Economic Development Legislation – 2017 Legislative Session

By Chris Pieper

Missouri businesses, local governments, and real estate, public finance and economic development professionals should be aware of a number of provisions related to economic development in legislation enacted during the 2017 regular legislative session of the Missouri General Assembly.

Advanced Industrial Manufacturing (“AIM”) Zones – SB 112, SB 283

Senate Bill 112 and Senate Bill 283 contain identical amendments to the Advanced Industrial Manufacturing (AIM) Zones Act, Section 68.075, RSMo.  Originally authorized by Senate Bill 861 (2016), AIM Zones were an outgrowth of the 2015 Interim Committee on the Development and Improvement of Missouri Ports, which recommended creating a sustainable funding source to support port development.  AIM Zones authorize a port authority to capture up to 50% of the state withholding tax for new jobs created within a designated zone.  The funding can be used for developing, expanding, redeveloping, and operating the port.

The Missouri Department of Economic Development (DED) is the state agency charged with administering the AIM Zone program.  Based on the authorizing legislation and DED’s published guidance, the process for establishing an AIM Zone begins with the port authority adopting a resolution designating the zone’s boundaries and submitting a Notice of Intent to DED.  Companies within the zone then apply to DED to determine base employment, development commences, the companies verify that the new jobs have been created, and DED notifies the Missouri Department of Revenue (DOR).  Companies file a MO-AIM form with DOR, and 50% of the state withholding taxes remitted on the eligible jobs within the zone are deposited into the AIM Zone Fund. Subject to appropriation, the port authority receives funding for approved projects in accordance with an annual budget submitted to DED.  AIM Zones can be established until August 28, 2023, when the legislation sunsets.

Senate Bills 112 and 283 modify the AIM Zones Act to define a “new job” as a job paying at or above the county average wage, instead of the state average wage, if the county average wage is lower than the state average wage.  In addition, the legislation expands a port authority’s power to establish an AIM zone anywhere within its ownership or control (as opposed to just areas located within its jurisdiction) and authorizes the expansion or contraction of the zone by resolution of the port authority.

Missouri Energy Efficiency Investment Act – SB 112

Senate Bill 112 included a long sought-after modification to the Missouri Energy Efficiency Investment Act (MEEIA) to address its interplay with state Low-Income Housing Tax Credits and Historic Preservation Tax Credits.

Under current law, utility customers that received such tax credits are excluded from participation in a utility’s demand-side energy efficiency programs that offer a monetary incentive to customers for conserving energy.  The legislation modifies MEEIA to eliminate this exclusion, thereby allowing such customers to participate in demand-side energy efficiency programs on the same footing as other customers of the utility.

Missouri Works Training – HB 93

House Bill 93 makes a number of modifications to the Missouri Works Training Program.  Missouri Works Training was originally enacted in 2013 to streamline, update and consolidate Missouri’s job training programs.   Under Missouri Works Training, companies making significant capital investment resulting in job creation or retention can receive state funding to offset eligible training costs, including costs for instructional salaries, curriculum development, assessments, vendor training and pre-employment training.

House Bill 93 updates Missouri Works Training by expanding eligible capital investment to include costs incurred prior to the company accepting a proposal for funding from DED, by authorizing DED to contract with private parties to advertise, market, and promote the program, to fund a consortium of qualified companies (instead of solely on a company-by-company basis), and to provide funding in advance of withholding taxes being remitted for the jobs being created or retained—in effect allowing DED to advance training funds to qualified companies.

Enhanced Enterprise Zones – SB 111  

Senate Bill 111 modifies the Enhanced Enterprise Zone (EEZ) program, which provides a property tax abatement for improvements to real property within the designated zone.  Under current law, improvements within an EEZ may be exempted from property tax for up to 25 years from the date the EEZ is created.  SB 111 provides that an exemption may be granted for up to 25 years, regardless of when the EEZ was created, with the only limitation that during the ten years prior to the expiration of an EEZ, the exemption cannot be granted for longer than 10 years.

The change is intended to maximize the abatement a company can receive if it locates within an already-existing EEZ.  For example, under current law, a company that located within an EEZ created 10 years earlier would only be able to obtain an abatement of up to 15 years (the EEZ would expire after year 25).  Under the new law, the company could receive an abatement of up to 25 years, regardless of the expiration of the EEZ.  Similarly, under current law, if the company located in an EEZ created 20 years earlier, it could receive a maximum abatement term of five years.  In contrast, the new law would allow the company to receive an abatement of up to 10 years, since it located in the EEZ during the 10 years prior to the EEZ’s expiration.

Project Labor Agreements (PLAs) – SB 182

Although much of the attention around Senate Bill 182 relating to Project Labor Agreements (PLAs) focused on labor organizations, the legislation also includes penalties for any local government that violates its provisions, including limiting the availability of state funding and tax credits to support development projects.

Under current law, cities and counties can require contractors bidding on a public construction project to enter into a PLA with a labor organization covering issues such as collective bargaining, hiring practices, wages, and benefits.  SB 182 prohibits political subdivisions from requiring, prohibiting, discriminating against, encouraging or giving preferential treatment for entering into, refusing to enter into or continuing to adhere to a PLA on the same or a related construction project.  SB 182 also prohibits governmental entities from making any grant, tax abatement, tax credit or cooperative agreement conditioned upon entering into or refusing to enter into a PLA, and it requires the governmental entity to preclude a grant, tax abatement, or tax credit recipient or party to a cooperative agreement from imposing a requirement or prohibition on entering into or refusing to enter into a PLA.

Of potential significance to real estate, public finance and economic development professionals is the penalty imposed on governmental entities for a violation—ineligibility for any state funding or tax credits for two years. While such violations are unlikely to occur, the ramifications of a violation are significant.  Examples of the programs implicated by this provision include state Community Development Block Grant (CDBG) from the State Tax Increment Financing (TIF), Missouri Development Finance Board (MDFB) Contribution Tax Credits, and Brownfield Tax Credits.  State tax credits issued directly to a private party are likely not affected.

Chris Pieper’s practice focuses on Regulatory and Government Solutions, Public Finance and Incentives, Real Estate, and Litigation.  Chris recently returned to private practice following service in state government, including as Chief of Staff to the Governor, Director and General Counsel of the Missouri Department of Economic Development, Deputy General Counsel for the Missouri Department of Natural Resources, Legislative Director for the Missouri Department of Revenue, and Special Assistant Attorney General.

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