Saint Louis Property Taxes, Part 3: The Tax Breaks

Posted on by Joseph Miller

In my previous two posts on Saint Louis City’s real property tax base, I discussed how various government bodies and nonprofits own a significant portion of the city’s land (by area and value). In most cases, these entities pay little or no real property tax to the city, which is likely a contributing factor to the city’s reliance on other forms of taxation to run municipal government.

However, even many private businesses and residences that are not tax exempt in any legal manner  receive reduced property taxes from the city or state government. The most common of these tax breaks are tax increment financing (TIF) and tax abatements. TIF allows businesses to use the increase in taxes created by their development to help pay for that development. Tax abatement allows a city to reduce or eliminate property taxes for a development. In some cases the property owner agrees to a negotiated level of payments in lieu of taxes (PILOTs) to offset part of the property tax loss (as the Cardinals have), but this is the exception to the rule. TIFs and tax abatements are often used in tandem, as is the case with the Chase Park Plaza.

The vast majority of these selective property tax breaks were designed to encourage development in economically depressed areas; many (including most TIF) require an area to be designated as “blighted” before property there can receive a tax break. However, over time these incentives have become just another tool  city officials use to attract the businesses they want wherever they want, regardless of whether the project is in one of the poorest or wealthiest sections of the city. Blight has been so loosely defined that parcels within Saint Louis City’s most prosperous neighborhoods are regularly deemed “blighted.”

A review of the city’s parcel data shows how pervasive the use of property tax breaks has become. In total, over 9% of the city’s property either receives tax abatements or is in a TIF district (not including government buildings and non-profits that fall within TIF districts). The map below shows all abatements and TIF districts:

Much of the TIF’d area is part of Paul McKee’s Northside Regeneration project, which (whatever the merits of this TIF) does contain many economically depressed properties. However, many valuable properties also receive significant tax breaks, including the Chase Park Plaza, Cortex (which includes IKEA), Ballpark Village, the Renaissance Center, and even a Mercedes dealership on Hampton. Altogether, around 18% of the city’s total assessed value is either in a TIF district or receives tax abatement. Properties in the these areas often pay much less in real property taxes than the city’s official rates would require.

Look for my next post on this issue, which will show the combined effects of government ownership, nonprofits, and tax breaks on Saint Louis City’s real property tax base. 

Income and Money Flee Missouri

Posted on by Rik W. Hafer

Earlier this year, Michael Rathbone and I published an essay examining migration trends for Missouri. We reported that over the past few years, more of Missouri’s income and residents have moved out of the state than have moved in.

The Statistics of Income Division (SOI) of the Internal Revenue Service publishes data that allow researchers to track migration patterns between states and Washington, D.C. The data just released by the IRS indicate that for the tax year 2012–2013, Missouri continued to lose income and residents to other states.

Missouri experienced a net outflow of adjusted gross income (AGI) based on individual tax forms filed. On net, over $61 million in income left the state in 2012–2013.Which states where the major recipients of our income? The left-hand panel of the table below provides the answer. (A complete ranking using all 50 states can be downloaded from the IRS website.)

Kansas, ninth on the list of where Missouri residents have (on net) relocated, is the number one destination state to which Missouri income fled. In 2012–2013, over $165 million in AGI found a new home in Kansas. Is it possible that tax cuts in Kansas had a bigger initial effect than many thought? This question is a clearly a worthy subject for future research.

Missouri also experienced a net outflow of total exemptions (i.e., tax filers and dependents) to other states in 2012–2013.Where did these 3,232 individuals go? The right-hand panel of the table below shows the top five destination states. (Again, a complete ranking using all 50 states is available at the IRS website.) Of the states to which Missouri has lost net population, Texas and Florida (both zero income tax states) are the top destination states, just as they were in 2010–2011.

 

Top 5 Destination Sites, Tax Year 2012–2013

Net Inflow*

Adjusted Gross Income
(thousands of dollars)

Total Exemptions

Kansas

–165,240

Texas

–2,742

Texas

–64,006

Florida

–1,773

Colorado

–52,473

Colorado

–901

Arizona

–20,683

Oklahoma

–654

Washington

–20,495

Arizona

–514

 

Saint Louis Property Taxes, Part 2: The Nonprofits

Posted on by Joseph Miller

        In my first post on property taxes in Saint Louis City, I discussed how the city’s property tax collections are limited, necessitating a reliance on other forms of taxation to run government. That post also detailed how various government bodies own much of the city’s land (by area and by value), reducing the real property tax base.

