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Legislation #: 041033 Introduction Date: 9/9/2004
Type: Resolution Effective Date: none
Sponsor: None
Title: Revising the policy for the use of Chapter 100 Bonds previously adopted by the Council.

Legislation History

Prepare to Introduce


Referred Finance Committee


Immediate Adoption as a Committee Substitute


Adopted as Substituted

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041033.pdf Authenticated 337K 041033

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Revising the policy for the use of Chapter 100 Bonds previously adopted by the Council.


WHEREAS, the City is authorized to issue revenue bonds for industrial development projects pursuant to Chapter 100, RSMo; and


WHEREAS, in November 1998, the Council adopted Committee Substitute for Resolution No. 980929, adopting a comprehensive policy for the use of these bonds; and


WHEREAS, in Committee Substitute for Resolution No. 000250, the Council revised the Chapter 100 policy to address concerns of certain taxing jurisdictions; and


WHEREAS, the controlling state statute has been amended to require additional procedural steps and the City wishes to amend its policy to conform to the statutory design; NOW, THEREFORE,




Section 1. That the Council adopts the following revised policy for the use of Chapter 100 Bonds:


City of Kansas City, Missouri Policy for Use of Chapter 100 Bonds




The City of Kansas City, Missouri can issue taxable Chapter 100 Revenue Bonds to encourage the purchase, construction, extension and improvement of warehouses, distribution facilities, research and development facilities, office industries, agricultural processing industries, service facilities which provide interstate commerce, and industrial plants. The use of the bonds includes real estate, buildings, fixtures, machinery, and equipment. The bonds are secured solely by revenue received from the project (the beneficiary company is the underlying credit on the bonds) and the bonds are not a debt of the municipality. Since the city holds title to the assets being financed, the assets (both real and personal property) are exempt from sales and property taxes. Bonds are generally issued for periods not to exceed 10 years.


The City of Kansas City, Missouri has issued Chapter 100 Bonds on six occasions in the past: for Libby Welding in 1983, GST in 1994, Harley Davidson in 1996 and 2001, NationsBank and Farmland Industries in 1999, Quintiles in 2000, Liberty Mutual in 2002, and MasterCard and Amerisource Bergen in April, 2003. Past use of Chapter 100 bonds, along with current interest in the bonds, helped to generate this policy, adopted by the City Council, November, 1998, and amended in March, 2000 (Resolution #31320) and in 2004 (Resolution #000250)


Chapter 100 Bonds are designed as a financial incentive, primarily for business retention projects, to encourage new jobs and investment in Kansas City.


1. Property Tax Abatement Under Chapter 100 Bonding Shall Be Limited in Duration and Impact on Affected Taxing Jurisdictions. Preference will be given to Existing Businesses in Kansas City, Missouri in the Use of Chapter 100 Bonds.


It should be standard City policy regarding the issuance of Chapter 100 bonds to give preference to existing businesses in Kansas City, Missouri and encourage payment-in-lieu of taxes (PILOTS) to taxing jurisdictions in the following manner:


Payments-in-lieu-of-taxes (PILOTS), at a level of no less than 50% of the amount the property would have paid if it had been fully taxed, will be made to the affected taxing jurisdictions during the term of the bonds.


The minimum amount of a Chapter 100 bond issuance for an existing business shall be $5 million versus $10 million for a new business to the City.


Bonds will be issued for a term not to exceed 10 years. Bonds issued for personal property shall have a term limited to the life of the personal property, but not to exceed 10 years.


NOTE: The use of Chapter 100 bonds by the City will not reduce the existing revenue paid for existing property by the project for which the bonds are issued.


2. The Use of Chapter 100 Bonding Should Be Geographically Targeted Based on FOCUS Priorities.


The City of Kansas City, Missouri FOCUS plan sets a framework of development priority zones which reflect both the older, industrial character of the City and its urbanized areas as well. The development tools that require findings of blight (such as the Land Clearance for Redevelopment Authority and 353) are appropriate to development priority zones such as the industrial crescent, the downtown loop, Crossroads, Midtown and other employment areas in the inner city.


Chapter 100 bonds are usually more appropriate incentives in areas less urban in character, since no finding of blight is required. The less urbanized development priority zones outlined in the FOCUS plan include the 1-29/KCI corridor, the 210 corridor, the southern portion of the 1-435 corridor, the Ward Parkway corridor, Executive Park and developing areas in the southern portion of the City, such as Richards Gebaur. However, this policy does not preclude the use of Chapter 100 bonds in industrial or urban areas as emphasized by FOCUS.


3. A Cost-Benefit Analysis Shall Be Generated to Aid the City Council in Evaluating the Chapter 100 Issuance.


The Citys Finance Department, in coordination with the Economic Development Corporation and the Citys Development Department, will present the cost-benefit analysis of the project seeking Chapter 100 financing. The emphasis of the cost-benefit analysis will be on expected revenue to the City generated by the project (benefits) compared to the property taxes abated (costs). Similarly, the EDC will work in cooperation with the affected school district to estimate the cost-benefit to the school district. School districts and the Chapter 100 applicants will be required to estimate the number of students likely to be generated by the development for the cost-benefit analysis. The cost-benefit analysis for both the City and the school district will be included in the community impact statement elaborated in #4, below.


