STAR BONDS FINANCING ACT — Executive Summary
Star Bonds Financing Act – Executive Summary
The Legislative Committee and the Arkansas Realtors® Board of Directors have voted to support a House Joint Resolution proposing a constitutional amendment authorizing cities and counties to create redevelopment projects for development and redevelopment projects within the district, and to issue bonds payable from the anticipated increase in sales and use tax revenue collected within the district, and enabling legislation concerning the same. The proposed constitutional amendment and legislation shall hereinafter collectively be referred to as the “STAR Bonds Financing Act” or the “Act.” Below is an executive summary of the Act.
- Purpose. The purpose of the Act is to provide an additional and alternative means for cities and counties to finance the development and redevelopment of eligible areas in order to promote, stimulate and develop the general and economic welfare of the State of Arkansas, its communities and its citizens.
- Creation of a Redevelopment District. The Act contemplates utilizing “redevelopment districts” similar to those described in the Arkansas Community Redevelopment Financing Act. A city or county may form a redevelopment district in an eligible area for the purpose of financing one or more redevelopment projects within the district. An “eligible area” is any blighted area, as defined under the Arkansas Community Redevelopment Financing Act, which includes an advanced state of dilapidation, vacant, functionally obsolete or ill-suited structures, or unimproved parcels of property within the district that are substantially impairing or arresting the growth of the city or county. A “redevelopment project” means an undertaking, including without limitation, the acquisition, development, redevelopment and revitalization of land within such district, for eliminating or preventing the development or spread of, slums or blighted, deteriorated, or deteriorating areas, for discoursing the loss of commerce, industry, or employment, or for increasing employment, or any combination thereof.
- Approval of Project Plan. The redevelopment district shall create a project plan for any redevelopment project to be financed by special obligation bonds issued pursuant to the Act. The district’s project plan must be approved by the Arkansas Economic Development Commission (“AEDC”). The project plan shall contain a feasibility study, which shall include, among other things, a description of the project, an economic impact study, a market impact study, the percentage of state and/or local sales and use taxes committed to repayment of special obligation bonds to be issued by the district for the redevelopment project, and other sources of financing for the project.
- Issuance of Bonds to Finance Projects within the District. The redevelopment district shall have the authority to issue special obligation bonds secured by and payable from all or a portion of the incremental city, county and state sales and/or use taxes collected from taxpayers within the district after the project plan has been approved (“STAR bonds”). The tax increment shall be the city, county and state sales and use tax revenue collected within the district above the base year revenue (i.e., the city, county and state sales and use tax revenue for the 12-month period immediately prior to the month in which the project plan is approved).
- Repayment of STAR Bonds. STAR bonds shall be payable solely from the tax increment revenue described in Section 4 above and/or other revenues deposited to the credit of the special fund created for the district.
- Bonds Generally. The bonds, together with the interest and income therefrom, shall be exempt from all state, county and municipal income taxes.
- Impact Reports. For each project financed with STAR bonds, the city or county shall prepare and submit to AEDC a report describing the status of any projects within the redevelopment district, any expenditures of the proceeds of STAR bonds that has occurred in the past year, any expected expenditures in the future, and the purposes of such expenditures.
- Audits. Each project financed with STAR bonds utilizing state sales and use taxes shall be audited by an independent certified public accountant annually at the expense of the city or county that established the district. The audit report shall supplement the impact report.