Missouri House gives initial approval to limits on development tax breaks

JEFFERSON CITY, Mo. -- Lawmakers in the House gave initial approval Tuesday to a bill that would make it harder for developers to get tax breaks for their projects but rejected an attempt to limit the use of eminent domain.

The tax breaks, called tax increment financing or TIF, allow a portion of the future taxes generated by a development to pay for the project's costs, instead of going to schools, cities and other government entities.

The tax breaks were originally designed to promote redevelopment in areas where an additional boost is needed to spur private investment. The move to limit the use of tax increment financing has picked up momentum since several municipalities approved using tax breaks over the objections of school boards, residents and other local government entities.

Rep. Bob Johnson, R-Lee's Summit, said his bill would prevent the worst TIF abuses by limiting the use of the financing on projects that use farmland and other areas that have never been developed.

"Vacant ground, farm ground and horse pastures have been abused for 10 or 15 years now," he said. "Finally, we are putting in some requirements as to what vacant ground is and when you can TIF it and when you cannot."

Land within TIF districts sometimes are acquired by developers through eminent domain, the taking of private property to further economic development.

House and Senate leaders have listed curtailing the use of eminent domain as among their leading priorities, and Gov. Matt Blunt created a task force to advise the legislature on the ways state law needs to be changed to limit the use of eminent domain.

Rep. J.C. Kuessner, D-Eminence, said private property should be respected and it didn't make sense to allow developers to take private land and then get a tax incentive to develop it. His attempt to add an amendment that would have barred communities from using TIFs on any property obtained through eminent domain proceedings was overwhelmingly defeated in a roll call vote.

Opponents said Kuessner, who acknowledged that he had no TIF projects in his district, should address concerns about the seizure of private property in a separate bill focusing on eminent domain and not mess with an economic development tool that doesn't affect his constituents.

"Although this has never happened in his district, he's trying to legislate how things should happen in the urban and suburban areas," said Rep. Shannon Cooper, R-Clinton. "The cities in my district have never used eminent domain for a TIF project, but I don't want that tool taken away from them if they feel like they need that tool in order to grow."

The House approved the legislation by voice vote after about 90 minutes of debate. It needs another vote to move to the Senate.

Johnson's bill would allow citizens who oppose tax increment financing the right to petition and appeal the TIF decision to the local governing body that originally approved it. The measure also would give a more explicit definition for "blight" -- a trigger that allows municipalities to offer the tax breaks.

Current law lists 13 conditions to mark "blight" but doesn't define each of them, which gives local governments leeway. Johnson said that makes it difficult to challenge TIF designations in court.

The legislation also would:

-- Require municipalities trying to use TIF to document that at least four of the 13 blight conditions are present -- and how they are present -- before they could declare areas blighted.

-- Require approval by a two-thirds majority of the local governing body for any plan to use tax increment financing if a panel designed to study the proposal rejects it or if 10 percent of those who voted in the last mayoral or county commissioner election submit a petition within 40 days.

-- Allows school districts to decide whether they will keep their tax receipts or allow them to go to the TIF when the project involves housing outside of a special business district. Currently, those taxes automatically go to the TIF district.

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TIF bill is HB1070.

On the Net:

Legislature: http://www.moga.mo.gov