HOUSE BILL 1434:
REFORMING TAX INCREMENT
By David Stokes
Testimony before the Missouri House of Representatives Ways and Means Committee
To the Honorable Members of this Committee:
Ladies and gentlemen, thank you for the opportunity to testify today. My name is David Stokes. I am the incoming executive director of the Great Rivers Habitat Alliance, a nonprofit conservation organization dedicated to preserving Missouri floodplains and wetlands for recreation, agriculture, and hunting. The ideas presented here are my own. This testimony is intended to state my opinion about the proposal in this bill regarding limitations on the allowed expenditures within Tax Increment Financing (TIF) districts based on research that I have conducted and reviewed over the past decade.
Missouri needs TIF reform. We need TIF reform for economic and environmental reasons. Our state just witnessed the severe floods of late December, and I believe that subsidized development in the floodplains over the past three decades has contributed to increasing the severity, frequency, and danger of flooding.
House Bill 1434 is a fair and beneficial compromise on the subject of TIF. The combination of a very large number of local governments and the inclusion of sales taxation in Missouri TIF law has been a dangerous mixture. By one measure, Missouri local governments use TIF more than all but two other states. Missouri’s many cities have readily engaged TIF in order to increase the sales taxes they collect. This leaves other taxing districts, such as school districts — which depend more on property taxation — holding the empty bag. Originally intended as a remedy for “blight,” TIF has been aggressively used throughout Missouri’s wealthier areas. HB 1434 addresses this concern, in part, by limiting the use of TIF in projects where a city goes forward without county TIF commission approval. The Bill will limit the use of TIF in such projects by looking at cost factors that directly address the condition of the property: demolition, clearing, and grading to determine the extent to which TIF may be authorized.
In general, TIF has not been beneficial to Missouri. An East-West Gateway Council of Governments study in Saint Louis concluded that TIFs and Transportation Development Districts (TDDs) have created jobs at the rate of one retail job for every $370,000 in taxpayer subsidies. That is not a road to successful, long-term economic growth.
That is not the only study that has found that TIF fails at job creation and economic development. A study of the use of TIF in Iowa concluded that, “On net (…) there is no evidence of economy-wide benefits (trade, all non-farm jobs) fiscal benefits, or population gains.” Another study from Illinois found that economic growth was stronger in cities that did NOT use TIF than in cities that did use TIF.
House Bill 1434 limits the expenditure of TIF funds to the amount required to return the property to “greenfield” status for certain projects where local governments are in disagreement about the value of subsidies. . The bill would continue to allow cities to override a county commission’s rejection of a TIF upon a supermajority vote of the city council. However, in those cases, the TIF funds would be limited to the demolition of buildings and the re-grading of land. These are very reasonable changes. This bill would continue to allow TIF to be implemented in blighted redevelopment areas where the infrastructure is substantially degraded. It would not eliminate any one project. It would not favor union companies or non-union companies. However, it would place reasonable limits on the expansion of TIF in the greater Saint Louis area, and that would benefit Missouri.
More reforms are needed, including eliminating TIF usage and other subsidies in the floodplain. Over the past decade, the Missouri General Assembly has taken several key steps to preserve the state’s instrumental flood plains from subsidized development. In 2003, Saint Charles County was given a special exemption that disallowed the use of TIF in the flood plain within that county. In 2007, many other parts of Missouri were added to the preservation list as part of the Hunting Heritage Protection Areas Act, which limited the use of TIF within the 100-year flood plain in Missouri, with some exclusions.
But TIF alone is not the issue in this instance. There is, more generally, a concern with subsidizing development in our flood plains. As a state famously defined by its rivers, Missouri should preserve its water resources and heritage. One of the best ways to do that is to ensure that we are not subsidizing developments within the floodplain. Those subsidies lead to an absurd circle where taxpayers subsidize development within areas where there is a predictable chance the development will have to be subsidized again after it is be damaged by a future flood.
