The Space and Place of St. Louis: The Economic Impact of Missouri HB 3231

1. Introduction

A faltering Midwestern economy, waning vitality: Brad Christ's Missouri House Bill 3231 (HB 3231), the "Missouri Innovation, Public Safety, and Accountability Act", culminates from efforts to revitalize downtown Missouri cities. The Bill allows for the establishment of innovation districts: compact areas where anchor institutions and companies connect with startups, incubators, and accelerators and housing, corporate, and retail spaces are intertwined (Katz & Wagner, 2014). Initiatives include tax benefits, public funds, and construction incentives that aim to attract and retain a greater flow of capital, resources, and people. HB 3231's proposed effective date is August 28, 2026 and has been delivered to the Governor as of May 28, 2026.

Missouri accounted for 1.9% of US GDP in 1997 but only 1.5% of national GDP in 2025. For St. Louis specifically, its real GDP growth rate has been lower than the national average from 2001 to 2025 except for five years, three of which were recessions (Bureau of Economic Analysis, 2026). With an economy that has dwindled farther from the national limelight over the years, the need for economic revitalization is ever pertinent: it is worth investigating what HB 3231 could mean economically for the space and place of St. Louis today.

2. Context

Existing economic literature, as noted by Buresch et al. (2024), finds that Midwest metropolitan areas show a positive correlation between population growth and Gross Domestic Product (GDP). Missouri follows this trend, as median household income tends to increase with population growth (Buresch et al., 2024, p. 8).

Des Moines and Omaha are chosen as benchmarks due to their comparable economic conditions to St. Louis. Both cities serve as economic hubs in their respective states, with real median household income of the cities consistently and similarly falling below that of the state, and have had similar real median household income levels to St. Louis since 1986 (Federal Reserve Bank of St. Louis, 2026). Hence, these cases are especially pertinent to discussing and modelling potential outcomes of HB 3231.

St. Louis's population has gradually declined from 2010 to 2024, decreasing from 319,294 to 278,144 residents (U.S. Census Bureau, 2026). As illustrated in Figure 2, the gray bar represents the 2020 recession, following an upward trend in GDP (though this increase may be attributable to other factors, such as inflation). This population decline has been consistent with Missouri's relatively lower GDP growth compared with other Midwestern states shown in the data. Overall, the percentage change in state GDP indicates a consistent pattern between population growth and increases in regional GDP.

3. Policy Concerns

3.1. Tax Benefits

Eligible employers may receive withholding tax credits or state income tax benefits if they remain within their innovation district location for at least five years and maintain specified payroll conditions. Qualified new Missouri residents may receive income tax exclusions or abatements if they establish and maintain primary residency in an innovation district. Under the Missouri Opportunity Zone policy, taxpayers are permitted to defer state income taxes when funds are reinvested in a specified opportunity zone (House Bill No. 3231, 2026). These incentives target population growth in two ways. First, through population attraction: employer tax credits are intended to incentivize new firms to invest in these districts, which would likely help stabilize property values and attract new residents. Second, through population retention: income tax exclusions reduce the overall cost of living in innovation districts, which may encourage long-term residency among individuals living in downtown Missouri cities. On the other hand, these measures could also contribute to tax base erosion if increases in population and consumer spending fail to compensate for reductions in local property and state income tax revenues. This raises policy concerns about whether state revenues would be able to offset the associated fiscal costs of tax reductions through higher employment, greater market activity, and increased demand for housing.

3.2. Public Funds

The Innovation District Public Safety Fund remits 50% of incremental state tax receipts from being deposited into General Revenue. Incremental receipts are defined as state sales tax revenues above a fixed baseline and state income tax withholdings above a fixed baseline (House Bill No. 3231, 2026). The underlying mechanism of this policy is that through targeted tax incentives, the resident population of downtown cities across Missouri is expected to increase, thereby attracting new businesses to the region and increasing consumer spending. Holding other factors constant, this, in turn, would generate new tax revenue from innovation projects, which would then flow into the state budget and support public services. Under these conditions, the Rural Missouri Development Fund may be better positioned to support economic development, infrastructure, housing, labour, and other community-building endeavours (House Bill No. 3231, 2026). However, this policy relies on a growth-dependent fiscal model that anticipates population growth, which has neither been estimated nor guaranteed within the next ten years. Downtown cities in Missouri, such as St. Louis continue to struggle with population loss, despite historically having been designed to accommodate far more residents than currently reside there. This creates a negative feedback loop: as the population shrinks, income tax revenue within the city's budget decreases, reducing available funds for public services such as transit, school funding, and maintenance of infrastructure, which in turn accelerates population loss. The availability of reliable and well-funded public services can help retain, if not increase a city's population. It may therefore be more effective to adopt a public investment model that focuses on using currently available tax revenue to fund public services, such as safety enforcement, in order to retain current residents and attract new investors, rather than relying on projected population growth as a fiscal strategy for increasing public revenue.

