University City officials say a $70 million subsidy of a Costco-anchored development will protect the suburb’s revenues in case Chesterfield leaves St. Louis County’s shared sales tax pool — a possible outcome of a case pending in the Missouri Supreme Court.
“As all of you know, the city of Chesterfield is currently engaged in a lawsuit that could be a game changer as it relates to shared revenue,” University City Manager Gregory Rose said at a Monday press conference in City Hall to discuss the suburb’s new agreement with Novus Development. “So we must be prepared not just for Chesterfield but for any city and the potential of shared revenue sources going away.”
University City Mayor Terry Crow and Rose endorsed the new agreement with Webster Groves-based Novus, reached after a new round of negotiations following a consultant’s costly error in sales tax projections. It’s expected to be introduced to the City Council on May 28.
Those negotiations ultimately led to a steep reduction in an advance payment for community development in the poorer, largely black Third Ward. But Rose said the development is also about new revenue for the city at large. He noted some of the new sales taxes generated by the development aren’t redistributed via the county pool and “will enable us to become less reliant on other cities for our revenues.”
“If this development were to go to a city that is not within the pool, University City gets nothing,” Rose said.
The $190 million redevelopment of the area at Olive Boulevard and Interstate 170 had been in the works for over a year. It was poised to receive final approval from the City Council in January when a concerned citizen, Gregory Pace, discovered that officials were counting on more revenue than would be generated.
As a result, University City officials and Novus hashed out a new development agreement that reduces payments for the city’s long-held priority of generating $15 million for Third Ward neighborhood improvements and Olive Boulevard upgrades. An advance payment to the city was cut to $3 million from $7.5 million and annual payments fall to about $200,000 from $500,000. New taxes generated in the Third Ward will also be contributed to that $15 million total, whereas the new development was initially projected to fund all of that.
Novus’s $70.5 million subsidy under the tax increment financing district — which lets developers use property and some sales taxes to finance construction — was unchanged.
“It’s a negotiated agreement,” Rose said. “We didn’t get everything that we want. Certainly Novus didn’t get everything that they want. But I do believe that we certainly were able to secure the $15 million that the mayor and council members indicated.... What other development agreement do you get $3 million upfront?”
Asked what Novus gave up, Rose said Novus should answer that question. A bond attorney for the municipality, Mark Grimm of Gilmore Bell, said the developer would likely have to hold more private debt — maybe about $3.5 million — that is repaid from TIF revenues later than other obligations.
Rose also addressed why University City allowed Novus to receive $70.5 million in tax increment financing when a consultant’s report found $65 million was adequate. The extra subsidy allows Novus to offer “fair” prices to the dozens of residents and several businesses that may require buyouts for the project. Most support the project, he added.
“The residents in the affected area have mostly told us we can’t move fast enough,” he said.