Saint Louis City Property Tax, Part 5: Problems Ahead

Saint Louis City Property Tax Blog Part V: Problems Ahead

In the first four blog posts in this series, we have seen how Saint Louis City’s property tax base is significantly curtailed because much of the city’s land is owned by governments and nonprofits, which pay little or no real property tax. Many other properties also receive special real property tax breaks, like TIF and Chapter 353 abatements, further reducing the number of parcels paying the city’s full property tax rate of $7.5850 per $100 assessed value (plus a $1.64 commercial surcharge). In total, an incredible 40% of the city’s property by value either is tax exempt or receives special tax breaks. The situation is worse downtown, where virtually any recent development has received tax breaks.

This situation has put Saint Louis City in a bind. Most cities rely almost entirely on property taxes and sales taxes to run government. But in Saint Louis, the city is forced to rely on an earnings tax to make up for the weak property tax base. Many economists and even Mayor Slay agree that earnings taxes are damaging to city growth and put Saint Louis at a competitive disadvantage. The mayor promised to look for ways to reduce the city’s reliance on the earnings tax in 2011. However, since that time Saint Louis’s reliance on the earnings tax has grown.

Another effect has been the creation of an unlevel economic playing field, especially for small businesses and depressed neighborhoods. Effective property tax rates vary from neighborhood to neighborhood, from block to block, and from building to building. If a business or development is big (or is setting up where civic leaders would like it to), it is almost certainly going to get a real property tax break. If a resident or a business doesn’t meet either of these criteria, it pays the full property tax rate. The homeowner in Southwest Garden pays full property tax rates, but the condo dweller downtown doesn’t. The laundromat in the Central West End pays full property taxes, but the Chase Park Plaza doesn’t. Fairness aside, the civic leaders are using the tax code to entice certain businesses or favor certain neighborhoods, in the hopes that these municipal champions will create trickle-down development. This prevents the city from charging broadly lower tax rates, which could generate more broad growth from the bottom up.

In the end, a good portion of the city’s property tax base problems are beyond its control. Parks, courthouses, schools, and cemeteries are tax exempt by state law or practicality. But much of the problem is the result of city policy. The city’s land bank, the LRA, has long dragged its feet over selling properties to willing buyers. Other city organs inappropriately own land on which private developments stand, like Busch Stadium. And when the city hands out tax breaks to any large developer that makes the request, even when their development plan is speculative at best, the hole gets deeper. With another vote on the earnings tax coming soon, now would be good time for the city government to stop hollowing out the tax base and reverse the damage already done.