The Infrastructure Investment Incentive Program (“I-Cubed”) is an innovative public-private partnership created to spur economic development and job growth in the Commonwealth through support for large-scale private real estate development projects with significant new public infrastructure requirements estimated to be in the range of $5 million to $50 million. Enabling legislation was initially passed in 2006, and has since been amended in 2008, 2012, and 2016. The program is administered by the Secretary of Administration and Finance and the Commissioner of the Department of Revenue in partnership with MassDevelopment.
The concept behind this financing program is that new state tax revenues generated from the private economic development project will cover the costs of the public infrastructure improvements needed to support the project. The project will further benefit municipalities through increased commercial property values and real estate tax revenues. The investment in public infrastructure is financed through bonds issued by MassDevelopment with the debt service on the bonds payable from contract assistance payments secured by a general obligation pledge of the Commonwealth. A cost and risk sharing agreement is arranged between the Commonwealth, the Municipality, and the private developer.
Current authorization permits up to $600 million of tax-exempt bonds to be issued under the I-Cubed program for certified economic development projects across the Commonwealth with a maximum of 10 projects per municipality. Priority is given to projects in economically distressed municipalities that meet both the unemployment rate and median income level criteria. Applications for participation in the program must demonstrate that the economic development project would not happen or achieve the contemplated level of development, jobs, or other economic activity without the public infrastructure improvements financed under I-Cubed. The developer must demonstrate that the project is financially feasible and that sufficient financing resources have been committed to complete the project. The economic development project must also be consistent with sustainable development principles.
The projected annual new state tax revenues must be at least 1.5 times greater than the projected annual debt service on the related bonds (construction-related state tax revenues may be taken into account under certain circumstances). The general categories of state tax revenues taken into account for purposes of the I-Cubed program includes, but is not limited to, personal income taxes on wages and partnership distributions, sales taxes, and hotel/motel room occupancy excise taxes, subject to certain exclusions.
The Commonwealth must have a high degree of confidence that the economic development project will generate state tax revenues that are new for the state or that would be lost to the state if not for the project. As a result, the Commissioner of Revenue will consider the facts and circumstances of each particular project, and determine if specific state tax revenues should not be treated as new (for purposes of evaluating an I-Cubed financing proposal) if they are found to have replaced, relocated, or displaced other state tax revenues. If the new state tax revenues are insufficient to cover the related debt service on the bonds, the Municipality will be required to reimburse the Commonwealth for the amount of the shortfall. The Commonwealth will work in partnership with municipalities with proposed economic development districts to ensure that there is a common understanding of the benefits and risks of a proposed economic development project and agreement about whether to approve projects for I-Cubed financing.