Summary of the Report of

The House Interim Committee Studying Tax Increment Financing

Representative Henry Rizzo, Co-Chair
Representative Tim Green, Co-Chair

December 2000

The House Interim Committee recognizes the need to revisit the various components and the overall progress of tax increment financing (TIF). In most projects, TIF proposals are crucial components of the success of development and redevelopment of areas that desperately need the increased economic activity and the jobs that come with it. However, the Interim Committee also recognizes that TIF may sometimes be misused or abused to the detriment of certain existing businesses, the general region where the project is located and/or the political subdivisions that rely on the tax revenues that are lost from the use of TIF. Examples cited as problems by the Interim Committee include:

• Loss of tax revenues, especially for schools, from the use of TIF for residential development. Most problems related to new construction projects;
 
• The effect on small or existing retailers from the use of TIF to attract the development of new large retailers;
 
• Using TIF to precipitate the move of businesses from one location to another within the same geographic region with no real economic benefit for the entire region;
 
• Lack of state oversight of local TIF project approvals. State oversight, possibly by the development of a state commission through which local project approval would be required, may increase regional cooperation on projects;
 
• Technical component standards and component definitions in state statute are unclear. A recent court decision, JG St. Louis West Limited Liability Co. v. City of Des Peres, brought to light the need to revisit the "but-for" test component, the definition and application of "blighted area" and the inclusion of separate but related structures in a project, such as parking garages.
 

It is important to note that the Interim Committee recognized that many of the aforementioned problems are geographical in nature and may be more severe in urban areas versus rural or even St. Louis versus Kansas City.

The Interim Committee makes no specific recommendation at this time, but does recommend the filing of legislation to address and further the discussion about these issues.