Costs, benefits of airport tax breaks analyzed
Monday, September 12, 2011
A cost-benefit analysis intended to address senators’ concerns about a proposed tax credit targeting international trade resulted in more questions Monday from senators who appear to remain divided over the centerpiece of Missouri’s special legislative session.
The “aerotropolis” tax credit has been promoted as a way to help transform Lambert-St. Louis International Airport into a cargo hub for Chinese airlines and other international shippers by offering incentives for nearby warehouses and manufacturers that would handle products moving into and out of the airport. Senators are scheduled to start debate on the measure Tuesday as part of a broader bill overhauling the state’s many tax credits and business incentives.
In an unusual procedure Monday night, senators met publicly as a large group — though not in an official session or committee — to review an analysis by the state Department of Economic Development on the potential costs and benefits to the state were the tax credits to be enacted by lawmakers and issued to a couple of hypothetical companies.
The analysis assumed the construction of a $10 million, 400,000 sq.-foot warehouse that would hire 160 employees to handle cargo moving through the St. Louis airport. Based on the particular combination of tax credits it would receive, the amount of tax revenues generated for the state could either double the amount of tax credits issued or fall short of breaking even over 10 to 15 years.
The analysis showed a net benefit to state revenues under all its scenarios for a hypothetical $4.7 million machinery manufacturing facility that would employ 40 people.
But some lawmakers questioned the underlying assumptions used for the analysis.
Sen. Jason Crowell, R-Cape Girardeau, a leading critic of the legislation, asked the agency to re-run the economic modeling to include the possibility of facilities also using an existing state tax credit for entities that amass large swaths of land in impoverished areas. If companies are able to claim those additional tax breaks, the return in state revenues would decline — though the exact amount remains to be determined, said Chris Pieper, a legal counsel for the Department of Economic Development.
Crowell also questioned whether the warehouse size and job assumptions used for the model might be too large.
Sen. Maria Chappelle-Nadal, D-St. Louis, asked the agency to further analyze the air-cargo tax credits to account for existing warehouse space in St. Louis and the potential impact on other modes of transportation, such as roads and bridges.
Sen. Luann Ridgeway, R-Smithville, questioned whether a business could tear down an existing warehouse and use the proposed tax credit to cover both the demolition and construction costs of a new warehouse.
In some cases, the senators’ questions could not immediately be answered.
Depending on the ratio of the tax credit issued, a warehouse would need to produce between 9 and 14 jobs for every $1 million of investment to produce a positive return to the state, Pieper said. He said a manufacturing facility would need to produce three or four jobs for each $1 million of investment to produce a positive return to the state, again depending on the tax credit rate.
Sen. Brad Lager, R-Savannah, who requested the cost-benefit analysis, said the analysis of the cargo tax credit program shows a better potential to benefit the state than several existing state tax credit programs.
“We’re at least in the ballpark of making sure Missouri taxpayers are made whole,” Lager said.
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