Measuring the Benefits of the City’s Tax Incentives

By Otis Williams, Executive Director of the St. Louis Development Corporation (SLDC)

This column was originally published in the St. Louis Post-Dispatch.

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The City of St. Louis, under Mayor Francis Slay’s direction, commissioned an independent study of all incentives offered throughout the city as a checkup to our progress and to monitor the results of incentivized projects.

It was done in an effort to reinforce our chief goal as the city’s economic development agency, which is to support and cultivate sustainable economic and financial growth—both of which need to be equitable and sufficient to provide enough jobs and opportunities for our residents, while also supporting the fiscal health of our government bodies.

The incentives study was conducted to show us what we’re doing well and where we can improve. Together with the Board of Aldermen, we are focusing on those improvements and dedicated to implementing the study’s recommendations, which include: a more quantitative decision-making process for awarding incentives; a more solid connection between incentive use and a citywide development plan; and better data collection and tracking afterward to help better inform future decision making.

To that end, we are moving forward with three interrelated goals. First, we will refine and build upon the quantitative decision-making process, which will help ensure that we are investing in projects that strengthen the city and wouldn’t happen otherwise.

Second, we are committed to using incentives to advance equity. Although incentive allocation ultimately follows the market (we can’t incentivize projects that don’t exist), we are raising the bar for projects in stronger, more stable neighborhoods, while making it easier to get more help out to distressed parts of the city.

Third, St. Louis Development Corp. will continue to recommend the appropriate incentive package to the Board of Aldermen to depoliticize the incentive process, which is designed for—and has resulted in—strengthened neighborhoods and the attraction and retention of city residents, who shop and eat in the city and pay sales and earnings taxes.

We already have developed and implemented a sophisticated system that measures the direct financial costs and benefits to the city, schools and other taxing bodies. However, we are measuring more than just the financial aspects of projects. We also are assessing projects by their contribution to quality, walkable urban design and opportunities provided to our minority and lower-income residents.

Beginning in early 2017, we will implement the first part of our online database and incentive tracking system. And, by the end of this year we will commence a community-driven, citywide economic development plan, which will take about a year to complete and will then drive future use of development resources, including incentives.

Similar to the report, I also want to clarify some misunderstandings of how incentives work.

Value-capture incentives like tax increment financing and tax abatement do not reduce the city’s existing revenue. These redevelopment tools freeze property tax revenues at their pre-development levels—which owners must continue to pay—while helping to fill the capital gap needed to successfully invest in our city. These property owners must also pay for permits and hire contractors—all of which generate additional revenue.

The city then captures the subsequent growth in tax revenue when the abatement expires. These subsidized projects would not happen without financial assistance and thus the city would be in identical fiscal positions with or without the incentive, for the duration of the incentive period. In fact, once the abatement expires, the city is in a stronger position by reaping a larger contribution to our tax rolls, because of that incentive.

While growth in the city is both measurable and strong, I caution that we still have work to do to retain and grow our population. Incentives have played a large part in resuscitating neighborhoods and slowing the population slide, especially in neighborhoods that were in poorer condition a decade ago, such as The Grove, Tower Grove South, Fox Park, Shaw, McKinley Heights and now north of Delmar with the North Sarah development project. Old North, Hyde Park and Arlington Grove also are seeing greater growth.

All of these neighborhoods have been supported by tax-abated homes and projects that would not have been completed otherwise. As a result of the stabilization and growth that we have seen, the city has been able to reduce the length of the abatement period necessary to ensure that a project happens. The use of both TIFs and abatements has declined. And now on the heels of a major construction boom and sustained growth among many of the city’s neighborhoods, we are at a juncture where we can become more surgical in our approach to allocate them.

We are encouraged by the renewed interest in the use of public incentives, and we are committed to being good stewards of these vital tools to use them for the betterment of our city.

Otis Williams is the Executive Director of the St. Louis Development Corporation (SLDC). Williams leads the agency’s economic development activities City-wide, aimed at bringing people, jobs, and investment to the City. Prior to joining SLDC, Williams served over 28 years in the U.S. Army and retired at the rank of Colonel. Since coming to St. Louis in 1998, Williams has served as a Senior Project manager, Director of Major Projects, and Deputy Executive Director for the St. Louis Development Corporation. In those positions, Williams had a leadership role in several multimillion-dollar development projects that are revitalizing the City’s downtown and neighborhoods.

Williams previously served three years on the National Board of Directors of the Society of American Military Engineers. He was the 1997 recipient of the National Black Engineer of the Year Award for Government Service; received the Better Family Life in Excellence Community Service Award (2014); was selected by the Community Development Administration (CDA), City of St. Louis as the 2015 Executive Director of the Year; was honored with the Joe Rinke Owner Award by the St. Louis Construction Cooperative at the Eighth Annual Construction Awards Luncheon (August 2015); received the 2016 J.H. Poelker Levee Stone Award from Downtown STL, Inc.; and received the 2016 Governor’s Award for Career Service in Economic Development. He is a registered professional engineer in the District of Columbia, and is a member of the International Council of Shopping Centers, the Urban Land Institute, and other professional and social organizations.

Williams is a native of Covington, Georgia and is married to the former Gwen Smith of St. Louis. They have two adult daughters.


Articles in “From the Field” represent the opinions of the author only and do not represent the views of the Community Builders Network of Metro St. Louis or the University of Missouri-St. Louis.