Knowledgebase-Application for Certificate of Public Purpose and Necessity for Industrial Parks


Information Product

Title:Application for Certificate of Public Purpose and Necessity for Industrial Parks
Summary:MTAS was asked whether there are any required procedures that the Town’s Industrial Development Board must take in order to be granted a Certificate of Public Purpose and Necessity from the Building Finance Committee of the state Department of Economic and Community Development for an industrial park project.
Original Author:Bingham, Pamela
Co-Author:
Product Create Date:05/09/2000
Last Reviewed on::03/15/2006
Subject:Economic development; Finance--Debt obligation; Industrial development
Type:Legal Opinion
Legal Opinion:

Reference Documents:

Text of Document: You have requested whether there are any required step-by-step procedures that the Town’s Industrial Development Board must take in order to be granted a Certificate of Public Purpose and Necessity from the Building Finance Committee of the state Department of Economic and Community Development for an industrial park project. The answer is yes.

As you explained, the Town is planning to proceed with the purchase of property for an industrial park, which will require the borrowing of funds. What follows is a summary of the specific requirements for making applications to the Building Finance Committee for a Certificate under the Industrial Park Act, as set forth in Tennessee Administrative Compilation of the Rules and Regulations of Tennessee state agencies. For the purposes of your question, Tenn. Admin. Comp. Chapter 0500-2 is the governing chapter. While these rules were promulgated in 1977, they do not appear to have been revised or updated since that time; therefore, I am assuming they are still viable. And, most likely there are several requirements included in this summary that may not applicable to the project; however, I have included them in the event that this question is raised again under a different fact situation or in a different municipality.

Tenn. Admin. Comp. 0500-2-.06 requires that Applications for a Certificate be submitted in twelve (12) copies, each of which must contain the information discussed later in this opinion, and each of which must be bound in a separate volume with an appropriate cover.

The information or statements contained in the volume must appear in the order described as follows:

1. A letter addressed to the Building Finance Committee from the chief officer of the municipality, bearing the signature of that individual and including:

(A) a statement requesting that the Building Finance Committee issue the municipality a certificate,

(B) a statement outlining the scope of the project for which the certificate is sought and the reasons for its undertaking,

(C) a statement showing the aggregate cost of the project, sources and amount of funding available for the implementation of the project and sources and amounts of anticipated revenues that will be derived from the project,

(D) a statement of the aggregate amount of general obligation bonds the municipality is seeking authority to issue to finance the project.

2. Certified copies of all necessary and required resolutions and or ordinances enacted/passed by the governing body of city that has the power to undertake the project.

3. An Expenditure versus Funding Statement - The rules state that this statement should be limited to a single page, if possible. This is an itemized statement of all project expenditures tabulated in a single column on the left-hand side of the page and an itemized statement of all funding for the project an itemized statement of all project expenditures tabulated in a single column on the right hand side of the page. Each column should be totaled and the totaled amounts should be equal to ane another.

(A) Costs should include all expenses to be incurred in undertaking the project including (as relevant) land cost, construction cost, cost of services of architects/engineers, legal and fiscal expenses and should include any interest accruing during the construction period and for 6 months thereafter on money borrowed for the project.

(B) Funds should include all grants and/or loans from governmental agencies as well as monies to be derived from the bonds, or borrowed from commercial institutions, or to be contributed from the general fund or any other special fund.

(C) In the Appendix to the application, in reference to cost, include the following:

(i) Where fees or costs are established by option, actual payment, invoice or contract, a copy of the document establishing the basis for the cost or fee,

(ii) Where fees or costs have been established by estimate, the source of the estimate and sufficient additional information concerning the estimate to establish that the party making the estimate is well-qualified and has enough experience and knowledge to make the estimate, and

(iii) In the case of land costs, you must provide, in addition to any option or contract setting forth the purchase price an independent appraisal of the property by a licensed or certified real estate property appraiser

4. Include in the Appendix, with reference to the sources of funding, the following:

(A) If provided by a governmental agency either by loan or grant, a copy of the application for funding, necessary approvals, including approvals by development districts, letters from any state of federal agency from which funds are elicited,

(B) If the loan is from a commercial lender, a copy of the loan agreement including mortgages, security agreements, etc.

