Missouri Governor Jay Nixon signed into law Wednesday a bill that represented “sensible and long overdue reform” designed to limit the use of tax increment finance (TIF) incentives in Jefferson, St. Charles, and St. Louis counties.
Nixon signed the legislation at the monthly meeting of the East-West Gateway Council of Governments, the federally designated metropolitan planning organization for St. Louis. Nixon credited EWG for its study in 2011 that documented that at least $5.8 billion in public money had been committed in TIFs and other forms of development districts. “The Assessment of the Effectiveness and Fiscal Impacts of the Use of Local Development Incentives in the St. Louis Region” concluded those tax incentive efforts were a losing economic development strategy for the region.
“When it’s done wrong, a TIF diverts revenue from schools, infrastructure and public safety, shuffling jobs from one area to another, lining the pockets of billionaire developers, and doing all this while not creating any lasting positive economic impact to the region as a whole,” Nixon said. “At their worst, TIFs can draw municipalities into a race to the bottom competing to see who can give the most generous giveaways at the expense of more pressing priorities.”
The legislation Nixon signed into law will give county-wide TIF boards more power to limit the tax incentive. Prior to this reform, a municipality could override its county TIF boards by a two-thirds vote of its municipal governing body. Under the new law, if a county board opposes a municipal TIF and the municipality proceeds despite that opposition, the diverted funds can only be used for demolition and land clearance.
Since their inception, TIFs were an economic development tool that used future increases in taxes to finance current projects. With a TIF, property taxes are frozen for the development site, but taxes derived from increases in assessed values and 50 percent of increases in sales, utility and income tax are directed to a special allocation fund, which is used to pay off debt on the project or to finance future improvements.
St. Charles County Executive Steve Ehlmann was credited by Nixon as being part of the “broad and diverse coalition” that was instrumental in getting the TIF reform bill through the legislature. Ehlmann is a former state senator and currently serves on the East-West Gateway Board of Directors.
“I don’t think this would have happened without the study by East-West Gateway. I want to thank the staff,” Ehlmann said at the bill signing. “Too often we are criticized for doing studies and putting them on the shelf and letting them gather dust. We didn’t do that with this one. We took it to elected representatives and got them to do something that I think will help the region by re-diverting resources that had been going to retail development.”
State Senator Bob Onder (R-Lake St. Louis) also credited East-West Gateway’s study of tax incentives as fundamental for the reform bill. “I want to thank East-West for providing the research and intellectual firepower to help us get this done,” Dr. Onder said.
The study, begun at the behest of former EWG Executive Director Les Sterman, documented that for the 20 years prior to 2011, more than $5.8 billion in public money had been committed to TIFs and other forms of development districts, including Transportation Development Districts. About 80 percent of that tax diversion was for retail development.
The study concluded that uniform reporting of revenues and overall recordkeeping for the tax incentives were “remarkably weak,” and that “massive tax expenditures to promote development have not resulted in real growth.”
Nixon cited those findings before signing the bill.
“As East-West Gateway has exhaustively documented, the use of TIFs in the St. Louis region has not effectively increased sales tax revenue or produced quality jobs for the region,” Nixon said.
The legislation, HB1434, was sponsored by Rep. Andrew Koenig (R-Dist.99) who attended the bill signing, along with Sen. Gina Walsh (D-Dist. 19) and Rep. Dan Shaul (R-Dist.113)
The bill also puts a deadline of Nov. 15 on the annual report of TIFs required by a municipality, and requires the Missouri Office of Administration to post information from the reports on the Missouri Accountability Portal.
The 2011 East-West Gateway report local development incentives can be accessed here:
The final version of HB 1434: