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House speaker warns against changes to economic deal


This article first appeared in the St. Louis Beacon, Sept. 12, 2011 - For the most part, it's still all about the "Hub."

That may be one of the few points of agreement among supporters and opponents of the economic development package that prompted Gov. Jay Nixon -- at the behest of Republican legislative leaders -- to call a special session of the Missouri General Assembly, which began last Tuesday.

On Thursday, state Senate President Pro Tem Rob Mayer, R-Dexter, sent his colleagues home for a long weekend, so they could study the latest amended versions of the economic package.

The Senate leader did so after the chamber spent two days wrangling in public and private, leading some economic-development advocates to fear the package was in jeopardy.

Most of the Senate's changes so far involve the project that has been a lightning rod for months: $360 million in proposed tax credits to encourage the Chinese government to locate a cargo hub at the underused Lambert St. Louis International Airport.

After a hearing late Wednesday, a Senate panel approved changes aimed at expanding the field of developers who might qualify for the Hub credits, while also tightening state oversight. 

On the other side of the Capitol, the House has, in effect, adjourned until late next week to give the Senate time to hash out its differences over the economic development package. But House Speaker Steve Tilley warned Friday against the Senate making too many changes in the original bill.

Tilley, R-Perryville, emphasized that any substantive changes by the Senate to the proposed economic development package would violate the terms of the deal struck this summer between House and Senate leaders.

"We spent six weeks negotiating,'' Tilley said during a news conference. "Decimating the economic tools we already have is off the table."

Tilley explained that he was referring to talk that some senators may seek to reduce the caps on state tax credits for low-income housing and historic preservation below what is in the original economic development package.

The speaker added that he also will oppose any talk of lowering the agreed-on "sunsets'' of seven years for the various state tax credit programs. Tilley noted that he disliked sunsetting the programs but had agreed to the seven years in exchange for other provisions he sought.

As for the China Hub, Tilley said that any major Senate changes -- or the Hub's removal from the bill -- would prompt a meeting of the House GOP caucus to decide how to proceed.

Tilley noted that he had formally introduced in the House an economic development bill mirroring the agreed-on package. But he added, "Right now, I have no intention to move it forward'' to give the Senate time to act.

Tilley allowed that he was somewhat surprised by the discord in the Senate over the package, but he added, "The Senate never ceases to amaze me from time to time."

State Rep. John Diehl, R-Town and Country and a key Hub supporter, likened the Senate wrangling to similar jockeying during last spring's heated debate over congressional redistricting.

"I'm not worried or panicked in the least -- yet," the lawmaker said.

Nixon Calls for Approval of Package

>Meanwhile, Nixon, a Democrat, broke Friday from his low-key presence all week to issue a statement pressing for action on the economic development package. The governor's action indicates that he apparently also has become concerned about the Senate's internal disputes.

The state Department of Economic Development also issued on Friday a fiscal analysis that, in the case of the China Hub, generally shows a positive return on the state's tax-credit investment.

Using a hypothetical warehouse project that cost $10.25 million, the analysis showed that it generally would create about 160 jobs and generate more income to the state than it had cost the state in tax credits. However, the benefit depended on how many credits were awarded. The bill allows for two levels of credits -- covering 20 percent or 30 percent of the initial private cost -- depending on the level of cargo traffic.

"When it comes to putting Missourians back to work and moving our economy forward, we simply don't have a day to lose," said the governor. "By embracing science and technology, sharpening our existing economic tools and investing in growing our exports, the 'Made in Missouri Jobs Act' will create thousands of jobs and make our state more competitive in the years to come. The analysis issued today by the Missouri Department of Economic Development clearly shows that with the right taxpayer protections in place, these incentives have real potential to create jobs, boost our exports, and grow our economy."

"This analysis offers a pathway forward for this legislation that will transform our economy, while ensuring proper protections for Missouri taxpayers," Nixon continued. "I urge the General Assembly to hit the ground running next week to finalize the Made in Missouri Jobs Act and send a strong bill to my desk."

The fiscal analysis, issued late Friday by the state Department of Economic Development, generally shows a positive return on the state's tax-credit investment when it comes to the proposed China Hub effort.

Using a hypothetical warehouse project that cost $10.25 million, the analysis showed that it generally would create about 215 jobs and generate more income to the state over 10 years than it had cost the state in tax credits. However, the benefit depended on how many credits were awarded. The bill allows for two levels of credits -- covering 20 percent or 30 percent of the initial private cost -- depending on the level of cargo traffic.

The higher level of credits, particularly if paired with the state's separate Quality Jobs credits, could end up costing the state more than it would make in new income off of a China Hub warehouse.

Mayer Seeks Focus On Overall Cut

St. Louis Mayor Francis Slay, a big booster of the China Hub, contends, "I believe that the more people know about the bill, the more likely they will support it."

That view seems to be shared by Mayer. The Senate leader said in an interview in his office Thursday afternoon, after most other senators had long cleared out, that he wanted to give his colleagues plenty of time to review and analyze the panel's changes.

Mayer also has asked the state Department of Economic Development to conduct a presentation on the financial impact of the economic package, most likely Monday, before the Senate engages in serious floor debate.

Despite filibuster threats, the Senate leader said he is optimistic that the full Senate will get a chance to vote on the package next week. Slay said that's all that he really seeks: an up-or-down vote by the full Senate.

Tea party groups have been circulating emails this week warning against such a vote, saying that their count puts a majority of the Senate in the pro-Hub camp.

