Blight here. Blight there. Blight everywhere.
City Councilman Craig Hosmer has been vocal in recent months about his concerns that the city of Springfield is too liberal in its tax abatement awards in support of redevelopment projects in blighted areas. His questions at council since September connected to two abatement requests, along with concerns expressed by Councilwoman Cindy Rushefsky, have prompted a planned review of the city’s incentives at the committee level and have business development personnel working to detail the prevalence of abatements.
Springfield Economic Development Director Mary Lilly Smith said she hopes to meet with council members in November to discuss the most recent data connected to incentives and blighted areas – properties marked by unsanitary or unsafe conditions, deterioration and obsolete platting. While data is still being gathered for council’s review, much about the landscape of incentives and their impact is already known.
According to Springfield’s most recent report on blighted areas, delivered to council in June 2011, 26 redevelopment areas have been established since 1964 through 38 blighted actions with a total of 1,133 acres of blight declared. Since mid-2011, 11 requests for tax abatements based on a designation of blight have been approved by council, including redevelopment projects at the former Landmark building, Bears Crossing student housing and Deep Elm apartments. There also have been six areas that have shed their former blighted status in the last two years including the Hammons Tower and University Plaza redevelopment areas.
According to Greene County assessor data, more than $219 million in appraised property value is abated through enterprise zones and urban redevelopment areas.
Husch Blackwell attorney Shawn Whitney has carved out a niche in the world of blight. Whitney assists local developers with securing incentives for their projects in urban areas. His client list is a who’s who of Springfield redevelopment projects that secured tax incentives in recent years. Developers Whitney has represented include Dalmark Development Group on the Heer’s project; Bryan Properties with Bear Village; Vecino Group for the Landmark building redevelopment; and the Brewery District Lofts Corp., which awaits a Nov. 4 vote on its request for incentives to transform several buildings west of Springfield Brewing Co.
“Ninety percent of my clients are developers, and almost 100 percent of those developers are seeking some type of incentive,” Whitney said, calling the incentives critical because they encourage redevelopment in areas where rehabilitation is sorely needed and such work is typically twice as expensive. “It is extremely expensive to redevelop a project in any downtown. When you tear open a hole in a wall, you have no idea what you’re getting into. When you do new construction, you can build from the ground up and everything is predictable. That is not the case with urban redevelopment.”
According to Smith, most requests for abatements in recent years have come from student-housing developers seeking Chapter 99 incentives. Under state statutes, developers can secure up to 10 years of abatements on 100 percent of property taxes on new improvements. A blighted area must be designated in order for a developer to secure abatements under Chapter 99 or Chapter 353, which allows municipalities to freeze property tax levels for up to 10 years, and cut in half property tax increases in years 11–25. Chapter 353 plans are typically multimillion-dollar projects, such as the conversion of the Woodruff building downtown into upscale apartments, Smith said.
Smith said Chapter 100 revenue bonds and Enhanced Enterprise Zones also are options for developers. In 2011, industrial revenue bonds were added to the list of incentives the city can offer through its Economic Development Incentives Policy Manual. The bonds can be issued to finance items including land, building, fixtures and machinery for certain businesses. Kraft Foods Group has twice received approval on bonds – up to nearly $100 million – for upgrades to its Springfield plant.
The EEZ program offers abatement incentives in specified areas that have the potential to create jobs in targeted industries such as manufacturing, construction or health care. The Missouri Department of Economic Development establishes the zone boundaries based on areas of low income and high unemployment with the goal to spur economic development and job creation. However, Smith said the entire city of Springfield rests within an EEZ. According to tax watchdog group Show-Me Institute, roughly one-third of the state of Missouri was in an EEZ last year. The state’s zones represent 24,870 square miles, collectively an area about the size of West Virginia.
That’s the issue, according to Hosmer, an attorney with Hosmer King & Royce LLC.
Hosmer said while there are projects that likely deserve support in the form of tax abatements, no one appears to be taking into account the cumulative impact those incentives can have on taxing districts.
“You want people to be entrepreneurial and take chances, but at the same time, there are a lot of other incentives people get,” Hosmer said, pointing to historic tax credits and low-interest loans. “With property taxes, that’s how we fund our schools. If you don’t have good schools, you’re going to have higher crime rates, higher social services and less economic development. I think sometimes what we are doing is taking out of that pool, and to me, you are doing something today that is going to hurt you tomorrow. It shouldn’t be the rule. It should be the exception.”
Whitney takes issue with Councilman Hosmer’s assertion that taxing districts are hurt by municipal incentives. With the Brewery District Lofts, the city stands to gain more than $500,000 in new property taxes during the next 25 years if council approves the redevelopment plan. He pointed out that a tax impact analysis is required by each developer before an abatement request can be presented to council.
“The abatements have been a tremendous benefit for downtown Springfield,” Whitney said.
Smith said her office currently is compiling cumulative data on the net effect of tax abatements in the city.
Perhaps the poster child for urban blight projects in Springfield – John Q. Hammons’ University Plaza Hotel and Hammons Tower redevelopment areas – returned to full tax assessments in 2010 and 2011. The two properties, along with Hammons Office Building, One Parkway Place Condominiums, the U.S. Federal Courthouse and the Springfield Area Chamber of Commerce building, were deemed blighted in the 1980s. According to a June 2011 report for City Council, the newly assessed property values in the Chapter 353 redevelopment areas grew to $8.4 million in 2010, compared to $3.9 million a year earlier under the tax protections.
