| St. Louis Five Year Consolidated Plan Strategy | |||||
| Chapter 3 |
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Anti-Crime | Youth | Seniors | Economy | Planning | Codes | Preservation | Energy 
Economic development lies at the heart of virtually every strategy the City of St. Louis has employed to revitalize itself. Historically the economic center of the region, the City has witnessed a gradual erosion of its economic base, as jobs and businesses followed workers to the suburbs in search of shorter commuting times, more modern facilities, room for expansion, the absence of a City earnings tax, and many other reasons. City officials recognize that retaining existing businesses, attracting new business and continuing to seek ways to create new jobs for City residents and others is vital to the long-term health of the City. Jobs create taxes, which help to fund City services. Jobs also generate individual earnings, which can be spent at City retail stores. Equally important, jobs generate a level of activity during the day, and to a lesser extent at night, that brings new life to the City and attracts others to visit and stay.
This section describes the business support programs which will continue to exist in the City over the next five years. COMMERCIAL-INDUSTRIAL LAND The last five years have witnessed the intensification of the city's land problem. The paradox continues whereby the city (Land Reutilization Authority) owns thousands of parcels of land, yet the resources and community will are not in place to assemble the land into developable sites. There is a great deal of interest in the problem, and some promising developments, but the overall dilemma remains. Current Services As noted in the 1994 Five-Year Strategy, the city has long been involved in the land acquisition and redevelopment process. That involvement takes various forms:
Needs and Challenges Despite some positive events over the past five years, the city remains unable at the turn of the century to initiate a large-scale land recycling program. At a time of strong demand for industrial and commercial land, there is no substantial funding source to enable on-going progress. This is not to say that major progress has been absent in recent years. Evidence of that progress has taken many forms:
U.S. Corps of Engineers Assistance. The Corp of Engineers has loaned a brownfields expert to help the city. With his two-year tour of duty, an aggressive program of seeking support for brownfield analysis and remediation has begun. State of Missouri Assistance. The Missouri Brownfields Law, Chapter 447, RSM, as amended in June of 1998 by Senate Bill 827, establishes a valuable clean-up incentive. Applicants enter the Missouri Department of Natural Resources' Voluntary Cleanup Program, which then allows 100% remediation tax credits associated with remediation costs, and the possibility of direct grants, loans, or loan guarantees from the Missouri Department of Economic Development. Under this program, progress has been made on a number of key sites, including Darst-Webbe/Hospital, the Arena Site, the Chase Park Plaza, and Laclede Town. EPA Brownfield Demonstration Grant. In 1996, the city received a demonstration grant to support development of a brownfield remediation program with emphasis on Dr. Martin Luther King Business Park expansion. A Phase I study had been done for this 26 acre area just to west of 18th street, north of Delmar, but support was necessary for Phase II analysis. Working with SLACO, an outreach effort was initiated to inform citizens about the requirements of hazardous material cleanup. Today that effort has paid off with a $12 million dollar investment by Balke Construction that is anticipated to result in 200 new jobs 2004 Land Trust Concept. The 2004 initiative has recognized the extent to which redevelopment has been curtailed by the city's inability to purchase, prepare and recycle commercial and industrial land. Unfortunately, this concept has generated controversy because of the fear on the part of some people that could lead to displacement of existing homes and businesses. A workable land recycling approach that has the endorsement of community based groups has yet to be defined. North Riverfront Initiative. The Economic Development Strategy developed by the Sedway Group in 1997-98 strongly recommended a pro- active approach that would allow businesses to expand between highway 70 and the Mississippi River. This portion of the city has relatively good highway access and visibility, and yet there are many underutilized or derelict properties. An outreach effort is now underway to communicate with businesses in this area, in an effort to explore how the city might help with their expansion or renovation needs. The north riverfront will benefit, and also be disrupted, by the construction of a new Mississippi River interstate bridge. Its timing is based on the availability of large ($500 million) funding resources, and hence hard to predict. Empowerment Zone Grant. The January 1999 decision by the Clinton Administration to award an Empowerment Zone designation in response to the Greater St. Louis Regional Empowerment Zone proposal holds promise for industrial land recycling. This was one of the priority initiatives in the proposal which calls for both funding and tax incentives. Unhappily only $3 million of the $100 million was awarded, and prospects for the remaining amount are not good. Recommendations Many of these recommendations were made five years ago. They remain as important today as they were then, if the city is to find away to compete with suburban and exurban locations. Achieving success in that competition is fundamental to the long-term prosperity of St. Louis, both the city and the region. a) Continue to design and implement a commercial and industrial land recycling program.
