Faith in the Free Market
A June 2 article in the St. Louis Business Journal discusses a plan to revitalize a former shopping mall and office space, as well as the former Dillard’s building and Union Pacific railroad building downtown. The plan is to convert them into multiple repurposed buildings: The Laurel, Park Pacific Apartments, The St. Louis Centre, and The One City Centre.
This initially sounds great (I am definitely in favor of a better-looking city), but after factoring in the cost of $89 million from Missouri taxpayers, the plan begins to lose its luster.
Private developers are footing the majority of the bill, but the remaining government intervention into this real estate market seems ill-advised. When an investment becomes economically viable, a private entrepreneur will usually dive in with no cost to the state. Whenever the government involves itself in a market, on the other hand, either through subsidies or special taxes, it entails some amount of dead-weight loss, but by placing some trust in reducing burdensome regulation and allowing the market to work, we can eliminate some of this wasted productivity.
If politicians had a demonstrated track record of choosing investments that paid off, there could be an argument for such targeted tax credits — but no such track record exists. If no private developer finds it worthwhile to redevelop a set of properties without receiving massive tax credits, the project is probably not an efficient way to invest our tax dollars, especially at this time when fiscal discipline is so important. The government would better serve the people of Missouri by trusting the market to do its job.