                However, government bodies are not the only institutions that pay little or no real property tax in the city. Nonprofit groups such as hospitals, schools, and religious institutions are exempt from property taxation by state law. In Saint Louis City, nonprofit groups own almost 15% of the city’s total property and account for more than 7% of the city’s total land valuation, as the map below shows:

The largest parcels owned by nonprofits are cemeteries. However, some of the most valuable nonprofit properties are in the center of the city, where Washington University, BJC Healthcare, and Saint Louis University have campuses. These hospitals and schools (or eds and meds) are some of the largest employers in Saint Louis and have combined property assessments of over $150 million (3.3% of the city’s total). Aside from well-known hospitals and schools, Saint Louis City is also dotted with thousands of nonprofit (and partially government) organizations that are exempt from property taxes. These include arts foundations, museums, clinics, business associations, and even Amtrak. Altogether, property-owning nonprofits, both large and small, remove a sizable and valuable portion of the city’s property tax base.

Look for my next post on this issue, which will explore the effects of tax breaks on Saint Louis City’s real property tax base. 

Note: The Show-Me Institute is also a nonprofit based in Saint Louis City. However, the Institute does not own real property, and therefore it does not receive real property tax exemptions. 

Saint Louis Property Taxes, Part 1: This Land is Their Land

Posted on by Joseph Miller

For cities across the country, property taxes make up a large—sometimes the largest—source of tax revenue. For instance, more than 90% of Portland’s revenue comes from property taxes. Many cities collect less, such as Denver, where property taxes make up only 25% of general revenue. But in Saint Louis City, property taxes are an abnormally small portion of city revenue. In fact, less than 15% of the city’s general revenue comes from property taxes. This makes the city reliant on earnings taxes, which make up more than 30% of the city’s tax revenue, despite the negative effects that the earnings tax has on the city’s growth.

                The problem with the city’s property tax collections is not the rate (around $7.5850 per $100 assessed value), but the fact that most of Saint Louis City is not actually paying the posted property tax rate. As this and future blog posts will detail, most of the city’s land area and much of the city’s properties either enjoy special property tax breaks or are exempt from property tax altogether.

                One type of entity that pays little or no property tax is government. This includes city, county, state, and federal government, but does not end there. In Saint Louis City, many properties are owned by other quasi-governmental bodies, including: the Bi-State Development Agency, the Metropolitan St. Louis Sewer District, Great River Greenways, the Land Reutilization Authority (LRA), the Saint Louis Convention and Visitors Commission (CVC), the Saint Louis Housing Authority, the St Louis Municipal Finance Corporation, and others. Altogether, government-owned properties make up almost 30% of all properties (by area) in the city, as the map below illustrates:

Large city parks are one reason governments own so much of Saint Louis City. But even if we take parks out of the equation, governments still own more than 23% of the city by land area and 12% of land by value. For instance, the city’s land bank, the LRA, owns more than 11,000 parcels of land, including the land on which Busch Stadium stands. Busch Stadium’s public connection is not an outlier. Many large entertainment venues in the city, including the Scott Trade Center and the Edward Jones Dome, are on public land. Different government organizations own housing complexes, office buildings, theatres, parking lots, and wharfs. Setting aside the question of whether or not all of this government ownership is justified, little if any property tax money can come from these parcels.

Check back for our next post on this issue, which will explore the prevalence of tax-exempt properties in Saint Louis City.  

Opt Out? Or Opt In to Other Accountability Measures

Posted on by Brittany Wagner

The release of the scores from the 2015 MAP test a few weeks ago has brought with it new discussion about standardized testing. Prior to the spring testing period, groups throughout the state and nation provided parents with information about how to “opt out” of Common Core tests. Missouri Coalition Against Common Core, for example, supplied this form.

There are currently no figures available for how many Missouri students opted out, but the Wall Street Journal reported that 20 percent of students opted out of New York state tests this year.