b) Continue a pro-active environmental testing and remediation program.
c) Explore realistic alternatives to full-scale cleanup of commercial/industrial property that will remain in the same use.
d) Promote full funding of the Empowerment Zone program.
e) Encourage public-private redevelopment programs that will bolster the whole region.
f) Remind corporations of their environmental responsibilities.
Resources The 1994 Consolidated Plan Strategy noted that assembling an ordinary 2.5-acre (109,000 sq. ft.) city block would usually range between $5 and $25 per square foot (or $545,000 to $2,725,000) depending upon the land use. Beyond that, the Phase I environmental study costs are modest (typically one or two thousand dollars), but the Phase II costs can range much higher (e.g. $10,000 to $100,000) depending upon the nature of the Phase I findings. Actual remediation costs can be in the $50,000 to $80,000 range especially if a dry cleaning, gas station, or similar use once occupied the site. A rough rule of thumb is that normal land assembly costs can be doubled when environmental cleanup turns out to be required. The benefit of placing land back into productive use is equally hard to calculate. If one assumes that every 10 acres of redeveloped land translates into 50 to 250 jobs, and that the typical job pays $18,000 per year, the contribution of those jobs to the tax coffers will be in range of $12,000 annually. This assumes $180 (one percent) earnings tax and perhaps another $300 in sales tax generation per person annually, thereby generating between $24,000 and $120,000 per year. This doesn't count property taxes (which may be abated), personal property, utility, license, and related income sources. Of course, the net gain will be very much a function of what taxes were previously generated by the property. The simplistic conclusion is that purchasing and restoring city land to productive use is expensive. Using these assumptions, a target of purchasing and reclaiming five acres of brownfield property a year could cost from $2 to $10 million a year. But above and beyond the direct tax gains, the advantages of such a program needs to consider the less tangible benefits the enhanced neighborhood stability, the reduced demand for police, fire and other municipal services, and the improved investment climate. BUSINESS FINANCE The St. Louis Development Corporation has expanded its business finance programs over the last five years, focusing on those business establishments for whom conventional banking support may be problematic. New interest on the part of the state and federal governments and the St. Louis corporate community has begun to adjust the traditional St. Louis reputation of a conservative lending community. Current Services The business assistance program continues to offer an array of long-term, low downpayment loans with below market interest payments. These are made to small businesses that want to improve their business by upgrading their facilities, property and/or equipment. One hundred forty three loans were made over the last five years, using nine different programs. This compares favorably with the previous five years when only 64 loans were made. Businesses are required to submit a quarterly report for the life of the loan to record the number of jobs created or loss during the previous three months. In addition, business participating in the loan program pledge to consider job candidates who are referred from the First Employment Referral registry that is maintained by the St. Louis Agency on Training and Employment. Typically, loans are made to businesses that contribute around 10-15% of the project cost in equity, and that secure around 50-60% of the loan from a lending institution. Thus SLDC usually is responsible for 25-40% of the total amount. SLDC typically has a second collateral position behind the participating bank. There are currently nine loan programs, with funding coming from four sources. Loans are approved by the Local Development Corporation board based on staff recommendations. The maximum amount that a given company can receive is typically $750,000 whether in one or multiple loans.
