Subsidies in St. Louis, Part 4: Accountability and Clawbacks
Supporters and opponents of tax subsidies disagree over one key question: Do the jobs and economic activity generated by a development justify the tax subsidies awarded to the developer? Answering that question requires accurate reporting of job creation/retention, so taxpayers can see what they’re getting for their money. Unfortunately, in Saint Louis that reporting is hard to obtain.
A recent study commissioned by the St. Louis Development Corporation (SLDC) found that the lack of aggregate information available from developers has made analysis of projects difficult. The study was intended to measure the impact subsidies have had on job creation, but the researchers found that no data was available regarding payroll information. The SLDC subsequently recommended additional reporting from incentive recipients.
Currently, municipalities must submit project details to the Missouri Department of Revenue every year or face losing TIF privileges, but municipalities get their information directly from developers (who self-report), and often reports are incomplete or inaccurate. In a few cases, such as the construction of a seven-story multi-use building on Tucker Blvd., developers have even listed their anticipated project costs at $0! (see “Nadira’s Place”).
Inaccurate reporting is also an obstacle to accountability, allowing developers to receive taxpayer dollars without being held to the promises they made regarding job creation. When projects fail, there are no consequences. Worse yet, without information about what (or how badly) things went wrong, we can’t learn from the failure and be more selective about future subsidies.
Increased accountability would not limit the use of subsidies where they may be appropriate, but it could help us make better decisions about how they should be used. The SLDC report contains several policy proposals, including the use of “claw back” provisions that would require developers to pay back money they received as incentive for developments that failed to produce their promised job-creation or revitalization outcomes. Given that the story of development subsidies in Saint Louis has hardly been a tale of rousing success, area leaders would do well to take note of the SLDC report and consider its recommendations.