3.3. Construction Incentives

Within annual cap restrictions, developers renovating office to residential buildings will qualify for up to 30% tax credit for eligible costs. For innovation zone projects, sponsors may be granted a construction phase withholding advance if total construction costs are greater than $5 million (House Bill No. 3231, 2026). Similar office-to-residential conversion programs have previously been implemented in major North American cities such as New York City, Chicago, Washington, D.C., and Calgary. Beasley (2025) finds that cities like Chicago and Calgary, that have successfully achieved their projected investment returns, benefited from strong market conditions in their targeted areas which enabled them to succeed. These programs also received upfront government assistance to address factors such high construction costs and the high cost of capital. Beasley (2025) notes that "providing subsid[ies] upfront are more successful than longer term tax abatement programs." (Beasley 2025, p. 01) Compared to St. Louis, each of those cities has an overall population at least twice as large, and in some cases, up to 30 times larger. Our analysis focuses on two variables to measure the conditions on which the effectiveness of this policy depends: metropolitan population and private investment.

In markets characterized by population growth and higher levels of investment in downtown innovation districts, the conversion of abandoned office buildings incentivizes investors to develop more downtown properties. Gorback et al. (2024) find that areas with high corporate presence eventually lead to an increase in large institutional investors in the housing market, compared to small landlords who rent family units. Existing economic literature has shown that, through the dynamics of "price-to-rent ratios" (Gorback et al., 2024, p. 02), investors anticipate future revenue from the residential districts in which they develop, even when they do not intend to reside there. This insight follows Büchler et al.'s (2021) demonstration of the correlation between housing supply responsiveness and investors' expectations of future property price increases. As a result, investors are more likely to prioritize the construction of smaller units, with prices varying depending on the amount of space consumed and the property's proximity to emerging central business districts (CBDs). Murphy (1972) describes CBDs as office and work areas typically associated with high-rise buildings such as major hotels, banks, and other business establishments. As housing demand increases, prices also increase. The price of housing may also be offset by the price of commuting to work, as predicted by the Alonso-Muth-Mills model (AMM). We use the equation presented by Glaeser (2020):

This dynamic may also be associated with an increase in median household income, as higher income residents are more likely to move into newly established residential buildings near CBDs, which can displace current residents, thus leading to gentrification (Glaeser, 2020).

4. Case Studies

In this study, case studies are used as parallels to suggest what could happen with St. Louis's implementation of an economic revitalization program. As mentioned, Nebraska's LB 450 in Omaha and Iowa's Greater Des Moines Partnership were chosen due to similar economic conditions in the city and state to St. Louis and Missouri respectively as well as the similar nature of the revitalization programs themselves. Thus, they illustrate possible outcomes that HB 3231 could have over time.

In section 4.1, we lay out the absolute numbers and impact of each program to illustrate the effectiveness of the program itself. In section 4.2, we mitigate the effect of macroeconomic confounding variables on the results of 4.1 by comparing the case study city to its sister city, a city with similar economic makeup and health, to indirectly illustrate the program's effect on economic prosperity.

