Tax breaks for developers -

Tax breaks for developers

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By KMOV Web Producer By KMOV Web Producer

(KMOV) -- It's hard to imagine that $6 billion in tax breaks during the last twenty years would have practically no impact on the metro-area economy. But that's the finding of a study by East-West Gateway. 

"Was it a bum deal for taxpayers?" I asked Maggie Hales, the Deputy Director of EWG. "I think it was," she told me.

Although tax incentives can bring major develoments into one community, that community is often competing with other nearby municipalities for the same project. In other words, one town gains, the other loses. And, according to EWG, the metro area as a whole gains nothing.

"It's mind boggling, really, when you think about what $6 billion could have done in the St. Louis region other than move retail from one municipality or county to another," she said.

Some communities insist they couldn't be competitive without those tax incentives. Belleville has handed out $119 million in tax breaks during the last twenty years, according to the Gateway study. The taxpayer funded projects include car lots and shopping centers. Belleville Mayor Mark Eckert says tax incentives helped turnaround the economy of the city. He insists it probably wasn't possible to do it any other way. Still, EWG says Belleville lost share of the sales tax in the area during the last twenty years, even though Eckert insists the tax revenue is up over the last year.

Most projects offer tax incentives that are available to developers over years and are often sold as bonds to private investors. The bondholders are the ones who bear financial risk if the project fails. The municipality that offered the breaks will lose a percentage of tax revenue, perhaps for more than twenty years, but the communities hope the increased business and jobs more than make up for the deal given to the developers.

The biggest risk to taxpayer funded projects is when a government "guarantees" the incentive, which means it accepts the risk of failure and will be left holding the bag, or loss, if the development fails. Guarantees are very unusual. In the early 90s, St. Louis City guaranteed $15 million in incentives for the St. Louis Marketplace development, which has struggled over the years. Today, Comptroller Darlene Green told me the city was forced to pay $3.4 million out of the general fund to meet it's guarantee. It was the first, and last time, the city "guaranteed" a TIF project.

St. Louis City, Belleville and many other cities have brought in significant developments with tax incentives, but it's also clear, at least to me, that it hasn't helped the region as a whole. Like Gateway's Maggie Hales, I wonder what we, as a region, could have done with that $6 billion if we had spent it on education, social services or health care.


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