Commission hears pleas to leave Missouri's tax breaks alone
This article first appeared in the St. Louis Beacon, Sept. 21, 2010 - The commission appointed by Gov. Jay Nixon to review Missouri's tax credits heard about a lot more than old buildings during more than four hours of hearings Tuesday.
Sure, much of the testimony was about how many run-down structures in St. Louis and in the state have been rehabbed or may not even still be standing if tax breaks hadn't given developers that pump-priming boost that the projects required.
As lawyer Jerry Schlichter pointed out, even the building where the hearing took place -- the Old Post Office in the heart of downtown -- may have become a vacant lot or a parking garage without the tax credits that may be cut back or eliminated altogether to help ease the state's budget crisis.
But others in the parade of witnesses talked not of bricks and mortar but of families and children and unwed mothers in distress, people who are going hungry and homes in neighborhoods that once had been marked by transients but now seem to be on their way to newfound stability.
Jim Brown, who talked of how essential tax cuts have been in funding badly needed youth programs, put it this way:
It would be "penny wise and pound foolish" to cut the tax credit programs for the relatively small amount of money they might save.
In July, Nixon named the commission, co-chaired by developer Steve Stogel and state Sen. Chuck Gross, R-St. Charles, as part of his efforts to revamp the state's 61 tax credit programs. It has held hearings in several other cities and will submit a report this fall, in time for possible action in next year's legislative session. (Click here to learn more about the commission's work.)
Not surprisingly, given the threat of cuts or even extinction that the credits face, most witnesses defended the programs, particularly the ones that they have directly taken part in. Their comments generally recounted the number of buildings saved and jobs created, the amount of new taxes that were paid to the state and the less quantifiable benefits like safe, secure environments that children and families have been able to enjoy that would not exist if the tax breaks had not been there to help create them.
The leadoff witness, Barbara Geisman, deputy mayor of St. Louis for development, said that more than 41,000 jobs -- from construction to white-collar, from temporary to permanent -- have been created because of Missouri's historic tax credit. Using a multiplier, she said those jobs could be traced to a total of 124,000 over the past 10 years.
A benefit that may be harder to see but is no less valuable, Geisman said, is the creation of an atmosphere in St. Louis and elsewhere that will help keep young adults in Missouri instead of seeing them move to other states.
"If you are going to appeal to young people and have them stay in Missouri," she said, "you're going to have to establish urban cores."
Maggie Campbell of the Partnership for Downtown St. Louis, who has noted the effect that tax credits have had on the $929 million worth of construction now going on downtown, echoed that view, saying:
"It is not always about the economics."
Rehabilitating what Geisman called "vacated and abandoned eyesores" helps boost the state's convention tourism business, she added. The middle of a recession is not the time to pull the plug on such valuable tax advantages, she said.
Schlichter recalled that when the federal tax credit to restore old buildings expired in the 1990s, the state stepped in to fill the void and stop the disinvestment and demolition that was happening to historic structures in St. Louis and elsewhere, like Hannibal. He noted that it was legislators, not developers, who were the spark behind the program.
Missouri became a national model that other states have emulated, Schlichter said.
Instead of concentrating on how much the tax credit programs may cost the state, he added, legislators should focus on how they can raise more revenue, from areas like collecting internet sales taxes or raising taxes on cigarettes and alcohol.
Others echoed his remarks and said more attention needs to be paid to the taxes -- income, sales and property -- that are brought in by the tax credits and the projects that they help to fund.
Alan Erdman, of Lutheran Family and Children Services, told the commission that tax credits such as the Neighborhood Assistance Program or the Youth Opportunity Program change lives the same way the historic tax credits save buildings.
"I'm here on behalf of the people we serve," he said, "so we can continue to be there for them."
He noted that though $16 million in credits had been set aside for such programs, only one application had been approved so far, for $100,000, and it was hard to find out from the state why.
"They say, 'You didn't meet our criteria,'" Erdman said, "but they won't tell you what the criteria are, and they won't tell you your score."
Glenn Koenen, head of Circle of Concern, stepped up to defend the food pantry tax credit, which he noted is small but is a "well-deserved reward to scores of donors of modest means."
With the need for food growing as tough economic times persist, Koenen noted that the credit costs less than 50 cents a citizen a year, but it has been a big boost for those who might otherwise go hungry.
A rare defense of paring the state's tax credit program came from Christine Harbin, a research analyst at the Show-Me Institute . She said that while benefits from the tax credits go to some, "we all bear the costs" because the breaks go to projects that the free market has already shown could not make it on their own.
Harbin said that money that the state spends on tax credits is money that could be better spent on education or other services that are not being fully funded.
Responding to other witnesses who said Missouri needed the credits to remain
competitive, Harbin said that even if no other state ended their tax credit programs, Missouri would be better off if it did so unilaterally, because the state should not be in a position of picking winners and losers.
"This strategy didn't work for the Soviet Union," Harbin said, "and it won't work for Missouri."