In most instances, the timing of the TIF project would not matter. It would start when passed by the TIF commission and city council and last up to 23 years from that date. But apparently, it really matters here, as the special city council session indicates. Why?

Probably because the work on the project has already begun, and if the work has already begun, there is risk of the property being assessed at a higher value in the looming 2023 reassessment cycle. If it is assessed at a higher value, that limits the size of the tax subsidy available. Don’t get me wrong, it would still be an enormous TIF project, but hey, every few million dollars counts.

Of course, the fact that the work has begun before the TIF proposal is finalized is important, because the justification for this abomination of a TIF project is that the area is “blighted” and that the project would not happen at all “but for” the tax subsidy. It is hard to claim that it would not happen “but for” the subsidy when construction has already started before the subsidy is approved, but this appears to mean nothing to Chesterfield, the St. Louis County TIF Commission, and the various planners and lawyers who are all in on the tax subsidy largesse. (See appendix C of this document for the relevant affidavits.)

There’s another way to interpret construction starting on this project before the money was even approved. The developers were so confident that the TIF commission and the Chesterfield City Council would approve the money that there was simply no need to wait. This attitude, if true, would conform with the broader subsidy culture in our state, where local governments often just rubber stamp tax subsidy requests.

Will the city further contort itself to do the bidding of the developer and get this all approved before 2023 when the reassessment clock will strike midnight? Or will the city protect taxpayers and the other affected taxing jurisdictions, such as the Parkway and Rockwood school districts, by dealing with the reality that the developers used the system to extract taxpayer money for a project that never needed subsidies to begin with?

The post What’s the Rush, Chesterfield? appeared first on Show-Me Institute.

Apparently, the problems that led to the initial postponement of the project have been overcome as the plan for the $27 million development with retail, restaurant, and office space is moving forward. The land for the proposed development was only annexed into the City of Springfield in June 2021.

The obvious question is: Why would the city annex an area only to spend millions of taxpayer dollars subsidizing the development of the land?

I’ll admit that the area seems to be in pretty bad shape, so it may legitimately be considered “blight,” a designation that would qualify the project for TIF. (Blight designations for TIF projects are frequently not legitimate.) But there are other programs intended for environmental remediation that the land’s private owners could pursue that are much less harmful to taxpayers.

Economic development incentives such as TIF put taxpayers on the hook to increase private business profits. While passing this TIF proposal may make Springfield lawmakers look like they are “fixing” this eyesore, it’s at the expense of taxpayers. Lawmakers should focus on keeping tax rates low for everyone instead of playing favorites and artificially lowering them for a chosen few.

The post Brody Corners TIF—It’s Back appeared first on Show-Me Institute.

But is there something for reformers to work with here? I think so.

The amended bill includes in the definition of blight certain impoverished census tracts in St. Louis, which forms the kernel of a good idea. Well-maintained parking lots in wealthy neighborhoods hardly meet a rational definition for “blight,” and yet, public officials regularly tumble through the usual legal gymnastics to provide taxpayer support for such projects. Instead, binding “blight” to some objective definition of local poverty would return the state’s TIF programs to their original purpose—aiding areas faced with intractable poverty and enormous barriers to development.

Herein lies the opportunity: Make “blight” contingent on two factors. The first factor would be based on the common definition of blight, including unsafe and unsanitary buildings. The second factor, however, would require the property to be in an impoverished census tract. A “blighted” parking lot in the Central West End doesn’t need a tax benefit to see redevelopment, but a blighted block in the poorest sections of North St. Louis very well might. If tax benefits are going to be meted out, they should be helping poor areas pull themselves up by their bootstraps, not helping wealthy areas polish their wingtips.

Whether SB 570 makes it into law is anyone’s guess; its rapid progress this early in the session would seem to bode well for it. But if TIF reform is going to pass this year, it really should include changes in where TIF support is legally proper. Fix “blight,” and you are taking an important step in the direction of fixing TIF. Hopefully, the political will exists to do that before the end of the legislative session.

The post Serious TIF Reform May Be in the Cards in 2020, With A Tweak appeared first on Show-Me Institute.

According to the St. Louis Post-Dispatch, the St. Louis Land Clearance for Redevelopment Authority (LCRA) has recommended that Balke Brown Transwestern receive 10 years of property “tax assurance” for a proposed housing development in the Central West End. The deal involves the current property being deemed blighted.

The property? A parking lot—a good-looking, useful one at that. The lot is pictured at the top of this post. Does it look blighted to you?

