Commentary: Kenrick Redevelopment Shifts Tax Burden to the Poor
Is it fair for low-income Walmart shoppers to pay for the cost of Shrewsbury services?
This Wednesday, November 30 the city of Shrewsbury Tax Increment Financing (TIF) Commission will consider G.J. Grewe’s proposed redevelopment of his property, Kenrick Plaza. This project requires reconfiguring the site for the big-box retailer, Walmart.
Most of the attention in the public meetings has been focused on the developer; on Walmart and its tactics as a competitor, employer and retailer; and on the design of the proposed redevelopment, especially the closing of Trianon Parkway and the locating of a massive structure so close to residential neighborhoods.
But what has been largely overlooked in the discussion of this project are both the tax and public policy implications from the use of TIF. Even though the process by the mayor and Board of Aldermen has been deliberate, it’s not been particularly informative on the real costs and tax burdens of this project.
Missouri’s TIF law allows for incremental property tax and sales tax revenues to be diverted from a redevelopment project for up to 23 years to cover the costs of reclaiming a “blighted” area. Local governments in St. Louis County have used TIF primarily to develop retail projects because of this unique feature to capture the sales tax revenue from redevelopment projects, used to bolster declining budgets. We now have less “blight” in places like Des Peres, Richmond Heights, Crestwood, Kirkwood, Brentwood, Maplewood and Chesterfield, which is the public purpose of TIF—to provide a public subsidy to eliminate blight which, but for the TIF, would never be privately developed. But the practice of using TIF for retail redevelopment is largely counter to the public purpose of subsidies. When used properly and as intended, public subsidies support those projects that deliver net new economic value: high-wage jobs, significant investment, technological advances, job training and new industries, none of which is a feature of the retail industry.
As with almost every other local government in the region, Shrewsbury’s finances are stressed and will be for the foreseeable future. The question for Shrewsbury, as it is for all local governments in St. Louis County: how to continue to pay for and deliver services to fewer residents? Based on the latest census data St. Louis County’s population declined by 8.3%, Shrewsbury’s population declined by almost 6%—fewer taxpayers equals less revenue. This is also predicted to be a long-term trend. Despite evidence that additional retail development merely shifts existing, and ever-changing, consumer demand, municipalities insist on believing that what is good for retail is good for them.
If Shrewsbury residents want our own police and fire departments, shouldn’t we just pay for them? Asking Shrewsbury residents to pay for services in the form of higher taxes would be fair and reasonable from a tax policy perspective, but given our size, likely not sufficient. Further, if the property tax is too high in Shrewsbury it would have the reverse effect of eroding housing values and weakening school districts.
The answer for Shrewsbury’s budget problems seems to be the redevelopment of Kenrick Plaza using the TIF redevelopment statutes. This will solve the problem of “blight,” but more importantly it will shift the responsibility of paying for Shrewsbury’s fire and police services (62% of the budget) to others.
But the “others” in this case are known to us: the Walmart shopper. Walmart’s customer is low-income, mostly female, between the ages of 35-44 (much like its employees). Its customer shops at Walmart because of the low prices; Walmart’s attempt to expand its customer base by changing its product mix was a complete failure. We also know that if this project is approved the sales tax rate will be 9.425%, one of the higher sales tax rates in the state. Thus, the tax burden is shifted to the low-income Walmart shopper to pay for financing the Walmart project costs and supporting Shrewsbury’s budget.
Just as significantly, there’s more tax shifting: The Affton School District will forego any additional property tax revenue from this redevelopment project for up to 23 years, or until the TIF bonds are paid. But what is the district to do if it needs those diverted taxes in the interim? Raise property taxes, of course.
If this project is approved, we’ll have less “blight” and more retail, but who will really pay, and at what cost? Can we really afford to subsidize retail developments given the true costs? If you do the math, does it add up?
Julia Hoffman is a tax consultant and Shrewsbury resident. She served on Shrewsbury’s Citizen’s Advisory Committee earlier in the redevelopment process.
Tony
7:47 am on Tuesday, November 29, 2011
My question is, why do Grewe and Lipton Kenrick LLC get a free pass on all this? It's their property to own and manage (whose sign is in front of the theater?), yet it's deteriorated under their ownership and care. And Grewe is the one to benefit from the TIF!
