They start out in the city, tenderly rehabbing a stern little redbrick house or glamming up a loft. They love the city—its crazy history; the smells of hops and river funk; the mix of bodegas and street brats and swanky Tony’s; the garment district warehouses and terra cotta ornament. They fall starry-eyed in love with somebody who feels exactly the same way.
And a few years later, they get pregnant and move to the suburbs.
In recent years, what’s drained the city of a healthy middle class (aside from crime, both real and perceived) is its lousy school system. Yet instead of using every possible cent of tax revenue to improve that system, we’ve sacrificed millions of dollars to create incentives that are designed to lure people back to a city that…still has lousy schools.
TIFs, the multimillion-dollar tax-increment financing incentives dangled as lures for large-scale projects, we hear about. True to their name, they cause squabbles. But tax abatements are little gift-wrapped prezzies quietly handed out to developers and homeowners. And between 2000 and 2014, these abatements amounted to $307.5 million.
The St. Louis Public Schools would have received well over half of that money. Instead, it was forgone for, in many cases, 10- or 25-year tax breaks handed to developers or homeowners with no hard-and-fast criteria, according to no overall plan, with no requirements and no tracking of outcomes. It’s as if the city was just grateful anybody would consider doing a project there.
There was a time when desperation was justified. The city’s population slid downhill fast between 1950 and 1980, and neighborhoods emptied out. But then the decline slowed, and since 2010 it has leveled off, dropping by only 4,000 between 2010 and 2015. “The centrifugal force is reversing,” says one political insider. Thanks to adventurous empty-nesters, childless couples, and a growing number of young singles, we don’t need to cover developers’ hands with grateful kisses anymore.
But they’ve grown used to it.
A system has evolved that works perfectly, as one resident put it, “for those who know how to work the system.” It follows developers rather than steering them.
It encourages growth in already thriving neighborhoods, and it keeps the city segregated—racially, economically, even aesthetically, with all the shiny new things clustered in the center and wastelands to the north and the far south.
SUCH A DEAL
Tax abatement freezes a parcel’s assessed value at its pre-construction level. In other words, you can buy an empty lot, build a $600,000 dream house, and pay taxes only on the land until the abatement expires. The notion is that in five or 10 years, when you do pay taxes on its full worth, the city will get a nice chunk of change, because you’ve increased that lot’s property value.
To get tax abatement for a particular project, a developer (or homeowner) goes first to that ward’s alderman, seeking his or her blessing. If the alderman smiles upon the plan, the developer fills out an application with the Land Clearance for Redevelopment Authority, which then makes a recommendation. Incorporating (or perhaps flat-out ignoring) that recommendation, the alderman presents a board bill to either the Neighborhood Development or the Housing, Urban Development, and Zoning committee of the Board of Aldermen. Traditionally the committee asks a few token or random questions, although lately folks have been getting grilled a little harder.
For big projects, the developer will send a lawyer from a big firm to give details about the project. In nearly every instance, the result is a unanimous “do pass” vote. And when the bill comes before the entire board, they follow suit.
Watch a few of these committee meetings, and you’ll quickly realize that although tax abatement was designed to be an incentive, these projects are often well underway by the time it’s awarded. You can’t very well use the classic TIF argument that “but for the abatement, this project would not have happened” when the drywall’s already hung and the pool’s concrete just got poured.
Nor can you reliably argue that abatement is needed to close the gap between a developer’s investment and the eventual sale price, because some of these homes are bought for about $100,000 and sold for three times that amount.
Nor can you use the commonsense definition of blight.
THE BLIGHT SHIFT
“Blight” entered St. Louis’ vocabulary in 1974 with the advent of Community Development Block Grants. The idea was to use federal money to reclaim chunks of the city, assembling land and conducting urban renewal one block at a time. When federal funding dried up, we started “spotblighting” a parcel at a time.
Under Missouri statute, a blighted area has “defective or inadequate street layout, unsanitary or unsafe conditions, deterioration,” or other conditions that endanger life or property. The area “retards the provision of housing accommodations or constitutes an economic or social liability or a menace to the public health, safety, morals, or welfare.”