4.1. Absolute Results

Omaha

Established in 2022, Omaha, Nebraska's LB 450 creates innovation districts within an iHub (a private nonprofit corporation) area that focus on entrepreneurship and tech small businesses. Similar to Missouri's recent decline in economic vitality, motivating reasons for Omaha's LB 450 included high unemployment at 150% of the state average and a poverty rate at 120% the state average. Run primarily on partnerships between schools, financial institutions, government agencies, incubators, businesses, and more, districts provide counselling or technical assistance, events, networking opportunities, and space or funds. In addition, $5 million is allocated annually for the Small Business Assistance Act; an Innovation Hub Cash Fund is established for the purpose of state revitalization; and grants of up to $25,000 for startups or $12,500 for existing small businesses are permitted. Each year, iHubs will be evaluated based on their goals and performance like the number of businesses supported, jobs created, and funds raised as well as businesses' impact on the local economy, taxes, and industry breakdowns. Currently, there are three reporting iHubs: the Fermentation Collaborative, Omaha Innovation Hub (OICH), and The Julian and Brittany Young iHub (Legislature Bill 450, 2022).

The Fermentation Collaborative is a partnership between Bio Nebraska, Invest Nebraska, Southeast Community College to incentivize innovation in the fermentation industry. As a finalist applying for grants, if successful, $160 million will be invested in the Collaborative in 2026. It aims to build a workforce pipeline via collaboration between higher education institutions, high schools, and biotech firms to eventually spread its awareness campaign, hold events, and host conferences (Owen, 2025).

In 2025, despite structural delays in expected state funding, OICH received $300,000 in investments and directly supported 52 small businesses via consulting, technical support, or partnerships. With OICH support, 2 companies relocated in-state and all businesses created or retained 5 jobs exceeding the state average wage. As the program continues to expand, future metrics will include taxable revenue, reduction in health disparities and crime, as well as the creation of higher wage jobs. Its goals for 2026 include supporting 100+ small businesses, implementing entrepreneurship and employment programs, creating more higher-paying jobs, and bettering health equity (Omaha Innovation Connection Hub, 2025).

As the Julian & Brittany Young's iHub funding fell short of expectations at $243,000 in 2025, its goals were not fully met. Key metrics include that it raised a total of $1.7 million, enrolled 96 businesses, and created or retained 107 jobs (Julian & Brittany Young Innovation Hub, 2025). On average, it met 38.30% of its goals.

Des Moines

The Greater Des Moines Partnership (DSMP) has been established for over 125 years and covers the Des Moines and Ames statistical areas. From 1999 to 2025, the DSMP has seen $16.5 billion in capital investment spanning 43 million square feet, the creation and retention of 39K jobs, and 787 new employer locations or expansions. As one of the largest Chamber of Commerce voices flown into Washington DC, the DSMP continues to advocate for state and federal wide policy implementations (Greater Des Moines Partnership, 2025).

"Greater Des Moines [outperforms its] Midwestern peers across key economic indicators" (Greater Des Moines Partnership, 2026, p.1), with its consistent population, employment, and GDP growth as well as affordability and collaboration across sectors. In the last decade, its population increased by 13.4%, real GDP by 30% (2nd among peers), and employment by 13.3% (1st among peers). In particular, its ability to attract 28% more dual-degree couples than peers further boosts its GDP by 2%. Des Moines has been named the 4th most livable US metro and the 2nd best place for young professionals according to Forbes in 2024 (DSMP, 2025).

Despite its longevity and growth momentum weakening as of late, the DSMP has a continued positive outlook with $2 billion invested in active projects (DSMP, 2026). If Des Moines sustains a 1.7 to 2% annual growth in population, it can imminently reach its 1 million population milestone, becoming eligible for larger state-wide economic development projects, and potentially become a large metro city. In 2024 alone, Iowa invested $20 billion, creating 1,600 jobs. Despite real agricultural GDP decreasing by 39% from 2023 to 2024, Iowa and Nebraska only experienced a 6.1% decrease from Q4 2024 to Q1 2025 (Wood, 2025). The continued investment over time has contributed to the DSMP's statistical areas' strong market performance.

4.2. Evaluating Effectiveness via Comparison

Since there lacks published studies on the direct impact of investment via the establishment of innovation districts on a city's prosperity, this article compares the case study city's real median household income relative to their sister city's over time to indirectly demonstrate the effectiveness of establishing an innovation district. Sister cities were identified using The Harvard Growth Lab's Metroverse, an economic navigator that calculates the similarity of cities' urban economies based on their competitiveness in each industry. For Omaha and Des Moines, Kansas City, MO and Spokane, WA (Metroverse, 2026) were determined to be their respective sister cities as they were ranked most similar, standardizing the macroeconomic headwinds and tailwinds experienced by each pair of sister cities in our comparisons.

