Residential TIF Versus School Districts

The St. Louis TIF Commission approved a second phase of the City Foundry TIF project by a vote of 5 to 3. The first phase of this project is nearly complete, turning an old Midtown factory into a food hall with other entertainment and retail spaces. Two of the votes against the amended second phase, which now includes an apartment structure with over 280 units instead of an office building, were from the school district representatives on the TIF commission. This really shouldn’t be a surprise, as residential TIF projects have direct negative effects on school districts.

When a TIF district is created, the property taxes allocated to the school district (and all other taxing districts in the TIF district) freeze at the pre-development amount. The developer receives any increase in property tax payments due to the increase in the property value during the life of the TIF project (up to 23 years). If the property generated $100 in property taxes before it was developed and generates $300 after it was developed, the developer gets to keep the increment of $200 for certain development costs while the school district and other taxing districts continue to only receive their portion of $100.

This aspect of TIF is always harmful for these taxing districts, but it is especially harmful for school districts when the TIF project has a residential component. With such residential projects, some families with school-aged children will likely move in, and the children will likely attend the local school district. The school district, however, won’t get additional funding. How are school districts supposed to educate additional kids without the appropriate funding?

Harmful residential TIFs have been proposed elsewhere in Missouri. In some cases, the school district raises taxes on everyone to cover the additional expenses. These potentially huge negative effects on the school district—on top of the $18 million in tax dollars, sales tax exemptions, and general display of governmental special treatment—should make us question whether the City Foundry project is actually a good thing for St. Louis’s citizens.