Property tax breaks granted to developers and building owners by St. Louis cut revenue last year by $31 million, with public schools, libraries and local cultural institutions among those taking a hit.
That is a bigger impact than in 2017, when property tax breaks awarded by the city reduced revenue collections by $29.6 million.
Planned are 500 apartments, 84,000 square-feet of commercial space.
The city of St. Louis and other local governments are required to estimate how incentives affect revenue under national accounting guidelines that went into effect two years ago. The disclosures are included in the city’s annual comprehensive financial reports. The most recent report was released last week by St. Louis Comptroller Darlene Green’s office.
Tax abatements, a common economic development incentive, have been controversial in recent years. They freeze real estate assessments, typically for a decade, prior to new construction or big rehabilitation projects. Even homeowners can take advantage of the incentive if they are planning significant upgrades.
Developers and some city officials point out the incentives are needed to help finance construction projects in a region where rents are often lower than those in other large metro areas and that the so-called forgone revenues never would have been generated without the tax breaks. And, they say, the new development helps attract residents who pay other taxes into city coffers.
But critics who have placed heightened scrutiny on the incentives in recent years question whether developers, particularly in strong central corridor neighborhoods, actually need all the tax breaks they receive.
Decisions on property tax breaks had been mostly driven by a neighborhood's alderman. Politics could still present roadblock to incentive guideline map.
With a tight budget picture year after year, the city’s use of incentives has stayed a hot political topic and prompted some policy changes. In recent years, economic development officials and aldermen have hired analysts to up their game at the negotiating table with developers. At the same time, they’ve pared back the value of some tax breaks.
Still, Glenn Burleigh, a member of local activist group Team TIF that tracks St. Louis’ use of development incentives, said he doesn’t expect much to change in the near future.
Board that recommends tax breaks for redevelopment offering more projects partial abatement so new money comes in faster.
“When we’re passing abatements for buildings that are 10, 15, 20 years in length, we’re going to be stuck with those for a long time,” he said.
Though the city and its various development arms approve the tax abatements, St. Louis Public Schools are actually most affected by lower property tax revenues despite having little to no say in how they are awarded. The city only receives about 19 cents of every property tax dollar collected, while the public school district takes in about 61 percent of St. Louis property tax collections. The remainder goes to the St. Louis Public Library, the Zoo and Museum District and other local services.
The city agency responsible for reviewing tax break requests is recommending fewer, but some aldermen have ignored them.
St. Louis, therefore, didn’t collect about $5.5 million in property taxes that would have gone into local functions, a small fraction of its roughly $1 billion budget. Still, Team TIF pointed out that the difference is roughly half of the budget deficit that city leaders last year had to figure out how to close.
St. Louis Public Schools, on the other hand, didn’t collect about $18.9 million due to tax abatements.
The city and schools have missed out on more than $700 million in revenue over the last 15 years due to tax abatement and tax increment financing.
The use of the city’s other large local development incentive, tax increment financing, or TIF, has slowed down in the last year, with fewer new TIF projects pushing back the future collection of local tax revenue. Like tax abatement, TIF freezes property assessments prior to new development and allows the developer to use the higher anticipated property taxes after development to finance construction. In addition, TIF also allows the developer to capture half of new sales taxes and earnings taxes.
TIF projects will divert $364 million in future revenue, according to the comptroller’s report, and taxes paid from TIF projects paid down $37.6 million in TIF obligations last year.