This Week in Urbanism Season 2 Premier: Development Incentives

Thank you for joining us for a second season! This Week in Urbanism returns with improved audio quality and production along with topics that are intended to foster nuance and excitement along the way.

In the time since the ending of the last season, a budding, 200+ group of St. Louis Urbanists has begun to find community and organize together. The group, the St. Louis Urbanist’s Confluence, can be found on Discord at the link below and is beginning to do great work on transit advocacy, housing, and collective action.

https://discord.com/invite/AvQsVs7B

ROUGH TRANSCRIPT BELOW:

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Could it be? Could it finally be?

The time’s finally here. You’re listening to This Week in Urbanism, and yes, Season 2 is finally here.

I’m your host, Brian Adler. Before I get started, why don’t you subscribe and check out my Patreon supporter page at Patreon.com/BrianAdler. Why check out my Patreon? Well, I want to buy more stuff and the benefit to you is that you can listen to this podcast a little early. Heck, it doesn’t hurt to boost my ego a little bit either and my brilliant, self-inflating writing doesn’t generate via AI just yet.

Anyway, it’s time. And I’m sure you’re ready.

And before we get started, I want to do a special shout out to a new group that I’m a moderator of, but, did not create. I’m talking about the St. Louis Urbanist Confluence group, and it’s a collection of urbanists, almost 200 strong, across the St. Louis area. We talk transit, density, affordability, neighborhoods, and more. Some of our incredible members are planning collective action to enhance walkability, bike-ability, and more. I will post a link to join on our Anchor.fm channel and everywhere else I can.

Today is June 22nd, 2022, and St. Louis, I think I have myself something just controversial and important enough to boost my listener base here. Don’t believe me? Well guess what today’s topic is: public development incentives.

See? What did I tell you. This is some real juicy stuff and by sheer virtue of listening to this niche, urban planning podcast, I’d be willing to bet you’re not somewhere in the middle on this. You’re probably gripping the steering wheel or bike handles a little bit harder, and baby, this is gonna make your hands sweat.

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But you know what? Life’s complicated. Tax incentives are nothing different. They’re probably one of the more complicated things in life, even more than basic human interactions with one another. Heck, especially during and after COVID. Yesterday I was in the elevator with someone for the first time in a long time, and my god, what even are you supposed to say?

Anyway suffice it to say that if you feel strongly about this issue, my goal is for you to loosen up a bit because as many good arguments as you have, there’s probably plenty that even your mortal urbanist enemies have too. And, even though there’s nothing sweeter in life than winning a petty argument on the internet, I’ve learned that us urbanists have to try to find some common ground if we want to make some progress.

Okay I’m going to dig in here a bit. This is an inherently thorny conversation. Let’s start with a definition. So, what I mean by the term “development incentive” is a distinct set of public goodies offered by a given municipality or development authority to either lure a project to their region or to ensure that a project is actually financially feasible and thus built. Of course, anything that a city gives away is essentially publicly generated, so you enter a realm of tricky and important politics too.

Still with me? I’ll try my best to keep this podcast episode accessible. Let’s briefly go over the main types of incentives that developers usually seek or are given here in St. Louis. I’ll probably miss some, but that’s where you can enjoy roasting me in the comments. Come at me, folks! I just got a haircut, so my ego has room to fall.

