the lease agreement will be the requirement that the company, acting on behalf of the municipality, to use the proceeds of the IDB’s to purchase and construct the project. The company will be unconditionally obligated to make payments in amounts that will be sufficient to pay principal and interest on the IDB’s as they become due.
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