It Has Been a Great Week for Economic Development Agencies in Missouri

This has been a fun week for those of us who feel that economic development agencies in Missouri are the equivalent of Churchill’s famous description of Russia. Our local economic development agencies are a riddle wrapped in a mystery inside an enigma.

North Side Grant Project Is a Disaster

The revelations about the North St. Louis Small Business & Non-Profit Grant Program being managed by the St. Louis Development Corporation (SLDC) keep coming. The entire grant program is rife with political favoritism, but at least the places connected to politicians actually exist! It turns out some of the other recipients of the grants are not, shall we say, real entities, like this “museum” just north of the Central West End:

The museum’s website advertises a facility, historical exhibits and a passion for illustrating the history of the Mississippi River and the people who have lived on its banks. But its address leads to a brick four-family structure in a neighborhood just north of the Central West End. No one answers the door, even during advertised business hours. And the building itself is surrounded by weeds and overgrowth.

“I’ve never heard anything about that place being a museum,” said Ray Sims, a longtime neighbor of the building. “How do I get the money?”

It’s almost like word got out that the SLDC was just giving away free money and, shockingly, people started making up reasons to get free money.

Recipients of Large Tax Subsidies Under Indictment

Does the SLDC make better decisions when dealing with big-time developers instead of ordinary people? Apparently not. Last week, the heads of a major St. Louis and Kansas City development firm were indicted in St. Louis for allegedly submitting false documents regarding minority-hiring rules. While this is the first indictment of these men (everyone is, of course, innocent until proven otherwise), their questionable business practices have been well known. Yet they have consistently received massive tax subsidies for work in St. Louis and Kansas City: particularly the latter in recent years.

Five Lux Living projects in Kansas City have been approved for incentives since 2021, including a $200 million apartment/hotel at 14th and Wyandotte streets.

Is it fair of me to blame the SLDC for an act  by private citizens or companies seeking subsidies? Perhaps not, but when politicians and bureaucrats choose who gets subsidies, don’t be surprised when unpleasant actors start circling. After all, political donations and tax subsidies have a strong connection:

For instance, around the country, politicians who make these deals are more likely to receive campaign donations, and they’re more likely to be re-elected. On the flip side, companies that make political donations to relevant officials are four times more likely to enjoy subsidy deals than those that don’t, and their deals are more than 60% bigger, to boot.

Again, it’s shocking, I know . . .

Maryland Heights Uses General Taxes to Make up for Failures

It isn’t just large cities that abuse economic development policy. Suburbs do it all the time, and they don’t always do it with misplaced tax subsidies. Sometimes, cities make the mistakes all on their own.

Several years ago, Maryland Heights decided to get into the ice arena business. Not a normal ice rink for its residents, mind you; that would have been understandable. City leaders apparently wanted to act like private developers and build a massive hockey and skating complex to make money for the city. This is, usually, a big mistake for cities.

It definitely was a big mistake for Maryland Heights. The city has announced that it has again been forced to tap into general tax revenues to fund the bond payments after its predicted ice complex revenues have continued to fall short. Part of the reason revenues fell short is that both Maryland Heights and the ice complex failed to collect a sales tax for several years that was implemented to pay for the bonds. I don’t know if that is funny, sad, or both.

Cities do not have to engage in economic development schemes to succeed. Unilateral disarmament is the best option all around. Until that happens, expect stories like these to be a regular occurrence.