Galloway Audit Calls For Better Oversight, Transparency On St. Louis TIFs
Missouri State Auditor Nicole Galloway released an audit Thursday calling on St. Louis officials to improve the way redevelopment subsidies are managed.
The audit found that as of 2018, the city had 109 active tax increment financing projects, known as TIFs. The city awarded more than $650 million in tax incentives to assist in funding those developments.
Galloway proposed several policy changes in the report, including implementing measures to control project costs and to improve transparency with TIF data. City officials called those recommendations “subjective” and criticized the audit for examining projects that predate policies enacted in 2017 that they say better predict developer and city profits.
TIF projects are funded partially through additional property and sales taxes levied within designated redevelopment districts. Developers must apply for the incentives. Those project applications are vetted and chosen by the St. Louis Development Corporation and sent to the Board of Aldermen for approval.
The audit examined 13 projects extensively and found the city to be in compliance with all laws in those cases. They included redevelopments in the east end of the Delmar Loop, the Arcade Building downtown, loft apartments near Soulard Market and others.
Galloway said the city has been ineffective in ensuring that TIF projects are likely to earn enough revenue to cover financing costs. She found that the city frequently waived its policy to cap TIF incentives at no more than 15% of a total project’s cost.
The auditor also expressed concern that projects regularly accrue significant levels of interest, which reduces the likelihood that debts will be paid off within the 23-year limit TIF projects have.
"TIFs can serve as a tool to help revitalize areas of our communities that badly need it. But strong guidelines and policies that control costs, provide transparency, and demonstrate need are necessary to protect taxpayers," Galloway wrote in a press release. "It is the city's responsibility to act on the side of taxpayers."
As of 2018, developers in the city owe around $515 million in unpaid TIF liabilities and interest payments on active projects. City officials say that amount is not a burden for taxpayers because revenue from TIF redevelopments — not citywide general tax revenue — pays for the projects.
More than half of the developments were awarded in just four wards, all in the city’s central corridor, according to the audit. Those wards include the Central West End, Downtown and neighborhoods around Forest Park. Only 6% of projects are located in the 14 wards with the lowest property values.
More than 35,000 jobs are located in TIF redevelopment areas, according to city officials.
Mayor Lyda Krewson's office wrote it is concerned that Galloway’s proposals to control costs are too rigid and would turn private investors off to developing the more than 25,000 properties that are vacant or abandoned in St. Louis.
Steve Conway, chief of staff for Mayor Lyda Krewson, says the city welcomes feedback, but criticized the audit for focusing on older projects. The projects ranged from the 90s to 2015.
Conway says the city made steps in 2017 to improve how incentives are managed, switching to a “scorecard” system. To date, four projects have gone through the new process.
Galloway is in the process of an extensive audit of St. Louis. She released an audit last November that was critical of the city’s use of special taxing districts.
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