The vote of the five members of the Ellisville City Council in favor of Tax Increment Financing (TIF) is just atrocious. You had to be there to feel how passionately opposed to the TIF the strong majority of people were during the public forum. Later, you could sense how angry they were after the vote. I was there, and I certainly felt it. The residents had every right to be livid.

I do not recall ever seeing such a brazen example of an elected body ignoring the will of the people. Combined with the terrible economic policy they are now instituting, the choice of the Ellisville City Council to enact this TIF is one of the worst decisions I have ever seen a government make.

Now more than ever, we need the state legislature to pass major TIF reform for Saint Louis County and all of Missouri. The ability of cities to override a county TIF commission must be removed. Furthermore, TIF districts should be required to make other taxing districts whole through alternate tax dollar arrangements. In other words, cities should share the sales tax dollars placed into the PILOT (Payments In Lieu Of Taxes) fund.

We still have many more TIFs to fight in Shrewsbury, Saint Ann, and Richmond Heights; and that is just Saint Louis County. Add in the Enhanced Enterprise Zone (EEZ) in Columbia, the Transportation Development District (TDD)/Community Improvement District (CID)  in Chesterfield, the incessant use of subsidies for every project in Kansas City and Saint Louis, and I can assure you we will be very busy. When it comes to pointing out the economic flaws in the terrible arguments for local development subsidies, the Show-Me Institute has only just begun to fight.

Now I am going to get some lunch. (Go to the 2:04 mark.)

So, what is it going to be, Ellisville? TIF or no TIF?

Tonight is the scheduled final vote on the use of Tax Increment Financing (TIF) for a proposed development at Manchester and Clarkson Roads in Ellisville. We know why Show-Me Institute thinks this is a bad idea for Ellisville. If this TIF can be defeated, as far as I know, it would mark the first rejection of such a proposal by a point-of-sale city. Combined with Florissant’s rejection of a TIF recently, we would be making real progress toward stopping the constant use of subsidies around Saint Louis.

Stay tuned, and follow me on twitter (@DavidCStokes) for results of tonight’s vote.

Officials for the St. Louis Rams football team must submit their counter-proposal for upgrading the Edward Jones Dome to the St. Louis Convention & Visitors Commission (CVC) by tomorrow. It will be interesting to see the Rams’ proposal; however, CVC officials will not release the plan — unless the Rams give them permission (I would not bet on that).

This proposal is integral in determining whether the Rams stay or leave Saint Louis. But what really matters is that the CVC will not let the public review the proposal, which if accepted, could cost the taxpayers millions on top of the $24 million per year that the state, city, and county already pay for the Dome’s construction. The Rams already rejected a proposal from the CVC that would have left the public on the hook for $60 million, so it is reasonable to guess that the public’s portion of the bill in the Rams’ counter-proposal will be much higher.

CVC officials maintain that they are complying with a provision in the lease with the Rams that some information can be kept confidential. However, considering that (a lot) of public money is potentially on the line with this deal, NO decision should be made until the public has a chance to review it.

The Show-Me Institute has a long record of opposing such government “investment.” However, even if the CVC accepts the Rams’ counter-proposal, it should do so only after the people who would actually pay for the project are allowed to see the costs.

The Columbia Missourian has published an overview of the statewide use of Tax Increment Financing (TIF), a development subsidy that is growing in popularity. The article provides a detailed overview, and the Missourian has posted excellent data online. Unfortunately, Columbia City Manager Mike Matthes, in his comments, seems to be fond of revising TIF history.

Matthes cited Independence, a suburb near Kansas City, as an example of a community that has enjoyed success with TIFs. I wonder if he was referring to the Bass Pro TIF in Independence that has failed. The city of Independence has had to kick in more than $4.1 million to cover bond payments associated with the project.

Matthes also said that ”(TIF) does prevent and eliminate blight” and “it does increase property value and tax revenue over time.” Though the Missourian highlighted a TIF in North Kansas City that is characterized as successful, it failed to mention the notorious Citadel TIF in nearby Kansas City.

