Post-Dispatch on Aerotropolis: “Those goods don’t actually have to be flown by plane…”
Longtime readers of the Show-Me Institute’s research into the Aerotropolis legislation have known for some time that the bill’s tax credits, as written, could be used for trade that was not international in nature. To quote from our case study (emphasis in original):
Most strikingly, owners of warehouses that use two modes of commerce – not necessarily air cargo, but perhaps road and rail transportation – could draw on the tax credits. So could owners of warehouses that are refrigerated for storage of perishable materials. Again, the Senate substitute for the Aerotropolis legislation doesn’t require those facilities to process international cargo.
The recent revelation by the St. Louis Post-Dispatch‘s Tim Logan that factories using “two separate ‘modes’ of transportation” could get Aerotropolis tax credits is, therefore, old news to SMI regulars. In a story published Monday about how a prospective car manufacturer coming to St. Louis might pay for a possible $160 million plant (“likely … a mix of private money, federal loans and, probably, state and local incentives,”) there was this tidbit (emphasis mine):
Then there’s Aerotropolis. Since it would be exporting, Emerald [Auto] may also be eligible for the tax credit program being debated by state lawmakers right now.
The legislation would offer credits, worth up to $300 million, towards the construction of warehouses and factories that house goods bound for export. Those goods don’t actually have to be flown by plane, just moved by two separate “modes” of transportation. So cars shipped to Europe may qualify.[Sharon Heaton, Emerald’s general counsel and a managing director at Wellford Energy, a D.C-based clean energy lobbying and investment firm] said she wasn’t sure yet if Emerald would seek Aerotropolis credits – should they become law. But, she said, they’re watching the debate, and said the credits represent the kind of thinking a company wants to see.
“Aerotropolis says a lot about the forward thinking of St. Louis area,” she said. “They’re really thinking about ‘what are the advantages we can provide a business to come here?'”
Logan is right that there’s a multi-modal aspect to the Aerotropolis tax credit legislation. He’s wrong that export is required to get a tax credit. The relevant text of the legislation is in 135.1513.1.(2) and says that “The owner of any qualifying gateway facility with level two air cargo activity, a qualifying assembly and manufacturing facility, or a qualifying cold-chain facility shall be entitled, during the eligibility period,” to Aerotropolis tax credits (emphasis mine). And what constitutes a “qualifying assembly and manufacturing facility”? As defined by the legislation itself in 135.1500.2.(28):
“Qualifying assembly and manufacturing facility,” a new building located within a gateway zone that is equipped for manufacturing or assembly and in which the receipt of production materials or components or the shipment of finished goods or products, or both, involves at least two modes of multimodal commerce;
Multimodal commerce is defined in 135.1500.2.(21) as “modes of commerce for the shipment of materials, components, goods, or products, including road transportation, railroad transportation, water transportation, or aircraft transportation.” (The “including” language is fun, too, because it means that a wide variety of transport methods — horse and buggy, bicycle, burro and/or foot — could qualify as multimodal modes of transport because the language doesn’t limit the number of modes that qualify.) But in any case, nowhere is there a word requiring that Emerald export a product to receive the credit.
And it’s reasonable to believe that the Emerald Auto example will not be an outlier as it pertains to the Aerotropolis legislation once implemented. We’ve noted the dubious beef export theme many times — and over the weekend the Columbia Missourian confirmed that “U.S. beef still banned” — but that aspect of the debate obscures the fact that the Aerotropolis legislation’s language could send millions of dollars to projects completely unrelated to international trade and even completely unrelated to the airport itself.
If Emerald Auto could snatch Aerotropolis tax credits without flying or even exporting their products, who else could? And why on earth would taxpayers need to subsidize it?
Update: After an e-mail from the Show-Me Institute noting exports aren’t required for the tax credit, the Post-Dispatch has edited its article. The key paragraph now reads (emphasis mine):
The legislation would offer credits, worth up to $300 million, towards the construction of warehouses and factories that house goods being shipped through St. Louis. Those goods don’t actually have to be flown by plane, just moved by two separate “modes” of transportation. So cars shipped to Europe may qualify – in fact the bill doesn’t specify that they must go overseas. The program also includes breaks on state and local income taxes.