And what exactly is the “tax assurance” Balke Brown is receiving? The resolution by the LCRA explains this a bit (pg. 44):

ten (10) years tax assurance that includes a fixed schedule of payments in lieu of taxes (PILOTs) equaling annual real estate taxes of $850 per unit, and annual real estate tax increases of 2.5%

Translation? It’s a tax break. Instead of paying taxes on the multimillion-dollar apartment complex as most St. Louis property owners would, the developer will pay a lesser, stair-stepped but nonetheless fixed amount each year. We continuously see developers try to bargain their way out of their tax burden and city officials can’t seem to tell them no.

While a new apartment complex in the Central West End may seem great, the tax assurance deal does not. To get the best deal for taxpayers and consumers, what Show-Me Institute analysts have said before bears repeating: If a developer can’t afford a project without assistance, maybe it shouldn’t be doing it. Local officials shouldn’t pick winners and losers, and they shouldn’t feed the appetite for incentives—especially in one of St. Louis’s wealthiest neighborhoods.

The post St. Louis Officials Recommend “Blight Designation” for . . . A Gated Parking Lot appeared first on Show-Me Institute.

The Philadelphia LandCare (PLC) program was started when residents of a particularly bad-off neighborhood team up with the state horticultural society to clean up vacant and trashy lots. The article reveals:

PLC is simple and was designed to be applied across the neighborhood. Trash and debris are removed from a vacant lot. The land is then graded, and grass and a few trees are planted. A low wooden post-and-rail fence is installed with openings to permit residents access to the newly greened spaces. The fence prevents illegal dumping of garbage and construction debris; it is also a visual sign that someone is maintaining the property. The result is a small “pocket park.” The rehabilitation of such lots takes less than a week to clean and green. The lots are maintained through twice-monthly cleaning, weeding, and mowing during the growing season (April through October). The cost to clean and green a typical lot is roughly $1,000–$1,300, along with $150 per year to stabilize the lot through biweekly cleaning and mowing.

The maintenance costs are higher in Missouri. St. Louis City’s Forestry Division (yes, St. Louis has a Forestry Division!) bills $108 per property per time they mow, and try to visit each property (there are 11,000) only 3 or 4 times each year instead of biweekly. As for Kansas City, a few weeks of calls and emails to various city departments and individuals have yielded no results on the costs of maintenance.

Kansas City is slowly making good on its promise to demolish dangerous structures, an important part of blight remediation. Addressing blight requires more. Churches, community groups, and charities of all kinds need to work together to address blight just like the people of Philadelphia. We clearly cannot expect government to do it for us.

The post Fighting Blight Can Help Address Crime appeared first on Show-Me Institute.

According to The Kansas City Star back in February 2016:

City Manager Troy Schulte recently estimated it would cost $10 million to knock down all the most dangerous houses and other buildings in the city. That backlog of 870 buildings has built up because in the past, the city has only been able to spend about $800,000 annually to demolish about 100 houses, and more properties keep getting added to the list every year.

The city sold bonds to raise the $10 million to pay for the demolition. Work started in June 2016 and it was to take two years to tear down about 800 buildings. In April 2018, Channel 41 reported that the city surpassed it goal and “taken care of” 895 buildings in two years. That is because many were sold and rehabilitated, not demolished.

According to city data, only 609 buildings actually have been torn down by the city in the three years since. While this is slower than initially planned, it represents good progress toward addressing blight.

As of October 7, 2019, there are 343 dangerous buildings remaining on the city’s list.

The post What Happened to Those 800 Dangerous Buildings? appeared first on Show-Me Institute.

One of those effects—severe real estate blight—is immediately obvious to any tourist. Abandoned warehouses line the riverfront and entire neighborhoods in north St. Louis are decaying.   

But two unlikely allies are trying to solve the problem by philanthropic means.

The St. Louis Post Dispatch reports on an effort by a new organization, the St. Louis Blight Authority, to address the blight crisis by demolishing vacant and abandoned homes:

Tech billionaire Jack Dorsey, a St. Louis native and co-founder and CEO of both Square Inc. and Twitter, along with Detroit native Bill Pulte, whose grandfather founded national homebuilder Pulte Homes, were paying for the demolitions — $500,000 for a pilot program to completely clear more than 130 lots in a four-block area of the northwest St. Louis neighborhood hard hit by abandonment and vacancy.

However, the Post-Dispatch article explains the initial pilot phase will only knock down 30 structures. It’s a good first step, but it will make trivial progress toward solving the problem. St. Louis has 7,000 vacant buildings and more than 12,000 vacant lots.

The blight crisis will not solve itself, and Missouri’s major cities already use economic development programs that haven’t been shown to improve the situation. Could private resources, invested in an ambitious project, successfully remove blight in St. Louis? And is the St. Louis Blight Authority the entity to usher in success?

From the Post-Dispatch: “Dorsey and Pulte hope to inspire other philanthropists to contribute to the effort and perhaps expand it to other city neighborhoods.”