In late 2011, Kansas City officials voted to pay $15 million to purchase property that had been razed and contaminated with asbestos. The Citadel site now sits vacant, and is an example of a TIF project that made an area much, much worse, instead of eliminating so-called blight.

Moreover, earlier this week, the Wall Street Journal characterized Kansas City’s downtown entertainment TIF development, the Power & Light Development, as a “budget hole.” The Journal reports that the Power & Light Development is generating less than one-third of the tax revenue needed to cover debt costs associated with the project. As a result, Kansas City is setting aside $12.8 million to make up the difference.

On the eastern side of the state, TIF does not look much better. Matthes’ statement that TIF eliminates blight and increases tax revenue over time ignores the findings of a multi-year study of TIF and other development subsidies in the Saint Louis area that those subsidies were frequently concentrated in “higher-income communities.” The same study found that retail jobs associated with TIF projects came at a cost of more than $370,000 in taxpayer dollars.

Those findings are not surprising: Years earlier, the Brookings Institution concluded that TIF in Missouri “. . . is used extensively in high-tax-base Missouri suburban areas with little need for assistance . . .”

Perhaps I am being unfair. When Matthes said that TIF has proven to eliminate blight, he may have been referring to the TIF awarded to a Saint Louis area mall. The mall was deemed “blighted” because it lacked a Nordstrom’s. I suppose, because the West County Mall now has a Nordstrom’s, one could consider the “blight” removed.

I can admit there was a problem with valet parking in the city of Saint Louis. Steve Patterson has covered the issue well over at Urban Review. I agree with all of his comments. Too many new restaurants, etc., were operating valet parking like they owned the street. But, in typical government fashion, the city has taken a jackhammer to a fly. Instead of enforcing a process by which certain areas can be dedicated for valet parking at certain times, and then writing tickets for people or companies who violate it (such as a new restaurant who just decides to install valet parking in front of their restaurant and removes parking to do so), the city has taken the opportunity to just regulate the entire industry. Absolute garbage.

The new law will require that every part-time high school kid who parks cars in the summer to give the city $100 (assuming the fee is set at the maximum legal limit) for the right to do so. Even worse is the option for the city to declare an entire part of the city (such as downtown) a “special valet zone” and then only allow one valet company (of the city’s choosing, wink, wink) to operate within that zone. So the city is going to limit competition within the industry, which always works out great. That is why economists use valet parking as the standard example of a natural monopoly in all the textbooks, because parking is a public good that does not operate under the law of supply and demand. (Sarcasm note: parking is not a public good.)

Licensing the people who park cars as valets is a bad idea that will limit youth employment. Regulating the entire industry is a terrible idea. Limiting competition within the industry is the worst idea of all.

For our regular readers, the fact that the Kansas City Power & Light District (P&LD) is hemorrhaging taxpayer money is no surprise. For those just finding out about the problems that have beset P&LD over the last few years, the Wall Street Journal’s report on the city’s budgetary mismanagement is as sobering as it is galling. The headline puts it succinctly: “Urban Center Is Budget Hole.” (Video via Tony’s Kansas City.)

The P&LD was a bet made in the 2000s that will cost the city $10 million-plus per year for years to come. Yet, the city refuses to learn its lesson. Kansas City officials persist in pursuing a massive new publicly-financed hotel project downtown and  an expensive new streetcar system that will burden local businesses with taxes they do not want. We are talking about a city with one of the worst debt loads and tax levels in the region, and the solution — with the benefit of hindsight — is more debt and higher taxes? Pair it with the ongoing border war the city has with its Kansas rivals, and it is clear that the city is not embarking on a credible development strategy, but a road to ruin.

Oscar Wilde wrote in The Picture of Dorian Gray that “there is only one thing in the world worse than being talked about, and that is not being talked about.” Kansas City is getting its press for sure, but as it does its best to keep up appearances with its spend-spend-spend strategy, it ratchets up the risk of debasing its tax resources, wrapped within that thin, debt-laden facade. On the outside, things may look good. On the inside, the city is almost assuredly disfiguring itself, one act at a time.

