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Extra Sales Tax Hurts Longtime Businesses and Picks Consumers' Pockets

Outlet mall developer asks Chesterfield for a Commercial Improvement District tax (CID) to build.

I hope the Chesterfield City Council is wise enough to turn down the request of Chesterfield Blue Valley, LLC for a Commercial Improvement District tax (CID) in connection with an Outlet Mall they want to build at the western end of Chesterfield Valley.

(These special taxing districts are also known by the names Community Improvement District and Business Improvement District.)

What's the purpose?

Future CIDto build—or if developers are using their own funds, it is a way to get unsuspecting shoppers to pay off the cost of construction through a sales tax.

CIDs are different than Tax Increment Financing (TIFs) where a portion or all of the property taxes are suspended for a period.

For example, there was a 23-year TIF plan for all of Chesterfield Valley that went into effect in 1994. After the 1993 floods, the land in Chesterfield Valley had little taxable value—it was undeveloped farm land. The small amount of commercial property that was there, was blighted from the flooding. 

And it turns out that Chesterfield Commons was so successful, the development costs were paid off 10 years early and the TIF was cancelled.

But, there is a big difference between giving a tax break on empty farmland (TIF) and taxing consumers to build an outlet mall 20 years later (CID) in Chesterfield Valley.

Historically speaking

CIDs and TIFs were originally created to be used as an incentive for developers to rebuild commercial districts in low-income, blighted areas. At first they were very popular in the Los Angeles area.

The idea was to use the promise of future tax money for developers to risk rebuilding business areas of neighborhoods. The idea of CIDs, also known by a third name of Business Improvement Districts, was to revitalize crime-ridden areas.

Its critics complained that successful districts (CIDs or BIDs) just moved undesirable factors from one area to another. Still, the districts seemed to provide incentive.

Present uses

But in the year 2012, billionaire developers now use CID taxes to build retail developments in high-end, affluent areas, getting you and me to pay a tax to cover their costs of building stores.

Back in the day, investors put their money into developing shopping centers where they thought people would come and spend money. The risk was their money, but the reward was handsome profits if they were right.

Now, wealthy developers and investors hide behind Limited Liability Corporations and try to eliminate their own risk, and consumers pick up the tab. 

Who Gets Hurt?

First of all, it is shoppers who take the hit, unknowingly paying a sales tax that goes back to the developer.

Back in  

I described how I quit shopping at West County Center, because all the stores inside the Center charged a CID sales tax.

First, the sales tax revenue paid for the Center owner to build new high-end restaurants. It was to run until 2021.

Secondly, Des Peres city officials then extended the tax to run longer to help pay for parking garage improvements. In all likelihood I’ll be dead before this CID expires. 

So this one percent CID sales tax at West County Center, plus a Traffic Development District (TDD) sales tax for the 65,000-square-foot Schnucks center nearby, have forced a 9.425 percent sales tax on shoppers.

Consumers are headed for the same thing with this Chesterfield outlet project. The sales tax at Chesterfield Mall is 7.925 percent now. The sales tax at the outlet stores may be as high as 9.3 percent if the developers get what they want.

Unfair

Who really gets crushed by these new CID (and TDD taxes in Des Peres)?

It isn't just the shoppers—it's the existing merchants. It's all the merchants who have had successful retail businesses and restaurants for years in the Chesterfield area.

These merchants and building owners have sunk their money into their shopping centers and stores. They have been successful and generated both sales taxes and property taxes that have allowed the City of Chesterfield, the Monarch Fire District and two school districts to prosper and expand.

Furthermore, the outlet malls are likely to take some business from the stores at Chesterfield Mall.

Giving outlet stores taxpayer funds to hurt a shopping district that has been supporting much of the community for 40 years? It's a bad idea.

Yet the city is considering whether to allow competition financed in part by taxpayers, to move in and set up shop.

It's not a level playing field. It's not fair. 

Competition at work

It's not like no outlet malls want to come to Chesterfield Valley. The competition already exists—so why have tax money subsidize one? 

Behind the scenes 

R. Dean Wolfe is the frontperson for Chesterfield Blue Valley, LLC (the group asking for the extra sales tax district.)

Wolfe is an attorney who formerly worked for May Department Stores (including Famous-Barr), building malls across the country. He now owns Wolfe Properties.

Wolfe doesn't live in Chesterfield. He seems to live in Clayton, in a multi-million dollar condo.   

What's next?

In February, Chesterfield City Council passed a resolution which allows Chesterfield Blue Valley, LLC to petition the Council to create the CID—special tax district. Soon there will be a public hearing and a bill will be written. There will be a first and second reading before the council will vote. I’m betting it will pass.       

Do you think you and other shoppers should help finance Mr. Wolfe’s next project or do you think he should? If you think he should, you might want to let your city council representative know before you and others end up paying for a new outlet mall. 

Jennifer Hojnacki March 06, 2012 at 03:00 AM
As a business owner in Chesterfield Valley, who will have to pass any increased taxes along to her clients, I object to this strenuously. I do not wish to pay for (or have my clients pay for) this gentleman's business venture.
Jean Whitney March 06, 2012 at 04:29 AM
Any more views out there in Chesterfield?

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