Northside Developer McKee leaves city property taxes unpaid | St. Louis Public Radio

Northside Developer McKee leaves city property taxes unpaid

Apr 9, 2015

Developer Paul McKee owns more than 1,500 acres on the north side of St. Louis, but for the last two years he has not paid property taxes on nearly any of it.

In examining real estate property taxes, St. Louis Public Radio discovered McKee’s company, Northside Regeneration LLC, owes the city more than $750,000 in taxes for 2013 and 2014. That total includes nearly $120,000 in interest and penalties.

The developer acknowledged the tax bill and said it would get paid.

"We’re working with the city," McKee said. "It’s not a cash flow problem." He refused to say any more about the matter on the record.

McKee has promised to revitalize a large part of the city’s north side with jobs centers, housing and other amenities. Since he began buying land in 2003, McKee has spent $40 million of his own money and received $43 million in state tax credits. The city of St. Louis also approved a $390 million Tax Increment Financing package in 2009.

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Mayor Francis Slay has supported McKee’s efforts from the beginning, including backing the TIF package, the largest in city history. After lawsuits held up the TIF for several years, the Missouri Supreme Court cleared the way in 2013. Still, dirt has yet to be turned within the massive redevelopment area.

Officials in Slay's office said that none of the TIF funding has gone to McKee yet. When asked about the outstanding tax bill, the administration emailed the following statement:

"We fully expect Northside Regeneration to pay in full, as it always has in the past," said Mary Ellen Ponder, the mayor's chief of staff.

McKee and a few of his companies have been entangled in several lawsuits in recent years. Just this week Titan Fish Two LLC, a Kansas City company, sued Northside Regeneration in St. Louis County. The suit claims the company has defaulted on several loans and owes more than $17 million, raising questions about McKee's claim of financial solvency.

Proposed NGA site provides snapshot

St. Louis Public Radio discovered Northside Regeneration’s unpaid taxes while looking at property tax information within the 100-acre proposed site of the National Geospatial-Intelligence Agency. The area is one of four in the region the NGA is considering for relocation. The St. Louis Board of Aldermen this year approved the use of eminent domain to move 47 home owners and a handful of businesses. The city is expected to purchase McKee’s 358 parcels within the proposed NGA footprint and sell the entire plot directly to the federal government.

The proposed NGA site is just north of the former Pruitt-Igoe housing project. It has no sidewalks, rows of boarded-up buildings and many vacant lots. If all 554 property owners paid their property taxes, the area should bring in about $100,000 to the city each year. About two-thirds of the property owners paid their taxes last year, coming to a total of $74,000. 

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But Northside Regeneration has paid taxes on only one parcel within the NGA footprint in 2014 in an amount just over $10,000 (pictured on the map above in yellow). The property taxes on the company's remaining parcels remain unpaid, leaving a bill of more than $18,000 last year. The same is true for 2013. The total bill for the two years, including penalties and interest, comes to $40,639.

That land represents just a fraction of what McKee owns on the city's north side.

When St. Louis Public Radio widened its investigation, it found the company had failed to pay taxes on more than 1,900 parcels in 2014 for a total of more than $317,000. The property taxes Northside Regeneration owes for 2013 is about $314,000. (It should be noted these numbers are a best approximation, given that land parcel numbers sometimes change and "Northside Regeneration" was spelled more than 30 ways in the city assessor's data.)

The consequences

Failing to pay property taxes is not illegal.

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In fact, in the first two years of an unpaid property tax bill there is little the city can do other than charge a penalty and interest. Under Missouri statute, a 2 percent penalty is added on Jan. 1 when a property tax bill is not paid for the previous year. Another 2 percent in flat interest is added for nine months each year.

But failing to pay property taxes does come with more significant risk, according to David Adam, a Clayton-based tax attorney who works with individuals and corporations. He said the city of St. Louis can file a "superior" lien against the property, which ensures that if the property is sold, the city will be paid before any other lien holder.

If taxes remain unpaid for three years, under Missouri state statute, the city can sue and move toward putting the property up for a public auction. But Adam said that’s something the government usually wants to avoid, because there’s no guarantee the land will be sold for more than the taxes owed, or whether it will sell at all.

Cities understand their position and for that reason they often times will work with property owners to pay on installment programs in order to allow property owners to maintain ownership," Adam said.

Gaming the system?

Last year the city of St. Louis brought in $45 million in property taxes. St. Louis Public Radio found that throughout the city, more than $19 million in 2014 property taxes remains unpaid. McKee’s share of that is fairly small in comparison, at about $317,000 last year.

With so much undeveloped land, Richard Ward of Ward Development Counsel, LLC said it makes sense for Northside Regeneration to wait on paying property taxes until the third year. Ward works with public, private and non-profit organizations on real estate and economic and community development issues. He has no connection with McKee.

"If I had all that property I’d do what he’s doing," Ward said. "I don’t see it as gaming. That’s what the law allows you to do."

He said McKee is making a legal choice and will have to pay the penalties and interest that are added to the bill.

"If you’re not generating revenue, why not?" Ward asked.

Property taxes generally go to pay for schools, the metropolitan sewer district and the library, among other things.

No projects have begun with the redevelopment area as of yet. But McKee has received the go-ahead from the Missouri Department of Health and Senior Services to build a 3-bed urgent care center within the former Pruitt-Igoe site. Northside Regeneration has an option to buy the land from the city for $1 million and a deadline of July 1 to complete the deal for the hospital.

Follow Maria on Twitter: @radioaltman