Executive Summary (6)

The PFM Group – St. Louis Comprehensive Revenue Study

Overview of TIF Utilization

St. Louis has made heavy use of TIF to redevelop derelict and abandoned properties, mostly within or close to the downtown core. The City has had success in redeveloping properties into profitable developments, particularly in downtown and adjacent areas. The City has used TIFs to attract new businesses downtown, in many instances to compensate for the effects of the earnings tax. Many of these targets have been small to medium sized businesses that highly value a downtown location; downtown currently lacks an abundance of large corporate tenants.

In recent years, the City has reduced its financial commitment to TIF projects, from $7.5 million in FY2008, to a projected $2.9 million in FY2010.

Comparative Analysis of TIF Policies

In general, St. Louis’ TIF policies are similar to those of comparable cities. Each city requires “but for” tests, cost benefit analyses, and targets the use of TIF to blighted areas. However, St. Louis and Kansas City maintain a broader array of eligible uses, allowing TIF for general areas that are targeted for economic development.

In general, pay-as-you-go systems are regarded as the safest financing methods for TIFs, as expenditures are closely related to the incremental tax revenue generated from the district.

Comparative Analysis of TIF Performance

In comparison to other benchmark cities, St. Louis’ has been relatively conservative in the use of tax increment financing. The City’s number of active TIF projects is roughly on par with comparable cities, and average PILOT revenue per project, although much lower than Kansas City, is in the mid range.

Local redevelopment agencies often seek near-term private investment ratios to public dollar participation at 8 to 1, ranging up to 12 to 1. St. Louis’ average ratio is 6.4 to 1, well below this range; however, it is slightly higher than Baltimore and Kansas City.

The job creation and retention performance of St. Louis TIF projects is roughly on par with that of Kansas City. However St Louis outperforms Kansas City on the percentage of projects falling short of projected jobs, with 37.3 percent of projects falling short as opposed to 51.0 percent in Kansas City.

St Louis has, at times, pledged General Fund revenue for TIF projects. Although this practice is common in Kansas City, it is generally not the norm for the benchmark cities — or most cities across the country. In addition, numerous studies of TIF best practices have recommended that General Fund subsidization of TIF projects be avoided.

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