Economic Development Incentives and Public Education

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Todays Discussion

• Funding for Public Schools in Missouri
• Impact of Economic Development Incentives on
  Public Schools
• Communitys Role on Achieving Proper Balance

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Reliance on Local Revenue
Source U.S. Department of Education
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Within the last 20 years

• A number of new incentives
• have been instituted to
• spur economic
• development in the state

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Economic Development Study
Study the use of Economic Development
Incentives in Missouri Gauge the impact of
these incentives on funding for public education
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Economic Development Study
Missouri School Boards Association Missouri
Association of School Administrators Missouri
NEA Missouri AFT Cooperating School Districts of
Greater St. Louis Cooperating School Districts of
Greater KC Missouri Association of Secondary
School Principals Missouri Association of
Elementary School Principals Missouri State
Teachers Association Missouri Parent Teachers
Association
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Economic Development Study
Conducted by Doolin Ward LLC of Kansas City
Focused only on the year 2007 Focused only on
tax abatements and diversions of four types of
incentives Chapter 353 Tax increment
financing (TIFs) Chapter 100 Enhanced
Enterprise Zones (EEZs)
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Question

• How Do Each of These
• Economic Development
• Incentives Work?

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353 Basics

• This is a real property tax abatement that allows
  up to 100 percent abatement for 10 years and 50
  percent abatement for subsequent 15 years
• Although seldom used, there is a capability in
  the statute to provide for PILOTS (Payments in
  Lieu of Taxes) to effectively reduce from full
  abatement
• Must meet blight test
• City council can award without any school
  district input

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TIF Basics

• Tax Increment Financing is not abatementprojects
  pay all taxesdiverted
• TIF can be approved up to 100 percent of the NEW
  incremental real property taxes generated by a
  project
• As well as 50 percent EATS (Economic Activity
  Taxes, primarily sales and earnings taxes) to pay
  certain agreed costs
• But for testthis is the key point of decision
• School districts, counties and other taxing
  districts participate in plan recommendation

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TIF Basics Continued

• Cost-benefit analysis must be provided to all
  taxing jurisdictions
• TIF proposal must include specific budget and
  project components
• Payment can be on reimbursement basisso project
  is constructed first
• Plans last for up to 23 years

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Super TIF

• Additional revenue from the citymore than 50
  percent of the EATS (usually sales and earnings
  taxes)
• State Supplemental TIF
• Additional revenue from the stateEATS
• Up to 50 percent of new incremental income
  taxes or
• Up to 50 percent of new incremental sales taxes

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TIF Commission Make-Up

• Six persons appointed by the mayor of the city or
  county with the TIF
• Two persons from the county where it is located
• Two persons from the largest taxing jurisdiction
• One person representing all other taxing
  jurisdictions
• Total persons 11

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Chapter 100 Basics

• The city purchases property by issuing bonds and
  then usually sells them back to the corporation
• Since the city owns the property, there is no tax
  due on the property
• State legislation allows 100 percent for 20 years
• No but for test or blight test
• Requires city council action only

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Enhanced Enterprise Zone Basics (EEZ)

• Purpose is for job generation
• Geographically limitedhigh poverty
• State tax credits and tax abatement
• 50 percent real property for 10 years
• One district representative on 7-person review
  committee for exceptions
• City council approval of zone-administrative
  approval of projectNo school district
  participation

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• Question We Posed
• What is the financial impact
• of these incentives on school districts in
  Missouri?

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Study Methodology

• Contact offices of county assessors and county
  clerks to determine 2007 economic development
  incentive amounts for each county and the City
  of St. Louis
• Determine levy rates from each school district
• Estimate the diverted/abated revenues

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Limitations

• Assumes 100 percent abatement (will tend to
  overstate)
• Unable to determine amount of some Chapter 100
  projects (will tend to understate)
• Unable to measure increased personal property
  taxes generated

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Cautionary Note

• The data presented assumes
• that the development project
• would have happened
• without the incentive.
• This is certainly
• not always the case.

