A version of the following commentary appeared in the Mound City Messenger.

A bad idea doesn’t get better with age. Bad ideas aren’t wine, jeans, or your high school memories. The tax subsidies for the Post-Dispatch building redevelopment in downtown St. Louis were a bad idea back in 2019 when the development was proposed, and they are a bad idea now.

Using tax subsidies for economic development rarely benefits the public. Instead, it lowers the risk and increases the returns for private investors. Under a capitalist system, the relationship between risk and reward for investors can be a wonderful thing, but in recent decades the government has somehow decided the public should get involved in private business dealings through tax subsidies and incentives. Taxpayers in St. Louis were left holding the bag for the failed St. Louis Marketplace tax increment financing (TIF) plan, the tax subsidy package for the Renaissance Hotel that was literally sold on the courthouse steps, and numerous other failed, subsidized enterprises. Most economic development schemes are like an expensive game of musical chairs in which the taxpayer is always the one with nowhere to sit.

The tax subsidy package for the old Post-Dispatch building at 900 N. Tucker on the northern edge of downtown St. Louis was approved by the Board of Aldermen in 2019. It primarily consisted of a $12 million TIF package. The summary included with the legislation featured the normal jargon required for such bills, and it included a statement that the development “will have approximately 1,250 jobs with an average salary of $76,500.”

How has that jobs promise worked out? Well, OK at first. The most recent annual TIF report (2024) filed by the developers with the state auditor repeated the same number of 1,250 estimated jobs created. It also listed 830 jobs created so far. There are two ways to look at that number, and both are accurate. The first is that, once again, developers exaggerated their job creation in order to get the subsidies they wanted. That often happens, and it may have happened here. The second is that getting to two-thirds of the promised jobs is actually better than many other subsidized developments, and maybe the developers deserve some credit. Not enough credit to justify all the subsidies in the first place, but, you know, some.

Except that recent actions indicate that the development is highly unlikely to ever get to 1,250, and it may quickly move in the other direction. The largest tenant in the redevelopment at 900 N. Tucker is Block, formerly known as Square. As you may have read, Block recently announced that it was laying off 4,000 people companywide, almost half of its total workforce. How many of those layoffs will be in St. Louis in unknown at this time, but the company previously announced much smaller layoffs in Missouri in both 2024 and 2025, so it seems unlikely that its St. Louis office will be unscathed.

I am not judging the company about the layoffs. If artificial intelligence is making some employees obsolete (the company’s stated reason for the move) then those people should be let go so they can do something else with their lives. That’s the creative destruction of capitalism. But this situation is a perfect example of why cities and counties should not give subsidies to private companies based on promises of employment, growth, renewal, or whatever the vibe of the moment is.

Numerous economic studies have disproved the belief that tax subsidies lead to economic growth. If tax subsidies worked, the City of St. Louis would already be awash in riches. Tax incentives have been piled on top of tax subsidies under every acronym under the sun for decades. None of it has worked. The city should focus on keeping tax rates level and low for everyone, not high for most and low (because of special exemptions) for the politically connected. A reliance on subsidies rewards cronyism, over-promising, and political grandstanding, but it doesn’t lead to real economic success. Just ask the Block employees who may be laid off soon.

The post Tax Subsidies Are a Mistake We Can’t Seem to Learn From appeared first on Show-Me Institute.

St. Louis County wants to follow the example of the City of St. Louis and create a land bank. This land bank will allow the county to become more aggressive about acquiring and selling property, primarily through tax auctions. If the examples in St. Louis and Kansas City are any indication, the land bank will fail in its goal of getting property back to the private sector. Creating a land bank will, however, increase opportunities for corruption and hold property off-market as a favor to politically influential developers. In case you have forgotten, here is the story on land bank corruption:

[Former Alderman] Boyd admitted accepting a total of $9,500 from Doe for his help convincing the city’s Land Reutilization Authority to accept a lower bid from Doe for a commercial property on Geraldine Avenue in Boyd’s ward. The LRA ultimately accepted Doe’s $14,000 bid. The LRA initially listed the property as worth $50,000. Boyd then worked to get a property tax abatement for Doe.

