St. Louis aldermen and economic development officials have proposed new guidelines for the city’s construction incentives, the latest effort to reform the common tax breaks amid calls to better manage their use.
The incentives have become a flashpoint in recent years and were a big issue during the most recent mayoral campaign, with most candidates calling for curbs on their use in stable neighborhoods. The city helped start the debate with a report it commissioned last year that put the value of the tax breaks over 15 years at roughly $709 million. It has since hired a financial analyst and begun more stringent reviews of proposals seeking tax breaks.
Those who support the use of incentives argue many projects wouldn’t have been built without them and that much of the forgone tax revenue never would have been generated. But critics say the city has historically put few limits on incentives, unnecessarily subsidizing some projects in vibrant areas and costing a cash-strapped city millions in annual revenue.
“We need to create a template so we don’t have a bloodletting every time a project comes through,” said 17th Ward Alderman Joe Roddy, who chairs the Housing Urban Development and Zoning Committee.
The proposals call for capping development incentives in stronger neighborhoods and requiring large projects to undergo reviews by the St. Louis Development Corp., the city’s economic development arm. Other measures aim to protect the city’s existing revenue streams and keep new voter-approved taxes from being captured by tax-increment financing, or TIF.
TIF lets developers use the increases in property and sales taxes generated by their project to help finance it. The city also commonly grants tax abatement, which freezes property taxes at current levels for years and exempts the owner from increases due to appreciation.
Roddy’s committee held an unusual evening public hearing Thursday at Ascension Evangelical Lutheran Church in St. Louis Hills to discuss the guidelines. The public was invited to comment on the incentive guidelines, and a similar meeting is planned for 6:30 p.m. Tuesday at the William J. Harris Center, 3140 Cass Avenue.
The guidelines are likely to be tweaked by the committee after it receives more public feedback and begins debating them. Even then, they’re only meant as a stopgap measure that will be revised by a citywide economic development plan.
On all sides of the debate, “people are all supportive of getting a plan,” said SLDC Director Otis Williams.
But officials are still figuring out how to get such a plan funded, which Williams has estimated would cost about $2 million. He has described next year’s budget, currently being crafted, as “short” for such a plan. He said Thursday his office is exploring “public-private partnerships” to pay for it.
Koran Addo, Mayor Lyda Krewson’s spokesman, indicated the effort is still in the planning stages but that “we would seek some private dollars to leverage public activities and funding.”
In the meantime, Roddy said he hopes the interim guidelines keep aldermen from “underwriting” each project that asks for TIF or tax abatement and instead moves toward a more administrative process, similar to state tax credit authorizations.
But Glenn Burleigh, a member of local activist group Team TIF, which advocates for incentive reform, said he was skeptical that aldermen and SLDC officials would follow the guidelines. He pointed out the city has an informal 15 percent cap on project costs that can be covered by TIF revenues, but that it is often exceeded by the time a development is approved.
“None of this will be a law,” Burleigh said. “They can ignore this at any time, as they do on a regular basis.”
Roddy, though, called the guidelines a “good-faith offering” that could result in political consequences if aldermen ignore them. “If we stray from these things, then all of a sudden fireworks are going off,” he said. “I don’t want to be spending all my time putting out fireworks.”
Bill Kuehling, a veteran development attorney at Thompson Coburn, told the committee Thursday that many projects downtown and elsewhere wouldn’t have been built without TIF or tax abatement. Afterward, he told the Post-Dispatch he thought those involved in development weren’t too worried about the discussion on incentive reform yet.
“I think they’re open to it, but cautiously,” Kuehling said. “Because it’s very difficult to develop in this area. It’s probably the most difficult in the region.”
Other aldermen, while calling the conversation healthy, urged opponents of tax incentives to not view the city in a vacuum. Other municipalities offer property tax breaks and TIFs. Developers can fetch higher office rents in Clayton or west St. Louis County than downtown, meaning projects in the region’s biggest employment hub often need the subsidies, 7th Ward Alderman Jack Coatar said.
“Our biggest competitor is just across the city line in Clayton,” he said. “Regionalism is really part of the key to this.”