Criticism May Ground Missouri 'Aerotropolis'

China Eastern Airlines will be expanding its cargo operations into St. Louis next week, but the goal of subsidizing a major airport construction project to lure more Chinese flights has drawn opposition in Missouri. 

When a Chinese cargo flight touches down at St. Louis' Lambert International Airport next Friday afternoon (September 23), it will be carrying what cargo flights always carry: thousands of pounds of freight.

But the flight, the inaugural voyage in a new nonstop shipping route between Shanghai and St. Louis, will also be carrying the hopes of many state politicians, city officials, regional planners and business leaders, who see it as the clearest example to date of an emerging and potentially lucrative trade relationship between China and Missouri. With the weekly cargo flight now established, they say, St. Louis has taken a big step on its way to becoming the "China Hub" that local officials have envisioned and worked toward for years: a major new shipping destination in the Midwest for one of the world's fastest-growing economies.

The arrival of the China Eastern Airlines Boeing 777 is sure to bring cheers from local political leaders. U.S. Senator Roy Blunt already has hailed news of the flight as a "critical step forward for St. Louis and the entire state's economic development."

But a potentially more significant component of the effort to make St. Louis a hub for Chinese business — a 15-year, $360 million package of tax incentives to spur construction of warehouses and other freight-related facilities around Lambert Airport — suddenly has run into problems in the Missouri legislature. The original plan for "Aerotropolis," as the ambitious project is known, has been scaled back sharply in a special session that is now under way in Jefferson City, one that Governor Jay Nixon called specifically to move forward on the plan and other economic development efforts. This week, lawmakers in the state Senate stripped about $300 million from the $360 million plan.

A chorus of critics has come to see Aerotropolis as a costly giveaway of taxpayer dollars at precisely the time that Missouri lawmakers are talking about reining in expensive tax credits. Skeptics see special interests at work, particularly a politically connected St. Louis developer who owns 700 acres of land near Lambert Airport and stands to gain from sweeping new tax incentives. Critics also point out that a taxpayer-subsidized cargo and passenger facility exists just 40 miles away from Lambert at the MidAmerica Airport in southwestern Illinois, and that the MidAmerica project is widely seen as an expensive failure. More broadly, critics ask a simple question: Why would China suddenly bring its business to St. Louis, particularly when Chicago and Dallas are already major air cargo hubs?

"We wouldn't spend $360 million to make St. Louis the destination point for ocean cruises," says Jeanette Mott Oxford, a state representative. "That's just not what to build our hopes and dreams on around here."

Aerotropolis, however, has drawn equally adamant pleas from its supporters, who say that the Missouri economy is sinking fast and that the state needs to do something big — and do it quickly — if it hopes to be competitive in a global economy. They argue that ties between St. Louis and China have been growing steadily and that Aerotropolis tax credits would pay for themselves by creating tens of thousands of new jobs over the coming years.

"If we don't get this cargo hub, if we can't lock it down and give it a future, I would advise every person under 40 years old in this state to find a new place to live, because we'll have nothing to offer," Robin Wright-Jones, a state senator, told Stateline in an interview. "We will continue to slide to the bottom."

Tax credit scrutiny

The impassioned debate in Missouri shows the importance that lawmakers there are attaching to large-scale economic development projects amid ongoing negative signs from the economy. That is true in most other states, too. Like Missouri, Connecticut is expected to take the unusual step of calling a special session on job creation in the coming weeks, and lawmakers in California recently wrapped up their work for the year by debating (and, ultimately, rejecting) a $1 billion economic development proposal from Governor Jerry Brown. Almost every governor has said that creating jobs is his or her top priority .

In Missouri, everyone agrees on the need for economic development, but there is sharp disagreement about what kind, particularly when tax credits are involved.

