In the last three years, a new tax break has become a standard request of big developers: a sales tax exemption on construction materials.
The break can save developers millions on major projects. And like other tax incentives offered through the agencies staffed by St. Louis Development Corp., the city’s economic development arm, the incentive provides lucrative administrative fees to the SLDC that can reach hundreds of thousands of dollars on the largest projects.
In April, after years of collecting a fee worth 0.2% of the value of at least a dozen multimillion-dollar projects, the SLDC arm that issues the bonds instituted a new policy on the fees.
The fee will be raised to 0.3% of project costs, but instead of retaining all of it, the LCRA will keep just one-third on most projects. The other two-thirds will be directed to the city’s Affordable Housing Trust Fund or the St. Louis Local Development Co., an SLDC-administered agency that makes small business loans.
The new sales tax incentive started just about the time the city began dialing back the amount of property tax abatement it offered developers. In practice, the incentive turns the city’s economic development arm into a pass-through for developers, buying the construction materials that usually would be subject to sales taxes had they been purchased by a private company.
The LCRA board has discretion over how much of the fee it collects and where it sends the money. The board could keep all of the money, for example, if a project already has an affordable housing component or requests a small amount of regular tax abatement. The board could also send a part of the cash to other city initiatives.
For more information: St. Louis Post-DispatchSt Louis Post-Dispatch
By jacob barker
june 27, 2020