But what if that weren’t the case? What if the government only assessed the value of your land—and not any improvements you put on it?

That approach is called a land tax, or land value tax (LVT). By separating land from improvements and taxing them differently, governments can encourage property development. In downtown areas, often dotted with parking lots or undeveloped parcels, owners would be incentivized to build or to sell to someone who will.

This need not be an increased cost to owners. Taxes on improvements and land could be set at different rates (ideally zero for improvements) to ensure there is no net increase.

Show-Me writers have argued in favor of this approach for years:

• 2010: A Land Tax Is Preferable to the Earnings Tax
• 2010: Great Article About the Land Tax in the Kansas City Star
• 2012: Kansas City Should Expand, Not Remove, Land Taxes
• 2012: Kansas City Land Tax Should Be Expanded, Not Eliminated
• 2015: Land Taxes and Columbia
• 2026: It’s Time to Phase Out the Earnings Tax. Honestly, Nothing Else Has Worked . . .

The legislature in Kentucky, our neighbor to the east, is considering a bill that would, among other things, allow cities to separate property taxes into land and improvements.

In Missouri, such an effort likely would require a change to the Constitution. Currently, Article X, Section 3 states, “Taxes may be levied and collected for public purposes only, and shall be uniform upon the same class or subclass of subjects within the territorial limits of the authority levying the tax.” Later, Article X Section 4 defines real property as a single class with limited subclasses.

This could easily be changed, perhaps by inserting into Section 4, “Land and improvements upon land may be classified as separate subclasses of real property for purposes of taxation.”

Every city wants to spur development. The structure of our taxing system often serves as a disincentive to build. A land tax is a way for cities to encourage building and development without increasing taxes and without offering taxpayer subsidies. And it’s simple to understand and explain.

As Missouri and its cities look to encourage population growth and development, adopting a land value tax is a simple and straightforward way to do so.

The post Land Taxes: Will the Grass Be Greener in the Bluegrass State? appeared first on Show-Me Institute.

That result should raise alarms—but not eyebrows. Set-aside requirements like this often function less as solutions and more as stumbling blocks. Rather than spur construction, Kansas City’s policy has become something to work around. Developers have leaned on other incentive-granting agencies or opted for minimal in-lieu payments instead. Meanwhile, regulation continues to inflate costs and suppress supply. As I’ve written before, regulation can be a root cause of unaffordability.

The KCBJ analysis looked at 114 development incentive applications since 2021. None resulted in affordable units under the set-aside rule. Many projects qualified for exemptions—using low-income housing tax credits (LIHTCs), being historic rehabs, or receiving incentives from agencies outside the city’s economic development corporation (EDCKC).

Examples:

• Of six qualifying EDCKC projects since August 2022, just one plans to meet the 20% set-aside (16 of 78 units at 60% MFI).
• Larger developments often went through the Port Authority of Kansas City (Port KC) or other entities, thereby sidestepping the requirement entirely.

The result is a policy with good intentions but poor results—and plenty of incentive for developers to seek workarounds.

Two themes stand out.

First: Incentives, not mandates, are doing the real work. Port KC has become the go-to agency for developers. Since mid-2023, it’s reviewed 17 housing proposals totaling over 5,000 units and $2.6 billion in investment. Because Port KC isn’t bound by the set-aside ordinance, many developers simply pay a lower in-lieu fee and move forward. A city spokesperson even admitted that some of these workarounds were done “at the request or with the blessing of city leaders.”

Second: Regulation continues to push costs up. Developers cited permitting delays, costly energy codes, and other burdens as key barriers. As one put it, requiring reduced rent on top of high costs is a “double negative.”

This tracks with previous findings: When regulation increases costs, it restricts the market’s ability to deliver lower-priced housing. If the goal is more affordability, then cities must lower the baseline costs—not just impose mandates.

The post Shocker! Kansas City’s Affordable Housing Set-Asides Nets Zero Housing Units appeared first on Show-Me Institute.

But a recent news story gave another twist to the idea of cities as romantic partners.

The St. Louis Post-Dispatch reported that NorthPoint Development called off a $120 million apartment complex of over 300 units and will soon sell the site. Why? Because the city was constantly making additional demands. What started as a yes was becoming a maybe. NorthPoint backed out.

