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Tuesday, May 9, 2017

TIF Plans in St. Louis Are 'Redlining and Block-Busting,' Show-Me Institute Says

Posted By on Tue, May 9, 2017 at 6:16 AM

click to enlarge Tax deals in the Central West End are Exhibit A in the Show Me Institute's broadside against tax increment financing. - PHOTO COURTESY OF FLICKR/ PAUL HOHMANN
  • Tax deals in the Central West End are Exhibit A in the Show Me Institute's broadside against tax increment financing.
Editor's note: This story has been updated with a correction. Please see our note at the story's end.

Located in the Central West End, the Argyle Building is one of the city's more expensive rental projects. Two-bedroom apartments currently run up to $2,295 per month — an environment that, according to recent marketing materials, "SCREAMS luxury."

"Walk into your new apartment with an expansive living area, recently updated kitchen, private patio, renovated bathrooms, cool architectural features, large bathrooms and walk in closets," one advertisement noted.

Yet when it came time to erect a parking garage next door, the​ ​developer sold the land to the city, which then ​​financed the edifice entirely​ ​with public funds, having argued that the project was "financially unfeasible in the marketplac​​e."​ ​In short, the taxpayers fully funded a $14.5 million parking garage next to luxury apartments in a trendy part of the city.

That deal is now Exhibit A in a new paper by researchers at the Show-Me Institute criticizing the use of Tax Increment Financing, or TIFs, in St. Louis. In the last year, a group of progressive activists calling itself Team TIF has pushed for reforms of the city's giveaways. Now they're being joined in that cry by a conservative think tank that holds genuine sway at the state legislature. The combination could prove explosive.

See also: Meet the Everly: $1,475/Month Studios, and a Tax Break from City Hall

Patrick Tuohey, co-author of the think tank's new report, was scheduled to speak in St. Louis on the topic at the Show-Me Institute's Police Breakfast this morning. Reached yesterday while he was en route to St. Louis from his office in Kansas City, Tuohey says that he expects reforming TIFs in Missouri will be a major focus of the Show-Me Institute in the coming year.

"I think Missouri needs tax reform, and I think TIFs are one of the most egregious examples of the issue," he says. "People can argue that it was developed with good intentions — but the execution of it is just shameful."

While the St. Louis study is relatively bare bones, Tuohey did a much more in-depth study on the problems with Kansas City's TIFs at the behest of the Urban League, and he says the report helped spur activists to block some particularly egregious examples there. He says he's horrified by the way these financing plans rob public schools and city services in order to line the pockets of affluent companies.

"The activists in Kansas City that started pushing back were public school parents," he says. "They came to realize that money going to school districts and libraries was instead being directed to these developers."

And the racial issues are real, he says. "These are modern-day versions of redlining and block-busting."

That fact comes across in Tuohey's more limited study of St. Louis, which echoes the findings of local progressives by showing that tax increment financing is mostly given to the neighborhoods that need it least. City officials say that such tax deals are needed to spur development in neighborhoods where it would otherwise not occur — yet Tuohey's study shows that only a small percentage of TIFs are found in high poverty census tracks. The other are disproportionately clumped in places like, yes, the Central West End — where, if developers can charge $2,295 a month in rent, they can surely also recoup the costs of building a parking structure.

The effect on the city is staggering. Tuohey found that TIF projects that are currently active alone have stripped St. Louis of $263 million in revenue — even as $207 million of that loss benefits wealthier neighborhoods that could presumably attract development even without such giveaways.

And while city officials often claim their hands are tied, Tuohey notes that one relatively straightforward reform would be to delineate which neighborhoods they're open to TIF packages — and eliminate their use in the others. As-is, just about anything can be designated as "blighted" if the consultants working on the project get creative enough (just look at the Circle K at Skinker and Delmar, one of the few businesses in the neighborhood making money hand over fist). Once it's been declared as such, the doorway to giving it tax money is wide open.

Tuohey says he hopes to work to get statewide reforms on the legislative agenda in Jefferson City in upcoming sessions. In the mean time, he says, he's interested in learning more about local reform efforts in St. Louis. He's convinced he can find common ground with progressives here.

"When I talk to the Urban League or to parent groups, they know we might not agree on the minimum wage or on charter schools, but we have everything in common when it comes to trying to stop crony capitalism," he says.

Editor's note: A previous version of this story inaccurately referred to the relationship between the developer of the Argyle Building and the developer of the Argyle Garage. They are not affiliated, and the Argyle Building's developers did not seek any tax increment financing for the apartments, nor did its current owners. The Show-Me Institute acknowledges its error; we regret including that information in the original version of this story.

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