WENTZVILLE — A shopping center owner is asking a court to kill a special taxing district established by the city of Wentzville and backed by companies affiliated with developer Stan Kroenke.
Attorneys for the Desco Group, which owns a Schnucks-anchored shopping center on Wentzville Parkway, filed suit on Friday in St. Charles County Circuit Court. The suit accuses the city and the Kroenke-backed community improvement district of not giving Desco enough notice before forming the district and imposing a 1% sales tax.
“It is evident that this Community Improvement District was not lawfully created,” said Capes Sokol attorney Amy Fehr, who is representing Desco.
The lawsuit pushes back on Wentzville’s and the Kroenke-related companies’ use of a community improvement district, or CID, to tax shoppers at properties Kroenke doesn’t own. Their plan would impose the special sales tax on shoppers along Wentzville Parkway to help finance a new shopping center pushed by Kroenke’s lawyers along with a new recreation center for the city.
Under a deal blessed by the Wentzville Board of Aldermen in a series of meetings over the spring and summer, a new CID, called the Wentzville Parkway Regional Community Improvement District, would cover the big-box shopping centers along Wentzville Parkway. It would use the proceeds to help pay down debt financing $23 million worth of site work for Wentzville Bend Development LLC, a company connected to Kroenke lawyers Alan Bornstein and Jeffrey Otto of the Dentons law firm.
Sixty percent of the sales taxes generated by the district would also help finance $38 million in debt issued to build the new recreation center long sought by the fast-growing St. Charles County suburb.
State law requires that a majority of property owners in an area support the formation of a CID and the tax it imposes. Because companies connected to Kroenke control most of the real estate along Wentzville Parkway, they can create the district and include properties they don’t own, including those anchored by local stores Dierbergs and Schnucks.
Plans for the new shopping center include space for a grocery, and the head of the union representing Schnucks and Dierbergs workers has criticized the CID because it could force shoppers of those stores to help build the locally-based grocers’ competition.
“If Stan Kroenke wants to build a grocery store out there and operate it on a level playing field, then do that,” David Cook, President of the United Food and Commercial Workers Local 655, said Wednesday. “Last time I checked, Stan Kroenke has enough money to build a grocery store on his own.”
Cook said he would be surprised if other property owners didn’t join in.
Some Wentzville aldermen have said the deal is a good one for the city and likely the only way it could finance a new recreation center any time soon. Wentzville Mayor Nick Guccione has suggested some of the opposition is because of the involvement of Kroenke, the owner of the NFL Rams, reviled locally for his decision to move the football team to Los Angeles.
The lone Wentzville alderman to oppose the deal, Robert Hussey, has said the city should have put a recreation center sales tax to a vote of Wentzville residents and kept all of the revenue rather than splitting it with the developer. He noted most of the city’s sales are from stores along Wentzville Parkway anyway.
The Wentzville development agreement with the CID and Wentzville Bend says legal costs defending the CID tax’s validity can be reimbursed with CID taxes.
Otto, the attorney at Dentons’ St. Louis office who pushed the deal and represents the Kroenke-related companies, did not immediately return a request for comment. Jim Hetlage, an attorney at Lashley & Baer who is Wentzville’s city attorney, also did not immediately return a phone call. Wentzville City Manager David Gipson said the city does not comment on pending litigation.
The Desco lawsuit argues it did not receive mailed notice as required by the state’s CID law and that the ballot asking about the imposition of a sales tax was not mailed to the company 10 days prior to the election, as required by Missouri’s Mail Ballot Election Act. It asks a judge to declare that the CID was improperly created and seeks an injunction preventing the imposition of a sales tax and setting aside taxes “improperly collected.”
“Moreover, the relief sought would prevent Petitioners (owned by or affiliated with Kroenke) from using their status as a majority of the qualified voters in the Regional CID to unilaterally impose a tax for their own benefit and to the detriment of other owners of real property within the Regional CID,” Desco’s lawsuit says.
CIDs have proliferated throughout Missouri in the last 20 years as property owners have established some 400 of them. Sometimes they’re used to pay for marketing, cleaning or security services in commercial districts such as downtown St. Louis. That often means winning the buy-in of a variety of property owners.
But developers also set them up on their own properties, using the sales tax to finance their projects. Even then, they typically only tax their own shoppers.
Missouri Auditor Nicole Galloway has warned that CIDs have lax oversight, a lack of transparency and insufficient reporting requirements.
St. Charles County Executive Steve Ehlmann, who has criticized the use of subsidies for retail developments, last month proposed a county charter amendment that would require retailers to prominently display the special sales taxes imposed in their shopping centers. He said then he hoped the Legislature would address the issue.
Meanwhile, the Wentzville Board of Aldermen was scheduled to vote Wednesday night on a measure advancing the issuance of bonds from the St. Charles County Industrial Development Authority to finance the recreation center and private development.