In most other states, units of local governments (both cities and counties) are empowered to issue general obligation bonds, backed by the "full faith and credit" of the of the governmental unit. These bonds are issued and the debt retired through assessments or special fees or taxes, levied against the real properties that benefit from the improvements. In Missouri however, prior to '1991, no provisions existed for this funding mechanism. Therefore, when faced with a specific improvement project, Missouri cities and counties had three options. One, consider the issuance of a general obligation bond issue, subject to a vote of the entire city or county. Two, establish a special benefit district or a special tax district. Or, three, simply ignore the situation. None of these three options offered a practical alternative to resolve the problem.
The Jefferson County Commission has recently completed an exhaustive review of Neighborhood Improvement Districts. Of principal concern to the County Commission was the need to develop a structure which would enable improvements to be made to streets, roads, sanitary sewage collection and disposal systems and stormwater systems. At the same time, the Commission was very concerned about maintaining the current strong financial rating of Jefferson County, After review, the Commission believes that the formation of NID's can provide an excellent opportunity for citizens to examine the particular needs of their community or subdivision and to structure a plan to address their needs. The County Commission believes that it is important that local residents have the ability to avail themselves of those lawful opportunities which enable them to improve their quality of life.
Therefore the basic premise of NID financing is that only those who benefit from the financed improvements pay for the improvements.
Missouri Statutes dictate the structure and formation processes for NID's. These can be very complex, even to those experienced in governmental affairs. The Missouri statutes place very specific requirements on the County officials seeking to utilize NED as a means to address local concerns. While some may believe that the passage of the ballot issuance or the submission of the petition is the major hurdle in the formation of a NID, in actuality, this represents only the beginning of a complicated and potentially costly process.
(4) "Improve", to construct, reconstruct, maintain, restore, replace, renew, repair, install, equip, extend, or to otherwise perform any work which will provide a new public facility or enhance, extend or restore the value or utility of an existing public facility;
(5) "Improvement", anyone or more public facilities or improvements which confer a benefit on property within a definable area and may include or consist of a reimprovement of a prior improvement. Improvements include, but are not limited to, the following activities:
(a) To acquire property or interests in property when necessary or desirable for any purpose authorized by sections 67.453 to 67.475:
(b) To open, widen, extend and otherwise to improve streets, paving and other surfacing, gutters, curbs, sidewalks, crosswalks, drive-way entrances and structures, drainage works incidental thereto, and service connections from sewer, water gas and other utility mains, conduits or pipes:
(c) To improve main and lateral storm water drains and sanitary sewer systems, and appurtenances thereto;
(d) To improve street lights and street lighting systems
(e) To improve waterworks systems;
(f) To improve parks, playgrounds and recreational facilities;
(g) To improve any street or other facility by landscaping, planting of trees, shrubs, and other plants;
(h) To improve dikes, levees and other flood control works, gates, lift stations, bridges and streets appurtenant thereto;
(i) To improve vehicle and pedestrian bridges, overpasses and funnels;
(j) To improve retaining walls and area walls on public ways or land abutting thereon;
(k) To improve property for off-street parking facilities including construction and equipment of buildings thereon;
(l) To acquire or improve any other public facilities or improvements deemed necessary by the governing body of the city or county; and
(m) To improve public safety;
(3) "Cost", all costs incurred in connection with an improvement, including, but not limited to, costs incurred for the preparation of preliminary reports, the preparation of plans and specifications, the preparation and publication of notices of hearings, resolutions, ordinances and other proceedings, fees and expenses of consultants, interest accrued on borrowed money during the period of construction, underwriting costs and other costs incurred in connection with the issuance of bonds or notes, establishment of reasonably required reserve funds for bonds or notes, the cost of land materials, Labor and other Lawful expenses incurred in planning, acquiring and doing any improvement, reasonable construction contingencies, and work done or services performed by the city or county in the administration and supervision of the improvement;
Once a NED is established, the County may issue temporary notes or may authorize a local bank or other financial institution to issue temporary notes which may then be refunded by issuing the NID bonds or general obligation bonds. This allows for projects to be linked together (also called "pooling") creating a larger single bond which should further reduce both issuance costs and allow projects to begin construction while the final financing structure is developed.
These bonds are repaid through an annual assessment on all real property within the NID. This special assessment will be included in the annual property tax bill for residents so only one payment per year is required. Failure to pay the special NID assessment is handled in the same manner as failure to pay property taxes. Failure to pay property taxes. may result in the sale of the real property by the County at a tax sale. Further, The IRS has determined that special assessments cannot be deducted from a property owner's income taxes, as can real and personal property taxes.