With the price tag for total blight removal estimated at $70 million, inspiration won’t cover the bill. But it’s a place to start.   

The post St. Louis Blight Authority: Philanthropy Might Provide What Markets Cannot appeared first on Show-Me Institute.

Happily, legislators are considering a reform proposal that would make three important changes to how TIF projects are awarded.

• It would eliminate TIF for the use of anything other than combating blight, eliminating TIF for “conservation areas,” and “economic development areas,” ensuring that it is used in “redevelopment areas” only inasmuch as they are blighted. Regarding blight, it removes from the blight definition such considerations as “defective or inadequate street layout,” “deterioration of site improvements, improper subdivision or obsolete platting” and “morals.” We’ve suggested a completely new standard for blight, but the language in the proposal is a step in the right direction.
• Once a TIF plan is sent to a city government for final approval, that body must hold a 30-day comment period before it votes on the proposed district.
• Finally, and perhaps most importantly, it grants those taxing jurisdictions a 60-day period after the city council or board of aldermen approves the TIF plan to decide on whether to withhold half of their portion of the TIF taxes excluded.

Proponents of TIF have argued that school districts have no incentive to give up their property tax and with vote to exclude themselves every time. But that argument does not stand up under examination. Missouri school districts have voted to support TIF in the past when it made sense. And in Kansas, where school superintendents may withhold all of their tax funds, they rarely if ever do.

The most powerful parts of this bill are the 30-day comment period and the ability of the taxing jurisdictions to exclude half their taxes. These provisions mean more time to consider the impacts of TIF plans and give more influence over the process to those with the most to lose.

Some will undoubtedly claim that this reform will kill TIF, but that’s unlikely. What it will do it make it more likely that TIF projects are a good deal for everyone, including developers, cities, libraries, and school districts. Taxpayers will need to remain vigilant, and this bill gives them more time to comment. Who could be against that?

The post Legislative Update: TIF Reform appeared first on Show-Me Institute.

For a project to qualify for some subsidies, the city must declare a parcel of land “blighted,” but the standards for doing so are very low—developers can qualify for subsidies for undeveloped fields or for buildings that are merely vacant. Under the current definition even the governor’s mansion could be blighted!

THE SOLUTION: Economic development reform.

The legal definition of blight should be narrowed to ensure that only truly needy projects would qualify. Other reforms that would help rein in these giveaways include moving TIF decision-making to the county level, providing greater voices for other impacted taxing jurisdictions such as schools, and capping subsidies.

WHO ELSE DOES IT? Various TIF and economic development reform efforts are underway in other states. California, which pioneered TIF in 1952, ended the existing program in 2012 due to the cost.

THE OPPORTUNITY: Focusing state law on addressing actual blight and doing so in communities suffering from high unemployment and poverty will go a long way in making sure that public policy addresses real needs and doesn’t just reward the politically well connected.

KEY POINTS

• TIF projects active in Missouri have collected almost $2.5 billion since their inception and do not deliver their promised benefits.
• Many subsidies are not used in the economically depressed areas they were designed to assist. In Saint Louis, less than 25% of TIF spending occurs in the poorer half of the city.

SHOW-ME INSTITUTE RESOURCES

Policy Study: Does Tax-Increment Financing Pass the But-For Test in Missouri?

Policy Study: Tax-Increment Financing and Missouri: an Overview

For a printable version of this article, click on the link below. You can also view the entire 2018 Missouri Blueprint online.

The post 2018 Blueprint: Economic Development Subsidies 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.

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Council members Quinton Lucas and Heather Hall voiced reservations. Hall found it “really hard for me to swallow that pill.” But she did. Lucas said the blight claim “sure doesn’t seem to pass the smell test of what blight is.” Yet he voted to support it. Only Councilwoman Alissia Canady voted against the measure.

The Journal concluded, “What we are hearing from staff is that once something is blighted, it’s always blighted…” Hall added. “That’s got to stop.”

Then stop it. All the hand-wringing and nose-holding in the world doesn’t matter if councilmembers continually vote yes.

The post The Crown Center Blight Expansion Is Bad Policy. Period. appeared first on Show-Me Institute.

It would be a shame if this money came from the police department amidst a spike in Kansas City murders. Where else could we find the money?

• Perhaps the city could sell the land it is considering using for the convention hotel. After all, that is city-owned land that is also blighted. And according to The Star, it’s worth $13 million. The Pitch says $4.5 million. Either way its a good start. And the city likely owns all sorts of valuable land that it is doing nothing with.
• The city could halt its awful idea to spend $12 million in taxpayer funds to tear down and rebuild a grocery store within 3 miles of at least two other grocery stores.
• Schulte is under order from the Council to find $18 million for the so-called Jazz District. Maybe tearing down “dangerous” buildings is more important.
• We could stop the streetcar project altogether on the grounds that protecting the health and well-being of thousands of families on the east side is more important than a 2.2 mile streetcar to nowhere.

