Who wins with tax incentives?

Some say everybody can benefit; others say schools lose out
Monday, January 2, 2006 | 12:00 a.m. CST; updated 4:12 p.m. CDT, Tuesday, July 8, 2008

Some people see recently proposed tax incentives for Columbia businesses as a game like chess: It’s impossible for both Columbia Public Schools and the city of Columbia to win.

Others, however, see the incentives as a game like Monopoly: All participants can win “property” from the “bank” and, in principle, two (or more) players can help each other in gathering a maximum amount of money.

For Columbia school board members and business leaders, the tax incentives to bring businesses to Columbia can be a blur between the two games — providing opportunity for gains and, at the same time, losing future revenue at the school district’s expense.

Regional Economic Development Inc., a public/private partnership that aims to promote economic expansion in Columbia and Boone County, has been pushing limited Chapter 100 tax incentives for attracting and retaining industry in the city and county. Chapter 100 refers to its citation in Missouri law.

Under REDI’s proposal to the city, Columbia would issue revenue bonds to companies that want to come to the area or expand existing operations. The City Council, which historically has been cool to the idea, thus far has no plans to formally review the proposal.

Because the city would issue the bonds, the land or equipment the companies would buy could be exempt from up to 50 percent of real or personal property taxes for as long as 10 years.

Boone County has adopted a version of the proposed policy that attempts to attract life sciences and related high-tech companies.

The incentives mean the Columbia school district would not receive 100 percent of its cut of the taxes, a prospect that worries school board members regardless of whether they favor the proposal.

School board member Kerry Crist said the proposed incentives would see Columbia develop the pitfalls of a big city. If the city had fallen on bad economic times and unemployment had increased, she said, the tax incentives would make sense.

“The idea that we’re so desperate to bring new business and new development to Columbia is shocking,” said Crist, who teaches part time at Stephens College. “I’m saying they’re coming anyway.”

Crist said tax breaks pit businesses against one another.

“Why would a new guy get a break?” she asked. “Instead of working as a team, businesses will be pushing some things that are harmful.”

Crist said that given one break, businesses would push for more. The first tax break is least damaging, but then they continue, she said.

“The school will be responsible for educating all those children,” she said, referring to families that would relocate to Columbia to fill jobs created by business expansion.

Crist said she doesn’t believe the promotion of tax incentives is malicious, but rather, it’s short-sighted.

“That’s kind of the direction our society is going in general,” she said.

Dave Griggs, president of Dave Griggs’ Flooring America and a chief proponent of the plan, said the backbone of the proposal is to attract capital investment that, in turn, creates quality jobs.

“I’m kind of the grandfather of this policy,” said Griggs, who also is a member of REDI and a former county commissioner.

Griggs said that while Columbia’s growth has led to the buildup of more retail stores, many of the jobs created don’t last.

“Retail jobs tend to be more transient,” Griggs said. “Those are not the jobs this initiative is trying to attract.”

In Crist’s view, companies should want to give back to the community and not be bribed to locate in Columbia in the first place.

“There’s nothing that indicates that these businesses will be the kind of businesses that will add anything to the community,” she said.

Crist noted that Columbia was listed in Money magazine in 2000 as one of the best places to live in the country. “And it wasn’t because they gave tax breaks to businesses.”

Crist believes tax incentives are “state-structured” to be most harmful to schools.

“These are structured so that the school could lose up to 100 percent of property tax,” she said. “The city could lose up to 50 percent.”

Board member Karla DeSpain, who favors the proposal, said the move is one of practicality: If Columbia has a downturn in areas such as insurance or education, the city could fall on bad economic times.

“We’re very limited in our diversity of our industry,” said DeSpain, who is the financial officer for John DeSpain Dermatology. “While we’re not struggling, we’re at the cusp.”

DeSpain said the jobs the incentives would bring are high-paying, permanent jobs, the kind that keep people in a community. And the incentives are not forever, she said.

“You don’t like to give away any taxes, but what we need are more of the middle-range positions,” she said. “And that’s what this is focusing on.”

Griggs said Columbia needs the policy to be competitive with other towns and states. He called the proposal one of the most conservative incentive plans in the country.

“In fact, I know that some companies will laugh at us,” he said. “But at least we get to tell our stories.”

School board member and attorney Elton Fay, whose support of the proposal is lukewarm, favors the tax incentives for clean industry, or businesses that commit to improving the town and don’t harm the environment.

“I’m not against it,” Fay said. “But I think we have to look at it carefully.”

Fay said he made his way through college and law school by working at Hubbell Power Systems, a factory in nearby Centralia. “Do we help them stay in Centralia, or do we say we don’t really care?” Fay asked.

“I know there are kids 40 years younger than me that will still need summer jobs,” Fay said. “Because of those good jobs, I was able to afford to go to school.”

Fay said as a resident, he’d rather see Columbia’s size stabilize.

“But I also know that you either grow or you’ll probably go the other way,” Fay said. “So, my selfish desire for Columbia to remain small is probably not going to happen.”

For Griggs, the proposal isn’t a question of the money the school district could lose; it’s money the schools stand to gain. There is no reduction of any existing revenue, he said. “What’s there today is irrelevant.”

“The policy is there for only substantial new capital investment,” he said. “Fifty percent of something is better than 100 percent of nothing.”

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