The city of St. Louis recently launched a revolutionary approach for evaluating businesses seeking economic development incentives. The new "scorecard" relies on an innovative, community benefits evaluation model for projects to shape future growth and increase transparency in how the city distributes tax incentives.
The underlying issue behind the need for the St. Louis scorecard is a decline in both population and investment within the city's core, a trend that affects many urban areas around the country.
For more than a decade, St. Louis had experienced significant disinvestment and population loss. In 2010, the population census indicated 319,294 residents. By 2021, the new estimate was 293,310, representing an 8.17% loss over 10 years — and the trend wasn't showing any signs of slowing down.
In 2021, looking at new ways to address the challenges, the city turned to the St. Louis Development Corporation (SLDC), a nonprofit entity of the city with the goal of stimulating private investment in city real estate and business development.
Like other cities around the country, St. Louis officials have long contended financial incentives are the primary way to attract development. This led to the SLDC's review of the existing economic development incentives, both tax abatement and tax incremental financing (TIF) for geographically targeting of specific areas of the city.
The SLDC found existing incentives were not achieving the desired results. Investment lacked in the most needed areas, and most projects were not driving economic growth while providing community benefits. In addition, public support — for how projects are selected and approved — had significantly declined. The prevailing community perception was that the review and approval process opened the door for corruption.
St. Louis Mayor Tishaura Jones and the President and CEO of SLDC, Neal Richardson, conceptualized the scorecard as part of the city's Economic Justice Action Plan. They sought outside help from Baker Tilly, a third-party advisory CPA firm with public sector advisory expertise in economic development strategies.
Together they embarked on an intensive process of data collection, analysis and consultation with key stakeholders, including elected officials, developers, school board members, SLDC and city staff members, and nonprofits involved in economic and community development. Key research findings indicated 97% of the stakeholders favored using incentives to attract developers, but 94% of the stakeholders wanted to modify the incentive criteria. The majority said they believed the existing incentives programs were not understood by developers and the public.
Being mindful of the research findings and need for change, SLDC and Baker Tilly developed a framework for evaluating economic development proposals based on a range of key performance indicators. The framework and data-driven approach resulted in a scorecard that allows SLDC to objectively assess proposed projects against established criteria, ensuring the resources are allocated to initiatives that align with the city's long-term vision.
The Community Benefits Scorecard, implemented in January of this year, evaluates proposed development projects on a variety of factors, such as inclusion and affordable housing, quality job creation, wages and benefits, walkability, and access to public transit. The scorecard also provides clarity for developers, allowing them to pre-evaluate projects to determine the number of incentives that could be available.
"One of the primary benefits of the economic scorecard is the enhanced transparency and consistency it brings to the process of awarding incentives," Richardson said. "Previously, the allocation of incentives lacked a standardized framework, leading to uncertainty and potential disparities. The Community Benefits Scorecard, which is available
The scorecard was also used to activate the city's Economic Justice Plan. A pillar of the Economic Justice Initiative is equitable and inclusive development. The incentive reform that is part of the initiative encourages investment across neighborhoods that have not seen investment in recent years, and the scorecard encourages community benefits.
SLDC's scorecard uses a point system rather than a percentage of total available points. Proposed projects can obtain points in several different categories. A project's total score on the Community Benefits Scorecard determines the term and amount of tax abatement it is eligible to receive. Projects must meet a minimum score to be eligible for incentives. The scorecard has separate categories for residential, commercial and mixed-use projects. For projects seeking TIF incentives, the scorecard will only determine eligibility for incentives, not the amount of incentives. The scorecard creates tiers for incentives based on how well a project scores. TIF projects must also meet the "Tier 2" scoring requirements to be eligible for incentives.
"This innovative approach evaluates projects on broader community benefits, rather than primarily focusing on capital investment and job creation," Richardson said. "Ultimately, it helps shape future growth and creates more livable communities, and improves accountability and transparency, ensuring all projects are evaluated through a lens of Economic Justice."
Since its debut in January, the scorecard has been well-received. SLDC has used the scorecard and incentives review model on a number of different projects. Baker Tilly designed the model so SLDC could easily modify the points for each category and the scoring tiers, knowing that they would likely need to do this periodically to calibrate the model as priorities shift over time.
As the city looks toward the future, the collaborative initiative between the SLDC and Baker Tilly sets a remarkable precedent for other regions seeking to bolster their economic strategies. Through the economic scorecard, St. Louis is not only setting a new standard for transparency and consistency, but also positioning itself as a national leader in data-driven economic planning and decision-making.
