Companies in line to take advantage of tax credits

Monday, May 18, 2009 | 2:00 p.m. CDT

 JEFFERSON CITY — A package of tax incentives passed by the General Assembly largely was debated in the abstract. But for each tax break being expanded, there are specific businesses that could benefit.

There's a high-tech battery plant in Lee's Summit, a brick factory in Mexico, Mo., and the world's largest seed maker in St. Louis, to name a few.

Economic development bill

A look at key provisions in an economic development bill passed by Missouri legislators. The bill now awaits Gov. Jay Nixon's signature.

QUALITY JOBS: Raises the program's tax credit cap to $80 million from the current $60 million. Quality Jobs provides incentives to certain businesses that add new jobs paying at least average wages and providing health benefits.

BUILD PROGRAM: Raises the program's tax credit cap to $25 million from the current $15 million. The Business Use Incentives for Large-Scale Development program awards tax credits to companies to pay off bonds used to build their plants.

NEW MARKETS: Raises the program's tax credit cap to $25 million from the current $15 million. The New Markets program provides tax credits to equity investments in development projects located in areas with significant poverty rates or low medium incomes.

LAND ASSEMBLAGE: Raises the amount of tax credits that can be awarded annually to $20 million from the current $10 million but keeps the program's cumulative cap at $95 million. The land assemblage tax breaks apply to developers who buy large sections of land in impoverished areas.

HISTORIC RENOVATIONS: Imposes a $140 million annual state cap on tax credits for the renovation of historic buildings. Exempts redevelopment projects costing less than $1.1 million from counting toward the state's cumulative cap on historic preservation tax credits.

FINANCE BOARD: Limits infrastructure tax credits that can be authorized by the Missouri Development Finance Board to $10 million annually, or $25 million if three executive branch officials approve of the higher figure. Current law allows an unlimited amount of tax credits if the executive officials give their approval.

LOW-INCOME HOUSING: Imposes a $6 million annual cap on certain tax credits for developers of low-income housing projects. The cap applies to developers seeking tax credits equaling 4 percent of their construction costs. A separate, more lucrative low-income housing tax credit already is capped under federal law around $12 million.

FRANCHISE TAX: Reduces the number of businesses that must pay Missouri's franchise tax by increasing the asset threshold that triggers the tax to $10 million from the current $1 million. The change would result in an estimated $12 million tax cut.

JOB TRAINING: Adds pre-employment training to an existing Department of Economic Development program that helps pay for job training in new or expanding industries.

CLOSED RECORDS: Allows public closure of records related to a business prospect with which the state Department of Economic Development or a regional planning commission is negotiating.


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As soon as Gov. Jay Nixon signs the bill, the companies could apply for the tax breaks.

"This emergency jobs bill couldn't come at a more important time," Nixon said when the legislative session ended Friday. "For several key economic development initiatives currently pending, this bill could make a critical difference in helping Missouri put forth more competitive bids and proposals."

It is difficult to know how much the legislation ultimately will provide in tax breaks — or cost the state. That's because some of the tax credits being expanded under the bill have not reached their annual limits in years. And the bill also imposes new limits on some tax breaks, which could offset the growth in others.

The core of the legislation would expand the amount of tax credits that can be offered under the Quality Jobs program by $20 million annually and the Business Use Incentives for Large-Scale Development program by $10 million.

Nixon has used Lee's Summit-based Kokam America Inc. as the poster company for his jobs bill. A month ago, Kokam announced it would partner with Dow Chemical Co. to build an 800,000-square-foot plant in Michigan to make lithium batteries for hybrid and electric vehicles. That plant is expected to employ 885 people.

Even though the company decided to construct a plant elsewhere, Kokam has said it still wants to expand its current facility and possibly build another large factory in Missouri.

Kokam would be eligible for Quality Jobs and BUILD tax credits and some additional job training funding included in the bill that passed Friday. Nixon has said the legislation would increase the state's offer of tax breaks to Kokam by $24.2 million.

Lawmakers also have said those programs could help encourage St. Louis-based Monsanto Co. to build a proposed new facility in Missouri instead of Iowa. Officials also had hoped to use a proposed new research tax credit to lure the Monsanto expansion. But that program was left out of the final version of the bill.

Part of the new Quality Jobs funding also could go to Hazelwood-based Confluence Solar, which produces the material that is used to make wafers for solar cells.

Confluence Solar CEO Tom Cadwell said the company is planning a $200 million expansion over the next 18 to 30 months. He said the expansion would employ up to 225 new workers.

Cadwell said he plans to announce specifics about the new plant, including where it will be built, by July.

"We'd love to stay in Missouri," he said. "We've had a number of states that have come to us and have solicited our consideration for moving."

Sen. Matt Bartle, R-Lee's Summit, calls that type of attitude a "stick-up job."

He also criticized companies that persuade the General Assembly to design a tax credit tailored for them.

"It's basically just not fair," he said. "You get a head start in the private marketplace."

Other critics of the bill took an opposite tactic. They said restricting popular programs such as the historic preservation tax credit would stifle growth. Lawmakers agreed to limit that program to $140 million per year in authorized tax breaks, beginning in January 2010. But projects costing less than $1.1 million would be exempt from the cap.

Last year, state officials authorized $170 million worth of historic preservation credits.

Sen. Jeff Smith, D-St. Louis, says the program has helped revitalize parts of St. Louis, and he's glad the program received a relatively high cap. He also said more than half of historic preservation projects would fall under the $1.1 million exemption.

"The average person rehabbing a house or duplex can be confident they'll never be affected by this cap," he said.

Jerry Owens could receive $600,000 worth of historic preservation tax credits for renovating Clemens Field in Hannibal, a ballpark originally built in 1936 under the Works Progress Administration.

"It's from the last time we had an economic meltdown," Owens said.

The roughly $2 million renovation is largely complete, including seats, doors and even bathroom fixtures made to resemble a 1930s-era ballpark. The Hannibal Cavemen, part of a summer collegiate league, will open their season June 4 at Clemens Field.

Owens estimated that 90 percent of the project's cost went back to the local economy. About 40 people will work at the stadium.

The economic development bill also adds $10 million to the tax credit cap on the New Markets program, which is designed to spur investments in developments in low-income areas.

One of the projects that could benefit from that expansion is a revival of the former AP Green brick plant in Mexico, Mo.

Frank Cordie, who is leading the effort to rebuild the plant, said he hopes to start work this fall. He plans to spend $20 million on the factory, which he said could be making bricks again in about a year. The plant would employ about 70 people when fully operational.

Cordie is working with St. Louis-based Advantage Capital to raise funding for his project. Advantage Capital acts as a go between with the projects and potential investors, who would receive the actual tax breaks.

The New Markets program allows people to receive tax breaks of up to 8 percent of their investment in a project.

Scott Zajac, an investment analyst with Advantage Capital, said the bill's additional $10 million in New Markets tax credits could help raise about $125 million in capital that would fund about 40 companies. Zajac said his firm could be involved in about a dozen of those projects.

"This is one of those times when I think a public-private partnership is appropriate in trying to free up capital," Zajac said. "Someone needs to bridge that gap to get things moving."


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