A Kinder tax break

St. Louis Post-Dispatch

One of the biggest obstacles to bringing new businesses with large numbers of jobs to the inner city is finding enough land to accommodate them. A company that wants to build a factory, a warehouse or an office complex needs a large tract of land. But the city of St. Louis is chopped up into thousands of small lots, and persuading dozens of owners to sell out in order to assemble one large piece of ground can be tricky. In rundown neighborhoods, property may have been abandoned and its owners hard to find. Some lots may contain the toxic residue of long-gone enterprises -- an expensive problem to neutralize.

As a result, many developers won't even consider putting big projects in urban areas. Consequently, major development moves to the fringes of suburbia where open fields and farm land are easier to come by. Meanwhile, city neighborhoods continue to decay, suffering from high unemployment, an eroding tax base, crumbling infrastructure and bleak prospects for the stability that jobs bring.

Lt. Gov. Peter Kinder has a plan to address the problem: large-scale state tax credits for large-scale developments (75 acres or more) in distressed city neighborhoods. It's an intriguing idea, although the particulars of his plan may be too generous.

A controversy brewing in north St. Louis, for which Mr. Kinder's plan would come in handy, is illustrative. Several years ago, McEagle Properties, founded by Paul McKee Jr., began buying up property in city neighborhoods north of downtown, in the hope of assembling enough land to attract a large development. Mr. McKee's firm built the giant Winghaven development in St. Charles County and is developing the NorthPark industrial development near Lambert Field. He's a serious developer with a solid track record. The Old North St. Louis Restoration Group, a community advocacy organization, thinks Mr. McKee's firm owns 291 properties in the area bounded by Grand Avenue on the west and 11th Street on the east.

Developers often move stealthily when buying land. If word gets out that a big project is in the works, land prices can jump. Assembling enough land behind the scenes can take years. North St. Louis residents concerned about their neighborhoods saw straw companies buying up dilapidated houses and letting them fall apart, rather than fix them up. Not surprisingly, they were upset. Many purchases were traced to McEagle.

Parts of the North Side near downtown are starting to come back after decades of decay. Abandoned row houses are being torn down or rehabbed, and new housing is being built. The last thing the area needs -- or residents want -- are speculators hanging on to derelict buildings, hoping the price will rise.

Now that McEagle's involvement is known, Mr. McKee says he's stuck with scattered plots of land too small to develop and dim prospects for assembling enough contiguous lots in-between at a reasonable price. "I am now dubious about my chances for successfully pressing forward as an assembler," Mr. McKee recently said in a written statement. He added that he'd like to join with others to buy land in north St. Louis. That leaves the neighborhood in a kind of suspended animation, with no prospect that Mr. McKee's holdings will be improved soon.

That's where Mr. Kinder's plan could help. It would offer tax credits in areas where 25 percent of the people are poor, or where half live on incomes 60 percent below the area median. Owner-occupied houses could make up no more than 5 percent of the area, and use of eminent domain would be limited but not prohibited.

Developers who assembled 75 acres or more would get tax credits equaling half the cost of the land. In addition, the state would cover the developer's interest payments for five years. In effect, developers would be getting land at half-price, plus a free loan. For that, they would have to sign agreements with local governments, promising to meet development deadlines. Those are very generous terms -- maybe too generous.

Mr. Kinder's proposed tax breaks would join a list of 65 other state incentives for projects ranging from rehabbing historic buildings to making wine to producing ethanol. State incentive programs now reduce tax collections by about $300 million a year. That means less tax money is available for basic state services such as schools, prisons, mental hospitals and health care. That, in turn, increases the pressure to raise taxes.

The basic concept of giving tax credits for large-scale land assembly is a good one, provided that the credits are given to projects that bring good-paying jobs to poor neighborhoods. The return to the state -- which Mr. Kinder projects as $10 for every $1 given in land assemblage credits -- would be income and property taxes, reduced expenses for government services consumed by grinding poverty and the stanching of urban decay.

Mr. Kinder, a Republican from Cape Girardeau, is a rare bird in state politics: a rural politician with a genuine interest in urban problems and a fondness for St. Louis in particular. He bridges the rural-urban split that so often poisons state politics and stalls development.

On this issue, he also spans party lines. His idea has the support of Mayor Francis Slay and Mike Jones, executive assistant to St. Louis County Executive Charlie Dooley. All three are Democrats. If more politicians were able to look beyond geographic and party boundaries to try to solve problems, Missouri would be a more prosperous place.