• Publications
    • Essay
    • Case Study
    • Policy Study
    • Report
    • Testimony
    • Other
    • Newsletter
  • Blog
    • Daily Blog
    • Podcasts and Radio
    • Video
    • Infographics
    • Commentary / Op-Eds
    • Events
  • Events
  • Donate
  • About
    • Our Team
    • Show-Me Institute Board of Directors
    • Fellows and Scholars
    • Our Authors
    • Jobs
  • Contact
  • Explore Topics
    • Education
      • Accountability
      • Education Finance
      • Performance
      • School Choice
    • Health Care
      • Free-Market Reform
      • Medicaid
    • Corporate Welfare
      • Special Taxing Districts
      • Subsidies
      • Tax Credits
    • Labor
      • Government Unions
      • Public Pensions
    • State and Local Government
      • Budget and Spending
      • Courts
      • Criminal Justice
      • Municipal Policy
      • Property Rights
      • Transparency
      • Transportation
    • Economy
      • Business Climate
      • Energy
      • Minimum Wage
      • Privatization
      • Regulation
      • Taxes
      • Welfare
      • Workforce
Show Me InstituteShow Me Institute
Show Me InstituteShow Me Institute
Support the Show-Me Institute
  • Publications
    • Essay
    • Case Study
    • Policy Study
    • Report
    • Testimony
    • Other
    • Newsletter
  • Blog
    • Daily Blog
    • Podcasts and Radio
    • Video
    • Infographics
    • Commentary / Op-Eds
    • Events
  • Events
  • Donate
  • About
    • Our Team
    • Show-Me Institute Board of Directors
    • Fellows and Scholars
    • Our Authors
    • Jobs
  • Contact
  • Explore Topics
    • Education
      • Accountability
      • Education Finance
      • Performance
      • School Choice
    • Health Care
      • Free-Market Reform
      • Medicaid
    • Corporate Welfare
      • Special Taxing Districts
      • Subsidies
      • Tax Credits
    • Labor
      • Government Unions
      • Public Pensions
    • State and Local Government
      • Budget and Spending
      • Courts
      • Criminal Justice
      • Municipal Policy
      • Property Rights
      • Transparency
      • Transportation
    • Economy
      • Business Climate
      • Energy
      • Minimum Wage
      • Privatization
      • Regulation
      • Taxes
      • Welfare
      • Workforce
Corporate Welfare / Subsidies

Are We Paying Some Developers to Develop Less?

By Patrick Ishmael on Dec 9, 2016

Last week the Post-Dispatch reported on a proposed $130 million luxury tower in the Central West End, to be named "One Hundred," that if built would be among the tallest residential buildings in the state, vaulting 36 stories and touting a modern design that will certainly stand out as residents leave nearby Forest Park. But one thing sticks out in the story about the project: it's gotten larger, thanks to fewer tax incentives.

The story begins like so many tales of tax incentives. The building's developers had been expecting taxpayer help with the project, and indeed the project appears set to receive a 15-year tax abatement—a "95 percent tax abatement for 10 years and 50 percent tax abatement for five years." As reported, that subsidy will account for about 8% of the project, translating into a tax incentive of around $10 million. That's serious money.

That abatement, however, was actually less than what the developers asked for, which led to this remarkable revelation in the St. Louis Post-Dispatch's report on the building (emphasis mine):

Mac Properties initially sought 20 years of full tax abatement, officials said. Pushback by city officials prompted the developer to increase One Hundred’s height by seven floors to accommodate about 50 more apartments and spread out the project’s cost, Roddy said.

To repeat: the project is set to receive fewer incentives than planned, and to make the project work, the developer actually increased the size of the building. 

We have often talked about the risk that's put on taxpayers when marginal development projects are underwritten by the public, but the story of the One Hundred building shows another risk we haven't talked about at length: that taxpayers could also be subsidizing the return on investment of private actors to the point that those actors settle on smaller, less risky projects. If a developer can make the same amount of money filling 250 rooms with a subsidy as 300 rooms with a smaller subsidy, a developer would do so. The former is less risky and the return is going to be about the same.

In practice, then, taxpayers may actually be paying some developers to develop less. Maybe it's time not only to emphasize the inequity of putting development risk on the public, but also to start talking about the potential of these subsidies to actively damage the state's growth potential.

  • Share
  • Tweet
  • Share
  • Email
  • Print
About the author

Patrick Ishmael

Director of Government Accountability

More about this author >
Footer Logo
Support the Show-Me-Institute
Showmeinstitute.org is brought to you by Show-Me Institute and Show-Me Opportunity.
  • Publications
  • Blog
  • Events
  • Donate
  • About
  • Contact

Reprint permission for Show-Me Institute publications and commentaries is hereby granted, provided that proper credit is given to the author. We request, but do not require, that those who reprint our material notify us of publication for our records: [email protected]

Mission Statement
Advancing liberty with responsibility by promoting market solutions for Missouri public policy.

© Copyright 2023 All Rights Reserved