Subsidies in Saint Louis, Part 3: Where They’re Used
Supporters of economic development subsidies justify them on the basis that the subsidies will help boost economically depressed areas by increasing investment. The intention seems good; but in Saint Louis, incentives seem to be going to places where they aren’t needed, and they don’t seem to be going to the places that do need them.
A study commissioned by the Saint Louis Development Corporation (SLDC) looked at geographic distribution of incentive use in the city and found that roughly two-thirds of the total value of credits is concentrated in a handful of neighborhoods. This by itself may not be a problem—maybe those few areas are struggling disproportionately and need the help. But that’s not the case. To the contrary, the study showed that most incentives go toward neighborhoods that already have strong housing markets. In other words, well-off areas are receiving subsidies, while the economically depressed parts of St. Louis are ignored.
One potential cause of this inequitable distribution is the lack of rigor in the approval process for incentives. Tax increment financing (TIF) applications currently require land to be declared as “blighted,” or as “conservation” or “economic development” areas, but the legal definition of blight has become so watered-down that almost any piece of property can be declared blighted.
Additionally, the SLDC report found that some important requirements that other cities use when deciding to award tax abatement aren’t applied in Saint Louis:
As it relates to tax abatement, a significant number of the benchmarked cities require either (or both) a cost benefit analysis prior to award of the abatement and have job creation criteria as part of the decision to award. St. Louis does not require either for tax abatement. (p.3)
It seems that Saint Louis’s method of evaluating and approving tax incentives could stand some improvement, but the issues run deeper than the approval process. Part 4 of “Subsidies in Saint Louis” will discuss accountability measures regarding reporting and job creation.