The Post-Dispatch quoted St. Louis Development Corp. Executive Director Otis Williams as saying, “if we just stuck to whatever we said we wanted to do,” the project would have continued.

Alderman Michael Browning alleged the city wasn’t “good-faith negotiators. With all of the unpredictable things in development, the city does not need to be the thing that constantly changes.”

Yes, the city needs to be consistent. But that does not mean the city should crank the subsidy spigot to full blast.

The story notes the number of projects receiving subsidies from the St. Louis Land Clearance for Redevelopment Authority (LCRA) has dropped since 2018. The chairman of the LCRA, Matt McBride, argued that because there are so few developers wanting to work with the city, “we need to be encouraging of those who are taking the risks to do so.” I suspect by “encourage” he means, “subsidize.” The folks who hand out subsidies always want more to hand out.

Perhaps there is another way. Perhaps, instead of overregulating the market, instead of demanding ever increasing concessions, instead of imposing costly application, permitting, and approval stages, the city just got out of the way of those who want to build in St. Louis?

City leaders should work to address barriers to development rather than leaving them in place and cutting checks to offset them. They’ve already shown a willingness to do so with liquor regulations and parking mandates.

Unfortunately, Megan Green, president of the board of aldermen, wants to further increase the city’s demands of developers regarding affordable housing and community benefits. But that will just increase the costs for developers and, in turn, increase the amount of taxpayer subsidies. “St. Louis,” she says, “has been a cheap date for way too long, and we should not be a cheap date.”

It calls to mind the bawdy punchline: ‘We’ve already established that, madam. Now we’re just haggling over the price.”

Unfortunately, taxpayers are picking up the tab for these dalliances. Instead of seeking more expensive dates, St. Louis should make itself a more attractive partner by ditching its baggage and focusing on stable, long-term relationships.

The post St. Louis Needs to Stop Dating and Settle Down appeared first on Show-Me Institute.

This is a timely reminder for Kansas City officials: if the goal is to help renters and low-income residents, the most effective solution is to build more housing—not to add new layers of regulation.

Kansas City has wrestled with housing affordability and tenant protections for years. Activists often push for stricter rules on landlords. But these approaches treat symptoms, not causes. When developers can’t build efficiently due to restrictive zoning, long permitting delays, or uncertain rules, the supply crunch only worsens.

The Journal article shows what happens when supply catches up with demand: rents stabilize, landlords compete, and renters benefit. That’s the dynamic Kansas City needs more of.

Some argue regulation is necessary to prevent abuse. That is a fair point about some regulations in some circumstances. But policymakers must also weigh how each new rule might deter investment or slow construction. A better strategy is to remove barriers that prevent new housing from being built—especially infill development (building on vacant or underutilized land), duplexes, and apartments near transit.

If Kansas City is serious about affordability, it needs to stop chasing complex fixes and start enabling more housing.

The post Want Cheaper Housing? Create More Units, Not More Rules appeared first on Show-Me Institute.

The proposal rests on shaky assumptions about the effectiveness of economic development subsidies. Tax credits and similar incentives have a long history of overpromising and underdelivering—even according to analyses from people supporting the projects!

These programs often enrich developers without producing significant long-term benefits for the communities footing the bill. Take, for example, the myriad subsidies for corporate headquarters and downtown stadiums in Kansas City. Despite their hefty price tags, these deals leave taxpayers shouldering higher costs with little to show for it in terms of jobs or economic growth. St. Louis risks again following the same path—throwing public money at developers while failing to address the underlying issues.

A major problem with subsidies like this is that they create a false sense of market demand. The St. Louis Post-Dispatch quotes one of the bill’s sponsors, Missouri Senator Steve Roberts, as saying, “The demand for more downtown residential is clear.” If that were true, private investors should already be stepping up. Developers should not need government support to pursue profitable opportunities.

Subsidy programs also suffer from a lack of transparency and accountability. Often, there are no robust safeguards to measure their success or clawback provisions when promises go unfulfilled. Without clear benchmarks and regular public reporting, these programs devolve into blank checks for developers.