Inexplicably, the state authorized land bank expansion last year. St. Louis County is moving ahead with it. This is really the worst move the county could make and it isn’t going to end well for St. Louis County.

On the other side of the state, when St. Joseph created its land bank several years ago, the authorizing legislation included elements to help protect against corruption. It prevented people who might have a conflict of interest, such as anyone affiliated with St. Joseph city government, the land bank itself, or relatives of land bank staff or St. Joseph city government, from buying land from the land bank. Keep in mind that family members of the Jackson County Executive were able to purchase and flip land bank properties in Kansas City under questionable circumstances, to say the least. From the Kansas City Star:

No houses were built, and the company formed by Frank White’s stepsons Joseph, Darrel and Jordan Hurtt more than doubled its initial $3,700 investment by selling just four lots to a woman who lived near the properties on Montgall.

Now that it’s been several years since the St. Joe land bank was created and it has accomplished nothing, there is a bill in the legislature to remove those protections against corruption. It’s astonishing. What is the thought process here? Do St. Joseph city officials want to flip a few empty houses so badly that allowing those with inside information to profit is suddenly alright in St. Joseph? When something isn’t working under honest means, the answer is not to try it with dishonest means.  I hereby award House Bill 717 the title of the worst bill in Jefferson City this year.

The post An Update on Land Banks in Missouri: From Bad to Worse appeared first on Show-Me Institute.

This stonewalling is troubling. Transparency is fundamental to good governance. As residents, we deserve to know where and how our tax dollars are spent, particularly when public funds benefit the relatives of city officials. The city’s response—offering vague explanations while withholding records—only deepens the suspicion that something is being hidden.

It’s not enough to claim there are checks and balances in place. History shows that, without public oversight, those checks can be woefully inadequate. City leaders should be proactive in clearing up any appearance of impropriety. If the grants are above board, there should be no issue with releasing detailed information.

This issue echoes the broader problem of cronyism in public spending. Whether it’s sweetheart deals to developers or insider grant allocations, we’ve seen too many instances of public resources being funneled to those with the right connections. These practices erode trust and damage the city’s credibility.

Public officials must recognize that transparency is not optional—it’s a duty.

The post STL Should Come Clean About Leadership Conflicts appeared first on Show-Me Institute.

But rounding out the card is the important issue of Certificate of Need (CON). CON laws allow governments to prevent medical facilities from opening, expanding or providing certain services should a given activity fall under the oversight of the CON law. Want to open a new hospital or senior center? Considering a new investment in an existing facility? Unfortunately, the state of Missouri might just have the power to stop you.

In the next month or so we’ll release a paper that provides greater detail about what CON laws affect, here and around the country, but the argument against such laws can be summarized succinctly:

CON laws subvert the marketplace, replacing consumer health care decisions with those of bureaucrats—whose interests are not always aligned with consumers.

In an environment where health care prices continue to rise, it is bizarre that Missouri would maintain a system that places upward pressure on costs. Missourians need greater supplies of, and greater options for, medical goods and services; CON laws are an enormous barrier to that objective.

Currently there’s a minor constellation of CON repeal bills that have been introduced in the legislature, and it remains to be seen which one will break through and get the most attention. There are also a few bills that would “reform” the CON system, which simply constitute a reshuffling of the law. To put it plainly, you can repaint a car that’s a piece of junk, but under that paint job, it’s still a piece of junk. And that’s what CON laws are: junk. They hurt patients, benefit incumbent providers and disadvantage new market entrants.

Given this story about a recent hearing on CON repeal, it seems pretty clear that the providers benefiting from the current system would prefer the illusion of reform rather than the real thing. That’s understandable—they get an advantage under CON, albeit to the detriment of consumers. But allowing that to continue is wrong for Missouri and for Missourians. Keep it simple: repeal CON. Anything short of that is just window dressing.

The post End the Cronyism: Repeal Certificate of Need in Missouri appeared first on Show-Me Institute.

As someone who ran his own business for many years, I am aware of the difference between cost and price, even if it is something that eludes many political leaders and more than a few businesspeople with their noses in the public trough.

