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Economy & Business

TIF Financing Hurts Communities By Forsaking Crucial Property Taxes For Sales Taxes

Show-Me Institute
David Stokes / Policy Analyst, Show-Me Institute

Shrewsbury is the latest city within Saint Louis County to consider Tax Increment Financing (known as TIFs) to subsidize a new Walmart. TIFs have been ravaging our region for twenty years, despite strong evidence they don’t help the economy. A study of TIF use in Chicago suburbs found that cities that did not use TIF grew faster than those that did, while a study of TIF in Iowa found no evidence of economy-wide benefits from its use. Here in Saint Louis, researchers at the East-West Gateway Council of Governments have documented the total failure of these projects to produce jobs or economic growth in the region. So, why do TIFs keep popping up like zombies in a bad economic development film?

TIFs keep surfacing because city officials often blindly focus on sales taxes.  After all, that’s how cities are primarily funded.   Desperate not to be one-upped by border cities and their own giveaways, cities gladly sacrifice property taxes for more sales tax dollars.  

The problem is that property taxes pay for schools and many other critical services.

Disturbingly, the quest for precious sales tax dollars often encourages cities to abuse eminent domain as a part of TIF. St. Louis County residents and business owners in Rock Hill, Sunset Hills, Richmond Heights, Manchester, and elsewhere have suffered the pain of having their property taken so that taxpayers can subsidize new developments. Joanne and Arthur Bailey fought for years to be able to keep their home in Hadley Township (in Richmond Heights) against threats of eminent domain. Thankfully, the Baileys won their battle. Many others have not been so lucky.   

Even when some officials understand the dangers and try to stop them, TIFs aren’t easy to defeat.  County TIF commissions in Saint Louis and Saint Charles County have recently rejected TIF proposals only to see city councils override their decision.  That is what happened in Ellisville, and will likely happen in Shrewsbury, because the law allows it.  

It is hard to believe that a city of a few thousand can make tax decisions that harm an entire region, but that is exactly what happens.  Shrewsbury has 6,600 people, but it will make tax decisions that affect the Saint Louis Community College district, which serves 1.3 million residents. Why continue to allow small cities to impose policies that hurt our larger region, with no way to stop it?  It is ludicrous.

Happily, some citizens are finally starting to recognize the harm done by TIF and local government economic planning. The Ellisville City Council passed the TIF despite substantial opposition from the residents. Anti-TIF candidates in the most recent Ellisville mayoral election received more than 70 percent of the vote last year, but the TIF still went through. It remains to be seen whether the opposition in Shrewsbury will be able to mount a major attempt to defeat the latest Kenrick Plaza TIF proposal.
Major TIF changes are sorely needed at the state level. Countywide TIF commissions should have the final say, not city councils, and Missouri needs far stricter limits on what can be taken by eminent domain.  Until then, the municipal TIF sprint to the bottom will continue. Next stop: your town.

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