Economic growth tool signed into law
Legislation signed into law on Sept. 7 provides municipalities with a new tool to stimulate job growth through both private and public investments in new development-related infrastructure improvements.
The new law, known as the Infrastructure Improvement Incentive, or “I-Cubed,” requires a partnership among the developer, the state and the host community, all of whom share in the program’s risks and rewards.
For example, a developer would pay the debt service on infrastructure improvements through a betterment on the property until such time that the new space is occupied. The state would pay the debt service for the remaining life of the bonds once the project is occupied consistent with the expectations provided in a feasibility study. And the host municipality would absorb any shortfall in the debt service payments if the developer fails to deliver the project, or the feasibility study expectations are not met. The local contribution may be enforced by the state by deducting the amount from that community’s share of local aid.
In return, the state receives the new income, sales, meals and hotel tax revenue generated from the new development. The municipality is able to develop parcels that otherwise might not be developed and receives the additional property tax revenue generated.
I-Cubed requires the developer to obtain zoning, permitting and other local approvals as well as financial commitments. The project feasibility study must be approved by the Executive Office for Administration and Finance as well as the municipality and must demonstrate that the project will generate new revenue sufficient to support infrastructure-related debt. The Massachusetts Development Finance Agency issues the bonds to fund the infrastructure improvements.
The number of projects is capped at five statewide, with no more than two to be located in any one community. The total amount of borrowing under “I-Cubed” is capped at $200 million. The program will “sunset” on Jan. 1, 2012.
A community that uses I-Cubed is not eligible for other financial assistance related to the project – including, but not limited to, designation as a Tax Increment Financing zone, Community Economic Development Action grants, and Public Works Economic Development grant.
The chief advocate of I-Cubed, Boston Mayor Thomas Menino, said the new law “forges a strong partnership between the state, local communities, and developers to overcome the enormous obstacle of financing new infrastructure. It represents a public-private partnership in the truest sense, because true partners share both risks and rewards.”