  1. TIFs
    1. TIF stands for ‘Tax Incremented Financing’, which is essentially a capital improvement bond that cities can issue on the behalf of developers. It is a financing tool that captures a rise in economic and property values and the connected increase in tax revenues to invest in the required infrastructure upfront. You’ll often see TIFs go toward infrastructure like roads, lighting, sidewalks, sewer and water, etc. Anyway, usually you’ll see these over a period of say 10 to 20 years.
  2. Tax Abatement
    1. Tax abatement is a tool that we see used relatively frequently in the St. Louis area as well. You’ll see this often as a percentage when applied, and the idea is that you pay property taxes on pre-improved values for a given amount of time. You’ll rarely see 100% abatements, but often somewhere between 50 and 75%. Although the developer will pay increased property taxes, they’ll not be paying that full amount, rather they’ll be paying the abated amount, for perhaps 5-15 years.
  3. CIDs
    1. CIDs, or Community Improvement Districts. Many CIDs are not related to particular developments, but sometimes they can be created primarily for a development too. These are a set of boundaries that create a special taxing district to offset costs for public improvements and services. For example, a hotel development could create a CID covering the boundaries of just the hotel, which I believe occurred at the Le Meridian in Downtown Clayton, where it then collects taxes from those boundaries.
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On the surface, this is a pretty benign topic, right? It gets a little complicated, though, and pretty incendiary too.

But let’s do our very best to examine some different arguments here. Let’s say I’m a developer and I want to develop market-rate apartments on a vacant lot in the Central West End. Let’s lay out some facts:

  1. First, I said market-rate, not affordable housing.
  2. This project would ask for a 50% tax abatement over 10 years.
  3. Let’s go crazy here and say we’re going to pick the most high-profile parking lot in the Central West End at Lindell and Kingshighway, where a new tower is actually slated to go. That parking lot generates about $64,000 annually in property tax revenue.
  4. Let’s say we’re going to have a building just like The Orion, the building that has the Whole Foods. That building generates about $700,000 in property taxes annually. We’ll do the same number of units and just estimate the same.

Okay so we’ve got some workable stuff here. Let’s say I’m anti-development incentive here. What would I probably argue?

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First, I’d be sure to point out that we’re using future public revenue to subsidize a project that does not, on the surface, necessarily represent public benefits.

Second, I would extend that argument credibily to discuss equity and schools. Schools in St. Louis City are perpetually underfunded, and a good portion of property tax revenue goes to schools. So, you would argue that you’re potentially taking 50% of the difference in property tax revenues between old and new, so about $318,000 each year for 10 years from schools that would, theoretically, be there if the building were developed without incentives.

Third, I’d probably talk a bit about the neighborhood itself and how it commands top-market rents in St. Louis and point to the fact that the building only serves an upper-market clientele, and point out how that subsidy isn’t going elsewhere. And, I’d talk about the precedent of subsidizing a well-developed, wealthy neighborhood rather than elsewhere.

There are certain to be other arguments too, but let’s let this serve as an introductory, good-faith argument from a fellow urbanist who simply doesn’t love the idea of incentives here for those above reasons.

Let’s flip the table and be in support of the incentives. What would I argue?

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I would point to a range of public benefits that are way too often forgotten in these conversations. It helps that I’m debating myself here, but I know from empirical research that there are inherently positive environmental benefits to dense residential buildings. I’d speak to the benefit of potentially having wealthy clientele move from Ladue to a Transit-Oriented development, and a location where they can replace many of their vehicle trips with walking or transit. I’d speak to the public benefits that would still occur from the other tax revenue being generated.

I’d also take a pragmatic approach and highlight that you would still have over $300,000 in new annual revenue, much of that going to children that otherwise wouldn’t have if we simply kept it a parking lot. Though they’re being shafted that amount each year from the incentive, they’re still getting that much more than they had before.

I’d mention that it’s been a parking lot for years, and that despite the success of the Central West End, St. Louis is still a difficult market to get financing for in some cases and it is still low-growth. There are inherent risks to development and there are huge inflationary pressures affecting labor and supply costs substantially. I don’t think people often realize just how expensive these buildings are.

So let’s be honest here, neither argument is wrong and both are well-rooted in positive values. But, if you can’t tell, I’m in favor of an incentive in the situation like the above.

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But, of course, that’s literally just an example that I made up. What if we bumped up the incentive to 95% abatement for 15 years? Well, we’d essentially erase all of the gain in property tax revenue. Schools wouldn’t gain a thing practically and it would be really lopsided. You would still get all the benefits described regarding density and built environment, but it could set a very bad precedent for other developers and reflect an unstable development environment.

