Tax abatements cost school district, city

~ Cape's enterprise zone is set to expire in 2008, but some businesses may get an extension.

Property tax abatements for commercial and industrial developments in the area's enterprise zone cost the Cape Girardeau School District more than $1.2 million in lost revenue over the past five years, tax records show.

But school officials say they're willing to put up with a little lost revenue for increased commercial and residential development that will ultimately mean more property tax revenue for the district when the tax breaks expire.

"Down the road it will pay off for us," said assistant superintendent Rob Huff, who previously was the district's chief financial officer.

At the same time, Huff said, the school district doesn't want widespread tax abatements that would dramatically reduce its annual property tax revenue.

The district relies on property tax revenue and state funding to pay its teachers and operate its schools.

The enterprise zone covers the south part of the city of Cape Girardeau and nearby parts of the county.

Expanded several times over the past 19 years, the zone also includes much of Scott City and the nearby regional port.

But the Cape school district only is affected by tax abatements for businesses within its boundaries, which don't include the Scott City area.

The Missouri Economic Development Department approved the initial Cape Girardeau enterprise zone in December 1986.

Since then, the zone has been expanded several times to encompass more than seven square miles.

Bigger zone

It includes much of the east part of the city including the downtown neighborhood and south side. It extends west of Interstate 55 and includes the Siemers Drive commercial area, as well as the Cape Girardeau Regional Airport, the Nash Road industrial tract, much of Scott City and the Southeast Missouri Regional Port.

Under state law, the Cape Girardeau zone is set to expire in 2008. But industrial recruiter Mitch Robinson said he expects to get an extension for some businesses so they can get the full 10 years of tax abatements afforded earlier employers in the zone.

He said the state intends to create new enterprise zones. Cape Girardeau would have to apply for the new designation, said Robinson, who heads up the Cape Girardeau Area MAGNET industrial recruitment association.

The new zones would have advisory committees that would include representatives of local school boards.

City councils and county commissions currently don't have to seek input from school districts before approving tax abatements.

But Huff said the Cape Girardeau City Council and the county commission do so anyway.

The state set up enterprise zones to stimulate commercial and industrial development in economically depressed areas by offering tax credits and tax abatements to new or expanding businesses in those areas.

"At that time in the 1980s, the economy was slow. There was a statewide effort to help businesses," said Robinson.

When the Cape Girardeau zone was created, city officials said only 26 percent of residents in that area had full-time jobs. Sixty-eight percent of the households within the zone boundaries had incomes below the poverty level, officials said in 1986.

At first, Missouri's enterprise zone law provided tax breaks to a range of businesses, everything from restaurants and Wal-Mart stores to warehouses, furniture stores and factories.

But by 1993, the state had tightened the law. Now it's restricted largely to manufacturing, warehouse and distribution centers.

Eligible businesses in the Cape Girardeau zone receive 50 percent property tax abatements for 10 years as approved by the city council or the county commission, depending on where they are located.

There is one exception, Robinson said.

The Alliance Blue Cross processing center, established in the city of Cape Girardeau in December 1996, received a 100 percent tax abatement over 10 years. The abatement runs through 2006.

The Cape Girardeau City Council approved the 100 percent tax abatement. Robinson said the financial incentive helped land the giant insurance company's processing center. The facility now employs close to 300 people, he said.

As of January 2001, 59 businesses covering 61 commercial and industrial sites were benefiting from property tax breaks in the enterprise zone, according to county tax records.

But many of those tax abatements expired in the last four years, including that for the Cape Girardeau Wal-Mart Supercenter.

Today, there are only 26 business operations receiving property tax breaks in the Cape Girardeau area enterprise zone.

Retailers like Wal-Mart no longer qualify for such tax breaks.

Enterprise-zone tax abatements now cost the school district about $218,000 annually, down from over $354,000 in 2001.

Huff doesn't expect an end to tax abatements as a way to attract new businesses.

"I don't think they will ever vanish, but I do think they will decrease," he said.

Huff said city and county officials now realize that property tax abatements impact school districts.

"I think the attitudes have changed in the last half-dozen years," Huff said.

City officials said property tax abatements have little impact on Cape Girardeau city government which relies mostly on sales taxes.

Property tax abatements in the enterprise zone cost the city $99,000 over the past five years or less than $20,000 a year.

The city council in recent years has resorted to other financial incentives to attract new businesses, said Robinson.

"I think it has been the philosophy of the city council and mayor and staff that they don't want to impact the school district unless it is a do-or-die situation almost," said Robinson.

With the new Sears Grand store, for example, the city will use some of the sales tax revenue generated by the retail store to repay Sears' cost for its parking lot, a large culvert and other drainage improvements.

Sears is in the enterprise zone, but wouldn't qualify for the property tax abatement under current restrictions, Robinson said.

mbliss@semissourian.com

335-6611, extension 123