Next 90 days could set North St. Louis’ direction for decades
Southeastward view of Downtown skyline from third floor window of Blewitt Middle School on Cass Ave near 19th St. Photo by Eddie Roth
For five years, St. Charles County developer Paul McKee steadily and painstakingly has moved forward with a vision to remake more than 1,100 acres of land in the heart of north St. Louis. It’s a testament to the scale and sophistication of his plan that a series of administrative decisions by city agencies over the next 90 days could chart the course for inner-city economic development in St. Louis for decades to come.
These actions will have little immediate impact on the city’s landscape, but they will leave a lasting impression. They will reveal to private investors, federal funders and entrepreneurs whether St. Louis is committed to becoming a place where transformation is possible.
The St. Louis Tax Increment Finance Commission has scheduled a public hearing Wednesday on Mr. McKee’s NorthSide project. The commission reviews requests for public subsidies in the form of tax revenue that a project is expected to generate, invites public testimony and recommends to the Board of Aldermen whether the project should proceed and how.
The Board of Aldermen then decides whether the project will move ahead through ordinances that set the project’s geographic boundaries, define the development rights, determine available tax benefits and authorize agreements between the city and developers governing a project’s progress.
The TIF commission is expected to recommend a NorthSide development plan and request for TIF financing, perhaps with some conditions. The Board of Alderman is expected to approve the plan in some form.
Two factors will alert potential investors and funders about the depth of the community’s commitment to pursuing the project:
• Whether St. Louis makes a financial commitment to support the borrowing that will be needed to rebuild the public infrastructure;
• Whether the city grants eminent domain power that would enable the developer to acquire parcels of land essential to the development.
The NorthSide project envisions four major “employment hubs” as its principal economic driver — a high-rise office district immediately west of downtown at the terminus of the Gateway Mall, with eased access to Interstate 64; a mixed commercial and industrial development around the Missouri landing of the new Mississippi River bridge; a development area on North Jefferson at Parnell Avenue that piggybacks onto the Sensient Technologies campus; and a “community-retail-employment” hub on the site of the old Pruitt-Igoe housing project, which also may include a residential tower and a large park.
Mr. McKee’s team estimates total project costs of $8.1 billion. Of that amount, the developer seeks $398 million in pubic subsidies through tax-increment financing. This means that just the increased tax revenue created by the project — through earnings taxes from new jobs, sales taxes from new retail sales and increases in property valuations because of improvements and new construction — would go to support the project, and then only for the public improvements.
Mr. McKee has not asked for the subsidy all at once and has limited his initial request to improvements around the “employment hubs” west of downtown and at the Mississippi River bridge landing, which he sees as the first two phases of the project. That is $141 million of the $398 million for which he is asking.
But to raise funds to begin work on these public improvements, one must borrow money by issuing bonds backed by forecasted TIF revenue. Should St. Louis join developers to guarantee repayment of some part of the TIF borrowings? Doing so would lower the risk to lenders and make the bonds more attractive to the market.
Mr. McKee has asked the city to guarantee half of the TIF funding for the first two project phases, which is a total risk of about $70 million. The city is reluctant to do so. It has a poor track record with such guarantees and has been burned when private projects have failed.
The city is right to protect the public coffers, especially in uncertain times. The challenge for the city, if it genuinely believes in NorthSide, is to make clear its commitment to the project while closely managing any potential loss.
But the same economic conditions that worry the city make a prudent guarantee possible. Credit markets are so tight that no lender will lend money to fund improvement based only on the project’s potential. Lenders want credit-worthy companies contractually committed to build and to move their operations into the project area.
The city can take the same conservative approach, showing its commitment to a guarantee — but limiting the amount and withholding its effectiveness until a real market commitment emerges.
Mr. McKee may need the power of eminent domain, which enables the forced sale of private land for public projects. Eminent domain raises the hackles of citizens. And, because the power of eminent domain has been abused, its opponents have a strong case. But it is a vital tool that can be used fairly if it is carefully controlled.
Developers, investors and other funders need to know that the project cannot be blocked by a unreasonable holdouts. The city needs to know that the power would be used sparingly and would not be used to force people out of their homes.