Today’s board bills still contain that language, and even some aldermen have begun to roll their eyes at the evidence developers put forth (a cracked sidewalk, say, in the Central West End). It’s a game, an archaic legal maneuver. Sites do come along that even a Martian would recognize as blighted, and everybody’s thrilled to sign off on those incentives. But the real goal of today’s blighting is not to tackle swaths of ruin and decay or improve morality and hygiene. The real goal is simply to bring in projects that will yield more revenue. The city’s looking for “the highest and best use,” and because there’s no clear, formalized definition of that, just about any project, in any neighborhood, can be a candidate for spotblighting.
The practice has its critics.
“The very idea of spotblighting is sort of like spot zoning—it undermines the basic logic of the policy,” says Colin Gordon, author of Mapping Decline: St. Louis and the Fate of the American City. “Blighting is a neighborhood condition, and unless you can rebuild the entire neighborhood, you are not fighting blight.”
You’re also, in most cases, not making a net gain by capturing investment from outside the region. Spotblighting just moves development—and blight—around the metro area, Gordon says. City engineer Harland Bartholomew raised the pertinent question back in 1919: “Do we stop to consider how large a proportion of our growth is at our own expense?”
Matthew Carroll-Schmidt, a lawyer who recently lost his race for Sixth Ward committeeman, has sat through a few hearings. “They will give a 30-minute presentation with no real information!” he exclaims. “Every time [21st Ward Alderman] Antonio French looks at the piece of paper and starts questioning them about their deals, they say, ‘Oh, those aren’t the right numbers.’ These guys always sound like f—king Donald Trump: ‘It will be the best building ev-er.’
“There are huge chunks of North City a reasonable person could drive through and say, ‘OK, this area is blighted; you don’t have to pay taxes for five years,” Carroll-Schmidt continues. “Instead, they use a statute that is supposed to be redeveloping the bad parts of our city to redevelop the good parts of our city.”
The only explanation he can fathom is that “there’s a feeling of decay and decline among older St. Louisans, so even though this stuff is just bullshit, it’s sold as the miracle cure to bring St. Louis back. But I didn’t grow up in that environment. I was born in 1980, and the city sucked, and it’s been getting better ever since.”
THE HIGHEST AND BEST USE
Reverting to the traditional definition of blight wouldn’t be as easy as it sounds. “If we were to say, ‘Hey, we’re going to make all of North City tax-free,’ that would entice some investment,” says Jonathan Ferry, a financial analyst SLDC hired last September to manage major projects. “But tax abatement is just one small piece of the equation when a developer is trying to figure out whether a project will be profitable, and they have to have a willing bank or financing partner… We use it to refine or slightly alter the quality of development to try and get something that might be the highest and best use.”
Ferry’s boss, SLDC executive director Otis Williams, says, “In the central corridor, we do not like to do incentives, but occasionally a project comes along that has infrastructure issues, or it’s one we would really like to see in the city.” North and far south, few questions are asked, he says, whereas “in areas like The Hill or Lafayette Square or some parts of Soulard, there is no tax abatement or, in some cases, five years instead of 10.”
That means no more deals like the one a prominent St. Louis family received in 2009: a 10-year abatement for a new 4,500-square-foot house on The Hill with an in-ground swimming pool. The assessor estimated a market value of more than $600,000. They’ve been paying less than $500 a year in property taxes.
Or the house across the street from that one, which cost an estimated $700,000 to build and received a 10-year abatement. The owners are paying less than $400 in property taxes.
A third house on The Hill, also owned by a prominent family, received a 10-year tax abatement when it was built in 2008 (with four bedrooms, an underground sprinkler system, and a heated in-ground saltwater pool). The family has been paying about $375 in taxes. The property was listed for $600,000 last spring.
With Williams’ words as a guide, though, we still might OK the five-year abatements for the row of houses in Lafayette Square with market values between $500,000 and $600,000. Five years for a house on elegant Flora Place because, as Eighth Ward Alderman Stephen Conway explained, “it was 3,300 square feet, so it was quite an expensive undertaking.” Ten years for Imo’s Pizza (Conway is its chief financial officer but was not present at the committee meeting where Fifth Ward Alderwoman Tammika Hubbard described the proposed new $7.4 million distribution center near City Museum). Ten years for a $16 million condo project in the Central West End, because it’s on a “strategically very important street.” Ten years for a new house on Dale east of Hampton, because it’ll need a pricey retaining wall. Ten years for a $270,000 rehab on Shaw. Ten years for a $386,000 house on Juniata, built new by Millennium Restoration and Development but with a cool historic-storefront turret. Twenty years for a $30 million luxury high-rise on Pershing, because its two levels of parking will be expensive.
