How Fenton, Hazelwood and their school districts are moving ahead despite auto plant closings
This article first appeared in the St. Louis Beacon, June 5, 2009 - The Rockwood and Hazelwood school districts have about the same number of students, similar budgets and a common experience -- having to cope with the loss of revenue from the permanent shutdown of automobile plants.
The jolt began in Hazelwood in 2002 when the Ford plant, then one of the region's key economic engines, began closing its doors, eventually depriving the school district of about $2.5 million in tax dollars and denying millions more to the city of Hazelwood. The school district has about 19,000 students and an operating budget of about $200 million.
Last month, Chrysler announced it would shut down its North Assembly Plant in Fenton, a move that eventually will mean less tax revenue for the Rockwood District. Assuming the Chrysler property is still on St. Louis County's tax rolls in January, Rockwood expects a payment of $3.7 million from Chrysler in the next school term. The district's operating budget is also in the $200 million range, and its enrollment of 22,000 students makes it the second largest public school district in the state, behind St. Louis.
What's remarkable is that officials in the affected cities and school districts, situated at opposite ends of St. Louis County, have found ways to cope with their financial losses. How they learned to offset what might have turned into irreversible economic setback offers a cautionary tale for other parts of the region grappling with the impact of recession.
No Gloom and Doom
Lines for coffee and snacks are shorter these days at gas stations along Interstate 44 in Fenton, and for-lease signs are more common now in storefronts along the city's Gravois Road. These sights offer little hint of the economic downturn that's defined most graphically by the 300-acre Chrysler plant as it winds down for permanent shutdown in the fall.
Many outsiders might have expected pessimism to settle over Fenton following news of the loss of one of its major industries. But Mayor Dennis Hancock offers a different spin. He speaks with the confidence of a professional property manager, his day job, trying to see the bright side even, maybe especially, during hard times. Serving his fifth term as mayor of the city of 4,400, where elderly homeowners get their lawns trimmed and snow removed free of charge, Hancock says he's both an optimist and a realist. What happened in Fenton, he says, "is not necessarily a gloom-and-doom story."
The reason, he says, is that Hazelwood's loss became a wakeup call for Fenton.
"The biggest lesson we learned from Hazelwood was that it could happen to us, too. So back in 2002, we started planning for this eventuality."
The city began to search for ways to trim government costs without reducing services and while trying to lure more businesses. The city's economy now sits on what Hancock calls a four-legged economic stool. One leg is represented by a manufacturing sector separate from the automobile industry. A second leg involves service businesses, such as the headquarters of Sachs Electric, formerly located in Chesterfield, and Mayflower Transit.
A third leg, Hancock says, is Fenton's retail sales component, represented by Gravois Bluffs, one of the region's largest shopping complexes.
The fourth leg consists of Fenton's growing medical services industry, including the appearance of several urgent-care centers associated with big-name hospitals; and the newly opened 158-bed SSM St. Clare Health Center at Highway 141 and Bowles Avenue.
"We made a concerted effort to diversify ourselves away from the automobile industry," Hancock says. "We've increased the number of full-time jobs in Fenton by about 10,000. When you put all of that together, we've really insulated ourselves against the current economic downturn,"
The upshot is that Fenton has reduced its reliance on taxes from Chrysler to about 6 percent of its current budget, down from about 20 percent in 2000. Even after spending tens of thousands of dollars for flood cleanup, the city ended the fiscal year with a $900,000 surplus, Hancock says. Put another way, if Fenton had been deprived of the $500,000 check from Chrysler, the city still would have had ended the fiscal year with $400,000 in the bank.
Still Hancock must be disappointed for failing so far to find a new tenant for the Chrysler site.
"It has excellent highway access," Hancock says. "MoDot spent about $10 million five years ago improving access to the site from Interstate 44. You have rail access, and it's out of the flood plain. So my expectation is that it will be used for something, even if it grows dark now and isn't used for producing cars."
Life After Ford
A similar story about surviving an auto shutdown happened in Hazelwood, where outgoing Mayor T. R. Carr admits he might have thought twice about becoming mayor in 2000 had he known the city would lose a plant whose taxes at the time accounted for 18 percent of Hazelwood's budget. After getting over the shock that Ford was leaving, Carr and other officials tried to convince the automaker to stay, but eventually faced up to the fact that the city had to shift gears and rebuild its economy.
For Carr and others in Hazelwood, one answer was the development of Park 370 Business Park retail and industrial facility as well as St. Louis Mills shopping center. These developments helped Hazelwood create about 3,000 jobs and offset some losses from the Ford plant. Like Mayor Hancock in Fenton, Carr concedes that some new jobs, particularly those in retail sales, don't pay anywhere near the $60,000 in salaries that some auto workers earned. Still, the mayors of both cities say a mixture of new service jobs and higher-paying jobs has helped their economies.
TIF Made a Difference
TIF or tax increment financing isn't popular these days. Some lawmakers say the program, which is supposed to help revive economically depressed areas, has been used far too broadly in far from blighted parts of the St. Louis region.
