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Corporate Welfare / Subsidies

Is This The Sort Of Development Missourians Expected?

By Patrick Ishmael on Feb 27, 2012

Meet Norwood Hills Country Club. In 2006, the state issued more than $1.1 million in state Historic Preservation tax credits (HPTC) to the facility.

Norwood Overview from Norwood Hills CC on Vimeo.

Norwood Hills Country Club first opened in 1922. A successful private club in north Saint Louis, it hosted the PGA Championship in 1948. In 2005, the club sought and received designation as an historic landmark in the federal government’s National Register of Historic Places. As a designated historic landmark, it was eligible for Historic Preservation tax credits from Missouri, and the state issued credits to Norwood the next year, in 2006.

norwood

Whether credits for a country club are an appropriate use of taxpayer money is a question worth considering. The Missouri Department of Economic Development administers the Historic Preservation tax credit program, so tax credits in that program are imbued with a presumption that a fundamental objective of the credit is economic growth. Indeed, entire studies have been devoted to trying to measure the HPTC’s impact in terms of jobs and growth. But does granting historic preservation credits to a private country club that markets a $1,000 entry-level membership package really promote economic growth? Is that what Missourians thought they were paying for by offering these credits?

The HPTC is often defended as a way of correcting market failures and increasing positive externalities — that is, giving an intangible boost to the standard of living of those who can see and enjoy the property. Is it likely that there was a market failure at Norwood Hills that the state had to step in and correct? And is it reasonable to believe that Missourians will really be able to enjoy the externalities promoted as a result of sending their tax dollars to a private club?

To be clear, determining whether a building is “historic” is oftentimes in the eye of the beholder. But taxpayers have ample reason to question whether the state should be granting tax credits to country clubs, not only on grounds of whether an economic development objective is really being advanced, but also whether society is really getting a “positive externality” when it subsidizes an operational private club and golf course. And certainly, sometimes buildings are properly considered “historic” by virtue of their age alone, but if the “age” of a building is enough to get an HPTC, what should be the cut-off year? 1800? 1900? 1950? 1980? The later that date gets, the more important it is that the reverse of the question is asked: how many buildings would not be considered historic under the tax credit system?

Moreover, the proximity in time between historic designation and tax credit issuance is troubling. Did Missouri issue a tax credit to preserve an historic landmark, or was an historic landmark created to access Missouri tax credits?

Lastly and more generally, what has the state foregone – what “unseen” projects and tax cuts have gone by the wayside – because the state has been putting money into projects like Norwood Hills?

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About the author

Patrick Ishmael

Director of Government Accountability

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