Senators not satisfied with Aerotropolis job creation projections

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4/28/2011: Newspaper Story - Legislators worked into the late hours of the night Wednesday debting legislation modifying numerous tax credit provisions.

JEFFERSON CITY - Senators requested updated projections 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 Model Inc., presented its projections at an informal briefing of Senators Monday night, the day before a scheduled chamber debate on the $360 million package of tax breaks. Several senators expressed dissatisfaction with information provided by the company.

"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 predicting a small positive return only ten years after the initial investment. REMI also predicted, using previous studies, one job created per 2,500 square feet of warehouse space created. 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 recieve tax credits without proof they created sustainable jobs. The Quality Jobs Credit, which companies would be eligible for as well as the Aerotropolis tax credits, requires proof before any payments are made.

"This as currently contemplated, as currently stated, is an entitlement, and that money goes out whether or not those jobs are created,"said Crowell. "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 assumptions, 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 ten and 15 years," said Sen. Chapalle-Nadal, D-St. Louis County. Nadal introduced the concern over possible road changes and requested information of how those costs change projected revenue.

A majority of the senate attended the briefing.