The list goes on.
OLD-FASHIONED COURTESY
Last September, Conway stood before the Neighborhood Development Committee and read a board bill for a new house on a double lot on The Hill. It was in Alderman Joseph Vollmer’s 10th Ward, but “somehow he’s related in a way to the person who’s going to build this house,” Conway explained vaguely.
(The house happens to be next door to Vollmer’s, and his sister-in-law bought it and passed it to her daughter.)
The reason the project merited 10 years of tax abatement, Conway continued, was that “they had to buy the property for $149,000” (actually, the records show $139,775) “and their construction cost is $282,000” (the permit estimate says $210,000), “which would bring them in at $430,000—so, overbuilding for that neighborhood.”
There was a quick and unanimous vote: “Do pass.”
In fact, of the 100-or-so tax abatement votes I checked, every one was a unanimous “Do pass.” That’s because of a quaint practice called aldermanic courtesy. In St. Louis Politics: The Triumph of Tradition, Lana Stein describes it as “a code of mutual noninterference that strengthened the aldermanic role while inhibiting citywide planning.” Today, it’s loosely understood to mean that if somebody wants something for his own ward, the other aldermen will play nice and give him their vote.
“Each alderman decides what they want to do in their own ward,” explains 17th Ward Alderman Joseph Roddy, “and we all acquiesce to each other. I say yes as much as anybody, because I have so much going on in my ward.”
Vollmer isn’t just feathering his family’s nests. He genuinely loves the city. “To me it was the best thing in life, growing up in a neighborhood like this,” he says mistily. He’s invested in The Hill—he owns several properties, and he runs Milo’s Bocce Garden—and he’s keenly aware that the neighborhood’s dotted with shotgun houses, some of them shoddily built, that are too cramped to suit today’s middle class. So if a developer’s willing to tear down two houses and build a big pretty one, Vollmer’s always ready with a board bill.
“Keeping people in these neighborhoods,” he says, “is the most important part of my job. Typically I’ve used tax abatement as an incentive to have people either stay in the city or move to the city. One person gutted their house and actually put a second story on it. Now that, to me, means they are making a major commitment to the city. I’ve seen 10-year abatements where these people might have been paying $800, and now their taxes are $5,000, but having had a 10-year break, they’ve saved enough. It’s a nice tradeoff.”
He’d thought of buying the house next door himself. But he was thrilled to see his wife’s niece build a big house there, and says “you need tax abatement for a young couple to put $300,000 into a property.”
We talk further about criteria for incentives:
“I’ll be dead honest with you: There probably might be rules and regulations I don’t know about,” Vollmer says, “but I use it as a device to keep the neighborhood strong. Call [SLDC]—those guys know more about numbers. I’m just a saloonkeeper who got elected.”
THE FIRST REPORT
Roddy, on the other hand, is a financial planner by profession. As chair of the HUDZ committee, he’s been pushing for more data, better numbers, tighter analysis, and long-term strategic planning.
Until recently, he says, SLDC was hiring law firms to do the financial underwriting, “which was kind of expensive, and you don’t develop any institutional knowledge. There was nobody in house who could tear these deals apart and challenge the developers a little bit.” Last September, SLDC hired Ferry, and he’s been busy setting up quantitative formulas and finding a way to track incentivized projects long-term.
“That will help us get an idea of how much we are incentivizing and how we are incentivizing,” Roddy says.
The city also commissioned a report from The PFM Group, financial advisors in Philadelphia. The result? The first-ever comprehensive inventory of all major economic development incentives used by the city between 2000 and 2014—and their total cost.
City communications director Maggie Crane says Mayor Francis Slay ordered this analysis “to a) ensure that incentives are only given in instances where projects would otherwise not happen, and only to the degree that they are necessary, and b) to ensure that projects will result in a reasonable level of financial benefit going forward” by generating new taxes.