Anyway, this is all to say that these conversations are complicated and it’s usually worth it to look at the numbers and to play things out before outright expressing approval or disapproval. The reason that I began developing this script is because development incentives are falling into a category of reactionary urban politics.

There have been discussions among neighborhood groups like my own and others who seek to reject any development incentive seemingly rooted in an unfounded confidence in our development environment and a genuine value for equity. But, having admirable values is different from actually supporting actions that meet your stated goals.

When you add new units to a market, you increase affordability. Let’s say you do that and you, a developer, seek a development incentive that’s a middle-ground and still financially beneficial to the city like the example that I described, and then a neighborhood immediately declines it and your project isn’t otherwise possible, then what?

Then it’s clear that the neighborhood may have fallen into its own trap, rejecting benefits even when the numbers showcase a genuine benefit, even if it isn’t as good as we would like.

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I think St. Louis is incredible. I think my neighbors are smart, empathetic, compassionate, and just wonderful people. But, as great as our communities are, we continue to need investment in a city that still sees its population declining. I don’t think we’re in the place to reject things in a reactionary manner even if we don’t on the face of it think the package is as good as it likes.

Now let’s be abundantly clear here. There are plenty of development incentives that we should decline. I don’t think you can credibly at this point request hefty incentives in the Central West End market, and we’re seeing those decline. But, every project is different. New construction is different than historic rehab.

My appeal here is for patience and for good-faith review and for mutual respect. Our mission is so great here as an urbanist collective, so let’s lead the way in our communities and strive to advocate for projects that are reasonable and beneficial.

So how’s that, huh? What do you think? Drop me some interactions, maybe even like Missouri Metro on the insta. My wife doesn’t think I’m cool enough for the tik tok but you can fax me some gif reactions instead.

Stay tuned for our next podcast, folks. Until then, enjoy the outro vibes.

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Cross Grand and the Small Business Revitalization of Dutchtown

Chip and Tasha Smith are here to stay. “I can see the future”, said Chip, as he gazed in wonder at his extravagantly remodeled storefront in the heart of Downtown Dutchtown on Meramec Ave. Living just steps from their store, Chip and Tasha could not be more bullish on their neighborhood. Chip, a photographer and artist by trade, has South City in his bones. Tasha even serves on the DT2 (Downtown Dutchtown) Board, influencing decisions that support local businesses, community events, and infrastructure.

Editor’s Note: The photos taken for this piece are sure to pale in comparison to what Chip is capable of.

For nearly a decade, Chip has been building his photography and videography business. It was only 10 years ago that he bought his first camera, and here Chip sat in a chic, modern studio of his own making. Brand new flooring, popping colors, wood accented walls, and a classic old South St. Louis ceiling grace a location that those just wandering in might expect in a New York City boutique. Much of the work came from the Smith Family’s own sweat, with Chip, Tasha, and their children putting in dozens of hours of physical and creative energy. Chip even put in many of the floorboards himself, save where sloped flooring posed a challenge more suitable for a general contractor than a photographer.

Chip and Tasha Smith

“Cross Grand represents where I am from”

Chip Smith

According to Chip, there has never been a better time to be starting a business in Dutchtown. With the Community Improvement District (CID), Downtown Dutchtown, and Neighborhood Innovation Center nearby, there is a large group of community-oriented individuals collaborating to support the neighborhood. Coupled with the incredible amount of development nearby and beginning to spill into Dutchtown itself, the “South Sider” Chip witnessed all these architecturally gorgeous buildings and storefronts and saw nothing but potential. Then he met the people and the community in Dutchtown, one of St. Louis’ most dense communities in terms of population, and saw the value of a strong and supportive community, both in terms of the residents nearby and the support infrastructure described above.

Every step of the way, Cross Grand found encouragement and support from the Dutchtown community. John Chen, founder of the Neighborhood Improvement Center just a block further East on Meramec, has advised on certain elements of the project and provided as much support as he can as the owner of the building.

