SUBJECT
A Resolution of official intent of the City of Cape Girardeau, Missouri, toward the issuance of Industrial Revenue Bonds to finance an Industrial Development Project and authorizing certain actions relating thereto.
EXECUTIVE SUMMARY
Chief Property Development, LLC (the “Company”) has requested that the City issue its industrial revenue bonds in an approximate principal amount of $10,000,000 to facilitate real property tax abatement and sales tax exemption on construction materials in connection with the construction of three art buildings (the “Project”) at 340 S. Frederick Street, which will be leased to Southeast Missouri State University. The Bonds will be payable solely out of payments, revenues and receipts derived from the lease of the Project by the City to the Company.
BACKGROUND/DISCUSSION
Industrial revenue bonds issued pursuant to Chapter 100 of the Missouri Revised Statutes are frequently used to provide tax abatement for projects throughout the State. Local projects that have received tax abatement under Chapter 100 include P&G, Mondi and Schaefer’s Electrical Enclosures. The Project is placed in the name of the City while the bonds are outstanding, thus exempting the property from property taxes. The Project is leased to the Company, and the lease payments made by the Company pay the principal of and interest on the bonds. The bonds are non-recourse and are not a debt or payment obligation of the City. When the bonds are paid, title to the Project is transferred back to the Company.
If approved, 100% of the real property taxes on the Project will be abated for 15 years. The estimated amount of the abated taxes is shown in the Cost/Benefit Analysis attached to the Resolution. The Company will continue to pay taxes on the underlying real estate (slightly more than $7,000 annually).
Additionally, the City will provide a sales tax exemption certificate for the purpose of enabling the Company to obtain sales tax exemption on all construction materials for the Project improvements (value of approximately $178,000).
FINANCIAL IMPACT
It’s estimated the City will forego approximately $155,000 in real estate taxes over the 15-year abatement period and approximately $5,000 in sales taxes on construction materials. The estimated amount of the abated taxes on each taxing district is shown in the Cost/Benefit Analysis.
SUSTAINABILITY: ECONOMIC, ENVIRONMENTAL AND SOCIAL IMPACTS
The City believes that the Company’s investment in the Project will create construction jobs during the construction period and spur additional investment in the City. Construction of the Project will enhance the aesthetics and vibrancy of the Project Site and surrounding area. The Project will be subleased to Southeast Missouri State University, expanding the presence of the River Campus and enabling the Department of Art & Design to provide expanded opportunities for students.
STAFF RECOMMENDATION
Staff recommends approval of the Resolution and a 15-year abatement term.
BOARD OR COMMISSION RECOMMENDATION
PUBLIC OUTREACH
Scott Blank, the owner of the Company, advises he has met with representatives of Cape Girardeau County and the Cape Girardeau School District and that they have endorsed real property abatement for 15 years. A copy of the Plan for an Industrial Development Project and Cost/Benefit Analysis must be sent by certified mail to each taxing district at least 20 days before the Council’s approval of the transaction.
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