Cost is the expense that a business incurs in making a product or performing a service. Price is the amount of money that a customer pays for the product or service. The difference between the two is the business’s profit or loss. In a competitive marketplace, profitability is the acid test that separates winners from losers.

In an article that appeared in the St. Louis Post-Dispatch on Dec. 24, Missouri Gov. Jay Nixon spoke in favor of awarding $120 million in subsidies to a group of wealthy businessmen who want to build a brand-new stadium and bring a Major League Soccer (MLS) franchise to downtown Saint Louis.

“It’s the price of doing business,” Nixon said, adding: “Folks may want to anguish a little bit” over the ladling out of such a large sum of public money to underwrite a private venture but not to worry — because, “quite frankly,” this is a necessary and “cost-effective” way of putting a new business (the MLS franchise) on its feet.

The suggestion here is that the city of St. Louis and the state of Missouri must be willing to part with $120 million — that being the price demanded by the group of businessmen (with the enthusiastic support of MLS Commissioner Don Garber) — in order to have a good chance of landing the soccer franchise.

But wait a minute.

If this was such a great business opportunity, why were these self-described businessmen and the MLS panhandling for public support? Why didn’t they think they could cover their costs — including the cost of building the stadium — through the sale of tickets, merchandise, and TV rights? And if they can’t cover their costs through their sales and still make a decent profit, why should anyone think that what they are trying to do is anything other than a foolhardy venture?

Running a business isn’t supposed to be easy. If misguided or self-interested political figures try to make it so (through public subsidies to private ventures), they inevitably divert scarce resources to less productive uses.

They make it possible for those without a solid business plan, and without any real appetite for innovation or risk, to enjoy an undeserved moment in the sun — at taxpayer expense.

At the same time, they encourage others to eschew enterprise for the seemingly easy but dead-end path of cronyism.

In short, they only poison the well that produces prosperity under the free market system.

What our outgoing governor called “the price of doing business” has nothing to do with business in any serious sense. Incoming Gov. Eric Greitens called it by its proper name.

It is “corporate welfare” for the idle rich.

The post The ‘Price’ of Doing Business appeared first on Show-Me Institute.

Cost is the expense that a business incurs in making a product or performing a service. Price is the amount of money that a customer pays for the product or service. The difference between the two is the business’s profit or loss.

In an article that appeared in the St. Louis Post-Dispatch on Dec. 24, Missouri Gov. Jay Nixon spoke in favor of awarding $120 million in subsidies to a group of wealthy businessmen who want to build a brand-new stadium and bring a Major League Soccer (MLS) franchise to downtown Saint Louis.

“It’s the price of doing business,” Nixon said, adding: “Folks may want to anguish a little bit” over the ladling out of such a large sum of public money to underwrite a private venture, but not to worry – because, “quite frankly,” this is a necessary and “cost-effective” way of putting a new business (the MLS franchise) on its feet.

The suggestion here is that the city of Saint Louis and the state of Missouri must be willing to part with $120 million – that being the price demanded by the group of businessmen (with the enthusiastic support of MLS Commissioner Don Garber) – in order to have a good chance of landing the soccer franchise.

But wait a minute.

If this was such a great business opportunity, why were these self-described businessmen and the MLS panhandling for public support? Why didn’t they think they could cover their costs – including the cost of building the stadium – through the sale of tickets, merchandise, and TV rights?

Running a business isn’t supposed to be easy. If misguided or self-interested political figures try to make it so (through public subsidies to private ventures), they inevitably divert scarce resources to less productive uses.

They make it possible for those without a solid business plan, and without any real appetite for innovation or risk, to enjoy an undeserved moment in the sun – at taxpayer expense.

At the same time, they encourage others to eschew enterprise for the seemingly easy but dead-end path of cronyism.

In short, they only poison the well that produces prosperity under the free market system.

What our outgoing governor called “the price of doing business” has nothing to do with business in any serious sense. Incoming Gov. Eric Greitens called it by its proper name.

It is “corporate welfare” for the idle rich.

The post Fuzzy Thinking on the “Price” of Doing Business appeared first on Show-Me Institute.

But as it turns out, the company may be looking to get even more money from the big spenders in government—this time, from state and local officials.

Centene Corp. is seeking $147 million in taxpayer help for its proposed $771.8 million, multibuilding expansion project in downtown Clayton.