The potential of Dutchtown is readily apparent as soon as you enter the neighborhood. There is an expansive infrastructure already in place comprised of incredible, historical housing stock, a walkable street grid, businesses that have been around for nearly a century, and critical retail corridors on Grand and Meramec. The Meramec corridor in particular evokes a similar feeling to Manchester in parts of The Grove, or even parts of Maplewood. A dense cluster of restaurants, boutiques, and age-old retailers sit in 100+ year old, brick-clad buildings with mansard roofs with ample room for outdoor dining.

Cross Grand Studio- Brian Adler

That’s not to say that they didn’t need to put in the work to make their storefront shine. To see the incredible transformation of the space, look no further than these photos Chip provided of the space before they saw its true potential. Drop ceiling hid the gorgeous ceiling pattern visible today, and the floor was in need a complete refresh. Perhaps someone could have envisioned an office or small store, but to imagine and create the Instagram-worthy color scheme and modern aesthetics is a true feat.

With Cross Grand, Chip and Tasha are combining their interests into a full service experience for creators like themselves in Dutchtown. Chip now does most of the video and photography work in the community, with many of his photos available on the Downtown Dutchtown website. Tasha, with lots of events in the small event world, and Chip with photography and videography, found that they could create a space that catered to both needs. They plan to bring other neighborhood creators into the studio in addition to the members of the community they hope will view their work, take photos, or hold small events there.

Chip hopes that the curated space will be a destination for nearby residents to get creative and see themselves in a new light. Far from only shooting weddings, Cross Grand will offer photo sessions, photo books, and event space. Chip is also looking for ways to capitalize off of the unique style that’s new to the Dutchtown neighborhood. Whether it is featuring the work of local artists or perhaps catering to a podcast and vlogger community, Cross Grand has a special space and a set of services that Dutchtown previously lacked.

Cross Grand Studio- Brian Adler

Grateful for their community support from the CID, DT2, Thomas Dunn, and the Neighborhood Innovation Center, Cross Grand owners Chip and Tasha are plainly excited to finally bring their dream to the community. To have a space to bring clients besides Starbucks, meet their neighbors who just walk in the door, and to show their kids the product of hard work are things that make Chip extremely proud and eager about this space.

The Grand Opening

Cross Grand is set to open to the public this Wednesday, October 21 with a Grand Opening and After Hours Happy Hour co-hosted by Downtown Dutchtown. The event will feature Chip’s first photo book, a Dutchtown/Cross Grand hoodie collaboration on display, a drummer playing live music, and possibly discounted packages in addition to the hoodies and photos being on sale. Members of the Dutchtown community and beyond are encouraged to stop by and witness all that Cross Grand has to offer. The Facebook event can be found here, and you can find more information about the event on Downtown Dutchtown’s website as well here. The event will take place from 5:30 to 7:00 PM and visitors are encouraged to meet neighbors and stick around for a drink.

“Cross Grand is here to stay. We are going to add value to this neighborhood.”

Chip Smith

Small business entries speak volumes about a neighborhood’s trajectory, and their value is even higher in the middle of an elongated Pandemic. Cross Grand is a project that rose from the community itself. It does not pad the pockets of national developer groups bringing in luxury units with no affordable housing, raze historical architecture, or displace other residents or businesses. That may sound like a low bar, but often developments in St. Louis do all those things, and while they can still offer plenty of intrinsic benefits, real neighborhood improvement and community stabilization comes from within and supports its residents.

Small businesses are the heart of truly equitable economic development that lifts communities up. The infrastructure provided in Dutchtown by community organizations is beginning to show what it is capable of. Combined with the incredible built environment, the nearby ecosystem is poised to keep pushing Dutchtown in the right direction with a focus on a community driven approach. While not as flashy as a 300-unit tower or several phase development, small businesses driven and supported by their communities have an incredible impact and make urban areas shine.

Cross Grand Entry – Brian Adler

Thank you for joining Missouri Metro on the first edition of our Small Business Series

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