How Many Chances Does TIF Get?
There are so many problems with the City of St. Louis’s tax-increment financing (TIF) program that it would make your head spin trying to list them all. TIF is an economic development tool meant to spur investment in neglected areas by providing some monetary incentives to developers. However, St. Louis seems to be handing out TIF projects and throwing away tax dollars without a second thought. A recent audit of the city’s use of TIF found serious problems. Some of the highlights:
- The city’s TIF policy “does not clearly define the evaluation process or criteria to be used in project selection.” Without clear criteria, city officials have subjective power to pick which companies or developers receive hundreds of millions in tax incentives. This creates horrible incentives for companies and gives too much power to lawmakers.
- The city’s policy “does not include effective project cost limits or overall program cost controls.” The city’s TIF program has grown significantly over the years. Limits and cost controls would cap TIF usage, which would help assure that the approved projects have been carefully vetted and that only the best projects are selected.
- The audit also discovered that “projects were approved with flawed cost-benefit analyses, including overestimated revenue projections.” A cost–benefit analysis is supposed to be completed in the application process and helps to determine if TIF should be awarded. The audit found that of the thirteen projects analyzed, eight had cost–benefit analyses that contained serious flaws or were missing the cost–benefit analysis altogether.
In response to the audit, a city spokesman said that most suggested reforms are not required by state law. Just because something isn’t required by the state doesn’t mean it shouldn’t be done in order to instill fair practices and proper use of taxpayer funds. The problems with the TIF program have been talked about for years, and research suggests that incentive packages like these don’t work. How many chances do the city and this program get? How many times do these problems need to be pointed out before we start to see some real change?