PFM subcontracted to local academics. Will Winter, research assistant professor at the University of Missouri–St. Louis’ Public Policy Research Center, had the job of gathering data—which in St. Louis is a little like following a golden thread through a labyrinth to reach a giant haystack that contains a few needles and a bunch of straight pins. Because the city hasn’t required developers to prove that they need an incentive to make a project work, Winter says, the money has followed development, concentrating in rapidly renovating areas rather than evening out the landscape.
• Downtown, Downtown West, and midtown received two-thirds of all incentives, the report notes. For tax abatement, the three biggest recipients were Downtown, Downtown West, and the CWE.
• Incentives increase the assessed property value, but they don’t create jobs in the surrounding neighborhoods; “there is little evidence of significant spillover effects around incentivized parcels.”
• “The involvement of individual members of the Board of Aldermen is unusual,” the report states. The board wields power to initiate and shape incentives, whereas in other cities they might enter the process only to do a final, collective review and vote.
“People who have been elected by 300 votes are determining multimillion-dollar tax incentives,” says Alex Ihnen of nextSTL.com, “and the reason they don’t want it taken out of their hands is the leverage it gives them.”
• Tax abatement rose from $5 million in 2000 to $29 million in 2014. (Crane offers two primary reasons for the increase: “One, as an alternative to tax increment financing,” which was declining in that period. Two, because “abatement is generally used more for smaller projects, many of them residential. While the last economic downturn resulted in fewer major projects, there have been more projects overall.”
• Heavy use of tax abatement for single-family homes is another oddity in St. Louis. The study counted 3,144, compared with 500 commercial, 105 multifamily, and 56 mixed-use. “It’s smaller dollar values than commercial,” Winter says, “but it’s more insidious. There’s more of it, and it happens easily behind the scenes.” Also, it happens in parts of the city that already have strong housing markets. St. Louis Hills, where houses are rarely for sale and there’s not a hint of blight by any definition, received more than double what Old North did and more than five times as much as Walnut Park East.
• Finally, St. Louis is unusual in its lack of a citywide development plan. Without such a plan, development tracks along the path of least resistance. Between 2000 and 2014, the 10 neighborhoods whose assessed property values dropped most sharply received about $5.6 million in tax abatement. The 10 neighborhoods with the most dramatic increases in assessed property values received $113.2 million—20 times as much tax abatement.
A draft of the report was completed in September 2015, but some suspect that the city wanted to get the earnings tax passed before releasing the final version, in May 2016.
Molly Metzger, an assistant professor in Washington University’s Brown School of Social Work, read the report and ran the numbers against census demographics.
In most of the neighborhoods receiving more abatement, the number of white residents rose and the number of African-American residents fell. The 10 neighborhoods receiving the least abatement remained solidly African-American.
“A lot of people of color have gotten pushed out of the central corridor,” Metzger notes. “We keep on re-segregating ourselves, through public policy, over and over again.” Unless we make dramatic policy changes that distribute resources and affordable housing more evenly, “St. Louis is going to stay segregated, and the color line will move a little bit farther south and north.”
REVERSING THE MAP
The mayor rather queasily quoted the PFM study at a Board of Estimate and Apportionment meeting in April: “They predicted that, all things being equal, our revenues will fall $75 million short from the increase in expenses over a 10-year period of time.”
In June, Fitch Ratings downgraded St. Louis’ issuer default rating from A to A- and its municipal bonds from A+ to BBB+. “Recent policy initiatives have made extensive use of tax incentives to spur redevelopment,” Fitch noted, “making it difficult for government to fully capture new ratables in the near term. Until incentives begin to expire, policymakers will have to endure the revenue time lag until revitalized properties are added to the taxable base.”
Andrew Arkills, a business analyst who’s president of the Tower Grove South Neighborhood Association, translates:
“The way we are using incentives limits our capacity to catch the windfall of all this development. Thus we have a budget process where we are robbing Peter to pay Paul. There’s this large disconnect: We’re sitting there with pompoms cheering all the new development and giving away all this money, and we’re so broke we can’t fund all the departments of the city. ‘We can’t help you, North Side. We can’t help you, far South Side. We don’t have any money.’”
