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Today’s Discussion

Today’s Discussion. Funding for Public Schools in Missouri Impact of Economic Development Incentives on Public Schools Community’s Role on Achieving Proper Balance. Reliance on Local Revenue. Source: U.S. Department of Education. Within the last 20 years…. A number of new incentives

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Today’s Discussion

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  1. Today’s Discussion • Funding for Public Schools in Missouri • Impact of Economic Development Incentives on Public Schools • Community’s Role on Achieving Proper Balance

  2. Reliance on Local Revenue Source: U.S. Department of Education

  3. Within the last 20 years… A number of new incentives have been instituted to spur economic development in the state

  4. Economic Development Study • Study the use of Economic Development Incentives in Missouri • Gauge the impact of these incentives on funding for public education

  5. Economic Development Study Missouri School Boards Association Missouri Association of School Administrators Missouri NEA Missouri AFT Cooperating School Districts of Greater St. Louis Cooperating School Districts of Greater KC Missouri Association of Secondary School Principals Missouri Association of Elementary School Principals Missouri State Teachers Association Missouri Parent Teachers Association

  6. Economic Development Study • Conducted by Doolin Ward LLC of Kansas City • Focused only on the year 2007 • Focused only on tax abatements and diversions of four types of incentives – Chapter 353 – Tax increment financing (TIFs) – Chapter 100 – Enhanced Enterprise Zones (EEZs)

  7. Question: How Do Each of These Economic Development Incentives Work?

  8. 353 Basics • This is a real property tax abatement that allows up to 100 percent abatement for 10 years and 50 percent abatement for subsequent 15 years • Although seldom used, there is a capability in the statute to provide for PILOTS (Payments in Lieu of Taxes) to effectively reduce from full abatement • Must meet blight test • City council can award without any school district input

  9. TIF Basics • Tax Increment Financing is not abatement—projects pay all taxes—diverted • TIF can be approved up to 100 percent of the NEW incremental real property taxes generated by a project • As well as 50 percent EATS (Economic Activity Taxes, primarily sales and earnings taxes) to pay certain agreed costs • ‘But for’ test—this is the key point of decision • School districts, counties and other taxing districts participate in plan recommendation

  10. TIF Basics Continued • Cost-benefit analysis must be provided to all taxing jurisdictions • TIF proposal must include specific budget and project components • Payment can be on reimbursement basis—so project is constructed first • Plans last for up to 23 years

  11. Super TIF • Additional revenue from the city—more than 50 percent of the EATS (usually sales and earnings taxes) State Supplemental TIF • Additional revenue from the state—EATS –Up to 50 percent of new incremental income taxes or –Up to 50 percent of new incremental sales taxes

  12. TIF Commission Make-Up • Six persons appointed by the mayor of the city or county with the TIF • Two persons from the county where it is located • Two persons from the largest taxing jurisdiction • One person representing all other taxing jurisdictions Total persons = 11

  13. Chapter 100 Basics • The city purchases property by issuing bonds and then usually sells them back to the corporation • Since the city owns the property, there is no tax due on the property • State legislation allows 100 percent for 20 years • No ‘but for’ test or blight test • Requires city council action only

  14. Enhanced Enterprise Zone Basics (EEZ) • Purpose is for job generation • Geographically limited—high poverty • State tax credits and tax abatement • 50 percent real property for 10 years • One district representative on 7-person review committee for exceptions • City council approval of zone-administrative approval of project––No school district participation

  15. Question We Posed: What is the financial impact of these incentives on school districts in Missouri?

  16. Study Methodology • Contact offices of county assessors and county clerks to determine 2007 economic development incentive amounts for each county and the City of St. Louis • Determine levy rates from each school district • Estimate the diverted/abated revenues

  17. Limitations • Assumes 100 percent abatement (will tend to overstate) • Unable to determine amount of some Chapter 100 projects (will tend to understate) • Unable to measure increased personal property taxes generated

  18. Cautionary Note The data presented assumes that the development project would have happened without the incentive. This is certainly not always the case.