To correctly structure and market general obligation bonds takes several professionals. First, bond counsel must be retained. The bond counsel serves several purposes including structure of the issue, drafting the documents, certifying its tax-exempt status and other related actions. A trustee must be retained. A trustee is the paying agent for the issuance. It is the trustee who certifies that sufficient funds are available to meet de ' debt service obligations. In some instances, an underwriter is retained to market the bonds. The marketing function involves the determination of the bond interest rates and providing potential customers to purchase the bonds. The bonds and various disclosure documents must be printed. In certain instances, a financial advisor is retained to provide independent financial analysis of the project to ascertain risk. The costs incurred in completing these and other related tasks are called the costs of issuance. These costs are added to the obligation and are part of the overall issuance. Therefore, bond issues can become expensive to develop.
However, one must consider the fact that interest rates for government backed securities, including those issued for Neighborhood Improvement Districts, will carry an interest rate substantially lower than the interest rates normally available to individuals. Since these bonds generally carry only a minimal level of risk, the interest rate will be significantly low.
Therefore, in considering whether to pursue a Neighborhood Improvement Project, one must weigh the costs of complying with the "red tape" normally associated with government financing with the substantially lower interest rate offered by using government backed securities.
The minimum project size for a "stand alone - Neighborhood Improvement District bond issue is $1. 0 million. Projects with total costs below this threshold are eligible for participation in the Neighborhood Improvement District Program but generally will be "pooled" with other similarly sized projects for bond issuance purposes. This will allow the issuance costs to he divided among the projects in the "pool". The result of this pooling should result in both a lower overall interest rate for these projects while keeping issuance costs at a reasonable level. Pooling may result in a change in project construction scheduling/sequencing to ensure that a sufficient number of smaller projects can be 'Packaged" for bond issuance purposes. Projects with total costs of less that? $100,000 are generally discouraged from seeking Neighborhood Improvement District funds.
The County Commission is willing to consider any project and can make adjustments to this standard should circumstances or the public interest justify.
Statutes also require that the total costs for the proposed project be certified. These costs must not vary more than 25% from the estimates included in the election ballot or the petition. If the construction costs exceed this 25% threshold, the NID cannot be expanded to cover the increased costs, regardless of the reason for the cost over run and the responsibility for these increased costs flows directly to the residents and property owners in the NID.
Because these projects involve "public improvements", all projects must include the payment of prevailing wage rates and must comply with the normal bidding and procurement policies of the County. These requirements may increase the cost of the construction portion of the project and may add additional time to the project.
The components of the Pre-Application are as follows and must be completed on each Neighborhood Improvement District
1. The name of the proposed Neighborhood Improvement District and the principals involved in the project. Principals include the local contact person, the subdivision attorney; the subdivision engineer; the subdivision trustees; and any other individual that will be involved in the project.
2. A Narrative Description of the proposed project. This narrative must include a statement of the problem and the prior steps that the subdivision has taken in attempting to solve the problem. Any sanctions imposed by other governmental agencies, the Health Department for example, should be included in this section; a general description of the area. Included should be the major roads which service the subdivision, the character of the subdivision, in particular, an assessment of whether the area growing, declining, or unchanged; the number of single family homes, businesses,. or other dwelling units in the subdivision; the Utility Companies which serve the area, particularly water company and the sanitary sewer company; Any steps that the subdivision has taken to secure financing for this project and the status of such requests.
3. If available, a metes and bounds survey of the proposed district. If this is not available, a copy of the recorded plat from the Recorder of Deeds office will suffice. If this is not available, an aerial of the proposed area must be provided. These are available, for a cost, either through commercial firms or through the Jefferson County Assessors Office.
4. A list, by street address and mailing address, of all current owners of real property located within the boundaries of the proposed district.
5. An estimate of the cost of construction, including component breakdowns, for the proposed improvement project. This estimate must be submitted on the appropriate form. The Department of Public Works has prepared a Schedule of Unit Costs for construction projects. This can be used to assist in the preparation of this estimate.
It is recommended, but not required, that an engineer registered by the State of Missouri be retained to prepared and seal this estimate. It should be noted that construction projects funded through Neighborhood Improvement Districts are "public works projects" as defined by the State of Missouri and as such are subject to the provisions of the Davis Bacon Act. Prevailing wages must be paid.
6. A petition, which at a minimum, includes the signatures of at least 70% of the owners of real property located within the proposed district.
7. A record of the current annual Subdivision Assessments, including regular and any Special Assessments imposed by the Subdivision; the uses established for this (these) assessment (s); and, a record of payments for each lot or property owner, by street address, for the past three (3) years.
8. A proposed maintenance schedule will be established to ensure that once the improvements has been completed, that it will be adequately maintained.
9. A deposit in the amount of $1,000. This is to be in check form made payable to Jefferson County, Missouri. This deposit is refundable, either fully or partially, if the project is not fully approved for participation in the Jefferson County Neighborhood improvement District Program.