St. Louis should focus on making the downtown area a desirable place to live by prioritizing public safety and basic city services. Addressing crime, for instance, would do far more to draw new residents and businesses than funneling public money into speculative real estate projects.

A smarter approach to revitalizing downtown St. Louis would let market forces lead the way. City leaders can play a supportive role by streamlining permitting processes and reducing regulatory barriers, making it easier for developers to pursue worthwhile projects. (There are some small, hopeful signs St. Louis is heeding this call.) At the same time, investments in public safety, infrastructure, and essential services would lay the groundwork for organic growth that benefits everyone—not just developers.

Yes, St. Louis needs more residents. Yes, increasing the downtown population would have all sorts of positive economic effects. But right now, too few people want to live there, and nothing will work until that changes first.

The post Downtown St. Louis Doesn’t Need Subsidies appeared first on Show-Me Institute.

It is, alas, same as it ever was. Cordish Cos. is again pushing Kansas City for more taxpayer-funded subsidies. This time, it’s for its $156 million, 24-story Four Light luxury apartment tower. And it is already laying the groundwork for a fifth (Four Light would be the fourth luxury apartment for Cordish Cos.). The catch? Cordish Cos. wants to declare part of the Power & Light District an “undeveloped industrial area” to qualify for incentives—an absurd claim for property it controls.

These developer handouts are draining the city of the resources it needs to provide basic public services. This isn’t about revitalizing a struggling neighborhood—it’s about maximizing profits for wealthy and well-connected developers at the public’s expense.

Kansas City needs to end this cycle. If Cordish believes there’s demand for Four Light, let it fund it privately. If the city thinks there is too much regulation or taxation, leaders should reduce it for everyone, not a select few.

The post K.C. Subsidies Stop Making Sense appeared first on Show-Me Institute.

Royals-loving Jackson County voters might think this is about baseball; it is not. It’s about Sherman enriching himself and his investors, leveraging our love of the Royals so he can drive up the value of the team. A recent CNN report pointed out:

Teams are now real estate plays for billionaire owners, stadiums increasingly serve as anchors for mixed-use shopping and entertainment districts, and development rights around stadiums for owners have become a key component of public financing for these projects.

Sound familiar? That same CNN story points out that the trend of moving stadiums downtown is relatively new. Prior to that, in the 1960s and ‘70s, new stadium construction moved to the suburbs—just as the Chiefs moved from Municipal Stadium to Arrowhead in 1972 at public expense. (Kansas City leaders are nothing if not suckers for developers’ slick sales pitches.)

The trend to move stadiums back downtown started in 1992, when the Baltimore Orioles opened Camden Yards. The deal struck by the Orioles owner, Peter Angelos, is a cautionary tale for Kansas City.

Neil deMause, freelance journalist and editor of the website Field of Schemes, has covered the Orioles for years. In 2019, he noted rumors of a possible Orioles move to Nashville. Orioles CEO John Angelos, son of the elderly owner, then inked a lease keeping the Orioles in place for 30 years.

Well, not exactly. According to deMause:

. . . the new lease gives Orioles owner John Angelos, or whoever buys the team from him, an out clause where he can leave early if he can’t come to an agreement with the state on a development deal for the area around Camden Yards by the end of 2027.

Maryland Governor Wes Moore extolled the agreement as protecting taxpayers, but it didn’t. In fact, the governor weakened his negotiating position because of that 2027 deadline—he either caves to Angelos on area development or risks triggering that out clause. Or, as Sherman has done in Kansas City, the owners could seek to renegotiate a subsidy package years before the lease expires.

The Angelos family recently announced they are selling the Orioles to billionaire David Rubenstein for over $1.72 billion.

Here’s the point: In 2019, when the rumors started that the team may relocate, the Orioles were valued at $1.3 billion. After renegotiating leases, additional subsidies, and an area development agreement, the team sold for over $1.72 billion. That’s a 33% increase in value driven not by playing baseball, but by negotiating deals—deals taxpayers paid for with subsidies.

Beyond the cost, deals like this allow developers to influence who sits on the other side of the negotiating table by backing sympathetic (or simply malleable) politicians. Here in Kansas City, Burns & McDonnell was one of the largest contributors to local political candidates, including Mayor Sly James, the year it applied for and received millions of dollars in taxpayer-funded subsidies. Incidentally, Sly James is now on Sherman’s stadium tax campaign payroll.

