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Bill would limit TIF projects to blighted areas

Bill would limit TIF projects to blighted areas

February 21st, 2018 by Philip Joens in Local News

This January 2014 photo shows the parking lot at Jefferson City's Capital Mall before tax increment financing was approved to assist with a project to make improvements.

Photo by News Tribune /News Tribune.

A bill winding through the Missouri Senate could make it harder for property developers to build projects using tax increment financing.

A Senate committee heard testimony Tuesday on a bill aimed at saving taxpayers money and preventing developers from taking advantage of the program. The bill would narrow the type of projects that qualify for TIF funding and require a third party to determine if an area qualifies for TIF.

State Sen. Andrew Koenig, R-Fenton, introduced a bill to narrow the state's TIF law to encompass projects in only blighted areas. Koenig said developers often abuse TIF by building projects in affluent areas.

"Too often we've been doing TIF in areas where it's not needed," Koenig said. "It needs to be used in areas where investment otherwise would not happen."

Under Missouri law, three types of projects qualify for TIF status: blighted areas, conservation areas and economic development areas. Blighted areas have been deemed unsafe or inadequate because of the deterioration of a site, obsolete conditions or any other combination, which prevents new housing and development from being built.

Conservation areas are any area in which 50 percent or more of structures are more than 30 years old and might become blighted. Economic development areas are located within municipalities that do not meet requirements of subdivisions and in which businesses built using TIF funding will not unfairly compete with local businesses.

Most TIF projects in Missouri fall under blighted status. Koenig's bill would narrow the definition of blighted areas.

"What you're doing a lot of time is you're reshuffling the deck," Koenig said. "You're not actually creating economic development."

Of 468 ongoing TIF projects statewide, 327 fall under blighted status, according to the Missouri Department of Revenue. Another 73 fall under the conservation area designation, and 40 fall under both blight and economic development designations.

Active projects originally estimated they would create 143,591 jobs. Through Feb. 1, active TIF projects have created 116,237 jobs.

TIF projects statewide originally estimated they would retain 26,301 jobs, but retained only 17,833 jobs.

In August, the Jefferson City Council approved Jefferson City's latest TIF project. Jefferson City-based Farmer Holding Company plans to redevelop the site of the historic St. Mary's Hospital using TIF.

A proposed $44.6 million project involving Lincoln University sought $7.3 million in TIF assistance to redevelop the site, while a $30.9 million project creating only commercial space sought $6.7 million in TIF assistance. The company is still deciding which project will move forward.

All three active TIF projects in Jefferson City fall under the blight designation.

A project to renovate the Capital Mall using TIF might take three more years to pay for than originally estimated. The Capital Mall TIF is on track to be paid for in 17 years, according to a report issued this month by the Department of Revenue. All TIF projects have a maximum of 23 years to be completed.

A small-scale TIF approved in 2009 to redevelop parts of the Old Munichburg area of Jefferson City might take 19 years to complete, instead of the originally estimated 10 years, according to the report.

Before awarding TIF funding, municipalities must perform a financial analysis to determine if areas will be redeveloped without public assistance. Koenig's bill would require a third party to detail how an area meets the blighted definition.

Patrick Tuhoy from St. Louis-based think-tank the Show-Me Institute said those tests often are weak because financial auditors for cities typically perform them.

"Because the standards for applying TIF are so weak, that what happens is they apply TIF anywhere," Tuhoy said.

A November study by the Show-Me Institute found levels of economic development in Kansas City and St. Louis with TIF projects were not discernibly greater than levels in similar areas without TIF projects. In general, TIF does not lead to higher employment, the study found.

"The development seen in TIF areas is what would have been expected in the absence of the TIF program," according to the study. "The use of TIF has not diverted investment or increased economic activity beyond what we would have expected if TIF was not used."

State Sen. John Rizzo, R-Independence, expressed skepticism about TIF and said he supports Koenig's bill. Still, Rizzo wants the state to retain TIF as a tool to attract businesses.

"We use the tool in Kansas City sometimes for businesses that are thinking about relocating from Kansas to Missouri," Rizzo said. "The cost is great, but there are certain things that come with having big businesses like that."