Lawsuit claims state tax credit unconstitutional

By Audrey Spalding
Show-Me Institute

A lawsuit filed on Oct. 9 alleges that a recently passed state tax credit is unconstitutional. The tax credit, established under the Distressed Areas Land Assemblage Tax Credit Act (DALATCA), awards up to $20 million each year to developers for costs associated with purchasing and maintaining properties that are part of a large-scale development.

DALATCA may soon be used in connection with a proposed $8.1 billion development of the city of Saint Louis’ north side. The development company undertaking that project, NorthSide Regeneration, LLC, is expected to be the first to apply for DALATCA funds. According to Ann Perry, manager of development finance at Missouri’s Department of Economic Development, no developer has yet applied for the tax credit.

NorthSide Regeneration plans to collect up to $83.6 million under the tax credit, according to documents submitted to the city in September. If approved by the city’s Board of Aldermen, the organization will apply to receive the money in equal payments of $16.72 million over the course of five years, beginning in 2010.You can download a copy of the three-page DALATCA application here.

The $16.72 million annual payout is more than was allowed under state statute until DALATCA was amended in April. Under the previous version of DALATCA, the maximum tax credit payout was capped at $10 million per year. In fact, the state’s website that lists statutes has not yet been updated to reflect the changes.

Irene J. Smith, former alderman, administrative judge, and mayoral candidate, is the attorney representing the plaintiffs. Smith, when reached by phone on Monday, said one of the unconstitutional  characteristics of DALATCA is that the act’s purpose is disconnected from its cost. While DALATCA’s stated intent is to encourage development, Smith said, it reimburses developers for land acquisition and maintenance costs. “That doesn’t pertain to development or redevelopment,” she said.

Another allegation of unconstitutionality in the suit is that the amendment to DALATCA was slipped covertly into HB 191, a bill that amended many disparate statutes. In the suit, Smith characterized the title of HB 191, “Relating to taxation, with penalty provisions and an emergency clause for certain Sections,” as “… overly inclusive and amorphous in violation of the Missouri Constitution, Article III, Section 23.”

Smith did not seek to file the lawsuit — she was approached by Keith Marquard and Barbara Manzara, the two plaintiffs in the suit. Both Marquard and Manzara are active critics of NorthSide Regeneration’s proposed development. Smith said the goal of the suit is for the court to declare DALATCA void.

Former state House Speaker Rod Jetton, who sponsored a version of the DALATCA bill in 2007, was not immediately available for comment.

This entry was posted on Monday, October 12th, 2009 at 11:21 pm. Both comments and pings are currently closed.