Whether you’re on the diamond or in city hall, it pays to play ball.

But nothing about this is about baseball. It’s about money and contracts.

If voters agree to the new stadium tax, elected leaders will have less leverage to strike a good deal on community benefits agreements, leases, and more. If the measure is defeated, Sherman and the county, in a stronger position, will go back to the negotiating table—hopefully cutting a better deal for taxpayers.

Sherman and his partners want to make as much money as they can, and that is fine. Voters need to be just as clear eyed about the costs and benefits of this proposal.

The post Royals Move Downtown Is Not About Baseball appeared first on Show-Me Institute.

In 2016, $25 million in government assistance (including TIF and special taxing districts) was approved for this site but the developers never moved forward with the plans. It’s not yet clear exactly what developers will be asking for this time, but whatever it is, it’s too much. Crestwood is not a blighted community and even if the property is an eyesore, there is no reason for government to be giving out incentives for this property. There’s already a Schnucks and an Aldi right across the street. Do we really need subsidies to build another grocery store in this area? And is it fair to the existing stores to have the government subsidizing their competition?

Using taxpayer dollars to fund private projects isn’t a good idea. Developers aren’t going to quit asking for these unfair advantages, but lawmakers need to stop giving them out

The post If at First You Don’t Succeed . . . appeared first on Show-Me Institute.

Joking aside, the developer of Wildhorse Village (which includes Ruth’s Chris) is seriously angry that he did not get his tax subsidy from the Chesterfield City Council. That is how bad Missouri has become with the constant corporate welfare giveaways. The developer is actually mad that elected officials did not give him other people’s tax dollars to help him make more money from his development. He assumed (and past history in our area justifies his assumption, unfortunately) that those tax dollars were his for the taking. All he had to do was fill out some forms, make the required official statements, and Chesterfield would give him his tax subsidy.

But a funny thing happened on the way to the finance meeting. The city council finance subcommittee voted the subsidy down. Four votes against, zero in favor. As one councilmember said:

We don’t need to subsidize developers to come into Chesterfield and build. It’s some of the most desirable real estate with the best demographics in the area. We don’t need to bribe people to come in.

He is completely right about this. The same thing can be said about many other parts of the state where tax incentives and subsidies are ubiquitous. In the Central West End of St. Louis, for example, the tax incentives are so unnecessary that they are simply capitalized into a higher price for the property since it is just a given that the new owner will get tax subsidies. More money for the entity that makes the sale, less money for public services, all caused by an unnecessary government market distortion in the first place (the final part is the key point here).

There are very few cities in Missouri that typically take a hard look a tax subsidy requests. Most say yes to the proposals faster than a contestant on The Bachelorette. There are rumors the developers will come back and request money again—hopefully Chesterfield sticks to its gun here. If Chesterfield were to take the lead in turning down at least some of these requests, that would be a big step forward for municipal policy in Missouri.

The post CID Dies appeared first on Show-Me Institute.

This is a tired tale here in St. Louis; developers say they have a great idea and a great plan, and then turn to the government instead of the market to finance their idea. Government officials pick winners and losers by offering advantages to some and not others.

We can point fingers at the developers and say they should seek private investors, but they aren’t the only ones to blame. The various incentive and subsidy programs in St. Louis have created a situation where bargaining for handouts during the development process is the norm. You can’t blame developers for seeking the best deal they can get. It might be too much to ask developers not to reach for the millions of dollars offered to them; we need to get the government to stop offering!

In this particular case, there may actually be good news. Though the St. Louis City TIF Commission approved a motion for a public hearing for this project, there was some resistance from commissioners, and that’s what we need to see more of at the hearing. Good projects shouldn’t need to rely on handouts to be successful, and developers certainly shouldn’t assume taxpayer money will be gifted for private projects. Developers and government officials should allow projects to face market forces on equal footing to see which projects are truly demanded in the St. Louis market.

The post A Tired Tale of Incentives appeared first on Show-Me Institute.