A recently released survey showed that despite lobbying from an eclectic group of advocacy organizations (including Tea Party Republicans, Black Lives Matter activists, and teachers’ unions), 59 percent of Americans are opposed to parents deciding whether or not their child takes a standardized test. At the same time, the 2015 Education Next poll indicated that a large number of Americans do not believe state governments do a very good job of measuring what students learn in math and reading.

So while Americans may want to know how students are doing at the state and national level, state governments may want to rethink how they hold schools accountable.

NPR Education highlighted four alternatives to standardized testing that were featured in Anya Kamenetz’s book, Why Our Schools Are Obsessed with Standardized Testing, but You Don’t Have to Be, as follows:

(1)   Sample. Instead of every student taking a test, only a small, representative group does. This alternative wouldn’t require changing anything about the testing process or the actual test itself, but it would give many kids a break from testing year after year.

(2)   Stealth assessment. Students are tested throughout the year using low-stakes evaluations such as quizzes. The data shows which skills students have mastered at a particular moment as opposed to measuring all students in all skills at the same point in the year.

(3)   Multiple measures. This is just what it sounds like. School districts are evaluated using graduation rates, discipline, demographic information, teacher created assessments, and post-graduation outcomes. 

(4)   Social and emotional skills surveys. Studies show that students can be evaluated using nonacademic measures. Some districts are using measures like hope, for example, as a way to evaluate their students’ high school and college potential. In 2014, 64 percent of Rockwood students reported feeling hopeful.

(5)   Inspections. This type of policy places an emphasis on student assessments, as well as presentations, performances, and reports. In the United Kingdom, for example, inspectors observe lessons, evaluate work, and interview students and staff members.

What should Missouri’s public school accountability system look like? Is it really necessary to test all students every year? Are there better measures than just reading and math proficiency? These are tough questions, but taking a long look at alternatives to standardized testing might provide answers.

Oops! Columbia Taxing District Likely To Be Decided by One Voter

Posted on by Patrick Ishmael

As my colleagues David Stokes, Michael Rathbone, and Joe Miller have chronicled for years, community improvement districts (CIDs)—a type of local taxing district—are both popular and problematic for policymakers in Missouri. CIDs can generally raise property assessments without much restriction, and after a CID is formed, the operations of the district often become a black box. As Michael wrote earlier this year, "The auditor’s office has consistently found deficiencies in reporting and documentation for these districts." Once a CID is in place, it can be very difficult to keep it accountable. 

But sometimes even the formation of a CID lends itself to chicanery. In Columbia, organizers of a CID planned to have only the businesses within the district's bounds vote on a proposed sales tax, so earlier this year they crafted the bounds of the CID to include only businesses—excluding nearby residents who, in many cases, would be paying the proposed tax. Why would they cut out those residents? Well, when there are no registered voters in a CID, under state law the property owners vote instead. And since the district has already started spending money, a vote in favor of the sales tax by the property owners who supported it was all the more important to keep the CID functioning.

There's just one (and I emphasize one) problem.

A mistake by representatives of the Business Loop 70 Community Improvement District means a sales tax increase the district needs to thrive will require approval by a single University of Missouri student.
 
On Feb. 28, Jen Henderson, 23, became the sole registered voter living within the community improvement district, or CID, meaning she is the only person who would vote on a half-cent sales tax increase for the district….
 
[CID Executive Director Carrie] Gartner said the CID has incurred “significant debt” the district hoped to pay down through the tax, including more than $100,000 it owes the city and for legal representation, $55,000 owed to Jack Miller of True Media and a $60,000 line of credit with Landmark Bank.
 
An official apparently even asked Henderson to "unregister" her vote so that the CID could be decided by the property owners as organizers intended, but it doesn't sound like that's happening.
 
Henderson said she doesn’t plan to give up her right to vote and feels negative about an increased sales tax—but has not made a decision about how to vote. Henderson said her concerns include vague project outlines, Gartner’s pay, Business Loop improvements she said will help businesses but not nearby residents and how an additional sales tax would affect low-income people purchasing groceries and other necessities.
 