Mr. McKee says he seeks no eminent domain power over residential properties. And among the more the 4,600 parcels of land in the development area, only 11 properties controlled by four private owners are critical to the project’s viability. It is those properties for which he might need the special power.
His proposal appears to involve limited-use eminent domain that protects against abuse and could be a tool to help advance a genuine public interest.
Financial guarantees from the city and the use of eminent domain are “hot-button” issues with the public, and for good reason. But there is every reason to think they can be resolved in ways that both impress potential investors with a prudent city commitment and protect the public.
The city CANNOT afford to guarantee ANY of the TIF. Mayor Slay is doing the right thing by not supporting that. This is a great project but the city can’t afford the risk. Get the TIF done but don’t put the city on the hook. McKee has a hard road ahead and the city can help but not by putting its money on the line.
I’m sorry, but now is the worst time in decades to start on something like this. I’ve seen the TIF application for this and it’s just a bunch of wishful thinking and made up numbers. If the city wants to pin it’s hopes to garbage like that, it’s time that city residents start looking for new leaders.
Seriously, you are calling for the city to kick people out of their homes and businesses so that their land can be given to someone else? I’m all for improving the city, but play by the rules.
Eminent domain used in this method is simple property theft. If the developer wants the land, then he should go try to buy it.
Did McKee pay by the word for this one? Eminent domain for private use and private profit doesn’t “raise hackles” — what are we, dogs? It is against everything this country stands for.
This has all the makings of a collosal flop with the city left holding the bag. In other words, typical St Louis.
McKee has played a steady, pyschological game with local residents, officials and, in seems, editorial writers with the Post Dispatch, convincing that NorthSide is the only answer for an area that has seen disinvestment going back forty years. His progressive pattern of buyouts–further emptying the area of both residents and businesses–serves to further convince skeptical onlookers that his proposal is the only viable option. The success of this is that he can state with a straight face–and others can repeat it–that what is to patently a overly subsidized and over-reaching development proposal makes “financial sense.”
Of course, that is an absurb claim–just as absurd that the statements that developers commonly make that they need public subsidy to make money. Additionally, McKee’s grandiosity flies in the face of much of the recent history of development in the city–by which one should prior to late 2007, when the credit crisis put a kabosh on most deals. There is no more economic good sense in McKee’s plan than in the more modestly sized redevelopment proposals which dot North City–ones which, admittedly, don’t pretend to solve the problem of demographic, economic and social disinvestment, but ones that have done a better job of integrating the visions of both developers as well as local residents.
“For five years, St. Charles County developer Paul McKee steadily and painstakingly has moved forward with a vision to remake more than 1,100 acres of land in the heart of north St. Louis. It’s a testament to the scale and sophistication of his plan”
Yes, violating city building codes, leaving property to rot and decay happens to be sophistication par excellence.
McKee couldn’t even connect Express Scripts’ HQ to UMSL’s North Metrolink Station. How will he pull off anything in his plan? Why does the “NorthSide” project start Downtown and not perhaps in St. Louis Place and J-V-L, where his property continues to rot?
Who cares about all the side issues like eminent domain. You can drive around all over MO and see the half vacant new developments even in the so called “good” areas. This is not a if you build it they will come situation. Will the local population really support this development? Will anyone outside of the local area support this development? Neighborhoods are made by the people within them and it appears this area does not have enough of those people to make this a reality. On top of this how can our city financially do anything generous right now.
If you’re not for this development perhaps you would like to explain how North St. Louis can become anything other than the stinking hole it is now without a huge amount of money and some leeway in getting the job done. Cities just don’t build themselves and save the one-brick-at-a-time crap. It would take a century to rebuild North St. Louis by rehabbers.
Steve,
So its our fault that the North side is in such sad shape. Look at the once proud south side (where I grew up) it is going the same way. Throwing a bunch of money at something never has worked. Look we can’t even get more than one street downtown (Washington) redeveloped and thriving, what makes you think we can get a terrible neighborhood in north city revived and thriving. I am not against trying to help but look around it just is not going to happen. The city needs to branch off development from downtown and keep that the focus. Trying these spot developments surrounded by slum areas is a recipe for failure.