(C) If the source of the funds is to be by issuance of bonds, general obligation or otherwise, a copy of all proposed recitals to become part of the bonds, including bondholders remedies, lien rights, pre-payment rights, penalties for late payments and estimated interest rates and/or amortization schedule for the bonds.
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5. A Payment versus Revenue Statement - This statement should contain a tabulation of the estimated annual payments which will be required to meet any indebtedness incurred by the municipality in undertaking the project, as well as a summary of expected revenues from the project, including estimated amounts and the dates the revenues will be received. Include in the Appendix to the Application, (with the reference to the revenues), the following:

(A) In cases where the anticipated revenues are based on the sale of land, a detailed and thorough discussion of the projected sales price used in establishing projected revenues and a discussion of the feasibility of the projected dates used in establishing the time at which such revenues will become available, and

(B) In the Appendix, also include with reference to payments, a complete amortization schedule for retiring the indebtedness incurred as a result of the project.

6. An emergency financing statement - This statement must contain a detailed plan
showing where the municipality will obtain any emergency funding needed to meet expenses in
the event project revenues do not materialize on schedule.

7. Sworn Statements from the appropriate official to the municipality. Such statements are to contain:

(A) The total assessed value of property within the municipality by an assessor of property -(“assessed value” is the value of all property within the municipality to which the tax rate is applied);

(B) A general tabulation of all outstanding General Obligation bonds issued by the chief fiscal officer of the city;

(C) A specific tabulation of all outstanding bonds under the authority of T.C.A. 7-55-101 et seq. and/or T.C.A. 13-16-201 et seq., by the chief fiscal officer of the city.

8. An Engineering Report - Must contain the following information and/or address the following items with respect to the site:

(A) topographical or terrain conditions for the area.

(B) location of the site with respect to access to highways, rail and or water transportation facilities, including a discussion of any problems or inherent drawbacks to the use of the site occasioned by the location of the site, with respect to these various modes of transportation,

(C) soil conditions at the site, including estimated quality of the soil with respect to industrial usage of the site, estimated depth to rock, probability of ground water and/or internal drainage problems with respect to site soil and any corrective measures to be taken with respect to soil conditions,
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(D) site configuration and any problems associated with the configuration of the site, including the probability of wasted property,

(E) site drainage, including a discussion of the nature of site drainage, provisions to handle site drainage and any problems associated with site drainage. A discussion of flood conditions relative to the site must be included in this section of the report.

(F) Provisions for serving the site with water, electricity, gas and sewage collection:

(i) With respect to water, the report shall include sufficient information to establish that proposed water service to the site shall be adequate, including water for fire protection. The discussion shall include an analysis of water pressures and quantities, the basis for establishing storage capacities, basis for establishing consumptive demands as well as a basis for establishing fire demands.

(ii) With respect to sources of energy/ power, a discussion of the manner and method of supplying needed energy or power to the park, including the type of energy sources available and to be supplied,

(iii) With respect to sewage collection, a discussion of the manner and method of collecting park waste and disposing of it. A discussion of estimated park waste and basis for such estimate, a discussion of the manner and method of collecting park waste and disposing of it. A discussion of estimated park waste and the basis for such estimate; a discussion of sewer hydraulics and the capacity at the local treatment facility which will handle the anticipated park waste.

(iv) In the event that any of the above services are not to be provided, the report should discuss in detail the impact on the park or site of not providing this service.

(G) The Engineering Report shall contain sufficient maps to:

(i) delineate the location of the site with respect to local modes of transportation, with respect to the municipality’s business district and with respect to sources of labor;

(ii) show all proposed improvements on the property;

(iii) indicate any anticipated subdivision of the property;

(iv) show the present terrain features and topographical relief of the site (suggested: a minimum 10' contour interval), and

(v) show the nature and extent of any proposed alterations to the topography of the site.

9. A Statement by a Licenced Attorney - This should assert that there not any legal problems associated with implementation of this project. In the event that legal complications do
exist, the statement shall discuss the problematic issues and their probable impact on the project.


10. A Statement as to the Available Sources of Labor - the labor sources are those that are within a 25- mile radius of the site; this statement should include a discussion of the basis for establishing available labor supplies.


11. A Discussion of any Environmental Problems - This refers to anticipated problems and their effect upon the project.


12. A Plat and Legal Description of the Property


13. An Appendix to the Application - The appendix should contain any information
as required by this rule, and any other information with regard to feasibility of the project that the municipality thinks should be or want to be included in the Application.

Finally, because state administrative rulemaking procedures typically takes many months to complete (from their inception to publication), it would be wise to advise your client to check with Building Finance Committee to ensure that the above requirements, if followed correctly, will be all that is needed to be eligible for a Certificate for Public Purpose and Necessity.

Please remember that these legal opinions were written based on the facts of a given city at a certain time. The laws referenced in any opinion may have changed or may not be applicable to your city or circumstances.

Always consult with your city attorney or an MTAS consultant before taking any action based on information contained in this database.