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The movement at the St. Louis Development Corporation follows a report released in May that found about $709 million in local tax revenue that would not be collected because of property tax abatements and tax increment financing, or TIF, promised between 2000 and 2014.

Proponents of individual developments often argue that the revenue would never have materialized without tax abatements, which freeze property taxes at their pre-development level, and TIFs, which allow increases in property, sales and income taxes to be used as project financing.

But the nearly 200-page report notes that “it is also likely that some tax revenue is being lost by the City as a result of these incentives.� And this summer, the use of the incentives was cited as a reason the city’s credit rating was downgraded.

Commissioned by the SLDC and conducted by Philadelphia-based Public Financial Management Inc. with University of Missouri-St. Louis researchers, the report found little correlation between individual developments and job creation or economic impact beyond the project footprint.

“I think a more sophisticated analysis could have been done, but generally the majority of impact on these projects is the economic activity on the parcel,� said Will Winter, a research assistant professor of public policy administration at UMSL who helped collect data for the report. “That’s because these incentives are really used in areas that are already successful.�

Some areas that have been big beneficiaries of development subsidized with tax abatement, such as the Central West End, are now trying to curb its use. But absent larger reform, limiting tax abatement in St. Louis is dependent on individual aldermen willing to offer less to developers who plan to build in their wards.

Overall, St. Louis’ incentives have been concentrated in several key neighborhoods along the central corridor. Some areas in north St. Louis, for instance, are “literally getting no incentives,� Winter said.

Scrutinizing incentives

St. Louis lacks a plan that would guide redevelopment and incentive use, and one of the report’s key recommendations was to come up with one. It also called for more reporting by recipients of the incentives, better tracking and analysis from the city, and a formal framework to evaluate and score requests for tax abatement and other development sweeteners.

Otis Williams, executive director of SLDC, said his agency is implementing some of those recommendations, including working on a way to better scrutinize developers’ requests for incentives and recommending shorter tax abatements or none at all in established neighborhoods.

“We are looking at beginning a planning process to get a strategic economic development plan for the city,� Williams said.

The lack of a development plan is particularly evident in St. Louis because of its heavy reliance on property tax abatements, which are doled out by individual aldermen to projects in their wards. Those projects often are residential rehabs in addition to large commercial developments, and “aldermanic courtesy� allows individual aldermen discretion to award abatement to projects they think are worthy instead of following a citywide plan.

“St. Louis’ significant reliance on Alderman involvement in the process is outside of the norm,� the Public Financial Management report says. “It is notable that the City allows abatements for any Board of Aldermen-approved property.�

Winters credited the city with developing more criteria and recently hiring a financial analyst to negotiate with developers and check their numbers. The city also is pushing for tax abatement periods of five years rather than 10 years, and it’s trying to establish more rigorous criteria before approving the most expensive tax abatements, which can give owners up to 25 years before they have to pay property taxes on improvements.

The bigger issue, Winters said, may be an overworked SLDC that can’t keep up with the increase in development activity and put long-term plans and best practices into place.

“We’re just not investing in city staff,� he said. “The number of people at SLDC is not enough for the projects running through them.�

Central West End limits use

Meanwhile, neighborhoods that have been booming with development in recent years have developed their own criteria to evaluate projects. In the Central West End, Park Central Community Development Corporation has boards made up of neighborhood residents and employers who evaluate projects and make recommendations on incentives.

As the neighborhood has become one of the premier areas in the region, Park Central Executive Director Brooks Goedeker said the organization has stopped offering incentives except for projects that would bring in a new amenity. An established zoning framework, known as a form-based code, guides the look of buildings in the area, and demand is now driving development rather than incentives.

“We have gone ahead and basically made it known, here’s the form-based code — this is what we expect you to do here, and we’re not offering tax abatement for someone who’s just bringing in an average project here,� Goedeker said.

He estimates just 10 percent of new Central West End projects get incentives now.

However, other neighborhoods Park Central represents, such as Forest Park Southeast, still have problem properties that can use incentives to lure developers, Goedeker said.

But Park Central’s system only works because Joe Roddy, the alderman who represents the area, has bought into it. He mostly follows the recommendations of the Park Central board on incentives.

“I handed away my discretion on most of this stuff to Park Central,� Roddy said.

Roddy is a major proponent of a business plan for development and incentive use around the city, and he’d like to see SLDC become a “larger and more robust� agency that can better negotiate with developers.

Incentives have become an entitlement in many areas of the city, Roddy said, and in order to adequately fund city services without scaring off developers leery of uncertainty, they have to be curtailed in an orderly fashion.

“That’s the problem, and you’ve got to figure out a way to wean people off of them,� Roddy said. “You can’t just slam the door on them.�

Roddy thinks there are ways to reform the system to get aldermen to give up some of their tax abatement authority and support a citywide development plan. One possibility, he said, would be to put some of the tax revenue raised if abatements were eliminated into a fund that aldermen would have some discretion over.

The growing tab from TIF and abatement is a problem the city will have to tackle. When Fitch downgraded St. Louis’ credit rating this summer, one of the main risks to the city’s relatively stable revenue growth was “ that will take time to translate into new tax revenues.�

Ultimately, reforms to better control the city’s tax incentive tab by targeting areas that most need them will depend on the willingness of the board of aldermen, and soon, a new mayor.

“A lot of that stuff is waiting on political leadership,� said Winter, the UMSL professor. “I don’t think the current crop of mayoral candidates have talked about this enough.