Strange Bedfellows Agree: TIFs for Whole Foods and Mercedes-Benz Are Absurd

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TIFs for a new Whole Foods and Mercedes dealership in the CWE? Are you kiddin' me?
TIFs for a new Whole Foods and Mercedes dealership in the CWE? Are you kiddin' me?
It's no surprise that Rex Sinquefield's Show-Me Institute opposes the granting of tax increment financing (TIFs) to developers who want to build a Whole Foods store in the Central West End and a Mercedes dealership just south of Forest Park.

To them, these incentives are offensive and unnecessary handouts. They hate handouts. Always have. In fact, they just want government out of the way in general.

But even the Post-Dispatch editorial board -- which is very comfortable with government action and has criticized Sinquefield's "bad" ideas -- thinks these TIFs are absurd.  Man, everybody hates this idea.

Well maybe not everybody -- the incentives were given a thumbs up by the city's TIF Commission on Tuesday. The Board of Aldermen still need to vote on it and give it the greenlight.

But the aldermen didn't slow down to ask many questions several years ago, when developer Paul McKee asked for, and received, a TIF for his massive Northside Regeneration project.

And by the way, the Post's sages supported McKee's project then, and still do.

Explainer: In a TIF arrangement, a developer borrows outside money to install infrastructure that normally the city would, such as a sewer system. In exchange, the city keeps the developer's tax obligations constant on the new property, while the new property bustles and balloons in value. This new stream of wealth, untapped by the city, puts extra cash in the developer's pocket that he can use to pay off his original loans.

In order to get a TIF, a developer has to prove that the area is "blighted" and that "but for" the incentive, no development would happen.

At the hearing on Tuesday, David Stokes of the Show-Me Institute testified that:

In reality, the process is a bad joke. The "but for," "blighting," and other tests that are supposed to be subject to independent analysis are a rigged game. How else to explain why I cannot find one project in the state of Missouri that failed these tests and urban planners found to be inappropriate for taxpayer assistance? Not one. The lawyers and planners who work arm-in-arm with the cities are all paid back by taxpayer dollars,  shielding the process from hard decisions and risk. Everyone involved in the process (planners, architects, lawyers, and developers) makes money if the project goes forward. Who among them is going to be foolish enough to jeopardize the entire deal by saying it -- or something close to it -- would likely happen even without the taxpayer assistance?

And the big injustice there, Stokes argues, is that it surrenders property tax revenue that could've been used by schools, fire departments, libraries and museums (and which revenue those entities can't replace).

Interestingly, that's precisely the conclusion the Post's own sages have reached, writing today:

When the city commits millions of future tax dollars for developments in parts of the city that are doing well, it makes it less likely that those dollars will be available to help blighted areas. And it sends a message to its schools, as they try to climb from unaccredited status: Don't plan on any increases in funding. That money will be in developers' pockets. Sorry.
And this is surprising because they've backed McKee's TIFs (although they have said they're against retail TIFs in general).

Responded one commenter to today's editorial:

Pigs must be flying. The PD publishes an editorial that actually makes sense.

We wouldn't go that far. But with McKee's project ground to a halt, and this new one attacked by all sides, who knows - maybe we're nearing a tipping point against TIFs.

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