Micro Loan Program. These are loans to businesses less than a year old, in an amount not to exceed $25,000. Terms are typically 5% for 5 years. Participation by a lending institution is not a requirement; in fact, applicants are required to demonstrate that have been rejected by a bank. The program is currently under re-design because of the high failure rate. Business Development Support Services. These are loans specifically designed to help an expanding business with an extraordinary cost such as environmental clean-up or utility relocation. Mini-Urban Development Action Grants (UDAG). These are occasional loans, forgivable loans, or grants made in unique cases where there is a project of special significance to the city. SBA 504 Loan Program. These tend to be more complicated loans requiring substantial documentation and a multi-level approval process. The company must secure participation of a bank (usually around 50%, participation of SLDC, serving as a Certified Development Corporation (CDC) with funds provided from an SBA debenture, and provide 10% in equity (more in start-up or special use situations). Loans can be between $120,000 and $750,000, and at least one full time job must be created for every $35,000 in the CDC portion. SLDC still processes SBA 502 loans (issued in the seventies) and SBA 503 loans (issued in the eighties). SBA 7A Loan Program. In this case, SBA guarantees between 75% and 80% of the bank loan. The Certified Development Corporation (SLDC) takes a third position, if it is involved. SBA Low Doc Program. Low Documentation loans are a variation of the SBA 7A program whereby the SBA accepts a one page application for an SBA guarantee from a bank. The project must be for less than $100,000, usually for a short time period. The banks originate and close these loans, usually with businesses that have a good track record with them. Metropolitan Loan Program (MLP). These loans have been made to assist former employees of the military or defense companies (e.g. Boeing or ATCOM employees). The St. Louis County Economic Development Council originates these loans with EDA funds. SLDC's role is to service the loan. Urban Enterprise Loan Program (UEL). These are loans made with state appropriated funds to assist companies that are expanding or relocating to the State Enterprise Zone or the Federal Enterprise Community. Participating companies must have less than 100 employees and create or retain a full time job for each $20,000 that is lent. Lending decisions are made by the Minority Business Council, up to $100,000 per loan. A typical loan would be 45% from a bank, 45% from the UEL program and 10% equity. Finally the business finance program offers some tax exempt revenue bonds which are issued at less than prime rate to cover the cost of land and building acquisition, machinery and equipment or construction and renovation. Table IIIK-3 summarizes the industrial revenue bonds issued over the last 5 years. Needs and Challenges Securing capital is a challenge for most small and medium sized businesses, especially from banks who traditionally "only want to lend to those who don't need it." Banks and other financial institutions are changing expressing more interest in inner city loans; nevertheless the role of government in extending financial support to companies without a conventional banking ability is critical.
Another challenge for the SLDC has been in processing loans and dealing with delinquent borrowers. This is labor intensive work with little reward. It hasn't always been done in a rigorous fashion. Recommendations a) Seek SBA designation as a "preferred lender."
b) Collaborate with the SBA One Stop Center.
c) Recapitalize the revolving loan fund.
d) Continue to create a workable micro-loan program.
e) Explore joint demonstration programs with commercial lending institutions that could assist startup and other city firms with less than perfect credit.
f) Improve our ability to service loans in a timely and professional manner.
g) Promote the creation of community development banks.
h) Explore ways to retain experienced SLDC staff.
