Tallying the Costs of Development Subsidies

Cities across Missouri are struggling to provide basic public services. At the same time, they’re giving hundreds of millions of public tax dollars to corporations for private development projects. What’s going on here? We decided to delve into dozens of financial reports to figure out exactly how much schools, libraries, and other public districts across the state have lost because of the generous awarding of subsidies like tax-increment financing (TIF) and other tax-abatement agreements.

A new government accounting standard known as GASB 77 theoretically requires public districts to disclose how much revenue they have foregone because of tax abatements. While GASB 77 provides a starting point, in the first year of reporting under this rule lost revenue was greatly understated—mostly because of carve-outs from the reporting requirements and misunderstanding of how to implement the rule.

Nonetheless, the numbers reported by the governments themselves show that the affected districts lose out on tens of millions of dollars every year. Instead of funding education, libraries, and other services, this money ends up in the bank accounts of private developers who in most cases don’t need subsidies to finance their projects.

About half of all public school budgets comes from local property taxes—so it matters that Missouri’s school districts lost out on nearly $100 million in fiscal year 2017 alone. St. Louis Public Schools missed out on at least $10.5 million, or nearly 3 percent of its annual operating budget, while Kansas City Public Schools lost out on at least $24 million, or nearly 10 percent of its annual budget.

The effect incentives have on other smaller districts, like Ste. Genevieve County R-II School District (1,858 students in 2018), can be even more significant than the larger ones. The amount forgone in fiscal year 2017 was $7.8 million. But with only about 4,500 students in the district, that’s equal to $4,172 per student.

Libraries also took a hit. According to the reports we examined, the 20 largest library districts across the state lost out on at least $6.8 million. A significant chunk of that foregone revenue came from the St. Louis Public Library, which missed out on $1.1 million (nearly 4 percent of its annual operating budget) and the Kansas City Public Library, which missed out on $2.5 million.

These numbers give taxpayers an idea of the cost when policymakers decide to put developers’ interests ahead of basic government services. But even the statistics above fail to capture a significant amount of the total revenue lost. GASB 77 is a step in the right direction, but more transparency is needed.

During a time of teacher protests and tax hikes, these figures give taxpayers an idea of how much money has been diverted from schools and other public services. The next time local officials stump for more revenue, ask them this: What did you do with the taxes we already sent you? Unfortunately, many have been giving them away through tax incentives.