Under the company’s plan, described in a document submitted to the Missouri Development Finance Board, much of the taxpayer help would come from the city of Clayton, which over a period of years would provide nearly $95.6 million in property tax abatement on Centene’s huge downtown investment.

Centene also wants from Clayton nearly $3.2 million in personal property tax abatement and a $2.5 million commitment from a transportation development district.

The full proposal can be found here at the St. Louis Business Journal. In addition to the individual incentives described above, Centene is seeking an additional $35.7 million in state "Mega Works" tax credits, which lawmakers created three years ago by consolidating several existing (and failed) tax credit programs. At least $10 million in BUILD bonds have already been approved for the project, and if the region's track record of incentive profligacy is any indicator, the remaining tax incentives will probably to be approved without much delay.

Centene's subsidy demands may be "business as usual" in Missouri's broken tax-incentive universe. Yet, that Centene's business model is already highly reliant on extravagant public spending puts the company's latest tax incentive plan into a whole new class of corporate welfare and cronyism.

The post Regarding Centene’s Outrageous Corporate Welfare Demands appeared first on Show-Me Institute.

But I was more disappointed that in his quest for an interesting headline, Yael again shuttled past a decade's worth of Show-Me research on the earnings tax. Rather than simply Google "Show Me Institute replace earnings tax," Yael chose to bowlderize a recent Show-Me blog post and ignore a host of detailed Show-Me reports published since the mid-2000s, showing how the earnings tax is destructive to growth and how it can be replaced. The newspaper didn't need a Woodward or Bernstein on staff to discover the research: just a passing familiarity with the Internet and glancing engagement with the earnings tax issue.

The research is there. It's been there for a long time.

Yet the argument against an earnings tax doesn't just spring forth from some economics lesson. That the Star doesn't find a city taxing the paychecks of the poor and subsidizing the rich a "compelling" reason to phase out the tax is its own commentary on the present state of the paper. I can accept that the Star has an entrenched and dire interest in maintaining the current taxing system, which at least explains the content and tenor of so many of the Star's editorials these days.

But I don't have to accept the self-serving cronyism that the Star would have us all perpetuate by keeping the earnings tax gravy train running. Neither does anyone else.

Kansas Citians deserve a serious discussion about the negative impact—on families, on businesses, and in the aggregate—of funding city government through an earnings tax. Fortunately for the city's taxpayers, the Star won't be mediating that debate. Not this time. Not anymore.

The post Kansas City Star Defends Corporate Welfare, Again appeared first on Show-Me Institute.

This month, the St. Louis City Board of Aldermen is considering legislation that would rig the construction contract bidding process in favor of union contractors. And it looks like a political move to scratch the back of an important constituency at the expense of the smaller minority contractors shut out by this type of legislation.

Does any of this sound familiar? It should. In 2012, the St. Louis County Council enacted similar regulations. Just as that law was a shameful example of special-interest pandering in the county, this legislation appears to serve the same function for city politicians who rely on trade and construction unions to stay in power. According to a story in the St. Louis American, Alderman Joe Vaccaro, who introduced this bill, freely admitted that the labor unions came to him with this bill and asked him to introduce it.

Of course, the bill does not specifically say that it would limit bids and contracts to “union-only” contractors. That would be illegal. Instead, it mandates a requirement that will legally accomplish the same goal. The new ordinance requires bidders on contracts of $25,000 or more to offer apprentice-training programs that are generally found in union shops. For all practical purposes, the only way a contractor or company can offer this type of program—and be allowed to participate in city construction contract bids—is to become a union shop. It would be an extreme burden for the typical independent non-union company to participate in the apprentice program. Whatever that burden may be, the city has no business mandating it.

Minority contractors, who want nothing more than an equal playing field in which to compete, say that restricting non-union contractors from bidding on construction projects will prevent minority-owned contractors from winning contracts. The county bill ended up keeping African-American independent contractors out of county construction worksites. Government should not be in the business of picking winners and losers. And government favoritism that has a disproportionately negative impact on minority businesses and independent contractors is simply indefensible.