Apparently, you get a TIF (Tax Increment Financing) anyway. The Ellisville City Council appears to be going forward with a TIF plan despite the overwhelming opposition to it within the city. How can I say “overwhelming opposition”? Well, earlier this month, the two anti-TIF candidates for mayor received more than 70 percent of the total vote. Seems like strong evidence to me that the people of Ellisville do not want this tax giveaway. But city officials nevertheless are going forward with it. Last night, the TIF received preliminary approval, and it is set for final passage in another two weeks. If this passes, it would be one of the most appalling decisions by an elected body I have ever seen. “Let’s enact terrible economic policy AND ignore the will of the voters at the same time!”

The vote last night was 5-2, with the newly victorious anti-TIF mayor and one city councilmember (who also ran for mayor opposing the TIF) voting against it.

I predict the Ellisville charter rules on referendum and recall will quickly become very important in Ellisville if the TIF passes — along with Missouri TIF-related case law involving referendums from this lawsuit.

Tonight is the big night in Ellisville. The just-announced closure of the Best Buy in town should make the choice easier for the city to just join the county sales tax pool, as the difference between what Ellisville would get as an “A” (point-of-sale) city and a “B” (pool) city is now much closer.  It should not be used as an excuse to enter into the proposed Tax Increment Financing (TIF). Cities do not have to play this game. They have a way out – the sales tax pool.

A new Walmart is opening in Jefferson County. Yes, it got a TIF. The property taxes will now be frozen for all the other taxing districts. So, someone please explain to me how the school district is going to pay for educating the kids in the 180 new homes that are part of the project, when those homes will not be paying the necessary marginal taxes for the schools. Oh yeah, the school district will seek to raise taxes on everyone else . . .

Meanwhile, in more positive news, Florissant officials are set to vote next week on approving a development for a Walmart that is being built without a TIF. The Florissant City Council rejected a TIF last year, but the project is going forward because this particular plan makes economic sense. I commend Florissant officials for their discipline, and hope this serves as an example to cities throughout Missouri. This is a good opportunity to remind people that I have nothing against Walmart – just the subsidies that usually accompany it.

Finally, here is the Show-Me Institute’s latest study on the basic structure of TIF.

Richmond Heights is the latest city in Missouri to dangle Tax Increment Financing (TIF) incentives in front of hungry developers seeking taxpayer assistance. Well, not really the latest. You see, Menards and Pace Properties are just the most recent on a long list of suitors who tried to develop Hadley Township, east of Hanley Road between Dale Ave. and Bruno Ave.

According to the St. Louis Post-Dispatch, Richmond Heights has been entertaining proposals since 2003. Things looked great back in 2006, when the Richmond Heights City Council found a serious suitor in Michelson Commercial Realty and Development. But three years later, Michelson still could not get the financing together even with Richmond Heights officials pledging $46.2 million in TIF. The project was scrapped and Michelson pulled out of the 86 contracts it had signed to purchase all the homes and businesses in the affected area. All told, four separate development plan proposals just like Michelson’s failed.

The (eternally) pending developments have sent the neighborhood into a state of disrepair. Richmond Heights City Manager Amy Hamilton told the Post-Dispatch prior to the City Council’s latest vote that more than 35 properties are in “poor or severely deteriorated condition, and the majority of these properties are owned by land speculators.” Hamilton blames speculators and absentee landlords for the degradation, but more likely, Hadley Township property owners are responding to the incentives the city has offered. Who would really invest significant time and money in home improvements while the city unsuccessfully plots deal after deal to snatch up their properties?

And what do Richmond Heights taxpayers get for all their trouble? With Menards, they get yet another big-box home improvement store on South Hanley Road. If the market really drives Menards, Lowe’s, and Home Depot to locate within a half mile of each other, that is great. But it should not be government’s role to plan the local economy. More importantly, however, taxpayers get to finance $19 million of Menards’ $56.1 million development and $26.6 million of Pace’s $125 million development. (Bonus!)

