Regional leaders shouldn’t have needed a another study to explain that they’ve been going about economic development the wrong way.
But now that they have one, let’s hope they put it to good use.
This month, Better Together, one of the groups studying how our divided region might be more efficiently organized, released an economic development report. It was particularly harsh toward the region’s use of tax increment financing districts.
TIF districts are generally created by municipalities to encourage development. Cities issue bonds to pay for upfront development costs, bonds backed by some of the anticipated growth of property or sales tax revenue. The idea is that new development will spawn the kind of growth that will make up for mortgaging a city’s future and robbing schools, libraries and fire districts of tax revenue.
In reality, it rarely works that way, especially in the St. Louis region.
In 2011, the East-West Gateway Council of Governments issued a detailed report examining the use of TIFs in the region and determined that mostly they moved retail growth around, from one municipality to another. Overall, little or no net regional growth has resulted from the diversion of more than $2 billion to developers over 20 years.
Worse, the East-West Gateway study showed that the use of TIFs exacerbated the region’s racial and economic divides. The rich get richer, the poor lose. Money gets diverted to areas like West County, which can support itself, as Ellisville and Chesterfield and Ballwin fight over smaller pieces of the same pie. Meanwhile, north St. Louis doesn’t get the attention it deserves, in the city or the county.
This new study, which relies heavily on the 2011 report, plows much of the same ground, but it also issues three important suggestions for changes in TIF law:
- Regionwide TIF commissions should become more powerful so that municipalities can’t grab future revenue from other taxing districts. This is clearly a form of taxation without representation that should be offensive to voters. Yet, the Missouri Legislature has blocked simple and common-sense legislation that would encourage a more regional approach.
- Missouri’s TIF laws are far more generous to developers than those in other states. Forty-nine states have TIF legislation, the study says, but only six states allow municipalities basically unfettered control over their use, as Missouri does. And of those six states, only two of them, Missouri and Colorado, allow a TIF to grab both property and sales taxes.
- Better Together’s study recommends that TIFs be limited to property taxes, not sales taxes.
We agree. The ability to grab future sales taxes has led to an emphasis on big-box retail development instead of a focus on lasting jobs that can lift a region.
These are solid recommendations that would create an opportunity for the region to work together toward regional economic development goals, regardless of whether any larger government consolidations take place.
Ultimately, Better Together’s studies are intended to move the serious conversation forward about what St. Louis looks like as a region in the next decade or two. Like many of the people working on regionalization, we ultimately want to see a region in which the city of St. Louis joins the county, or in which the two entities become one, or even in which many of the county’s 90 municipalities and other government entities tear down their dividing lines and unite as one, efficient and focused governmental unit.
In the meantime, the TIF study points the region in the right direction even if none of that ever happens. It’s time for municipalities to stop helping Peter rob Paul.