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PROGRESS IN ST. LOUIS:
A PUBLIC/PRIVATE PARTNERSHIP
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BY BRYAN BEZOLD
The case studies featured in the cover story of this issue of St.
Louis Commerce Magazine represent not only important steps in
regional development, but also the success of public/private partnerships
through business incentive programs. Many local developments might
not have taken place if developers had not been able to take advantage
of tax credits and other incentives that state and local governments
offer. It may be tempting to some to see tax credits and other incentive
programs as “expenses to the government” or tax loopholes, but these
programs generate economic activity that, in turn, generates increased
state and local tax revenue.
One of the projects featured this month is St. Louis Commerce Center
I and II. As the article notes, the developers received $1,000,000
in brownfield tax credits from the Missouri Department of Economic
Development. Brownfield tax credits reimburse developers for expenses
incurred cleaning up a site that has become devalued through its
prior use. Given the nature of urban redevelopment sites, brownfield
tax programs are very important tools for developers. In the case
of St. Louis Commerce Center, brownfield tax credits bridged an
important gap in project financing. According to Don Land, senior
vice president of Balke Brown, "Without the State's brownfields
tax credit program, the St. Louis Commerce Center redevelopment
never would have happened." In return for the tax credits,
the State of Missouri will receive a stream of tax revenue from
the project. One of the tenants at St. Louis Commerce Center I,
GPX, employs 300 people. The estimated indirect economic impact
of those 300 jobs supports another 250 jobs in the Missouri counties
of the St. Louis region. So one tenant at the site is directly and
indirectly responsible for approximately 550 jobs in Missouri. Each
of these jobs represents wages for a household, and tax revenue
for the State of Missouri and the city of St. Louis. Those tax revenues
are the State’s return on its brownfield tax credit investment.
The Missouri Historic Preservation Tax credit program is another
important tool for economic development. Historic Restoration Inc.,
the same firm that is redeveloping the Merchandise Mart, used these
tax credits in their redevelopment of the Marriott Renaissance Grand
Hotel in downtown St. Louis. Along with the apartments in the Mart,
the new Renaissance Grand will further accelerate the conversion
of the Washington Avenue area into a 24-hour lifestyle neighborhood.
These tax credits are used for development projects that update
existing structures while still retaining their historic character.
Neither the Merchandise Mart nor the Renaissance Grand would have
been renovated without tax credits. "Credits are fundamental
to putting these complicated deals together," notes Ron Silverman,
vice president of Historic Restoration Inc. The program isn’t limited
to urban areas and has been used throughout the State of Missouri.
In return for an investment of state dollars, the Missouri Historic
Preservation tax credit program helps retain Missouri’s heritage
while providing an economic benefit to the State’s bottom line.
A third tax credit program, Missouri BUILD, has been essential to
many of the region’s successes in the Campaign for a Greater St.
Louis. Missouri BUILD allows companies to take a tax credit for
investments in buildings and capital equipment that is proportional
to the number of jobs they create. GKN Aerospace, MasterCard, and
CitiMortgage all used this program to help finance capital investment.
Brownfields, Historic Preservation, and Missouri BUILD tax credit
programs each provide unique financing that can overcome the last
barrier to profitability for development projects. That’s beneficial
for developers, but tax credit programs also serve the public good.
In a dollars and sense way, they add jobs and income that provide
tax revenue for the public coffers. In another way, that is perhaps
more difficult to quantify, programs like these help ensure development
in places and ways that retain and contribute to St. Louis’ unique
heritage and character.
Bryan Bezold is the chief economist at the RCGA.
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