During a special session this week, the Missouri legislature is expected to approve $360 million in tax credit subsidies for “Aerotropolis,” a project that would create a cargo hub at Lambert–St. Louis International Airport to lure Chinese air carriers. Yet, the project faces some serious questions. In its report Aerotropolis: If You Build It, Will They Come? the Missouri Budget Project (MBP) makes the case that the legislature should think twice before approving the subsidy.
The report points to some important issues overlooked by the legislature. Based on a review of Airports Council International market data, MBP argues that the U.S. has been experiencing a decrease in air cargo transportation and already has “excessive unused existing capacity for international cargo movement throughout the entire Midwest.” Chicago‘s O’Hare Airport, one of the nation’s biggest cargo hubs, has unused capacity even as it undergoes an expansion. MBP notes that Lambert, where traffic is down 20 percent since 2000, also has extra capacity.
Another concern, according to MBP, is that the project lacks an enforceable commitment from a major international freight forwarder, a company that manages cargo movement. MBP cites an independent analysis that evaluated a similar project in Hazelton, Pennsylvania. The Hazelton analysis, noting that no cargo airport has ever succeeded in the United States without a major tenant such as FedEx, UPS, or DHL, argued that the project should not proceed without a committed anchor tenant. MBP also notes that Aerotropolis has not been subjected to an independently performed cost-benefit analysis.
While voting on the big Aerotropolis giveaway, the special session will also, ironically, consider proposals to reform the state’s entire system of tax credits. While some of those credits definitely need reform, the plan to eliminate others could have a harmful effect on low-income residents. One of the most controversial proposals is to phase out tax credits for low-income seniors and disabled renters (MBP’s reports on the issue are available on its website).
As MBP argues, it is foolish of the Missouri Legislature to rush through the Aerotropolis subsidy deal with no strings attached. Before committing any public money, the legislature should commission an independent study that would evaluate the costs and benefits of Aerotropolis, and secure an enforceable commitment from a major international freight forwarder.
September 21 update:
As of this week, the Missouri legislature is still debating the Aerotropolis proposal, but with significant changes. In the new version of the bill, the Missouri Senate took out the $300 million tax credit for warehouses at the future hub and created the Compete Missouri program. The new $141 million fund would combine six economic development programs and would give the Governor power to control who gets the subsidies. Warehouses at Aerotropolis would be able to apply for subsidies under the new program. Unhappy with the changes, the House threatened to kill the bill if consensus between both chambers is not reached by Friday.