The public finance group of King, Hershey, Coleman, Koch & Stone serves as bond counsel and counsel to issuers, underwriters and developers in regard to the issuance of municipal bonds and other public financing transactions. We have gained experience in utilizing development incentives to finance public and private projects including neighborhood improvement districts.

The Neighborhood Improvement District Act, Section 67.453 through 67.475, RSMo (the "Act") was adopted by the Missouri General Assembly in 1990 for the purpose of stimulating development of public improvements which in turn will stimulate private developments. The Act provides a method by which municipalities may issue general obligations upon a petition or vote of the property owners within the area known as the neighborhood improvement district, which would be benefited by the public improvements and would be specially assessed to reimburse the municipality for its costs.

The following is a summary of the steps that must be taken to establish a neighborhood improvement district ("District") and issue general obligations under the Act.

1. POTENTIAL USES OF NEIGHBORBOOD IMPROVEMENT DISTRICT

   The following is a list of activities which constitute "public improvements" under the Act which may be financed by establishing a District and issuing general obligations:

   1. To acquire property or interests in property when necessary or desirable for any purpose authorized by the Act;
   2. To open, widen, extend and otherwise to improve streets, paving and other surfacing, gutters, curbs, sidewalks, crosswalks, driveway entrances and structures, drainage works incidental thereto, and service connections from sewer, water, gas and other utility mains, conduits or pipes.
   3. To improve main and lateral storm water drains and sanitary sewer systems, and appurtenances thereto;
   4. To improve street lights and street lighting systems;
   5. To improve waterworks systems;
   6. To improve parks, playgrounds and recreational facilities;
   7. 7. To improve any street or other facility by landscaping, planting of trees, shrubs and other plants;
   8. 8. To improve dikes, levees and other flood control works, gates, lift stations, bridges and streets appurtenant thereto;
   9. 9. To improve vehicle and pedestrian bridges, overpasses and tunnels;
   10. 10. To improve retaining walls and area walls on public ways or land abutting thereon; and
   11. 11. To acquire or improve any other public facilities or improvements deemed necessary by the governing body of the city or county.

2. ESTABLISHMENT OF NEIGHBORHOOD IMPROVEMENT DISTRICT
   1. Alternative Procedures. There are two procedures by which a District may be established:
      1. Voter Approval. The governing body of the city or county may by resolution submit the question of creating a District to all qualified voters residing within the proposed District at a general or special election called for that purpose. See Section 67.457.2 of the Act for the specific procedures to be followed and the information to be contained in the ballot.

      2. Proper Petition. The governing body of the city or county may create a District when a proper petition has been filed by the owners of record of at least two-thirds by area of all real property located within the proposed District. The petition must be filed with the city or county clerk. The petition must contain the following information:
         1. The project name for the proposed improvement;
         2. The general nature of the proposed improvement;
         3. The estimated cost of the proposed improvement;
         4. The boundaries of the proposed District to be assessed;
         5. The proposed method or methods of assessment to pay for the proposed improvement, which should state that the assessment will be paid in substantially equal installments for a certain number of years and the number of years should also be specified;
         6. A notice that the names of the signers may not be withdrawn later than seven (7) days after the petition is filed with the city or county clerk; and
         7. A notice that the final cost of the proposed improvement assessed against property within the District and the amount of general obligations issued shall not exceed the estimated cost of the proposed improvement by more than twenty-five percent (15%).

      NOTE: The petition may also provide for an annual assessment of maintenance costs of the improvement in each year after the bonds issued for the original improvement are paid in full.

   2. Municipal Approval. After receiving requisite voter approval or upon the filing of a proper petition, the governing body may by resolution or ordinance determine the advisability of the improvement and may order that the District be established and that preliminary plans and specifications for the improvement be made. The resolution of ordinance must state and make the following findings:
      1. The project name;
      2. The nature of the improvement;
      3. The estimated cost of the improvement;
      4. The boundaries of the District to be assessed;
      5. The proposed method or methods of assessment to pay for the proposed improvement, which should state that the assessment will be paid in substantially equal installments for a certain number of years and the number of years should also be specified; and
      6. A statement that the final cost of the proposed improvement assessed against the property in the District and the amount of general obligations bonds shall not exceed the estimated cost of the proposed improvement by more than twenty-five percent (25%).

3. PROPOSED ASSESSMENT ROLE.

   After the governing body has made the findings specified above and the plans and specifications have been prepared, the governing body must by ordinance or resolution order assessments to be made against each property deemed to be benefited by the improvement based upon the revised estimated cost of the improvement or, if available, the final cost, and must order the preparation of a proposed assessment role.

4. PUBLIC HEARING.
   1. Public Inspection. The plans and specifications and the proposed assessment role must be filed with the city or county clerk and be open for public inspection.

