The Infrastructure Investment Incentive, signed by Governor Romney on September 7, 2006, is designed to jump start major public infrastructure improvements. The so-called "I-Cubed" legislation could be a formidable force in establishing public-private partnerships to finance major public infrastructure improvements such as streets, sidewalks, water and sewer lines, storm drainage facilities, and street lights.
I-Cubed permits the Commonwealth to invest in infrastructure projects by issuing up to $200 million in bonds to fund up to five major infrastructure projects. The bonds will be repaid by special real estate tax assessments on development parcels that will benefit from the infrastructure improvements. The special tax assessments will be paid by the developers until the newly constructed buildings are occupied. The expectation is that the bonds will then be repaid by the new state taxes generated by the new development. In exchange for receiving the bond funding, the city or town must commit to making the bond payments if the developer defaults in paying the special tax assessments or if the newly-generated taxes are insufficient to cover the debt service.
Each project requires the approval of the local governing body after a detailed submission and a public hearing. After local approval, the developer and municipality will jointly seek the approval of the Massachusetts Secretary of Administration and Finance. Before the Secretary will approve a proposal, the developer must demonstrate that financing for the entire project has been secured (except for the public infrastructure improvements), and the municipality must establish a liquidity reserve that is twice the amount of the annual debt service on the bonds. Once a project is approved, the parties (the Commonwealth, the municipality, and the developer) will enter into an Infrastructure Development Assistance Agreement that lays out the requirements for the special real estate tax assessments and the payment of the debt service.
Mayor Menino, one of the legislation's main proponents, has stated that the legislation may be used to jump start the development of the 100 Acres Area in the Fort Point District south of Summer Street in South Boston. He projects that I-Cubed bonds will help create 12,000 new jobs, 2,000 housing units and $50 million in annual real estate taxes in this district alone.
I-Cubed has the potential to benefit communities across the state by encouraging public and private entities to become partners in important infrastructure initiatives that are essential to major new real estate developments. By including safeguards to protect the Commonwealth from any loss of revenue, this new legislation is expected to lead to fiscally prudent and productive infrastructure investments and economic development.
This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.