Approximately 9 percent of Missouri is within a flood plain. That is a significant total, and Missouri has more flood plains than other states. Nobody knows what the proper amount of development within the flood plains is. After seeing the recent, major flooding in Missouri, I think many would argue it should be zero. Whatever it is, by definition, when you subsidize something you get more of it than normal market forces would produce. While there are certain examples, such as public safety, where subsidies are reasonably desired in order to increase the level or amount, I do not believe flood plain development is one of those items.
Missouri should preserve our river areas and flood plains for recreation, hunting, environmental benefits, fish, wildlife, and plant preservation, and other important reasons. One effective way to help do that is to limit subsidies within those areas.
David Stokes is the incoming executive director of Great Rivers Habitat Alliance.
 That measure is TIF bond sales by state, 2005 to 2010. Reported by O’Toole, Randal. “Crony Capitalism and Social Engineering: The Case Against TIF.” Cato Institute Policy Study No. 676, May 2011, page 12.
 East-West Gateway Council of Governments. “An Assessment of the Effectiveness and Fiscal Impact of the Use of Local Development Incentives in the St. Louis Region.” Final Report, January 2011, page 18.
 Swenson, David, and Liesl Easthington. “Do Tax Increment Finance Districts in Iowa Spur Regional Economic and Demographic Growth?” Department of Economics, Iowa State University, April 2002, page 11.
 Dye, Richard, and David Merriman. “The Effects of Tax Increment Financing on Economic Development.” Journal of Urban Economics, Volume 47, Issue 2, March 2000: pages 306-328.
 RSMo 99.847.
 RSMo 252.243 The primary exclusion was that TIF could still be used within the flood plain in any urban area, defined as having more than 50,000 people and categorized by the US Census as an “urbanized” area. There were additional exclusions as well.
 Shipley, Sarah “A Flood Of Development: Unprecedented Growth In The Flood Plain Brings Riches And Risks” St. Louis Post-Dispatch, July 28, 2003. Missouri has 6,400 square miles of flood plain out of a total of 67,900 square miles.
Why should political pressure trump common sense? It’s hard to understand how a misguided levee project in Missouri’s Bootheel, estimated to cost taxpayers upward of $165 million, can be resurrected for a seventh attempt since 1954.
A small but politically influential group of landowners (one a New Madrid businessman who has been a member of the highly influential Mississippi River Commission for over 30 years) is insisting the Army Corps of Engineers close off the last remaining natural floodplain on the Mississippi River in Missouri. This proposed levee would benefit the group’s personal agricultural and economic interests despite a questionable cost/benefit ratio.
These landowners, who control a significant portion of the land in the area’s floodplain, want Washington to spend federal tax dollars to stimulate economic activity in a zone already designated as a “floodway” during high-water events. It should come as no surprise the proponents are putting up none of their own cash in a brazen effort to increase their own land values. With backing from congressional representatives, they are demanding $165 million to prevent “too much flooding” in a designated floodway.
These landowners have conveniently forgotten Washington purchased easements for the New Madrid Floodway as compensation for flooding. These easements came with the understanding that the government has the right to flood this area when necessary, such as in 2011 to save Cairo, Ill.
As recently as 2007, the Army Corps of Engineers, along with these same local supporters, attempted to construct the levee project, totally disregarding significant negative economic and environmental impacts. U.S. District Judge James Robertson found the corps had deliberately provided inaccurate environmental impact numbers in a “malicious and capricious” manner to justify the levee. He demanded the corps dismantle the entire project. Astonishingly, this project is back on the table.
The New Madrid Levee is like a bad rash that keeps coming back. The Army Corps of Engineers has recently released its latest draft environmental impact statement in an effort to re-start this foolish project, only this time with the benefit of Sen. Roy Blunt’s political influence. Blunt has gone so far as to demand federal environmental agencies “make the numbers work” to support this levee.
Once again political pressure is attempting to trump common sense. Sooner or later the Army Corps of Engineers must realize when they build a levee to protect one area they are concurrently pushing that water somewhere else with greater force. When will the corps finally realize the cumulative impact of building levees? When will they agree with modern hydrologist and cease using their obsolete card table models?
The New Madrid Levee is not only a waste of taxpayer money; it’s a foolish idea. For once, let common sense trump political influence.