Arkills likes to look at numbers—especially when they don’t add up. Flipping through recent board bills, he started noticing anything that said “redevelopment.” Using the new vote tracker on the city’s website, he mapped addresses that were being declared blighted and wound up with a color-coded ward map that showed very clearly which aldermen are requesting tax abatement.
Of 121 board bills, most aldermen had two or three, but six central corridor aldermen submitted 80. The dots on the map look like they’ve been poured straight down and pooled in the middle, covering the central corridor, with just a few spatters to the north and far south.
The pattern’s so predictable, Arkills needn’t have bothered to map it. The central corridor is the city’s spine and central nervous system, with MetroLink passing through and interstates feeding in. It’s stable—even with last century’s white flight, the big institutions and their surrounding cultural resources held it in place. And in traditional St. Louis, developers like that reassurance.
“The best way to figure out what the Board of Aldermen have declared blighted,” says Carroll-Schmidt, “is to look at a map of the real blighted areas and reverse it.”
SCHOOL'S OUT
Add up all the abatement received by the 34 neighborhoods that received less than $1 million apiece between 2000 and 2014. Now compare that to the Central West End: It received twice as much tax abatement as those 34 combined. Activists characterize this as poorer areas of the city subsidizing the Central West End—an accusation that Roddy—whose 17th Ward contains parts of the CWE, Midtown, and Forest Park Southeast—finds frankly ridiculous.
“Residents in the central corridor often don’t have kids, and if they do, their kids go to private schools,” he says. Point being, they are not costing the city much in services, and neither are the businesses. “Basically, all the rest of society works to support families who have children in the school system. Children are very expensive.”
Ironically, it’s the children’s schools that are losing out to tax abatement. Last year’s property tax rate was about $7.59 per $100, and $4.37 of that went to the St. Louis Public Schools. In other words, they would have received more than half of the money used for tax abatement. And it’s not like the schools are flush: They just went hat in hand to voters this April, begging for a 75-cent hike in property taxes to fund their programs.
Doesn’t SLPS ever squawk about the money it’s losing? “They used to, 100 years ago,” says Mike Jones, former deputy mayor of St. Louis, who now sits on the Missouri State Board of Education. “Now I think they have just thrown up their hands, because complaining about this would be a full-time job.” He also points out that there’s been a demographic shift in recent decades: Far fewer U.S. households (about 30 percent) have children in public schools. “That’s why you don’t have a political counterweight to this kind of activity.”
As far as Jones is concerned, the very notion of using property taxes to fund schools is obsolete. “It might have made sense in a 19th-century preindustrial economy or an early 20th-century industrial economy, because those were place-based activities. In the 21st-century networked society, using place-based taxes to fund universal infrastructure makes absolutely no sense.”
After placing several calls, I receive an emailed comment from developer Rick Sullivan, who is president of the governance board set up to oversee the troubled school system: “The Special Administrative Board is supportive of any revisions or reforms to TIFs and Tax Abatement that would result in additional revenues to St. Louis Public Schools.”
PHAROAH ECONOMICS
The city could always ask corporations to pay at least part of their abatement back to the school district later. But that doesn’t happen, Jones says, because lawyers are trying to “create value” for clients: “If you pay me $400 an hour, I can make this cheaper for you.” Developers, meanwhile, have developed a fine sense of entitlement: “They ask for this like it’s free money. The weakness is that the people on the public side—the mayor, developers, aldermen—don’t underwrite these deals the way they would if they were banks. They just want a building to stand in front of, to say they did something. I used to call it pharaoh economics. A pyramid is a great public works project: It takes forever to build, so it provides jobs, and every pharaoh needs his own pyramid.”
Still, there are solid examples of tax abatement being used to benefit all of us: beautiful old schools that would be cost-prohibitive to develop otherwise; wasteland stretches of the city cleaned up and occupied; sprawling outdated warehouses that become homes to new businesses; derelict eyesores transformed.