We weren’t the only ones present to speak though. A development official from the City of St. Charles also came prepared to present his viewpoint, and he was generally in favor of CIDs. But the arguments he marshaled were so unpersuasive I didn’t know if he took the whole hearing thing seriously or not.

Here, in outline, is what he said in support of allowing CIDs to collect sales taxes without notification to taxpayers.

“CIDs have been used to subsidize projects that many felt were important.”

The basic idea is that CIDs can make certain developments feasible, so they’re good, and we shouldn’t require merchants to post placards notifying shoppers that they’ll be subject to an extra sales tax.

But, of course, whether or not CIDs are powerful development tools has no clear logical connection to whether taxpayers should be given information on their existence. Grand theft auto is a powerful method for obtaining vehicles, and has been used to obtain vehicles that many couldn’t afford to purchase on their own. But this doesn’t mean grand theft auto is permissible or prudent, and it doesn’t bear on whether or not would-be victims of grand theft auto should know about the chances of losing their cars. The bottom line is that the efficacy of a development tool isn’t germane to the question of whether or not taxpayers should know about it.

“If merchants are required to notify shoppers of additional CID taxes, it will make it too hard for developers to find tenants.”

If I apply for a CID in order to build a shopping center, the ordinance being considered would require that I tell would-be tenants of my property that they must post a sign that says something to the effect of “You’re paying extra taxes here.” The concern is that this would dissuade shoppers from patronizing a business, and so would cripple developers’ ability to land tenants for their properties. And if there are no tenants to sign leases, then there just won’t be any new development.

Here is what such an argument boils down to: Letting taxpayers know what tax rate they’re subject to is (allegedly) bad for business, and since we want business to do well, we shouldn’t let taxpayers know what tax rate they’re subject to.

But it just isn’t the job of taxpayers to make life easy for businesses. And it certainly is government’s job to make sure taxpayers are being treated fairly and not being taken advantage of. The importance of honesty isn’t diminished by the profit one can make through deceit. Moreover, developers using another type of special taxing district known as a transportation development district are already required to post additional sales tax notices (though they often fail to do so), and they don’t seem to have any trouble getting tenants. What’s different about CIDs that would make such notices overly burdensome?

It takes some chutzpah to argue that it’s better for everyone if you are allowed to tax people without their knowledge.  Instead of being upfront and simply charging tenants an amount that makes the investment in a property worthwhile, developers are going through the rigmarole of forming a district and collecting a tax. It’s easy to see why a developer would want to have the government collect a tax from consumers and pass it along to the developer as profit. What’s harder to understand is why the government would want to play along.

The post How Not to Argue for Special Taxing Districts appeared first on Show-Me Institute.

First, you need to develop a plan for the project and estimate how much it will cost. For simplicity, let’s assume you want to build a new apartment complex for low-income individuals, and it will cost an estimated $1.25 million. Of those costs, only $1.11 million are eligible for tax credits because land and several other expenses aren’t eligible.  In this case, the project would be eligible for the new construction credit, which means that up to 90% of all projected costs could be covered. So if approved, you could receive nearly $1 million in state and federal credits over ten years.

To start the process, you have to get your project approved by the Missouri Housing Development Commission (MHDC), the state’s housing agency. This complex approval process includes filling out a slew of forms, completing audits of your finances, hosting inspections of the property, and paying a variety of fees.

Once you jump through the required hoops and get your project approved, you will likely need to sell the tax credits to begin development. (This is because many firms need the startup capital to fund construction; the credits are paid out over several years) To do this, most developers find a tax syndicator, which is simply a business that helps find investors willing to buy credits in exchange for financing the project. This process can be difficult because Missouri’s tax credits are non-transferrable, which means they cannot be transferred or sold to any investor that isn’t part of the development group. Thus, new legal partnerships are formed for most projects that include the developers and investors to allow them to buy and use the credits.

Once you have people willing to buy your credits, how much can you expect them to pay? The first hurdle is the federal tax implication for each investor. Paying less in state taxes (because they’re using credits) reduces the claimable portion of the federal tax deduction that comes from state taxes paid. In other words, using state tax credits can increase their federal tax liability. As a result, the value of the state credit to each investor drops by the federal tax rate they would have to pay on those funds—typically around 35% of the credit’s value.

