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School closures revive debate on St. Louis tax incentives

School closures revive debate on St. Louis tax incentives

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Teachers and staff protest St. Louis public school closures

Cynthia Fehrmann, left, spells out the letter “R” with her arms as she protests the closure of some St. Louis public schools with her kindergarten student Elijah Sutherlin, 5, right, outside of Clyde C. Miller Career Academy in St. Louis on Tuesday, Dec. 8, 2020. Photo by Cheyenne Boone, cboone@post-dispatch.com

ST. LOUIS — For years, St. Louis Public Schools representatives were mostly quiet as city aldermen routinely approved developer tax incentives that have more impact on school budgets than on the city’s own revenue.

But the St. Louis School Board’s recent decision to shutter as many as nine city schools amid continued drops in enrollment has reinvigorated an old debate on the use of developer property tax breaks. That discussion could lead to a more active role for the school district on city decisions that would affect its revenue.

Aldermen have spent hours in recent meetings debating what are normally routine bills granting property tax abatements, which freeze tax collections for years before developments yield much new revenue for the school district. A new group, Solidarity with SLPS, has emerged, advocating for a halt to new charter schools and more scrutiny of development incentives.

In its resolution last month on the school closure plan, the St. Louis School Board called for a review of the city’s use of development incentives along with a moratorium on new charter schools. Last year, $35 million in property tax revenue that would have gone to schools was not collected because of city-approved tax breaks for developers, according to the district’s annual financial report. About 60% of property taxes in the city go to public education.

Some aldermen are calling for the next mayor to appoint school representatives to the city’s Land Clearance for Redevelopment Authority board, which vets tax abatements. Schools already have two members on the city’s tax increment financing commission, which considers TIF requests.

“I do see this as a real turning point as far as the role that the school district and the School Board play,” board president Dorothy Rohde-Collins said about the incentive debate. “I’m hopeful that the next mayor of the city of St. Louis will take an active role in the school district. I think that’s been missing for a very long time.”

Indeed, the issue has found its way into the current mayoral race. Two candidates in the upcoming primary election, Alderman Cara Spencer and Treasurer Tishaura Jones, have signed the Solidarity with SLPS petition. The two candidates who haven’t signed the petition, Board of Aldermen President Lewis Reed and utility executive Andrew Jones, argued that incentives are too simple of a talking point for what ails the school district, pointing out the school district’s budget is in fine shape, with reserves of over 30% and slow but steady growth in local tax revenue.

Still, all four candidates agree that it’s important to continue improving the city’s scrutiny of developers’ requests, dialing back approval in areas that would attract development without incentives, while keeping them available to encourage redevelopment in the city’s poorest neighborhoods. And they say incentives are only one of the issues facing the school district, which also has to contend with charter schools siphoning away state aid and a drop in support from the state funding formula.

Rohde-Collins acknowledged that the school district’s budget is far healthier than it was a decade ago. But she said the impact of uncollected property taxes awarded to developers is one thing the city can control locally. And she said it still affects the resources the district can provide to students and teachers when public schools are competing with charters and private schools for students.

‘We aren’t taking money away’

Otis Williams, head of the St. Louis Development Corp., the city’s economic development arm, pushed back on the notion that the incentives his office vets deplete school resources. Tax abatements and tax increment financing, or TIF, freeze property taxes at current levels for a number of years. It’s the taxes on the property’s increased value, generated by redevelopment or new construction, that are abated. Abatement periods can stretch for as long as 20 years.

“We aren’t taking money away from taxing districts,” Williams said.

He noted that his office has instituted a new evaluation system in the last five years, hiring analysts that scrutinize developer requests far more than previously was the case. Often, SLDC officials negotiate down developer incentive requests. Most tax abatements now start at 95%, down from the full abatement that had been standard. Big projects in stronger neighborhoods often receive less.

“The only way that what people are saying is true is if a project would happen without incentives,” Williams said. “And I can tell you that the environment that we’re in the city of St. Louis, given the differences on the return on investment, all of the social issues that we deal with, you aren’t going to find this plethora of developers coming to the table to do a project without having a discussion about some assistance to make a project work.”

Rohde-Collins, though, doesn’t buy that all the developers who receive incentives needed them to make their projects feasible.

“That may be true in some places or some locations,” she said. “I don’t think that argument should go unchecked.”

There are examples of projects that finance construction even without the tax abatement developers initially told the city they needed. For instance, Lux Living’s $29 million 150-unit apartment complex on DeBaliviere Avenue broke ground despite a dispute with another developer and the city that has kept SLDC from finalizing an 80% property tax abatement. Other times, rehabs have already begun by the time aldermen approve the incentives.

Williams pointed to several projects key to the city’s future that he believes truly needed incentives to close on financing: the rehab of a shuttered Midtown factory into the City Foundry food hall and entertainment complex; the Union Station renovations adding an aquarium and Ferris wheel; and Ballpark Village’s new downtown apartment high-rise and office building.

Still, some aldermen say they need to take a harder look at incentives. That notion bumps up against the long held tradition of aldermanic courtesy, by which aldermen are supposed to vote for projects in another alderman’s ward, no matter what. Those who don’t are often retaliated against by fellow board members.

Keeping that in mind, Alderman Christine Ingrassia, D-6th Ward, last month amended one of her own abatement bills, reducing to 50% from 90% the 10-year tax abatement for a $900,000 rehab of a former auto repair shop into office space.

“It’s very symbolic, but it does demonstrate the fact that I’m committed to making sure we are much more thoughtful about the taxes that are being taken away from the school district,” she said.

The developer, Jassen Johnson, who has been chipping away at redeveloping the Midtown corridor with rehabs for years, said he understands the school debate and didn’t “want to be greedy.” But he said SLDC has come a long way with its evaluation system. “It’s not just hearsay from a developer,” Johnson said. “There’s real data behind it.”

He cautioned against dialing back incentives too quickly.

“If incentives go away,” Johnson said, “then development would come to a screeching halt.”

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