The real issue was that through Shrewsbury's consultants, PGAV, we were convinced that the city was a "partner" in the redevelopment. What mental gymnastics had to be foisted upon Shrewsbury to convince residents that the deteriorated condition of Kenrick Plaza was their problem to fix?! The Shrewsury ordinances specifically lay out the fines that are supposed to be levied on property owners (Lipton Kenrick LLC) when certain hazardous conditions exist. And they do exist. Even the consultants indicate that there's a hole in the roof of the theater, that dangerous mold exists, and that the property is a magnet for crime. This is the property owner's responsibility, yet somehow they have us convinced that it's our job to clean it up.
For those who blame the economy, look at the other plaza that was created and developed around the same time as Kenrick. Not only does it have quality tenants, but the manager (Capitol) continually finds new ones as old ones move away. Who would have guessed that Mackenzie Pointe is the same age as Kenrick?
In short, Shrewsbury's problem came into being when it was tricked into thinking that the onus of development is on citizens, not the property owner.
Susan
10:03 am on Tuesday, November 29, 2011
I have long said the TIF was a burden and the wealthiest corportation will get a pass on 23 million dollars. Shrewsbury government is foolish to let this happen, how long unitl Wal Mart ruins Mackenzie Point and then we start all over. Stabilty in the area, wait unti; the economy improves and then do small housing, duplexs etc. The stabiltiy is more important, then people will shop more at Mackenzie Pointe, pay taxes etc. It is corruption to give away all this FREEE money when the rest of the economy is hurting and the average persen is waorking harder and longer just to get by. I have been to all the meetings and the city's mind was made up from the first meeting. Tell the occupiers to come to Kenrick, if they don't like big bail outs! We have a 23 million plus right here!!
Martha Duchild
11:37 am on Tuesday, November 29, 2011
Crestwood residents have had the pleasure of working with Mr. Grewe and PGAV. Shrewsbury would do well to say good riddance to both. When Sports Authority left as the anchor store on Mr. Grewe's Crestwood Square property, he had no qualms about letting the space stay vacant for years. He made no attempt to fill that space until he had a CID in hand. I was at the meeting where Mr. Grewe presented his plans for the property, and when he was questioned regarding his financial exposure on the project, his response was that "it's not a spreadsheet type of project." I was waiting for laughter, as I could not believe anyone, let alone someone attempting to extract tax incentives from a government body, could reply in such a manner. He was not joking. What's disconcerting is that I've seen the disrespect with which Mr. Grewe treats government bodies, yet these same government bodies are willing to forego the necessary due diligence that should be used on these projects in favor of blindly following promises of retail revenue.
There is ample evidence, incuding exhaustive reports on TIF"s, TDD's, and CID's from the East-West Gateway Council, to demonstrate that tax subsidies used for retail have failed to create sustainable jobs and sustainable retail revenue. The only area where they do succeed is in transferring tax burdens from one entity to another.
In other words, they are not the financial cure-all that developers would have us believe.
Great op-ed piece!
Tony
1:16 pm on Tuesday, November 29, 2011
When asked how much money Grewe plans to spend on the project, the developer replied, “We have no idea...”
“OK, well then, I guess it’s fair to ask how much are you contributing in relationship to how much you’re asking taxpayers to contribute?” Nieder asked.
“There’s no way of telling today,” Grewe replied. “At the end of the project, you will know.”
If a TIF could not be agreed upon, he said Crestwood Square would “become something a lot less desirable than anybody wants. And it will be leased for what it is, which is warehouse space, a call center, something like that.”
“You’ve received for the last four or five years, whatever period of time it was, you’ve received your income from the property,” Nieder told Grewe. “From what I can tell, you didn’t have to invest a whole lot. It’s been pretty well vacant. There’s been improvements that have to be done, but yet you’re asking us to help you subsidize this redevelopment. I’m having a hard time understanding how a person who has this property sitting there bringing in revenue with little cost involved in bringing in that revenue can’t afford to reinvest that money into that particular facility to keep it going. That’s what I’m having difficulty wrestling with at this point. Right or wrong.”
“I see that you’re having difficulty with it,” Grewe replied. “I know that you’re not a shopping-center developer. So I understand why you can’t understand it.”
Tony
1:17 pm on Tuesday, November 29, 2011
The above is quoted from the Creswtood Call.
This conversation prompted Crestwood officials to ask in a memorandum if giving the developer money would be "rewarding Grewe for not maintaining his property".
Sound familiar, Shrewsbury?