City of O'Fallon, IL

There has been a lot of media coverage lately over the proposed STAR Bond Bill (SB1909) that seeks to establish a 900-acre business district in Glen Carbon. The special legislation is necessary because so-called “STAR Bonds” work differently than traditional economic incentives in that all sales taxes are rebated to the developer for the purposes of developing the business district. The rebated sales taxes include local, county, state, hotel/motel, food/beverage, Metro East Park and Recreation District, Madison County Transit, and flood levee protection.

The City of O’Fallon believes the STAR Bond Bill is detrimental to southwestern Illinois. Because of the excessive incentives in the bill, it puts surrounding communities at a competitive disadvantage. On a level playing field, we willingly compete for development with neighboring communities. This, however, is not a level playing field. The STAR Bond’s incentive package threatens to considerably reduce sales and sales tax revenue for all the current commercial areas in Edwardsville, Alton, Fairview Heights, Granite City, Columbia, Swansea, O’Fallon, Shiloh, Belleville and Collinsville. We don’t have a problem competing, but this is inequitable and unfair and strictly to the benefit of one developer at the expense of area businesses and communities.

The following are some reasons why we believe STAR Bonds are a bad idea. There may be amendments made to the bill that address some of these concerns, but essentially we contend the bill benefits one developer and one project at the expense of other communities in the Metro East.

1. Glen Carbon only: Testimony from the Senate committee hearing indicates that no other STAR Bond Districts will be allowed within 250 miles of the Glen Carbon site. The developers state that substantial property taxes and income taxes will be generated and that may be true. However, Illinois has the Publication 134 Developer’s Exemption, which will allow the developer to keep all the property zoned as “Agricultural” until each development project is occupancy ready and one parcel at a time. It could take years for this to develop and Glen Carbon would have to provide development services, police protection and other government services without added income for possibly years after project start.

They also promote the Kansas City, KS, STAR Bond District as their model. However, the enabling legislation in Kansas did not establish a 250-mile exclusionary zone. Any community in Kansas can establish a STAR Bond District. In fact, STAR Bond Districts are currently proposed in four other cities in Kansas, and two of them are in the same metropolitan area as Kansas City, KS.

2. Will not create business: A project of this size is likely to divert business from other Madison and St. Clair businesses. Motels in the area are currently running at 54% capacity (down 24% from last year) and we have an approved hotel on hold. O’Fallon alone has more than 175 acres of Interstate-ready retail building lots that do not require government support. O’Fallon and Fairview Heights have three major furniture stores and a national electronics store sitting empty and available immediately for rent.

The East West Gateway Council of Governments recently conducted a study on the effect of retail-oriented Tax Increment Financing (TIF) projects in the St. Louis metropolitan area. In a nutshell, the report researched all of the TIF’s in both Missouri and Illinois and determined that while the TIF may have benefitted the specific community where it was located, there was no discernable benefit to the region in terms of additional jobs, tax revenue, or economic impact. The TIF’s merely moved the money from one part of the region to the other.

Here is a quote from the East West Gateway report: “While distribution effects might yield broader economic benefits when used to redevelop economically distressed communities, when incentives are used in healthy and prosperous communities the regional effect may be to destabilize the fiscal health of neighboring areas. This conclusion particularly applies to retail development. While there is ample justification for tax expenditures on retail development in underserved areas, overall there seems little economic basis to support public expenditures for private retail development. Despite massive public investment, the number of retail jobs has increased only slightly and, in real dollars, retail sales or per capita spending have not increased in years.”

3. 100% Rebate: The project takes 100% of taxes generated from Sales and Service on the 900 acres and gives it to the developer. That includes the State of Illinois 5% sales tax at a time when the state is in such dire straits that its bond rating recently was reduced from AA to AA-. It rebates revenue from public transportation and proposes thousands of minimum wage jobs that would depend on public transportation to get to the site. The site is located in a 100-year floodplain, yet it rebates the recently approved Flood Protection Levee sales tax. It rebates Metro East Park and Recreation District (MEPRD) tax money away from public parks to build a private pay-as-you-go entertainment complex that minimum wage workers will not be able to afford.

5. Public Support: The developers promote job creation, but retail jobs are notoriously low-wage. The project calls for thousands of minimum wage jobs that Glen Carbon has little capacity to support. Public housing, public health , public transportation, public education would all be required and most likely provided by communities other than Glen Carbon.

While the City of O’Fallon has attracted its share of retail businesses, we are currently in the process of using economic incentives to attract office projects that will provide high-paying professional for O’Fallon residents.

6. Federal Support: This property is surrounded by Interstate highway on two sides but does not have an Interstate exchange or entrance on either I-270 or I-255. An interchange of this size usually costs $7-10 million each and would come from the region’s transportation dollars. This would be in addition to all the sales and service tax rebates. In addition, the site has flooding and drainage problems that the STAR Bond District could apply for federal grants to repair. These funds would also come from the region’s share of available funds and we just raised the sales tax on everyone but the STAR Bond District to fix the flood levee districts.

7. Environment: Numerous environmental concerns will vigorously oppose this project. Among those who have contacted us or have been recommended are Kaskaskia Group of the Sierra Club, American Bottoms Conservancy, Prairie Rivers Network, National Resources Conservation Service, and the U.S. Army Corps of Engineers. The area contains a floodplain, wetlands, and a wildlife area that will surely gain the attention of the Illinois Environmental Protection Agency and the Illinois Department of Natural Resources.

8. Business: There have been several rumors on businesses wanting to locate there (hotels, discount furniture, sporting goods, entertainment), and all have direct competition in the local area that would be placed at a severe disadvantage if the STAR Bond District could be rebated up to 26% on every dollar sale or service (Sales and Service 9%, Hotel/Motel 7%, Gas and Electric 5%, Telephone 5%, and Use Tax for a little extra). The City of O’Fallon and other cities only have the ability to rebate the local 1% sales tax.

9. Economic Development: This project does not propose a single job to help the laid off steel worker from Granite City or Alton and does not bring long term higher paying jobs for students graduating from the universities in the area. However, the project does propose to compete with local established businesses for retail and entertainment dollars from a large area--all for the benefit of the developer who relies primarily on government subsidies to finance his project.