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.