A July 2 court ruling halted the $390 million in tax increment financing for developer Paul McKee’s $8 billion Northside Redevelopment plan, stating that the projects were not “shovel-ready,” as required by the TIF Act.
Circuit Court Judge Robert Dierker ruled that the two ordinances, which the City of St. Louis Board of Aldermen passed last fall, are “arbitrary and beyond the powers of defendant City under the TIF Act.”
The court found evidence that the parties intentionally substituted “less specific language,” and “may” for “will,” throughout the redevelopment plan. “They elected to postpone any real project agreements,” Dierker said.
Paul McKee, owner of McEagle Properties, is leading the 1,560-acre project and proposes to construct four commercial centers totaling over four million square feet of new retail/office space, 10,000 new homes, parks, and a trolley line.
McKee said he did not receive this kind of scrutiny in his other developments, noting NorthPark, a joint venture including five million square feet of planned commercial and industrial redevelopment in North St. Louis County and Hazelwood Commerce Center, a 151-acre industrial park in Hazelwood, Missouri.
“How come in North Park, I had the same attorney, the same TIF law?” he said. “There is never a specific project in mind when you do a TIF. TIFs are done like this.”
Few sure things, judge says
Although the judge sided with the City and Northside Regeneration LLC on all the plaintiffs’ arguments, except one, Dierker said the lack of specifics was the plan’s “fatal flaw.”
Eric Vickers, an attorney who helped in the plaintiffs’ case, said Dierker “has re-balanced the development equation in this city to give back to citizens the voice and input the TIF statute requires.”
Although Dierker said that declaring 1,100 acres blighted in one fell swoop is “weighty,” the judge found the blight finding is supportable.
He said the only “sure things” on the plan’s financial side are McKee’s secured state tax credits and his control of a substantial portion of the redevelopment area’s land already.
McKee’s detailed statement of the proposed method of financing the development “was little more than the developer’s promise to find the money.”
However, the court concluded that the plan met the minimum requirement, and by law, “the court cannot demand ‘Show me the money!’”
McKee said that he has a better financial commitment with Northside than he had with North Park or Hazelwood.
Paul Puricelli, legal counsel for the Northside Regeneration and McKee, said, he disagreed with the decision, and is looking at the quickest way to get the issue resolved. He said he wants to get back in front of the judge “to fill in any possible blanks.”
Opportunity to clear it up
Defendants-respondents included City of St. Louis, the City’s Tax Increment Financing Commission, Mayor Francis Slay, and the Board of Aldermen, as well as the Northside Regeneration LLC.
Emails and phone calls to the Board of Aldermen President Lewis Reed, Ward 13 Alderman Alfred Wessels, Jr., Chairman of the Housing, Urban Development and Zoning committee, and Director of Development Barbara Geisman were not returned by press time.
Comptroller Darlene Green said the court decision offers an opportunity for McKee to work more closely with the community “to perhaps save some homes from blight, offering residential infill as part of an overall solution.”
“It will benefit both the residents and the city to have a detailed
plan as evidence to the public that the jobs, the new homes and the
businesses that are the cornerstone of the revitalization are real,” she said.
McKee’s plan is broken into four redevelopment zones of mixed-use development, creating separate tax financing districts for each. In the fall, the Board of Aldermen approved two districts, A and B, which are the western edge of Downtown and the foot of the Mississippi River Bridge.
Dierker said that the Northside plan would be “nothing short of a miracle,” and the plan puts homeowners at risk of diminishing the value of their properties or facing eminent domain. The decision comes after months of legal action, which was initiated by resident Bonzella Smith.
Pie in the Northside
Michele Boldrin, head of the department of economics at Washington University, testified saying that the Northside plan’s revenue and economic projections were “pie in the sky.”
Boldrin testified that the cost-benefit study’s projections were “utterly incredible.” For example, the study states that the Redevelopment Area C, a rundown neighborhood, could generate an increase of 2,400 percent in assessed valuation over the life of the development plan, with massive increases in tax revenue to follow.
“If the Court is wrong, then regardless of the merits of Dr. Boldrin’s testimony, the board of aldermen was at liberty to consider voodoo economics, so long as the voodoo doctor was qualified to utter his incantations,” Dierker stated.
Northside’s cost-benefit analysis for the project was prepared by “qualified urban planners,” who were relying largely on financial “pro formas” prepared by Russell Caplin, an employee of McKee’s McEagle Properties. The court did not find that Caplin constructed his cost-benefit analysis “in a fraudulent manner or in bad faith.”
The Northside TIF is by far the largest in the city’s history. Comparatively, the next largest TIF district on the books is the Convention Center Hotel at $80.1 million. Ballpark Village would technically be in second place with $115 million, but no development has begun yet.
A TIF is a tool for developing blighted areas, which involves capturing the revenue from taxes when they increase rather than actually raising property or sales taxes.
The question before the Court, fundamentally, was whether the City’s Board of Aldermen had the discretion to say, in Ward 3 Aldermen Freeman Bosley’s words, “Let’s try it.”
“The court concludes that the answer must be no,” Dierker writes.
“Only the utmost fortitude and perseverance, an unprecedented willingness of the City’s land use bureaucracy and aldermen to stay out of the way, and incredible good luck, could accomplish Northside’s ambitious goals,” Dierker stated.