A former colleague of mine, journalist Bill Powell, lived in a gorgeous rehab in Fox Park, and it was tax abated. “It didn’t factor into our decision at all,” he tells me. “We found out later and thought, ‘Oh, that’s nice.’ We are clearly people who could have afforded it.” By the same token, when they moved in, their neighbors’ welcome was heartfelt: “Oh my God,” they’d say, “this house has been an eyesore for years.”
The developer who rehabbed Powell’s house, Orlando Askins, says tax abatement “absolutely makes a difference when you’re selling the property, but I think it’s a better selling point in neighborhoods that are on the rise, that just need that little extra push. It’s always nice to have a chip in your pocket to help entice someone, but it’s not like I wouldn’t do the project if it wasn’t tax abated.”
Abatement’s a useful tool, agrees longtime developer Pete Rothschild, to spur development in neighborhoods that are deteriorating or stuck. “Once a neighborhood is on the way, though, it shouldn’t be used. Way too many of these decisions are based on politics rather than project merits, and aldermanic courtesy costs the city huge amounts of money.”
Even developer Paul McKee, who received a $390 million TIF package to lure something, anything, to the North Side, announced in 2013 that his goal was to be selling houses without any property tax abatement within five years. “We need to wean our city off all the tax breaks we give people to come here,” he told the St. Louis Post-Dispatch. “We need to get people to think this is a different marketplace.”
At SLDC, I ask whether developers are spoiled. “If they are, our goal is to make sure they’re not,” Ferry says.
“Let’s not say they are spoiled,” Williams inserts hastily. “Everyone sees this as a time in our history when a lot can be done. Developers believe this should be a public-private partnership. We are now in a place where we are scrutinizing all these things more.”
“It’s human nature,” Ferry says. “Everyone wants to know they got a fair deal, and what’s often defined as fair is what the next guy got.”
“Or the previous guy,” adds Williams.
“We have to come up with a system that is based on something objective and quantitative,” Ferry says, “so we can say, ‘This is fair, and here’s why.’” Without tight criteria, agreed-upon goals, and a citywide economic development plan, the temptation is to just keep saying yes.
NEVER-LAID PLANS
Why don’t we have a plan? First, because the city’s so fragmented, and you can’t even get all the data, says Roddy. “You have the comptroller’s office, the collector of revenue’s office, the license collector’s office, the budget division, the SLDC, the treasurer’s office. Getting that information organized in a way that you can actually make decisions and track your results is going to require the cooperation of three or four separately elected officials.”
Historically, data hasn’t been handled in a uniform way, so when you do research, you’re fishing with a net full of holes. For many properties, I could only find a partial sales history. “I’ve done analysis with the assessor’s database, and I agree, it’s incomplete,” says Williams. “Sometimes forms are filed and they just aren’t put into the record.” The city funded new software for the assessor’s office this past April, he says, and that should help. But the office only maintains records on individual parcels, so we still won’t be able to see which developers are receiving the most incentives.
And we still have no idea how much money we’re losing to tax abatement at any given point.
“Say you are the school system,” suggests Roddy, “and 70 percent of your money comes from local real estate taxes. You try to figure out what’s going to come off of abatement next year so you’ll know what you have to work with—but none of the numbers are there.”
Williams nods: “The problem is that we don’t have it in a central database. We could look up a specific project individually. We can tell you what is going to be coming off the tax abatement rolls. But in order to figure out what will actually go to the school district, we have to know what each project’s assessed value is.” Until a property’s unfrozen, the amount isn’t recalculated.
Lyda Krewson, alderwoman for the 28th Ward and a mayoral hopeful, also points to the lack of regional government and collaboration, not to mention St. Louis’ weak-mayor structure, which means “there’s no one voice that can speak for the city.”
But Sarah Coffin, associate professor of urban planning and development at Saint Louis University’s Center for Sustainability (and a founding member of the applied research collaborative that helped prepare the PFM report) says “there are some highly effective weak mayors—look at Chicago’s Mayor Daley. It’s how you choose to manage your power.”
Coffin sees the city’s lack of planning as a statewide problem. “State regulations incentivize and create structure for development, and Missouri has the oldest planning regs in the country. Its legislature is the fourth largest in the country, and it’s disproportionate to the population. The urban areas have a disproportionate lack of say, and the rural areas don’t necessarily value planning as much.”