In addition, getting money for tax credits today requires selling them at a discount, because the tax credits are issued over ten years. Selling all your credits today, adjusted for net present value, and including all fees for the syndicator’s efforts, you can expect to receive around 65% of the remaining value. After all is said and done, your $1 million in LIHTCs results in around $420,000 cash for project construction. These figures are in line with the analysis completed by Missouri’s State Auditor’s Office.

The rest of the project’s financing has to come from the developer, other investors, or mortgages. No matter the amount MDHC awards in tax credits, the end result is the same; there will typically only be around $0.42 of each dollar in tax credits available for actual construction. More than half the state’s investment in your project is lost by the time the construction can begin. This is a big reason why the program is such an inefficient use of taxpayer dollars.

For the next post in this series, I’ll look into the LIHTC program’s measurable impact (or lack thereof) on the supply of affordable housing in Missouri.

The post LIHTC 101: How Does it Work? appeared first on Show-Me Institute.

Developer Brian Hayden is creating private, suburban-style garages within a larger parking garage. The outer ring of his building will be Gallery Villas, and residents here will have their own private garage structure just like the ones attached to houses in the ‘burbs. When you open the garage door, you’ll be in a large parking garage for residents and businesses of other buildings.

The project is novel and a little unconventional, but is it a good one? Time will tell, but the good news is Hayden is willing to submit his ideas to the free market for approval. Hayden is not using tax abatements, tax credits, or other public financing methods to prop up his development. Rather, he’s relying on private investors and consumer demand for these private garages. Hayden is quoted as saying “I believe a project should fully financially support itself,” and I agree.

In the free market, a developer relies on people to decide if a project succeeds or fails—either people like the idea of a garage inside a garage and put money toward it (investing or buying the product) or they don’t. It’s as simple as that. Unfortunately, many developers don’t just submit their project to the free market. They seek money from the government to finance their projects, allowing bureaucrats to decide if an idea is good or bad. The boost from government dollars means developers don’t have to work as hard to convince investors and consumers that their project is worthwhile. As my colleague Patrick Tuohey has asked before, “If private investors won’t invest their own money, why should taxpayers invest theirs?”

When risk-takers, like Hayden, offer up their good (and bad) ideas to the free market, we get to use our hard-earned money to decide on the ideas that we like. Isn’t that better than having bureaucrats spend our money on ideas they like? I applaud Hayden for taking a risk with his innovative garage project and leaving it up to consumer to decide if it will succeed.

The post Finally, a Developer Using the Free Market appeared first on Show-Me Institute.

Real estate developers are indeed fraught characters in city life. . . . And the history of American development certainly includes shady land speculation schemes, racist intentions and bloated egos. . . . But at its best, development has also meant progress in America. And that possibility has been banished from recent debate.

The worry is that “developer” has become a dirty word, and that our mostly negative perception of developers and development is off-base. While urban politics demonizes developers, we ought to be grateful there are people who work to develop and build our cities, the thinking goes.

This assessment is both right and wrong.

It’s right inasmuch as developers shouldn’t be demonized for providing what consumers demand through market forces. People need housing and space for their businesses, and developers provide just that. Just as we shouldn’t lambast farmers and grocers for “profiting off” our hunger, we shouldn’t bemoan developers for profiting off of our need for homes and office towers. (Indeed, we all profit off of someone else’s needs through the exchange of goods and services for money.) As Adam Smith remarked in his Wealth of Nations, it is incredible that, without any sort of orchestration, the market is full of goods and services we need and want. What Smith said about butchers, bakers, and brewers is equally true of developers.

But the Times article also misses the mark in some ways. While there is nothing wrong with providing housing by chasing profits, there is something wrong with advocating that the public subsidize projects for private gain. Developers don’t invest just their own money; they often invest taxpayer money as well. Through subsidy programs like tax-increment financing, abatements, and special taxing districts, developers reduce their private risk. And since policymakers are often generous with these subsidies, for some developers it pays—and pays very well—to chase down subsidies and ensure they continue to flow for years to come.

