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Senators request update on benefits of Aerotropolis tax break

Tuesday, September 13, 2011 | 8:25 a.m. CDT; updated 9:31 p.m. CDT, Wednesday, September 14, 2011

*CORRECTION: Regional Economic Models Inc. is the company that presented the job creation projections to the Missouri Senate. An earlier version of this article misidentified the company.

JEFFERSON CITY — Missouri senators requested an update to answer their questions regarding projections on revenue and job creation under the administration's proposal for tax breaks to develop an air cargo transport hub in St. Louis.

A private company hired by the state, *Regional Economic Models Inc., presented its projections for the benefits of proposed Aerotropolis spending at an informal briefing with senators on Monday night, the day before a scheduled chamber debate on the $360 million package of tax breaks. The bill provides tax incentives to promote the possibility of using Lambert-St. Louis International Airport as a cargo transport hub for Chinese airlines. Several senators expressed dissatisfaction with information provided by the company.

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"Understanding that every dollar that we invest in this or any other economic incentive is a dollar that we're not going to put in education, or we're not going to put in roads, or we're not going to put in bigger issues," said Sen. Brad Lager, R-Maryville. "We need to understand what those returns and opportunity costs are."

Lager said he requested the information because a consensus had not been reached in the Senate. Farrah Fite, communications director for the Majority Caucus, said they still hope to begin debating the bill during session despite unanswered questions.

The results encompassed multiple scenarios, most of which predicted a small positive return only 10 years after the initial investment. REMI also predicted, using previous studies, one job created per 2,500 square feet of warehouse space created near the airport. Multiple senators requested that more information be provided. The bill is up for discussion during the special session.

Multiple senators questioned the accuracy of REMI's data, saying that REMI has previously overestimated job creation. Sen. Jason Crowell, R-Cape Girardeau, questioned whether companies would be able to receive tax credits without proof they created sustainable jobs. The Quality Jobs Credit, which companies would be eligible for, along with the Aerotropolis tax credits, requires proof before any payments are made. Both tax credits reward businesses for job creation, especially development relating to the cargo hub around Lambert, but they are different in how they distribute funds.

"This, as currently contemplated, as currently stated, is an entitlement, and that money goes out whether or not those jobs are created," Crowell said. "It's not the same as, in my understanding, as a typical economic development to where you're able to negotiate out a 1-1 return to where if the company doesn't produce those jobs, they don't get the tax credits."

Another concern presented was that REMI has no data on how accurate it's projections have been in the past, despite being in use since it's creation at the University of Massachusetts in 1980. A REMI spokesman said the accuracy of the data depends on the accuracy of the information presented by the company. However, in this projection, REMI's data is based on research and predictions from the Missouri Economic Research and Information Center, not an actual business plan.

Factors that were not taken into consideration include the possibility that roads would need to be altered to account for increased traffic and a tax credit applying to distressed land, including areas where this development would take place. Another concern was that some of the jobs created could be temporary construction jobs, demolishing some of the 31 million square feet of existing warehouse space to build new facilities. Senators requested that REMI include these factors in another set of projections.

"If you incorporate that into your formula, I think we would have a better ability to see what the benefit is over 10 and 15 years," said Sen. Maria Chappelle-Nadal, D-St. Louis County. Chappelle-Nadal introduced the concern about possible road changes and requested information of how those costs change projected revenue.

A majority of the Senate attended the briefing.


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Comments

Stephanie Ebbs September 14, 2011 | 9:24 p.m.

I have to correct myself on this. The company is Regional Economic Models Inc. (REMI) not Regional Economic Development Inc. REDI is a separate entity responsible for something very similar.

My apologies, reporters make mistakes too!

-Stephanie Ebbs

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