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Wednesday, August 22, 2007

Testimony on the Distressed Areas Land Assemblage Tax Credit Act

Here is an extended version of testimony I provided yesterday at a hearing on the economic development bill (HB 1) currently being considered in a special session of the Missouri legislature called by Governor Matt Blunt. The Special Committee on Job Creation and Economic Development of the Missouri House of Representatives conducted the hearing.

Pub Def has a video of the testimony as delivered as well as my questioning by Rep. Rodney Hubbard; watch it here.


Good afternoon. I am Michael Allen, Research Associate for Landmarks Association of St. Louis and a resident of north St. Louis. Landmarks’ mission since its founding in 1959 is to preserve, promote and enhance the architecture of St. Louis. We have a deep interest in promoting good urban planning practices that solve the complicated challenges of our city.

We are supportive of the concept of creating an economic incentive program of benefit urban areas deprived of investment, like north St. Louis. However, we oppose the current version of the Distressed Areas Land Assemblage Tax Credit Act. The act encourages a size of development both inappropriate and unfeasible in urban areas where its use could be highly desirable. A much lower threshold for assemblage would enable more flexible use of the tax credit. Inserting requirements for development completion, public input and historic preservation would ensure good results. The current version is of little use to the majority of developers in places where its use is likely.

The numbers are simply too high to be realistic. In the city of St. Louis, the average city block is about one acre or less. We haven’t seen anyone put together a 75-acre redevelopment project in a distressed area of St. Louis; a recent attempt seems to be failing. What we have seen recently are projects of 25 and 30 acres in size that create remarkable transformation and gain community support.

Sometimes, however, a 75-acre project may be necessary. Other times, a ten-acre project may be more desirable. These choices can only be made at the community level. What the state legislature can do is create an incentive that hands the question over to those people who know best what is needed at a local level. This would leave many options open. Fundamentally, the size of a project depends on the size of the problem at hand. A credit that truly could be used statewide should not apply a standard that promotes one type of development with no proven track record.

The preponderance of city-owned land in north St. Louis has created a major development crisis that requires a solution. This tax credit needs to enable that solution. Applicants should be allowed to count city-owned land toward the total acreage acquired within a project area.

There is no guarantee that this incentive program will actually lead to development. As written, the tax credit would apply only to acquiring large amounts of property in distressed areas. Without required development timetables, rewarding acquisition in distressed areas could in fact lead to further blight rather than investment. These credits should be issued only upon completion of development. Also, a recapture provision would provide a final safeguard.

The requirements for the municipal approval process here are too vague. We need to make sure that the redevelopment agreement required under the act be approved by a municipal legislative body that represents affected residents.

The act lacks needed requirements for historic preservation planning. One of the most likely areas for use of this tax credit is in north St. Louis. Even in the most depopulated parts of north St. Louis, there are few areas of even one acre where there are no historic buildings. In an urban area, any project of 75 acres will include hundreds of potentially significant buildings. A preservation plan is essential to ensure careful choices about these resources. Rehabilitation of historic neighborhoods is the one of the few proven redevelopment strategies for urban areas.

As written, an applicant could use the tax credits to pay for fines and bills levied by municipal government for code violations. State law should not provide any incentive for violating municipal health and safety codes.

In conclusion, the current version of the Distressed Areas Land Assemblage Tax Credit Act might end of being of little use in encouraging development of the most economically distressed areas of the state. Binding ourselves to a flawed proposal could result in continued stagnation of areas like north St. Louis. Fortunately, we still have the chance to make useful changes, and I urge the committee to do so. Thank you.

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