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Findings

• Total State Diversions/Abatements
• Assessed Valuations

• Incremental TIF 1,623,507,000
• 353 715,721,000
• Chapter 100 336,108,000
• EEZ 357,747,000
• Total 3,033,083,000

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Findings

• Total State Diversions/Abatements
• 2007 School Tax Revenues

• Incremental TIF 79,851,065
• 353 31,401,799
• Chapter 100 14,538,524
• EEZ 14,982,831
• Total 140,774,219

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Findings

• Top Ten Counties Total Diversions/Abatements
• School Tax Revenues
• Jackson 43,001,000
• St. Louis County 29,873,000
• St. Louis City 15,905,000
• Clay 15,351,000
• St. Charles 12,166,000
• Buchanan 4,081,000
• Platte 3,402,000
• Jasper 2,879,000
• Green 1,010,000
• Taney 991,000

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Findings

• Top Ten School Districts Total Diversions/Abatemen
  ts
• School Tax Revenue
• Kansas City 32,567,000
• St. Louis City 15,905,000
• North Kansas City 8,896,000
• Rockwood 8,668,000
• Liberty 5,605,000
• Blue Springs 4,986,000
• Hazelwood 4,861,000
• Wentzville 4,089,000
• St. Joseph 4,080,000
• Francis Howell 3,834,000

Includes district portion for Special School
District
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Findings

• Top Ten School Districts Total TIF Diversions
• School Tax Revenues
• Kansas City 14,330,000
• Rockwood 8,668,000
• Liberty 5,605,000
• North Kansas City 5,471,000
• Blue Springs 4,674,000
• Hazelwood 4,541,000
• St. Louis City 3,431,000
• Kirkwood 2,825,000
• Lindbergh 2,183,000
• Orchard Farm 2,103,000

Includes district portion for Special School
District
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Findings

• Top Ten School Districts Total 353 Abatements
• School Tax Revenues
• Kansas City 15,580,000
• St. Louis City 10,657,000
• North Kansas City 679,000
• Clinton 595,000
• Independence 542,000
• Springfield 319,000
• Blue Springs 312,000
• Jefferson City 256,000
• Moberly 234,000
• Warren County R-III 214,000

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Findings

• Top Ten School Districts Total Chapter 100
  Abatements School Tax Revenues
• Wentzville 3,775,000
• Francis Howell 3,345,000
• Kansas City 2,107,000
• Park Hill 1,301,000
• Bowling Green 1,026,000
• Pattonville 995,000
• St. Joseph 970,000
• Hazelwood 320,000
• St. James 204,000
• Parkway 201,000

Includes district portion for Special School
District
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Findings

• Top Ten School Districts Total EEZ Abatements
• School Tax Revenues
• North Kansas City 2,745,000
• St. Louis City 1,817,000
• St. Joseph 1,535,000
• Joplin 898,000
• Kansas City 550,480
• Carthage 507,000
• Excelsior Springs 468,000
• Poplar Bluff 408,000
• Sedalia 369,000
• Sikeston 364,000

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Summary Observations

• Economic Development Incentives have been used in
  73 of 114 counties in Missouri
• Use of Economic Development Incentives continues
  to spread
• Under the current systems, school districts are
  the primary contributors and cities generally are
  the ones that control

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Summary Observations(Continued)

• Missouri competes with other states to attract
  and grow business
• Tax incentives are the tool of choice for many
  economic development organizations
• Economic stagnation is not in the best interest
  of public education
• Proper balance must be the goal

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How Property Tax is Spent in Missouri
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QuestionHave the Use of Economic Development
Incentives Created a Greater Tax Burden on Others?

• Anecdotal evidence indicates
• this may be the
• case

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What is the Proper Balance Between the Funding of
Public Schools and Fostering Economic Development?

• Good schools are necessary for good development
• Good development is important for a good
  community, good schools and infrastructure
  development
• How do we assure each?

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Next Steps

• Local effort is required
• Local education of elected officials and voters
• Partnering with other public policymakers
• Statewide effort is required
• Re-examine the total funding strategy for
  public education in Missouri
• Success will depend on effective partnering and a
  balanced approach