Study: STAR bonds would have significant negative impacts

Ann Knef Mar. 18, 2010, 7:16am



Communities surrounding the proposed University Town Center (UTC) development in Glen Carbon could lose more than $400 million in annual retail sales, according to a new economic impact study.

The study, commissioned by the Southwest Illinois Council of Mayors, is highly critical of pending state legislation that would support development of UTC. The sales tax and revenue (STAR) bond legislation is a "poorly designed economic development tool that will actually have significant negative impacts" to communities surrounding the STAR bond district, the report says.

It claims the project would displace sales, jobs and tax revenues from surrounding communities. And, it calls into question the market feasibility of a 3.2 million square foot retail establishment.

Sponsored by Sen. James Clayborne (D-Belleville) and Rep. Thomas Holbrook (D-Belleville), the legislation would funnel retail sales taxes from the state to developers of a 650 acre retail, entertainment and office project at the crossroads of Interstate 270 and 255.

Peckham Guyton Albers & Viets (PGAV) Urban Consulting of St. Louis conducted the study for the group of mayors from Madison, St. Clair, Monroe and Jersey counties. The mayors have objected to UTC saying it would drain their tax bases and eliminate opportunities for new and existing businesses. The study was undertaken to determine what impact the project would have on surrounding retailers and communities.

In the meantime, UTC developers have conducted their own study that paints a job creation picture that is even more optimistic than its initial projections.

Developers include Bruce Holland of Holland Construction and John Costello, son of U.S. Rep. Jerry Costello.

In the UTC study conducted by Zimmer Real Estate Services of St. Louis, 11,000 construction jobs and 6,400 full-time equivalent jobs are predicted, over previous estimates of 10,000 construction jobs and 3,100 full time ones.

Complete results of the study have not yet been released.

After the stand-alone STAR bonds bill fizzled in Springfield last year, similar proposals were re-introduced this year through amendments to two separate bills unrelated to revenue. In the Senate, the STAR bonds legislation amends the Mental Health and Developmental Disabilities Administrative Act in SB2093. In the House, the legislation amends the State Facilities Closure Act in HB2376.

In fiscal notes issued last year and again this year, the Illinois Department of Revenue predicts the development wouldn't create new sales but would only capture sales from other stores. The department calls it "cannibalization."

PGAV's study estimates the state would forego as much as $729 million in the first 20 years of UTC's operation "at a time when the State's dire fiscal outlook is forcing severe public service cutbacks, reduction in revenues paid to local communities, and consideration of tax increases."

It also disputes UTC's job creation claims.

"Previous claims about UTC's job creation potential have been presented out of context," the report states.

"Construction employment would be spread over at least 15 years, and each 'job' would not necessarily employ a separate person because a single worker could fill numerous jobs over the course of construction.

"Furthermore, jobs at UTC, whether construction, retail or office positions, would be offset by any jobs lost or not created nearby due to displacement."

The study also warns that municipalities could see losses in taxable retail sales as high as 25 to 30 percent. It estimates that losses for Madison and St. Clair county governments could exceed $1.2 million combined.

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