Prior to the implementation of LB 450, Omaha's real median household income fell within $1000 of that of Kansas City's from 2019 to 2021 (U.S. Census Bureau, 2024a). After the implementation of LB 450 in 2022, Omaha's real median household income has since risen above Kansas City's.

While its long duration makes it difficult to compare economic outcomes before and after the DSMP's establishment, a snapshot of 2015 to 2024 (U.S. Census Bureau, 2024a) shows Des Moines consistently outperforming its sister city Spokane. To further contextualize Des Moines's economic conditions, it was also compared to its sister city in the Midwest, Lincoln, NE (Metroverse, 2026), and was found to have an even wider lead on real median household income.

4.3. Summary

Both Omaha's LB 450 and the DSMP saw absolute and relative economic benefits: after the recent implementation of LB 450 in 2022, Omaha has seen improvement in revenues and job creation or retention for participating small businesses while consistently rising above its sister city's real median household income. Similarly, the DSMP continues to boast high population, real GDP, and employment growth rates while its real median household income has outperformed its sister city Spokane's and its midwestern sister city Lincoln's from 2015 to 2024.

5. Limitations

A limitation to HB 3231 itself is its uncertainty of long term success. As noted in our analysis of the Greater Des Moines Partnership, cities desiring truly successful economic revitalizations need to establish their unique economic identities. Such has been the case with Austin, TX with its tech boom and real median household income at $99,897 in 2024 (U.S. Census Bureau, 2024a); Raleigh, NC as part of the Research Triangle region with tech, biotech, and pharmaceuticals (Cummings, 2020); Omaha; Des Moines; and most metropolitan areas (Wood, 2025). Looking to St. Louis itself, we already have a focused, small-scale innovation hub: the Cortex Innovation Community. Anchored by WashU, SLU, BJC Healthcare, Mizzou, and Missouri Botanical Garden, it specializes in healthcare research and tech innovation (Wagner et al., 2019). Hence, the presence of the Cortex Innovation Community questions the proposed effectiveness of establishing innovation districts without niches and the potential redundancy of establishing new innovation districts rather than expanding a proven existing one for St. Louis.

We acknowledge that the rise of remote and hybrid work have altered the demand for proximity to central business districts (CBDs), following the COVID-19 pandemic. Given that many residents prefer to work from homes and commute less frequently to their offices, this changes the equilibrium predicted by the Alonso-Muth-Mills model. The National Bureau of Economic Research estimates that only about 15% of office buildings across major cities in the U.S. may be "physically suitable for conversion," (Gupta et al, 2023, p. 03) as many of them hold layouts that lack accommodations for residential use, such potential risks of fire hazards. We recognize that higher population growth does not always correlate with higher GDP growth, as many other factors such as migration patterns, interest rates and educational attainment, affect Missouri's economy. There are other alternatives that could shift the allocation of public funds. In markets where population growth is declining or remains flat, tax credits can lead to a reallocation of public funds due to fiscal strain, potentially creating a misalignment between government spending (or opportunity costs) and anticipated future tax revenue. Additional factors, such as levels of crime rates, also affect whether population growth occurs or whether developers choose to invest. Moreover, due to a shorter time period, we were not able to include an extensive sample of various economic metrics across our study or a longer timeline for the Des Moines case study graph in 4.2. All findings are reached indirectly through pairing the analysis of credible existing studies and data.

6. Conclusion

This study evaluates the extent to which the implementation of Missouri House Bill 3231 could generate a positive economic impact for St. Louis. First, we examine whether the potential benefits of increased private investment would outweigh losses in local tax revenue. We find that the extent to which benefits flow back into the local economy depends heavily on population growth, private investment and the proximity of downtown areas near central business districts (CBDs). Later referencing the cases of Omaha and Des Moines, we indirectly analyze the effectiveness of legislative economic revitalization plans through their numerical impacts and comparable economic prosperities to their sister cities. Our case studies suggest that these economic revitalization plans were successful to varying degrees, though isolating causal effects remains challenging. We weave together a complex narrative of one path forward within St. Louis's search for an economic identity. With the prospect of better attracting investments, St. Louis may yet be a step closer to finding its place in the national economy.