On Thursday night, the Arnold city council approved a Chapter 100 bond issue to finance the expansion of the Metal Container Corporation (MCC) plant, which makes cans and aluminum bottles for Anheuser-Busch and others. The incentives include a 20-year tax abatement. This means that MCC, an A-B subsidiary, won’t have to pay any property or personal property taxes on the new buildings and equipment that come with the project. But this doesn’t only affect the city of Arnold. In fact, it has little effect on the city ($55,000 per year, states councilman Brian McArthur). However, the abatement covers every taxing entity that the site is a part of, including JeffCo entites like the Health Department (which is considering seeking a tax hike) as well as the state of Missouri. This is because the site will become city property for 20 years, making it exempt from taxation.
These other entities include the Fox C-6 School District and the Rock Fire District, which rely heavily on property taxes, unlike the city of Arnold, which will see revenue gains from this project. Fox stands to lose out on over $12 million over the life of the project, and Rock Fire will lose over $2 million. Here is the full list of impacted entities (from page 28 here):
Note the empty third column. “Pilot” stands for Payments in Lieu of Taxes. In exchange for the abatement, a recipient of corporate welfare can agree to pay some of the money it would have otherwise owed. But MCC does not have to make pilot payments based of the value of improvements in this agreement (it does have to make the tax payments on the (minimal) land value, based on the current value of the empty land). Rock Fire attorney Frank Vatterott said at the meeting that it is “highly unusual” for there to be no pilot payments for fire districts in an incentive package like this. Rock Fire chief Bill Mayer said protecting the project will require new equipment and training for his firemen, and that the district’s taxpayers, many who live outside of Arnold, will have to foot the bill while MCC pays nothing.
Here is what Fox chief financial officer (CFO) John Brazeal had to say about this in a comment on the Post-Dispatch article:
“It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” (Thomas Sowell)
Compare the Arnold, MO deal to the Jacksonville, FL deal, both projects currently in progress.
Arnold: $150M project ($20M building + $130M equipment) with a 100% tax abatement of $19.96M over a 20-year term, including $12.72M of school taxes. This on the heels of Arnold’s 2012 project of $88M having a 100% tax abatement of $14.53M over a 20-year term, including $9.59M of school taxes.
Jacksonville: $170M project ($40M building + $130M equipment) with a 75% tax abatement of city taxes totalling $12.0M over a 12-year term. All other property taxes, including 100% of school taxes) to be paid by Metal Container.
Team Jacksonville = smart. Team Arnold = @#$%!
Incredibly, Team Arnold’s starting offer was 100% abatement. This deal was announced in December 2014 following a council approval that took place somewhere other than an open meeting.
It takes no special skill and no special strategy to end up empty handed. Nothing for the emergency services. Nothing for the school students. Not even cheaper beer prices.
Almost all of that, up to $12 million, is in the form of relief from 75 percent of the additional property taxes that the project would generate for 12 years after completion. That only applies to city taxes. School district and other taxes would still be paid in full.
And that’s only a 12-year abatement in Jacksonville, not the 20 years Arnold handed out. It seems clear from the comments from Vatterot and Mayer at the council meeting that these districts weren’t even consulted on this. Councilman Phil Amato made a motion to table the deal for 30 days to allow these entities to weigh in, but nobody seconded his motion. Amato was the only no vote on the deal.
Art of the Bad Deal
Based on the details of this deal compared to the Jacksonville deal, as well as Brazeal’s comments, it sounds like Arnold did quite a poor job negotiating this deal. Arnold probably would have been out-negotiated by Obama’s Iran nuclear negotiating team. If Donald Trump read about this deal, he would call Arnold leaders “losers.” Former councilwoman Doris Borgelt suggested in the P-D comments that Arnold officials need to read Trump’s book, “The Art of the Deal.”
At the meeting, councilmen Brian McArthur and Paul Freese made comments stating that Missouri needed to change some state law in order to get the same deal as Jacksonville. Apparently Florida law prevents cities from giving away the farm in these deals. That would probably be a good plan, given the incompetents that run many Missouri municipalities. But it wouldn’t take a state law for Arnold to demand a better deal from MCC.
MCC and Anheuser-Busch appear to be playing the Stan Kroenke game here, intimating that they will leave without a sweetheart deal. But is that at all plausible? MCC just finished an expansion last year, also financed and abated by Arnold, worth $88 million or so. Is MCC really going to walk away from that? They also spent $5 million to upgrade the plant in 2010-11. And the Arnold plant is less than 20 miles from A-B’s biggest domestic brewery, just like Jacksonville hosts both a brewery and a can plant. Is the can plant really going to move further away from its biggest customer?
“I’m sorry if it conflicts with the districts, but we can’t take the chance of them leaving (Arnold). It is a great business decision,” McArthur said.
Sure it is. Arnold will say, oh, well, this tax money that’s being abated wouldn’t be here at all without this project. But this project could have been done without handing the company a blank check to write their own incentives.
Wipke Holds Back
Along with Vatterott and Mayer, Fox superintendent Jim Wipke spoke at the meeting, but he did not mention the MCC project. Instead he spoke generally about wanting there to be a good relationship between the district and the city. He gave the councilmen copies of the book “Turning to One Another.” It sounded like a “get to know you” speech. But why would he give such a statement on the very night the MCC project, which would strip his district of millions of dollars, was being considered? He could have said this piece anytime in the past four months. I wonder if his statement was a nice way of saying, “hey, I know you shafted us on this deal without consulting us, but maybe in the future we can work together.” Perhaps we should take Brazeal’s harsh critique of the plan as revealing of Fox’s true feelings in the matter.
Speaking of Brazeal, his blistering statement is interesting given his close association with Arnold. He was city administrator there from 1999 to 2005 and city CFO for 18 years before that. In 2005, he became CFO of the Affton School District, where Arnold Police Chief Bob Shockey was on the board. He was hired as Fox CFO by a board that includes Arnold treasurer Dan Kroupa. He also served as a consultant on redevelopment projects for Arnold when the Arnold Commons TIF/TDD/CID incentive-palooza was being developed. So he is familiar with taxes and development.