If the Chapter 100 plan is approved after August 28, 2003, and the project plan involves issuance of revenue bonds or involves conveyance of a fee interest in property to a municipality, the project plan shall additionally include the following information:


a. A statement identifying each property tax jurisdiction affected by such project except property assessed by the state tax commission;

b. The most recent equalized assessed valuation of the real property and personal property included in the project, and an estimate as to the equalized assessed valuation of real property and personal property included in the project after development;


c. A cost benefit analysis of the project on each school district, county or city; and,


d. Identification of any payments in lieu of taxes (PILOTS) expected to be made by any lessee of the project, and the disposition of any such payments by the City.


4. A Community Impact Analysis Shall Be Generated To Aid the City Council in Evaluating the Chapter 100 Issuance.


A community impact statement shall be performed on all Chapter 100 Bonds. The intent of the community impact statement is to provide the Council with a holistic picture of the developments impact. The community impact statement will address the following issues:


a. The projects integration with the FOCUS development priority zones


b. Cost-benefit of the project, as outlined in #3 above, for the City and other property tax jurisdictions.


c. The projects projected use of affirmative action policies in construction and hiring


d. The City Council will be given a checklist of the following issues to evaluate the general character of the following:


(1) Substantial increase in job creation and/or retention of a substantial number of existing employees


(2) Real and personal property investment


(3) Average wages of present/future employees


(4) Capability to attract sales from outside the City


(5) Financial strength of the business


(6) Additional residents to the area


(7) Potential for future expansion


(8) Existing versus new business to the City


(9) General environmental impact on the area


(10) Use of federal and state incentives for the project


(11) Evidence of the need for the Chapter 100 bond in recruitment projects (but for that demonstrates competition from another state and/or city)


(12) Evidence of support for the Chapter 100 bonds by the affected taxing jurisdictions listed in #6, below.


(13) Estimated impact to proximate businesses, or to businesses selling similar products or services located in Kansas City, Missouri.


City Development staff, in cooperation with the business requesting the Chapter 100 bonds, the affected school district, and the EDC will prepare the Community Impact Statement. Use of Chapter 100 bonds will be reviewed by the City Planning Commission for land use issues.


The City shall, not less than twenty (20) days before approving the plan for a project, provide written, certified mail, notice of the proposed project to the county in which the project is located, the school district in which the project is located and any other property taxing jurisdiction in which the project is located. Such notice shall state the date on which the City Council will first consider approval of the plan, and shall invite such school districts, counties or other taxing jurisdictions to submit comments. Such notice shall also include the following information:


a. A description of the project;


b. An estimate of the cost of the project;


c. A statement of the source of funds to be expended for the project;


d. A statement of the terms upon which the facilities to be provided by the project are to be leased or otherwise disposed of by the municipality.


5. Incentive Levels for Chapter 100 Bonds Will be Monitored for Job Creation and Investment Pledged in the Bond Documents.


The company will be required to achieve the stated jobs and/or investment levels necessary to facilitate the issuance of Chapter 100 bonds. In the event that the stated jobs and/or investment levels are not achieved and/or maintained, the bond documents shall provide for increased payments-in-lieu-of-taxes (PILOTS), in proportion to the gap in the promised jobs and/or investment.


The company must achieve the levels of jobs and/or investment stated in the resolution of the bond issuance within a designate period and must maintain the stated jobs and/or investments.


The Company will certify its achievements in a form acceptable to the City Finance Department and provide an annual affidavit that testifies to their compliance with the designated levels of jobs and/or investment.


In the event the company does not achieve the stated level of jobs and/or investment, the City will require the increased PILOTS for the remainder of the term of the bonds, or until the jobs and/or investment levels are achieved.


6. Affected Taxing Jurisdictions Will Be Engaged in the Use of Chapter 100 Bonds


Representatives of the affected taxing jurisdictions will review the proposed use of Chapter 100 bonds prior to Council resolution to proceed. County economic development agencies are urged to act as the liaison between the City and the three taxing jurisdictions.

7. A Standard Set of Legal and Administrative Documents Will Be Developed for Chapter 100 Applicants.


The Law Department will develop a standard set of legal requirements for Chapter 100 bonds that outline types of indemnification and assignments to be distributed to the Chapter 100 applicant as part of the City application. The legal requirements shall limit the use of third party agreements. (i.e. LLCs).


Administrative fees for the City and the Economic Development Corporation (EDC) will be generated to address administration of the application by the City and production of the cost-benefit analysis. Administrative fees for both EDC and the City will be limited to the recovery of actual costs related to the issuance of the Chapter 100 bonds and will be set by the City Manager. The fees may include an application fee to be paid up front and may also be subject to a maximum.


8. This Chapter 100 Policy Will Be Reviewed By the Council Four Years After Adoption.


In addition, each Chapter 100 project shall be reviewed annually by the Finance Department to assess compliance with the bond documents. The City Auditor will review the following issues, in addition to the impact of the incentives, and make a report to the City Council.


a. Projected versus actual job creation


b. Bond retirement payments


c. Environmental issues specified in the bond documents


d. Proactive programs with local school districts designed to improve student performance


e. Impact on physical infrastructure and public services


f. Evidence of notification to the City and contractor (s) by the Chapter 100 recipient of obligations by contractor (s) to pay City taxes (e.g. earnings)


Section 2. That the revised Chapter 100 policy will not apply to Chapter 100 Bond Projects for which the Council has adopted an inducement resolution prior to the approval of this resolution.