Those are all very important questions that deserve serious consideration in all CIDs. Of course, the director of the CID has said that if they can't get their sales tax, they'll begin paying off the district's debts through special assessments on district properties instead. The reason is simple: a special levy by the CID has no voting requirement, but a CID sales tax needs voter approval. So even a "no vote" here (emphasis on the singular) or having no vote would still likely mean higher taxes being passed on to consumers in the CID, albeit in a more indirect way.
 
But whatever the case, Columbia's tax district problems are beginning to attract interest from around the country, focusing much-needed attention on CID practices that not only are largely done out of sight, but oftentimes are designed to game our political system. In this case, the CID wanted to impose a sales tax without letting the people purposefully left outside the district a chance to vote on the matter. That is difficult to justify under almost any circumstance, and points to the need for significant reform of the laws that control CIDs in Missouri. Hopefully, Columbia's comedy of errors will provide the final umph needed to make those reforms happen.

Big News: Accounting Board Beefs Up Tax Abatement Disclosure Requirements

Posted on by Patrick Ishmael

Back in April I noted that the Government Accounting Standards Board (GASB) was mulling significant changes to the way that cities and counties reported their tax incentive liabilities. For a long time, local governments have been able to sidestep the question of how much of their tax revenue is given away through local incentive programs. In order for the public to get a better sense of their governments’ financial conditions, reform was needed in the way governments reported their incentive liabilities.

Well, earlier this month GASB issued long-awaited guidance on local tax abatement reporting, and it's a doozy for abatement-happy governments. From GASB's Statement:

This Statement requires governments that enter into tax abatement agreements to disclose the following information about the agreements:

• Brief descriptive information, such as the tax being abated, the authority under which tax abatements are provided, eligibility criteria, the mechanism by which taxes are abated, provisions for recapturing abated taxes, and the types of commitments made by tax abatement recipients

• The gross dollar amount of taxes abated during the period

• Commitments made by a government, other than to abate taxes, as part of a tax abatement agreement.

The accountants out there can find greater detail about the policy change at the link above.

Also, this story from American City & County magazine has an excellent rundown of the reactions to GASB's guidance seen in the policy sphere.  Greg LeRoy of Good Jobs First, while generally supportive of the change, notes that GASB's guidance doesn't necessarily require local governments to disaggregate tax abatements by company, and I do think that's a shortcoming of the reform. The other reservation I have is that many of these reforms won't become effective until later this year, with the first round of data becoming available sometime in 2017. I hope that in the interest of being proactie and transparent, local governments in Missouri will release a version of this data well before then.

Overall, GASB's reform is a significant improvement over the status quo. Tax abatement liabilities have long been a public policy concern; it's terrific that local governments, many of which have been less than forthcoming about them, will now have to reveal those costs annually.

 

Why Labor Reform Is a Low-cost Improvement to Missouri Government

Posted on by John Wright

In Missouri, once a union becomes the “exclusive representative” for a group of public employees, that union remains in power indefinitely. Another election will not be scheduled unless employees organize against the union and successfully gather enough signatures for a decertification election. Often, employees are punished by the union—in some cases successfully sued for thousands of dollars—for attempting to have a decertification election

Some have suggested fixing this system by requiring government unions to run for re-election periodically. A regular secret-ballot election sounds like a good check on the potential abuses that can occur when a representative body isn’t held accountable to its constituents. But aren’t elections expensive?

In fact, by following the example set by Wisconsin, our state can provide regular elections for its unionized employees at a low cost to incumbent unions and at no cost to taxpayers.

I’ve pointed out before that Wisconsin has revenue-neutral elections for its unionized public employees. In Wisconsin, teachers and state workers periodically decide whether or not to keep their unions. These elections do not cost the state money because they are paid for with a small filing fee—about $1.50 per voter—paid by each government union. The state also contracts with a private company that uses telephone voting to decrease the amount charged to unions, while increasing the convenience of elections.

Lawmakers should carefully consider the costs and benefits of union elections before enacting reforms. However, Wisconsin proves that fiscal cost should not be treated as a serious obstacle to more democratic union representation. By carefully crafting the law to encourage contracting for polling services and by requiring the unions to pay for these elections, Missourians can enjoy greater union accountability without increased cost.

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