The economist William Baumol, in his famous paper “Entrepreneurship: Productive, Unproductive, and Destructive,” argues that market agents are after profit, and they will try to get it through productive means or unproductive means. He thought that when governments have the power to pick winners and losers in the economy, entrepreneurs will chase government favor instead of working to meet consumer demand competitively. Many developers, like many market agents, have become infatuated with government handouts, and that is deserving of criticism.    

The post Why “Developer” Is and Is Not a Dirty Word appeared first on Show-Me Institute.

Read more here.

The post Show-Me Now! Controversial Redevelopment Seeks Millions from Taxpayers appeared first on Show-Me Institute.

The development has been awarded more than $30 million in TIF over the years for the construction of high-end shopping, office, and luxury residential spaces in one of the most economically successful areas in the region. Just read this developer overview, which claims this part of Richmond Heights “forms the metropolitan area’s most successful and dynamic commercial and residential district.” The area hardly looks like the “urban blight” TIF was originally designed to remedy.  

But there’s a recent development, beyond the (ahem) questionable use of subsidies in this area, worth touching on.

The most recent phase of the development was originally estimated to cost just shy of $80 million. Back then, developers claimed the project was financially infeasible without TIF and other subsidies. But now the project’s costs are up $20 million and it’s still moving forward. But how can this be? How can a project that was infeasible at $80 million be moving ahead when it is now $100 million?

Here are three theories:

1. The magnanimous developers decided they could part with an additional $20 million of their own funds even though they claimed the original cost of their project was too high to burden privately.
2. The initial request for public assistance was far more than was actually required to move ahead, and so, the $20 million setback can be easily absorbed. (Though I doubt any public assistance could be considered reasonable for this project.)
3. The developers were going to build their project with or without public assistance, but helped themselves to taxpayer cash because it was being offered.

This list may not be exhaustive; there may be other ways to explain the project going ahead. Nevertheless, if I were a betting man, I’d put my money on #2 or #3. Why? Because much of the academic research on TIF suggests developments will happen regardless of whether or not subsidies are awarded. The Boulevard development is consistent with this theory, and suggests that perhaps taxpayer handouts aren’t as essential to economic growth as many public officials seem to think they are.

The post Is TIF Failing the “But-For” Test? appeared first on Show-Me Institute.

The piece in question is about how Hyatt learned only recently that they would not be the hotel operator and includes the following:

[Hyatt senior vice president of development, David] Tarr said he also had been surprised to learn a few months earlier [than June 21] that KC Hotel Developers was coming up $30 million to $40 million short on equity.

“When we partner with a development group, we like to know that they have the most meaningful portion of the equity (in a new hotel project),” Tarr said. “That’s our preference in most situations, and in this particular situation, we came to the table with this group because we felt that they had the wherewithal to assemble the capital to do the project and that our equity was not required.

Tarr was wrong. According to The Kansas City Star, “Tarr said Hyatt was approached by KC Hotel Developers for additional equity in the project.” Hyatt declined, and on June 21 found out that after years of work that they had been cut out of the deal. Tarr suspects the developers may have gone to the market looking for additional equity, “but may have settled for significantly less than that.”

Just over a month ago I wrote that, despite their claims to the contrary, the developers didn’t have the financing in place. Now we learn from Hyatt that the developers had a $30 to $40 million gap. Was Loews, the company chosen to operate the hotel, offering to make up the difference? A June 21 Star piece suggests this was the case:

Burke said Hyatt is a terrific operator “but at the end of the day, our obligation was to get a convention hotel financed, built and operating. We believe that partnering with Loews gives us certainty,” he said. “That’s most important. This deal has been kicked around for six years.”

Unfortunately, we can’t be sure. According to the Star, “Burke and [Lowes CEO Jonathan] Tisch declined to provide details of how much money Loews is investing in the project, which has had a total estimated cost of $311 million.”

It’s worth asking whether Loews—a smaller company than Hyatt and which does not appear to operate any other convention hotels—is in a position to put up the $36 to $48 million that Hyatt elected not to contribute. Until City Hall starts demanding transparency from the developers, taxpayers won’t have any way of knowing the risks involved. Even if only investors lose on a venture, another failed convention hotel would be a blight on the KC skyline.

The post KC Convention Hotel Still Coming Up Short? appeared first on Show-Me Institute.