Moreover, if the city adopts this legislation and non-union shops no longer participate in the bid process, taxpayers will take a hit. Limiting the number of potential bidders can only have one effect: raising overall prices. Researchers at the Beacon Hill Institute found that Project-Labor Agreements (PLAs), another method of union-favored project bidding, raised costs to taxpayers by 27 percent over non-PLA projects (which included many non-union bidders). This new law for Saint Louis City likely would have a similar result.

Law should facilitate open access, such that access to public institutions is not contingent on personal relationships and political connections. Law should be structured to apply to everyone equally. By favoring unionized contractors over non-unionized contractors, this bill reeks of cronyism. This is one bad idea I hope will not come back again, but as Yogi said, “It ain’t over ’til it’s over.”

John Wright is a policy researcher at the Show-Me Institute.

The post Playing Favorites on the Board of Aldermen? appeared first on Show-Me Institute.

I didn’t catch why my DJ was upset with the Board of Aldermen, but one reason Saint Louisans are upset with the board right now is their decision to consider a bill that purportedly limits minority businesses from bidding on county government contracts.

The bill mimics regrettable legislation passed by the county in 2012 that requires bidders on construction contracts of $25,000 or more to maintain their own Department of Labor-approved apprentice program. The catch is that union contractors are often the only bidders who can meet this requirement.

When the county council adopted its bill in 2012, my colleague David Stokes wrote,

While some non-union companies do participate in apprentice programs through industry organizations, union-affiliated companies still have a decided advantage in meeting the requirements of this new bill. This is a blatant ploy to guarantee that union companies will win all county bids. . . .

Using the council’s authority to prevent non-union contractors from even attempting to participate in county projects is an egregious misuse of power. It is bad enough that this will increase costs to taxpayers, but the use of government for political favoritism is simply indefensible and immoral.

Just as it was two years ago, this type of legislation still appears to be a naked attempt by elected officials to please a powerful special interest.

Law should facilitate open access, such that access to public institutions is not contingent on personal relationships and political connections. Law should be structured to apply to everyone equally. By favoring unionized contractors over non-unionized contractors, this bill fails in providing a neutral rule. It reeks of cronyism, and it is the sort of thing Saint Louisans are right to be upset about.

The post Union Cronyism and the Board of Aldermen appeared first on Show-Me Institute.

Missouri is not a “low-tax state” yet, but today’s vote is a welcome opening salvo to get us there.

The post We Have A Tax Cut: Missouri Legislature Overrides Governor’s Veto appeared first on Show-Me Institute.

Governore [sic] Nixon is calling the legislature into special session, beginning at 4 o-clock Monday afternoon. He wants it to enact legislation that will let Missouri bid for Boeing’s new airliner factory.

Missouri is competing to be the site where Boeing will build its new 777x airliner.

Nixon says in his call that “building this next-generation commercial aircraft in Missouri would create thousands of jobs…and secure our position as a hub for advanced aerospace manufacturing.”

He’s asking for incentives legislation adding up to $150 million a year for large-scale aerospace projects under four state economic development programs.

This is the definition of cronyism. If we’re going to basically wipe out taxes for a single business, here’s a better idea: Instead of giving out massive special tax breaks to one company or project, how about we stop taxing the income of all businesses? And don’t stop there: eliminate the individual income tax and stop sponsoring special tax cuts like this one for just a handful of companies and well-connected individuals.

Will Boeing be picking up the per diems we have to pay the legislators during the special session and all the associated costs for their tax cut package? Asking rhetorically.

The post Outrageous: After Denying You Tax Cuts, State Officials Return Monday To Give Boeing One Instead appeared first on Show-Me Institute.

That extraordinary liability provides the state with a great opportunity — to pursue deep, substantive, and pro-growth tax cuts while mitigating their budgetary impact. I trust Missourians to invest their money more than the state to invest it on their behalf. Unfortunately, some in the Missouri House of Representatives appear to disagree (emphasis mine):

A Missouri House committee has approved a tax-credit reduction plan, but it stops short of the significant cuts passed by the Senate.

The legislation endorsed Thursday by a House panel would impose a $135 million annual cap on tax credits for historic renovation projects. That could essentially allow the program to continue as is, since it issued a total of $134 million of tax credits last year.