Yet the Park 370 project offers an example of TIF's benefits. Hazelwood turned to TIF to underwrite construction of new roads and an overpass over Highway 370 to make the Park 370 project feasible. Schools are usual big losers from TIFs because they initially get none of the new revenue. It goes first to paying off bonds used to underwrite street improvements. The $17 million in bonds used to finance improvements for the Highway 370 project could have been paid off over 20 years. The bonds were retired instead in five years. Before the Park 370 project, the Hazelwood District got about $50,000 in taxes from a trucking company on the property. Now that the project has been completed and the bonds paid off, the district is getting $3.8 million because of the higher tax assessment at the Park 370 project site.
Carr sees that as a welcome example of the good that a TIF can do, but Hazelwood District officials are taking a cautious attitude toward the money. In fact, the school district's approach suggests how other districts might avoid ending up in a fiscal hole down the road.
Watching the Books
A few districts under financial pressure might have been tempted to add the $3.8 million check to future budget projections -- as if it were money in the bank.
But not Hazelwood.
"The TIF bonds have been paid off, so we'll get some money from that," says Dwight Lindhorst, chief financial officer for the Hazelwood District. The problem, he says, is that officials technically have roughly two decades to retire the bonds.
"That means they don't have to declare a surplus every year. Until we're pretty sure we'll have that money, we won't put it in the budget. Instead, we'll use it for (funding) one-time things," such as for repairing buildings.
This line is echoed in the Rockwood District, where Shirley Broz is beginning her first year as the district's chief financial officer.
"We're already conservative in our spending," she says, adding that Rockwood's five-year plan "always anticipated that Chrysler's property taxes on which our tax revenue is based would depreciate."
There were no surprises, then, when the district learned that its share of Chrysler-related taxes would be $3.7 million for the 2010-2011 fiscal year, down from $5.7 million the previous year. Broz says that Chrysler's shrinking contributions have been easier to adapt to than a sudden loss of all the tax money.
Still, in good times, those huge checks from the auto giant bought a lot of services. To get a sense of how much, consider this: A $5.7 million tax payment from any property in the district is enough to cover salaries for a year for 165 new teachers.
Russ Signorino, a vice president of United Way of Greater St. Louis, says both Fenton and Hazelwood are examples of how other parts of the region can respond to economic changes and try to emerge stronger.
"The single biggest thing we can learn from areas affected by major car closures is don't sit back and be complacent, don't sit back and think jobs and businesses are going to be there for long periods of time," he says.
The economy is in such a flux that people might have to pursue training or retraining more frequently to make themselves employable, Signorino says.
"As individuals, community leaders, politicians and business leader, we have to do a better job of preparing ourselves for that change" he says. "When we were dealing with (auto shutdowns) before, the fact was that many of the jobs would come back, and the layoffs would be temporary. Unfortunately, it doesn't look like that's the case this time."
In its heyday, the auto industry provided a minimum of 20,000 direct jobs in the St. Louis region, Signorino says.
"It's difficult to replace good-paying jobs, but one thing we need to keep in mind is that this isn't something we haven't dealt with before," he says. "The St. Louis metro area has been dealing with the ups and downs, the feast or famine, in the Ameican auto industry for quite some time."
In years before the last recession, St. Louis' economy had begun to offset the loss of auto-related employment by creating new jobs in other industries. This has meant good jobs in areas such as professional services, engineering services, financial services, accounting services and even in the nonprofit sector, Signorino says. A good example of the shift, he says, is the decision by Express Scripts, Inc., to build its headquarters here in 2007.
In a way, Signorino says, the impact of closing auto plants might have been worse if St. Louis had gotten its wish of more automobile suppliers. "In my estimation, we never had our fair share of suppliers based on the amount of automobile production we were doing. So we didn't lose as many of those supplier jobs because we didn't have our fair share."
After the Train Wreck
The mayors in Fenton and Hazelwood say the plant's shutdown was cushioned by the number of auto workers who retired, were retrained or took buyouts. Certainly, Hancock acknowledges, some individual workers are having a tough time, but he thinks the overall picture in Fenton is one of a community staring a potential train wreck in the face and heading off the disaster.
But there always are victims, says Will Becker, spokesperson for the Salvation Army. Those affected in Fenton aren't all poor and undereducated, he adds, citing instances of middle-income moms and dads accustomed to having more disposable income for amenities for their children.
"When you're laid off, you're trying to make ends meet, and you're stressed and you wonder what to do," Becker says. "You have families who had their children in private schools or who worry about whether their kids will be able to afford equipment to play sports, or whether the family will be able to keep its vacation plans."
Melissa Feig, a school social worker in the Rockwood District, says she got no referrals near the end of the school term about families affected by the shutdown. But she says, "When I come back in the fall, I'm sure we'll have a number of families needing resources and referrals to community agencies."
From experience, she knows that a parent losing a job "can affect the student. The student may be used to certain things that aren't available now that the mom's or dad's income is cut. So that affects the student, academically or emotionally."
Still, on the outside, what looked like an economic disaster for Hazelwood and later for Fenton has turned out to be manageable hardship. The key in Fenton and Rockwood at least was early planning and proactive measures that prepared them for the loss of revenue from the automaker.
"You can learn from other people's experiences, and that's what we did in the Hazelwood situation," says Mayor Hancock. "We prepared for the worst case scenario. I like to say we 'right-sized' our government."