Senate leader Mayer emphasized that he supports the economic package -- and the proposed China Hub -- but that he recognizes that "there's a lot of pressure on members from outside this building'' to reject it.

Much of the pressure comes from conservatives who oppose tax credits, in general, or progressives who oppose cuts in existing tax-credit programs.

Mayer also acknowledged the concerns about the Hub, aka Aerotropolis, from legislators who are A) wary of dealing with the Chinese or B) see the Hub proposal as wasting tax money with little chance of succeeding.

Mayer said he agreed that the project might not be successful, but emphasized that the tax credits earmarked for the effort will only be spent as more international cargo flights or the related local development come about.

A lawyer and former farmer who still owns farmland (he leases it to a farming son), Mayer is keenly interested in the prospect that the Hub effort -- if successful -- could lead to new markets in Asia and elsewhere for Missouri agricultural products, which are the state's top industry.

Mayer added that the China Hub effort shouldn't be viewed as encouraging the shipments of more Chinese-made products into the United States.

Rather, he continued, the aim is to divert already planned shipments into St. Louis, instead of Chicago or other major gateways, so that the Chinese can take advantage of St. Louis' regional advantage.

Mayer said he also supported efforts to change the bill's treatment of the so-called "circuit breaker'' tax credit for low-income elderly and disabled renters. The bill originally killed off the credit, which costs the state $57 million a year and benefits about 100,000 people. The latest version would phase out the credit over four years, possibly replacing it with an annual appropriation by the General Assembly out of the regional budget.

Overall, Mayer said, he saw the economic package as "a good bill'' that recognizes that for Missouri to move forward economically, "we've go to do more than just slice and cut the (state) budget."

The Senate leader also wants to get the focus back to an element of the package that he says has often been overlooked: the long-term proposed savings, by eliminating or curbing a variety of existing state credits.

Some opponents, said Mayer, "fail to recognize the great amount of savings that can be obtained."

Even with the proposed new tax breaks, Mayer noted that the package is estimated to save the state $1.5 billion over 15 years.

His similar but somewhat different version saves a bit more -- $1.7 billion -- by imposing lower spending limits on the state's tax credits for low-income housing and historic preservation.

(Mayer's economic development proposal also would eliminate the Missouri Development Finance Board, a 20-year-old body that he sees as unnecessary.)

Mayer's observations about cost savings are shared by state Sen. John Lamping, R-Ladue, who was making a similar argument at Wednesday night's hearing. Lamping recalled in an interview that he had met recently with some Hub critics who were stunned when they were told of the overall tax-credit savings. They had not known.

Over in the House, Diehl has embraced a similar approach. He is circulating graphics (seen below) -- developed by House researchers at his request -- that he says illustrate the savings that the economic development package could produce over the next five years.

The graphics also show how spending for the popular low-income housing and historic preservation tax credits would still outstrip those awarded for the Hub. (story continues below the graphics)


Some Hub Critics Standing Firm
Some Senate critics -- including Jim Lembke, R-Lemay, and Brian Nieves, R-Washington -- said the state could save even more if it eliminated all tax credits. Such an approach would be fairer to businesses, both said.

Nieves was among only two "No" votes on the Senate economic panel that amended and approved the package late Wednesday. Afterward, he said he had too many objections to go into detail. "That bill is a whole lot of straws that broke the camel's back,'' the senator quipped.

The Senate's most vocal critic -- state Sen. Jason Crowell, R-Cape Girardeau -- sent out a newsletter Thursday that referred to the China Hub as "Error-tropolis" and reaffirmed his general opposition to tax credits.

Crowell is expected to wage a filibuster when the bill finally hits the floor, although he has said several times this week that he might be open to some sort of compromise.

Two senators from the Kansas City area also are highly critical of the Hub, in what some supporters privately hint may reflect a desire for the Kansas City International Airport to be considered as a China Hub prospect.

Sen. Rob Schaaf, R-St. Joseph and a physician, dubbed the Hub on Thursday as "a tumor'' that could kill the whole economic development package unless it is removed.

Sen. Luann Ridgeway, R-Smithville, said she views the China Hub effort as an improper attempt to use taxpayer money to bail out Lambert, which has been plagued with debt and high airplane landing fees.

Jeff Rainford, Slay's chief of staff, replied at Wednesday's hearing that legislators needed to recognize that Lambert faces such fiscal issues only because it lost its lucrative status as an airline hub when Trans World Airlines declared bankruptcy in the early 1990s, followed by American Airlines' sharp flight reductions since 2001.

On Thursday, Rainford and Slay were in the Missouri House testifying on an unrelated bill when they got the news about the Senate's delay.

Rainford observed philosophically that "Rome wasn't built in a day."

He then added that he hoped the debate over the China Hub would stay focused on the issues, and not degenerate into the type of partisan or regional bickering seen in the nation's Capitol. "What's going to happen in the next two weeks will determine whether the ugliness that's infected Washington politics will infect Missouri politics,'' Rainford said.

State Sen. Eric Schmitt, R-Glendale, said he and others are working hard to make sure that the Jefferson City debate remains civil. Schmitt is the Senate's chief cheerleader for the China Hub and chaired the lengthy hearing held Wednesday night.

Schmitt said Thursday, as he drove home from Jefferson City, that he was optimistic the delay would help senators become more familiar with changes in the economic development bill that they likely may support.

In the meantime, Schmitt has his own idea on how best to prepare for next week's likely contentious debate.

"When I get home,'' he said, "I'm taking a nap."

Senate Research-SS SCS SB8 Memo, 0031S01M03FProject Scenarios HubPlus Sept8 2011

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