8

Executive Summary (8)

The PFM Group – St. Louis Comprehensive Revenue Study

Overview of Use

Tax abatement in St. Louis has largely been determined by whether areas are able to receive designation as a redevelopment area. Since tax abatement is open to any residential, commercial, or industrial project in redevelopment areas, a large number of projects have been eligible for financing.

Comparative Analysis of Tax Abatement Policies

As in other comparable cities, St. Louis limits development property tax abatements to 10 years, with the option of an extension. In addition, the City targets tax abatements to Enterprise Zones but is unique in allowing abatements for any Board of Aldermen-approved property. St. Louis and Baltimore do not require a cost benefit analysis for approval of tax abatement; Kansas City and Minneapolis maintain this requirement. While St. Louis and Kansas City require job creation reporting for commercial projects, they are the only cities that do not have a job creation criterion for tax abatement applications.

In St. Louis, tax abatement is possible on the added value from property improvements (similar to TIF). Other cities abate fixed percentages of total property tax liability or adjust the abatement in line with the fulfillment of job creation and new investment criteria.

Tax Abatement Evaluation

In St. Louis, it has generally not been difficult to secure tax abatement. The City’s criteria are broad enough to include a variety of developments that may or may not align with the City’s economic development goals. In addition, the approval of tax abatement is heavily influenced by the Alderman of the ward where the development is located, who often can apply special conditions or unrelated demands on the development as a condition of support.

Currently there are no guidelines or restrictions on the percentage of property assessed valuation that can be subject to tax abatement. In 2007, 15.7 percent of the City’s assessed property value was subject to some sort of real estate tax abatement, accounting for a very significant portion of the City’s property tax base.

The lack of a cost benefit analysis, job creation or property value improvement standards, and other criteria makes it impossible to know if tax abated developments help forward City goals. The effect has been that a massive amount of City property tax capacity has been committed in support of projects that may or may not post a net economic benefit to the City.

Recommendations/Options

  • Use a Sliding Scale Approach that More Quickly Phases Out the Value of Abatement.
  • Align Maximum Abatement Period with Project Benefits
  • Conduct a Cost Benefit Analysis Similar to that Performed for TIFs
  • Restrict Abated Projects to Those Meeting Specific Criteria Advancing City Goals
  • Improve Tax Abatement Recordkeeping to Allow Broader Analysis and Comparisons
  • Set a Cap on the Percentage of Property Assessed Valuation Subject to Abatement.



Previous Page First Page