If public officials take $5.8 billion of the taxpayers' money and transfer it to private hands in the name of economic development, taxpayers should get measurable economic benefits from the development that results.

That is not the way it has been working in the St. Louis area.

An exhaustive report released last week by the East-West Gateway Council of Governments finds little evidence that the more than $5.8 billion in incentives provided by local governments over the last 20 years has done very much to improve economic conditions for the people of the region.

Job growth has been modest at best. Even though retail developments received more than three-fourths of the money from some of the largest incentive programs, the region added a mere 5,400 retail jobs between 1990 and 2007. That is less than 4 percent growth, even before the Great Recession.

Nor have 20 years of taxpayer-subsidized developments increased the total amount generated in sales taxes, the Holy Grail of municipalities; receipts for the region have remained essentially flat.

The money has moved around within the region, however, as vampire-like new developments suck the life out of existing ones. So publicly subsidized retail developments in Chesterfield and Fenton bleed business out of existing centers in, say, Ballwin. New big-box developments in Manchester drain the vitality out of older shopping centers in Crestwood, and so on. Net gain for the region: virtually zero.

And while some development incentives have been used, as the concept originally was intended, to breathe life into blighted or economically threatened areas - downtown Belleville and Martin Luther King Plaza in north St. Louis, for example - the vast majority of the incentives have gone for retail projects in areas already populated with plenty of higher-income shoppers.

Thus, the report states, tax incentive projects have "exacerbated economic and racial disparity in the St. Louis region" and have given wealthier areas "an unneeded, extra advantage."

The East-West Gateway report, three years in the making, also notes that financial record-keeping among municipalities is erratic at best when it comes to the many kinds of incentive programs: tax increment financing, transportation development districts in Missouri, special service areas in Illinois and property tax abatement. Then there are a wide variety of development incentive programs at the state level in both Missouri and Illinois involving tax credits, exemptions, preferential rates and bond financing.

Perhaps worst of all, the contracts covering these public incentives rarely protect the public interest. If promises made by developers on their applications - more jobs, higher incomes, increased property values - fail to materialize, there are no penalties, no reduction of benefits, no refunds required. (An important exception is the so-called "clawback" clause that became standard in 2005 in such contracts with the city of St. Louis.)

Smart, creative use of public development subsidies can improve people's lives and revitalize communities. The current system doesn't work that way. Reform will require take state legislation in the face of muscular opposition from special interests. It will take unprecedented cooperation among local governments with notoriously short-range and narrow priorities.

And it will need support from the public, which has yet to be convinced that working together as a region is our only route to a better future.

Area leaders, public and private, face a daunting challenge.

 


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