Menards & Co.: Hardware Trio Illustrates Taxpayer Funding's Perks, Challenges

*Editor's note: An earlier subheadline for this article incorrectly identified the status of tax-payer funding for one of the hardware stores. Lowe's received such funding, while Menards has requested it. This article has been updated to reflect the correct status.

In Mid-County, there are two chain hardware stores within a 1-mile radius of each other along the South Hanley Road corridor. If Menards successfully opens a store in Richmond Heights, there will be a third.

So what circumstances enabled these companies—the others being The Home Depot in Brentwood and Lowe's in Maplewood—to set up shop?

In two cases, one of which is Menards, the answer is tax-increment financing (TIF). District 3 Councilwoman Gina Mitten of Richmond Heights even identified the company's taxpayer financing request as one of the reasons for her vote in favor of the development. (Competing developer Costco asked for more.)

The stories behind each location shed light on the area's hardware history. They also reveal how cities and St. Louis County often have differing perspectives on the usefulness of TIF incentives for promoting economic development.

Defining TIFs

The Missouri Economic Development Financing Association defines a TIF as a tool that enables developers to "use a portion of the new property taxes, sales, earnings and other locally collected taxes resulting from the new development to pay for certain authorized improvements."

A TIF already exists in the Hadley Township area. The city first approved a taxpayer financing package of roughly $38 million for developer Michelson Commercial Realty & Development in 2006, a timeline from the city states. The two parted ways in January 2009.

Several development proposals came and went. Now, the city will consider amending the TIF area to support the Menards project.

To do that, the city must convene a TIF commission composed of representatives from local government, school districts and other taxing entities. It must approve or reject the project.

Then City Council will give its final approval or denial. If the TIF commission rejects the proposal, more council members must vote yes for the project to pass.

Once a TIF passes, all property taxes and a portion of the sales taxes collected at the site will be used to pay it off. Final repayment must be made within 23 years under Missouri law.

"The goal is to pay them off early, but there's no way you can guarantee you're going to pay it off early," Maplewood City Manager Marty Corcoran said.

When repayment occurs, those property and sales taxes are freed up and channeled to the city and other area taxing entities.

St. Louis County official concerned TIFs are short on economic benefits

St. Louis County planning director Glenn Powers is reserving judgment on the Menards proposal until he learns all of the facts. He will serve on the Richmond Heights TIF commission taxed with reviewing the company's request for public assistance.

But in general, he is concerned that TIFs bring sales tax dollars to cities within the county without generating new revenue streams countywide.

"If you're a city, you look at it differently," Powers said. "… Because we're essentially being asked to be a partner in these developments. So if you're the county you represent the whole area, other cities included. You're being asked to invest in something that doesn't have a return, really. It has a return in a particular area, but it doesn't have a return overall."

TIFs were created to stimulate development where it might not otherwise occur, he said. That mentality still drives TIF formation, in some cases. But in other situations, he said, it appears TIFs are used to reduce economic risk in areas that already have a normal amount of risk.

Beyond tax monies, Powers is concerned that large retailers can hurt the county's transit efforts. The Hadley Township property is adjacent to the MetroLink corridor, and MetroLink is meant to reduce dependence on cars.

"Big box uses are pretty much the opposite of that, they're car-dependent, low-rise things," Power said. "I think it would be ashame if this proposal were to detract from the TOD (transit-oriented development) potential on Hanley Road. "

Powers admits he's seen "interesting takes" on the big-box model, proposals that include such features as underground parking. But he remains cautious.

"My impression of Menards is that they've got a template and that's it," Powers said.

Official: Lowe's TIF allowed development of chemical-contaminated land

Lowe's received a $9.5 million TIF for the property that includes its building, 2300 Maplewood Commons Dr. in Maplewood, Corcoran said. THF Realty served as the developer.

Both the city's TIF commission and City Council voted unanimously to approve the taxpayer funding.

The TIF provided the developer with the money necessary to perform the "tremendous amount of cleanup" needed at the site, Corcoran said. Chemicals left by the old ChemTech operation had contaminated the soil, and the land had been vacant for years after that.

What's more, every resident in that area had come to the city and asked that the land be redeveloped, Corcoran said. Lowe's provided an economic boon for the city even though a portion of taxpayer money went to pay off the TIF.

"We still get a substantial increase in revenue," he said.

The TIF went into effect in 2004 and is expected to be paid off in 12 to 15 years.

Menards seeks tens of millions in TIF assistance

Menards is seeking a $19 million TIF package to help with its $56 million development, an April 6 news release from the City of Richmond Heights states.

Requests for public assistance by that company and adjoining developer Pace Properties—which seeks $26.6 million in TIF funding for a $125 million retail space south of The Heights—will be considered "in light of the relative benefits of these projects to the city," the release states.

Menards is the latest in a string of developers to promise change in Hadley Township. In the past, developers have vowed to buy out homeowners only to come up short. Now, Menards has the opportunity to make good on its proposal.

The two-story hardware store would cover 246,000 square feet, and space would be available for three or four outlying retail businesses or restaurants.

The city's TIF commission is expected to convene and wrap up its work by fall. The commission will determine whether to amend an existing TIF district in favor of the proposed developments.

Home Depot went up without taxpayer assistance

The Home Depot was developed from 1994-95 in Brentwood without the assistance of taxpayer funding.

At the time, "there was no home improvement store in the county," City Administrator Bola Akande wrote in an email interview. "A private person bought the lot from the previous owner, then sold it to a developer, who also sold the outlots to McDonald's and Lion's Choice."

Brentwood still uses TIFs for some projects, she said. It just didn't happen in this case.

"The City of Brentwood has used economic development tools on a number of projects when requested by the developers," Akande stated. "Each project was evaluated on an individual basis and when determined the project warranted and appropriated the city granted the request through negotiations."

City manager sees positive outcomes using TIF funding

Corcoran, the Maplewood city manager, differs from the county's Powers in his view of TIFs.

The way Corcoran understands it, the county sees new retail development as invariably taking sales from somebody else. He references the host of McDonald's stores in the county as an example of a business that challenges that notion.

"I don't know anywhere in government … that it's our job to regulate competition," Corcoran said.