A tax incentive proposal that we believe not only pushed - but strayed beyond - established boundaries was wisely rejected by the Jefferson City Council on Monday.
The council voted 5-5 - short of a required two-thirds majority - on a Tax Increment Financing (TIF) proposal to redevelop the former Truman Hotel & Conference Center at 1510 Jefferson St. The proposal was advanced earlier this year by the Puri Group of Enterprises, which purchased the property in 2013 and closed the 223-room hotel in November 2015.
A TIF allows developers to finance specified improvements in blighted areas using a portion of the additional sales and/or property tax revenues produced in the district that results from the development.
TIF proposals have been approved elsewhere in Jefferson City - most notably for redevelopment of Capital Mall - but a troubling aspect of the Puri proposal was its reliance on the lodging tax, which was not part of the original proposal.
A brief history is helpful.
A TIF normally reimburses the developer's eligible costs through property or sales tax, and the initial Puri proposal relying heavily on property tax reimbursement was consistent with that norm.
Political subdivisions that rely primarily on property tax - most notably Jefferson City Public Schools - expressed concerns about the Puri proposal.
The proposal was revised to decrease property tax reimbursement by about half, with the remainder to come from the city's lodging tax, approved by voters, generated on the redeveloped property.
Another component - annexation into the city of two Puri-owned hotels in Apache Flats, which would increase lodging tax revenues - was added to the proposal.
The revised proposal in June was rejected 7-1 by the Jefferson City TIF Commission. Months later, city staff in September recommended the council reject the proposal.
The lodging tax was approved by voters to promote tourism and to help pay for a conference center.
Although a former city attorney said inclusion of the lodging tax in a TIF proposal meets the letter of the law, we find it inconsistent with the spirit of the law.
A hotel project may accommodate tourism, but it does not promote tourism.
The difference is important because governments must keep faith with the voters who approve tax measures - including the lodging tax - intended for a specific purpose.