The impact of economic development incentives on public education in Missouri

Abstract

Economic development incentives are formally intended for use in attracting new businesses to a community or a particular part of a community. Studies of their effectiveness in achieving this purpose show little direction coming from community planning, but rather direction coming from developers, and a general failure to create new economic activity in most instances of retail development or sporting venues. However little research has been done to measure the impact on the other taxing jurisdictions whose revenues are impacted by the diversion or abatement of taxes for supporting economic development. This dissertation studies the impact on public school financing in Missouri of locally administered economic development incentives, including tax increment financing, chapter 353 tax abatement, chapter 100 bond issuances and enterprise zones. School districts in Missouri are dependent on local property tax revenues for a majority of their financing. Granting of all incentives is controlled by the municipality or the county. The school district is an independent entity established by the state of Missouri and is solely responsible for its own solvency, but these incentives alter funding. The analysis of all of the tax incentives granted within each school district in 2007 and 2009, created an understanding of the nature of the extent of these incentives. Additionally, through qualitative research, understanding of the use of these incentives from multiple perspectives was sought. Key findings emerging include: · In 2007, nearly $140 million was diverted or abated from taxes for public education. By 2009, the amount had increased to $162 million. · Between 2007 and 2009. the amount of revenues impacted increased by 19.6% while the total assessed value went up by 14%. · The best predictor of assessed value impact was district size. · All forms of incentive increased state-wide, over the two years, but Increased abatement didn't correlate with either increased assessed value or student population in that short window. · Incentives are seldom used as formally intended to address blight, but have become an additional source of funding for developers. · The impacts on non-municipal public entities are seldom considered in the decision to grant the incentives.