Section 16.7 Taxable Industrial Revenue Bonds (“Chapter 100 Bonds”)

• Library: Local Government Deskbook (2017 Ed.)

E. (§16.7) Taxable Industrial Revenue Bonds (“Chapter 100 Bonds”)

Under Chapter 100, RSMo, cities, counties, incorporated towns, and villages may issue taxable revenue bonds in conjunction with a lease-back transaction to effect abatement of both real and personal property taxes on private industrial facilities. See §§ 100.020 and 100.100, RSMo 2016. Under this species of financing, the municipality issues so-called “Chapter 100 Bonds” secured by leasehold revenues. Bonds are typically purchased by the benefiting industry end-user. Proceeds are then used to acquire title by or on behalf of the municipality to the desired facilities, which are rendered tax-exempt by virtue of the municipality’s ownership of the “fee” interests. See, e.g., Mo. Const. art. X, § 6; § 137.100, RSMo 2016. In turn, the municipality leases the acquired facilities to the industry end-user. Lease revenues in the form of rental payments or credits equal to annual debt service satisfy debt service on the bonds. The bonds are secured solely by lease revenues, and neither constitute a municipality’s pledge of full faith and credit nor provide resort to any municipal taxing power.

The following chart illustrates the flow of funds in a typical Chapter 100 Bonds transaction.

CHAPTER 100 BONDS FLOW CHART

Bonds Component	Lease Component
1. Municipality Issues and Company (as Bondholder) Buys Bonds	4. Company (as Lessee) Pays Rents to Municipality
2. Bond Proceeds Deposited in Acquisition Fund	5. Rent Payments Deposited in

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