Missouri think tank pleads caution for use of TIF

One day after the Columbia City Council approved taking requests for a hotel development using tax increment financing, a state think tank is calling for more scrutiny on the method.

The Show-ME Institute gave a presentation on Tuesday on the state’s use of the financing method, commonly called a TIF. The speaker, Patrick Tuohey, likened it to “corporate welfare,” and said local residents needed to closely watch that local developers come through on what they promise in using a TIF.

The city of Columbia approved a request for proposal for contractors to build a second hotel tower on Walnut Street for The Broadway. The new hotel would connect to the original hotel, located at 1111 Broadway with two walkways at the fourth and seventh floors, and sport a top-floor ballroom. Owner David Parmley is asking for $2 million in tax increments for the estimated $20 million project.

Tax increment financing allows developers to keep some sales and property tax they would otherwise give to local governments or schools and use it finance their projects. The property tax amount is based on the difference between the current property’s value and the estimated value of the new development. Fifty percent of the sales tax the business generates during the TIF also goes towards paying for the development.

Tuohey said the money often enriches the developer rather than giving a major benefit to the community. The money used to develop is taken from money that would otherwise fund services like public safety or schools. Developers need to prove the property they want to build is either blighted or on track for disrepair, which Tuohey believes have loose definitions in Missouri that are rife for abuse.

Agencies in Columbia have often lamented the lack of sales tax revenue, including Columbia City Manager Mike Matthes. Sales tax is a large portion of the city’s general fund, which primarily goes towards the police and fire departments. CPS mainly collects from property tax, which would also be discounted for The Broadway’s second tower with TIF.

“My hope is that cities will adopt reforms or the state legislature will adopt reforms to make sure businesses that are getting taxpayers dollars are doing the right things with it, are delivering on their promises and aren’t just using the system to enrich themselves,” Tuohey told ABC 17 News.

Tony St. Romaine works as a consultant for Columbia to guide it through the latest TIF proposal. He said while concern for the tax money public agencies might lose out on is valid, the Broadway Tower 2 proposal would turn a defunct piece of land into a business. The building there used to be The Broadway’s business office, but has no apparent use now. St. Romaine said a new hotel would begin collecting sales and lodging tax, which local governments can use.

“Taxing jurisdicitions like the city, county, school district aren’t collecting any sales tax on that property,” St. Romaine said. “They will be collecting 50 percent, at least 50 percent of the new sales taxes that are collected on the facilities.”

The city will take in requests from builders on The Broadway Hotel Tower 2 project for the next month. The city’s TIF Commission will then review the proposal chosen, along with their proof that their development would create more tax money than what’s currently there. The commission simply makes a recommendation to the city council, which then approves a TIF for the area.

The city currently has two active TIFs, both for downtown hotel developments. The Broadway was built with the help of TIF, and the Tiger Hotel redeveloped its property with TIF.

“Those two projects by themselves, I think, helped to kind of jump start downtown,” St. Romaine said. “We’re seeing, we hope that these types of projects have a catalytic effect on downtown.”