The last time St. Louis approved a citywide land-use plan was in 1947, Williams says, “and I don’t think we’ve ever had an economic plan. But we will have a strategic economic development plan.”
It’s already in the works, he says. SLDC’s just waiting for funding and for the St. Louis Economic Development Partnership, a city-county collaboration, to set strategic goals for the region. Then SLDC will draw up a specific city plan. “But it would be done in a collaborative process where we would engage stakeholders and citizens and hire a consultant to lead us through that process,” Williams says. He wants input from neighborhood groups, regional entities, corporations, civic institutions, universities, foundations, banks—“everybody we can think of who interacts with us in this process.”
In other words, it will take a while.
For now, all development incentives are under review, Williams says. Ferry’s running numbers, trying to make sure that every project that gets incentivized is financially sustainable. And old rivalries are beginning to dissolve. Before the city-county partnership, “we were singularly focused on just the city,” Williams explains, “and we were fighting for our part of the pie. Developers or companies would cause the city and county to provide offers, and we would compete. We don’t do that anymore.”
Coffin has noticed a sea change at SLDC, a willingness to listen and a determination to become more proactive than reactive. “We’ve always been chasing one step behind the developer,” she observes. “We need to get in front and say, ‘This is our plan for that area.’ Developers want some sort of planning. They need to know what they are preparing is going to fit into a bigger picture.”
Krewson says she’s been limiting the incentives she proposes, telling residents of her well-heeled 28th Ward, “We’d all have nicer kitchens if we didn’t have to pay those danged taxes.” She’d like to see SLDC’s role strengthened, with more formal scrutiny of numbers and also of architecture, and she’d like to see aldermen—who, as she politely puts it, “all come with different skillsets”—going to the SLDC to fight for their constituents.
Roddy’s HUDZ committee prepared a list of ways to “Wean Developers Off of Incentives,” including caps and time limits, tougher criteria, and an end to incentives for “occupied and economically viable buildings.” Two of the tactics on the list actually involve the use of incentives to reduce the use of incentives: “Provide incentives to Aldermen to reduce the amount awarded to developers by letting them keep the savings for infrastructure”; “Encourage SLDC to reduce incentives by letting SLDC redistribute the savings for staffing of financial and planning functions.”
Habits are hard to break.
TEN MINUTES AT A HUDZ HEARING
On May 18, the Housing, Urban Development, and Zoning Committee hears Board Bill 27, asking for up to 25 years of full tax abatement for a $42.1 million office building that will rise from the parking lot across from Busch Stadium.
The hearing’s in the Kennedy Room at City Hall, a musty brown room with a cheaply veneered dais. The room was once grand, and the proof is above the aldermen’s heads: a half-domed ceiling that glows with allegory, its painted figures representing wisdom, courage, and justice. But down below, reality’s a little messier.
Roddy plays devil’s advocate, noting the high vacancy rate downtown: “Are we just cannibalizing other office space?”
“It’s a terrific question, sir, honestly,” says Jonathan Giokas, the Husch Blackwell attorney representing Koman Group, the developer. “We don’t feel this is competitive with anything else in St. Louis.” Rents will be higher, he says, and the project’s geared to “a creative-class type of tenant.”
“And so this bill asks us to label the land across the street from Busch Stadium as blighted?” Alderman Antonio French asks. “You don’t have a tenant yet, so how do you know it’s going to create 348 jobs?”
That number, he’s told, is “a metric.”
“It’s hard to weigh this without knowing the total incentives you’re asking for,” French says.
“You’ll certainly have a bite at that apple,” Giokas assures him, saying they’ll be back in a few weeks asking for other incentives.
“But is it impossible to present that before we vote?” French presses.
“Is it impossible?” Giokas repeats. “It’s not possible.”
“You don’t even have an idea of the incentives you are seeking?”
“We do… I don’t think we have yet put together a package… Under all the scenarios, we have been assuming that we need at least 25 years of tax abatement.”
“Why do you need so much incentive? That’s prime real estate!”
Garrick Hamilton of the Koman Group steps forward. “It will be something you and your colleagues will be proud of,” he promises.
“Mmm,” says French. A minute later, he takes one final shot: “How is it fair to allow developers to pay lower tax rates than grandmas?”
