St. Louis Looks to Better Control Abatements
Date Posted: August 30, 2016
Posted In: Ideas,
From St. Louis Post-Dispatch: With a growing number of properties off the tax rolls for years, St. Louis is looking at how to better target and control the incentives that now are almost always included in development proposals in the city.
The movement at the St. Louis Development Corporation follows a report released in May that found about $709 million in local tax revenue that would not be collected because of property tax abatements and tax increment financing, or TIF, promised between 2000 and 2014.
Proponents of individual developments often argue that the revenue would never have materialized without tax abatements, which freeze property taxes at their pre-development level, and TIFs, which allow increases in property, sales and income taxes to be used as project financing.
But the nearly 200-page report notes that “it is also likely that some tax revenue is being lost by the City as a result of these incentives.” And this summer, the use of the incentives was cited as a reason the city’s credit rating was downgraded.
Commissioned by the SLDC and conducted by Philadelphia-based Public Financial Management Inc. with University of Missouri-St. Louis researchers, the report found little correlation between individual developments and job creation or economic impact beyond the project footprint.
“I think a more sophisticated analysis could have been done, but generally the majority of impact on these projects is the economic activity on the parcel,” said Will Winter, a research assistant professor of public policy administration at UMSL who helped collect data for the report. “That’s because these incentives are really used in areas that are already successful.”
Some areas that have been big beneficiaries of development subsidized with tax abatement, such as the Central West End, are now trying to curb its use. But absent larger reform, limiting tax abatement in St. Louis is dependent on individual aldermen willing to offer less to developers who plan to build in their wards.
Overall, St. Louis’ incentives have been concentrated in several key neighborhoods along the central corridor. Some areas in north St. Louis, for instance, are “literally getting no incentives,” Winter said.