A Senate bill passed last week would impose a $50 million annual cap on historic tax credits.

The Historic Preservation Tax Credit (HPTC) returns 23 cents for every dollar the state plows into it. This, like so many other “development” tax credits, is a special interest money pit, not an investment. It is an affront to good governance that the House would impose a “reform” that fails to reform anything. That the House appears prepared to continue this destructive status quo by also creating new tax credits and maintaining others is beyond disappointing.

Missouri needs tax reform. It needs it now. Tax credits are central to that conversation, but it seems the House may want to talk about something else. That is very, very unfortunate.

The post The Emerging, Awful Response Of The Missouri House To The Tax Credit Crisis appeared first on Show-Me Institute.

The Saint Louis County Council passed, and County Executive Charlie Dooley signed, a bill that will prohibit non-union construction contractors from participating in all but the smallest county projects. Two members of the council’s Democrat majority who voted for the bill, Chairman Mike O’Mara and Patrick Dolan, are affiliated with unions that will directly benefit from this rank favoritism. At a minimum (here, the barest of minimums), they should have recused themselves from the vote.

The new law lays down several new requirements on county construction bidders. Of course, it does not specifically say the bids and contracts are “union-only” because that would be illegal. Instead, it mandates a requirement that will legally accomplish the same goal. The new ordinance requires that bidders offer apprentice-training programs that are generally found in union shops. For all practical purposes, the only way a contractor or company can offer this type of program — and be allowed to participate in county bids — is to become a union shop. It would be an extreme burden for the typical independent, non-union company to participate in the apprentice program. Whatever that burden may be, the county council has no business mandating it.

While some non-union companies do participate in apprentice programs through industry organizations, union-affiliated companies still have a decided advantage in meeting the requirements of this new bill. This is a blatant ploy to guarantee that union companies will win all county bids.

The non-union shops will now not win any bids, and likely will not participate in the bid process either. This will hurt taxpayers. Limiting the number of potential bidders can only have one effect: raising overall prices. Researchers at the Beacon Hill Institute found that Project-Labor Agreements (PLAs), another method of union-favoring project bidding, raised costs to taxpayers by 27 percent over non-PLA projects (which included many non-union bidders). This new law for Saint Louis County will likely have a similar result.

Using the council’s authority to prevent non-union contractors from even attempting to participate in county projects is an egregious misuse of power. It is bad enough that this will increase costs to taxpayers, but the use of government for political favoritism is simply indefensible and immoral.

State government need not allow this. Local governments are creatures of states, and the residents of Saint Louis County deserve for the state to correct this legislation. State government should quickly address this practice and prohibit local governments from favoring unions in the bidding process. (To be clear, local governments should not be allowed to discriminate against unions and union contractors, either.) We have a system of checks and balances to address exactly this type of unbalanced legislation. Unfortunately, the first option — a county executive veto — failed. Higher levels of government or the circuit courts need to correct this unseemly example of crony government.

David Stokes is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Shame on Saint Louis County Council for Union Cronyism appeared first on Show-Me Institute.

Legislators are considering moving forward with the so-called “Aerotropolis” legislation, a bill that would create $360 million in tax credits. Of that total, $300 million would go toward subsidizing warehouses, and $60 million would go toward subsidizing cargo flights from Saint Louis to international destinations. The bill’s proponents promise that these tax incentives will increase air cargo traffic to the region and boost the state and local economy.

Policy analysts at the Show-Me Institute have researched this proposal extensively. Based on a thorough review of the legislation, we believe that the proposal is a raw deal for Missouri taxpayers, and that certain provisions are indistinguishable from the cronyism often seen at the federal level.

Furthermore, the use of tax credits to encourage economic development has a poor track record, both in Missouri and nationwide. Our case study detailing the most serious problems with the bill, and with tax credits in general, is available online. We encourage all who are interested in good government to read that paper.

Without endorsing the use of any tax credits in this case, changes to the legislation might mitigate the harmful effects on the state economy and taxpayers. Below are revisions that we believe should be considered if the legislation moves forward despite a lack of substantive empirical support.

Allow all new warehouse owners to compete for the tax credits
All arbitrary limits on Aerotropolis eligibility should be removed.

