Law / NorthSide Development Project
1:50 pm
Tue August 2, 2011

Mo. Supreme Court upholds constitutionality of tax credit that could affect NorthSide project

In March, the Missouri Supreme Court heard a case regarding the constitutionality of a state tax credit which, as we stated then, enabled St. Louis developer Paul McKee to buy up several tracts of land on the city’s north side.

At that time, McKee had received $28 million in tax credits for his NorthSide project and St. Louis Mayor Francis Slay signed off on the project in February.

Today, the Missouri Supreme Court said that the tax credit is, indeed, constitutional.

When the case was heard in March, attorney Irene Smith, who represents plaintiffs and North St. Louis residents Barbara Manzara and Keith Marquard,  said that the tax credit violates the state constitution by giving state tax dollars to private business interests.

The Supreme Court cited a couple different reasons for their decision.

Three of the court's seven judges - Mary Russell, Patricia Breckenridge, and Zel Fischer - wrote that tax credits are not an expenditure of public money and thus Marquard and Manzara did not have legal standing to sue as taxpayers.

Two other judges - Richard Teitelman and William Ray Price -  joined an opinion written by Michael Wolff that Marquard and Manzara had standing to sue because tax credits are an expenditure of public money, but that the credit in question should be upheld because it benefits a public purpose. Judge Laura Denvir Stith agreed with aspects of both opinions.

Paul Puricelli, an attorney for McKee's project, the Northside Regeneration Initiative, pronounced himself pleased with the ruling, especially the concurring opinions that the development is a public purpose.

The Supreme Court ruling doesn't have any legal impact on a second suit that's challenging $390 million in tax increment financing from the city of St. Louis, according to Puricelli.

"But at least it's an endorsement that we have an important public purpose in the redevelopment in distressed areas, and perhaps the Court of Appeals will at least take notice of that," Puricelli said.

Marquard, one of the residents who sued, called the ruling "Kafka-esque."

"On the one hand, they rule that we have no standing because tax credits are not direct expenditures," Marquard said. "But court precedent says tax credits are as much a grant of public money or property as would be an outright payment to the state."

Marquard also found the reasoning by Wolff, Teitelman and Price a bit hard to swallow.

"It seems that the courts have basically said that anything that might be thinly veiled as a public purpose is legal even if the Constitution directly prohibits it, such as it does the grant of public moneys and funds," Marquard said.