financial adviser | by bob mayer

In the last 20 years as I've worked on development and finance in Kansas and Missouri, I've seen enough new tax incentive tools to require a scorecard and an interpreter to keep track of them all.

Ten years ago, very few people had heard of Tax Increment Financing (TIF). As Kansas and Missouri utilize this tax incentive tool for redevelopment of critical areas and expanded business opportunities, tax increment financing has made difficult projects possible. Kansas City, MO has over 28 TIF plans. The state of Kansas has had a TIF statute for a number of years, but its tool has a limited definition of blight and redevelopment and only collects property tax abatement. Missouri also allows 50 percent of economic activity taxes to be thrown into the project; Kansas does not. Even so, in the last few years, Kansas TIF has seen increasing use in older residential and industrial areas.

If you are a business owner, or looking to locate in Kansas or Missouri, both states have similar property tax abatement programs for the creation of new jobs. Both have enterprise zones where tax incentives and tax credits are given to certain types of job creation, as in manufacturing, service and office jobs. In Kansas, this can be a one-time credit against the state business tax liability. Missouri's job enterprise program is similar to this.

If you are an individual, large or small business, both states have investment tax credits in business and job development. Kansas has tax credits to offset the individual's income tax liability, if you designate it for research and development within the state. Likewise, Missouri has tax credits for expansion of new or existing businesses. For example, rebuilding communities in distressed areas, transportation zones, development for airports, railroads and parking facilities. Contributors giving to small business "incubator" centers can be eligible for tax credits of anywhere between $1,500 to $50,000, per contributor. Missouri has tax credits for research as well, which are used to induce businesses to increase their research efforts.

Today, Kansas and Missouri are encouraging the rebuilding of older, distressed areas. Both Kansas Cities have utilized state grants and incentives, coupled with the federal government, to encourage "Brownfield Redevelopment." This is for sites or industries abandoned for at least three years and contaminated by hazardous substances. This allows the funds from tax credits, state grants and federal grants to clean up the site. Once this is accomplished, the site is available for future business development.

For reclaiming the urban core, Missouri has two unique programs. The Missouri Development Finance Board (MDFB) provides targeted tax credits of up to 50 percent of the contribution. These funds are granted to public entities, cities, counties or special districts to finance infrastructure improvements to expand projects that are of public interest. For example, Union Station was developed using these tax credits, combined with other monies.

The second program, increasingly popular in historical areas, is the use of Historic Tax Credits. This program provides financial incentive for the redevelopment of historical structures in Missouri, allowing state credits for 25 percent of eligible costs and expenses for rehabilitation of approved historic structures. These eligible projects may also be combined with a federal 20 percent Historic Tax Credit.

Traversing the Downtown, River Market and Freight House Districts of Kansas City, the redevelopment of historic buildings converted to residential lofts is apparent. When you combine the historic tax credits with permanent non-recourse financing provided by specific lenders, you can see why redevelopment of these buildings is possible.

If you have a good interpreter and creative lender, Kansas and Missouri provide extensive economic development incentives and boundless real estate and business opportunities.

Bob Mayer has worked in economic development and creative financing in Kansas and Missouri for over 20 years. He is Vice President at GMAC Commercial Mortgage Corporation, Overland Park, Kansas. Contact Mayer at 913.469.0224, ext. 226, or e-Mail him at: robert_mayer@gmaccm.com.