In response to a question from Councilman Quinton Lucas, Cole added that the developers would not seek any incentives for West Port Terrace at Manor Square. They expect to begin work on the project by early next year and complete construction within about 18 months.

I can’t speak to the merits of the project, but I am pleased that Pulse Development LLC, the developer of record, is willing to pay taxes. Happily, this appears to be a trend. A proposed 13-story, 257-unit apartment building just west of Country Club Plaza and an entertainment development at Ward Parkway Mall that are likewise eschewing taxpayer subsidies. Maybe someday businesses paying taxes in Kansas City will be so common that it won’t show up in news reports.

The post Shocker! KC Developer Builds Building, Pays Taxes! appeared first on Show-Me Institute.

They do, finally—maybe—have a guaranteed maximum price (GMP) from project general contractor JE Dunn. According to The Kansas City Business Journal, JE Dunn “provided the final GMP proposal two weeks ago.” Burke described the number as “preliminary,” making it reasonable to wonder if the price is actually guaranteed.

The Star now says that Hyatt has pulled out of the convention hotel project. This news wasn’t made public weeks ago when it happened, nor has the development group revealed how much the new hotel company, Loews, is investing in the project. This is no surprise; Burke’s group has previously refused to provide information about the hotel. When asked by The Pitch in 2015 to share information about the project, he said,

There’s some sensitivity to releasing anything that’s old or anything that causes us grief with the bond buyers,” Burke tells The Pitch. “The minute we put it out, somebody with the Show-Me Institute will say it’s unrealistic.”

Not only are we left wondering how much the hotel company is investing, but we also don’t know who the other investors are. Those who watched the Planning and Zoning Committee hearing on June 7 saw conflicting testimony. Development team member Steve Rattner now tells the committee, “the financing is in place; we’re ready to go.” Mind you, it was supposed to wrapped up by March or April, and Rattner said it was in place back in October 2015. But the project attorney, Roxsen Koch, said that drafting the bond documents will take months and only after that—in early August—will the financing be in place. How confident should we be that deadline will be met?

Those aren’t the only examples of information from the hotel’s development team being hard to come by or subject to change. Two months ago, Burke promised a summer groundbreaking. Now, he says groundbreaking has been moved to October. Before that it was spring 2017; and before that early 2016.   

Even members of the committee were hesitant to endorse predictions from the development team. Chairman Taylor called for a motion to advance the matter to the full Council and the committee members sat in silence for 9 seconds before Councilwoman Katheryn Shields laughed and offered the motion herself. (See here.) That delay likely represents a well-founded lack of confidence that this project will deliver as promised.

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As the St. Louis Post-Dispatch reports, a $26 million multi-use development planned for a busy intersection in the Loop was recently awarded some $4.4 million in tax increment financing (TIF). This means the developers will pay $4.4 million less in taxes over the next few decades because, apparently, the project isn’t financially feasible without tax breaks.

As with all subsidies, there is a question regarding the prudence of funneling taxpayer dollars to specific projects on the grounds that they could not be profitable on their own. I also can’t help wondering why incentives are still “needed” in the Loop when the $51 million trolley is supposed to spur economic growth. But I don’t want to focus on these issues here. Instead, I want to focus on a much larger lesson we can learn from the widespread use of development subsidies in Saint Louis and elsewhere.

The handing out of subsidies in one of the most lucrative Saint Louis is evidence that policymakers have created a “developer’s market.” In short, subsidy-granting agencies have given away so much in taxpayer money that developers are rarely willing to invest without public help. And not because their projects aren’t financially viable, but because they know policymakers will grant their requests for subsidies. Incentives are no longer about eliminating blight, or making tough projects feasible. Instead, incentives are an ordinary part of doing business, because policymakers have repeatedly shown developers that subsidy dollars are there for the taking. The use of incentives has transformed the real estate market—and not for the better.

Despite spending hundreds of millions of taxpayer dollars on developments, Kansas City and St. Louis continue down bleak economic paths. In fact, there’s evidence that incentives have reduced private investment in Missouri cities. It’s time policymakers enact meaningful incentive reforms to ensure that taxpayer money isn’t wasted and that development occurs according to the free market principles that grow the economic pie for everyone. 

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