The City Council agenda for March 13th includes an item related to the Western Illinois Economic Development Authority (WIEDA). Specifically, transferring the Volume Cap of the City of Nauvoo to WIEDA. In conversations with Andrew Hamilton, Executive Director of WIEDA, we learned how this program works.
The federal government created the ability for states to create these districts (like a port authority in other locations) that would allow businesses, factories, etc. to gain access to a benefit that previously had only been available to actual municipalities themselves–“tax free financing”. Now, this is not to say that WIEDA loans money, it simply passes this unique characteristic of tax exempt financing on to those financial institutions who loan funds to qualified businesses. Normally, a city government can borrow money at a better rate than an individual, in part because the financial institution will not have to pay taxes on the interest it collects. What this “tax free financing” does is allow banks and other financial institutions to make loans to qualifying businesses, and claim a tax exempt status on the interest fees they collect. As an example, the bank may be required to pay 2% taxes on a loan that it collected 6% interest on. With “tax free financing” status, they would not be required to pay the 2% in taxes, and so could offer the same loan at 4%, with the bank retaining the same profitability.
Only certain types of business can qualify for this type of financing, and WIEDA has a process to follow. In reality, the City of Nauvoo can offer these bonds. The State of Illinois allocates its limit of this kind of incentive to approximately $1.3 billion. This is allocated by population at a rate of $105/inhabitant. In Illinois this is broken down by local governments, with Home Rule communities (like Nauvoo) being granted their allocation of eligibility. There is one problem. The legal process to use these funds can amount to $30,000 in fees. And with less than $100,000 available to be allocated in the City of Nauvoo, it is unlikely it would be used. And, the state of Illinois says that if a City does not use its allocation by April 1 of the year, it loses it (which is a polite way of saying the State takes it back and uses it as it sees fit). WIEDA solves this problem by taking the allocation of smaller communities, pooling it together, and allocating to larger projects in Western Illinois which can justify the expensive legal fees.
That is not to say that Nauvoo could not be a candidate. Our conversation with Mr Hamilton was very helpful, and it seems that there are businesses that could be interested in Nauvoo that might benefit from this kind of program. As a part of a larger recruiting package to attract business, it is a definite plus. To be clear, WIEDA does not loan money, or help get financing. What WIEDA does it make that money potentially more affordable, by helping to get a lower interest rate, through the “tax free financing” it can provide to lenders.
Transferring Nauvoo’s volume cap seems a very worthwhile effort. We also hope to see a potential employer for Nauvoo taking advantage of it.