The amount of revenue taxing jurisdictions within St. Louis didn’t collect last year because of property tax abatements is about 76 percent higher than initially thought.
In a little-noticed update to a report tallying the amount of forgone revenue due to the development subsidies, the city now says the value of those incentives was $29.6 million in the fiscal year that ended June 30.
Updated national accounting standards now require local governments to disclose the value of tax abatements in their annual financial reports, which in St. Louis is produced each year by St. Louis Comptroller Darlene Green’s office.
The new standards kicked in for the first time in the city’s 2017 fiscal year, and the comptroller’s office first tallied them in its annual report released in late December.
That report found nearly $17 million in forgone revenue because of abatements, money that would have been shared among St. Louis Public Schools, the Zoo-Museum District, St. Louis Public Library, the city and other taxing jurisdictions.
Aldermen say analysis guiding incentive use six months away.
But last month, the comptroller’s office filed a supplement showing that the amount was actually closer to $30 million.
Comptroller spokesman Tyson Pruitt said the change was “purely a computational error” as the office collected data from the city assessor’s office and the St. Louis Development Corp., the city’s economic development arm.
The change did not affect the report’s financial outlook or other disclosures, Pruitt said. He noted it is the first year the abatement amounts were calculated and the various arms of city government caught the discrepancy quickly.
Tax abatements are a common development tool in St. Louis, offered to high-profile projects, expanding businesses and homeowners planning significant upgrades to their houses. For example, the proposed 33-story apartment tower across from Busch Stadium was recently granted 20 years of tax abatement, and the now-under construction One Hundred apartment tower across from Forest Park will have 15 years of tax abatement.
The mechanism freezes a property’s assessed value for years so property owners don’t pay taxes based on the value of improvements. The abatements have typically burned off after a decade, but the length of time can vary based on the project and part of town it’s in.
Economic development and city officials say many projects wouldn’t get built without the subsidies. The forgone revenue, therefore, wouldn’t otherwise exist.
The city agency responsible for reviewing tax break requests is recommending fewer, but some aldermen have ignored them.
The tools, along with tax-increment financing, or TIF, have come under increased scrutiny as the city works to shore up its budget and critics question whether the incentives are always offered to projects that really need it. A 2016 report commissioned by the St. Louis Development Corp. estimated taxing jurisdictions didn’t collect about $307.5 million because of tax abatements from 2000 through 2014 and $401.6 million because of tax-increment financing in that time frame.
Gerry Connolly of Team TIF, a local group critical of the city’s incentive use, pointed out the new estimate from the comptroller’s office on Monday. He said a public database of incentives was needed, a project that economic development officials say they’re working toward.
“Transparency in the incentive programs is vital; the release of the new abatement figures should have been accompanied by an explanation,” Connolly said in an email.
“The revised figures call into question the city’s confidence in the data utilized and how the forgone revenue was calculated … While many projects have deserved incentives, a substantial number would likely have proceeded with either a reduced incentive or none at all.”
Economic development officials and aldermen have recently tried to better evaluate the incentives. To try to generate at least some new money up front, they’ve begun abating less than 100 percent of a property’s improvements, as was common in the city for years.
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 city’s share of property taxes paid by resident and businesses is around 18 percent, so it missed out on about $5.25 million last year because of abatements, a very small portion of its roughly $1 billion budget.
The school district relies far more heavily on property taxes, collecting about 61 cents on each tax dollar paid. That means the district, which has little to no say over whether property taxes are abated on real estate projects, missed out on about $18 million in revenue last year.
St. Louis County, which released its first annual financial report breaking out tax abatements over the summer, said it reduced its revenue by about $1.3 million in 2016. The county’s share of property taxes, however, is about 5 percent on average, so the total value of tax abatements there is likely closer to $26 million, with the impact split among municipalities, school districts and other taxing jurisdictions.