   2. Notice Requirements.
      1. By Publication.
         1. The clerk, at the direction of the governing body, must publish notice that the governing body will conduct a hearing to consider the proposed improvement and proposed assessments.
         2. The notice must be published in a newspaper of general circulation at least once, not more than twenty (20) days and not less than ten (10) days before the hearing.
         3. The notice must contain the following information:
            1. Project name for the proposed Improvement;
            2. The date, time and place of the hearing;
            3. The general nature of the proposed improvement;
            4. The revised estimated cost or, if available the final cost of the proposed improvement;
            5. The boundaries of the District to be assessed; and
            6. A statement that written or oral objections will be considered at the haring.

      2. By Mail. The clerk must mail to the owners of record of the property to be assessed, at their last know post office address, a notice of the hearing and a statement of the cost proposed to be assessed against the property so owned and assessed. [NOTE: Although not required by the Act it is suggested that the mailing also contain the information required to be provided in the published notice.]

   3. The Hearing. At the public hearing, the governing body shall hear and pass upon all objections to the proposed improvement and proposed assessments if any. The governing body at the hearing may amend the proposed improvement, the plans and specifications, or the proposed assessments. Thereafter, the governing body shall order that the improvement be made and direct that financing for the cost of the improvement be obtained.

5. AUTHORITY TO ISSUE TEMPORARY NOTES AND GENERAL OBLIGATION BONDS.
   1. Temporary Notes. After the governing body has authorized the improvement, the governing body may issue temporary notes to pay the improvement costs in an amount not to exceed the estimated cost of the improvement. The temporary notes are general obligations of the municipality.

   2. General Obligation Bonds. The municipality shall issue general obligation bonds to refund, retire and pay off the temporary notes and any accrued interest. These general obligation bonds make the municipality guarantor of the debt which is anticipated to be repaid from special assessments against real property in the District. It should be noted, however, if the municipality is required to make payments on account of its guaranty such payments will have to be made from existing tax revenue, unless a new tax has been authorized by a city-wide or county-wide vote.

   3. Maximum Indebtedness. The total amount of general obligation bond indebtedness issued under the Act (including temporary notes) shall not exceed ten percent (10%) of the assessed valuation of all taxable tangible property, as shown by the last competed property assessment for state or local purposes within the municipality. This is an additional limit and debt issued under the Act does not cut against other debt limitations.

6. ADVISORY COMMITTEE IN CERTAIN CITIES.

   Any city with a population of 350,000 or more must appoint a Citizen Advisory Committee composed of members of each council district in proposed District.

7. SPECIAL ASSESSMENTS.
   1. Apportionment. After the construction has been completed, the governing body must compute the final costs of the improvement and apportion the costs among the property benefited by the improvement in an equitable manner as determined by the governing body.

      See Section 67.459 of the Act for meaning of "equitable manner."

   2. Imposition. By resolution or ordinance, the governing body must assess the final cost of the improvement or the amount of the general obligation bonds issued, or to be issued, as special assessments against the property described in the assessment role.

   3. Notice. After passage or adoption of the ordinance or resolution assessing the special assessment, the clerk must mail a notice to each property owner within the District. The notice must contain the following information:
      1. A description of each parcel of real property to be assessed which is owned by such owner;
      2. The special assessment assigned to such property; and
      3. A statement that the assessment may be paid in full, together with interest accrued from the effective date of the ordinance or resolution imposing such assessment, on or before a specified date determined by the effective date of the ordinance or resolution, or may pay such assessments in annual installments as set forth below.

   4. Payment. Special assessments may be paid in full or in annual installments of not more than twenty (20) years. If paid in installments, the first installment must be payable after the first collection of general property taxes following the adoption of the assessment ordinance or resolution unless such ordinance or resolution was adopted and certified too late to prevent collection at this time.

   5. Interest. Interest on the assessments shall not exceed the rate permitted for bonds by Section 108.170, RSMo. See Section 67.463.4 of the Act for more interest requirements.

8. FUNDS TO BE CREATED.
   1. Separate Funds Required. A separate fund must be created in the city or county treasury for each improvement project. The separate fund or account must be identified by a suitable title. The proceeds from the sale of the bonds and temporary notes must be credited to such fund or account.

   2. Use of Funds. The proceeds in such fund or account must be used solely to pay the costs incurred in making the respective improvement. Upon completion of the improvement, the balance remaining in the fund or account, if any, shall be credited against the amount of the original assessment of each parcel of property, in accordance with the manner in which it was originally assessed.

9. CONSTITUTIONAL AUTHORITY.

   Article 3, Section 38 c of the Missouri Constitution empowers the General Assembly to authorize cities and counties to create neighborhood improvement districts and incur indebtedness and issue general obligation bonds to pay for all or part of the cost of public improvements within neighborhood improvement districts.