New Tool to Pay for Old and New Infrastructure

Here is one useful approach to insure that those wanting infrastructure and benefiting more than the community at large will have the option to finance such improvements on favorable terms:

WHY WE NEED CHAPTER 40T TO SELF-FINANCE A PORTION OF THE COMMONWEALTH’S TRANSPORTATION INFRASTRUCTURE NEEDS

Our State and municipal budgets are under tremendous financial strain. There is a huge back log of State and local infrastructure projects that need to be addressed. It is a rare state or community that is able to fund all the water, sewer, roads and other infrastructure needed to support existing neighborhoods and new desired development.
We traditionally have relied upon State or municipal general obligation bonds, repaid from taxes to pay these costs. The State and local tax payers are saying no more. We can ill afford to miss out on alternative and innovative techniques to finance public works that many other states have used for years. In 2006, Massachusetts did not access any of the $15 billion in land-secured tax-exempt financing used to fund infrastructure. This financing can be as long as thirty-five years and carries a very attractive interest rate.
The proposed Chapter 40T (S.146 and H.159) is a local option. Under the legislation, Development Zones (designated sections of a town or city benefiting and paying for the improvements) would be provided with access to this capital. Such Zones would serve much the same function as traditional betterment districts. In both, the costs of improvements such as new roads, highway ramps and transit stations could be assessed against the property receiving benefits as distinguished from the community at large. Chapter 40T does not provide any eminent domain powers and has no affect on local zoning and permitting.
Chapter 40T offers several key advantages over traditional betterment financing. First, the Development Zone is a voluntary imitative by the property owners (at least 80% of the owners of all tax parcels and owners of 80% of the acreage) that benefit from and pay for the improvements. After a public hearing, the municipality must also consent to the use of Chapter 40T. Second, the project is financed by bonds issued by the Massachusetts Development Finance Agency or a Local Improvement District. The credit of the community is specifically NOT pledged to repay the bond issue. Third, the property owners may pay the assessments back over a term as long as thirty-five years as opposed to twenty under the General Laws.
Chapter 40T has been designed to work with State and federal programs such as the State’s Revolving Loan Fund and District Improvement Financing. It would provide the best sources for funds needed to fill any gaps left by State or federal programs.

Some typical projects that could be funded under Chapter 40T:

• Does your town or city have neighborhoods that for years have complained about poor septic systems, roads or other public works needs? They could organize and petition the municipality to establish a Chapter 40T Development Zone to fund the improvements paid by assessments on the property within the Zone. This means that only those benefiting directly from the improvement would pay the cost.

• Does the community wish to encourage new quality development but wants to make sure that additional services or facilities are paid for by the developer or new residents? The formation of a 40T Development Zone could fund such improvements.

• Is funding for a highway ramp or other transportation facility holding up a desired real estate development? If State or federal funds are not available, such needs could be met voluntarily under the proposed legislation.

The type of infrastructure that might be financed is very broad. It includes: “the acquiring, laying, constructing, improving and operating of capital improvements to be owned by a public facilities owner, such as, but not limited to, storm drainage systems, dams, sewage treatment plants, sewers, water and well systems, roads, bridges, culverts, tunnels, streets, sidewalks, lighting, traffic lights, signage and traffic control systems, parking, including garages, public safety and public works buildings, parks, landscaping of public facilities, cultural and performing arts facilities, recreational facilities, marine facilities such as piers, wharfs, bulkheads and sea walls, transportation stations and related facilities, shuttle transportation equipment, fiber and telecommunication systems, facilities to produce and distribute electricity, including alternate energy sources such as co-generation and solar installations, the investigation and remediation associated with the cleanup of actual or perceived environmental contamination within the development zone in accordance with applicable governmental regulations and provided that no such investigation or remediation shall impair the rights of the public facilities owner or any other person to contribution or reimbursement from any potentially responsible party for the costs thereof, and other improvements…”