VISION STATEMENT(S)
Activists and academics who are digging into this wonky issue for reasons of social and economic justice would like to see strict limits on where incentives can be used. Metzger suggests zero incentives for areas with a poverty rate of less than 10 percent. If the rate’s between 10 and 20 percent, only five-year incentives, and so on, until you reach poverty of more than 40 percent and can give 15-year incentives. (She doesn’t even comment on the 25-year abatements currently proffered to sexy commercial projects.)
One point on which almost everyone agrees is that we should be tying strings to incentives. For a residence to receive a 10-year tax abatement in Portland, Oregon, it must be located in the Homebuyer Opportunity Area, its sale price must be no more than $275,000, and the total annual income of all occupants must not exceed $73,000. In Cleveland, any tax-abated home must be new construction and must meet the Cleveland Green Building Standards.
There are no St. Louis Green Building Standards for tax abatement—19th Ward Alderwoman Marlene Davis was overjoyed one day because a developer intended to install solar panels.
So, we need more strings. The problem is, we disagree about where to tie which strings and how to pull them taut. Metzger wants to mix things up a little: In a market-rate condo project, set aside 20 percent of units for low-income residents. For a commercial project, require that a living wage be paid. Teach ordinary homeowners and small business owners how to apply for these incentives. Pay more attention to who’s benefiting and how.
The questions go on and on. If a family can no longer afford the home as soon as the abatement’s up, have you really improved diversity? If the family could afford it all along, have you really made a difference? Does tax abatement really clinch deals, or are there more creative ways to encourage development?
At the core, this is a philosophical debate: Do you use incentives to ease poverty and distribute resources more evenly? Or do you tie incentives to the creation of wealth, arguing that those higher tax revenues will support services to help people with lower incomes?
For residential abatements, the individual amounts are relatively small—savings that would only make a real difference for low-income families. Yet low-income families aren’t the intended recipients, because properties they can afford don’t bring much return to the city.
“In my ward, we don’t have any problem with having more affordable housing,” Roddy says, “but there are lower-income areas that aren’t getting any investment, and they want those projects.” Hand them over, though, and you’re perpetuating economic segregation, further concentrating lower income in a lower-income area without ready access to jobs, education, healthy food, or safe parks.
“The bigger your heart is, the deeper the ditch you are digging yourself,” Roddy sighs. “In St. Louis city, not only have we lost jobs and residents but we have typically lost middle- and upper-class residents, and we have far more lower-income people, so the cost of providing services for them falls heavier and heavier on whoever’s left behind. You don’t mind giving tax breaks to a project if it’s going to bring more net revenue into the city so you can use it to provide services for your people. So we are calling some things blighted that aren’t really, because the new project will make more money.”
The tension of this oft-misunderstood game runs right through the Board of Aldermen. After Roddy presents a board bill for a $15 million condo project strategically located at Laclede and Sarah (and “affordably” priced with one-bedrooms starting at $220,000), he’s grilled by the Neighborhood Development Committee chair, Ward 22 Alderman Jeffrey Boyd, whose ward includes the Wells/Goodfellow and Mark Twain/I-70 neighborhoods.
“Did you say ‘affordable’?” Boyd asks incredulously. Assured that the $220,000 is market rate, he drawls, “Lookin’ forward to Joe Roddy helpin’ us get there on the other side of town.”
Later, Boyd takes a similar shot at Dave Richardson, a lawyer from Husch Blackwell who presents a big apartment building project: “I certainly look forward to Dave working on a project on Martin Luther King with us someday.”
SLDC’s plan, Ferry tells me, is that “as the central corridor needs less and less incentives, we pare those down and start increasing incentives in the immediate adjacent areas to get that growth spreading out.”
Williams winces, imagining the look on a North Side alderman’s face when he hears this. “If we had an investor and all they needed was an incentive that would fill a gap, we would be there posthaste,” he assures me.
Even the timing of success is tricky, as the Fitch downgrade illustrates. Jones sums up the trap: “You have this desolate geography. You abate taxes to create activity. People come and create a demand for services. And now you don’t have the money to support those services, because you gave away the revenue to get them here.”
