An “Inducement” is defined as “a motive or consideration that leads one to action.”Exhibit 6 of the “Branson Landing Tax Increment Financing Plan” indicates that up to $33 million dollars of Branson Landing Project funds could be used to “induce prospective Retail and Hotel Anchors” to commit to the project.
One such potential “Hotel Anchor,” conditioned their participation upon “receiving at least $10,000,000 in direct Sales Tax TIF Bond Proceeds or other similar inducement and entering a long-term subordinated land lease with the City of Branson at a minimum cost.”That’s sure a way to “lead one to action,” pay them $10 million dollars up front to take the desired action.The Ole Seagull would bet that there are a lot of businesses, theatres, hotels, etc. that would have loved to been “induced” like that when they started their businesses in Branson.
There is also another way to “lead one to action.”It is called “incentives.”As used in the case of Branson Landing, an “Incentive” could be defined as, “the expectation of a reward, that induces action or motivates effort.”What a difference it would have been if the potential “Hotel Anchor” mentioned above had conditioned their participation upon “receiving $10 million dollars in tax revenues only if their business produced $15 million in tax revenues first and, in addition, taken as a whole, the tax revenues from the Branson Landing Project were sufficient to pay the projects indebtedness.
In the first case it’s a one sided situation.They get their “inducement” up front, merely by coming to the Branson Landing Project.In the second case, the “incentive situation,” they have to get it “the old fashioned way, earn it.”If the Ole Seagull understands the process, it appears that the “incentive” case scenario is being used for the Branson Landing Project inducements. Let’s take a look.
“Gotcha Outdoor Outfitters,” GOO, approaches the city about the possibility of building a $50 million dollar outdoor retail facility in Branson Landing.The city of Branson determines that GOO would make a great anchor and decides, as an inducement, to give GOO the opportunity to earn $10 million dollars in incentives.At this point the city hasn’t given GOO one penney.
In a “bond legalese” thing, $10 million dollars of the $50 million that GOO is going to invest in Branson Landing is also used to simultaneously “purchase,” what the Ole Seagull will call, “Incentive Bonds” from the City of Branson.At this point GOO gets the Incentive Bonds from the city, giving it the opportunity to earn up to $10 million dollars in incentives, is investing $50 million dollars in a facility in the Branson Landing Project, and the city hasn’t given GOO one penney.
It is important to note that the Incentive Bonds are “subordinate” to, what the Ole Seagull will call, the “Non Incentive” Branson Landing Bonds.In terms of priority, tax revenues from the Branson Landing Project will first be used to pay off the Non Incentive Bonds.Then, whatever tax revenues that are left may be used to pay off the Incentive Bonds.If there is insufficient revenues to pay the debt on the Non Incentive Bonds the Incentive Bonds will not get paid.
In addition, there will be performance and revenue incentive criteria that the holders of the Incentive Bonds must meet before they would receive payment.This criterion would be business specific, subject to negotiation, and would change from business to business depending on their perceived value to the overall project and other factors.The one thing that would not change however is the fact that it is another condition that the Incentive Bond holders must meet prior to receiving payment on their bonds.
In a nut shell, two things must happen before “Gotcha Outdoor Outfitters,” GOO, receives one penney in incentives from the City.First, the Branson Landing Project must generate enough tax revenue to pay the indebtedness on the Non Incentive Bonds.Second, the holders of the Incentive Bonds, in this case GOO, must meet the specific performance and revenue incentive criterion that they agreed to.If both do not happen, the Incentive Bond holders do not get paid.If both do happen, then GOO receives the $10 million dollars and the incentive process has worked.
“Could the incentive process be prostituted?”Of course it could but, in an Ole Seagulls opinion, the citizens and businesses of Branson are best served if the process is honored.It will either result in obtaining the sincere interest and commitment of the “world class” anchors that will be critical for the success of the Branson Landing Project or demonstrate their lack of interest and commitment.Either way, assuming appropriate action by city officials, the Branson wins.
