This week St. Louis hosts the National Urban League’s national conference, the theme of which is “Save Our Cities: Education, Jobs and Justice.” These are important topics to address, and Missouri is a good place in which to do so. Unfortunately, many of the economic development policies adopted to save cities come at the expense of education, jobs and justice.
Consider tax increment financing, a widely used development program in Missouri. It was originally proposed as a way to spur development in economically distressed areas. Under a TIF program, the city redirects the increased taxes paid on improved property back to the developer. In areas where the return on investment is questionable, public funds can help reduce risk. It sounds like a great idea.
Unfortunately, as practiced in St. Louis, TIF often undercuts public education. The money used to fund these TIF projects — which overwhelmingly occur in economically vibrant parts of the city — is diverted away from public schools, libraries and basic city services. As a result, poor communities suffer twice — not only do they not receive the help that TIF and other programs were meant to provide, but the assistance provided to others comes at a cost to them.
For example, TIF has been used to build luxury high-rises downtown and an entertainment district around Busch Stadium, and it will be used to construct a $134 million mixed-use development, dubbed “City Foundry” in midtown. Much of the tax revenue diverted back to developers for these projects would otherwise support the St. Louis Public Schools (where 82 percent of students are African-American and 90 percent qualify for free or reduced-price lunch).
Regarding jobs, the Missouri Department of Revenue’s annual reports on TIFs show that these projects create only about one-third to one-half the jobs they promise. Even those numbers should be viewed with skepticism as they come from the developers themselves; the state does not define what constitutes a new job or audit the information the developers provide. A report that the St. Louis Development Corp. (the organization that oversees TIFs) itself commissioned in May 2016 reported that “there is little relationship between incentive use and an increase in jobs within neighborhoods.”
Consider the April 2015 essay in The Atlantic in which Harvard professor Walter Johnson detailed the use of TIFs in Ferguson. He found that as a result of business-friendly development policies, regressive “sales taxes account for the largest share of the city’s revenues. Next come municipal court fines. And after that franchise taxes — taxes on telecommunications, natural gas and electricity usage. Only after all of these other sources comes revenue from property taxes.”
This reverse-Robin Hood subsidization — redirecting tax revenue away from basic services to corporate bottom lines — does not take place solely within poor or urban areas. Urban League conference sponsor Centene has sought taxpayer subsidies to build high-rise office buildings in a wealthy neighborhood, something that should be paid for by the company itself. But the standards for qualifying for these handouts are so low that one can understand why businesses seek them. Policymakers must do better with public resources.
Saving our cities is a worthy goal. But across Missouri and especially in St. Louis, many of the policies that are intended to do so are often the same ones that undercut education, jobs and justice. We can no longer judge government programs by their intent; we must judge them by their results. And when it comes to so many economic development programs, the results do not justify their continuation.
Patrick Tuohey is western Missouri field manager at the Show-Me Institute.