Six copies of this Pre-Application is to be submitted to the Jefferson County Commission as follows.
The Jefferson County Commission
Post Office Box 100
Hillsboro, Missouri 63050
ATTN: Neighborhood Improvement Program Work Group
After receipt, the County Commission will refer the Pre-Application to the local work group who will review and evaluate the materials submitted. The work group will also check the property tax payment records on all properties within the proposed NID.
After the review of the Pre-Application is completed, the Work Group will complete a written evaluation of the proposed project. This evaluation will include a recommendation on whether to include the project in the Neighborhood Improvement District Program for Jefferson County. The evaluation will be submitted to the applicant and after comments have been received, will be presented to the Jefferson County Commission for their action.
Projects that successfully complete the Pre-Application screening process, will be moved to the second phase of project evaluation. Those projects which do not successfully complete the Pre-Application Screening Process will receive a full refund of their $ 1,000 deposit.
Those projects which have successfully completed this Pre-Application Screening will then undergo an additional screening, involving Bond Counsel, Project Manager and other Professionals as deemed necessary. This review and evaluation will consider the structure and bond packaging of the project. This screening will determine whether the project structure can meet current standards, including legal and financial standards, for financing the project. This evaluation will include a recommendation on whether to include the project in the Neighborhood Improvement District Program for Jefferson County. The evaluation will be submitted to the applicant for comment and to the County Commission for their action.
Projects that successfully complete this review will be included in the Jefferson County Neighborhood Improvement Program the development of a Formal NED Proposal will be started. Those projects which do not successfully complete this review will receive a partial refund of their $1,000 deposit. The amount of the refund will be dependent upon the number of professionals involved as well as the time required to adequately assesses the project.
There will be no reimbursement of deposit funds for projects included in the County Neighborhood Improvement Program.
It is important to recognize that projects that have successfully completed the Pre-Application screening process are eligible to have costs reimbursed, as allowable under State Statutes, for the completion of the requirements of the Formal Proposal. This Formal Proposal development will -Include all statutory requirements including, but not limited to:
1. The completion of a metes and bounds survey and the development of a project legal description;
2. The development and certification of costs associated with the project. This is to include construction costs (developed through a formal bidding process); the costs of issuance of the bonds to finance the project; the administrative costs for the project; and any other allowable costs deemed necessary and appropriate for the successful operation and management of the Neighborhood Improvement District; and,
3. The completion and submission of a petition which complies with the statutory requirements of section 67.457 RSMO.
The conduct of an election which complies with the statutory requirements of section 67.457 RSMO
I hereby certify I have been authorized by the _______________________________ to submit this Pre- Application to the Jefferson County Commission for their consideration in the establishment of a Neighborhood Improvement District. I hereby certify the following materials have been completed and six copies of these materials are included in this submission:
In addition to these materials, enclosed is a check in the amount of $ 1,000 (one thousand dollars and no cents) made payable to JEFFERSON COUNTY, MISSOURI. I understand this check is to be deposited by Jefferson County. I understand this deposit is refundable, either fully or partially, only if this proposed project is not accepted into the Jefferson County Neighborhood Improvement District Program. If this project is accepted into the Jefferson County Neighborhood Improvement District Program I understand no refund of this deposit will be made. I understand the decision on whether to include this project in the Neighborhood Improvement District Program of Jefferson County rests solely with the Jefferson County Commission a and, I and the group I represent will cooperate to the fullest extent possible in the review and evaluation of this project. I understand this project may not be accepted for inclusion into the Jefferson County Neighborhood Improvement District Program and, I and the group I represent shall hold harmless Jefferson County, Missouri, the Jefferson County Commission, and employees of Jefferson County involved in the review and evaluation of this project from actions or cause of action resulting from this process.
Provide a NARRATIVE DESCRIPTION of the Proposed Project. This NARRATIVE should begin with a STATEMENT OF THE PROBLEM; the identification of the PRIOR STEPS TAKEN TO SOLVE THE PROBLEM; a SUMMARY OF ANY SANCTIONS IMPOSED ON THE AREA BY A GOVERNMENTAL AGENCY (the Health Department, the Department of Natural Resources, the Building Department, for example); a DESCRIPTION OF THE CHARACTER OF THE AREA (i.e.. Primarily residential; mixed development; commercial or industrial; etc.), whether the area is growing, declining or is generally unchanged; THE NUMBER OF STRUCTURES IN THE AREA including the number of single family homes, multi-family units, manufactured homes, businesses and other structures; IDENTIFICATION OF THE LOCAL UTILITY COMPANIES specifically the Water Supply District and the Sanitary Sewer Company; and any prior STEPS TAKEN TO SECURE FINANCING FOR THIS PROJECT.
Please attach additional sheets if needed.