The Aerotropolis tax credits would subsidize warehouse construction, as well as cargo flights from Saint Louis to international destinations. Up to $300 million in tax credits — more than 80 percent of the bill’s tax breaks — would be made available for the construction of new warehouses around the airport. Those tax credits could be used to pay up to 30 percent of a warehouse owner’s demolition, construction, and equipment costs.

The bill requires that warehouses qualifying for those incentives must be built on 100 contiguous acres of land or in specially designated areas. There does not seem to be any practical reason for the “100 acre” requirement contained within the Aerotropolis tax credit bill. The requirement seems to serve only to restrict who could draw upon such tax credits, narrowing the field to a small pool of large-scale developers.

This restriction should be removed. If the state is determined to subsidize warehouse construction — without any substantive empirical evidence that such subsidy would lead to increased economic growth and international trade — such subsidies should at least be made available as broadly as possible.

Accountability measures
Include clawback provisions and reporting requirements in the legislation.

In its current form, the Aerotropolis legislation does not include any sort of clawback provisions or reporting requirements. Accountability provisions should be added. If claims of job creation and investment are used to sell the creation of $360 million in state tax credits, then those credits should be evaluated objectively on the merits of job creation and investment.

In 2010, Gov. Jay Nixon tasked the Missouri Tax Credit Review Commission with reviewing the state’s tax credit programs. The commission recommended that:

…strict statutory clawbacks to be enforced by the State in cases of non-compliance with program requirements be included in all tax credit programs currently lacking such provisions.

And that:

…all applicants for state incentives be required to enter into a contract with the agency administering the tax credit specifying standards of performance, program requirements, and penalties in the issue event of non-compliance.

The commission’s recommendations are sensible, and should be extended to all prospective tax credit programs, including the Aerotropolis legislation.

As written, the legislation requires that new warehouses be built, and little else. If the state subsidizes warehouse construction, but there is no increase in demand for warehouse space, the state will be either subsidizing the construction of vacant warehouses, or helping owners of new warehouses drive owners of older warehouses out of business. Either case is not a desirable outcome for the state or for the area economy.

If legislators move forward with the Aerotropolis bill, a provision that would require an objective evaluation of the tax credit program — that is neither conducted by nor commissioned by an organization receiving any benefit from the Aerotropolis legislation — should be added.

Such an evaluation could be made three years after the inception of the tax credit program. It could include a comparison of the level of international cargo processed at area warehouses, employment numbers at area warehouses, and area warehouse vacancy rates before and after the creation of the tax credit program. If that objective review finds that the Aerotropolis program has not delivered on its promises, then the state should cease authorizing tax credits under the legislation.

In line with the Tax Credit Review Commission’s recommendations, the Aerotropolis legislation should also include clawback provisions. If warehouse owners receive Aerotropolis tax credits, and are found not to be in compliance with its requirements, or are not processing any level of international cargo, then the state should have a mechanism to recover the tax credits awarded to such noncompliant owners.

Furthermore, the Show-Me Institute has highlighted the fact that, despite proponents’ statements to the contrary, the Aerotropolis legislation would allow tax credits to be issued to owners of warehouses that do not process any international cargo. Since the primary argument for the Aerotropolis tax credits is that the incentives would promote international trade, the definitions within the Aerotropolis bill should be revised so that only warehouses processing international cargo may receive the credits.

Grants of Extensive Political Power (135.1503)
Remove the provision that would grant power to the mayor and county executives to determine who could receive the warehouse tax credits.

The Aerotropolis bill gives the authority to the mayor of Saint Louis or the executive officers of nearby counties the power to designate “gateway zones.” While this power sounds innocuous, it has important ramifications.

Those chief executives would become gatekeepers in the distribution of millions of taxpayer dollars. The Aerotropolis legislation would create $300 million in tax credits that would subsidize warehouse construction. That tax credit money may be awarded only to warehouses built in gateway zones.

Even if motives are pure, the ability to pick what areas could be eligible for hundreds of millions in tax credits would be an incredible power. The legislation does not say anything about monitoring such designations. Nothing in the legislation would prevent one of these chief executives from using such power as an indirect way to acquire campaign contributions or other untoward benefits.