The post The Demolition Option in Kansas City appeared first on Show-Me Institute.

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. 

The post Saint Louis Property Taxes, Part 3: The Tax Breaks appeared first on Show-Me Institute.

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At the Del Taco with Show-Me Institute intern Bruce Stahl. Photo by Josh Smith.

At the Show-Me Institute, we first heard of Del Taco’s uncertain fate at last week’s Land Clearance for Reclamation Authority (LCRA) meeting. At the meeting, the agency declared the property blighted.

Blighting sounds bad, doesn’t it? The word calls to mind disease, destruction, and decay. Yet as anyone who has visited or driven by this Del Taco can attest, there’s a functioning business on the property. You can still get your burrito and fries at 1:00 a.m. at the Del Taco.

So, why would a city agency vote to find this building blighted?

The sad fact is, blighting in city of Saint Louis and throughout Missouri frequently has very little to do with the actual condition of a property, and everything to do with awarding tax subsidy. Colin Gordon, author of Mapping Decline: St. Louis and the Fate of the American City highlights one of my favorite examples of a contorted blight finding: Officials blighted a thriving shopping mall because it didn’t have a Nordstrom’s.

In Columbia, city officials almost blighted a functioning downtown hotel in order to award the building tax increment financing (TIF). At the last minute, perhaps after realizing how strikingly apparent it was that the hotel was not diseased, destroyed, or decaying, the council used a different portion of TIF law to award the subsidy. After all, it’s really just about the money, isn’t it?

Missouri law limits forms of property tax subsidy to properties that are blighted — most notably property tax abatement and tax increment financing (TIF). So the first step for anyone hoping to get tax subsidy for their development in the city of Saint Louis is to get city officials to declare the property blighted.

This isn’t the first time that Del Taco has been blighted.

In 2008, the Saint Louis Board of Aldermen blighted the property in order to enact a TIF agreement. Under TIF law, “blight” is defined as:

[…] an area which, by reason of the predominance of defective or inadequate street layout, unsanitary or unsafe conditions, deterioration of site improvements, improper subdivision or obsolete platting, or the existence of conditions which endanger life or property by fire and other causes, or any combination of such factors, retards the provision of housing accommodations or constitutes an economic or social liability or a menace to the public health, safety, morals, or welfare in its present condition and use;

Well, for the sake of everyone who has eaten at Del Taco since the city blighted the property, I hope that the restaurant wasn’t blighted because it was a “menace to the public health,” or was “unsanitary.”

If you look at the blight definition closely, it becomes clear that certain definitions could be interpreted to include just about any property. For example, what property doesn’t have “deterioration of site improvements”? Paint fades and wood ages. And, I wonder, what qualifies as “inadequate street layout”? I find the phrase “social liability” troubling. Who decides what is a “social liability”? Would a bar qualify? How about low-income housing? And what could possibly be considered a menace to “public morals”?

In case you’re wondering, the Board of Aldermen’s TIF ordinance didn’t specify which conditions rendered the saucer-shaped building blighted.

At last week’s LCRA meeting, the agency voted to declare the Del Taco property blighted again. Apparently, the city’s earlier TIF agreement didn’t fix the problem.

If pretty much any property can be blighted under state law in order to award tax subsidy, why do only certain properties receive tax breaks? I’m going to state the obvious: If the definition of “blight” is so broad that it can be applied (and re-applied) to pretty much any property in order to award tax breaks, the application is arbitrary.

TIF and tax abatement is not being applied to the worst buildings in an area, as illustrated by the cases of Del Taco and the Regency Hotel. Instead, those tax breaks are awarded to particular properties and areas that catch a politician’s eye.

The East-West Gateway Council of Governments has studied TIF and tax abatement, and concluded that using TIF where there really wasn’t any blight didn’t make much sense. From the St. Louis Post-Dispatch:

Maggie Hales, East-West Gateway deputy executive director, reported on the study to the St. Charles County Council during a work session Monday. Hales told council members the three-year study covered eight counties in two states. She said that overall, TIFs have a negative effect on communities and there are racial and economic disparities when and where they’re used.

“The TIF statute was originally designed to alleviate blight,” Hales said after the work session. “In areas where there isn’t any blight, I don’t know as a policy matter it’s a good investment of public tax dollars. […]”

Instead of blighting and re-blighting properties like Del Taco, here’s a better idea: Lower property taxes for everyone. Take politicians out of the process entirely.

The post Del Blighto appeared first on Show-Me Institute.