Late last year, the Missouri Tax Credit Review Commission , a bipartisan panel of legislators, business leaders and others assembled by Nixon, found that the state has 61 tax credit programs, and that their cost has grown by 408 percent over the past 12 years, from $103 million in 1998 to $522 million in 2010. The commission recommended that lawmakers eliminate or phase out dozens of credits to save money, from incentives for specific industries such as wine and grape production to broad and politically popular tax breaks for poor and disabled renters. Lawmakers entered this month's special session set to take up many of the commission's recommendations, but with a twist: They would do so in large part to pay for the new tax credit package that would build Aerotropolis and attract more Chinese planes.

To many observers, the legislature's agenda was a contradiction. On one hand, lawmakers, particularly in the state Senate, were stressing the need to discard wasteful tax credits and keep only those with a proven, "fact-based" return on investment. On the other, they were proposing $360 million in credits for an airport project that has never been studied comprehensively by an independent source. The study that most Aerotropolis backers have cited in defense of the project is an eight-page economic impact analysis published by the St. Louis Regional Chamber and Growth Association, one of the idea's most aggressive supporters.

Special session detour

From the moment Missouri's special session began on September 6, it began to look as if reaching an agreement on Aerotropolis was wishful thinking on the part of legislative leaders and Nixon, even though they claimed before the session that a deal was at hand.

State Senator Jason Crowell, a Republican prone to filibusters, immediately threatened to derail the plan, calling it a waste of money and suggesting that it had been crafted to appease wealthy campaign contributors. Indeed, looming over the proposal for much of its existence has been Paul McKee, a St. Louis developer and campaign donor who has already received tens of millions of dollars in state tax credits to build projects that have yet to bring about the jobs that were promised. McKee owns huge tracts of land around Lambert Airport and would be among many beneficiaries of the Aerotropolis credits.

Other state lawmakers were outraged that funding for the project would depend on phasing out widely popular existing tax credits, particularly the "circuit breaker" provision that benefits elderly and disabled renters. The public applied its own pressure, with activists at the Capitol denouncing "tax money for corporate welfare."

Aviation industry consultants have not done the project many favors, either, comparing Aerotropolis to the MidAmerica airport in neighboring Illinois, where a gleaming terminal sits virtually unused despite hundreds of millions of dollars in tax breaks from that state's taxpayers. "They're stuck with that boondoggle," says Mike Boyd, a Colorado-based aviation consultant who worked on the MidAmerica project years ago and has been following the debate over Aerotropolis in Missouri. "That's what you'll be stuck with if you do it at Lambert."

Author raises concerns

But perhaps the most damning criticism of Aerotropolis has come from those who are widely credited with coining the futuristic-sounding word in the first place. "Aerotropolis" is the name of a book co-authored by a professor at the University of North Carolina, John Kasarda, who has long highlighted airports as a potential source of economic growth for entire cities and regions.

In July, Kasarda's co-author, Greg Lindsay, embarrassed supporters of the Missouri Aerotropolis by casting doubt on whether the project would work at Lambert. Rather than being too expensive, Lindsay told several media outlets in Missouri, the $360 million price tag was probably too small to turn St. Louis into a legitimate competitor against existing air cargo hubs elsewhere.

"$360 million probably isn't enough to really build the critical mass of flights and infrastructure and regulation that's going to lure cargo companies away from Chicago or away from Dallas," Lindsay told KTRS , a talk radio station in St. Louis. "You really are starting from scratch in St. Louis."

Despite the setbacks, supporters of the St. Louis Aerotropolis remain hopeful that their vision will be realized, even if it doesn't happen in the current special session. After all, they say, the Chinese are watching Missouri closely, viewing tax credits as a key part of any plan to expand more fully into St. Louis.

"They're bringing the airplanes. They're not bringing the warehouses and the trucks," says Mike Jones, chairman of the Midwest-China Hub Commission, a public-private entity that has led the charge for Aerotropolis. "Their legitimate question to us is, 'What's Missouri's plan to take this opportunity and expand it?'"


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