Resources The volume of business finance programs at SLDC currently depend upon resources from different sources - CDBG, the SBA and competitive grants - that can be secured. There are other sources, such as Rural Missouri Inc. which has funded micro-loans in the St. Louis area. Additional monies can be raised from these traditional sources and/or from expanded assistance from the corporate community. COMMERCIAL DISTRICT REVITALIZATION The City's Neighborhood Commercial District Incentive Program has accelerated at a fast pace over the past five years. The primary challenge continues to be the ongoing process to stabilize, organize, and energize commercial districts in the City of St. Louis through business recruitment, retention, and marketing. There are six (6) Commercial District Managers located at the St. Louis Development Corporation and in district offices which are located in the commercial districts in which they work. The rent, utilities, and supplies of these offices are donated by the respective businesses. A major aspect of the program is convincing the building/business owners to invest in their properties. Likewise, the success of the program has created a problem whereby some businesses wait for money to become available before they consider any renovation of their building. The Commercial District Managers are not in a position to achieve large-scale revitalization of commercial districts because each manager has more than three commercial districts. With the demands of convincing building/business owners to participate in the Neighborhood Commercial District Incentive Program, there is not sufficient time to perform other aspects of the Commercial District Manager's job functions. Additional labor would alleviate this problem. Current Services The Commercial District Managers help commercial building/business owners restore the facades of their buildings, In the past, too much emphasis has been placed on awnings. While awnings may be installed along a commercial strip, the Commercial District Managers are now involved in much more detailed development projects for the buildings in the commercial areas. The Commercial District Managers work closely with building/business owners to provide information about City and state grants to help them renovate their property, They work with architects and construction companies to facilitate these renovations. In addition, they act as a liaison between the business community and various departments of the City of St. Louis. It must be noted that the number of projects has increased tremendously in the past five years. In 1994, a total of 17 projects were completed under the Neighborhood Commercial District Incentive Program. This increased to 55 in 1995, and 66 in 1996. Currently, there is still 1997 and 1998 funding available, but to date, 155 and l10 projects have been completed respectively for these years funds. These numbers exceed national averages for similar programs across the country. Between 1994 and 1998, the Neighborhood Commercial Facade Improvement Program has assisted in 403 commercial development projects totaling in excess of $4.1 million in expenditures. The Community Development Block Grant funding for that period was just over $2.9 million. The funding went predominantly into facade improvements for commercial buildings and businesses, with the exception of 55 projects, which were earmarked for public improvement. The public improvement projects entailed greater funding, averaging just over $13,000 per project compared to an average of just over $10,300 for facade improvement projects. The average cost rose steadily from 1994 to 1998, The peak year was 1997, with 155 project totaling in excess of $2 million in expenditures, with over $1.5 million being supplied by Community Development Block Grant Funds. The average commercial facade project was just below $14,000, which was up from $6000 for 1994 funding. Almost $400,000 was spent on public improvement projects. There have been 110 projects with 1998 funds which total in excess of $1 million. These projects cover a range of buildings and businesses in all areas of the City. The amount of the assistance for these projects ranges from $250 to $98,000. However, most commercial facade improvement projects total less than $10,000. The Commercial District Managers meet on a regular basis to discuss problems and concerns and offer each other advise on solving similar problems that they are presented with. Quarterly reports are generated which describe how the Community Development Block Grant Funds are spent. The Commercial District Managers organize and manage 30 Business Associations across the City and work in 23 wards. There is an increasing demand for assistance from areas of the City that do not have a Commercial District Manager assigned to them. In addition, in the past few years the Commercial District Managers have been called upon to revitalize or establish business associations and assist in the establishment and management of Special Taxing Districts. The Commercial District Managers are very knowledgeable about the commercial districts across the City. They are instrumental in developing strategies to improve the public areas of these commercial districts. Frequently they are involved with marketing available commercial properties in these districts. In addition, the Commercial District Managers help identify business opportunities to prospective entrepreneurs. When necessary, the Commercial District Managers assist in the advertising and promotional efforts in the commercial areas. Needs and Challenges The popularity of this program continues to increase. It is one of the few programs that provide a direct payback to the building/business owners. The program is extremely user friendly, with the Commercial District Managers assisting with the paperwork for the building/business owner. In addition, the program provides immediate visual examples of revitalization of a property in an area. Three or four renovated structures in a commercial area show that business is good in the area and encourages other building/business owners to restore their buildings. Furthermore, the Commercial District Managers help establish and maintain a positive business climate in the City of St. Louis. Despite their popularity, the Commercial District Managers often are handicapped in the performance of their duties. Funding is provided solely by an alderman from his/her Community Development Block Grant funds. The fact that funding is controlled by individual aldermen results in different criteria for different wards. This is difficult to explain to individual building/business owners. For example, a building on one side of a street is eligible and a building across the street that is not in a low-mod area is ineligible. Recommendations a) Establish a common, consistent set of guidelines for Commercial District Managers.