This really is TIF at its worst.

More than a third of the state of Missouri — 24,870 square miles — is in enhanced enterprise zones (EEZ), areas that must be declared blighted in order to be created. The enhanced enterprise zones cover an area the size of West Virginia. These zones are appealing to local governments because businesses in the area become eligible for certain state and local tax incentives. But regardless of the desirability of enhanced enterprise zones, the notion of blight has lost substantial meaning when it characterizes a third of the state.

Blight is not benign. It can lead to eminent domain abuse. As long as it is this easy to blight a property, no home or business is safe. This is the fear of CiViC, the citizen group that has arisen in Columbia, Mo., to resist the EEZ being considered there. The group fears the city’s blight declaration will lead to eminent domain abuse.

EEZs are in red (zone boundaries as of 2011)

Consider: the definition of blight for the purpose of establishing an EEZ is exactly the same as the definition of blight for statutes explicitly granting eminent domain privileges. The implication is it can be just as easy to declare blight for eminent domain as it has been to declare enhanced enterprise zones in more than a third of the state.

Clearly, it is time to reform the definition of blight and separate it from the use of eminent domain. This separation has been granted to farmland, and it should be extended to all types of property.

I do not smoke. But I am curious about radio ads that are advocating for stronger anti-smoking laws in Saint Louis County. The ads, which come from a group called Let’s Face It, are creative – and alarming. Consider this line from one of the ads:

There are still workplaces in St. Louis County that legally allow smoking. . . . let’s truly eliminate second-hand smoke in the workplace. It’s better for all of us.

Saint Louis County recently passed an expansive anti-smoking ordinance; the law includes exemptions for bars and casinos. The owners of those establishments felt that if smoking was not permitted, they would go out of business. I attended one of the hearings when the Saint Louis County Council was considering the partial ban. Several bar and restaurant owners told officials they feared their businesses would close or they would have to lay off employees if customers were not allowed to smoke.

Well, it turns out that more than $7.5 million in federal stimulus money is funding those radio ads and advocacy efforts to eliminate exemptions. According to the Recovery.gov website, federal stimulus money has gone to Let’s Face It’s anti-exemption campaign. In its report to the federal government, Let’s Face It noted that it hopes to “place amendment on council agenda,” “remove exemptions from current ordinance,” and  ”increase the number of County municipalities that enact smokefree [sic] policies that exceed the comprehensive County-wide policy. . .”

The group has also partnered with the St. Louis Rams, and ran anti-smoking advertisements during the Rams’ Dec. 18, 2011, home game. In its report to the federal government, Let’s Face It claims to have created 38.16 jobs associated with this campaign. Some of those jobs are associated with $2 million that went to Fleishman-Hillard (four jobs) and $175,000 that went to the St. Louis Cardinals (actually, no jobs are claimed to be created with the money directed to the Cardinals).

The Show-Me Institute has made the case that customers (and employees) have the freedom to choose what bars and restaurants they frequent. The argument that customers or employees are somehow trapped at a venue that allows smoking is a smokescreen, at best.

But federal funding of advocacy efforts goes even further. If the anti-second-hand smoking argument is a good one, then why aren’t private associations and nonprofits stepping up to make the case? Why does the federal government have to fund an advocacy campaign?

What is next, Fannie Mae funding an organization that advocates for land banking legislation? Or federal stimulus money being used to fund similar advocacy campaigns throughout the United States against soda?

Ellisville officials made the right decision last night. They decided to delay a vote on the much-discussed Tax Increment Financing (TIF) proposal involving a proposed new WalMart at the corner of Manchester and Clarkson Roads. We have already discussed why we think the TIF would be bad policy.

It would have compounded the mistake if the Ellisville City Council had voted for it one day after a new mayor and city council were elected.  Mayor-elect Adam Paul and the new city council will be sworn in April 18.  Properly, the ball is now in their court.