Adolphus A. Busch IV has been a staunch advocate of environmental issues. He is active with many wildlife and conservation organizations, including Ducks Unlimited, Great Rivers Habitat Alliance (founder and past chairman), The Wild Turkey Federation and Delta Waterfowl.
The U.S. Army Corps of Engineers has recently released its seventh study of a proposal to destroy tens of thousands of acres of important wetlands while increasing the flooding risk for a dozen communities along the Mississippi River. The Corps proposes to spend $165 million taxpayer dollars on this effort.
This folly of a project has never moved forward for one simple reason: it is a subsidy for a handful of wealthy farmers that is not in the best interest of the American people.
The Corps’s proposal is quite straightforward and yet phenomenally difficult to comprehend. The agency would like to build a sixty-foot high, quarter-mile long levee that would block the Mississippi River from entering an area that has been designated as a floodway for eight decades.
The effects of this project could be catastrophic for communities along the river in three states. In the spring of 2011, the state of Missouri, acting on behalf of landowners in the region, sued to stop use of the floodway during the record-breaking flooding along the Mississippi and Ohio Rivers. Once the Corps was allowed to divert water into the floodway, river levels dropped quickly. But the delay was at least partially responsible for devastating flooding in Olive Branch, IL.
Additional economic development in the area will only make it more difficult to operate the floodway to protect communities—as it was designed to do.
This floodway is the last remaining area in Missouri where the Mississippi River is allowed to regularly connect to its floodplain. The floodway provides many benefits: it filters pollution, stores floodwaters, and is important habitat for waterfowl and for fish populations in this part of Mississippi River.
The courts have not been kind to this project. Back in 2007, a U.S. District Court found the Corps had justified the project using “arbitrary and capricious reasoning—manipulating models and changing definitions where necessary—to make this project seem compliant with the Clean Water Act and the National Environmental Policy Act when it is not.” The judge also took the unusual step of demanding the Army Corps dismantle the portion of the project that had already been built.
The Department of Interior and the U.S. Fish and Wildlife Service have also long taken a dim view of the proposal, which has been kicking around in various incarnations since the 1950s.
The Fish and Wildlife Service’s preliminary review of this latest version found the project would result in “unacceptable losses of nationally significant fish, wildlife, and aquatic resources.”
Back in 2011, the Department of Interior tried to discourage the Corps from reviving the project, saying, “the Department does not believe it is in the public interest to engage in continued environmental analysis of this project.”
Even Corps staffers have quietly expressed concern about the New Madrid Levee. In 2002, the then-Chief of the Corps’ Legislative Management Branch described the New Madrid Levee in an email as an “economic dud with huge environmental consequences.”
And yet here we are again. The Corps, along with their local supporters, are once again pushing for the levee, once again disregarding the significant negative economic and environmental impacts. And yet these local entities are not contributing any of their own money towards this brazen effort to increase their land values.
All of this points to the dire need to overhaul the Corps planning process. Right now the Corps has an estimated $60-80 billion backlog of projects—many of which are critical restoration and flood control efforts—and yet this boondoggle somehow manages to rise to the top?
Many in Congress apparently believe having other federal agencies review Corps projects is merely red tape that slows construction down. However, in this case, the outside reviews have proven their worth by shining some light on a project that makes little sense, environmentally or economically. This is obviously a benefit, unless you happen to own land in the floodway.
The rest of us can clearly see that the New Madrid Levee is a foolish idea and a waste of taxpayer dollars. The Obama Administration should make sure that common sense prevails in Missouri’s Bootheel by vetoing the project outright.
The record flood rolling down the Mississippi River is prompting the U.S. Army Corps of Engineers to activate a decades-old flood plan that so far has prevented a catastrophic levee breach—but not without a price.
Once it was a cornfield; now it’s a Wal-Mart, a Taco Bell, a Target. Here along a stretch of Missouri’s Highway 40, in the Chesterfield Valley area just west of downtown St. Louis, what’s said to be the largest strip mall in the country sits on about 46 acres of Mississippi River bottomlands. Less than 20 years ago, the land was open space.