b) Engage larger corporations in commercial district improvements.
c) Promote the use/expansion of business associations.
d) Give Commercial District Managers the technology to be more efficient.
e) Identify those commercial areas with the greatest potential for revitalization.
f) Seek alternate sources of funding to stabilize business areas.
g) Encourage Commercial District Managers and Aldermen to develop collaborative plans for redevelopment.
h) Provide initial architectural services to building owners to facilitate revitalization plans.
i) Publicize the role of Commercial District Managers in successful revitalization efforts.
Resources The Commercial District Managers are well respected in the business community and this can be illustrated by the fact that businesses are willing to provide office space for them in the commercial districts. The Neighborhood Commercial District Incentive Program is highly supported both politically and in the business community. The success of the program can in part be attributed to the cooperation and active participation by a variety of City agencies and departments, including the Business Assistance Center, the Building Division, Heritage and Urban Design, Zoning, the Board of Public Service and the Street Department. Representatives from these departments meet bi-weekly to review pending projects in the commercial districts, and to facilitate a more efficient process of obtaining the necessary approvals and permits from the City. This high level of participation is unprecedented in St. Louis and most other large cities. Community interest and involvement are key factors that contribute to the success of the Neighborhood Commercial District Incentive Program. This interest and involvement includes all community members, from the aldermen to city departments, to the property owners. A high level of personal contact between the Commercial District Manager and neighborhood participants is also critical to building a successful neighborhood program. The role of business associations is critical to the success of the Neighborhood Commercial District Incentive Program. Often the Commercial District Managers must organize or reorganize a business association for it to be effective tool. They help with the management of these associations. These business associations are vital to the long-term stability of the commercial districts. BUSINESS ASSISTANCE AND MARKETING Over the last five years, the St. Louis Development Corporation has committed to working with other departments of city government in order to dramatically improve the business climate in the city. Some of the business impediments, such as brownfield remediation, assembly of large development tracts, and the building of a talented and motivated work force, are challenges that will take many years to rectify. There are other impediments, such as promoting a business friendly environment, that can be more easily addressed. Current Services Like any economic development function, the city offers a number of business oriented services:
Tax Incentive Programs - Traditional. Despite differences about the need for property tax incentives, development plans continue to be prepared and forwarded to the Board of Aldermen under the terms of Chapter 99, and occasionally Chapter 100 or Chapter 353. Table x summarizes the development plans that were prepared, approved by the appropriate board and forward to the Aldermen. In addition x Tax Increment Financing (TIF) plans have been prepared. Table IIIK-4 also highlights the number of businesses that have taken advantage of the Missouri Enterprise Zone program. Tax Incentive Programs - New. An impressive number of new tax incentive programs have been enacted in recent years. These include Missouri Historic District Tax Credits and the Distressed Community Act at the state level. Beyond this there are incentives associated with the national Enterprise Community, and especially the Empowerment Zone designation available to those who invest and commit to hiring residents of the zone. The HUBZ zone legislation and the President's New Market Initiative are additional incentives designed to attract investment to the inner city. Business Communication. SLDC has initiated a letter campaign that each month goes to a hundred different businesses in order to inquire about their needs and to update them on the new business programs. The resources have not been available to allow a business call or marketing program. Real Estate Locational Services. The SLDC Real Estate Division is available to share its knowledge regarding the acquisition or lease of buildings and sites, relocation, and related real estate issues. Efforts are underway to use the Community Information Network Internet service to complement traditional services. Minority and Women Business Enterprises. SLDC devotes considerable time to encouraging MBE and WBE firms to share in the economic development activity of the city. A certification process is undertaken to identify legitimate MBE/WBE firms, information that is distributed