Agenda - 10-04-1982 - Laserfiche WebLink

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Board Members -3- Economic Development Program "63-20" financing gets its name from an Internal Revenue Service ruling which set thd ground rules for the practioe. In effect, the ruling gives tax exempt status to private business facilities similar to revenue bonds. Under ^63-20" a non-profit corporation constructs and leases a structure. When the obligations f the corporation are retired by the lease payments of the occupant-, the facility is treated like a governmental unit. The five conditions that must be met for 3-20/' financing are: ---- 1. Tlie corporation must engage in essentially public activities._ ' 2, The corporation must be non-profit. 3. The corporation income must not benefit a private person. 4. The governmental unit must have a "beneficial interest" in the corporation for while the obligation is being retired and must � o�tain full title to the property when indebtedness is retired. 5. T1.e governmetal unit must approve the corporation and the igmtions undertaken. This thod of financing is useful because of the degree of fYeuibflitv allowed, which does not exist with industrial revenue bonds. There are two ' disadvantages: First, the corporation may not wish to have the government own the facility land second, it is not certain 63-20 financing 1s allowed due to recent chmng s in North Carolina law. Conclusions as to Public Financins The 4tention of the above discussion was to point out some of the possi- bilities and financial limitations placed on a local government undertaking an ecunhmic development pn}Bram. The main points are: 1. T e use of public funds in the Economic Development effort are restricted by State law and the State Constitution. 2. Private efforts that do not use public funds are not constrained bY these laws. 3. P ivate efforts using public funds must use the funds according to the State Lawy, 4. Tbere exists several different financing methods for local govern- ment to mount an economic development effort. 5. S me sources of funds necessary for development are not available in the private sector. Funcdons of the Economic Develo"ment Pro"ram There are at least ten functions that any one of the proposed models would need to carry out. It is reasonable to assume that there would be revisions toithis list, but it provides a starting point for discussion. An effort has been made to evaluate the effectiveness with which each model could be expected io achieve in carrying out the functions. This is a judgment evaluation staff's part and therefore subject to any revisions that a wider assessment might show. In the following matrix an asterisk indicates a high rating of effectiveness per each function.