A simple way to stop any such potential abuse of power would be to take the city and county chief executives out of the equation. If the state — despite a lack of substantive empirical evidence that these tax credits will do any economic good — really wants to subsidize warehouse construction, then all vacant land owners should be able to compete equally for the tax credits. There is no need to give special power to city and county executives. The language creating this power should be removed.

If this delegation of power is kept in the Aerotropolis legislation, then the Mayor and county executives should be required to make their gateway designations at a public meeting, with any and all applications and correspondence to the mayor or county executives requesting such a designation treated as public information.

Restrict the ability to layer tax credits with other tax incentives
It is fiscally irresponsible for the state to heavily subsidize projects under certain programs.

It is no secret that the state heavily subsidizes some projects through a myriad of its tax incentive programs. The level of subsidy for those projects can reach absurd heights. According to an analysis of state tax credit data, Missouri’s fifth Senate District – which includes downtown Saint Louis – was the recipient of nearly $1 billion in state tax credits between 2000 and 2010. This total does not include local tax subsidies, such as property tax abatement and tax increment financing (TIF), which likely are substantial. The Aerotropolis tax credits, as proposed, could easily be layered on top of existing tax incentives already offered by the state or local government.

In fact, in an internal review of the Aerotropolis legislation, Saint Louis County identified five areas near the airport that would likely be eligible for Aerotropolis tax credits. According to the county’s analysis, those areas had already been authorized to receive or were eligible to receive almost $300 million in state and local tax incentives, including Brownfield and Enhanced Enterprise Zone tax credits, as well as tax increment financing, property tax abatement, sales tax exemption, and state tax increment financing.

Some existing Missouri tax credit programs place restrictions on the layering of tax credits. For example, the Missouri Quality Jobs tax credits explicitly prohibit recipients from also receiving Enterprise Zone or Enhanced Enterprise Zone tax credits, Business Facility Program tax credits, Rebuilding Communities tax credits, or Brownfield Jobs and Investment tax credits.

It would be prudent to add similar restrictions to the Aerotropolis tax credit legislation. Similar tax incentive programs that should not be combined with the proposed Aerotropolis program include: Distressed Areas Land Assemblage tax credits, tax increment financing, state tax increment financing, Enhanced Enterprise Zone tax credits, and Brownfield tax credits. Those tax incentive programs are designed to encourage similar activity – construction – that the Aerotropolis legislation is designed to encourage. The state should not award redundant incentives.

Final thoughts

The proposed Aerotropolis legislation is problematic, especially in light of questionable jobs claims and the expansion of power for local government executives contained within the bill. There appears to be an incredible amount of political pressure attempting to push the tax credit measures forward, despite a lack of substantive empirical study. Moreover, China, the country cited by proponents as the source for increased international cargo traffic, has not stated publicly that warehouse construction tax credits are necessary before it will consider sending more cargo flights to the Lambert Airport.

All of the above facts should give legislators pause. But, if the state legislature is prepared to go forward and pass the Aerotropolis tax credits despite those concerns, then provisions designed to protect Missouri taxpayers should be added to the bill.

The post Mitigating the Harmful Effects of the ‘Aerotropolis’ Legislation appeared first on Show-Me Institute.

The Missouri General Assembly may reconvene in special session to take up tax credit legislation that includes $360 million in taxpayer-backed incentives to develop in Saint Louis a new international trade hub, more commonly known today as “Aerotropolis.” Proponents claim that these indirect subsidies would bring increased air cargo to Lambert–St. Louis International Airport from international destinations, boosting economic development in the region.

As written, however, the plan violates sound public policy principles by sanctioning a government handout to local developers on terms that are indistinguishable from the cronyism often seen in legislation at the federal level.

Legislators should not take claims that the bill is for “economic development” or “jobs” at face value, because the economics that undergird the Aerotropolis plan fail to support such claims. The state’s representatives and senators appear to take the need for regional growth seriously, as do we at the Show-Me Institute. This plan, however, is a raw deal for Missourians.

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The post ‘Aerotropolis’: A Raw Deal for Missouri appeared first on Show-Me Institute.