in directory of qualifying firms, and a database that is accessible over the Internet. The Mayor's Executive Order and HUD's Section 3 requirements establish targets to be pursued. World Trade Specialists. SLDC is retaining an individual who, working in conjunction with the regional World Trade Center, can promote export activity and international business recruiting on the part of the city. Traditionally, the sister city program has been an important element in promoting global economic relations. Business Incubator Support. The Center for Emerging Technologies opened on Forest Park Expressway several years ago, an investment made possible because of an Defense Adjustment grant from the U.S. Department of Commerce's Economic Development Administration. With support from the state Department of Economic Development and the University of Missouri-St. Louis, this high technology incubator has assisted almost a dozen firms with collectively 80 employees. This success is in keeping with the "Technopolis" vision articulated at the beginning of the decade concerning the potential of the bio-medical industry made possible because of the university and hospital complexes. The City also participates in the regional incubator program that is led by the St. Louis County Economic Council. Business Information. A concerted effort has been made to assemble and disseminate information of use to the business community. With support of the Defense Adjustment program, a new Economic Development Strategic Plan was developed in 1997-98, the first since the late seventies. More recently the Initiative for a Competitive Inner City (ICIC) has initiated a study of those business clusters in the City that have a competitive advantage. With support from Civic Progress, this study led by Harvard Business School Professor Michael Porter, will recommend an action agenda for inner city reinvestment. Beyond these studies, progress is being made on the improvement of systems for delivering accurate information about zoning, development plans, historic districts and related information of importance to businesses. Needs and Challenges It is easy to dwell on the shortcomings of the City as a business location. The infrastructure is older; there is a shortage of modern, efficient buildings and developable sites; there are tax issues, the perception of " red tape" and suspicion regarding the workforce. Yet those realities too often overshadow the major advantages that the city has as a place of business.
Recommendations a) Continue to re-energize the Business Assistance Center.
b) Accelerate automation of the permitting, licensing and business communications process.
c) Market new and traditional tax incentives.
d) Create an aggressive marketing, public relations, and outreach program.
e) Expand the State Enterprise Zone.
f) Promote the MBE/WBE program.
g) Explore ways to simplify the certification process.
h) Establish a panel of experts to monitor the economy of St. Louis.
i) Analyze tax incentive alternatives.
j) Analyze new commercial/industrial land opportunities.
Resources The Board of Aldermen appropriated general revenue funds for economic development in 1999, the first time in many years. This came after repeated fiscal crises at SLDC, and reflected a growing awareness that the city needs to more to expand its business activity. Business Assistance programs can be carried out in part with Community Development Block Grant funds, but those federal funds are limited. For the most part they may not be used to assist companies that do not hire low or moderate-income individuals or for general marketing purposes. Additional help from the corporate and foundation community is likely to be necessary or a new source of all-purpose funding. | |||||
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ECONOMIC DEVELOPMENT
Over the past five years, the City has instituted a variety of programs designed to assist City businesses and attract new ones. These programs fall under four general headings: Commercial/Industrial Land Use programs, Commercial District Management programs, Business Finance programs, and Marketing and Technical Assistance programs. The majority of these programs are administered under the auspices of the St. Louis Development Agency, which is the leading agency for business support and economic development on the City.
Knowing when to lend to a company that doesn't meet normal bank underwriting standards is not easy. SLDC has experienced higher default rates than desirable, especially within the area of micro-loans; however, the purpose of these loans IS to help startup and other businesses unable to secure regular bank loans. Some risk is normal and, in fact, desirable. The micro-loan program supported by the Enterprise Community has suffered as well. Working Capital and Grace Hill have both had difficulties in finding entrepreneurs in the Zone with a combination of interest and ability to "grow" a business. The St. Louis Reinvestment Corporation could not find a workable solution either, after the death of Justine Petersen.