  19. Findings Total State Diversions/Abatements Assessed Valuations • Incremental TIF $1,623,507,000 • 353 $ 715,721,000 • Chapter 100 $ 336,108,000 • EEZ $ 357,747,000 • Total: $3,033,083,000

  20. Findings Total State Diversions/Abatements 2007 School Tax Revenues • Incremental TIF $ 79,851,065 • 353 $ 31,401,799 • Chapter 100 $ 14,538,524 • EEZ $ 14,982,831 • Total: $140,774,219

  21. Findings Top Ten Counties Total Diversions/Abatements School Tax Revenues Jackson $ 43,001,000 St. Louis County $ 29,873,000 St. Louis City $ 15,905,000 Clay $ 15,351,000 St. Charles $ 12,166,000 Buchanan $ 4,081,000 Platte $ 3,402,000 Jasper $ 2,879,000 Green $ 1,010,000 Taney $ 991,000

  22. Findings Top Ten School Districts Total Diversions/Abatements School Tax Revenue Kansas City $ 32,567,000 St. Louis City $ 15,905,000 North Kansas City $ 8,896,000 Rockwood $ 8,668,000 Liberty $ 5,605,000 Blue Springs $ 4,986,000 Hazelwood $ 4,861,000 Wentzville $ 4,089,000 St. Joseph $ 4,080,000 Francis Howell $ 3,834,000 * * * Includes district portion for Special School District

  23. Findings Top Ten School Districts Total TIF Diversions School Tax Revenues Kansas City $ 14,330,000 Rockwood $ 8,668,000 Liberty $ 5,605,000 North Kansas City $ 5,471,000 Blue Springs $ 4,674,000 Hazelwood $ 4,541,000 St. Louis City $ 3,431,000 Kirkwood $ 2,825,000 Lindbergh $ 2,183,000 Orchard Farm $ 2,103,000 * * * * * Includes district portion for Special School District

  24. Findings Top Ten School Districts Total 353 Abatements School Tax Revenues Kansas City $ 15,580,000 St. Louis City $ 10,657,000 North Kansas City $ 679,000 Clinton $ 595,000 Independence $ 542,000 Springfield $ 319,000 Blue Springs $ 312,000 Jefferson City $ 256,000 Moberly $ 234,000 Warren County R-III $ 214,000

  25. Findings Top Ten School Districts Total Chapter 100 Abatements School Tax Revenues Wentzville $ 3,775,000 Francis Howell $ 3,345,000 Kansas City $ 2,107,000 Park Hill $ 1,301,000 Bowling Green $ 1,026,000 Pattonville $ 995,000 St. Joseph $ 970,000 Hazelwood $ 320,000 St. James $ 204,000 Parkway $ 201,000 * * * * Includes district portion for Special School District

  26. Findings Top Ten School Districts Total EEZ Abatements School Tax Revenues North Kansas City $ 2,745,000 St. Louis City $ 1,817,000 St. Joseph $ 1,535,000 Joplin $ 898,000 Kansas City $ 550,480 Carthage $ 507,000 Excelsior Springs $ 468,000 Poplar Bluff $ 408,000 Sedalia $ 369,000 Sikeston $ 364,000

  27. Summary Observations • Economic Development Incentives have been used in 73 of 114+ counties in Missouri • Use of Economic Development Incentives continues to spread • Under the current systems, school districts are the primary contributors and cities generally are the ones that control

  28. Summary Observations(Continued) • Missouri competes with other states to attract and grow business • Tax incentives are the tool of choice for many economic development organizations • Economic stagnation is not in the best interest of public education • Proper balance must be the goal

  29. How Property Tax is Spent in Missouri

  30. Question:Have the Use of Economic Development Incentives Created a Greater Tax Burden on Others? Anecdotal evidence indicates this may be the case

  31. What is the Proper Balance Between the Funding of Public Schools and Fostering Economic Development? • Good schools are necessary for good development • Good development is important for a good community, good schools and infrastructure development • How do we assure each?

  32. Next Steps • Local effort is required –Local education of elected officials and voters –Partnering with other public policymakers • Statewide effort is required –Re-examine the total funding strategy for public education in Missouri • Success will depend on effective partnering and a balanced approach

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